SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14c-5(d)(2))
[ ] Definitive Information Statement
fonix corporation
........................................................................
(Name of Registrant as Specified in Charter)
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
...........................................................
4) Proposed maximum aggregate value of transaction:
............................................................
5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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fonix corporation
1225 Eagle Gate Tower
60 East South Temple Street
Salt Lake City, Utah 84111
NOTICE OF THE TAKING OF CORPORATE ACTION
WITHOUT A MEETING BY WRITTEN CONSENT
To the Shareholders:
Notice is hereby given that, pursuant to written consent resolutions
adopted by the owners of approximately 61 percent of the issued and
outstanding shares of Common Stock of fonix corporation, a Delaware
corporation (the "Company"), effective twenty (20) days after this Notice and
the attached Information Statement are mailed to all shareholders of the
Company (approximately September 8, 1997), the Certificate of Incorporation
of the Company will be amended to: (i) authorize the issuance of a new
class of Preferred Stock of the Company, par value $.0001 per share, and
(ii) ratify the actions of the Board of Directors of the Company in
designating 166,667 shares of a new Series A Preferred Stock of the Company,
which shares will be issued to Beesmark Investments, L.C., a Utah limited
liability company ("Beesmark"), in connection with the conversion of that
certain Series A Subordinated Convertible Debenture in the original
principal amount of $500,000 issued by the Company to Beesmark in October
1995.
All necessary corporate approvals in connection with the matters
referred to herein have been obtained. The accompanying Information
Statement is furnished to all shareholders of the Company pursuant to
Section 14(c) of the Securities Exchange Act of 1934 and the rules
thereunder solely for the purpose of informing shareholders of these
corporate actions before they take effect.
Pursuant to Section 228 of the Delaware General Corporation Law,
shareholders of record of the Company as of July 23, 1997, the date on which
the Written Consent Resolutions were signed by shareholders owning at least
a majority of the issued and outstanding shares of Common Stock of the
Company, are entitled to receive this Information Statement and Notice of
Shareholder Action by Written Consent.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
By Order of the Board of Directors,
Jeffrey N. Clayton,
Vice President and Secretary
Salt Lake City, Utah
August ____, 1997
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fonix corporation
1225 Eagle Gate Tower
60 East South Temple
Salt Lake City, Utah 84111
(801) 328-0161
INFORMATION STATEMENT
This Information Statement is provided by the Board of Directors of
fonix corporation, a Delaware corporation (the "Company"), in connection
with stockholder approval of an amendment to the Company's Certificate of
Incorporation (the "Amendment") pursuant to which the Company's Board of
Directors has been authorized to issue up to twenty million (20,000,000)
shares of a new class of Preferred Stock of the Company, par value $.0001
per share. Stockholder approval of the Amendment has been obtained by
receipt of written consent resolutions of the holders of a majority of the
Company's issued and outstanding common stock. The complete text of the
Amendment is attached hereto as Exhibit "A". A copy of the Shareholder
Consent Resolutiions is attached hereto as Exhibit "C". The Preferred Stock
may be issued from time to time in one or more series, with such distinct
serial designations as shall be stated in resolutions of the Board of
Directors providing for the issuance of such series of Preferred Stock. The
Amendment authorizes the Board, without further vote or action of the
shareholders of the Company, to designate the rights, preferences,
privileges, and restrictions associated with any such series of Preferred
Stock.
In addition, stockholders owning at least a majority of the Common
Stock of the Company, by written consent resolutions, have ratified the
actions of the Board of Directors, effective upon filing the foregoing
Amendment, with respect to: (i) the creation of a new Series A Preferred
Stock of the Company, having those rights and preferences set forth in the
Certificate of Designation of Rights and Preferences of Series A Preferred
Stock attached hereto as Exhibit "B" and by this reference incorporated
herein, and (ii) the issuance of 166,667 shares of the new Series A
Preferred Stock to Beesmark, in exchange for cancellation of a certain
Debenture previously issued by the Company to Beesmark.
A summary of each of these matters is set forth herein.
All of the foregoing actions have been effected pursuant to Section 228
of the Delaware General Corporation Law, by written consent resolutions (the
"Consent Resolutions") of shareholders of the Company executed by holders of
an aggregate of approximately sixty-one percent (61%) of the Company's
issued and outstanding Common Stock. In accordance with regulations of the
Securities and Exchange Commission (the "Commission"), the Consent
Resolutions will be effective 20 days following the mailing of this
Information Statement. The Company anticipates that the Amendment and
Certificate of Designation will be filed with the Secretary of State of
Delaware immediately thereafter, at which time the Company will issue the
166,667 shares of Series A Preferred Stock to Beesmark.
The Board of Directors does not intend to solicit any proxies or
consents in connection with the foregoing actions.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
<PAGE>
The Company's principal executive offices are located at 1225 Eagle
Gate Tower, 60 East South Temple, Salt Lake City, Utah 84111. This
Information Statement will be mailed to the Company's stockholders on or
about August 19, 1997.
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<PAGE>
SHAREHOLDER CONSENT RESOLUTION 1:
AMENDMENT TO CERTIFICATE OF INCORPORATION TO AUTHORIZE PREFERRED STOCK
The Board of Directors and the holders of a majority of the Company's
outstanding Common Stock have approved an amendment to the Company's
Certificate of Incorporation (the "Amendment"), pursuant to which Article
Fourth of the Certificate is amended to: (i) create and authorize for
future issuance a new class of capital stock of the Company, consisting of
twenty million (20,000,000) shares of Preferred Stock, par value $.0001 per
share, and (ii) vest in the Board of Directors of the Company the authority
to establish by resolution of the directors, at or prior to the time of
issuance, without further vote or action by the shareholders of the Company,
distinct series of such Preferred Stock, and to fix by resolution the
rights, preferences, privileges, and restrictions of each such series which
the Board might designate. Such rights and preferences shall include, but
not be limited to, dividend rates, whether dividends are cumulative or
noncumulative, conversion rights, voting rights, terms of redemption, if
any, redemption prices, liquidation preferences, anti-dilution rights, and
similar matters. If the Board of Directors shall authorize the issuance of
any series of Preferred Stock, such series may be granted the right to elect
one or more of the Company's directors, and such series of Preferred Stock
may be granted preemptive rights to acquire additional issues of such
Preferred Stock or any other class of stock issued by the Company.
The foregoing is only a summary of the Amendment and is not intended to
be complete. Stockholders are urged to read carefully the provisions of the
Amendment, the complete text of which is attached as Exhibit "A" to this
Information Statement. The foregoing summary is qualified in its entirety
by reference to the complete text.
Pursuant to regulations promulgated by the Securities and Exchange
Commission, the Consent Resolutions adopting the Amendment will become
effective 20 days after the date of mailing this Information Statement to
all Shareholders of record of the Company. The Company will then file the
Amendment with the Secretary of State of Delaware. Thereafter, shares of
Preferred Stock will be issuable at any time and from time to time, by
action of the Board of Directors, without further authorization from the
Company's stockholders, except as otherwise required by applicable law or
rules and regulations to which the Company may be subject, to such persons
and for such consideration (but not less than the par value thereof) as the
Board of Directors determines.
Prior to approval and adoption of the Amendment and in connection with
that certain Securities Purchase Agreement between the Company and Beesmark
dated October 23, 1995 (the "Beesmark Agreement"), the Board of Directors
authorized the creation of a new series of Preferred Stock (the "Series A
Preferred Shares"), and the issuance of 166,667 such shares to Beesmark upon
Beesmark's conversion of the principal amount of a $500,000 Subordinated
Convertible Debenture issued in connection with the Beesmark Agreement. The
creation and issuance of the Series A Preferred Stock as described in the
Beesmark Agreement is contingent upon approval by the Company's shareholders
of the Amendment. Shareholders owning at least a majority of the issued and
outstanding shares of Common Stock of the Company have ratified the actions
of the Board in connection with the creation and issuance of the Series A
Preferred Shares. See "Shareholder Consent Resolution 2," below, for more
details regarding the Series A Preferred Shares.
The Company's Board of Directors believes that the Amendment
authorizing the new class of Preferred Stock is in best interests of the
Company and its stockholders. It will permit the Company to satisfy its
obligations to Beesmark under the Beesmark Agreement. It will also insure
that a sufficient
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<PAGE>
number of shares will be readily available for use by the Company in
connection with future transactions such as acquisitions and capital raising
efforts.
Other than the Series A Preferred Shares to be issued to Beesmark, the
Company presently has no understandings or arrangements which would require
the issuance of any of the shares of Preferred Stock which are authorized by
the Amendment.
Due to the Board of Directors' discretion in connection with the
issuance of additional shares of Preferred Stock to be issued in a private
placement, the Amendment may, under certain circumstances, provide the Board
of Directors timing and other advantages in responding to a tender offer or
other attempts to gain control of the Company, which may make such attempts
more difficult and less attractive. For example, issuance of additional
shares would increase the number of shares outstanding and could necessitate
the acquisition of a greater number of shares by a person making a tender
offer and could make such acquisition more difficult since the recipient of
such additional shares may favor the incumbent management. Moreover, these
advantages give the Board of Directors the ability to provide any such
holders with a veto power over actions proposed to be taken by the holders
of the Company's Common Stock. This could have the effect of insulating
existing management from removal. Management of the Company is not aware of
any existing or threatened efforts to obtain control of the Company.
The Consent Resolutions authorizing the Amendment will become effective
20 days after the date of mailing of this Information Statement, on or about
September 8, 1997.
SHAREHOLDER CONSENT RESOLUTION 2:
RATIFICATION OF ISSUANCE OF SERIES A PREFERRED STOCK
TO BEESMARK INVESTMENTS, L.C.
The holders of a majority of the Company's outstanding Common Stock
have also ratified the action of the Company's Board of Directors in issuing
166,667 shares of a new Series A Preferred stock to Beesmark.
Background
On October 23, 1995, the Company entered into the Beesmark Agreement,
pursuant to which Beesmark agreed to invest $6,050,000 in the Company in
exchange for the issuance of 11,562,500 shares of Common Stock and a Series
A Subordinated Convertible Debenture in the principal amount of $500,000
(the "Debenture"), currently due October 23, 1997. The Debenture provides
that it may be converted, at the election of the holder, into either 166,667
shares of Series A Convertible Preferred Stock, at a conversion price of
$3.00 per share or into the same number of shares of common stock.
Conversion of the Debenture into Series A Preferred Stock can occur only
when and if the Board of Directors and shareholders of the Company amend the
Certificate of Incorporation of the Company to authorize the issuance of
preferred stock.
The Beesmark Agreement provides that the Company will use its best
efforts to authorize the issuance of the Series A Preferred Stock, so that
Beesmark will be permitted to exercise its conversion rights under the
Debenture.
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<PAGE>
Simultaneously with the execution of the Beesmark Agreement, the Board
of Directors of the Company approved the form of Amendment to the
Certificate of Incorporation, together with a Certificate of Designation of
Rights and Preferences of Series A Preferred Stock, on October 20, 1995,
directing that the Amendment be presented to the stockholders of the Company
for their approval as required by Delaware law.
Since the date of the Beesmark Agreement, Beesmark has waived its right
to convert the Debenture into preferred stock. However, Beesmark recently
has requested that the Debenture be converted to shares of preferred stock
as soon a possible. The request came too late to be included in the Proxy
Statement for the Annual Meeting of Shareholders of the Company held on June
16, 1997. The Company nevertheless has agreed to proceed to have shares of
preferred stock available for issuance upon conversion of the Debenture as
soon as possible. Accordingly, as of July 23, 1997, the Board of Directors
unanimously ratified and approved the forms of Amendment and Certificate of
Designation, and directed that the Amendment and Certificate of Designation
be presented for ratification and approval of the Company's shareholders by
written consent resolution of shareholders owning at least a majority of the
issued and outstanding shares of common stock of the Company.
Section 228 of the Delaware General Corporation Law provides that, in
lieu of obtaining approval of a proposal at a special meeting of
shareholders, shareholders of the Company may take action by written consent
resolutions, provided that the consent resolutions are signed by
shareholders of the Company who own at least fifty percent of the issued and
outstanding shares of Common Stock of the Company. Accordingly, the
Company's decision to secure the Consent Resolutions in the form attached as
Exhibit "C" hereto, is in fulfillment of the Company's original commitment to
Beesmark in the Purchase Agreement.
The Board of Directors of the Company has resolved that, upon
effectiveness of the Amendment, a new series of Preferred Stock of the
Company will be created, to be known as "Series A Preferred Stock", par value
$.0001 per share (the "Series A Preferred Shares"). The Series A Preferred
shares shall have the rights and preferences set forth in the Certificate of
Designation of Rights and Preferences for Series A Preferred Stock attached
hereto as Exhibit "B" and by this reference incorporated herein (the
"Certificate of Designation"). The Certificate of Designation will be filed
with the Secretary of State of Delaware. The Series A Preferred Shares
shall consist of one hundred sixty-six thousand six hundred sixty-seven
(166,667) shares, and shall have the following rights and preferences
relative to shares of Common Stock of the Company:
Voting Rights. Holders of Series A Preferred Shares will be entitled
to vote on any matters submitted to a vote by the shareholders of the
Company. Each share of Series A Preferred stock shall have the voting
rights of one share of Common Stock of the Company.
Election of Director. Holders of Series A Preferred Shares will have
the right to elect one person to the Company's Board of Directors (the
"Series A Director"), to serve until his successor shall have been elected or
until there are no more shares of Series A Preferred stock outstanding. The
Series A Director will be elected, together with the other directors of the
Company, at the Company's Annual Meeting of Shareholders. Mr. Alan C.
Ashton, currently one of seven members of the Company's Board of Directors
and an affiliate of Beesmark, will be designated the Series A Director upon
issuance of the Series A Preferred Shares to Beesmark.
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<PAGE>
Dividends. In the event the Board of Directors declares any dividends
on any class or series of stock of the Company, the holders of Series A
Preferred Shares shall be entitled to receive, out of legally available
funds and payable in preference and priority to any payment of any cash
dividend on the Common Stock or any other shares of capital stock of the
Company, a dividend of $2.905 per share.
Conversion. Each share of Series A Preferred stock shall be
convertible, at the option of the holder, at any time, into one fully paid
share of Common Stock of the Company. Each share of Series A Preferred
stock shall automatically be converted into shares of Common Stock at the
rate of one share of Common for each share of Series A Preferred, if the
market price of the Common Stock shall have equaled or exceeded $15.00 per
share for a period of fifteen consecutive market days.
Liquidation Rights. If the Company liquidates or dissolves, whether
voluntarily or involuntarily, the holders of the Series A Preferred Shares
will be entitled to receive, after due provision for payment of the debts
and other liabilities of the Company and before any distribution to holders
of any other class of stock, a preferential liquidating distribution of
$36.33 per share of Series A Preferred stock. After such payment, all
remaining assets and funds of the Company shall be divided among and paid to
the holders of the Common Stock of the Company and to the holders of the
Series A Preferred stock, pro rata, provided that the holders of the Series
A Preferred stock shall receive, for each share held, an amount equal to 1.5
multiplied by the per share amount distributed to the holders of the Common
Stock.
The foregoing summary of the rights and preferences of the Series A
Preferred Stock is qualified in its entirety by reference to the complete
text of the Certificate of Designation of Rights and Preferences of such
shares, attached hereto as Exhibit "B".
As of the date of this Information Statement, the authorized capital of
the Company consisted of One Hundred Million (100,000,000) shares of Common
Stock, par value $.0001 per share, of which 42,131,563 shares were issued
outstanding, and no shares of Preferred Stock. After adoption of the
Amendment, and issuance to Beesmark of the Series A Preferred Stock, the
authorized capital of the Company will consist of One Hundred Million
(100,000,000) shares of Common Stock, of which 42,131,563 shares will be
issued and outstanding, and Twenty Million (20,000,000) shares of Preferred
Stock, of which 166,667 shares of the new Series A Preferred Stock will be
issued and held by Beesmark.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Alan C. Ashton, Ph.D., as a director of the Company and as manager of
Beesmark Investments, L.C., has a personal interest in the adoption of the
Amendment and the authorization and issuance of the Series A Preferred
Shares. Adoption of the Amendment will enable the Company to fulfill its
obligations to Beesmark under the original Securities Purchase Agreement
pursuant to which Beesmark invested $6,050,000 in the Company, permitting
Beesmark to convert its Debenture into shares of Preferred Stock of the
Company.
The Consent Resolutions of Shareholders, pursuant to which the
Amendment has been authorized, by a majority of the shareholders of the
Company, was executed by Thomas Murdock as Trustee of a Voting Trust. The
Voting Trust Agreement, originally dated December 10, 1993, and amended
October 23, 1995, July 2, 1996 and September 20, 1996, authorizes the
Trustee to vote the shares of Common Stock of the Company presently held by
all parties to the Voting Trust Agreement; namely, Stephen M. Studdert,
Thomas A. Murdock, Roger D. Dudley, Studdert Companies Corporation, and
Beesmark
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<PAGE>
Investments, L.C. The total number of shares of Common Stock represented by
the Trust is 25,657,749, or 61% of the total issued and outstanding shares
of Common Stock of the Company.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following sections from the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1996 (the "Annual Report") are hereby
incorporated by reference and made a part hereof:
1. Financial Statements of the Company included in Part II, Item 7
of the Annual Report.
2. Management's Plan of Operation, Part II, Item 6 of the Annual
Report.
3. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures, Part II, Item 8 of the Annual Report.
The Commission file number for the Company's documents which are
incorporated by reference herein is 0-23862. All documents filed by the
Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act
subsequent to the date of this Information Statement shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of
filing thereof. Any statement contained herein shall be deemed to be
modified or superseded for all purposes of this Information Statement to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Information Statement.
By Order of the Board of Directors
Jeffrey N. Clayton,
Vice President and Secretary
Salt Lake City, Utah
August ____, 1997
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<PAGE>
EXHIBITS
Exhibit A: Amendment to Certificate of Incorporation
Exhibit B: Designation of Rights and Preferences of Series A Preferred
Stock
Exhibit C: Written Consent of Stockholders in Lieu of Meeting
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<PAGE>
EXHIBIT "A" to INFORMATION STATEMENT
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
fonix CORPORATION
fonix corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That pursuant to the recommendation of the Board of Directors of
the Company, the following resolution amending the Certificate of
Incorporation of the Company has been adopted by the vote of stockholders of
the Company holding a majority of the outstanding stock entitled to vote
thereon. The resolutions setting forth the amendment are as follows:
RESOLVED, that the Company's Certificate of Incorporation be amended to
authorize and provide for the issuance of a preferred stock of the Company
as more fully set forth herein.
FURTHER RESOLVED, the form of the Amendment to the Certificate of
Incorporation of the Company (the " Amendment") attached hereto as Exhibit A
is hereby adopted and approved. Pursuant to the Amendment, Article "FOURTH"
of the Company's Certificate Of Incorporation will be amended to provide
that the authorized capital of the Company will consist of 100,000,000
shares of common stock, par value $.0001 per share, and 20,000,000 shares of
Preferred Stock, par value $.0001 per share, and that the Board of Directors
of the Company shall have authority to create by powers, designations,
preferences and relative, participating, optional or other rights, or the
qualifications, limitations or restrictions of any such series and issue
shares of one or more series of Preferred Stock of the Company and to
designate the relative rights of preferences of any such series.
SECOND: That these resolutions have been adopted by written consent of
stockholders holding a majority of the outstanding stock entitled to vote
thereon in accordance with Section 228 of the General Corporation Law of the
State of Delaware.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed by its Vice President-Secretary this ___ day of _______________,
1997.
fonix corporation
By:_____________________________
Jeffrey N. Clayton
Title: Vice President and Secretary
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<PAGE>
EXHIBIT "A"
TO
WRITTEN CONSENT OF STOCKHOLDERS and to CERTIFICATE OF AMENDMENT
Amendment to Certificate of Incorporation
Article FOURTH of the Certificate of Incorporation of fonix Corporation is
hereby amended in its entirety so that, as amended, said FOURTH Article
shall read as follows:
"FOURTH" The total number of shares of stock which the Company shall have
authority to issue is ONE HUNDRED MILLION (100,000,000) shares of Common
Stock and TWENTY MILLION (20,000,000) shares of Preferred Stock. All shares
of stock authorized hereunder shall have a par value of 1/100th of one cent
($.0001) per share. The Common Stock shall be of one class and one series
without cumulative voting rights and without any preemptive rights. Except
as otherwise required by statute, this Certificate of Incorporation, or
provided for by resolution or resolutions of the Board of Directors, as
hereinafter set forth, the holders of the Common Stock of the Company shall
possess the exclusive right to vote for the election of directors and for
all other corporate purposes. The Preferred Stock shall be issued from time
to time in one or more series, with such distinctive serial designations as
shall be stated and expressed in the resolution or resolutions providing for
the issuance of such shares as are from time to time adopted by the Board of
Directors. In such resolution or resolutions providing for the issuance of
shares of each particular series of Preferred Stock, the Board of Directors
is expressly authorized, without further vote or action of the stockholders
of the Company and to the fullest extent allowed under Delaware law, to fix
the rights, preferences, privileges, and restrictions of such series of
Preferred Stock, including the annual rate or rates of dividends for the
particular series and whether such dividends shall be cumulative or
noncumulative; the redemption price or prices for the particular series; the
rights, if any, of holders of the shares of the particular series to convert
the same into shares of any other series or class or other securities of the
Company or any other corporation, with any provisions for the subsequent
adjustment of such conversion rights; the voting rights; anti-dilution
rights; terms of redemption (including sinking fund provisions); the number
of shares constituting any series, and the designation of such series; and
to classify or reclassify any unissued Preferred Stock by fixing or altering
from time to time any of the foregoing rights, privileges and
qualifications. If pursuant to this Article FOURTH, the Company's Board of
Directors shall authorize the issuance of any class or series of Preferred
Stock, (i) such class or series of Preferred Stock may be granted the right
to elect one or more of the Company's directors, as the Board of Directors
shall prescribe, and said directors shall have voting rights identical to
the other directors of the Company and shall serve until such time as their
successors are elected or until the class or series of Preferred Stock
entitled to elect them shall cease to be outstanding; and (ii) such class or
series of Preferred Stock may be granted preemptive rights to acquire
additional issues of such Preferred Stock or any other class or series of
stock issued by the Company."
<PAGE>
EXHIBIT "B" to INFORMATION STATEMENT
Certificate of Designation of Rights and Preferences
for Series A Preferred Stock
The ONE HUNDRED SIXTY SIX THOUSAND SIX HUNDRED SIXTY-SEVEN (166,667) of
Series A Preferred Stock which class and series of stock shall have the
following rights and preferences:
1. Designation and Number of Shares. The Series A Preferred Stock shall
be designated and known as "Series A Preferred Stock" and shall consist
of ONE HUNDRED SIXTY-SIX THOUSAND SIX HUNDRED SIXTY-SEVEN (166,667)
shares.
2. Voting Rights. The holders of the Series A Preferred Stock shall be
entitled to vote on any matters submitted to the shareholders of the
company; each share of Series A Preferred Stock shall have the voting
rights of one share of the Company's Common Stock.
3. Election of Director. The holders of the Series A Preferred Sock
shall have the right to elect one (1) person to the Company's Board of
Directors. Such director shall serve until such time as his or her
successor shall elected or until there are no more shares of the
Series A Preferred Stock issued and outstanding. The election of such
director shall take place simultaneously with the annual election of
the other directors of the Company, or at such other time as allowed
by the Delaware General Business Company Statute, the Company's
Certificate of Incorporation, or its Bylaws.
4. Dividends. In the event the Board of Directors of the Company shall
declare any dividend or dividends on any class or series of stock, the
holders of the shares of Series A Preferred Stock shall be entitled to
receive, out of legally available funds and payable in preference and
priority to any payment of any cash dividend on the Common Stock or
any other shares of capital stock in this Company, a dividend of
$2.905 per share of Series A Preferred Stock (the "Series A Dividend").
In the event the Company shall not have legally available funds
sufficient to pay the entire divided for all of the shares of the
Series A Preferred Stock issued and outstanding at the record date for
any dividend declaration, the Series A Dividend shall be paid to the
extent of legally available funds pro rata to the holders of the
Series A Preferred Stock, and any balance of the Series A Dividend as
to which there is not legally available funds shall be payable out of
the next declared dividend or dividends. The Series A Dividend shall
be payable to the holders of record at the close of business on the
date specified by the Board of Directors of the Company at the time
such dividend is declared. No dividends shall be declared or paid or
set apart specifically for payment on the Common Stock, or on the
Preferred Stock of any series ranking, as to dividends, junior to the
Series A Preferred Stock, for any period unless the Series A Dividend
shall have been paid or is contemporaneously paid. Unless the
Series A Dividend shall have been paid in full, no other distribution
shall be made upon the Common Stock of the Company or upon any
securities junior to the Series A Preferred Stock.
5. Conversion. The holders of the Series A Preferred Stock shall have
conversion rights as follows:
a. Right to Convert. Subject to the provision for adjustment set
forth below, each share of Series A Preferred Stock shall be
convertible (the "Conversion Right"), at the option of the
<PAGE>
holder of such shares, at any time and from time to time, into
one fully paid and non-assessable share of the Company's Common
Stock.
b. Mandatory Conversion. In the event that after issuance of the
Series A Preferred Stock the market price of the Company's
common Stock, as quoted on the NASDAQ Electronic Bulletin Board
or any other similarly reliable quotation service, shall have
equaled or exceeded $15.00 per share for a period of fifteen
(15) consecutive market days, the entire amount of the then
issued and outstanding shares of Series A Preferred Stock
automatically shall be converted into shares of Common Stock at
a conversion rate of one share of Common Stock for each share of
Series A Preferred Stock.
c. Effect of Liquidation. If the Company is liquidated, the
Conversion Right of the Series A Preferred Stock 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 A Preferred Stock.
d. Mechanics of Conversion. To convert shares of Series A
Preferred Stock to shares of Common Stock, the holder of such
shares shall surrender the certificate or certificates for such
shares of Series A Preferred Stock at the office of the transfer
agent for the Common Stock, together with written notice that
such holder elects to convert all or any number of shares of the
Series A Preferred Stock represented by such certificate or
certificates. The date of receipt of such certificates and
notice by the transfer agent shall be the conversion date
("Conversion Date"). The Company shall, as soon as practicable
after the Conversion Date, issue and deliver to such holder of
the Series A Preferred Stock, a certificate for the number of
shares of Common Stock to which such holder shall be entitled.
e. Reservation of Shares of Common Stock. The Company shall, for
so long as there are shares of Series A Preferred Stock
outstanding, reserve and keep available out of its authorized
but unissued shares of Common Stock, for the purpose of
effecting the conversion of the Series A Preferred Stock, such
number of duly authorized shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all
outstanding shares of Series A Preferred Stock.
6. Conversion Adjustment. The number of shares of Common Stock into
which the shares of Series A Preferred Stock may be converted shall be
subject to adjustment from time to time in certain circumstances as
follows:
a. If at any time before such conversion the Company shall (i)
subdivide the outstanding shares of Common Stock into a greater
number of shares; (ii) combine the outstanding shares of Common
Stock into a smaller number of shares; (iii) change the
outstanding shares of Common Stock into the same or a given
number of shares or another class or classes of shares; (iv)
declare a dividend on or in respect of the shares or other
securities of the Company; or (v) offer to the holders of the
shares of Common Stock any rights to subscribe for shares or for
other securities of the Company; then the holders of the shares
of Series A Preferred Stock shall be entitled, as the case may
be, to receive the same number of shares of Common Stock or
other securities of the Company, or to purchase, at
2
<PAGE>
the same price that the shares or securities are being offered
to the holders of the shares of Common Stock, the number of such
shares or the amount of such securities as will represent the
same proportion of the outstanding shares of Common Stock before
such increase or decrease as they would have been entitled to
receive or subscribe for, as the case may be, had they been
holders of the number of shares of Common Stock into which their
convertible Series A Preferred Stock was convertible on the
record date for any such even.
b. If at any time any of the shares of Series A Preferred Stock are
outstanding the Company shall be consolidated with or merged
into any other corporation or corporations, or shall sell or
lease substantially all of its property and business as an
entirety, lawful provision shall be made as part of the terms of
such consolidation, merger, sale or lease that the holder of any
shares of Series A Preferred Stock receive, as securities or
cash compensation for its shares of Series A Preferred Stock,
the same kind and amount of securities, cash or assets as may be
issuable, distributable or payable upon such consolidation,
merger, sale or lease with respect to the shares of Common Stock
of the Company, applying the conversion rate which would
otherwise be in effect at the time of conversion as provided in
this Resolution.
7. Liquidation Rights. In the event of insolvency or the liquidation,
dissolution or winding up of the Company, whether voluntarily or
involuntarily, the holders of the Series A Preferred Stock shall be
entitled to receive, after due payment or provision for the payment of
the debts and other liabilities of the Company and before any
liquidating distribution in respect of any other class of stock, a
liquidating distribution of $36.33 per share of Series A Preferred
Stock. After such payments to the holders of the Series A Preferred
Stock, all remaining assets and funds of the Company shall be divided
among and paid to the holders of the Company's Common Stock and the
holders of the Series A Preferred Stock, pro rata, provided that the
holders of the Series A Preferred Stock shall receive, for each share
held, an amount equal to 1.5 multiplied by the per share amount
distributed to the holders of the Common Stock.
3
<PAGE>
EXHIBIT "C" to INFORMATION STATEMENT
Written Consent of Stockholders of fonix corporation in Lieu of Meeting
The undersigned, trustee of that certain Voting Trust Agreement
entered into on the 10th day of December 1993, and as amended from time to
time does hereby take the following actions and adopt the following
resolutions in accordance with Section 228 (a) of the general corporation of
the State of Delaware.
WHEREAS, the Board of Directors of the Company has determined that it
is in the best interest of the Company to fulfill the obligations of the
Company pursuant to that certain Securities Purchase Agreement dated as of
October 23, 1995, between and among Beesmark Investments, L.C. ("Beesmark"),
Alan C. Ashton, and the Company and to comply with the terms of the Series A
Subordinated Convertible Debenture dated October 23, 1995 which has
subsequently been renewed between the Company and Beesmark ("Debenture").
RESOLVED, that the Company's Certificate of Incorporation be amended
to authorize and provide for the issuance of a preferred stock of the
Company as more fully set forth herein.
FURTHER RESOLVED, the form of the Amendment to the Certificate of
Incorporation of the Company (the "Amendment") attached hereto as Exhibit A
is hereby adopted and approved. Pursuant to the Amendment, Article "FOURTH"
of the Company's Certificate Of Incorporation will be amended to provide
that the authorized capital of the Company will consist of 100,000,000
shares of common stock, par value $.0001 per share, and 20,000,000 shares of
Preferred Stock, par value $.0001 per share, and that the Board of Directors
of the Company shall have authority to create by powers, designations,
preferences and relative, participating, optional or other rights, or the
qualifications, limitations or restrictions of any such series and issue
shares of one or more series of Preferred Stock of the Company and to
designate the relative rights of preferences of any such series.
FURTHER RESOLVED, that the shareholders of the Company hereby ratify
and approve the actions of the Board of Directors of the Company in
connection with: (i) the creation of a new Series A Preferred Stock of the
Company, upon filing the Amendment with the Secretary of State of Delaware,
having those rights and preferences set forth in the Certificate of
Designation of Rights and Preferences of Series A Preferred Stock attached
hereto as Exhibit "B" and by this reference incorporated herein, and (ii)
the issuance of 166,667 shares of the new Series A Preferred Stock to
Beesmark Investments, L.C., in exchange for cancellation of the Debenture
previously issued by the Company to Beesmark.
FURTHER RESOLVED, that the actions of the officers and the Directors
of the Company heretofore taken in connection with the Amendment to the
Certificate of Incorporation of the Company and the authorization of the new
class of Preferred Stock be, and that the same hereby are, ratified and
approved in all respects.
FURTHER RESOLVED, that the Directors of the Company be and they are
hereby authorized and directed to take any such action as may be deemed
necessary and advisable in order to carry out the purpose and intent of the
foregoing resolutions.
IN WITNESS WHEREOF, the undersigned stockholders have caused this
Consent to be executed
<PAGE>
as of the 23 day of July, 1997.
The undersigned understands and agrees that the foregoing consent
resolutions shall not become effective until 20 days after the Company mails
to all shareholders of the Company an Information Statement pursuant to the
rules and regulations of the Securities and Exchange Commission.
/s/ Thomas A. Murdock
---------------------------------
Thomas A. Murdock, Trustee
2
<PAGE>
EXHIBIT "A"
TO
WRITTEN CONSENT OF STOCKHOLDERS and to CERTIFICATE OF AMENDMENT
Amendment to Certificate of Incorporation
Article FOURTH of the Certificate of Incorporation of fonix Corporation is
hereby amended in its entirety so that, as amended, said FOURTH Article
shall read as follows:
"FOURTH" The total number of shares of stock which the Company shall have
authority to issue is ONE HUNDRED MILLION (100,000,000) shares of Common
Stock and TWENTY MILLION (20,000,000) shares of Preferred Stock. All shares
of stock authorized hereunder shall have a par value of 1/100th of one cent
($.0001) per share. The Common Stock shall be of one class and one series
without cumulative voting rights and without any preemptive rights. Except
as otherwise required by statute, this Certificate of Incorporation, or
provided for by resolution or resolutions of the Board of Directors, as
hereinafter set forth, the holders of the Common Stock of the Company shall
possess the exclusive right to vote for the election of directors and for
all other corporate purposes. The Preferred Stock shall be issued from time
to time in one or more series, with such distinctive serial designations as
shall be stated and expressed in the resolution or resolutions providing for
the issuance of such shares as are from time to time adopted by the Board of
Directors. In such resolution or resolutions providing for the issuance of
shares of each particular series of Preferred Stock, the Board of Directors
is expressly authorized, without further vote or action of the stockholders
of the Company and to the fullest extent allowed under Delaware law, to fix
the rights, preferences, privileges, and restrictions of such series of
Preferred Stock, including the annual rate or rates of dividends for the
particular series and whether such dividends shall be cumulative or
noncumulative; the redemption price or prices for the particular series; the
rights, if any, of holders of the shares of the particular series to convert
the same into shares of any other series or class or other securities of the
Company or any other corporation, with any provisions for the subsequent
adjustment of such conversion rights; the voting rights; anti-dilution
rights; terms of redemption (including sinking fund provisions); the number
of shares constituting any series, and the designation of such series; and
to classify or reclassify any unissued Preferred Stock by fixing or altering
from time to time any of the foregoing rights, privileges and
qualifications. If pursuant to this Article FOURTH, the Company's Board of
Directors shall authorize the issuance of any class or series of Preferred
Stock, (i) such class or series of Preferred Stock may be granted the right
to elect one or more of the Company's directors, as the Board of Directors
shall prescribe, and said directors shall have voting rights identical to
the other directors of the Company and shall serve until such time as their
successors are elected or until the class or series of Preferred Stock
entitled to elect them shall cease to be outstanding; and (ii) such class or
series of Preferred Stock may be granted preemptive rights to acquire
additional issues of such Preferred Stock or any other class or series of
stock issued by the Company."
