<PAGE>
UNITED STATES
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): September 30, 1999
ADDvantage Media Group, Inc.
(Exact name of Registrant as specified in its charter)
Oklahoma 1-10799 73-1351610
-------- ------- ----------
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
808 North 16/th/ Street
Broken Arrow, Oklahoma
----------------------
(Address of principal executive offices)
74012
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(Zip code)
(918) 251-9121
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(Registrant's telephone number, including area code)
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ITEM 1. Changes in Control of Registrant.
On September 30, 1999, the former shareholders of DRK Enterprises, Inc.
d/b/a TULSAT, an Oklahoma corporation ("TULSAT"), assumed control of the
Registrant pursuant to the Securities Exchange Agreement (the "Agreement")
entered on September 16, 1999, by and among ADDvantage Media Group, Inc. (the
"Registrant") and David E. Chymiak, Kenneth A. Chymiak, as Trustee of the Ken
Chymiak Revocable Trust Dated March 4, 1992, and Susan C. Chymiak, as Trustee of
the Susan Chymiak Revocable Trust Dated March 4, 1992 (collectively, the
"Shareholders"). In accordance with the Agreement, the existing officers and
directors of the Registrant other than Gary W. Young tendered their
resignations. Mr. Young, as the sole remaining director, appointed the new
officers of the Registrant. David E. Chymiak was appointed Chairman of the
Board and Kenneth A. Chymiak was appointed President and Chief Executive Officer
of the Registrant.
Mr. Young also named David E. Chymiak, Kenneth A. Chymiak, Stephen J. Tyde
and Freddie H. Gibson as new directors to the Board of Directors of the
Registrant and they will take office effective October 18, 1999 which is 10 days
after the Disclosure Statement disclosing these events was first sent to
shareholders of the Registrant pursuant to Rule 14f-1 promulgated under the
Securities and Exchange Act of 1934, as amended. See discussion under Item 2.
below.
ITEM 2. Acquisition or Disposition of Assets.
On September 30, 1999, the Registrant and the Shareholders consummated the
transactions contemplated by the Agreement. Pursuant to the Agreement, the
Shareholders transferred to the Registrant all of the issued and outstanding
common stock of TULSAT, along with certain promissory notes issued by TULSAT, in
favor of the Shareholders, in the aggregate original principal amount of $10
million in exchange for 8,000,000 shares of the Registrant's common stock, par
value $.01 per share, 200,000 shares of newly issued Series A 5% Cumulative
Convertible Preferred Stock of the Registrant, par value $1.00 per share, with a
stated value of $40.00 per share (which are convertible into shares of the
Registrant's common stock at a price of $4.00 per share), and 300,000 shares of
newly issued Series B 7% Cumulative Preferred Stock of the Registrant, par value
$1.00 per share, with a stated value of $40.00 per share.
As a result of this transaction, TULSAT became the wholly owned subsidiary
of the Registrant and the Shareholders own approximately eighty-two percent
(82%) of the issued and outstanding common stock of the Registrant and one
hundred percent (100%) of the issued and outstanding preferred stock of the
Registrant. See discussion under Item 1. above.
<PAGE>
ITEM 7. Financial Statements and Exhibits.
(a) Financial Statements.
Audited financial statements of DRK Enterprises, Inc. for the year ended
December 31, 1998 were included as an Exhibit to the Current Report of Form 8-K
filed on September 24, 1999. As of the date of the filing of this Current
Report on Form 8-K, it is impracticable for the Registrant to provide the
complete financial statements required by Item 7(a) of Form 8-K. Such financial
statements shall be filed by amendment to this Form 8-K no later than 60 days
after October 15, 1999.
(b) Pro Forma Financial Information.
As of the date of filing of this Current Report on Form 8-K, it is impracticable
for the Registrant to provide the pro forma financial information required by
Item 7(b) of Form 8-K. Such financial information shall be filed by amendment
to this Form 8-K no later than 60 days after October 15, 1999.
(c) Exhibits.
The Exhibits to this report are listed in the Exhibit Index set forth elsewhere
herein.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADDvantage Media Group, Inc.
Dated: October 14, 1999 By: \s\ Gary W. Young
-----------------------------------------
Gary W. Young, Executive Vice -- President
Finance and Administration
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- ------------
2.1 .......... The Securities Exchange Agreement, dated as of September 16,
1999, by and among ADDvantage Media Group, Inc. and David E.
Chymiak, Kenneth A. Chymiak, as Trustee of the Ken Chymiak
Revocable Trust Dated March 4, 1992, and Susan C. Chymiak, as
Trustee of the Susan Chymiak Revocable Trust Dated March 4, 1992
is incorporated by reference to the Current Report on Form 8-K
filed by the Registrant on September 24, 1999
2.2 .......... The Amendment and Clarification of the Securities Exchange
Agreement, dated as of September 16, 1999
4.1 .......... Certificate of the Designation, Preferences, Rights and
Limitations of ADDvantage Media Group, Inc. Series A 5%
Cumulative Convertible Preferred Stock and Series B 7%
Cumulative Preferred Stock as filed with the Secretary of State
of Oklahoma on September 30, 1999
<PAGE>
EXHIBIT 2.2
AMENDMENT AND CLARIFICATION OF SECURITIES EXCHANGE AGREEMENT
This Amendment and Clarification of Securities Exchange Agreement is made
and entered into as of the 16/th/ day of September, 1999, for the purpose of and
clarifying certain provisions of the Securities Exchange Agreement entered into
as of the 16/th/ day of September, 1999 (the "Agreement") by and among
ADDvantage Media Group, Inc., an Oklahoma corporation ("AMG"), David E. Chymiak,
Kenneth A. Chymiak, as Trustee of the Ken Chymiak Revocable Trust Dated March 4,
1992, and Susan C. Chymiak, as Trustee of the Susan Chymiak Revocable Trust
Dated March 4, 1992 (collectively, "Shareholders" each a "Shareholder").
Recitals:
WHEREAS, the parties hereto desire to clarify and, to the extent
appropriate, amend and modify certain terms of the Agreement and are entering
into this Amendment and Clarification of Securities Exchange Agreement (this
Amendment) for such purpose;
NOW THEREFOR, IN CONSIDERATION of the recitals and mutual covenants and
agreements set forth in this Amendment, the parties hereto hereby agree as
follows:
1. The capitalized terms used herein shall have the same meanings as set
forth in the Agreement unless otherwise specifically provided herein. The term,
"Shareholder Notes" is revised to mean those certain demand promissory notes
issued by TULSAT, in favor of the Shareholders in the aggregate original
principal amount of $10,000,000.
2. The provisions of Article 2 of the Agreement shall be amended so that
it reads in its entirety as follows:
"ARTICLE II
Tax-Free Transfer
"Section 2.1 Transfer of TULSAT Common Stock. At Closing, upon the
terms and subject to the conditions set forth in this Agreement,
Shareholders shall contribute, assign, and transfer to AMG, and AMG shall
receive from Shareholders, all of the issued and outstanding TULSAT Common
Stock. At Closing, Shareholders shall deliver to AMG certificates
representing all of the TULSAT Common Stock, free and clear of all liens,
claims, charges, restrictions, equities or encumbrances of any kind, which
certificates shall be duly endorsed to AMG or accompanied by duly executed
stock powers in a form satisfactory to AMG.
"Section 2.2 Issuance of AMG Securities. In exchange for all of the
shares of TULSAT Common Stock, AMG shall issue to the Shareholders a total
of 50,000 shares of AMG Nonconvertible Preferred Stock, 200,000 shares of
AMG Convertible Preferred
<PAGE>
Stock and 8,000,000 shares of AMG Common Stock, registered in each
Shareholder's name and in the respective amounts set forth in Exhibit B. At
Closing, AMG shall deliver to each Shareholder the stock certificates
representing the AMG Securities.
"Section 2.3 Closing. Closing shall take place on the Closing Date at
such time and place as is agreed by AMG and Shareholders.
"Section 2.4 Post-Closing Exchange of Notes. Subsequent to Closing,
the Shareholders shall deliver to AMG the Shareholder Notes, endorsed
"Payable to the Order of ADDvantage Media Group, Inc.," free and clear of
all liens, claims, charges, restrictions, equities or encumbrances of any
kind. In exchange therefor, AMG shall issue to the Shareholders an
aggregate of 250,000 shares of AMG Nonconvertible Preferred Stock
registered in each Shareholder's name and in the respective amounts set
forth in Exhibit B. At such time, AMG shall deliver to each Shareholder the
stock certificates representing such shares of AMG Nonconvertible Preferred
Stock."
3. Exhibit B attached hereto shall replace in its entirety the Exhibit B
which is attached to the Agreement.
4. Except as specifically amended and clarified hereby, the Agreement
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
AMG: Shareholders:
ADDvantage Media Group, Inc. /s/ David E. Chymiak
------------------------------------
David E. Chymiak
/s/ Kenneth A. Chymiak
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By: /s/ Charles H. Hood Kenneth A. Chymiak, as Trustee of
------------------------------ the Ken Chymiak Revocable Trust
Charles H. Hood, President Dated March 4, 1992
/s/ Susan C. Chymiak
------------------------------------
Susan C. Chymiak, as Trustee of
the Susan C. Chymiak Revocable Trust
Dated March 4, 1992
<PAGE>
EXHIBIT B
Exchanges Occurring at Closing
<TABLE>
<CAPTION>
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TULSAT Securities AMG Securities
Shareholder Surrendered Received
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- -----------------------------------------------------------------------------------
<S> <C> <C>
David E. Chymiak 350 Shares of 25,000 Shares of AMG
TULSAT Common Stock Nonconvertible Preferred Stock;
100,000 Shares of AMG
Convertible Preferred Stock; and
4,000,000 Shares of AMG
Common Stock
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Kenneth A. Chymiak, as 175 Shares of TULSAT 12,500 Shares of AMG
Trustee of the Ken Common Stock Nonconvertible Preferred Stock;
Chymiak Revocable Trust 50,000 Shares of AMG Convertible
Dated March 4, 1992 Preferred Stock; and
2,000,000 Shares of AMG
Common Stock
- -----------------------------------------------------------------------------------
Susan C. Chymiak, as 175 Shares of TULSAT 12,500 Shares of AMG
Trustee of the Susan Common Stock Nonconvertible Preferred Stock;
Chymiak Revocable Trust 50,000 Shares of AMG Convertible
Dated March 4, 1992 Preferred Stock; and
2,000,000 Shares of AMG
Common Stock
- -----------------------------------------------------------------------------------
</TABLE>
Exchanges Occurring After Closing
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Amount of Shareholder Note AMG Securities
Shareholder Surrendered Received
- ----------- ----------- --------
- ------------------------------------------------------------------------------------------
<S> <C> <C>
David E. Chymiak $5,000,000 125,000 Shares of AMG
Nonconvertible Preferred
Stock
- ------------------------------------------------------------------------------------------
Kenneth A. Chymiak, as $2,500,000 Shareholder Note 62,500 Shares of AMG
Trustee of the Ken Chymiak Nonconvertible Preferred
Revocable Trust Dated Stock
March 4, 1992
- ------------------------------------------------------------------------------------------
Susan C. Chymiak, as $2,500,000 Shareholder Note 62,500 Shares of AMG
Trustee of the Susan Nonconvertible Preferred
Chymiak Revocable Trust Stock
Dated March 4, 1992
- ------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 4.1
CERTIFICATE OF THE DESIGNATION, PREFERENCES,
RIGHTS AND LIMITATIONS OF ADDVANTAGE MEDIA GROUP, INC.
SERIES A 5% CUMULATIVE CONVERTIBLE PREFERRED STOCK AND
SERIES B 7% CUMULATIVE PREFERRED STOCK
Pursuant to Section 1032 of the Oklahoma General Corporation Act
We, Charles H. Hood, President, and Del L. Gustafson, Secretary, of
ADDvantage Media Group, Inc. (the "Company"), a corporation organized and
existing under the Oklahoma General Corporation Act, in accordance with the
provisions of Section 1032 thereof, do hereby certify:
That pursuant to authority conferred upon the Board of Directors of the
Company by the Certificate of Incorporation of the Company, said Board of
Directors duly authorized and adopted, by means of a written unanimous consent
to action dated September 21, 1999, the following resolutions providing for the
issuance of two series of the Company's preferred stock of the par value of
$1.00 per share, to be designated "Series A 5% Cumulative Convertible Preferred
Stock" and "Series B 7% Cumulative Preferred Stock," respectively:
"RESOLVED, that issues of series of preferred stock of the Company,
designated 'Series A 5% Cumulative Convertible Preferred Stock' (herein referred
to as 'Series A Preferred Stock'), par value $1.00 per share with a stated value
of $40.00 per share and consisting of a maximum of 200,000 shares, and 'Series B
7% Cumulative Preferred Stock' (herein referred to as 'Series B Preferred
Stock'), par value $1.00 per share with a stated value of $40.00 per share and
consisting of a maximum of 300,000 shares, are hereby provided for and the
powers, preferences and relative and other special rights, and the
qualifications, limitations and restrictions thereof, are hereby fixed as
follows:
1. Priority; Number of Shares.
--------------------------
Shares of Series A Preferred Stock and Series B Preferred Stock shall be
prior to the Company's Common Stock, $.01 par value per share ("Common Stock"),
with respect to the payment of dividends and the distribution of assets. The
number of shares which shall constitute Series A Preferred Stock shall be
200,000. The number of shares which shall constitute Series B Preferred Stock
shall be 300,000. References herein to the "Preferred Stock" shall mean and
refer to Series A Preferred Stock and Series B Preferred Stock collectively
unless the context requires otherwise.
2. Dividends.
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(a) The quarterly cash dividend rate of Series A Preferred Stock
shall be $.50 on each outstanding share of such stock and the quarterly
cash dividend rate of Series B Preferred Stock shall be $.70 on each
outstanding share of such stock. Such preferential cash dividends shall be
payable when and as declared by the Board of Directors, to the extent per
mitted by law, quarterly on the last day of March, June, September and
December in each year (the "Dividend Payment Dates"), commencing December
30, 1999.
<PAGE>
(b) All cash dividends payable shall accrue and be cumulative.
Interest at the rate of 5% per annum shall accrue and be payable with
respect to any amounts of unpaid cumulative cash dividends on Series A
Preferred Stock. Interest at the rate of 7% per annum shall accrue and be
payable with respect to any amounts of unpaid cumulative cash dividends on
Series B Preferred Stock.
(c) So long as any shares of the Preferred Stock shall remain
outstanding, no dividend whatsoever (other than a dividend payable in
Common Stock) shall be declared or paid upon any class of stock or series
thereof ranking junior to the Preferred Stock in the payment of dividends,
nor shall any shares of any class of stock or series thereof ranking junior
to the Preferred Stock in payment of dividends be redeemed or purchased by
the Company or any subsidiary thereof, nor shall any monies be paid to or
made available for a sinking fund for the redemption or purchase of any
shares of any class of stock or series thereof ranking junior to the
Preferred Stock in payment of dividends, unless in each instance full
cumulative cash dividends on all outstanding shares of the Preferred Stock
payable on all previous Dividend Payment Dates and the cash dividend on all
outstanding shares of the Preferred Stock for the then current quarterly
dividend period shall have been paid or declared and sufficient funds set
apart therefor.
(d) No dividend shall be declared or paid on any share or shares of
any class of stock or series thereof ranking on a parity with the Preferred
Stock in respect of payment of dividends for any dividend period unless
there shall have been declared or paid on all shares then outstanding of
the Preferred Stock for the same dividend period, or for the dividend
period of the Preferred Stock terminating within the dividend period of
said parity stock, like proportionate dividends, ratably in proportion to
the respective dividend rates fixed for the Preferred Stock and said parity
stock.
3. Preference On Liquidation.
-------------------------
(a) In the event of any voluntary or involuntary liquidation,
distribution of assets (other than the payment of dividends), dissolution
or winding up of the Company, before any payment or distribution of the
assets of the Company (whether capital or surplus) shall be made to or set
apart for the holders of Common Stock or of any other class of stock of the
Company ranking junior to the Preferred Stock in distribution of assets
upon liquidation, the holders of shares of the Preferred Stock shall each
be entitled to receive payment of the stated value per share held by them
plus any accrued and unpaid dividends and interest thereon to the date of
final distribution to such holders, but they shall be entitled to no
further payment with respect to such shares.
(b) Nothing herein contained shall be deemed to prevent redemption of
shares of the Preferred Stock by the Company in the manner provided in
Paragraph 4. Neither the merger nor consolidation of the Company into or
with any other corporation, nor the merger or consolidation of any other
corporation into or with the Company, nor a sale, transfer or
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<PAGE>
lease of all or any part of the assets of the Company, shall be deemed to
be a liquidation, dissolution or winding up of the Company within the
meaning of this Paragraph 3.
(c) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, stating a payment
date and the place where the distributable amounts shall be payable and
containing a statement of or reference to the conversion, if any, right set
forth in Paragraph 6, shall be given, by not less than thirty (30) days
prior to the payment date stated therein, to the holders of record of the
Preferred Stock.
(d) No payment on account of such liquidation, dissolution or winding
up of the affairs of the Company shall be made to the holders of any class
or series of stock ranking on a parity with the Preferred Stock in respect
to the distribution of assets, unless there shall likewise be paid at the
same time to the holders of the Preferred Stock like proportionate
distributive amounts, ratably, in proportion to the full distributive
amounts to which they and the holders of such parity stock are respectively
entitled with respect to such preferential distributions.
4. Redemption.
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(a) At any time and from time to time, the Company, at the option of
the Board of Directors, may redeem all or less than all of the shares of
the Preferred Stock or either series thereof then outstanding at a
redemption price equal to the stated value per share plus all accrued and
unpaid dividends thereon and accrued and unpaid interest thereon to and
including the redemption date.
(b) Notice of any redemption, specifying the date fixed for said
redemption and the place where the amount to be paid upon redemption is
payable, shall be given at least thirty (30) days but not more than sixty
(60) days prior to said redemption date to the holders of record of the
Preferred Stock to be redeemed, if applicable. If such notice of redemption
shall have been so mailed, and if on or before the redemption date
specified in such notice all funds necessary for such redemption shall have
been set aside by the Company separate and apart from its other funds, in
trust for the account of the holders of the shares to be redeemed, so as to
be and continue to be available therefor, then on and after said redemption
date, notwithstanding that any certificate for shares of the Preferred
Stock to be redeemed shall not have been surrendered for cancellation, the
shares represented thereby shall be deemed to be no longer outstanding, the
right to receive dividends thereon shall cease to accrue, and all rights
with respect to such shares of the Preferred Stock shall forthwith cease
and terminate, except only the right of the holders thereof to receive out
of the funds so set aside in trust the amount payable on redemption
thereof, but without interest. However, if such notice of redemption shall
have been so mailed, and, if prior to the date such notice of redemption
shall have been so mailed and prior to the date of redemption specified in
such notice, all said funds necessary for such redemption shall have been
irrevocably deposited in trust, for the account of the holders of the
shares of the Preferred Stock to be redeemed
-3-
<PAGE>
(and so as to be and continue to be available therefor), with a bank or
trust company named in such notice doing business in the City of Tulsa,
Oklahoma, thereupon and without awaiting the redemption date, all such
shares of the Preferred Stock shall be deemed to be no longer outstanding,
and all rights with respect to such shares of the Preferred Stock shall
forthwith upon such deposit in trust cease and terminate, except only the
right, if any, of the holders thereof to convert such shares in accordance
with the provisions of Paragraph 6 at any time prior to the close of
business on the business day next preceding the redemption date, and the
right of the holders thereof on or after the redemption date to receive
from such deposit the amount payable upon the redemption, but without
interest. In case the holders of shares of the Preferred Stock called for
redemption shall not within six years (or any longer period if required by
law) after the redemption date claim any amount so deposited in trust for
the redemption of such shares, such bank or trust company shall, upon
demand, pay over to the Company any such unclaimed amount so deposited with
it, and shall thereupon be relieved of all responsibility in respect
thereof, and thereafter the holders of such shares shall look only to the
Company for payment of the redemption price thereof, but without interest.
(c) Shares of the Preferred Stock redeemed or otherwise purchased or
acquired by the Company shall not be reissued as shares of Series A
Preferred Stock or Series B Preferred Stock, as the case may be, but shall
assume the status of authorized but unissued preferred stock of the
Company.
5. Voting Rights.
-------------
The holders of the Preferred Stock shall not have any voting rights, except
as set forth below or as otherwise are required by law:
(a) If, and so often as, the Company shall fail to declare and pay
dividends on the Preferred Stock at the time outstanding at the rate
specified for such shares for four consecutive Dividend Payment Dates, the
holders of the Preferred Stock will be entitled to vote as a separate
voting group for election, as herein provided, of two additional members of
the Board of Directors of the Company; provided, however, that the holders
of the Preferred Stock shall exercise such special voting rights only at
the next annual meeting of shareholders or any special meeting of
shareholders held in lieu thereof after the fourth such payment date at
which directors are elected and at which the holders of not less than a
majority of the shares of the Preferred Stock, then outstanding, are
present in person or by proxy; and provided further that the special class
voting rights provided for in this subparagraph (a) shall remain vested in
the holders of the Preferred Stock until all accrued and unpaid dividends
on the Preferred Stock then outstanding shall have been declared and paid,
whereupon the holders of the Preferred Stock shall be divested of their
special voting rights in respect of subsequent elections of directors. In
no event shall any voting rights be created with respect to any class or
series of preferred stock of the Company which would be senior to the
voting rights of the Preferred Stock.
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<PAGE>
(b) At any meeting at which the holders of the shares of the
Preferred Stock shall be entitled to elect directors, the holders of a
majority of the outstanding shares of the Preferred Stock, present in
person or by proxy, shall be sufficient to constitute a quorum, and the
vote of the holders of a plurality of such shares so present at any such
meeting at which there shall be such a quorum shall be sufficient to elect
the two members of the Board of Directors which such holders are entitled
to elect as herein provided. Nothing in this subparagraph (b) shall prevent
any change otherwise permitted in the total number of or classifications of
directors of the Company nor require the resignation of any director
elected other than pursuant to this subparagraph (b). Notwithstanding any
classification of the other directors of the Company, any directors elected
by the holders of the Preferred Stock shall be elected annually for terms
expiring at the next succeeding annual meeting of shareholders, subject to
the earlier termination pursuant to the provisions of subparagraph (c)
below.
(c) Upon any divesting of the special class of voting rights of the
holders of the Preferred Stock in respect of elections of directors as
provided in this Paragraph 5, the terms of office of all directors then in
office elected by such holders shall terminate immediately. If the office
of any director elected by such holders, voting as a class, becomes vacant
by reason of death, resignation, removal from office or otherwise, the
remaining director elected by such holders may elect a successor who shall
holder office for the unexpired term in respect of which such vacancy
occurred.
(d) No class or series of stock of the Company ranking senior to the
Preferred Stock in distribution of assets upon liquidation or in payment of
dividends shall be authorized and issued by the Company without the prior
approval of the holders of a majority of the shares of Series A Preferred
Stock then outstanding and holders of a majority of the shares of Series B
Preferred Stock then outstanding.
6. Convertibility.
--------------
Subject to subparagraph 6(m) below, shares of Series A Preferred Stock
shall be convertible into Common Stock on the following terms and conditions:
(a) Subject to and upon compliance with the provisions of this
paragraph 6, the holder of any shares of Series A Preferred Stock shall
have the right, at such holder's option, at any time or from time to time
before the close of business on the date next preceding the date fixed for
redemption or repurchase of such shares of Series A Preferred Stock (unless
the Company shall default in payment due upon such redemption or
repurchase), to convert any of such shares into such number of fully paid
and nonassessable shares of Common Stock at the Conversion Price (as
hereafter defined) therefor in effect at the time of conversion.
(b) Each share of Series A Preferred Stock shall be convertible into
the number of shares of Common Stock that results from dividing the stated
value per share of Series A
-5-
<PAGE>
Preferred Stock by the Conversion Price, as hereinafter defined. The
Conversion Price as of the original date of issuance of Series A Preferred
Stock shall be $4.00 per share of Common Stock subject to adjustment from
time to time as provided herein.
(c) The holder of any shares of Series A Preferred Stock may exercise
the conversion right as to any part thereof by surrendering to the Company
at the office of any transfer agent of the Company for Series A Preferred
Stock or at the principal office of the Company, the certificate or
certificates for the shares to be converted, accompanied by written notice
stating that the holder elects to convert all or a specified portion of the
shares represented thereby and stating the name or names (with addresses)
in which the certificate or certificates for the shares of Common Stock are
to be issued. Subject to the provisions of this paragraph 6, every such
notice of election to convert shall constitute a contract between the
holder of such shares and the Company whereby such holder shall be deemed
to subscribe for the number of shares of Common Stock which he will be
entitled to receive upon such conversion and, in payment and satisfaction
of such subscription, to surrender such shares of Series A Preferred Stock
and to release the Company from all obligations thereon and whereby the
Company shall be deemed to agree that the surrender of such shares and the
extinguishment of obligations thereon shall constitute full payment for
Common Stock so subscribed for and to be issued upon such conversion.
Conversion shall be deemed to have been effected on the date when delivery
of such notice and such shares is made, and such date is referred to herein
as the "Conversion Date." As promptly as practicable thereafter the Company
shall issue and deliver, to or upon the written order of such holder, a
certificate or certificates for the number of full shares of Common Stock
to which such holder is entitled and a check or cash with respect to any
fractional interest in a share of Common Stock as provided in subparagraph
6(j). The person in whose name the certificate or certificates for Common
Stock are to be issued shall be deemed to have become a holder of record of
such Common Stock on the applicable Conversion Date. Upon conversion of
only a portion of the number of shares covered by a certificate
representing shares of Series A Preferred Stock surrendered for conversion,
the Company shall issue and deliver to or upon the written order of the
holder of the certificate so surrendered for conversion, at the expense of
the Company, a new certificate covering the number of shares of Series A
Preferred Stock representing the unconverted portion of the certificate so
surrendered.
(d) If the Company shall at any time or from time to time after the
original issue date of Series A Preferred Stock effect a subdivision or
combination of any outstanding Common Stock, including a dividend payable
in Common Stock, the Conversion Price then in effect immediately before
such subdivision or combination shall be proportionately adjusted by
multiplying the then effective Conversion Price by a fraction, (i) the
numerator of which shall be the number of shares of Common Stock issued and
outstanding immediately prior to such subdivision or combination, and (ii)
the denominator of which shall be the number of shares of Common Stock
issued and outstanding immediately after such subdivision or combination.
The number of shares of Common Stock outstanding at any time shall, for the
purposes of this resolution, include the number of shares of Common
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<PAGE>
Stock into which any convertible securities of the Company, including
Series A Preferred Stock, may be converted, or for which any warrant,
option or rights of the Company may be exercised or exchanged. Any
adjustment under this resolution shall become effective at the close of
business on the date the subdivision or combination becomes effective.
Advance notice of events which would give rise to an adjustment in the
Conversion Price shall be given to holders of Series A Preferred Stock, but
failure to give such notice shall not affect the validity or effectiveness
of such event. No adjustment of the Conversion Price shall be made for the
issuance of shares of Common Stock to employees pursuant to the Company's
or any subsidiary's stock ownership, stock option or other benefit plan. No
adjustment of the Conversion Price will be required to be made in any case
until cumulative adjustments amount to one percent or more of the
Conversion Price. The Company reserves the right to make such changes in
the Conversion Price in addition to those required in the foregoing
provisions as the Company in its discretion shall determine to be advisable
in order that certain stock-related distributions hereafter made by the
Company to its shareholders shall not be taxable.
(e) In the event the Company at any time or from time to time after
the original issue date of Series A Preferred Stock shall make or issue, or
fix a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution payable in (i) evidences of
indebtedness of the Company, (ii) assets of the Company (other than cash
dividends or distributions paid out of retained earnings), or (iii)
securities of the Company other than Common Stock, then and in each such
event provision shall be made so that the holders of Series A Preferred
Stock shall receive upon conversion thereof, in addition to the number of
shares of Common Stock receivable thereupon, the amount of such evidences,
assets or securities that they would have received had they held, on such
record date, the maximum number of shares of Common Stock into which their
Series A Preferred Stock could then have been converted. The Company
reserves the right to make such changes in the Conversion Price in addition
to those required in the foregoing provisions as the Company in its
discretion shall determine to be advisable in order that certain stock-
related distributions hereafter made by the Company to its shareholders
shall not be taxable.
(f) If Common Stock issuable upon the conversion of Series A
Preferred Stock shall be changed into the same or a different number of
shares of any class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Paragraph
6), then and in each such event the holders of Series A Preferred Stock
shall have the right thereafter to convert each such share into the kind
and amounts of shares of stock and other securities and property receivable
upon such reorganization, reclassification or other change, by holders of
the maximum number of shares of Common Stock into which such Series A
Preferred Stock could have been converted immediately prior to such
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<PAGE>
reorganization, reclassification or change, all subject to further
adjustment as provided herein.
(g) If at any time or from time to time there shall be a capital
reorganization of Common Stock (other than a subdivision, combination,
reclassification or exchange of shares provided for in this Paragraph 6) or
a merger or consolidation of the Company with or into another corporation,
or the sale of all or substantially all the Company's properties and assets
or capital stock to any other person, then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made so
that each holder of Series A Preferred Stock shall thereafter be entitled
to receive, upon conversion of Series A Preferred Stock, the number of
shares of stock or other securities or property of the Company, or of the
successor corporation resulting from such merger of consolidation or sale
as though conversion of Series A Preferred Stock had occurred immediately
prior to such event, provided such holder (x) is not the entity with which
the Company consolidated or into which the Company merged or which merged
into the Company or to which such sale or transfer was made, as the case
may be, or an affiliate of such an entity and (y) failed to exercise its
rights of election, if any, as to the kind or amount of securities, cash
and other property receivable upon such consolidation, merger, sale or
transfer. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Paragraph 6 with respect to the
rights of the holders of Series A Preferred Stock after the reorganization,
merger, consolidation or sale to the end that the provisions of this
Paragraph 6 (including adjustment of the Conversion Price then in effect
and the number of shares purchasable upon conversion of Series A Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
(h) Series A Preferred Stock shall not be subject to any sinking fund
for the purchase or redemption of shares.
(i) In each case of an adjustment or readjustment of a Conversion
Price for Common Stock issuable upon conversion of Series A Preferred
Stock, the Company, at its expense, shall cause independent certified
public accountants of recognized standing selected by the Company (who
shall be the independent certified public accountants then reviewing or
auditing the books of the Company) to compute such adjustment or
readjustment in accordance herewith and prepare a certificate showing such
adjustment or readjustment, and shall provide a copy of such certificate to
each registered holder of that Series A Preferred Stock in the manner in
which notices are to be given hereunder. The certificate shall set forth
such adjustment or readjustment and show in detail the facts upon which
such adjustment or readjustment is based.
(j) No fractional shares of Common Stock or scrip shall be issued
upon conversion of shares of Series A Preferred Stock. If more than one
share of Series A Preferred Stock shall be surrendered for conversion at
any one time by the same holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed
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<PAGE>
on the basis of the aggregate number of shares of Series A Preferred Stock
so surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of any shares of Series A Preferred
Stock, the Company shall pay a cash adjustment in respect of such
fractional interest in an amount equal to that fractional interest of the
then Current Market Price. The "Current Market Price" at any date shall
mean the price per share of Common Stock on such date determined by the
Board of Directors as provided below. The Current Market Price shall be the
average of the daily closing prices per share of Common Stock for thirty
(30) consecutive business days ending no more than fifteen (15) business
days before the day in question (as adjusted for any stock dividend, split,
combination or reclassification that took effect during such thirty (30)
business day period). The closing price for each day shall be the last
reported sales price regular way or, in case no such reported sales take
place on such day, the average of the last reported bid and asked prices
regular way, in either case on the principal national securities exchange
on which Common Stock is listed or admitted to trading, or if not listed or
admitted to trading on any national securities exchange, the average of the
highest bid and the lowest asked prices quoted on The Nasdaq Stock Market;
provided, however, that if Common Stock is not traded in such manner that
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the quotations referred to above are available for the period required
hereunder, Current Market Price per share of Common Stock shall be deemed
to be the fair value as determined by the Board of Directors, irrespective
of any accounting treatment.
(k) If the shares of Series A Preferred Stock shall be called for
redemption, the right to convert such shares shall terminate and expire at
the close of business on the last business day preceding the redemption
date.
(l) The Company shall pay any tax in respect of the issue of stock
certificates on conversion of shares of Series A Preferred Stock. The
Company 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 stock in a
name other than that of the holder of the shares converted, and the Company
shall not be required to issue or deliver any such stock certificate unless
and until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of any such tax or shall have established to
the satisfaction of the Company that such tax has been paid.
(m) The Company shall, as soon as reasonably practicable, propose to
its shareholders approval of an amendment to the Company's certificate of
incorporation increasing the number of authorized shares of Common Stock to
an amount which is at least sufficient to have available the full number of
shares of Common Stock that would be issuable upon an exercise in full of
all of the outstanding shares of Series A Preferred Stock. Thereafter, the
Company shall at all times reserve and keep available out of its authorized
Common Stock the full number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of Series A Preferred Stock and shall
take all such action as may be required from time to time in order that it
may validly and legally issue fully paid and
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<PAGE>
nonassessable shares of Common Stock upon conversion of Series A Preferred
Stock. As a condition precedent to the taking of any action which would
cause an adjustment to the Conversion Price for Series A Preferred Stock,
the Company will take such corporate action as may, in the opinion of its
counsel, be necessary to authorize such number of shares of Common Stock as
shall be issuable pursuant to such adjusted Conversion Price.
(n) Shares of Series A Preferred Stock converted shall not be
reissued as shares of Series A Preferred Stock, but shall assume the status
of authorized but unissued shares of preferred stock of the Company.
(o) If any shares of Common Stock to be reserved for the purpose of
conversion of shares of Series A Preferred Stock require registration with
or approval of any governmental authority under any federal or state law
before such shares may be validly issued or delivered upon conversion, then
the Company will in good faith and as expe ditiously as possible endeavor
to secure such registration or approval, as the case may be. If, and so
long as, any shares of Common Stock into which the shares of Series A
Preferred Stock are then convertible are listed on any national securities
exchange or The Nasdaq Stock Market, the Company will, if permitted by the
rules of such exchange, list and keep listed on such exchange or The Nasdaq
Stock Market, as the case may be, upon official notice of issuance, all
shares of Common Stock issuable upon conversion.
(p) All shares of Common Stock which may be issued upon conversion of
the shares of Series A Preferred Stock will upon issuance by the Company be
duly and validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issuance thereof and the
Company shall take no action which will cause a contrary result.
The shares of Series B Preferred Stock are not convertible into shares of the
Company's Common Stock or any other securities of the Company.
7. Sinking Fund.
------------
No sinking fund will be established for the retirement or redemption of
shares of the Preferred Stock.
8. Authorized Shares.
-----------------
The number of authorized shares of Series A Preferred Stock and/or Series B
Preferred Stock may be increased or decreased by further resolutions duly
adopted by the Board of Directors of the Company and the filing of a certificate
pursuant to the provisions of the Oklahoma General Corporation Act stating that
such increase or decrease has been so authorized.
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<PAGE>
9. General Provisions.
------------------
(a) Any notice required by the provisions of this resolution to be
given to holders of record of the Preferred Stock shall be deemed given
when personally delivered to such holder or five business days after the
same has been deposited in the United States mail, certified or registered
mail, return receipt requested, postage prepaid, and addressed to that
holder of record at its address appearing on the books of the Company.
(b) The Company shall not amend the certificate of incorporation of
the Company or participate in any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, for the purpose of avoiding or
seeking to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company.
IN WITNESS WHEREOF, said ADDvantage Media Group, Inc. has caused this
Certificate to be signed by Charles H. Hood, as President, and its corporate
seal to be hereunto affixed and attested by Del L. Gustafson, as Secretary, this
28/th/ day of September, 1999, and each of said persons by his signature hereto
affirms that this Certificate is his act and deed and the act and deed of said
Company, and that the facts stated therein are true.
ADDVANTAGE MEDIA GROUP, INC.
By: /s/ Charles. H. Hood
--------------------------------------
Charles H. Hood, President
[SEAL]
Attest:
/s/ Del L. Gustafson
- -----------------------------
Del L. Gustafson, Secretary
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