U.S. WIRELESS DATA, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
FIRST: That the name of the Corporation is U.S. Wireless Data, Inc.
SECOND: That the text of the Amendment to the Articles of Incorporation of
the Corporation (a) removing all shares of previously designated Series A
Preferred Stock from the status of outstanding shares and returning such shares
to the status of authorized and unissued shares of undesignated preferred stock
and (b) amending the designations, preferences, limitations and relative rights
of the Series B Preferred Stock is set forth on Exhibit A attached hereto and is
incorporated herein by reference.
THIRD: That the Amendment was adopted on January 4, 2000.
FOURTH: That the Amendment was duly adopted by the Board of Directors of
the Corporation.
IN WITNESS WHEREOF, U.S. Wireless Data, Inc. has caused these Articles of
Amendment to be duly executed this 2ND day of March, 2000.
U.S. Wireless Data, Inc.
By: /s/ Dean M/ Leavitt
--------------------------
Dean M. Leavitt,
Chief Executive Officer
ATTEST:
/s/ Charles I. Leone
------------------------
Charles I. Leone,
Secretary
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Exhibit A
REMOVAL FROM DESIGNATION OF ALL SHARES OF
SERIES A CUMULATIVE CONVERTIBLE
REDEEMABLE PREFERRED STOCK
U.S. Wireless Data, Inc., a Colorado corporation (the "Corporation"),
hereby removes from designation all shares of its previously designated Series A
Cumulative Convertible Redeemable Preferred Stock (the "Series A Preferred
Stock"), for the reasons set forth below:
1. On February 9, 1998, the Corporation filed Articles of Amendment to
it Articles of Incorporation designating a total of Four Million shares of its
no par value preferred stock as Series A Preferred Stock.
2. The Corporation issued a total of 3,060,000 shares of Series A
Preferred Stock, but did not issue any of the remaining designated shares of
Series A Preferred Stock.
3. The Corporation has exchanged all outstanding shares of Series A
Preferred Stock for shares of its no par value Common Stock and there remain no
shares of Series A Preferred Stock outstanding, and the Corporation has no plans
to issue or reissue any shares of Series A Preferred Stock.
4. There is therefore removed from designation all shares of
previously designated Series A Preferred Stock and all such previously issued
and authorized shares of Series A Preferred Stock are hereby reclassified as
unissued shares of no par value preferred stock.
DESIGNATION OF SERIES B CUMULATIVE
CONVERTIBLE REDEEMABLE PREFERRED STOCK
The Corporation hereby amends its designation of Series B Cumulative
Convertible Redeemable Preferred Stock (which was originally designated by
filing of Articles of Amendment to the Articles of Incorporation (the "Series B
Designation") with the Colorado Secretary of State on April 29, 1999) to remove
from designation as Series B Cumulative Convertible Redeemable Preferred Stock
("Series B Preferred Stock"), all but 1,954,705 shares (out of 5,000,000 shares
originally designated as Series B Preferred Stock). Other than such change to
the Series B Designation, such Series B Designation remains unchanged.
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A. Description and Designation of Series B Preferred
1. Designation and Definitions.
(a) Designation. One Million Nine Hundred Fifty Four Thousand Seven
Hundred and Five (1,954,705) shares of the Corporation's 15,000,000 total
authorized shares of no par value preferred stock are hereby designated as
Series B Cumulative Convertible Redeemable Preferred Stock (hereinafter referred
to as the "Series B Preferred"). The Series B Preferred shall have a stated
value (original issue price) of one dollar ($1.00) per share (the "Original
Issue Price").
(b) Certain Definitions. As used herein, the following terms, unless
the context otherwise requires, have the following respective meanings:
(i) "Average Quoted Price" means the average of the closing bid
price of the Common Stock of the Corporation as reported by the Nasdaq Bulletin
Board, Nasdaq SmallCap Market or Nasdaq National Market or, if the Corporation's
Common Stock is no longer traded on a Nasdaq market, such other exchange on
which the Corporation's Common Stock is then traded, for the five (5) trading
days immediately preceding any holder's Conversion Date, the Mandatory
Conversion Date (as defined in Section 5(c) below) or the date of the
consummation or closing of a Fundamental Change, as the case may be.
(ii) "Conversion Date" means each date on which the Corporation
receives by telecopy written notice in accordance with Section 5(j) hereof from
a holder of Series B Preferred that such holder elects to convert shares of its
Series B Preferred.
(iii) "Fundamental Change" means: (i) any sale, lease, exchange
or other transfer of all or substantially all of the assets of the Corporation;
or (ii) any merger or consolidation to which the Corporation is a party.
Notwithstanding the foregoing, the following shall not be a Fundamental Change:
A merger or consolidation (a) to which the Corporation is a party; (b) in which
it is the surviving corporation and there is no resulting reclassification of
the outstanding Common Stock; and (c) after giving effect to which, persons who
were, immediately before the consummation or closing of such merger or
consolidation, holders of outstanding Common Stock will be the direct or
indirect owners of securities of the Corporation possessing, on a fully diluted
basis, at least seventy-five percent (75%) of the voting power of all voting
securities of the Corporation (excluding, for purposes of such computation, any
such person who also is a party to such merger or consolidation).
(iv) "Issue Date" means, with respect to each share of Series B
Preferred held by any holder, the date on which the Corporation originally
issued such share to such holder (irrespective of any subsequent transfer or
other disposition of such share to any other holder).
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2. Dividends.
(a) Preferred Dividend - Cash and/or In-Kind. When and as declared by
the Board of Directors and to the extent permitted by the Colorado Business
Corporation Act, the Corporation shall pay preferential dividends to the holders
of the Series B Preferred as provided in this Section 2(a).
(i) Preferred Dividend. Except as otherwise provided herein,
dividends on each share of Series B Preferred shall accrue, cumulatively on a
daily basis, at the rate of six percent (6%) per annum of the Original Issue
Price, from and including the Issue Date of such share to and including the date
on which the Liquidation Value of such share is paid or such share is converted
in accordance with the provisions hereof (the "Preferred Dividend"). Such
Preferred Dividend will accrue whether or not it has been declared and whether
or not there are profits, surplus or other funds of the Corporation legally
available for its payment.
(ii) Semi-Annual Payments. Commencing on September 30, 1999, the
Preferred Dividend shall be payable in cash (subject to Section 2(a)(v) below)
semi-annually, for the actual number of days elapsed, on each March 31 and
September 30, to the holders of record of shares of Series B Preferred as of the
tenth (10th) trading day preceding the applicable dividend payment date.
(iii) No Interest. Accrued but unpaid Preferred Dividends shall
not bear interest. Preferred Dividends paid in cash in an amount less than the
total amount of such dividends at the time accrued and payable shall be
allocated on a share-by-share basis among all shares of Series B Preferred at
the time outstanding.
(iv) Payment Upon Conversion. On the date on which any holder's
shares of Series B Preferred are converted into Common Stock pursuant to Section
5 hereof, the accrued Preferred Dividend with respect to the shares so converted
shall be paid to such holder. All accrued Preferred Dividends also shall be
payable upon the liquidation, dissolution or winding up of the Corporation.
(v) Payment in Common Stock. The Corporation, at its sole
discretion, may pay the Preferred Dividends in cash or in shares of Common Stock
at the then fair market value per share of Common Stock as of the date on which
the Preferred Dividend is payable. For purposes of this Section 2(a)(v), fair
market value shall be the average of the closing bid price of the Common Stock
of the Corporation as reported by the Nasdaq SmallCap Market or Nasdaq National
Market or, if the Corporation's Common Stock is no longer traded on a Nasdaq
market, such other exchange on which the Corporation's Common Stock is then
traded, for the five (5) trading days immediately preceding the date on which
the Preferred Dividend is payable.
(vi) Fractional Shares. Notwithstanding anything herein to the
contrary, no fractional shares shall be issued pursuant to this Section 2, and
the number of shares of Common Stock issued upon the payment of the Preferred
Dividend shall be rounded up or down to the nearest whole share, with fractional
shares of 0.5 or greater being rounded up.
(b) Declared Dividends on Common Stock. If the Board of Directors
shall declare a cash dividend payable upon the then outstanding shares of Common
Stock (other than a stock dividend on the Common Stock distributed solely in the
form of additional shares of Common Stock), the holders of the Series B
Preferred Stock shall be entitled to the amount of dividends on the Series B
Preferred as would be declared payable on the largest number of whole shares of
Common Stock into which the shares of Series B Preferred held by each holder
thereof could be converted pursuant to the provisions of Section 5 hereof, such
number determined as of the record date for the determination of holders of
Common Stock entitled to receive such dividend. Such determination of "whole
shares" shall be based upon the aggregate number of shares of Series B Preferred
held by each holder, and not upon each share of Series B Preferred so held by
the holder.
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(c) Dividends on Other Securities. Subject to the foregoing provisions
of this Section 2, the Board of Directors may declare and the Corporation may
pay or set apart for payment, or cause the accrual of, stated or cumulative
dividends and other distributions on the Series A Preferred Stock of the
Corporation, or any other series of preferred stock hereafter designated, and
may purchase or otherwise redeem any of the same (or any warrants, rights,
options or other securities exercisable therefor or convertible or exchangeable
there into), and the holders of Series B Preferred shall not be entitled to
share therein.
3. Liquidation, Dissolution or Winding Up.
(a) Treatment at Liquidation, Dissolution or Winding Up. In the event
of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, or in the event of its insolvency, before any
distribution or payment is made to any holders of Common Stock or any other
class or series of capital stock of the Corporation designated to be junior to
the Series B Preferred, and subject to the liquidation rights and preferences of
any class or series of Preferred Stock designated by the Board of Directors in
the future to be senior to or on a parity with the Series B Preferred with
respect to liquidation preferences, the holder of each share of Series B
Preferred shall be entitled to be paid first out of the assets of the
Corporation available for distribution to holders of the Corporation's capital
stock of all classes, whether such assets are capital, surplus or earnings, an
amount equal to the Original Issue Price per share of Series B Preferred held by
any holder, plus the Preferred Dividend accruing to such share of Series B
Preferred pursuant to Section 2 above (the "Liquidation Value"). For purposes
hereof, the Series B Preferred shall rank on liquidation junior to the Series A
Preferred Stock.
If, upon liquidation, dissolution or winding up of the Corporation,
the assets of the Corporation available for distribution to its stockholders
shall be insufficient to pay the holders of the Series B Preferred the full
amount to which they otherwise would be entitled, the holders of Series B
Preferred shall share ratably in any distribution of available assets pro rata
in proportion to the respective liquidation preference amounts which would
otherwise be payable upon liquidation with respect to the outstanding shares of
the Series B Preferred if all liquidation preference amounts with respect to
such shares were paid in full, based upon the aggregate Liquidation Value
payable upon all shares of Series B Preferred then outstanding.
After such payment shall have been made in full to the holders of the
Series B Preferred, or funds necessary for such payment shall have been set
aside by the Corporation in trust for the account of holders of the Series B
Preferred so as to be available for such payment, the remaining assets available
for distribution shall be distributed ratably among the holders of the Common
Stock and any class or series of capital stock designated to be junior to the
Series B Preferred (if any) in right of payment upon any liquidation,
dissolution or winding up of the Corporation.
The amounts set forth above shall be subject to equitable adjustment
by the Board of Directors whenever there shall occur a stock dividend, stock
split, combination, reorganization, recapitalization, reclassification or other
similar event involving a change in the capital structure of the Series B
Preferred.
(b) Distributions Other than Cash. Whenever the distributions provided
for in this Section shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors. All distributions (including
distributions other than cash) made hereunder shall be made pro rata to the
holders of Series B Preferred.
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(c) Events Not Deemed a Liquidation. Neither the merger or
consolidation of the Corporation into or with any other corporation(s), nor the
sale or transfer by the Corporation of all or any part of its assets, nor the
reduction of the capital stock of the Corporation, will be deemed to be a
liquidation, dissolution or winding up of the Corporation under this Section 3.
4. Voting Power.
(a) General. The holders of Series B Preferred will not have any
voting rights except as set forth below or as otherwise from time to time
required by law. To the extent that under Colorado law the vote of the holders
of Series B Preferred, voting separately as a class, is required to authorize a
given action of the Corporation, the affirmative vote or consent of the holders
of at least a majority of the outstanding shares of Series B Preferred shall
constitute the approval of such action by the class. To the extent that under
Colorado law the holders of Series B Preferred are entitled to vote on a matter
with holders of Common Stock, voting together as one class, each share of Series
B Preferred shall be entitled to a number of votes equal to the number of shares
of Common Stock into which it is then convertible using the record date for the
taking of such vote of stockholders as the date as of which the Conversion Price
is calculated. Holders of Series B Preferred shall be entitled to notice of all
shareholders meetings or written consents regardless of whether they would be
entitled to vote with respect thereto, which notice would be provided pursuant
to the Corporation's by-laws and applicable statutes.
(b) Amendments to Charter. For so long as there are any shares of
Series B Preferred outstanding, the Corporation shall not amend its Articles of
Incorporation or this Certificate of Designation without the approval, by vote
or written consent, of the holders of at least a majority of the then
outstanding shares of Series B Preferred, voting together as a class, each share
of Series B Preferred to be entitled to one vote in each instance, if such
amendment would adversely affect the rights of the holders of Series B
Preferred; provided, that the creation, or increase in the authorized number of
shares, of any class or series of stock ranking prior to or on a parity with the
Series B Preferred either as to dividends or upon liquidation shall not be
deemed to adversely affect the rights of the holders of Series B Preferred for
purposes of this Section 4(b).
5. Conversion Rights.
(a) Conversion at the Option of Holders. Beginning the earlier of
ninety (90) days after the Issue Date to such holder, or five (5) days after
notice by the Securities and Exchange Commission that the Registration Statement
(filed with the SEC pursuant to the Registration Rights Agreement, dated the
date hereof, between the Company and the holders of the Series B Preferred) may
be declared effective, each such holder of Series B Preferred shall have the
right, at such holder's option, to convert up to fifty percent (50%) of the
shares of Series B Preferred held by such holder into such number of fully paid
and nonassessable shares of Common Stock as shall be determined by multiplying
the number of shares of Series B Preferred to be converted by a fraction, the
numerator of which is the Original Issue Price, and the denominator of which is
the applicable Conversion Price (as defined below). Beginning thirty (30) days
thereafter, all of the Preferred Stock shall, at the option of the Holder, be
convertible.
(b) Conversion Price. The conversion price per share (the "Conversion
Price") shall be equal to Eighty Percent (80%) of the Average Quoted Price.
(c) Conversion at Option of Corporation. At any time after the close
of business on the second (2nd) year anniversary of the date on which the
Securities and Exchange Commission declares effective the registration statement
registering the shares of Common Stock issuable upon conversion of the Series B
Preferred, all of the shares of Series B Preferred shall be convertible, at the
option of the Corporation, into such number of fully paid and nonassessable
shares of Common Stock as shall be determined by multiplying the number of
shares of Series B Preferred outstanding on the Mandatory Conversion Date (as
defined below) by a fraction, the numerator of which is the Original Issue
Price, and the denominator of which is the applicable Conversion Price.
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The Corporation shall give notice of its exercise of such conversion
option to all holders of Series B Preferred no later than five (5) trading days
before the date as of which the Corporation has elected to make such conversion
effective (such effective date of the conversion, the "Mandatory Conversion
Date"). Each holder of Series B Preferred as of the Mandatory Conversion Date
shall, promptly after such date, surrender for conversion to the Corporation at
its principal office or to any transfer agent for the Series B Preferred or the
Common Stock all certificates representing all shares of Series B Preferred held
by such holder, accompanied by a written notice specifying the name or names in
which such holder wishes the certificate(s) for shares of Common Stock to be
issued.
Effective as of the close of business on the Mandatory Conversion
Date, each share of Series B Preferred then outstanding shall be (and be deemed
to have been) converted automatically, without any further action by the holders
thereof, into shares of Common Stock. Such conversion shall be deemed to have
occurred whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent.
(d) Limitation on Number of Shares. Additionally, notwithstanding
anything set forth in this Section 5 to the contrary:
(i) in no event shall any holder of Series B Preferred, prior to
the earlier to occur of the Mandatory Conversion Date or the date of the
consummation or closing of a Fundamental Change, be entitled to convert Series B
Preferred into shares of Common Stock to the extent that (x) the number of
shares of the Corporation's Common Stock beneficially owned by such holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
shares of Series B Preferred held by such holder) plus (y) the number of shares
of Common Stock issuable upon such conversion would result in beneficial
ownership by the holder and its affiliates of more than 4.99% of the shares of
Common Stock then outstanding. For purposes of this Section 5(d), beneficial
ownership shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Regulation 13D and 13G promulgated
thereunder, except as otherwise provided in clause (x) of this Section 5(d).
Each holder shall, upon delivering to the Corporation a notice of election to
convert shares of Series B Preferred in accordance with Section 5(j) hereof, be
required to provide the Corporation with a certification in form and substance
reasonably satisfactory to the Corporation, that the conversion of the Series B
Preferred being converted will not result in such holder and its affiliates
beneficially holding more than 4.99%, determined as heretofore provided, of the
outstanding shares of Common Stock on such Conversion Date. If the holder cannot
make such certification, the shares of Series B Preferred to be converted shall
not be convertible. Notwithstanding the foregoing, upon the Mandatory Conversion
Date or upon the consummation or closing of a Fundamental Change, all such
shares of Series B Preferred then outstanding shall be converted into Common
Stock in accordance with Section 5(c) or 5(h), as applicable.
(ii) the maximum number of shares which will be issued on
conversion of the Series B Preferred and exercise of the Warrants, if any, is
3,472,583 (20% of the outstanding shares) (the "Share Cap") unless and until the
shareholders of the Corporation shall have approved the issuance of shares of
Common Stock beyond the Cap, if such approval is required by the NASD or NASDAQ,
subject to the redemption rights of the holders of the Series B Preferred set
forth in Sections 4(i)(x) and (y) of the Securities Purchase Agreement.
(e) Intentionally Deleted.
(f) Dividends Other Than Common Stock Dividends. In the event the
Corporation shall make or issue, or shall fix a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
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distribution (other than a distribution in liquidation or other distribution
otherwise provided for herein) with respect to the Common Stock payable in (i)
securities of the Corporation other than shares of Common Stock, or (ii) other
assets (excluding cash dividends or distributions), then and in each such event
provision shall be made so that the holders of the Series B Preferred shall
receive upon conversion thereof in addition to the number of shares of Common
Stock receivable thereupon, the number of securities or such other assets of the
Corporation which they would have received had their Series B Preferred been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the Conversion
Date, retained such securities or such other assets receivable by them during
such period, giving application to all other adjustments called for during such
period under this Section 5 with respect to the rights of the holders of the
Series B Preferred.
(g) Capital Reorganization or Reclassification. If the Common Stock
issuable upon the conversion of the Series B Preferred shall be changed into the
same or different number of shares of any class or classes of capital stock,
whether by capital reorganization, recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for elsewhere in this Section 5, or the sale of all or substantially
all of the Corporation's capital stock or assets to any other person), then and
in each such event the holders of Series B Preferred shall have the right
thereafter to convert such shares into the kind and amount of shares of capital
stock and other securities and property receivable upon such reorganization,
recapitalization, reclassification or other change by the holders of the number
of shares of Common Stock into which such shares of Series B Preferred might
have been converted immediately prior to such reorganization, recapitalization,
reclassification or change, all subject to further adjustment as provided
herein.
(h) Mandatory Conversion - Fundamental Change. If any Fundamental
Change shall occur, then each share of Series B Preferred outstanding as of the
date of the consummation or closing thereof shall be (and be deemed to have
been) converted automatically, without any further action by the holders
thereof, into such number of fully paid and nonassessable shares of Common Stock
as shall be determined by multiplying the number of shares of Series B Preferred
outstanding on the date of such consummation or closing date by a fraction, the
numerator of which is the Original Issue Price, and the denominator of which is
the applicable Conversion Price. Such conversion shall be deemed to have
occurred whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent.
The Corporation shall give notice of a proposed or anticipated
Fundamental Change to all holders of the Series B Preferred not later than ten
(10) trading days before the expected closing or consummation of such
Fundamental Change. The Corporation also shall give prompt notice of the closing
or consummation of such Fundamental Change to all holders of record of the
Series B Preferred as of the date of such closing or consummation. Each holder
of Series B Preferred shall thereupon promptly surrender for conversion, to the
Corporation at its principal office or to any transfer agent for the Series B
Preferred or the Common Stock, all certificates representing all shares of
Series B Preferred held by such holder, accompanied by a written notice
specifying the name or names in which such holder wishes the certificate(s) for
shares of Common Stock to be issued.
(i) Certificate as to Adjustments; Notice by Corporation. In each
case of an adjustment or readjustment of the Original Issue Price, the
Corporation at its expense will furnish each holder of Series B Preferred so
affected with a certificate prepared by an officer of the Corporation, showing
such adjustment or readjustment, and stating in detail the facts upon which such
adjustment or readjustment is based.
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(j) Exercise of Conversion Privilege. To exercise its conversion
privilege, a holder of Series B Preferred shall give written notice by telecopy
to the Corporation at its principal office that such holder elects to convert
shares of its Series B Preferred and shall thereafter surrender the original
certificate(s) representing the shares being converted to the Corporation at its
principal office together with an originally executed copy of such notice. Such
notice shall also state the name or names (with its address or addresses, as
well as the address(es) for delivery) in which the certificate(s) for shares of
Common Stock issuable upon such conversion shall be issued. The certificate(s)
for the shares of Series B Preferred surrendered for conversion shall be
accompanied by proper assignment thereof to the Corporation or in blank. As
promptly as practicable after the Corporation receives the original
certificate(s) for the shares of Series B Preferred surrendered for conversion,
the proper assignment thereof to the Corporation or in blank and the original
notice of conversion (collectively, the "Original Documentation"), but in no
event more than three (3) trading days after the Corporation's receipt of the
Original Documentation, the Corporation shall issue and deliver to the holder of
the shares of Series B Preferred being converted, at the addresses set forth
therefor by the holder, such certificate(s) as it may request for the number of
whole shares of Common Stock issuable upon the conversion of such shares of
Series B Preferred in accordance with the provisions of this Section 5. Such
conversion shall be deemed to have been effected immediately prior to the close
of business on the Conversion Date, and at such time the rights of the holder as
holder of the converted shares of Series B Preferred shall cease and the
person(s) in whose name(s) any certificate(s) for shares of Common Stock shall
be issuable upon such conversion shall be deemed to have become the holder(s) of
record of the shares of Common Stock represented thereby. If the Corporation
fails to issue and deliver to such holder such certificate(s) for shares of
Common Stock within three (3) trading days after the Corporation's receipt of
the Original Documentation, the Corporation shall pay the liquidated damages set
forth in Section 5 of the Stock Purchase Agreement between the Corporation and
the purchasers of the Series B Preferred (the "Stock Purchase Agreement"). No
issuance of shares in any name other than the original holder shall be effected
unless such transfer is in compliance with the transfer restrictions contained
in the Stock Purchase Agreement.
(k) Fractional Shares. No fractional shares of Common Stock or
scrip representing fractional shares shall be issued upon the conversion of
shares of Series B Preferred. Instead of any fractional shares of Common Stock
that would otherwise be issuable upon conversion of Series B Preferred, the
number of shares issuable upon conversion shall be rounded up or down to the
nearest whole share, with fractional shares of 0.5 or greater being rounded up.
(l) Partial Conversion. In the event some but not all of the
shares of Series B Preferred represented by a certificate(s) surrendered by a
holder are converted, the Corporation shall execute and deliver to or on the
order of the holder, at the expense of the Corporation, a new certificate
representing the number of shares of Series B Preferred which were not
converted. Such new certificate shall be so delivered on or prior to the date
set forth in Section 5(j) for the delivery of certificates for shares of Common
Stock.
(m) Reservation of Common Stock. The Corporation shall at all
times reserve and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion of the shares
of the Series B Preferred, 150% of such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series B Preferred (including any shares of Series B
Preferred represented by any warrants, options, subscription or purchase rights
for the Series B Preferred), and if at any time the number of authorized but
unissued shares of Common Stock shall not be 150% of the number of such shares
sufficient to effect the conversion of all then outstanding shares of the Series
B Preferred (including any shares of Series B Preferred represented by any
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warrants, options, subscriptions or purchase rights for the Series B Preferred),
then the Corporation shall be deemed to be in breach and default of its
obligations hereunder, and in addition to all charges, claims and rights at law
or in equity that each holder shall be entitled to, the Corporation shall use
all means reasonably available to it, and promptly take any and all actions as
may be necessary, to increase its authorized but unissued shares of Common Stock
to such number of shares as shall be 150% of the amount sufficient for such
purpose.
6. Redemption and Repurchase Rights. The Corporation shall have no right to
redeem and holders of shares of Series B Preferred shall have no right to cause
the Corporation to redeem, any or all of the outstanding shares of Series B
Preferred, except as follows:
(a) if a holder of shares of Series B Preferred submits Original
Documentation relating to the conversion of shares of Series B Preferred in the
manner provided for in Section 5(j) and the number of shares of Common Stock
issuable upon such conversion is limited by reason of the Share Cap described in
Section 5(d)(ii), the Corporation shall, on demand of any holder of Series B
Preferred, redeem any portion of the Series B Preferred not exercisable as a
result of such limitation at a redemption price equal to $1.25 per share plus
accrued dividends (the "Share Cap Redemption Price"). The Share Cap Redemption
Price shall be payable within five (5) business days after demand for such
redemption is made.
(b) if (i) the Registration Statement is not filed within sixty
(60) days from the Closing Date (as defined in the Registration Rights
Agreement) or (b) the Required Effective Date (as defined in the Registration
Rights Agreement) is greater than one hundred fifty (150) days after the Closing
Date, or (c) the effectiveness of the Registration Statement is not maintained
during the Registration Period (as defined in the Registration Rights Agreement)
each holder may, at its option, require the Company to redeem the Preferred
Shares in full, within three (3) days, in cash, at the Share Cap Redemption
Price.
(c) in the event that the Company does not register the Preferred
Stock within 150 days after the Closing Date (as defined in the Registration
Rights Agreement), as more particularly described in Section 2 of the
Registration Rights Agreement, the Company shall redeem the Preferred Shares at
the Share Cap Redemption Price within three (3) business days after it has
received demand for such redemption from the holders of the Series B Preferred.
In exercising its rights hereunder or pursuant to Section 6(a) above the holders
can individually exercise their respective redemption rights without the
participation of the other holders.
7. Notices of Record Date. In the event of any:
(a) taking by the Corporation of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of capital stock of any
class or any other securities or property, or to receive any other right, or
(b) capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger or consolidation of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation to any other Corporation, or
any other entity or person, or
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(c) voluntary or involuntary dissolution, liquidation or winding
up of the Corporation, then and in each such event the Corporation shall
telecopy and thereafter mail or cause to be mailed to each holder of Series B
Preferred a notice specifying (i) the date on which any such record is to be
taken for the purpose of such dividend, distribution or right and a description
of such dividend, distribution or right, (ii) the date on which any such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (iii) the time, if any, that is to be fixed, as to when the holders of
record of Common Stock (or other securities) shall be entitled to exchange their
shares of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding up. Such
notice shall be telecopied and thereafter mailed by first class mail, postage
prepaid, or by express overnight courier service, at least ten (10) days prior
to the date specified in such notice on which such action is to be taken.
8. General.
(a) Replacement of Certificates. Upon the Corporation's receipt,
from the holder of any certificate evidencing shares of Series B Preferred, of
evidence reasonably satisfactory to the Corporation (an affidavit of such holder
will be satisfactory) of the ownership and the loss, theft, destruction or
mutilation of such certificate, and in the case of any such loss, theft or
destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation, and in the case of any such mutilation, upon surrender of such
certificate, the Corporation (at its expense) shall execute and deliver to such
holder, in lieu of such certificate, a new certificate that represents the
number of shares represented by, is dated the date of, is issued in the name of
the holder of, and is substantially identical in form of, such lost, stolen,
destroyed or mutilated certificate.
(b) Payment of Taxes. The Corporation shall pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
in connection with the issuance or delivery of any shares of Common Stock (or
other of the Corporation's securities) that results from (i) the conversion of
shares of Series B Preferred pursuant to this Certificate of Designations or
(ii) the application of Section 2(a)(v) hereof. Notwithstanding the foregoing,
if the Corporation, pursuant to a notice from a holder of any shares of Series B
Preferred, effects the issuance or delivery of any shares of Common Stock (or
other of the Corporation's securities) in any name(s) other than such holder's
name, then such holder shall deliver to the Corporation with the aforesaid
notice (A) all transfer taxes and other governmental charges payable upon the
issuance or delivery of securities in such other name(s) or (B) evidence
satisfactory to the Corporation that such taxes and charges have been or shall
be paid in full.
(c) Status of Redeemed or Converted Shares. Shares of Series B
Preferred that are redeemed, converted or otherwise acquired by the Corporation
in any manner (including by purchase or exchange) shall be canceled and upon
cancellation (i) shall no longer be deemed to be outstanding, (ii) shall become
authorized but unissued shares of preferred stock undesignated as to series and
(iii) may be reissued as part of another series of preferred stock.
[End of Certificate of Designation]
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