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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of earliest event reported: July 20, 1998
AUTONOMOUS TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
Florida 000-28278 59-2554729
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
2800 Discovery Drive, Orlando, Florida 32826
(Address of registrant's principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 384-1600
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ITEM 5: OTHER EVENTS.
On July 20, 1998, the Company's board or directors authorized an amendment
to the Company's Third Amended and Restated Articles of Incorporation. On August
3, 1998, the Company filed the Articles of Amendment to the Third Amended and
Restated Articles of Incorporation, which set forth the terms of the newly
designated Series I Convertible Preferred Stock. The Third Amended and Restated
Articles of Incorporation, as amended, are filed as Exhibit 3.1 to this Form 8-
K.
EXHIBITS
Exhibit Number Exhibit Description
- ---------------- --------------------------------------------------------------
3.1 Third Amended and Restated Articles of Incorporation, as
amended
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 hereunto duly authorized.
Autonomous Technologies Corporation
Date: August 18, 1998 By: /s/ Randy W. Frey
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Randy W. Frey, Chief Executive Officer
INDEX TO EXHIBITS
Exhibit Number Exhibit Description
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3.1 Third Amended and Restated Articles of Incorporation, as
amended
2
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Exhibit 3.1
THIRD AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF
AUTONOMOUS TECHNOLOGIES CORPORATION,
as amended
ARTICLE I
NAME AND ADDRESS
The name of the Corporation and the street address of both its initial and
current principal office are:
Autonomous Technologies Corporation
520 North Semoran Boulevard
Orlando, Florida 32807
ARTICLE II
DURATION
The Corporation began its existence on July 23, 1985, which was the
effective date of the Initial Articles; and the Corporation shall have perpetual
existence.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any activities or business
permitted under the laws of the United States and the State of Florida.
ARTICLE IV
CAPITAL STOCK
The maximum number of shares of its common stock that the Corporation is
authorized to have outstanding at any one time is 25,000,000 shares, $0.01 per
share par value (the "Common Stock"). The maximum number of shares of its
preferred stock that the Corporation is authorized to have outstanding at any
time is 1,000,000 shares, $0.01 per share par value (the "Preferred Stock").
The consideration to be paid for each share shall be fixed by the Board and may
be paid in whole or in part in cash or other property, tangible or intangible,
or in labor or services actually performed or to be performed for the
Corporation, with a value, in the judgment of the directors, equivalent to or
greater than the full value of the shares.
COMMON STOCK. Subject to the rights of the Corporation's preferred stock
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and except as otherwise provided by the laws of the State of Florida, the
holders of record of Common Stock shall share ratably in all dividends, payable
in cash, stock or otherwise, and other distributions, whether in respect of
liquidation or dissolution (voluntary or involuntary) or otherwise. The holders
of Common Stock shall be entitled to one vote per share of Common Stock held,
with respect to all matters to be voted on by the shareholders of the
Corporation.
PREFERRED STOCK. The Board is authorized to determine and alter the
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rights, preferences, privileges, limitations and restrictions granted to and
imposed upon the Preferred Stock and any series thereof, and to fix the number
of shares and designation of any series of Preferred Stock. The Board, within
the limits and restrictions stated in any resolutions of the Board originally
fixing the number of shares constituting any series of Preferred Stock, may
increase or decrease (but not below the number of shares of such series then
outstanding) the number of shares of any series subsequent to the issue of
shares of that series.
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1. Designation, Amount and Par Value. A series of preferred stock shall
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be designated as Convertible Preferred Stock, Series I (the "Series I Preferred
Stock"), and the number of shares so designated ("Shares") shall be 1,000 (which
shall not be subject to increase without the consent of the holders thereof as
provided in Section 3). Each share of Series I Preferred Stock shall have a par
value of $.01 per share and a stated value of $10,000 per share (the "Stated
Value").
2. Dividends.
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(a) The holders of the Series I Preferred Stock shall not be entitled
to receive dividends.
(b) So long as any Series I Preferred Stock shall remain outstanding,
the Corporation shall not redeem, purchase or otherwise acquire directly or
indirectly any Common Stock or other equity securities which are junior in
rights and liquidation preference to the Series I Preferred Stock (the "Junior
Securities") nor shall the Corporation directly or indirectly pay or declare any
dividend or make any distribution upon, nor shall any distribution be made in
respect of, any Junior Securities, nor shall any monies be set aside for or
applied to the purchase or redemption (through a sinking fund or otherwise) of
any Junior Securities or shares pari passu with the Series I Preferred Stock,
except for repurchases effected by the Corporation on the open market, pursuant
to a direct stock purchase plan.
3. Voting Rights. Except as otherwise provided herein and as otherwise
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required by law, the Series I Preferred Stock shall have no voting rights.
However, the Corporation shall not, without the affirmative vote of the holders
of a majority of the shares of the Series I Preferred Stock then outstanding,
take any of the following actions: (a) so long as any shares of Series I
Preferred Stock are outstanding, amend its Articles of Incorporation, bylaws or
other charter documents so as materially and adversely to affect any conversion
or transfer rights of any holder of Series I Preferred Stock (the "Holder(s)");
(b) so long as 15% of the shares of Series I Preferred Stock are outstanding,
declare, authorize, set aside or pay any dividend or other distribution with
respect to the Common Stock except as permitted under these Articles of
Incorporation and as would not materially and adversely affect the rights of any
Holder hereunder; (c) so long as 30% of the shares of Series I Preferred Stock
are outstanding, repay, repurchase or offer to repay, repurchase or otherwise
acquire shares of its Common Stock, except for repurchases effected by the
Corporation on the open market, pursuant to a direct stock purchase plan; (d)
so long as 15% of the shares of Series I Preferred Stock are outstanding,
authorize or create any class of equity or equity equivalent security that ranks
senior to or on parity with the Series I Preferred Stock; (e) so long as 30% of
the shares of Series I Preferred Stock are outstanding, make investments outside
the ordinary course of the Corporation's business in a cumulative amount in
excess of $500,000; (f) so long as 30% of the shares of Series I Preferred Stock
are outstanding, incur indebtedness for borrowed money, or for the deferred
purchase or acquisition price of property or services, directly or indirectly,
in an amount greater than $500,000, excluding, however, indebtedness incurred in
financing of equipment in connection with the Corporation's product sales in the
ordinary course; (g) so long as any shares of Series I Preferred Stock are
outstanding, merge or consolidate with another entity or sell substantially all
of the Corporation's assets if the proceeds of the transaction are insufficient
to redeem the Series I Preferred Stock then outstanding in full; (h) so long as
15% of the shares of Series I Preferred Stock are outstanding, pledge or
encumber substantially all of the Corporation's assets or property; or (i) enter
into any agreement with respect to any of the foregoing. The voting rights
provided in the foregoing clauses (b) - (h) shall expire on the 300th day
following the date of first issuance of any shares of the Series I Preferred
Stock (the "Original Issue Date").
4. Liquidation. Upon any liquidation, dissolution or winding-up of the
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Corporation, whether voluntary or involuntary (a "Liquidation"), the Holders
shall be entitled to receive out of the assets of the Corporation, whether such
assets are capital or surplus, for each share of Series I Preferred Stock an
amount equal to 100% of the Stated Value per Share, before any distribution or
payment shall be made to the holders of any Junior Securities, and if the assets
of the Corporation shall be insufficient to pay in full such amounts, then the
entire assets to be distributed to the Holders shall be distributed among the
Holders ratably in accordance with the respective amounts that would be payable
on such shares if all amounts payable thereon were paid in full. A sale,
conveyance or disposition of all or substantially all of the assets of the
Corporation or the effectuation by the Corporation of a transaction or series of
related transactions in which more than 50% of the voting power of the
Corporation is disposed of, or a consolidation or merger of the Corporation with
or into any other Corporation or
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companies shall not be treated as a Liquidation, but instead shall be subject to
the provisions of Section 5. The Corporation shall mail written notice of any
such Liquidation, not less than 45 days prior to the payment date stated
therein, to each record Holder.
5. Conversion.
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(a) Conversion Elections.
(i) The Series I Preferred Stock shall be convertible at the
option of the Holder into shares of Common Stock, at the then prevailing
Conversion Ratio (where the "Conversion Ratio" at any time is the fraction, of
which (x) the numerator is the Stated Value and (y) the denominator is the
Conversion Price at such time), from time to time following the Original Issue
Date, in minimum amounts of ten shares of Series I Preferred Stock, or such
lesser amounts as any converting Holder then holds. 115 shares of Series I
Preferred Stock shall become convertible on or after the 15th day following the
Original Issue Date of such Shares, and a further 115 shares of Series I
Preferred Stock shall become convertible on each subsequent monthly anniversary
of such 15th day, subject to reduction pursuant to Section 5(a)(iii) below and
to Section 3.7 of the Convertible Series I Preferred Stock Purchase Agreement
dated as of April 16, 1998 (the "Purchase Agreement"). Shares need not be
converted on the date initially convertible, but may be cumulated with other
Shares eligible for conversion and converted at any time thereafter. The Holder
shall effect conversions by surrendering to the Corporation the certificate or
certificates representing the shares of Series I Preferred Stock to be
converted, together with a conversion notice as set forth in Exhibit A to the
Purchase Agreement (the "Holder Conversion Notice"), or otherwise as provided
separately with the Holders, specifying the date on which such conversion is to
be effected (the "Holder Conversion Date"). If no Holder Conversion Date is
specified in a Holder Conversion Notice, the Holder Conversion Date shall be the
date that the Holder Conversion Notice is deemed delivered pursuant to Section
5(a)(i). Subject to Sections 5(b) and 5(a)(iii) hereof, each Holder Conversion
Notice, once given, shall be irrevocable. If the Holder is converting less than
all shares of Series I Preferred Stock represented by the certificate or
certificates tendered by the Holder with the Holder Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the Corporation
shall promptly deliver to such Holder (in the manner and within the time set
forth in Section 5(b)) a certificate for such number of shares as have not been
converted.
(ii) On or after the second anniversary of the Original Issue
Date, the Corporation may require the conversion of all or a portion of the then
outstanding and unconverted shares of Series I Preferred Stock at the then
prevailing Conversion Ratio (subject to reduction pursuant to Section 5(a)(iii))
by delivering to the Holder of such shares to be converted a notice in the form
as set forth in Exhibit A to the Purchase Agreement (the "Corporation Conversion
Notice"), provided, that no such conversion is permitted unless at the time of
the delivery of the Corporation Conversion Notice and on the Corporation
Conversion Date (as defined below), (a) a Registration Statement covering the
resale of the shares of Common Stock issuable upon such conversion is effective,
(b) the shares of Common Stock issuable upon such conversion are listed for
trading on the Nasdaq National Market (or The New York Stock Exchange or any
other principal exchange) and any other exchange or quotation system on which
the Common Stock is then listed for trading, and (c) the Corporation is in
compliance with all of its obligations under its Certificate of Designation, the
Purchase Agreement and the Registration Rights Agreement dated as of April 16,
1998 (the "Registration Rights Agreement"). Each Corporation Conversion Notice
shall specify the number of shares of Series I Preferred Stock to be converted
and the date on which such conversion is to be effected, which date may not be
prior to the day after the Corporation delivers such Corporation Conversion
Notice by facsimile (the "Corporation Conversion Date"). If no Corporation
Conversion Date is specified in a Corporation Conversion Notice, the Corporation
Conversion Date shall be the date that the Corporation Conversion Notice is
deemed delivered pursuant to Section 5(a)(i). A Holder Conversion Date and a
Corporation Conversion Date are sometimes referred to herein as the "Conversion
Date" and a Holder Conversion Notice and a Corporation Conversion Notice are
sometimes referred to as a "Conversion Notice." Any conversion pursuant to this
Section 5(a)(ii) shall be subject to Section 5(b) with respect to consequences
of the Corporation's failure to deliver shares of Common Stock in respect of a
conversion under this Section. If the Corporation is converting less than all
shares of Series I Preferred Stock represented by the certificate or
certificates tendered by the Holder in response to a Corporation Conversion
Notice, or if a conversion hereunder cannot be effected in full
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for any reason, the Corporation shall promptly deliver to such tendering Holder
(in the manner and within the time set forth in Section 5(b)) a certificate for
such number of shares as have not been converted.
(iii) If on any Conversion Date prior to the exercise of the
Option, the Conversion Price then in effect is such that the aggregate number of
shares of Common Stock that would be issuable upon the conversion of the
outstanding Initial Shares, together with any shares of Common Stock previously
issued upon conversion of Initial Shares would equal or exceed 1,750,000 shares
of Common Stock, the Corporation shall redeem, from funds legally available
therefore at the time of such redemption, such Holder's Surplus Amount of the
Initial Shares of Series I Preferred Stock subject to such Conversion Notice at
a price per share equal to the product of (i) the average Per Share Market Value
for the five Trading Days immediately preceding (x) the Conversion Date or (y)
the date of payment in full by the Corporation of such redemption price,
whichever is greater, and (ii) the Conversion Ratio calculated on the Conversion
Date. If the Corporation fails for any reason to pay the redemption price
within seven (7) days after the Conversion Date, the Corporation will pay
interest on such redemption price at a rate of 15% per annum to the converting
Holder, accruing from the Conversion Date until the redemption price plus any
accrued interest thereon is paid in full. The entire redemption price,
including interest thereon, shall be paid in cash. "Per Share Market Value"
means on any particular date (a) the lowest trading price per share of the
Common Stock on such date on the Nasdaq National Market or other stock exchange
or quotation system on which the Common Stock is then listed or if there is no
such price on such date, then the lowest trading price on such exchange or
quotation system on the date nearest preceding such date, or (b) if the Common
Stock is not listed then on the Nasdaq National Market or any stock exchange or
quotation system, the lowest trading price for a share of Common Stock in the
over-the-counter market, as reported by the Nasdaq Stock Market or in the
National Quotation Bureau Incorporated or similar organization or agency
succeeding to its functions of reporting prices), or (c) if the Common Stock is
not then reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its functions of reporting prices), then
the average of the lowest "Pink Sheet" quotes for the relevant conversion
period, as determined in good faith by the Holder, or (d) if the Common Stock is
not then publicly traded the fair market value of a share of Common Stock as
determined by a nationally recognized or major regional investment banking firm
or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Corporation) (an "Appraiser") selected in good faith by the Holders of a
majority in interest of the shares of the Series I Preferred Stock; provided,
that the Corporation, after receipt of the determination by such Appraiser,
shall have the right to select an additional Appraiser, in which case, the fair
market value shall be equal to the average of the determinations by each such
Appraiser. "Trading Day" means (a) a day on which the Common Stock is traded on
the Nasdaq National Market or other stock exchange or market on which the Common
Stock has been listed, or (b) if the Common Stock is not listed on the Nasdaq
National Market or any stock exchange or market, a day on which the Common Stock
is traded in the over-the-counter market, as reported by the OTC Bulletin Board,
or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on
which the Common Stock is quoted in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or any similar organization or
agency succeeding its functions of reporting prices); provided, that in the
event that the Common Stock is not listed or quoted as set forth in (a), (b) and
(c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other government action
to close.
(iv) If on any Conversion Date subsequent to the exercise of the
Option, (A) the Common Stock is then listed for trading on the Nasdaq National
Market or the American Stock Exchange, or if the rules of the Nasdaq Stock
Market, Inc. are hereafter amended to extend or adopt rules similar to Rule
4460(i) promulgated thereby (or any successor or replacement provision thereof,
the "20% Rule") to the Nasdaq SmallCap Market or over-the-counter market and the
Corporation's Common Stock is listed for trading on such market or exchange, (B)
the 20% Rule is applicable on such Conversion Date, (C) the Conversion Price
then in effect is such that the aggregate number of shares of Common Stock that
would then be issuable upon conversion of all outstanding shares of Series I
Preferred Stock, together with any shares of Common Stock previously issued upon
conversion of Series I Preferred Stock would equal or exceed 20% of the number
of shares of Common Stock outstanding on the Original Issue Date (the "Issuable
Maximum"), and (D) the Corporation has not previously obtained Shareholder
Approval (as defined below), then the Corporation shall issue to any Holder so
requesting conversion of Series I Preferred Stock its pro rata portion of the
Issuable Maximum in the same ratio that the
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number of shares of Series I Preferred Stock held by any such Holder bears to
all shares of Series I Preferred Stock then outstanding and, with respect to any
shares of Common Stock that otherwise would have been issuable to such Holder in
respect of the Conversion Notice at issue hereunder in excess of such Holders
pro rata portion of the Issuable Maximum (the "Surplus Amount"), the Corporation
shall have the option to either (1) as promptly as possible, but in no event
later than 90 days after such Conversion Date, convene a meeting of the holders
of the Common Stock and use its reasonable efforts (which may include, among
other things, hiring a proxy solicitor) to obtain the Shareholder Approval and
the approval of the Corporation's Board of Directors or (2) redeem, from funds
legally available therefor at the time of such redemption, such Holder's Surplus
Amount of the Series I Preferred Stock subject to such Conversion Notice at a
price per share equal to the product of (i) the average Per Share Market Value
for the five Trading Days immediately preceding (x) the Conversion Date or (y)
the date of payment in full by the Corporation of such redemption price,
whichever is greater, and (ii) the Conversion Ratio calculated on the Conversion
Date; provided, that if the Corporation has elected to obtain Shareholder
Approval under clause (1) above, the Holders of a majority of the outstanding
shares of Series I Preferred Stock may request, in lieu of such meeting, that
the Corporation redeem each Holder's Surplus Amount as set forth herein and
provided, further that if the Corporation fails for any reason to obtain such
Shareholder Approval within the time period set forth in (1) above, the
Corporation shall be obligated to redeem the Series I Preferred Stock not
converted as a result of the provisions of this Section in accordance with the
provisions of clause (2) above, and in such case the interest contemplated by
the immediately succeeding sentence shall be deemed to accrue from the
Conversion Date. If the Holder has requested that the Corporation redeem shares
of Series I Preferred Stock pursuant to this Section and the Corporation fails
for any reason to pay the redemption price under clause (2) above within seven
days after the Conversion Date, the Corporation will pay interest on such
redemption price at a rate of 15% per annum to the converting Holder, accruing
from the Conversion Date until the redemption price plus any accrued interest
thereon is paid in full. The entire redemption price, including interest
thereon, shall be paid in cash. "Shareholder Approval" means the approval by a
majority of the total votes cast on the proposal, in person or by proxy, at a
meeting of the shareholders of the Corporation held in accordance with the
Corporation's Articles of Incorporation and bylaws, of the issuance by the
Corporation of shares of Common Stock exceeding the Issuable Maximum as a
consequence of the conversion of Series I Preferred Stock into Common Stock at a
price less than the greater of the book or market value on the Original Issue
Date as and to the extent required pursuant to Rule 4460(i) of the Nasdaq Stock
Market or Rule 713 of the American Stock Exchange (or any successor or
replacement provision thereof), as applicable.
(b) Conversion Mechanics. Not later than three Trading Days after
receipt by the Corporation of a properly completed and duly executed Conversion
Notice, the Corporation will deliver to the Holder (i) a certificate or
certificates which shall be free of restrictive legends and trading restrictions
(other than those required by Section 3.1(b) of the Purchase Agreement)
representing the number of shares of Common Stock being acquired upon the
conversion of shares of Series I Preferred Stock (subject to reduction pursuant
to Section 5(a)(iii) and Section 3.7 of the Purchase Agreement), (ii) if a
certificate for Series I Preferred Stock has been delivered to the Corporation,
one or more certificates representing the number of shares of Series I Preferred
Stock not converted, and (iii) if applicable, a bank check in the amount of
declared but unpaid dividends. If such certificate or certificates are not
delivered to or as directed by the applicable Holder by the third Trading Day
after receipt by the Corporation of a properly completed and duly executed
Conversion Notice, the Holder shall be entitled by written notice to the
Corporation at any time on or before its receipt of such certificate or
certificates thereafter, to rescind such conversion, in which event the
Corporation shall immediately return any certificates representing the shares of
Series I Preferred Stock tendered for conversion. If the Corporation fails to
deliver to the Holder such certificate or certificates pursuant to this Section,
prior to the fourth Trading Day after receipt by the Corporation of a properly
completed and duly executed Conversion Notice, the Corporation shall pay to such
Holder, in cash, as liquidated damages and not as a penalty, $2,500 for each day
after such fourth Trading Day until such certificates are delivered. If the
Corporation fails to deliver to the Holder such certificate or certificates
pursuant to this Section prior to the 11th day after receipt by the Corporation
of a properly completed and duly executed Conversion Notice and an original
share certificate representing the shares of Series I Preferred Stock to be
converted, the Corporation shall, at the Holder's option redeem, from funds
legally available therefor at the time of such redemption, such number of shares
of Series I Preferred Stock then held by such Holder, as requested by such
Holder. The redemption price shall be equal to the sum of (A) the aggregate of
all declared but unpaid dividends, plus (B) the number of shares of Series I
Preferred Stock then held by such Holder multiplied by (1) the
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average Per Share Market Value for the five Trading Days immediately preceding
(x) the Conversion Date or (y) the date of payment in full by the Corporation of
such prepayment price, whichever is greater, multiplied by, (2) the Conversion
Ratio calculated on the Conversion Date. If the Holder has requested that the
Corporation redeem shares of Series I Preferred Stock pursuant to this Section
and the Corporation fails for any reason to pay the redemption price under (2)
above within seven days after such notice is deemed delivered pursuant to
Section 5(i), the Corporation will pay interest on the redemption price at a
rate of 15% per annum, in cash to such Holder, accruing from such seventh day
until the redemption price and any accrued interest thereon is paid in full.
Nothing herein shall limit a Holder's right to pursue actual damages for the
Corporation's failure to deliver certificates representing shares of Common upon
conversion within the period specified herein (including, without limitation,
damages relating to any purchase of shares of Common Stock by such Holder to
make delivery on a sale effected in anticipation of receiving certificates
representing shares of Common Stock upon conversion, such damages to be in an
amount equal to (A) the aggregate amount paid by such Holder for the shares of
Common Stock so purchased minus (B) the aggregate amount of net proceeds, if
any, received by such Holder from the sale of the shares of Common Stock issued
by the Corporation pursuant to such conversion), and such Holder shall have the
right to pursue all remedies available to it at law or in equity (including,
without limitation, a decree of specific performance and/or injunctive relief).
(c) Conversion Price.
(i) The conversion price for each share of Series I Preferred
Stock (the "Conversion Price") in effect on any Conversion Date shall be the
"Applicable Percentage" of the average Per Share Market Value for the five
Trading Days immediately preceding the Conversion Date; provided, that (a) if
the underlying shares Registration Statement ceases to be effective as to all
Registrable Securities (as such term is defined in the Registration Rights
Agreement) at any time prior to the expiration of the "Effectiveness Period" (as
such term as defined in the Registration Rights Agreement), without being
succeeded within 10 Trading Days by a subsequent underlying shares Registration
Statement filed with and declared effective by the Commission, or (b) if trading
in the Common Stock shall be suspended for any reason (other than (I) as a
result of the suspension of trading in securities generally or (II) pursuant to
a holdback agreement pursuant to Section 7(a) of the Registration Rights
Agreement) for more than five Trading Days in the aggregate, or (c) if the
conversion rights of the Holders of Series I Preferred Stock hereunder are
suspended for five consecutive Trading Days (other than as a result of the
suspension of trading in securities on such market or exchange generally or
temporary suspensions pending the release of material information or due to
circumstances within the Corporation's control, which may include among other
things, suspension of the effectiveness of the underlying securities
Registration Statement by the Commission or a suspension imposed by the
Corporation's board of directors pending any release of material non-public
information) or (d) if the Corporation breaches in a material respect any
covenant or other material term or condition to the Purchase Agreement (other
than a representation or warranty contained therein), the Registration Rights
Agreement or any other agreement, document, certificate or other instrument
delivered in connection with the transactions contemplated thereby, and such
breach continues for a period of 30 days after written notice thereof to the
Corporation (any such failure being referred to as an "Event," and for purposes
of clause (c) the date on which such Event occurs, or for purposes of clause (a)
the date which such 10 Trading Day-period is exceeded, or for purposes of clause
(b) the date on which such three Trading Day period is exceeded, or for clause
(d) the date on which such 30 day period is exceeded, being referred to as
"Event Date"), then, the Applicable Percentage shall be decreased by 1.5% each
month (e.g., the Applicable Percentage would decrease by 1.5% as of the Event
Date and an additional 1.5% as of the first monthly anniversary of the Event
Date) until the earlier to occur of the third month anniversary after the Event
Date and such time as the applicable Event is cured. Commencing the third month
anniversary after the Event Date, the Corporation shall pay to the Holders of
the Series I Preferred Stock $25,000 (each Holder being entitled to receive such
portion of such amount as equals its pro rata portion of the Series I Preferred
Stock then outstanding) in cash as liquidated damages, and not as a penalty, on
the first day of each monthly anniversary of the Event Date until such time as
the applicable Event is cured; provided, that the aggregate amount of such cash
payments shall not in any case exceed the product of (I) the number of Shares
outstanding on the date of calculation multiplied by (II) $2,000 per Share. Any
decrease in the Applicable Percentage pursuant to this Section shall be
reversed, and the originally prevailing Applicable Percentage shall be restored,
if the Event
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causing such decrease has been subsequently cured, but with effect only as to
Shares which become convertible after such cure date (i.e., the Conversion Price
for Shares eligible for conversion prior to such cure date, but not converted by
such date, shall be calculated based on the lower Applicable Percentage). The
provisions of this Section are not exclusive and shall in no way limit the
Corporation's obligations under the Registration Rights Agreement. The
"Applicable Percentage" means (i) 90% or (ii) such lesser amount as is
determined in accordance with the foregoing.
(ii) In case of any reclassification of the Common Stock,
any consolidation or merger of the Corporation with or into another person
pursuant to which (i) a majority of the Corporation's Board of Directors will
not constitute a majority of the board of directors of the surviving entity or
(ii) less than 65% of the outstanding shares of the capital stock of the
surviving entity will be held by the same shareholders of the Corporation, the
sale or transfer of all or substantially all of the assets of the Corporation or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, the Holders of the Series I Preferred
Stock then outstanding shall have the right thereafter to, at their option, (A)
convert such shares only into the shares of stock and other securities, cash and
property receivable upon or deemed to be held by holders of Common Stock
following such reclassification, consolidation, merger, sale, transfer or share
exchange, and the Holders shall be entitled upon such event to receive such
amount of securities, cash or property as the shares of the Common Stock of the
Corporation into which such shares of Series I Preferred Stock could have been
converted immediately prior to such reclassification, consolidation, merger,
sale, transfer or share exchange would have been entitled or (B) require the
Corporation to redeem, from funds legally available therefor at the time of such
redemption, its shares of Series I Preferred Stock at a price per share equal to
the product of (i) the average Per Share Market Value for the five Trading Days
immediately preceding (1) the effective date, the date of the closing or the
date of the announcement, as the case may be, of the reclassification,
consolidation, merger, sale, transfer or share exchange the triggering such
redemption right or (2) the date of payment in full by the Corporation of the
redemption price hereunder, whichever is greater, and (ii) the Conversion Ratio
calculated on the date of the closing or the effective date, as the case may be,
of the reclassification, consolidation, merger, sale, transfer or share exchange
triggering such redemption right, as the case may be. The entire redemption
price shall be paid in cash, and the terms of payment of such redemption price
shall be subject to the provisions set forth in Section 6(c). The terms of any
such consolidation, merger, sale, transfer or share exchange shall include such
terms so as to continue to give to the Holder the right to receive the
securities, cash or property set forth in this subsection upon any conversion or
redemption following such consolidation, merger, sale, transfer or share
exchange. This provision shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
(iii) If the Corporation (i) makes a public announcement that
it intends to enter into a Change of Control Transaction (as defined below) or
(ii) any person, group or entity (including the Corporation, but excluding a
Holder or any affiliate of a Holder) publicly announces a bona fide tender
offer, exchange offer or other transaction to purchase 50% or more of the Common
Stock (such announcement being referred to herein as a "Major Announcement" and
the date on which a Major Announcement is made, the "Announcement Date"), then,
in the event that a Holder seeks to convert shares of Series I Preferred Stock
on or following the Announcement Date, the Conversion Price shall, effective
upon the Announcement Date and continuing through the earlier of the
consummation of the proposed transaction or tender offer, exchange offer or
other transaction and the Abandonment Date (as defined below), be equal to the
lower of (x) the average Per Share Market Value on the five Trading Days
immediately preceding (but not including) the Announcement Date and (y) the
Conversion Price in effect on the Conversion Date for such Series I Preferred
Stock. "Abandonment Date" means with respect to any proposed transaction or
tender offer, exchange offer or other transaction for which a public
announcement as contemplated by this paragraph has been made, the date upon
which the Corporation (in the case of clause (i) above) or the person, group or
entity (in the case of clause (ii) above) publicly announces the termination or
abandonment of the proposed transaction or tender offer, exchange offer or
another transaction which caused this paragraph to become operative.
(d) Reservation of Common Stock. The Corporation covenants that it
will at all times reserve and keep available out of its authorized and unissued
Common Stock solely for the purpose of issuance upon conversion of Series I
Preferred Stock, free from preemptive rights or any other actual contingent
purchase rights of persons other than the Holders, not less than such number of
shares of Common Stock as shall (subject to
<PAGE>
any additional requirements of the Corporation as to reservation of such shares
set forth in the Purchase Agreement) be issuable upon the conversion of all
outstanding shares of Series I Preferred Stock. The Corporation covenants that
all shares of Common Stock that shall be so issuable shall, upon issue, be duly
and validly authorized, issued and fully paid, nonassessable and freely
tradeable.
(e) Calculations. Upon a conversion hereunder the Corporation shall
not be required to issue stock certificates representing fractions of shares of
Common Stock, but shall instead round to the nearest whole share. All
calculations, and all cash payments hereunder, upon redemptions or otherwise,
shall be rounded to the nearest $.01.
(f) Issuance Costs. The issuance of certificates for shares of Common
Stock on conversion of Series I Preferred Stock shall be made without charge to
the Holders for any documentary stamp or similar taxes that may be payable in
respect of the issue or delivery of such certificate, provided that the
Corporation shall not be required to pay any tax that may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the Holder of such shares of Series
I Preferred Stock so converted and the Corporation shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Corporation the amount of
such tax or shall have established to the satisfaction of the Corporation that
such tax has been paid.
(g) Converted Stock. Shares of Series I Preferred Stock converted
into Common Stock shall be canceled and shall have the status of authorized but
unissued shares of undesignated stock.
(h) Notices. Any and all notices or other communications or
deliveries to be provided by the Holders hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by facsimile or sent by a nationally recognized overnight courier service,
addressed to the attention of the Legal Department of the Corporation at the
facsimile telephone number or address of the principal place of business of the
Corporation as set forth in the Purchase Agreement. Any and all notices or
other communications or deliveries to be provided by the Corporation hereunder
shall be in writing and delivered personally, by facsimile or sent by a
nationally recognized overnight courier service, addressed to each Holder at the
facsimile telephone number or address of such Holder appearing on the books of
the Corporation, or if no such facsimile telephone number or address appears, at
the principal place of business of the Holder. Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the
earliest of (i) the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this
Section prior to 7:00 p.m. (Eastern Time), (ii) the date after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section later than 7:00 p.m. (New
York Time) on any date and earlier than 11:59 p.m. (New York Time) on such date,
(iii) upon receipt, if sent by a nationally recognized overnight courier
service, or (iv) upon actual receipt by the party to whom such notice is
required to be given.
6. Redemptions.
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(a) All outstanding and unconverted shares of Series I Preferred Stock
on the third anniversary of the Original Issue Date may, at the Corporation's
option, be converted pursuant to Section 5(a)(ii) or redeemed by the Corporation
pursuant to this Section 6(a), from funds legally available therefor at a price
per share of Series I Preferred Stock equal to 110% of the aggregate Stated
Value of the outstanding Series I Preferred Stock. Thereafter, all shares of
Series I Preferred Stock shall cease to be outstanding and shall have the status
of authorized but undesignated stock. The entire redemption price shall be paid
in cash.
(b) If at any time the Conversion Price falls below $4.50 (the
"Minimum Price"), the Corporation may give written notice (a "Cash Conversion
Notice") to the Holders, not less than five Trading Days prior to the effective
date, that it will redeem by cash payment all Shares tendered for conversion at
a Conversion Price less than the Minimum Price, in lieu of issuing Common Stock.
Any such cash payment shall be equal to 110% of the Stated Value of the Shares
tendered for conversion (the "Cash Conversion Amount"). Whenever a Holder
Conversion Notice is given while a Cash Conversion Notice is in effect, the
Corporation shall, within 48 hours of receipt of a duly executed Holder
Conversion Notice, pay the Cash Conversion Amount to the converting
<PAGE>
Holder by wire transfer of immediately available funds. If the Corporation fails
to pay the required amount as and when specified herein, time being of the
essence, any current Cash Conversion Notice shall cease to be effective, the
converting Holder shall be entitled to immediate return of all Share
certificates submitted by it, and whether or not such certificates have been
returned, such Holder may convert its Shares into Common Stock of the
Corporation, without regard to the cash redemption option of this subsection.
The Corporation may terminate the Cash Conversion Notice on notice to the
Holders to such effect, effective on the date of such notice if delivered to
such Holders prior to 9:30 a.m. on a Trading Day, otherwise effective on the
next following Trading Day. In case of any subdivision, combination or
reclassification of outstanding shares of Common Stock, the Minimum Price shall
be proportionately adjusted to reflect such change.
(c) If any portion of the applicable redemption price under this
Section 6 shall not be paid by the Corporation within seven calendar days after
the date due, interest shall accrue thereon at the rate of 15% per annum until
the redemption price plus all such interest is paid in full (which amount shall
be paid as liquidated damages and not as a penalty). In addition, if any
portion of such redemption price remains unpaid for more than seven calendar
days after the date due, the Holder of the Series I Preferred Stock subject to
such redemption may elect, by written notice to the Corporation given within 30
days after the date due, to either (i) demand conversion in accordance with the
formula and the time frame therefor set forth in Section 5 of all of the shares
of Series I Preferred Stock for which such redemption price, plus accrued
liquidated damages thereof, has not been paid in full (the "Unpaid Redemption
Shares"), in which event the Per Share Market Price for such shares shall be the
lower of the Per Share Market Price calculated on the date such redemption price
was originally due and the Per Share Market Price as of the Holder's written
demand for conversion, or (ii) invalidate ab initio such redemption,
notwithstanding anything herein contained to the contrary. If the Holder elects
option (i) above, the Corporation shall within three Trading Days of its receipt
of such election deliver to the Holder the shares of Common Stock issuable upon
conversion of the Unpaid Redemption Shares subject to such Holder conversion
demand and otherwise perform its obligations hereunder with respect thereto; or,
if the Holder elects option (ii) above, the Corporation shall promptly, and in
any event not later than three Trading Days from receipt of Holder's notice of
such election, return to the Holder all of the Unpaid Redemption Shares.
ARTICLE V
REGISTERED OFFICE AND AGENT
The name of the registered agent and the street address of the registered
office of the Corporation, as heretofore designated and reported to the Florida
Department of State, are:
William A. Grimm, Esq.
Akerman, Senterfitt & Eidson, P.A.
255 South Orange Avenue
Orlando, Florida 32801
ARTICLE VI
BOARD OF DIRECTORS
The Corporation initially had one director, Rudolph William Frey, 574
Rosemont Street, Orlando, Florida 32807. The Corporation now has and may
continue to have as many directors as specified in the bylaws of the
Corporation, and the number of directors may be increased or decreased, from
time to time, by an amendment to the bylaws of the Corporation in the manner
provided by law, but shall never be less than one.
<PAGE>
ARTICLE VII
INCORPORATOR
The name and address of the incorporator, who signed the Initial Articles,
are:
Rudolph William Frey
574 Rosemont Street
Orlando, Florida 32807
ARTICLE VIII
DIRECTORS' AUTHORITY TO FIX COMPENSATION
The Board shall have authority to fix the compensation of the officers of
the Corporation.
ARTICLE IX
DIRECTOR CONFLICTS OF INTEREST
1. TRANSACTIONS INVOLVING DIRECTORS. No contract or other transaction
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between the Corporation and one or more of its directors, or between the
Corporation and any other corporation, firm, association, or other entity, in
which one or more of the directors of the Corporation are directors or officers,
or are financially interested, shall either be void or voidable for this reason
alone or by reason alone that such director or directors are present at the
meeting of the Board or of a committee thereof which approves such contract or
transaction, or that his or their votes are counted for such purpose, if:
(a) the fact of such common directorship, officership or financial
interest is disclosed or known to the Board or committee, and the
Board or committee approves such contract or transaction by a vote
sufficient for such purpose without counting the vote or votes of
such interested director or directors; or
(b) such common directorship, officership or financial interest is
disclosed or known to the shareholders entitled to vote thereon,
and such contract or transaction is approved by a vote of such
shareholders; or
(c) the contract or transaction is fair and reasonable as to the
Corporation at the time it is approved by the Board, a committee
thereof, or the shareholders.
2. QUORUM. Common or interested directors may be counted in determining
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the presence of a quorum at a meeting of the Board or of a committee thereof
which approves such contract or transaction.
ARTICLE X
INDEMNIFICATION
The Corporation is authorized to indemnify any director or officer, or any
former director or officer, in the manner set forth and provided for in the
bylaws of the Corporation, to the fullest extent permitted by the laws of the
State of Florida.
ARTICLE XI
SHAREHOLDER QUORUM AND VOTING
A majority of the shares entitled to vote, represented in person or in
proxy, shall constitute a quorum at a meeting of the shareholders. If a quorum
is present, the affirmative vote of a majority of the shares represented at the
meeting and entitled to vote on the subject matter shall be the act of the
shareholders, unless otherwise set forth herein.
<PAGE>
ARTICLE XII
REMOVAL OF DIRECTORS
At a meeting of shareholders called expressly for that purpose, any
director or the entire Board may be removed, with or without cause, by a vote of
the holders of a majority of the shares then entitled to vote at an election of
directors.
ARTICLE XIII
PROHIBITION OF WRITTEN CONSENTS
WITHOUT BOARD OF DIRECTOR APPROVAL
Action to be taken by written consent in lieu of an annual or special
meeting of the shareholders is prohibited unless the use of written consents is
approved in advance thereof by the Board of Directors. Any amendment of this
provision requires an affirmative vote of the holders of not less than two-
thirds of the outstanding voting shares.
Amendment filed with the Florida Secretary of State on June 27, 1997 increasing
the number of authorized shares, amending the shareholder voting and quorum
provisions and adding limiting the use of written consents by shareholders.
Amendment filed the with the Florida Secretary of State on July 15, 1998,
designating the Series I Convertible Preferred Stock and all rights and
privileges associated therewith.
Amendment filed the with Florida Secretary of State on August 3, 1998, amending
the rights of the Series I Convertible Preferred Stock prior to the issuance of
any shares of Series I Convertible Preferred Stock.
