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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
March 6, 1997
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Date of Report (Date of Earliest Event Reported)
AVIC Group International, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 0-22520 52-1989122
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(State or other (Commission (IRS Employer
jurisdiction of file Number) Identification No.)
incorporation or
organization)
599 Lexington Avenue
44th Floor
New York, New York 10022
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(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 319-9160
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with copies to:
Jeffrey P. Berg, Esq.
Matthias & Berg LLP
515 South Flower Street
Suite 700
Los Angeles, California 90071
Tel: 213-895-4200
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS.
3.1 Restated Certificate of Incorporation.
3.2 Certificate of Designations of Series D Convertible Preferred Stock.
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
As of March 6, 1997, AVIC Group International, Inc., a Delaware corporation
(the "Company") issued 150 shares (the "Series D Preferred Shares") of the
Company's Series D Convertible Preferred Stock, par value $0.001 per share
("Series D Preferred Stock"), in consideration of an aggregate purchase price of
$1,500,000, or at a per share purchase price of $10,000.
The 150 shares of Series D Preferred Stock were issued to a single investor
pursuant to exemption from registration under Regulation S promulgated under the
Securities Act of 1933, as amended. The Company did not pay any brokerage fees
or commissions in connection with the transaction.
The Series D Preferred Shares will be convertible, at the option of the
holder thereof, into the number of shares of the Company's common stock, par
value $0.001 per share (the "Common Stock") which may be purchased at the lowest
trading price of the Common Stock during the thirty (30) business days
immediately preceding each conversion date (the "Conversion Date") for the
Series D Preferred Shares ("Average Stock Price").
Under certain circumstances, the holder of the Series D Preferred Shares
may be obligated to purchase additional shares ("Additional Shares") of Common
Stock for cash.
In the event that the Company issues or sells any shares of its Common
Stock or any of its securities which are convertible into or exchangeable for
its Common Stock (other than shares or options issued or which may be issued
pursuant to the Company's stock option plans or otherwise currently issued and
outstanding) at an effective purchase price per share of Common Stock which is
less than $5.00, then at the time the Series D Preferred Stock is submitted for
conversion, upon such conversion, the Company shall issue to the holder such
number of shares of Common Stock as will cause the effective market price on the
Conversion Date of such shares of Common Stock to be equal to the lesser of (i)
the Average Stock Price, and (ii) the effective issuance price at which such
equity securities are issued.
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If the Company does not have a sufficient number of shares of Common Stock
available to satisfy the Company's obligations to a holder of Series D Preferred
Shares upon receipt of a conversion notice, or otherwise fails or refuses to
perfect conversion of any Series D Preferred Stock, with respect to the Series D
Preferred Stock, as to which conversion is not perfected by the Company through
the delivery of certificates representing the shares of Common Stock issuable
upon such conversion (including Additional Shares, if any) (a "Conversion
Default") the holder of the Series D Preferred Stock shall have the right to put
the shares of Series D Preferred Stock to the Company at a price which shall be
equal to 125% of the purchase price, plus all accrued and unpaid dividends.
Holders of Series D Preferred Shares may not convert any of the Series D
Preferred Shares within the first 60 calendar days following March 6, 1997, the
date of issuance (the "Closing Date") of the Series D Preferred Shares.
Thereafter, holders of Series D Preferred Stock may convert the Series D
Preferred Shares after the Closing Date in an aggregate number, as follows: (i)
30 shares after 61 days, (ii) 60 shares after 91 days, (iii) 90 shares after 121
days, (iv) 120 shares after 151 days, and (v) 150 shares after 181 days.
The holders of the Series D Preferred Shares will be entitled to receive
cumulative dividends at the annual rate of 8% PER ANNUM per share, payable
quarterly (i) in shares of Common Stock at the time of conversion, or (ii) in
cash in connection with any payment pursuant to a Conversion Default.
The number of shares of Common Stock which may be issuable upon conversion
of the Series D Preferred Stock may be adjustable upon certain events, including
recapitalizations, reclassifications, splits, reorganizations, dividends or
distributions with respect to the Company's Common Stock.
The Series D Preferred Shares will have certain preferential rights over
the holders of Common Stock in the event of the liquidation, dissolution or
winding up of the Company or of a disposition of all or substantially all of the
Company's assets.
The Series D Preferred Shares will have no voting rights, except with
respect to certain matters which affect the rights of the Series D Preferred
Shares.
The purchaser of the Series D Preferred Shares will have certain
registration rights in the event that the purchaser's ability to resell the
underlying shares of Common Stock without registration is called into question
by applicable law.
Further, the purchaser will have certain rights to participate in exempt
equity offerings by the Company in the two (2) year period following the Closing
Date.
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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 authorized.
AVIC GROUP INTERNATIONAL, INC.
Dated: March 20, 1997 By: /s/ Joseph R. Wright, Jr.
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Joseph R. Wright, Jr.
Chief Executive Officer
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EXHIBIT 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
AVIC GROUP INTERNATIONAL, INC.
This Restated Certificate of Incorporation (the "Certificate") of AVIC
Group International, Inc. (the "Corporation"), was duly adopted by the Board of
Directors and the stockholders of the Corporation, as set forth below, in
accordance with Sections 242 and 245 of the General Corporation Law of the State
of Delaware. The original Certificate of Incorporation was filed on June 20,
1996.
The foregoing Restated Certificate of Incorporation was adopted by a
majority of the issued and outstanding stock of each class of stockholders of
the Corporation entitled to vote thereon as a class.
This Restated Certificate of Incorporation restates and integrates and
further amends the original Certificate of Incorporation of this Corporation to
read in its entirety as follows:
FIRST: The name of the corporation is AVIC Group International, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware shall be at Corporation Trust Center, 1209 Orange Street, City
of Wilmington, County of New Castle, Delaware 19801. The name and address of the
Corporation's registered agent in the State of Delaware is The Corporation Trust
Company, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware
19805.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may now or hereafter be organized under the
General Corporation Law of the State of Delaware.
FOURTH: 1. The total number of shares of stock which the Corporation
shall have authority to issue is One Hundred Ten Million (110,000,000) shares,
consisting of One Hundred Million (100,000,000) shares of Common Stock, par
value $0.001 per share (the "Common Stock"), and Ten Million (10,000,000) shares
of Preferred Stock, par value $0.001 per share (the "Preferred Stock").
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2. Shares of Preferred Stock may be issued from time to time in one or
more series as may be established from time to time by resolution of the Board
of Directors of the Corporation (the "Board of Directors"), each of which series
shall consist of such number of shares and have such distinctive designation or
title as shall be fixed by resolution of the Board of Directors prior to the
issuance of any shares of such series. Each such class or series of Preferred
Stock shall have such voting powers, full or limited, or no voting powers, and
such preferences and relative, participating, optional or other special rights
and such qualifications, limitations or restrictions thereof, as shall be stated
in such resolution of the Board of Directors providing for the issuance of such
series of Preferred Stock. The Board of Directors is further authorized to
increase or decrease (but not below the number of shares of such class or series
then outstanding) the number of shares of any series subsequent to the issuance
of shares of that series.
FIFTH: In furtherance and not in limitation of the powers conferred by
statute and subject to Article Sixth hereof, the Board of Directors is expressly
authorized to adopt, repeal, rescind, alter or amend in any respect the Bylaws
of the Corporation (the "Bylaws").
SIXTH: Notwithstanding Article Fifth hereof, the Bylaws may be adopted,
rescinded, altered or amended in any respect by the stockholders of the
Corporation, but only by the affirmative vote of the holders of not less than 66
2/3% of the voting power of all outstanding shares of voting stock regardless of
class and voting together as a single voting class; PROVIDED, HOWEVER, that
where such action is approved by a majority of the continuing directors the
affirmative vote of a majority of the voting power of all outstanding shares of
voting stock, regardless of class and voting together as a single voting class,
shall be required for approval of such action.
SEVENTH: The business and affairs of the Corporation shall be managed by
and under the direction of the Board of Directors. Except as may otherwise be
provided pursuant to Section 2 of Article Fourth hereof in connection with
rights to elect additional directors under specified circumstances which may be
granted to the holders of any series of Preferred Stock, the exact number of
directors of the Corporation shall be determined from time to time by a Bylaw or
Amendment thereto provided that the number of directors shall not be reduced to
less than three (3), except that there need be only as many directors as there
are stockholders in the event that the outstanding shares are held of record by
fewer than three (3) stockholders.
Elections of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
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EIGHTH: Each director shall serve until his successor is elected and
qualified or until his death, resignation or removal; no decrease in the
authorized number of directors shall shorten the term of any incumbent director;
and additional directors, elected pursuant to Section 2 of Article Fourth hereof
in connection with rights to elect such additional directors under specified
circumstances which may be granted to the holders of any series of Preferred
Stock, shall not be included in any class, but shall serve for such term or
terms and pursuant to such other provisions as are specified in the resolution
of the Board of Directors establishing such series.
NINTH: Except as may otherwise be provided pursuant to Section 2 of
Article Fourth hereof in connection with rights to elect additional directors
under specified circumstances which may be granted to the holders of any series
of Preferred Stock, newly created directorships resulting from any increase in
the number of directors, or any vacancies on the Board of Directors resulting
from death, resignation, removal or other causes, shall be filled solely by the
affirmative vote of a majority of the remaining directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified or until such director's death, resignation or
removal, whichever first occurs.
TENTH: Except for such additional directors as may be elected by the
holders of any series of Preferred Stock pursuant to the terms thereof
established by a resolution of the Board of Directors pursuant to Article Fourth
hereof, any director may be removed from office with or without cause and only
by the affirmative vote of the holders of not less than 66 2/3% of the voting
power of all outstanding shares of voting stock entitled to vote in connection
with the election of such director regardless of class and voting together as a
single voting class; PROVIDED, HOWEVER, that where such removal is approved by a
majority of the continuing directors, the affirmative vote of a majority of the
voting power of all outstanding shares of voting stock entitled to vote in
connection with the election of such director, regardless of class and voting
together as a single voting class, shall be required for approval of such
removal.
ELEVENTH: Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called Annual Meeting or at a
special meeting of stockholders of the Corporation, unless such action requiring
or permitting stockholder approval is approved by a majority of the continuing
directors, in which case such action may be authorized or taken by the written
consent of the holders of outstanding shares of voting stock having not less
than the minimum voting power that would be necessary to
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authorize or take such action at a meeting of stockholders at which all shares
entitled to vote thereon were present and voted, provided, all other
requirements of applicable law and this Certificate have been satisfied. Except
as specifically set forth in this Article Eleventh, no action may be taken by
stockholders by written consent.
TWELFTH: Meetings of stockholders of the Corporation may be held within or
without the State of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provision of applicable law) outside the
State of Delaware at such place or places as may be designated from time to time
by the Board of Directors or in the Bylaws.
THIRTEENTH: For the purposes of this Restated Certificate of
Incorporation, the following definitions shall apply:
(a) "continuing director" means: (i) any member of the Board of Directors
who (A) is not an interested stockholder or an affiliate or associate
of an interested stockholder and (B) was a member of the Board of
Directors prior to the time that an interested stockholder became an
interested stockholder; and (ii) any person who is elected or
nominated to succeed a continuing director, or to join the Board of
Directors, by a majority of the continuing directors.
(b) The terms "affiliate," "associate," "control," "interested
stockholder," "owner," "person" and "voting stock" shall have the
meanings set forth in Section 203(c) of the Delaware General
Corporation Law.
FOURTEENTH: The provisions set forth in this Article Fourteenth and in
Articles Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth and Eleventh hereof
may not be repealed, rescinded, altered or amended in any respect, and no other
provision or provisions may be adopted which impair(s) in any respect the
operation or effect of any such provision, except by the affirmative vote of the
holders of not less than 66 2/3% of the voting power of all outstanding shares
of voting stock regardless of class and voting together as a single voting
class, and, where such action is proposed by an interested stockholder or by any
associate or affiliate of an interested stockholder, the affirmative vote of the
holders of a majority of the voting power of all outstanding shares of voting
stock, regardless of class and voting together as a single class, other than
shares held by the interested stockholder which proposed (or the affiliate or
associate of which proposed) such action, or any affiliate or associate of such
interested stockholder; PROVIDED, HOWEVER, that where such action is approved by
a majority of the continuing directors, the affirmative vote of a majority of
the voting power of all outstanding shares of voting stock, regardless of class
and
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voting together as a single voting class, shall be required for approval of such
action.
FIFTEENTH: The Corporation reserves the right to adopt, repeal, rescind,
alter or amend in any respect any provision contained in this Certificate in the
manner now or hereafter prescribed by applicable law, and all rights conferred
on stockholders herein are granted subject to this reservation. Notwithstanding
the preceding sentence, the provisions set forth in Articles Fourth, Fifth,
Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh and Fourteenth may not be
repealed, rescinded, altered or amended in any respect, and no other provision
or provisions may be adopted which impair(s) in any respect the operation or
effect of any such provision, unless such action is approved as specified in
Article Fourteenth hereof.
SIXTEENTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (a) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (b) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the Delaware General Corporation Law,
or (d) for any transaction from which the director derived an improper personal
benefit. If the Delaware General Corporation Law hereafter is amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the Corporation, in addition to the
limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended Delaware General Corporation Law. Any
repeal or modification of this Section by the stockholders of the Corporation
shall be prospective only and shall not adversely affect any limitation on the
personal liability of a director of the Corporation existing at the time of such
repeal or modification.
SEVENTEENTH: No contract or other transaction of the Corporation with any
other person, firm or corporation, or in which this corporation is interested,
shall be affected or invalidated by: (a) the fact that any one or more of the
directors or officers of the Corporation is interested in or is a director or
officer of such other firm or corporation; or, (b) the fact that any director or
officer of the Corporation, individually or jointly with others, may be a party
to or may be interested in any such contract or transaction, so long as the
contract or transaction is authorized, approved or ratified at a meeting of the
Board of Directors by sufficient vote thereon by directors not interested
therein, to which such fact of relationship or interest has been disclosed, or
the contract or transaction has been approved or ratified by vote or written
consent of the stockholders entitled to vote, to whom such fact of relationship
or interest has been disclosed, or so long as the contract or transaction is
fair and reasonable to the
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Corporation. Each person who may become a director or officer of the
Corporation is hereby relieved from any liability that might otherwise arise by
reason of his contracting with the Corporation for the benefit of himself or any
firm or corporation in which he may in any way be interested.
EIGHTEENTH: The Corporation hereby provides for a series of Preferred
Stock designated as the Series A Convertible Preferred Stock, as follows:
1. DEFINITIONS. For purposes of this Article, the following definitions
shall apply:
"COMMON STOCK" shall mean the common stock, par value $0.001 per share, of
the Corporation.
"DEFAULTED DIVIDENDS" shall mean dividends for any full calendar annual
period which, as of the date of conversion or redemption, have not been declared
by the Board of Directors or shall remain accrued and unpaid as of such date.
"LIQUIDATION PREFERENCE" shall mean $3.00 per share, subject to adjustment
from time to time as provided in Section 2 (b)(1)(C) of this Article.
"PREFERRED STOCK" shall mean the preferred stock, par value $0.001 per
share, of the Corporation.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any successor act.
"SERIES A PREFERRED STOCK" shall mean the series of Preferred Stock
designated as the Series A Convertible Preferred Stock by the Corporation's
Board of Directors.
2. DETERMINATION OF PREFERENCES OF SERIES A PREFERRED STOCK. The rights,
preferences, privileges, restrictions and other matters related to the Series A
Preferred Stock in this Article are as follows:
(a) DIVIDEND PROVISIONS.
(1) The holders of the Series A Preferred Stock shall be entitled to
receive a cumulative preferential dividend of $0.18 per share PER ANNUM,
payable in cash, out of funds legally available therefor, once annually, on
December 31 of each year (the "Dividend Payment Date"), commencing December 31,
1996, (or, if any such Dividend Payment Date shall be a weekend or a bank
holiday, on the next business day thereafter), in arrears, to each holder of
record of Series A Preferred Stock on the Corporation's books on each December
15, commencing December 15, 1996 (the "Record Date").
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(2) The rate of dividends payable with respect to the Series A
Preferred Stock shall be adjusted from time to time in connection with any stock
split, reverse stock split or reclassification of the Series A Preferred Stock
which would result in an adjustment of the Conversion Base for such class of
stock under Section 2(c)(4) of this Article.
(3) CUMULATIVE RIGHTS. To the extent, if any, that dividends at the
rate set forth in Section 2 (a)(1) above shall not be paid or set apart in full
for the Series A Preferred Stock, the aggregate deficiency shall be cumulated
and must be fully paid or set apart for payment before any dividends may be paid
upon or set apart for the Common Stock of the Corporation or before the
Corporation may purchase any of its Common Stock or otherwise make any
distribution on account of its Common Stock or any other class of capital stock
now or hereafter authorized or issued by the Corporation which ranks on a parity
with or junior to the Series A Preferred Stock (other than (a) a dividend
payable in Common Stock, or (b) by conversion into or exchange for capital stock
of the Corporation ranking junior to the Series A Preferred Stock as to
dividends).
(4) NO INTEREST ON ACCRUED DIVIDENDS. Any accumulations of dividends
on the Series A Preferred Stock shall not bear interest.
(5) DECLARATION. Dividends on the Series A Preferred Stock shall be
declared if, when and as the Board of Directors of the Corporation shall in its
sole discretion deem advisable, and only from the surplus of the Corporation as
such shall be fixed and determined by the Board of Directors. The determination
of the Board of Directors at any time of the amount of surplus available for the
payment of dividends shall be binding and conclusive on the holders of the
shares of Series A Preferred Stock then outstanding. If dividends are not paid
in full upon the Series A Preferred Stock and any other Preferred Stock ranking
on a parity as to the dividends with the Series A Preferred Stock, all
dividends declared upon shares of Series A Preferred Stock and upon such other
shares of Preferred Stock shall bear the same ratio to each other that the
accumulated dividends per share on the shares of the Series A Preferred Stock
and such other shares of Preferred Stock bear to each other. The holders of the
Series A Preferred Stock shall be not be entitled to receive any dividends
thereon other than the dividends provided for in the preceding provisions of
this Section.
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(b) LIQUIDATION PREFERENCE.
(1) PREFERENCE. In the event of any voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Corporation, after
payment or provision for payment of the debts and other liabilities of the
Corporation, each holder of the Series A Preferred Stock shall be entitled to
receive, out of the remaining net assets of the Corporation legally available
for distribution to its shareholders, before any payment or distribution shall
be made on the Common Stock, or on any other class of stock of the Corporation
ranking junior to the shares of Series A Preferred Stock upon liquidation, the
amount of the Liquidation Preference, plus all Defaulted Dividends, as of the
date of such dissolution, liquidation or winding up.
(2) PROPORTIONATE DISTRIBUTION WHERE ASSETS INSUFFICIENT. In the
event the assets of the Corporation available for distribution to the holders of
shares of Series A Preferred Stock upon dissolution, liquidation or winding up
of the Corporation whether voluntary or involuntary, shall be sufficient to pay
in full all amounts to which such holders are entitled pursuant to paragraph (1)
of this Section, no such distribution shall be made on account of any shares of
any class of capital stock of the Corporation ranking on a parity with the
shares of Series A Preferred Stock upon such dissolution, liquidation or winding
up unless proportionate distributive amounts shall be paid on account of the
shares of Series A Preferred Stock, ratably, in proportion to the full
distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(3) NONPARTICIPATION RIGHT. After the payment to the holders of the
shares of Series A Preferred Stock of the full preferential amounts provided for
in either paragraph (1) or (2) of this Section, as applicable, the holders of
Series A Preferred Stock such shall have no right or claim to any of the
remaining assets of the Corporation.
(4) REORGANIZATION. For the purposes of this Article, a liquidation,
dissolution or winding up of the affairs of the Corporation shall not be deemed
to be occasioned by or to include the sale of all or substantially all of the
assets of the Corporation or the acquisition of the Corporation by another
entity by means of a merger, consolidation or other reorganization.
(5) ADJUSTMENTS TO LIQUIDATION PREFERENCE. The Liquidation
Preference shall be adjusted from time to time in connection with any stock
split, reverse stock split or reclassification of the Series A Preferred Stock
which would result in an adjustment to the Conversion Base for such class of
stock under Section 2(c)(4) of this Article.
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(c) CONVERSION AND REDEMPTION RIGHTS. The holders of the Series A
Preferred Stock shall have conversion rights (the "Conversion Rights") and
redemption rights ("Redemption Rights"), respectively as follows:
(1) OPTIONAL CONVERSION.
(A) Each share of the Series A Preferred shall be convertible,
at the option of the holder thereof at any time after January 1, 1997, in
accordance with Section 2(c)(2) of this Article.
(B) In order to convert shares of the Series A Preferred Stock
into shares of Common Stock, the holder thereof shall surrender the certificate
or certificates therefor, duly endorsed, at the office of the Corporation or its
transfer agent, together with written notice (the "Conversion Notice") to the
Corporation stating that it elects to convert the same and setting forth the
name or names in which it wishes the certificate or certificates for Common
Stock to be issued, and the number of shares of Series A Preferred Stock being
converted.
(C) The Corporation shall, as soon as practicable after the
surrender of the certificate or certificates evidencing shares of Series A
Preferred Stock for conversion, issue to the holder of such shares a certificate
or certificates evidencing the number of shares of Common Stock (and any other
securities and property) to which it shall be entitled and, in the event that
only a part of the shares evidenced by such certificate or certificates are
converted, a certificate evidencing the number of shares of Series A Preferred
Stock, as the case may be, which are not converted. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series A Preferred Stock to be converted, and
the person or persons entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock at such date and shall, with respect to
such shares, thereafter have only the rights of a holder of Common Stock;
PROVIDED, HOWEVER, that if, at the date of such notice and surrender, the
transfer books for the Common Stock or other class of stock purchasable upon the
exercise of such conversion rights shall be closed, the certificate or
certificates for the shares of Common Stock in respect of which such conversion
rights are then exercised shall be issuable as of the date on which such books
shall next be opened, and until such date the Corporation shall be under no duty
to deliver any certificate for such shares of Common Stock; and PROVIDED,
FURTHER, that the transfer books of record, unless otherwise required by law,
shall not be closed at any one time for a period longer than twenty (20) days.
The rights of purchase represented by the foregoing conversion rights shall be
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exercisable, at the election of the holder, either in full or from time to time
in part.
(D) With respect to the issue of shares of Common Stock upon
conversion of the Series A Preferred Stock and the transfer of such shares of
Common Stock:
(i) The holder and any transferee of the shares of Common Stock
issuable upon the exercise of the foregoing conversion rights agree
that, notwithstanding anything in this Certificate to the contrary,
during such period as delivery of a prospectus or like document with
respect to such Common Stock may be required by the securities laws of
any applicable jurisdiction, no public distribution of such Common
Stock will be made in a manner or on terms different from those set
forth in, or without delivery of, a prospectus or other document then
meeting the requirements of such laws. The holder and any such
transferee further agree that if any distribution of any of such
Common Stock is proposed to be made to them or by them otherwise than
by delivery of such a prospectus or other document meeting the
requirements of the securities laws of all applicable jurisdictions,
such action shall be taken only after submission to the Corporation of
an opinion of counsel, reasonably satisfactory in form and substance
to the Corporation's counsel, to the effect that the proposed
distribution will not be in violation of such securities laws.
(ii) It shall be a condition to the transfer of such Common Stock
that any transferee of such Common Stock deliver to the Corporation
his or its written agreement to accept and be bound by all of the
terms and conditions of this Certificate.
(2) NUMBER OF SHARES
(A) Each share of the Series A Preferred Stock shall be
convertible, subject to adjustment from time to time in connection with any
stock split, reverse stock split or reclassification of the Series A Preferred
Stock which would result in an adjustment to the Conversion Base for such class
of stock under Section 2(c)(4) of this Article, into duly authorized, validly
issued, fully paid and non-assessable shares of Common Stock, calculated as to
each conversion to the greatest number of full shares of Common Stock,
disregarding fractions, with a cash adjustment for fractional shares as
hereinafter provided, at any time after January 1, 1997 (the "Conversion
Period"), into one share of Common Stock (the "Conversion Base"); PROVIDED,
HOWEVER, that holder shall be entitled to convert the aggregate of any eligible
shares of Series A Preferred Stock, previously not so elected to be converted,
during the Conversion Period; and
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PROVIDED, FURTHER, that such right of conversion shall only be exercisable at
such time as: (i) the exercise of such right of conversion and the delivery of
such shares of Common Stock are lawful under federal securities laws and the
securities laws of the jurisdiction of residence of all persons to whom such
shares of Common Stock are otherwise deliverable, and, (ii) only if a current
prospectus, as set forth in Section 2(c)(2) of this Article, relating to the
underlying shares of Common Stock is then in effect and only if such shares of
Common Stock are qualified for sale under the securities laws of the
jurisdiction or jurisdictions in which the holder resides.
(B) No fractional shares of Common Stock or scrip shall be issued
upon conversion of the 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 on the basis of the aggregate number of
shares of Series A Preferred Stock so surrendered. If the computation for
determining the number of shares of Common Stock issuable upon conversion of
Series A Preferred Stock shall result in other than a whole number, the
Corporation shall issue to such shareholder, in respect of the aggregate number
of shares of Series A Preferred Stock held by any shareholder, one share of
Common Stock in respect of any fractional shares of Common Stock otherwise
issuable to such shareholder.
(3) OPTIONAL REDEMPTION.
(A) The Series A Preferred Stock at any time outstanding may be
redeemed by the Corporation, in whole or in part, at any time or from time to
time after January 1, 1997, at the option of the Board of Directors upon not
less than thirty (30) days' prior written notice (the "Redemption Notice") to
the holders of record of the shares of Series A Preferred Stock to be redeemed,
upon payment to the holders of the Series A Preferred Stock of the Liquidation
Preference, plus all Defaulted Dividends, as of the redemption date (the
"Redemption Price"), and no penalty shall become due as a result of such
redemption. If less than all of the outstanding shares of Series A Preferred
Stock are to be redeemed, the redemption may be made either by lot or PRO RATA
or by such other method as the Board of Directors in its discretion may
determine. If such notice of redemption shall have been duly given and if, on
or before the redemption date specified in such notice, all funds necessary for
such redemption shall have been set aside so as to be available therefor, then
notwithstanding that any certificate for shares of Series A Preferred Stock so
called for redemption shall not have been surrendered for cancellation, all
dividends on such shares of Series A Preferred Stock shall forthwith on such
redemption date cease and terminate, except only the right of holders thereof to
receive the amount payable upon redemption thereof, but without interest.
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<PAGE>
(B) SURRENDER OF SHARES. The Corporation shall, as soon as
practicable after the surrender of the certificate or certificates evidencing
shares of Series A Preferred Stock for redemption, issue to the holder of such
shares, in the event that only a part of the shares evidenced by such
certificate or certificates are redeemed, a certificate evidencing the number of
shares of Series A Preferred Stock which are not redeemed. Such redemption
shall be deemed to have become effective immediately prior to the close of
business on the date of such surrender of the shares of Series A Preferred Stock
to be redeemed. On or after the date fixed for redemption, each holder of Series
A Preferred Stock called for redemption shall, unless such holder shall have
previously exercised such holder's option to convert the Series A Preferred
Stock into Common Stock in the manner set forth in Section 2(c)(i) above,
surrender such holder's certificates for such shares of Series A Preferred Stock
to the Corporation at the place designated in the Redemption Notice and shall
thereupon be entitled to receive the Redemption Price. Should less than all the
shares of Series A Preferred Stock represented by any surrendered certificate be
redeemed, a new certificate for the unredeemed shares shall be issued to the
holder of record of such unredeemed shares. Notwithstanding anything to the
contrary, the holder of Series A Preferred Stock shall not be obligated to
exercise the conversion rights hereunder, if the Corporation calls the Series A
Preferred Stock for redemption, during such time as the holder may be liable for
damages or penalties with respect to the conversion of such shares pursuant to
Section 16 of the Securities Exchange Act of 1934, as amended, only with respect
to an event occurring prior to the date of the Redemption Notice. However, in
such event, the holder of Series A Preferred Stock shall provide the Corporation
with an opinion of qualified United States securities counsel to the effect that
the conversion of the Series A Preferred Stock shall subject the holder to such
damages or penalties for such reasons and shall set forth the inclusive dates
during which such damages or penalties shall accrue and terminate. Upon the
termination date of such inclusive dates, the holder shall have ten (10) days to
elect to convert the shares of Series A Preferred Stock into shares of Common
Stock, or shall otherwise be subject to call for redemption pursuant to the
terms and conditions of the previously delivered Redemption Notice.
(C) CESSATION OF RIGHTS AS SHAREHOLDER. From and after the
redemption date (unless default shall be made by the Corporation in duly paying
the Redemption Price in which case all rights of the holders of Series A
Preferred Stock shall continue), the holders of the shares of the Series A
Preferred Stock called for redemption shall cease to have any rights as
shareholders of the Corporation except the right to receive, without interest,
the Redemption Price thereof upon surrender of the certificate(s) representing
the shares of Series A Preferred Stock being redeemed, and such shares shall not
thereafter be transferred (except with
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<PAGE>
the consent of the Corporation) on the books of the Corporation and shall not be
deemed outstanding for any purpose whatsoever.
(D) CANCELLATION OF REDEEMED SHARES. All shares of Series A
Preferred Stock that are redeemed shall be cancelled and such shares shall be
restored to the status of authorized but unissued shares of Preferred Stock.
(4) STOCK SPLITS AND REVERSE STOCK SPLITS. If outstanding shares of
Common Stock shall be subdivided into a greater number of shares, or a dividend
in Common Stock or other securities of the Corporation convertible into or
exchangeable for Common Stock (in which latter event the number of shares of
Common Stock issuable upon the conversion or exchange of such securities shall
be deemed to have been distributed) shall be paid in respect of the Common
Stock, the Conversion Base in effect immediately prior to such subdivision or at
the record date of such dividend shall each, simultaneously with the
effectiveness of such subdivision or immediately after the record date of such
dividend, be proportionately reduced, and conversely, if outstanding shares of
the Common Stock shall be combined into a smaller number of shares, the
Conversion Base in effect immediately prior to such combination shall each,
simultaneously with the effectiveness of such combination, be proportionately
increased.
Any adjustments to the Conversion Base under this Section 2 (c)(4) of this
Article shall become effective at the close of business on the date the
subdivision or combination referred to herein becomes effective.
(5) CERTAIN DISTRIBUTIONS. In the event the Corporation at any time,
or from time to time, 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 securities of the Corporation other than shares of
Common Stock or securities convertible into or exchangeable for Common Stock,
then and in each such event, provision shall be made so that the holders of the
Series A Preferred Stock shall receive upon conversion thereof, in addition to
the number of shares of Common Stock receivable thereupon, the amount of
securities of the Corporation which they would have received had their Series A
Preferred Stock been converted into Common Stock on the date of such event and
had thereafter, during the period from the date of such event to and including
the date of conversion, retained such securities receivable by them as aforesaid
during such period, giving application to all adjustments called for during such
period under this Section 2(c)(6) of this Article with respect to the rights of
the holders of Series A Preferred Stock.
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(6) CERTAIN REORGANIZATIONS. In the event of any capital
reorganization, any reclassification of the Common Stock (other than a change in
par value or as a result of a stock dividend, subdivision, split-up or
combination of shares), the consolidation or merger of the Corporation with or
into another person, or the sale or other disposition of all or substantially
all of the properties of the Corporation as an entirety to another person
(collectively referred to hereinafter as a "Reorganization"), the holders of the
Series A Preferred Stock shall thereafter be entitled to receive, and provision
shall be made therefor in any agreement relating to a Reorganization, upon
conversion of the Series A Preferred Stock, the kind and number of shares of
Common Stock or other securities or property (including cash) of the
Corporation, or the other corporation resulting from such consolidation or
surviving such merger, which the Series A Preferred Stock entitled the holder
thereof to convert to immediately prior to such Reorganization; and in any such
case appropriate adjustment shall be made in the application of the provisions
herein set forth with respect to the rights and interests thereafter of the
holders of the Series A Preferred Stock to the end that the provisions set forth
herein shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares, to such other securities or property thereafter
receivable upon conversion of the Series A Preferred Stock. The provisions of
this Section 2(c)(6) of this Article shall similarly apply to successive
Reorganizations.
(7) NOTICE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Conversion Base or the number of shares of Common Stock or
other securities issuable upon conversion of the Series A Preferred Stock, the
Corporation, at its expense, shall prepare a certificate showing such adjustment
or readjustment, and shall mail such certificate, by first-class mail, postage
prepaid, to each holder of the Series A Preferred Stock which is the subject of
adjustment. The certificate shall set forth such adjustment or readjustment,
showing in detail the facts upon which such adjustment or readjustment is based,
including a statement of (A) the Conversion Base at the time in effect for the
Series A Preferred Stock, and (B) the number of shares of Common Stock and the
type and amount, if any, of other property which at the time would be received
upon conversion of such Series A Preferred Stock.
(8) RESERVATION OF SHARES. 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 or the issuance of dividends
in respect of the shares of Series A Preferred Stock, such number of the shares
of Common Stock as shall from time to time be sufficient to effect a conversion
or the issuance of dividends in respect of all outstanding shares of the Series
A Preferred Stock, and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion or the
issuance of dividends in
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<PAGE>
respect of all then outstanding shares of the Series A Preferred Stock, the
Corporation shall promptly seek such corporate action as may in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose.
In the event of the consolidation or merger of the Corporation with another
corporation, effective provision shall be made in the certificate or articles of
incorporation, documents of merger or consolidation, or otherwise, of the
surviving corporation so that such corporation will at all times reserve and
keep available a sufficient number of shares of Common Stock or other securities
or property to provide for the conversion or issuance of dividends in respect of
the Series A Preferred Stock accordance with the provisions of this Section 2(c)
of this Article.
(9) TAXES. The Corporation shall pay all taxes and other governmental
charges (other than any income or other taxes imposed upon the profits realized
by the recipient) that may be imposed in respect of the issue or delivery of
shares of Common Stock or other securities or property upon conversion or
issuance of dividends in respect of shares of Series A Preferred Stock,
including without limitation, any tax or other charge (other than any transfer
tax) imposed in connection with the issue and delivery of shares of Common Stock
or other securities at the time of such conversion or issuance of dividends in a
name other than that in which the shares of Series A Preferred Stock so
converted or otherwise held were registered.
(10) CANCELLATION OF CERTIFICATES. All certificates representing
Series A Preferred Stock surrendered for conversion or redemption shall be
appropriately canceled on the books, and the shares so converted or redeemed
represented by such certificates shall be restored to the status of authorized
but unissued shares of undesignated Preferred Stock, but may not be reissued as
part of the Series A Preferred Stock.
(11) NO AVOIDANCE. The Corporation shall not amend the Corporation's
Articles of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or attempting to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation.
(d) VOTING RIGHTS. The holders of the Series A Preferred Stock shall
have one vote per share. In the event that the outstanding shares of Common
Stock shall be adjusted from time to time in connection with any stock split,
reverse stock split or reclassification of the Common Stock pursuant to which
the outstanding shares of Common Stock shall be subdivided into a greater number
of shares or combined into a smaller number of shares, and which would result in
an adjustment of the Conversion
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<PAGE>
Base under Section 2(c)(4) of this Article, the number of votes per share of
Series A Preferred Stock shall be proportionately increased simultaneously with
the effectiveness of such subdivision or reduced simultaneously with the
effectiveness of such combination.
(e) ADDITIONAL SERIES OF PREFERRED STOCK. Except for the Series A
Preferred Stock, the Board of Directors of the Corporation is authorized to fix
the number of shares of any additional series of Preferred Stock and to
determine the designation of any such series. The Board of Directors is also
authorized to determine or alter the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock and, within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series, to increase or decrease (but not below the number of
shares of any such series then outstanding) the number of shares of any series
subsequent to the issue of shares of that series. The Corporation expressly
reserves the right to issue additional series of Preferred Stock from time to
time which may rank on a parity with or junior to the Series A Preferred Stock
with respect to any distributions upon dissolution, liquidation or winding up,
or of dividends pursuant to Sections 2(a) and 2(b) of this Article,
respectively, without the prior authorization of the holders of the Series A
Preferred Stock.
(f) MISCELLANEOUS.
(1) NOTICES. All notices, requests, consents and other
communications required hereunder shall be in writing and by overnight,
registered or certified mail, postage prepaid, return receipt requested, and
shall be deemed to have been duly made when deposited in the mails upon mailing
or by overnight, registered or certified mail, postage prepaid, return receipt
requested: if addressed to the holder at the last address of such holder on the
books of the Corporation; if addressed to the Corporation, at 599 Lexington
Avenue, 44th Floor, New York, New York 10022 or such other address as the
Corporation may designate in writing.
(2) HOLDERS. For purposes of this Article, the "holder" of any
share of Common Stock or Series A Preferred Stock shall be the holder of record
of such share as set forth in the stock register of the Corporation, and the
Corporation shall be entitled to treat the holder as the owner of such
securities for all purposes.
NINETEENTH: The Corporation hereby provides for a series of Preferred
Stock designated as the Series B Convertible Preferred Stock, as follows:
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<PAGE>
1. DESIGNATION AND AMOUNT. The shares of such series shall be designated
as "Series B Convertible Preferred Stock" (the "Series B Preferred Stock") and
the number of shares constituting the Series B Preferred Stock shall be 100.
Such number of shares may be increased or decreased by resolution of the Board
of Directors; provided, that no decrease shall reduce the number of shares of
Series B Preferred Stock to a number less than the number of shares then
outstanding plus the number shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series B
Preferred Stock.
2. RANK. The Series B Preferred Stock shall rank: (i) prior to all of the
Corporation's Common Stock, par value $0.001 per share ("Common Stock"); (ii)
prior to any class or series of capital stock of the Corporation hereafter
created (collectively, with the Common Stock, "Junior Securities"); (iii) on
parity with any class or series of capital stock of the Corporation hereafter
created specifically ranking by its terms on parity with the Series B Preferred
Stock ("Parity Securities") in each case as to dividends, premium, conversion,
redemption, voting rights, and distributions of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary
(all such distributions being referred to collectively as "Distributions"); and
(iv) junior to the Series A Preferred Stock ("Senior Securities") in terms of
Distributions.
3. DIVIDENDS. The Series B Preferred Stock will bear no dividends, and the
holders of the Series B Preferred Stock shall not be entitled to receive
dividends on the Series B Preferred Stock.
4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, the holders of shares of Series B
Preferred Stock shall be entitled to receive, immediately after any
distributions to Senior Securities required by the Corporation's Articles of
Incorporation or any statement of designation of preferences, and prior and in
preference to any distribution to Junior Securities but in parity with any
distribution of Parity Securities, an amount per share equal to the sum of (i)
$25,000 for each outstanding share of Series B Preferred Stock (the "Original
Series B Issue Price") and (ii) an amount equal to 8% of the Original Series B
Issue Price per annum for the period that has passed since the date of issuance
of any Series B Preferred Stock (such amount being referred to herein as the
"Premium"). If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series B Preferred Stock and Parity
Securities shall be insufficient to permit the payment to such holders of the
full preferential amounts due to the holders of the Series B Preferred Stock and
the Parity
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Securities, respectively, then the entire assets and funds of the Corporation
legally available for distribution shall be distributed among the holders of the
Series B Preferred Stock and the Parity Securities, pro rata, based on the
respective liquidation amounts to which each such series of stock is entitled by
the Corporation's Articles of Incorporation and any statement(s) of designation
of preferences.
(b) Upon the completion of the distribution required by subsection
4(a), if assets remain in this Corporation, they shall be distributed to holders
of Parity Securities (unless holders of Parity Securities have received
distributions pursuant to subsection (a) above) and Junior Securities in
accordance with the Corporation's Articles of Incorporation including any duly
adopted certificate(s) of designation of preferences.
(c) A consolidation or merger of the Corporation with or into any
other corporation or corporations, or 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, shall not be
deemed to be a liquidation, dissolution or winding up within the meaning of this
Section 4, but shall instead be treated pursuant to Section 7 hereof.
5. CONVERSION.
The record holders of the Series B Preferred Stock shall have conversion rights
as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. The record holder of the Series B Preferred
Stock shall be entitled, as set forth below, and, subject to the Company's right
of redemption set forth in Section 6(a) and the restrictions on conversion set
forth in Section 5(b) below, at the office of the Company or any transfer agent
for the Series B Preferred Stock, to convert the shares of Series B Preferred
Stock held by such holder into that number of fully-paid and nonassessable
shares of the Company's Common Stock at the Conversion Rate as set forth below.
The number of shares of Common Stock into which this Series B Preferred Stock
may be converted is hereinafter referred to as the "Conversion Rate" for such
Series B Preferred Stock, and is computed as follows:
Number of shares issued upon conversion of one share of Preferred Stock
equals
[(.08)(N/365)(Issue Price)] + Issue Price
-----------------------------------------
Conversion Price
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where
*N = the number of days between (i) the date that, in connection with the
consummation of the initial purchase of this Series B Preferred Stock from
the Company, the escrow agent first had in its possession funds
representing full payment for the Series B Preferred Stock for which
conversion is being elected, and (ii) the applicable date of conversion for
the Series B Preferred Stock for which conversion is being elected,
*Issue Price = the Original Series B Issue Price, as defined in Section
4(a), and
*Conversion Price = the lesser of (x) the Fixed Conversion Price, as may be
adjusted pursuant to Section 5(e) below, or (y) the price which is the
lesser of (i) 85% of the average Closing Bid Price of the Company's Common
Stock on each of the five (5) trading days immediately preceding the Date
of Conversion, as defined below, or (ii) 85% of the average of the Daily
Low Trading Price of the Company's Common Stock on each of the five (5)
trading days immediately preceding the Date of Conversion, as defined
below.
For purposes hereof, (i) the "Fixed Conversion Price" shall equal 110% of
the Index Price, provided, however, that if on the date that is 180
calendar days after the termination of the offering of the Series B
Preferred Stock, the average Closing Bid Price for the prior 20 business
days has declined 25% or more from the Index Price, then the Fixed
Conversion Price shall be reset to equal 110% of that 20-day average
Closing Bid Price, (ii) the "Index Price" shall be $5.40, and (iii) the
terms "Closing Bid Price" and "Daily Low Trading Price" shall mean the
closing bid price and daily low trading price, respectively, of the
Company's Common Stock as reported by NASDAQ (or, if not reported by
NASDAQ, as reported by such other exchange or market where traded) on the
applicable date.
(b) MECHANICS OF CONVERSION. No fractional shares of Common Stock shall
be issued upon conversion of this Series B Preferred Stock. In lieu of any
fractional share to which the holder would otherwise be entitled, the number of
shares of Common Stock to be received shall be rounded up to the next whole
number of shares. In the case of a dispute as to the calculation of the
Conversion Rate, the Company's calculation shall be deemed conclusive absent
manifest error. In order to convert Series B Preferred Stock into full shares of
Common Stock, the holder shall surrender the certificate or certificates
therefor, duly endorsed, by either overnight courier or 2-day courier, to the
office of the Company or of any transfer agent for the Series B Preferred Stock,
and shall give written notice ("Notice of Conversion") to the Company at such
office that he elects to convert the same, the number of shares of
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Series B Preferred Stock so converted and a calculation of the Conversion Rate
(with an advance copy of the certificate(s) and the notice by facsimile). Once
the Notice of Conversion has been so delivered, the conversion set forth therein
shall be irrevocable, and the certificate(s) indicated for conversion shall be
canceled on the Company's books; provided, however, that the Company shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless either the certificates evidencing such
Series B Preferred Stock are delivered to the Company or its transfer agent as
provided above, or the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates.
The Company shall issue and deliver within three (3) business days after
delivery to the Company of such certificates, or after such agreement and
indemnification, to such holder of Series B Preferred Stock at the address of
the holder on the books of the Company, a certificate or certificates for the
number of shares of Common Stock to which the holder shall be entitled as
aforesaid. The date on which conversion occurs (the "Date of Conversion") shall
be deemed to be the date set forth in such Notice of Conversion, provided that
the advance copy of the Notice of Conversion is faxed to the Company before
midnight, New York City time, on the Date of Conversion.
(c) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company 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
Series B Preferred Stock, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all then outstanding
shares of Series B Preferred Stock; and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of Series B Preferred Stock, the
Company will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
(d) AUTOMATIC CONVERSION. Each share of Series B Preferred Stock
outstanding on June 7, 1998 automatically shall be converted into Common Stock
on such date at the Conversion Price then in effect and June 7, 1998 shall be
deemed the Date of Conversion with respect to such Conversion.
(e) ADJUSTMENT TO FIXED CONVERSION PRICE.
In computing the Fixed Conversion Price for purposes of Section 5(a):
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(i) If, prior to the conversion of all of the Series B Preferred
Stock, the number of outstanding shares of Common Stock is increased by a stock
split, stock dividend, or other similar event, the Fixed Conversion Price shall
be proportionately reduced, or if the number of outstanding shares of Common
Stock is decreased by a combination or reclassification of shares, or other
similar event, the Fixed Conversion Price shall be proportionately increased.
(ii) If, prior to the conversion of all Series B Preferred Stock,
there shall be any merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event, as a result of which shares of Common
Stock of the Company shall be changed into the same or a different number of
shares of the same or another class or classes of stock or securities of the
Company or another entity, then the holders of Series B Preferred Stock shall
thereafter have the right to purchase and receive upon conversion of Series B
Preferred Stock, upon the basis and upon the terms and conditions specified
herein and in lieu of the shares of Common Stock immediately theretofore
issuable upon conversion, such shares of stock and/or securities as may be
issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore purchasable and receivable upon the
conversion of Series B Preferred Stock held by such holders had such merger,
consolidation, exchange of shares, recapitalization or reorganization not taken
place, and in any such case appropriate provisions shall be made with respect to
the rights and interests of the holders of the Series B Preferred Stock to the
end that the provisions hereof (including, without limitation, provisions for
adjustment of the Fixed Conversion Price and of the number of shares issuable
upon conversion of the Series B Preferred Stock) shall thereafter be applicable,
as nearly as may be practicable in relation to any shares of stock or securities
thereafter deliverable upon the exercise hereof. The Company shall not effect
any transaction described in this subsection 5(e) unless the resulting successor
or acquiring entity (if not the Company) assumes by written instrument the
obligation to deliver to the holders of the Series B Preferred Stock such shares
of stock and/or securities as, in accordance with the foregoing provisions, the
holders of the Series B Preferred Stock may be entitled to purchase.
(iii) If any adjustment under this Section 5(e) would create a
fractional share of Common Stock or a right to acquire a fractional share of
Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon conversion shall be the next higher number
of shares.
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(f) FORCED CONVERSION OPTION. At any time after one year from the
termination of the offering of the Series B Preferred Stock, the Company may, at
its option, elect to force conversion of the Series B Preferred Stock into
Common Stock. In order to do so, the Company must give sixty days prior written
notice, delivered by facsimile with hard copy by courier, to the holders of the
Series B Preferred Stock of the Company's election to force conversion. The
notice must state the effective date of the forced conversion. Prior to the
effective date of the forced conversion, the holders of the Series B Preferred
Stock may exercise any rights they may have under this Certificate or applicable
law. In the event of a forced conversion, notwithstanding anything to the
contrary herein, the conversion formula applicable to the shares of Series B
Preferred Stock that are the subject of the forced conversion shall be as
follows:
Number of shares issued upon conversion of one share of Preferred Stock
equals
[(.08 + Forced Conversion Premium)(N/365)(Issue Price)] + Issue Price
---------------------------------------------------------------------
Conversion Price
where the term "Forced Conversion Premium" means six percent (6% or 0.06) for
the thirteenth month after the Final Closing Date, declining by one-half of one
percent (0.5%) each month thereafter until it equals zero the end of the twenty-
third month after the Final Closing Date, and the terms "N", "Issue Price" and
"Conversion Price" have the meanings set forth in 5(a) above.
6. REDEMPTION BY COMPANY UPON CONVERSION.
(a) RIGHT TO REDEEM. In the event the Conversion Price per share shall be
less than or equal to 75% of the Index Price, the Company shall have the right,
in its sole discretion, upon receipt of a Notice of Conversion pursuant to
Section 5, to redeem in whole or in part any Series B Preferred Stock submitted
for conversion, immediately prior to conversion, at the Redemption Price on
Conversion (as defined below). If the Company elects to redeem some, but not
all, of the Series B Preferred Stock submitted for conversion, the Company shall
redeem from among the Series B Preferred Stock submitted by the various
shareholders for conversion on the applicable date, a pro-rata amount from each
shareholder so submitting Series B Preferred Stock for conversion.
(b) MECHANICS OF REDEMPTION. Any shareholder considering submitting
Preferred Stock for conversion at such time as the Company's right of redemption
under Section 6(a) is or may be in effect may provide notice to the Company of
his possible desire to convert and ask the Company to determine whether or not
the Company would exercise its right of redemption if the Preferred Stock were
submitted for conversion. The Company shall respond within two
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<PAGE>
business days of the date of that notice, and state whether it would redeem the
shares, in whole or in part, or allow conversion into shares without redemption,
which election will be applicable to conversion by such shareholder within the
next five business days after the date of the Company's response. Failure of
the Company to respond within the two-day period shall be deemed an election by
the Company not to redeem the shares covered by that notice if submitted for
conversion within the next five business days. If the shareholder does not
provide advance notice of intention to convert as contemplated in this section
(ii), the Company shall effect each such redemption of shares submitted for
conversion by giving notice of its election to redeem, by facsimile within 2
business days following receipt of a Notice of Conversion from a holder, with a
copy by 2-day courier, to (A) the holder of Series B Preferred Stock submitted
for conversion at the address and facsimile number of such holder appearing in
the Company's register for the Series B Preferred Stock and (B) the Company's
Transfer Agent. Such redemption notice shall indicate whether the Company will
redeem all or part of the Series B Preferred Stock submitted for conversion and
the applicable redemption price. The Company shall not be entitled to exercise
its right to redeem shares submitted for conversion under this Section 6(a)
unless it has (x) the full amount of the redemption price, in cash, available in
a demand or other immediately available account in a bank or similar financial
institution or (y) immediately available credit facilities, in the full amount
of the redemption price, with a bank or similar financial institution on the
date the redemption notice is sent to shareholders.
(c) REDEMPTION PRICE. In the case of a redemption under this Section 6(a),
the redemption price ("Redemption Price on Conversion") shall equal:
= [[(.08)(N/365)(Issue Price)] + Issue Price] [Closing Bid Price]
-----------------------------------------------------------------
Conversion Price
where "N," "Issue Price," "Closing Bid Price" and "Conversion Price"
have the meanings set forth in Section 5.
The Redemption Price on Conversion shall be paid to the holder of Series B
Preferred Stock redeemed within 10 business days of the delivery of the notice
of such redemption to such holder; provided, however, that the Company shall not
be obligated to deliver any portion of such Redemption Price on Conversion
unless either the certificates evidencing the Series B Preferred Stock redeemed
are delivered to the Company or its transfer agent as provided in Section 4(b),
or the holder notifies the Company or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Company to indemnify
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the Company from any loss incurred by it in connection with such certificates.
7. CORPORATE CHANGE. In the event of a merger, reorganization,
recapitalization or similar event of or with respect to the Company (a
"Corporate Change") (other than a Corporate Change in which or substantially all
of the consideration received by the holders of the Company's equity securities
upon such Corporate Change consists of cash or assets other than securities
issued by the acquiring entity or any affiliate thereof), this Series B
Preferred Stock shall be assumed by the acquiring entity and thereafter this
Series B Preferred Stock shall be convertible into such class and type of
securities as the holder would have received had the holder converted this
Series B Preferred Stock immediately prior to such Corporate Change.
8. PROTECTIVE PROVISIONS. So long as shares of Series B Preferred Stock are
outstanding, the Corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least a
majority of the then outstanding shares of Series B Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
shares of Series B Preferred Stock or any Senior Securities so as to affect
adversely the Series B Preferred Stock;
(b) create any new class or series of stock having a rights
preferential to or equal to those of the Series B Preferred Stock with respect
to conversion, redemption or voting rights or privileges, or with respect to
Distributions (as defined in Section 2 above); or
(c) do any act or thing not authorized or contemplated by this
Designation which would result in taxation of the holders of shares of the
Series B Preferred Stock under Section 305 of the Internal Revenue Code of 1986,
as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
9. STATUS OF REDEEMED OR CONVERTED STOCK. In the event any shares of
Series B Preferred Stock shall be redeemed or converted pursuant to Section 5 or
Section 6 hereof, the shares so converted or redeemed shall be canceled, shall
return to the status of authorized but unissued Preferred Stock of no designated
series, and shall not be issuable by the Corporation as Series B Preferred
Stock.
10. MISCELLANEOUS. As used herein, the term "business day" means a
business day in the City of New York.
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IN WITNESS WHEREOF AVIC GROUP INTERNATIONAL, INC. has caused this Restated
Certificate of Incorporation to be executed by its President and to be attested
to by its Secretary as of June 24, 1996.
AVIC GROUP INTERNATIONAL, INC.
By: /s/ Joseph R. Wright, Jr.
------------------------------
Joseph R. Wright, Jr.
Chief Executive Officer
By: /s/ Timothy P.F. Crowley
------------------------------
Timothy P.F. Crowley
Secretary
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EXHIBIT 3.2
AVIC GROUP INTERNATIONAL, INC.
Certificate of Designations of Preferences of Series D
Convertible Preferred Stock of AVIC Group International, Inc.
Joseph R. Wright and Timothy P.F. Crowley hereby certify that:
(1) They are the President and Secretary, respectively of AVIC Group
International, Inc. a Delaware corporation (the "Corporation").
(2) Pursuant to the authority granted under the Corporation's Certificate
of Incorporation, the Board of Directors of said Corporation has duly adopted
the following recitals and resolutions:
WHEREAS, this Corporation is authorized by its Certificate of Incorporation
to issue Ten Million (10,000,000) shares of Preferred Stock (the "Preferred
Stock"); and
WHEREAS, the Board of Directors of this Corporation is authorized, as to
the Preferred Stock, within the limitations and restrictions stated in the
Certificate of Incorporation, to fix by resolution or resolutions the
designation of each Series of Preferred Stock and the powers, preferences and
relative participating, optional or other special rights and qualifications,
limitations or restrictions thereof, including, without limitation, such
provisions as may be desired concerning dividends, redemption, voting,
dissolution or the distribution of assets, conversion or exchange, and such
other subjects or matters as may be fixed by resolution or resolutions of the
Board of Directors; and
WHEREAS, 1,524,178 shares of such Preferred Stock are issued or outstanding
and the Board of Directors of this Corporation desires, pursuant to its
authority granted under the Articles of Incorporation, to determine and fix the
rights, preferences, privileges and restrictions relating to a Series D of said
Preferred Stock, and to fix the number of shares constituting and the
designation of such Series;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized a Series D
of Preferred Stock on the terms and with the provisions herein set forth:
1. DEFINITIONS. For purposes hereof the following definitions shall
apply:
"AVERAGE STOCK PRICE" shall mean the lowest trading price of the Company's
Common Stock during the thirty (30) business days immediately preceding each
Holder Conversion Date.
"BOARD" shall mean the Board of Directors of the Company.
"CLOSING DATE" shall mean the date of original issuance of the Series D
Preferred Stock.
<PAGE>
"COMMON STOCK" shall mean the Common Stock, $0.001 par value of the
Company.
"COMPANY" shall mean this corporation.
"CONVERSION DATE MARKET PRICE" shall mean an amount that is equal to the
Average Stock Price.
"CONVERSION DEFAULT" shall have the meaning set forth in Paragraph 10(b).
"CONVERSION NOTICE" shall have the meaning set forth in Paragraph 7(c).
"CONVERSION RATE" shall have the meaning set forth in Paragraph 7(b).
"DESIGNATED PRICE" shall mean $10,000 per share plus all accrued and unpaid
dividends.
"HOLDER CONVERSION DATE" shall have the meaning set forth in Paragraph
7(c).
"JUNIOR STOCK" shall mean the Common Stock and all other shares of the
Company's capital stock, whether presently outstanding or hereafter issued,
other than the Series D Preferred Stock; PROVIDED, HOWEVER, the Company may from
time to time, without the consent of the holders of the outstanding shares of
the Series D Preferred Stock, issue additional series of its presently
authorized and unissued Preferred Stock which rank pari passu to or do not have
preference over the Series D Preferred Stock in dividends, distribution upon
liquidation or other respects.
"MARKET PRICE FOR SHARES OF COMMON STOCK" shall mean the price of one share
of Common Stock determined as follows:
(i) If the Common Stock is listed on NASDAQ, the daily low trading
price on the date of valuation;
(ii) If the Common Stock is listed on a national securities exchange,
the daily low trading price on the date of valuation;
(iii) If neither (i) or (ii) apply but the Common Stock is quoted
in the over-the-counter market on the pink sheets or bulletin board, the
lowest "bid" price thereof on the date of valuation; and
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<PAGE>
(iv) If neither clause (i), (ii) or (iii) above applies, the market
value as determined by a nationally recognized investment banking firm or
other nationally recognized financial advisor retained by the Company for
such purpose, taking into consideration, among other factors, the earnings
history book value and prospects for the Company, and the prices at which
shares of Common Stock recently have been traded. Such determination shall
be conclusive and binding on all persons.
"PARAGRAPH 5 TRANSACTION" shall mean a merger, consolidation or other
transaction referred to in Paragraph 5.
"SERIES D PREFERRED STOCK" shall mean the Series D Convertible Preferred
Stock of the Company $0.001 par value.
2. DESIGNATION AND NUMBER. The designation of the shares of Preferred
Stock authorized by these resolutions shall be "Series D Convertible Preferred
Stock" (the "Series D Preferred Stock"). The authorized number of shares
constituting the Series D Preferred Stock shall be 150 shares and each share of
Series D Preferred Stock shall rank equally in all respects.
3. DIVIDENDS. The holders of the then outstanding Series D Preferred
Stock shall be entitled to receive cumulative dividends at the annual rate of 8%
per annum per share, payable quarterly (i) in shares of Common Stock at the time
of Conversion (as provided in Paragraph 7 hereof) or (ii) in cash in connection
with any payment pursuant to Paragraph 10(b). Dividends on the Series D
Preferred Stock shall accumulate and accrue from the date of its original issue
and shall accrue from day to day thereafter, whether or not earned or declared.
The Series D Preferred Stock shall have no right to participate in dividends
paid on Junior Stock.
4. LIQUIDATION RIGHTS OF SERIES D PREFERRED STOCK.
(a) PREFERENCE. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, or a sale or other
disposition of all or substantially all of the assets of the Company which shall
be deemed to be a liquidation, dissolution or winding up of the Company, the
holders of the Series D Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Company available for distribution to its
stockholders, whether such assets are capital, surplus, or earnings, before any
payment or declaration and setting apart for payment of any amount shall be made
in respect of any Junior Stock, an amount equal to the Designated Price, and no
more. If upon any actual or deemed liquidation, dissolution, or winding up of
the Company, whether voluntary or involuntary, the assets to be distributed to
the holders of the Series D Preferred Stock shall be insufficient to permit the
payment to such stockholders of the full preferential amounts aforesaid, then
all of the assets of the Company to be distributed shall be distributed ratably
to the holders of the Series D Preferred Stock and to any holders of any series
of Preferred Stock that ranks PARI
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PASSU with the Series D Preferred Stock (including Series C Preferred Stock), on
the basis of the number of shares of Preferred Stock held. The Company shall
promptly mail written notice of such liquidation, dissolution or winding up
(with a copy sent by facsimile), but in any event such notice shall not be given
less than thirty (30) days prior to the effective date stated therein to each
record holder of the Series D Preferred Stock. If the Company determines to
effect a liquidation, dissolution or winding up of the Company, then,
notwithstanding the limitations set forth in Paragraph 7, the Series D Preferred
Stock shall thereupon, at the option of a holder thereof, be convertible in
full.
(b) REMAINING ASSETS. After the payment or distribution to the
holders of the Series D Preferred Stock of the full preferential amounts
aforesaid, the holders of the Junior Stock then outstanding shall be entitled to
receive all remaining assets of the Company to be distributed.
5. MERGER, CONSOLIDATION. If at any time there occurs any consolidation
or merger of the Company with or into any other corporation or other entity or
person (whether or not the Company is the surviving corporation), or any other
corporate reorganization or transaction or series of related transactions in
which in excess of 50% of the Company's voting power is transferred (a
"Paragraph 5 Transaction"), the holders of the Series D Preferred Stock then
outstanding shall have the right in their sole discretion to participate in any
such transaction as a class with common stockholders on the same basis as if the
Preferred Stock had been converted one day prior to the record date or effective
date of such transactions, as applicable.
6. VOTING RIGHTS. The holders of the Series D Preferred Stock will not
have any voting rights except as set forth below or as otherwise from time to
time required by law.
The affirmative approval (by vote or written consent as permitted by
applicable law) of the holders of at least 66 2/3% of the outstanding shares of
the Series D Preferred Stock, voting separately as a class, will be required for
(i) any amendment, alteration or repeal of the Company's Restated Certificate of
Incorporation (including any Certificate of Designations, Rights and
Preferences) if the amendment, alteration or repeal adversely affects the
powers, preferences or rights of the Series D Preferred Stock (including,
without limitation, by creating any class or series of equity securities having
a preference over the Series D Preferred Stock with respect to dividends,
distribution upon liquidation or in any other respect, but excluding the
issuance of a series of Preferred Stock that ranks PARI PASSU with the Series D
Preferred Stock), or (ii) any amendment to or waiver of the terms of the Series
D Preferred Stock or this Certificate.
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<PAGE>
To the extent that under Delaware law the approval of the holders of the
Series D Preferred Stock, voting separately as a class, is required to authorize
a given action of the Company, the affirmative approval (by vote or written
consent as permitted by applicable law) of the holders of a majority of the
outstanding shares of the Series D Preferred Stock shall constitute the approval
of such action by the class. To the extent that under Delaware law the holders
of the Series D Preferred Stock are entitled to vote on a matter with holders of
the Common Stock, voting together as one class, each share of Series D Preferred
Stock shall be entitled to one vote for each share thereof held. Holders of the
Series D Preferred Stock shall be entitled to notice of all shareholder meetings
or written consents (whether or not they are entitled to vote thereat), which
notice will be provided pursuant to the Company's by-laws and applicable
statutes.
7. CONVERSION AT THE OPTION OF THE HOLDER. The holders of Series D
Preferred Stock shall have the following conversion rights.
(a) HOLDER'S RIGHT TO CONVERT. Each share of Series D Preferred
Stock shall be convertible, at the option of the holder thereof, into fully paid
and nonassessable shares of Common Stock.
(b) CONVERSION PRICE FOR HOLDER CONVERTED SHARES. Each share of the
Series D Preferred Stock, valued at the Designated Price, that is converted into
shares of Common Stock at the option of the holder shall be convertible into the
number of shares of Common Stock which may be purchased at the Average Stock
Price.
The number of shares of Common Stock into which each share of Series D
Preferred Stock may be converted pursuant to this paragraph hereof is hereafter
referred to as the "Conversion Rate" for such Series D Preferred Stock.
(c) MECHANICS OF CONVERSION. In order to convert any or all shares
of Series D Preferred Stock into full shares of Common Stock, the holder shall
surrender the certificate or certificates therefor, duly endorsed, by either
overnight courier or 2-day courier, to the principal office of the Company or of
any transfer agent for the Series D Preferred Stock, and shall give written
notice (the "Conversion Notice") together with the holder's calculation of the
Conversion Rate by facsimile (with the original of such notice forwarded with
the foregoing courier) to the Company at such office that he elects to convert
the number of shares (specified therein, which such notice and election shall be
irrevocable by the holder; PROVIDED, HOWEVER, that the Company shall not be
obligated to issue certificates evidencing the shares of the Common Stock
issuable upon such conversion unless either the certificates evidencing the
shares of Series D Preferred Stock are delivered to the Company or its transfer
agent as provided above, or the holder notifies the Company that such
certificates have been lost, stolen or destroyed and promptly executes an
agreement reasonably satisfactory to the Company to
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<PAGE>
indemnify the Company from any loss incurred by it in connection with the loss
of such certificates.
Immediately on receipt of the Conversion Notice and an executed
Investor Representation Certificate which may be required to be executed by the
holder pursuant to any Subscription Agreement related to the initial issuance of
the Series D Preferred Stock, the Company shall verify the holder's calculation
of the Conversion Rate as calculated by the holder or, if the Company disagrees
with the holder's calculation of the Conversion Rate deliver the Company's
calculation of the Conversion Rate to the holder. The Company shall use its
best efforts to issue and deliver within three business days after delivery to
the Company of such certificates, or after receipt of such agreement and
indemnification, to such holder of Series D Preferred Stock at the address of
the holder on the stock books of the Company, or to its designee, a certificate
or certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid, together with a certificate or certificates for the
number of Series D Preferred Stock not submitted for conversion. The date on
which the Conversion Notice is given (the "Holder Conversion Date") shall be
deemed to be the date the Company received by facsimile the Conversion Notice,
provided that the original shares of Series D Preferred Stock to be converted,
or the aforesaid notice of lost, stolen or destroyed certificates, are received
by the Company or any transfer agent for the Series D Preferred Stock within
five business days thereafter, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date. If the original certificates or the aforesaid notice of lost, stolen or
destroyed certificates, are not received by the Company or any transfer agent
for the Series D Preferred Stock within five business days after the Holder
Conversion Date, the Conversion Notice shall become null and void.
(d) ADDITIONAL SHARES OF COMMON STOCK. If the Conversion Price on a
Holder Conversion Date shall be $5.00 (the "Minimum Additional Share Price"), as
the Minimum Additional Share Price may be adjusted as hereinafter provided, or
more, then, in addition to and not in lieu of the shares of Common Stock
issuable by reason of the conversion notice given on such Conversion Date, the
Company shall issue and sell to the Holder giving such conversion notice and
such Holder shall purchase from the Company, at a price per share equal to such
Conversion Price on such Conversion Date, one (1) share of Common Stock (each an
"Additional Share" and, collectively with all such other shares so purchased and
sold hereunder, "Additional Shares") for each share of Common Stock issuable to
such Holder by reason of such conversion of Series D Preferred Stock pursuant to
such conversion notice. If the Conversion Price on a Holder Conversion Date
shall be less than the Minimum Additional Share Price, upon the conversion of
shares of Series D Preferred Stock on such Holder Conversion Date, any rights to
purchase Additional Shares with respect to such shares of Series D Preferred
Stock so converted on such Holder Conversion Date shall terminate. The total
price for such Additional Shares so to be purchased and sold incident to such a
conversion notice shall be paid by such Holder upon issuance of the certificate
or certificates therefor pursuant to subparagraph 7(c)
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<PAGE>
hereof by wire transfer of immediately available federal funds to such account
as the Company shall specify in writing to such Holder following receipt by the
Company of such conversion notice.
8. ADJUSTMENTS; REORGANIZATIONS.
(a) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. In
the event that at any time or from time to time after the Closing Date, the
Common Stock issuable upon the conversion of the Series D Preferred Stock is
changed into the same or a different number of shares of any class or classes of
stock, whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or reorganization
provided for elsewhere in this Paragraph 8 or a merger or consolidation,
provided for in Paragraph 5), then and in each such event each holder of Series
D Preferred Stock shall have the right thereafter to convert such stock into the
kind of stock receivable upon such recapitalization, reclassification or other
change by holders of shares of Common Stock, all subject to further adjustment
as provided herein. In such event, the formulae set forth herein for conversion
and redemption shall be equitably adjusted to reflect such change in number of
shares or, if shares of a new class of stock are issued to reflect the market
price of the class or classes of stock (applying the same factors used in
determining the Market Price for Shares of Common Stock) issued in connection
with the above described transaction.
(b) ADJUSTMENTS FOR STOCK SPLITS, COMBINATIONS, DIVIDENDS,
DISTRIBUTIONS OR REORGANIZATION. If at any time or from time to time after the
Closing Date, the Company (i) effects a subdivision of the outstanding Common
Stock, (ii) combines the outstanding shares of Common Stock into a smaller
number of shares (i.e., by reverse stock split or otherwise), (iii) makes or
fixes a record date for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in additional shares of Common
Stock, (iv) makes or fixes a record date for the determination of holders of
Common Stock entitled to receive a dividend or other distribution payable in
securities of the Company other than shares of common stock, or (v) there is a
capital reorganization of the Common Stock (other than as set forth in (i)-(iv),
above) then, as a part of such, provision shall be made so that the holders of
the Series D Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series D Preferred Stock the number of shares of stock or
other securities or property to which a holder of the number of shares of Common
Stock deliverable upon conversion would have been entitled on such event. In
any such case, appropriate adjustment shall be made in the application of the
provisions of this Paragraph 8 with respect to the rights of the holders of the
Series D Preferred Stock after such event to the end that the provisions of this
Paragraph 8 shall be applicable after that event and be as nearly equivalent as
may be practicable, including, by way of illustration and not limitation, by
equitably adjusting the formulae set forth herein for conversion and redemption
to reflect the market price of the securities or property (applying the same
factors used in determining the Market Price for Shares of Common Stock) issued
in connection with the above described transaction.
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<PAGE>
(c) CONVERSION DATE MARKET PRICE ADJUSTMENT. In the event that the
Company issues or sells any shares of its Common Stock or any of its securities
which are convertible into or exchangeable for its Common Stock or any
convertible security, or any warrants or other rights subscribed for or to
purchase any options for the purchase of its Common Stock or other securities
(other than shares or options issued or which may be issued pursuant to the
Company's employee or director option plan or shares issued upon exercise of
options, warrants or right of standing on the Closing Date listed in the
Exchange Act Reports) (the "Equity Securities") at an effective purchase price
per share of Common Stock which is less than $5.00, then at the time the Series
D Preferred Stock is submitted for conversion, upon such conversion, the Company
shall issue to the Holder or any assignee of Holder's rights hereunder such
number of shares of Common Stock as will cause the effective Conversion Date
Market Price of such shares of Common Stock to be equal to the lesser of (i) the
Average Stock Price and (ii) the effective issuance price at which such Equity
Securities are issued.
9. FRACTIONAL SHARES. No fractional shares of Common Stock or scrip
representing fractional shares of Common Stock shall be issuable hereunder. The
number of shares of Common Stock that are issuable upon any conversion shall be
rounded up or down to the nearest whole share.
10. RESERVATION OF STOCK ISSUABLE UPON CONVERSION
(a) RESERVATION REQUIREMENT. The Company has reserved and the
Company shall continue to reserve and keep available at all times, free of
preemptive rights, shares of Common Stock for the purpose of enabling the
Company to satisfy any obligation to issue shares of its Common Stock upon
conversion of the Series D Preferred Stock provided, however, that the number of
shares so reserved shall at all times be at least equal to 150% of the number of
shares necessary for the Company to satisfy any obligation to issue shares of
its Common Stock (and Additional Shares, if any) incident to the conversion of
Series D Preferred Stock. The number of shares so reserved may be reduced by
the number of shares actually delivered pursuant to conversion of Series D
Preferred Stock; provided that in no event shall the number of shares so
reserved be less than 150% of the number of shares required to satisfy remaining
conversion rights on the unconverted Series D Preferred Stock and the number of
shares so reserved shall be increased to reflect stock splits and stock
dividends and distributions.
(b) DEFAULT. If the Company does not have a sufficient number of
shares of Common Stock available to satisfy the Company's obligations to a
holder of Series D Preferred Stock upon receipt of a Conversion Notice, or
otherwise fails or refuses to perfect conversion of any Series D Preferred
Stock, with respect to the Series D Preferred Stock as to which conversion is
not perfected by the Company through the delivery of certificates representing
the shares of Common Stock issuable upon such conversion (including Additional
Shares, if any) (a "Conversion Default") the holder of the Series D Preferred
Stock shall have the right to put
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the Preferred Stock to the Company at a price which shall be equal to 125% of
the Designated Price.
11. NO REISSUANCE OF SERIES D PREFERRED STOCK. No share or shares of
Series D Preferred Stock acquired by the Company by reason of redemption,
purchase, conversion or otherwise shall be reissued as Series D Preferred Stock,
and all such shares shall be retired and shall return to the status of
authorized, unissued and retired and undesignated shares of Preferred Stock. No
additional shares of Series D Preferred Stock shall be authorized or issued
without the consent of at least 66 2/3% in interest of the holders of Series D
Preferred Stock outstanding immediately prior thereto.
12. NO IMPAIRMENT. The Company shall not intentionally take any action
which would impair the rights and privileges of the shares of Series D Preferred
Stock set forth herein.
13. HOLDER'S RIGHTS IF SHARES ARE DELISTED OR IF TRADING IN COMMON STOCK
IS SUSPENDED. In the event that at any time on or after the date hereof and
prior to the third anniversary of the Closing Date, trading in the shares of the
Company's Common Stock is suspended on the principal market or exchange for such
shares (including the NASDAQ Stock Market), for a period of five consecutive
trading days, other than as a result of the suspension of trading in securities
in general, or if such Shares are delisted, then, at holder's option, the
Company shall redeem such holders shares of Series D Preferred Stock at a
redemption date designated by such holder and at the price which is the greater
of (a) the product of the Conversion Rate and the Closing Market Price of the
Company's Common Stock on the date of Redemption Notice and (b) 125% of the
Designated Price of the Preferred Stock.
14. LIMITATIONS ON HOLDER'S RIGHT TO CONVERT.
Holders of Series D Preferred Stock may not convert any of the Series D
Preferred Stock within the first 60 calendar days following the date of issuance
of the Series D Preferred Stock. Thereafter, Holders of Series D Preferred
Stock may convert the Series D Preferred Stock as follows:
Calendar Days from Issuance Shares Convertible
61 30
91 60
121 90
151 120
181 150
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Notwithstanding anything to the contrary contained herein, each Conversion
Notice shall contain a representation that the number of shares of the Company's
Common Stock that the holder is then entitled to receive upon the conversion of
such number of Shares of Series D Preferred Stock as is then being submitted for
conversion, together with any other shares of Common Stock then deemed
beneficially owned by such holder, together with all shares of the Company's
Common Stock deemed beneficially owned by the holder's "affiliates" as defined
in Rule 144 of the Act will not exceed 4.9% of the total issued and outstanding
shares of the Company's Common Stock, after giving effect to the shares of
Common Stock to be issued pursuant to such conversion notice.
15. The authorized number of shares of Preferred Stock of this Corporation
is 10,000,000 shares and the number of shares constituting the Series D
Convertible Preferred Stock, none of which has been issued, is 150 shares.
IN WITNESS WHEREOF the undersigned have executed this Certificate of
Designations of Preferences at the City of New York, State of New York, on this
28th day of February, 1997.
/s/ Joseph R. Wright
------------------------------
Joseph R. Wright, President
/s/ Timothy P.F. Crowley
------------------------------
Timothy P.F. Crowley, Secretary
The undersigned declare under the penalty of perjury that the matters set
forth in the foregoing Certificate are true of their own knowledge. Executed at
New York, New York, on the 28th day of February, 1997.
/s/ Joseph R. Wright
------------------------------
Joseph R. Wright, President
/s/ Timothy P.F. Crowley
------------------------------
Timothy P.F. Crowley, Secretary
10
