PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ x ]
Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X ] Definitive Proxy Statement Commission Only (as
[ ] Definitive Additional Materials permitted by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
ss. 240.14a-11(c)or ss. 240.14a-12
AmTec, Inc.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously by written preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.: Schedule 14A
3) Filing Party: AmTec, Inc.
4) Date Filed:
AMTEC, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Date: Friday, September 24, 1999
Time: 10:00 a.m., local time
Place: 599 Lexington Avenue, 44th Floor
New York, New York 10022-6030
Dear Stockholder:
You are cordially invited to attend AmTec's Annual Meeting of
Stockholders to:
1. elect directors;
2. ratify the appointment of Deloitte & Touche LLP as
independent public accountants;
3. approve the issuance of up to 8,000,000 shares of common
stock of the Company ("Shares") to holders of the Company's
Series E Preferred Stock upon conversion of the Series E
Preferred Stock;
4. approve an amendment to the Company's Certificate of
Incorporation to classify the Company's Board of Directors
into three classes with staggered terms of office;
5. approve an amendment to the Company's Certificate of
Incorporation to eliminate action by written consent of
stockholders; and
6. conduct any other business properly brought before the
meeting.
The record date for the meeting is August 27, 1999. Only
stockholders at the close of business on the record date are entitled to
vote at the Annual Meeting.
THIS VOTE IS IMPORTANT. ACCOMPANYING THIS NOTICE ARE A PROXY AND A
PROXY STATEMENT. PLEASE VOTE NOW BY PROXY EVEN IF YOU PLAN TO ATTEND THE
MEETING BY SIGNING, DATING AND MAILING YOUR PROXY CARD IN THE ENCLOSED
ENVELOPE.
I look forward to seeing you at the meeting.
Sincerely,
Joseph R. Wright, Jr.
Chairman of the Board
AMTEC, INC.
599 LEXINGTON AVENUE, 44th FLOOR
NEW YORK, NEW YORK 10022
---------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS, September 24, 1999
* * * * * * * *
This Proxy Statement is being furnished to the stockholders of the
Company in connection with the solicitation of proxies by and on behalf of
the Board of Directors of the Company. The proxies solicited hereby are to
be voted at the Meeting to be held on Friday, September 24, 1999, at 599
Lexington Avenue, 44th Floor, New York, New York, 10022-6030 or at any and
all adjournments thereof.
This Proxy Statement and the accompanying form of proxy are first
being mailed to stockholders on or about September 8, 1999.
The Company will bear the expense of this solicitation of proxies.
It is expected that only solicitations by mail will be used, except that
Directors, Officers or regular employees of the Company may solicit proxies
personally, by telephone or by facsimile. The Company may pay brokers and
other custodians, nominees and fiduciaries their reasonable expenses for
sending proxy material to principals and obtaining their proxies.
On August 27, 1999, the outstanding voting securities of the
Company consisted of 30,781,721 shares of $0.001 par value Common Stock
("Shares"), each share of which is entitled to one vote. Only shareholders
of record at the close of business on August 27, 1999, will be entitled to
vote at the meeting.
THE MEETING
PURPOSE OF THE MEETING
AmTec's common stockholders will be asked at the Annual Meeting
to:
1. elect directors;
2. ratify the appointment of Deloitte & Touche LLP as
independent public accountants;
3. approve the issuance of up to 8,000,000 Shares to holders of
the Company's Series E Shares upon conversion of the Series E
Shares;
4. approve an amendment to the Company's Certificate of
Incorporation to classify the Company's Board of Directors
into three classes with staggered terms of office;
5. approve an amendment to the Company's Certificate of
Incorporation to eliminate action by written consent of
stockholders; and
6. conduct any other business properly brought before the
meeting.
WITH RESPECT TO ELECTION OF THE SIX NOMINEES FOR DIRECTORS OF THE
COMPANY, YOUR DIRECTORS RECOMMEND THAT YOU VOTE IN FAVOR OF (I.E. "FOR")
THEIR ELECTION.
WITH RESPECT TO RATIFICATION OF THE APPOINTMENT OF DELOITTE &
TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING
MARCH 31, 1999, YOUR DIRECTORS RECOMMEND THAT YOU VOTE IN FAVOR OF (I.E.
"FOR") THEIR RATIFICATION.
WITH RESPECT TO APPROVAL FOR THE ISSUANCE OF ALL REQUESTED SHARES
TO HOLDERS OF THE SERIES E SHARES, YOUR DIRECTORS RECOMMEND THAT YOU VOTE
IN FAVOR OF (I.E. "FOR") THESE ISSUANCES.
WITH RESPECT TO APPROVAL FOR THE PROPOSED AMENDMENTS TO AMTEC'S
CERTIFICATE OF INCORPORATION, YOUR DIRECTORS RECOMMEND THAT YOU VOTE IN
FAVOR OF (I.E. "FOR") THESE AMENDMENTS.
DATE, PLACE AND TIME
The Annual Meeting will be held at 599 Lexington Avenue, 44th Floor,
New York, New York, 10022-6030, on September 24, 1999 at 10:00 a.m., local time.
RECORD DATE AND QUORUM
The record date for the meeting is August 27, 1999. On that date
30,781,721 Shares were outstanding. A majority of those Shares (a quorum)
must be present, in person or by proxy, to conduct business at the meeting.
Abstentions and broker non-votes are counted as present in determining
whether there is a quorum.
VOTE REQUIRED
You are entitled to one vote for each Share you held of record at
the close of business on the record date. Directors are elected by a
plurality of votes, which means that the nominees who receive the highest
number of votes will be elected. At the Annual Meeting, the six nominees
who receive the highest number of votes will be elected as Directors of the
Company. Amendments to the Company's Certificate of Incorporation will be
approved if a majority of the outstanding stock entitled to vote thereon is
voted in favor of the amendments. Each other matter voted on at the Annual
Meeting will be approved if a majority of the outstanding Shares present at
the meeting in person or by proxy and entitled to vote thereon, vote in
favor of such matter. With respect to the election of Directors,
abstentions and broker non-votes are not votes cast and are not counted in
determining whether a nominee is elected. With respect to matters other
than the election of Directors, abstentions and broker non-votes are
treated as shares present or represented and entitled to vote on such
matters and thus have the same effect as negative votes. Inspectors of
election appointed by the Board will tabulate the votes cast. Any
stockholder executing a proxy has the power to revoke the proxy at any time
prior to its exercise. A proxy may be revoked prior to exercise by (a)
filing with the Company a written revocation of the proxy; (b) appearing at
the Annual Meeting and casting a vote contrary to that indicated on the
proxy; or (c) submitting a duly executed proxy bearing a later date.
PROXY VOTING
Your proxy card represents the Shares you hold of record. You can
authorize the individuals named on your proxy card to vote your Shares by
signing, dating and mailing your proxy card. Your Shares will then be voted
at the meeting as you specify or, if you do not specify a choice, as
recommended by the Board. You may revoke your proxy by voting in person at
the meeting, or by submitting a written revocation or a later dated proxy
that is received by AmTec before the meeting.
ELECTION OF DIRECTORS
(PROPOSAL 1)
A full board of six directors will be elected to serve until the
next Annual Meeting or until their successors are elected and qualified or
if the shareholders approve an amendment to the Company's Certificate of
Incorporation to classify the Board of Directors of the Company into three
classes with staggered terms of office, until the expiration of the
respective terms of office of each class. Unless you specify otherwise,
your proxy will be voted for the election of the nominees named below, all
of whom are now Directors. If any nominee becomes unavailable, your proxy
will be voted for a new nominee designated by the Board unless the Board
reduces the number of directors to be elected.
The nominees for the Board of Directors are:
JOSEPH R. WRIGHT, JR.
Age: 60
First Elected: 1995
Experience: AmTec - Chairman and Chief Executive Officer (since 1995)
W.R. Grace & Co. - Vice Chairman and Executive Vice
President (1989-1994) U.S. Office of Management and
Budget - Director and Deputy Director (1982-1989) U.S.
Department of Commerce - Deputy Secretary (1981-1982)
Citicorp Retail Services and Consumer Services -
President (1975-1981)
RICHARD T. MCNAMAR
Age: 59
First Elected: 1996
Experience: AmTec - Vice Chairman (since 1996)
International Franchise - Chairman (1995-1997)
Oppenheimer & Co. - Managing Director (1991-1994)
Bank of New England Corporation - Vice Chairman (1990-1991)
Conover & McNamar - Managing Director (1986-1990)
U.S. Department of Treasury - Deputy Secretary (1981-1985)
RICHARD S. BRADDOCK
Age: 56
First Elected: 1997
Experience: Priceline.com - Chief Executive Officer (since 1998)
True North Communications - Chairman (since 1997)
Clayton, Dubilier & Rice - Principal (1994-1995)
Medco Containment Services - Chief Executive Officer (1993)
Citicorp - President and Chief Operating Officer (1990-1992)
JAMES R. LILLEY
Age: 70
First Elected: 1997
Experience: American Enterprise Institute - Resident Director (since
1993) Institute for Global Chinese Affairs at University
of Maryland - Director (since 1996) U.S. Assistant
Secretary of Defense for International Security Affairs
(1991-1993) U.S. Ambassador to People's Republic of China
(1989-1991) U.S. Ambassador to South Korea (1986-1989)
MICHAEL H. WILSON
Age: 61
First Elected: 1997
Experience: RBC Dominion Securities, Inc. - Vice Chairman (since 1995)
Government of Canada - Minister of Industry, Science and
Technology and Minister for International Trade
(1991-1993) Government of Canada - Minister of Finance
(1984-1991) RBC Dominion Securities - Executive Vice
President (1993-1997)
MARVIN S. ROSEN
Age: 58
First Elected: 1999
Experience: Greenberg Traurig, P.A. - Principal Shareholder, Member
of the Executive Committee (since 1983) Children's Health
Fund - Director (since 1994) Robert F. Kennedy Memorial
(Washington D.C.) - Director (since 1995) Bio-Medical
Disposal, Inc. - Director (since 1998) Fusion
Telecommunications International - Director (since 1997);
Vice-Chairman (since December 1998) Democratic National
Committee - Finance Chairman (1995 to 1997)
If the proposal described below (see "APPROVALS OF RESTATED AND
AMENDED CERTIFICATE OF INCORPORATION -- Proposal Concerning Classification
of the Board of Directors") is approved and all of the nominees listed
above are elected as Directors, Richard McNamar and Marvin Rosen will serve
until the Annual Meeting for the 1999 fiscal year, Michael Wilson and James
Lilley will serve until the Annual Meeting for the 2000 fiscal year, and
Joseph Wright and Richard Braddock will serve until the Annual Meeting for
the 2001 fiscal year. If the proposal for classification of the Board of
Directors is not approved, all elected Directors will serve until the
Annual Meeting for the 1999 fiscal year or until their successors are
elected and qualified. Abstentions, broker non-votes, and instructions on
the accompanying proxy card to withhold authority to vote for one or more
of the nominees will result in the respective nominees receiving fewer
votes. If for any reason any nominee should, prior to the Annual meeting,
become unavailable for election as a director, an event not now
anticipated, the proxies will be voted for such substitute nominee, if any,
as may be recommended by the Board. In no event, however, shall the proxies
be voted for a greater number of persons than the number of nominees named.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
(PROPOSAL 2)
The Board of Directors has appointed Deloitte & Touche LLP
("Deloitte & Touche") as the Company's independent auditors for the fiscal
year ending March 31, 1999, subject to ratification by the stockholders.
Effective December 6, 1996, the Company appointed Deloitte & Touche to
replace Singer Lewak Greenbaum & Goldstein LLP ("Singer Lewak") as the
Company's independent auditors.
Effective December 6, 1996, the Company terminated Singer Lewak as
independent certified accountants for the Company. Singer Lewak's annual
report covering the fiscal year ended March 31, 1996 contained a
qualification based on the Company's ability to continue as a going
concern. Except for this qualification, Singer Lewak's report did not
contain an adverse opinion or a disclaimer of opinion, and was not modified
as to uncertainty, audit scope or accounting principles. The decision to
change accounting firms was made by the Board of Directors. In connection
with the audit of the fiscal year ended March 31, 1996 and during the
subsequent interim periods preceding such termination, there has not
developed any disagreement between Singer Lewak and management of the
Company or other reportable events which have not been resolved to Singer
Lewak's satisfaction. Singer Lewak had been the Company's independent
certified accountants since December 1994. Effective December 6, 1996, the
Company determined to engage Deloitte & Touche as the Company's new
independent certified accountants to replace Singer Lewak. The Company did
not, during the fiscal year ended March 31, 1996, consult with Deloitte &
Touche regarding the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion
that might be rendered on the Company's financial statements. A
representative of Deloitte & Touche is expected to be present at the
Meeting and will have an opportunity to make a statement if he desires to
do so and will be available to respond to appropriate questions from the
Company's stockholders.
YOUR DIRECTORS RECOMMEND A VOTE IN FAVOR OF THE
APPOINTMENT OF DELOITTE & TOUCHE AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING MARCH 31, 1999.
APPROVAL OF THE ISSUANCE OF COMMON STOCK
(PROPOSAL 3)
APPROVAL TO ISSUE UP TO 8,000,000 SHARES TO HOLDERS OF SERIES E SHARES
You are being asked to approve the issuance of 8,000,000 Shares to
holders of the Company's Series E Shares upon conversion of the Series E
Shares. Your directors believe that approval of this issuance is in
the best interest of the Company and its stockholders.
DESCRIPTION OF THE SERIES E SHARES
On October 22, 1997, the Company completed the sale of 74 shares
of its Series E Shares for gross proceeds of $7,400,000. The Series E
Shares were sold pursuant to Reg. D of the Exchange Act at a price of
$100,000 per share. The holders of the Series E Shares have no rights to
cash dividends but are entitled to dividends of 8% per annum, payable in
shares of Common Stock. Conversion of the Series E Shares into Common Stock
is based on the lower of (i) $1.106875 per Share or (ii) 80% of the average
closing price of the Shares during the five trading days preceding such
conversion. As of March 15, 1999, 29.7640 shares of Series E Shares were
issued and outstanding.
Pursuant to the terms of the Subscription Agreement for the Series
E Shares, the Company is obligated to reserve and keep available for
issuance a sufficient number of Shares for conversion of the Series E
Shares and exercise of the Warrants granted in connection with the sale of
the Series E Shares. Subsequent to the issuance of the Series E Shares, the
outstanding Shares were reduced as a result of the cancellation of
12,727,909 Shares formerly held by Tweedia International Ltd. As a result
thereof, and subsequent declines in the price of the Shares (which resulted
in adjustments to the number of Shares into which the Series E Shares could
be converted), the amount of Shares which the Company is obligated to keep
available for issuance to the holders of the Series E Shares became in
excess of 19.9% of the Shares issued and outstanding. Under ASE Guideline
713(a)(ii), this circumstance has created the requirement that AmTec's
shareholders approve the issuance of Shares in excess of 19.9% of the
Shares issued and outstanding.
Pursuant to ASE Guideline 713(a) (ii), the ASE listed 6,857,635
Shares on May 8, 1998. After discussions between the American Stock
Exchange and the Company, the American Stock Exchange has determined that
the Company will be required to obtain shareholder approval to issue, upon
conversion of the Series E Shares, any Shares beyond the 6,857,635 Shares
previously approved for listing. Accordingly, in order to ensure a
sufficient availability of Shares for conversion of the Series E Shares,
the Company is seeking approval of the issuance of up to 8,000,000
additional Shares to the holders of the Series E Shares.
Conversion of the Series E Shares into Shares is based on the
lower of (i) $1.106875 per Share (calculated based on 110% of the average
closing bid price of the Shares for the ten business days immediately
preceding March 2, 1998) or (ii) 80% of the average closing price of the
Shares during the five trading days preceding such conversion. If the
issued and outstanding Series E Shares were converted into Shares on March
15, 1999, they would have been convertible into 3,091,402 Shares, based on
the conversion price of $1.07, 80% of the then average five-day closing
price of the Shares as reported by the American Stock Exchange.
The following tables set forth certain information with respect to
the ownership of the Series E Shares:
<TABLE>
<CAPTION>
AmTec, Inc.
Analysis of Series E Preferred Shares
As of March 15, 1999
SERIES E CONVERTIBLE PREFERRED SHARES COMMON STOCK
--------------------------------------------------------- ---------------------------------------
EQUIVALENT
SHARES
SHARES AT PERCENT
PURCHASED SHARES SHARES SHARES SHARES ISSUED CURRENT TOTAL OF TOTAL
AT LATER LATER CONVERTED/ CURRENTLY UPON MARKET COMMON COMMON
SERIES E PURCHASER ISSUANCE SOLD PURCHASED CANCELLED HELD CONVERSION (B) SHARES (C)
- ---------------------- ----------- --------- --------- --------- -------- ----------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Risk Opportunity
Fund, Ltd. 45.0000 (38.5000) (6.5000) 0.0000 667,355 667,355 2.17%
KB Ventures Limited 10.0000 10.0000 1,038,638 1,038,638 3.37%
Kossar, Bernard 2.0000 2.0000 207,728 207,728 0.67%
Kossar, Carol 1.0000 1.0000 103,864 103,864 0.34%
Ramius Fund, Ltd. 3.0000 1.0000 (2.0000) 2.0000 259,129 207,728 466,857 1.52%
Ross, Courtney Sale 10.0000 10.0000 1,038,638 1,038,638 3.37%
Krusen, Charles 1.0000 (1.0000) 0.0000 107,137 107,137 0.35%
Medici Partners, LP 1.0000 (1.0000) 0.0000 123,392 123,392 0.40%
Hick Investments 1.0000 (1.0000) 0.0000 0 0.00%
Rocco D. Pennella 0.3080 (0.3080) 0.0000 46,161 46,161 0.15%
Barry C. Towmey 0.7700 (0.7700) 0.0000 115,403 115,403 0.37%
Chas A. Neal & Company 0.7700 (0.7700) 0.0000 115,403 115,403 0.37%
Albert G. Pastino 1.4322 (1.4322) 0.0000 214,650 214,650 0.70%
Lisa O'Neill 0.1078 (0.1078) 0.0000 16,156 16,156 0.05%
Richard Albosta 0.7700 (0.7700) 0.0000 115,403 115,403 0.37%
Orina Chang 0.9240 (0.9240) 0.0000 138,484 138,484 0.45%
Thomas S. Wang 3.0800 (3.0800) 0.0000 461,612 461,612 1.50%
Max Ulfane 1.5400 (1.5400) 0.0000 230,806 230,806 0.75%
AGR Halifax Fund 4.0040 (1.6220) 2.3820 197,854 247,404 445,258 1.45%
Ramius Securities 4.0040 (1.6220) 2.3820 197,584 247,404 445,258 1.45%
Marvin S. Rosen 7.7000 (7.7000) 0.0000 1,154,030 1,154,030 3.75%
Communications Investors 62%
Group 5.3900 (5.3900) 0.0000 807,821 807,821 2.
HANRO, Inc. 1.5400 (1.5400) 0.0000 230,806 230,806 0.75%
Rod O'Connor 3.0800 (3.0800) 0.0000 461,612 461,612 1.50%
AmTec, Inc. (a) 3.0800 (3.0800) 0.0000 0 0.00%
--------- --------- --------- ---------- -------- ----------- ---------- --------- --------
Total 74.0000 (39.5000) 39.5000 (44.2360) 29.7640 5,661,068 3,091,402 8,752,470 28.43%
========= ========= ========= ========== ======== =========== ========== ========= ========
- --------------------
(a) Acquired from High Risk Opportunity Fund, Ltd. and retired.
(b) Conversion price = $1.07.
(c) Based on the number of Shares outstanding as of March 15, 1999, 30,781,721 Shares.
</TABLE>
<TABLE>
<CAPTION>
AMTEC, INC.
POTENTIAL COMMON SHARES ISSUED UPON
CONVERSION OF SERIES E SHARES
AS OF MARCH 15, 1999
AVERAGE PRICE OF AVERAGE PRICE OF AVERAGE PRICE OF AVERAGE PRICE OF
COMMON STOCK - $1.50 COMMON STOCK - $1.25 COMMON STOCK - $1.00 COMMON STOCK - $0.75
-------------------- -------------------- -------------------- --------------------
COMMON PERCENT COMMON PERCENT COMMON PERCENT COMMON PERCENT
# OF STOCK OF STOCK OF STOCK OF TOTAL STOCK OF
SERIES E EQUIVALENT TOTAL EQUIVALENT TOTAL EQUIVALENT SHARES EQUIVALENT TOTAL
CURRENT SERIES E HOLDERS SHARES (B) SHARES (B) SHARES (B) (B) SHARES
- --------------------------- ----------- ----------- -------- ----------- -------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
KB Ventures Limited 10.0000 903,444 2.94% 1,000,000 3.25% 1,250,000 4.06% 166,667 5.41%
Kossar, Bernard 2.0000 180,689 0.59% 200,000 0.65% 250,000 0.81% 333,333 1.08%
Kossar, Carol 1.0000 90,344 0.29% 100,000 0.32% 125,000 0.41% 166,667 0.54%
Ramius Fund, Ltd. 2.0000 180,689 0.59% 200,000 0.65% 250,000 0.81% 333,333 1.08%
Ross, Courtney Sale 10.0000 903,444 2.94% 1,000,000 3.251, 250,000 4.06% 1,666,667 5.41%
AGR Halifax Fund 2.3820 215,200 0.70% 238,200 0.77% 297,750 0.97% 397,000 1.29%
Ramius Securities 2.3820 215,200 0.70% 238,200 0.77% 297,750 0.97% 397,000 1.29%
--------- --------- -------- ----------- ---- -- --------- -------- --------- ------
TOTAL 29.7640 2,689,012 8.74% 2,976,400 9.67% 3,720,500 12.09% 4,960,667 16.12%
======== ========= ======== =========== ======= ========= ======= ========= ======
Shares outstanding
as of 3/15/1999 30,781,721
Conversion Price (a) $1.106875 $1.000000 $0.800000 $0.600000
- ---------------------------
(a) Conversion price is equal to the lower of: (1) 80% of the 5 day
average closing price on the American Stock Exchange, or (2)
$1.106875.
(b) Equivalent shares includes shares issued in connection with 8%
cumulative dividend payable in shares at the time of conversion.
</TABLE>
As a result of the floating conversion rate of the Series E
Shares, there is no ceiling on the maximum number of Shares into which the
Series E Shares can be converted. As the market price of the Shares
decreases, the number of underlying Shares of the Series E Shares
increases.
To the extent the selling Series E shareholders convert and then
sell their Shares, the price of the Shares may decrease due to the
additional number of Shares in the market. This could allow the selling
shareholders to convert their Series E Shares into a greater amount of
Shares, the sale of which could further depress the price of the Shares.
While each holder of the Series E Shares has agreed not to engage in any
short sale of the Shares as long as it holds any Shares or securities
convertible into Shares, the significant downward pressure on the price of
the Shares as the selling shareholders convert and sell material amounts of
Shares could encourage short sales by others. This could place further
downward pressure on the price of the Shares.
The Company issued Warrants ("Warrants") in October 1997 to
certain investors in connection with the private placement of the Series E
Shares that were not subject to the registration requirements of the
Securities Act.
The Company granted to Series E Share investors a number of
Warrants based on how long such investors held their Series E Shares. There
are three groups of Series E Shares investors. The first group ("A
Investors"), was granted Warrants vesting on March 22, 1998 and July 1998.
The A Investors received a number of warrants equal to 20% of the
investment amount of Series E Shares they held on such date. For example,
an A Investor who held, on March 22, 1998, two Series E Shares, with each
such share purchased at $100,000 per share, would receive 40,000 Warrants.
Each Warrant is exercisable for one Share. The second group ("B
Investors"), who could not convert the Series E Shares to Shares for a
twelve month period from the closing date of the Series E Shares offering,
received Warrants equal to 60% of the investment amount of Series E Shares
they held on such date. The third group ("C Investors"), who could not
convert the Series E Shares to Shares for a twelve month period from the
closing date of the Series E Shares offering, received Warrants equal to
20% of the investment amount of Series E Shares they held on such date. No
other Warrants remain to be granted.
As of March 15, 1999, 1,126,143 Warrants with an exercise price of
$2.475 per share were outstanding and 326,171 Warrants with an exercise
price of $2.2685. The exercise price was determined by multiplying 120% by
the average closing bid price of the Shares for the ten business days
immediately preceding the date the Warrant was issued to the holders of the
Warrants. The Warrants contain customary anti-dilution provisions providing
for adjustment of the exercise price upon the occurrence of certain events,
including stock dividends, stock splits and recapitalization. The Warrants
are exercisable at any time on or before 5:00 p.m., October 22, 2001.
The Warrants may be exercised by surrendering to the Company the
warrant with an exercise form, indicating the warrant holder's election to
exercise all or a portion of the Warrant. The Warrant holder may pay the
exercise price either in the form of cash or check or in a cashless
exercise, in which the holder would receive a number of Shares adjusted
downwards to reflect the difference between the market price of the Shares
and the exercise price.
No predictions can be made as to the effect, if any, that the
exercise of the outstanding Warrants will have on the market price of the
Shares prevailing from time to time. The following table sets forth certain
information with respect to ownership of the Warrants:
<TABLE>
<CAPTION>
AMTEC, INC.
ANALYSIS OF WARRANTS RELATED TO SERIES E SHARES
AS OF MARCH 15, 1999
SERIES E WARRANTS COMMON STOCK
--------------------------------------------------- -----------------------------------------
EQUIVALENT
SHARES
WARRANTS AT
PURCHASED WARRANTS WARRANTS WARRANTS WARRANTS ISSUED CURRENT TOTAL PERCENT
AT LATER LATER CONVERTED/ CURRENTLY UPON MARKET COMMON OF TOTAL
SERIES E PURCHASER ISSUANCE SOLD PURCHASED CANCELLED HELD EXERCISE (B) SHARES COMMON
- ---------------------- ---------- -------- --------- ---------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
High Risk Opportunity
Fund, Ltd. 670,707 (670,707) -- -- -- -- 0.00%
KB Ventures Limited 242,424 242,424 -- -- -- 0.00%
Kossar, Bernard 16,162 16,162 -- -- -- 0.00%
Kossar, Carol 8,081 8,081 -- -- -- 0.00%
Ross, Courtney Sale 242,424 242,424 -- -- -- 0.00%
Regal International Capital 326,171 (326,171) -- -- -- -- 0.00%
Rocco D. Pennella 5,366 5,366 -- -- -- 0.00%
Barry C. Towmey 13,414 13,414 -- -- -- 0.00%
Chas A. Neal & Company 13,414 13,414 -- -- -- 0.00%
Albert G. Pastino 24,950 24,950 -- -- -- 0.00%
Lisa O'Neill 1,878 1,878 -- -- -- 0.00%
Richard Albosta 13,414 13,414 -- -- -- 0.00%
Orina Chang 16,097 16,097 -- -- -- 0.00%
Thomas S. Wang 53,657 53,657 -- -- -- 0.00%
Max Ulfane 26,828 26,828 -- -- -- 0.00%
AGR Halifax Fund 69,754 69,754 -- -- -- 0.00%
Ramius Securities 69,754 69,754 -- -- -- 0.00%
Marvin S. Rosen 134,142 134,142 -- -- -- 0.00%
Communications Investors
Group 93,899 93,899 -- -- -- 0.00%
HANRO Inc. 26,828 26,828 -- -- -- 0.00%
Rod O'Connor 53,657 53,657 -- -- -- 0.00%
Sarah Threadwell* 297,081 297,081 -- -- -- 0.00%
Charles Krusen* 29,090 29,090 -- -- -- 0.00%
AmTec, Inc. (a) 53,655 (53,655) -- -- -- -- 0.00%
---------- --------- ---------- --------- --------- ------- -------- -------- ---------
Total 1,505,969 (996,878) 996,878 (53,655) 1,452,314 -- -- -- 0.00%
========== ========= ========== ========= ========= ======= ======== ======== =========
- ------------------------------
(a) Acquired from High Risk Opportunity Fund, Ltd. and retired.
(b) Stock price as of March 15, 1999 = $1.25 and the exercise price of the
warrants is $2.475
* Exercise price of these warrants is $2.26875
</TABLE>
RATIONALE FOR ISSUANCE OF SHARES
Before the issuance of the Series E Shares, the Board of Directors
of the Company carefully considered the terms thereof, the dilutive effects
of the conversion mechanism described in this proxy statement, the
Company's need for cash to finance its operations and the availability of
other financing opportunities to the Company. Based on these
considerations, it believed that the transaction involving the Series E
Shares was in the best interest of the Company and its stockholders.
Your directors believe that approval for issuance of up to
8,000,000 Shares to holders of the Series E Shares is in the best interests
of AmTec's stockholders. If approval is not obtained, the Company could be
required to redeem or retire the Series E Shares which would adversely
impact the Company's ability to finance its existing and planned operations
and raise funds to finance its business in the future.
YOUR DIRECTORS RECOMMEND THAT YOU VOTE IN FAVOR OF THIS ISSUANCE,
AND YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
APPROVALS OF RESTATED AND AMENDED CERTIFICATE OF INCORPORATION
(PROPOSALS 4 AND 5)
INTRODUCTION
At the Meeting, the stockholders of the Company will be asked to
approve two proposals concerning amendments to the Company's Certificate of
Incorporation (the "Company's Certificate"), each of which was approved and
adopted by the Board of Directors on December 8, 1997. At that time, the
Board of Directors also approved the restatement of the Company's
Certificate to incorporate those proposals approved by the stockholders at
the Meeting. Following the effectiveness of the two proposed amendments,
the Company intends to file a Restated Certificate of Incorporation
substantially in the form set forth as Appendix 1 to this Proxy Statement,
which reflects the Company's Certificate substantially in the form it
presently exists and assumes that both proposed amendments have been
adopted by the stockholders. If fewer than both proposed amendments are
approved by the stockholders, the Company intends to file a Restated
Certificate of Incorporation reflecting those amendments that have been
approved by the stockholders and have become effective. The Board of
Directors recommends a vote "for" each amendment to the Company's
Certificate.
A description of each of the two proposals is set forth below. The
descriptions are a summary only and are qualified in their entirety by
reference to the text of such amendments as set forth in the proposed
Restated Certificate of Incorporation, which will be substantially as set
forth in Appendix 1 to this Proxy Statement. The text of the proposed
Restated Certificate of Incorporation in Appendix 1 is subject to revision
if any of the two proposals as set forth below is not approved by the
stockholders.
Although these proposals individually and together with other
provisions already present in the Company's Certificate and bylaws may have
the effect of discouraging a holder of a large block of the Company's
securities from attempting a merger, tender offer, proxy contest, or other
assumption of control with or for the Company or the removal of incumbent
management, the Company is not aware of any proposed attempt to take over
the Company or of any attempt to acquire a large block of the Common Stock,
and the proposed amendments to the Company's Certificate are not in
response to any specific effort to do so.
PROPOSAL CONCERNING CLASSIFICATION OF THE BOARD OF DIRECTORS
Description of Provision. The Board of Directors has approved and
recommends stockholder approval of an amendment to the Company's
Certificate to add a new Article VII to provide for the classification of
directors (the "Classified Board Provision"). At a meeting of the Board of
Directors duly called and noticed, all directors voted in favor of the
Classified Board Provision. The proposed amendment provides that the
directors of the Company would be divided into three equal or nearly equal
classes, designated Class 1, Class 2, and Class 3. If the stockholders
approve the Classified Board Provision, directors will be divided into the
three classes. The initial term of Class 1 directors, which would consist
of Richard T. McNamar and Marvin S. Rosen, would extend to the Annual
Meeting for the 1999 fiscal year; the initial term of the Class 2
directors, which would consist of James R. Lilley and Michael H. Wilson,
would extend to the Annual Meeting for the 2000 fiscal year; and the
initial term of the Class 3 directors, which would consist of Richard S.
Braddock and Joseph R. Wright, Jr., would extend until the Annual Meeting
for the 2001 fiscal year. At each succeeding annual meeting of
stockholders, successors to directors whose terms expired at that annual
meeting would be included in the same class as the directors they succeed
and they would be elected for three-year terms. Any vacancy prior to the
expiration of a term may be filled only by the vote of the remaining
directors, and the director filling that vacancy would serve the remainder
of the full term, until the next annual meeting of stockholders at which
directors of that class are elected.
The Company's Certificate and bylaws presently contain a number of
other provisions that may have the effect of discouraging, delaying, or
preventing hostile takeovers, including those that might result in a
premium over the market price, or discouraging, delaying, or preventing
changes in control or management of the Company. These provisions include
(a) the authority of the Board of Directors to fill vacancies on the Board
of Directors and (b) the authority of the Board of Directors to issue
series of preferred stock with such voting rights and other powers as the
Board of Directors may determine.
Purposes and Effects. The Classified Board Provision is intended
to promote continuity and stability of the Company's management and
policies because a majority of the Company's directors at any given time
will have prior experience as directors with the Company.
The classification of directors could have the effect of making it
more difficult for stockholders to change the composition of the Board of
Directors in a relatively short period of time because at least two annual
meetings of stockholders, instead of one, generally would be required to
effect a change in the majority of the Board of Directors. Although the
delay necessary to effect a change in the majority of the Board of
Directors may discourage certain attempts at takeovers of the Company, such
a provision would have the effect of encouraging potential acquirors to
negotiate with the Company and obtain the specified approval of the
directors or stockholders. Takeovers or changes in the directors of the
Company that are proposed and effected without prior consultation and
negotiation with the Company's Board of Directors may not necessarily be
detrimental to the Company and its stockholders; the adoption of the
proposed amendments could discourage or frustrate future attempts to
acquire control of the Company that are not approved by the incumbent Board
of Directors, but which a majority of stockholders might deem to be in
their best interests. One of the effects of a new Article VII may be to
discourage prospective acquirors from making tender offers for, or open
market purchases of, the Shares without the approval of the Company's Board
of Directors. The proposed amendments, if adopted, could also delay or
frustrate the assumption of control by a holder of a large block of Shares
or the removal of incumbent directors, even if stockholders considered such
events to be beneficial. the Board of Directors thinks, however, that the
benefits of seeking to protect its ability to negotiate with the proponent
of an unfriendly or unsolicited proposal to take over or restructure the
Company outweigh the disadvantages of discouraging such proposals.
PROPOSAL TO ELIMINATE ACTIONS BY WRITTEN CONSENT OF STOCKHOLDERS
Description of Provision. The Board of Directors has approved and
recommends stockholder approval of an amendment to the Company's
Certificate to add a new Article XI providing for the elimination of
actions by written consent of stockholders. Pursuant to Delaware law,
unless otherwise provided in the certificate of incorporation, any action
required or permitted to be taken by stockholders of a corporation may be
taken without a meeting and without a stockholder vote, provided a written
consent setting forth the action to be taken is signed by the holders of
Shares having a requisite number of votes that would be necessary to
authorize such action at a meeting of stockholders. The Company's
certificate currently does not provide for any alteration from this
provision. The proposed amendment would require that action by stockholders
be taken at an annual or special meeting and would prohibit action by
stockholders by written consent other than at such a meeting.
Purposes and Effects. The provisions limiting action by
stockholders by written consent give all stockholders the opportunity to
participate in the discussion of any proposed action, but has the effect of
delaying any stockholder action until a meeting of stockholders can be
called. Since the Company's ByLaws, as amended, do not authorize
stockholders to call a special meeting of stockholders, the presentation of
stockholder actions that have not received approval of the Board of
Directors may be delayed until the next annual meeting of stockholders.
Furthermore, since the Company's By-Laws set notice requirements for the
presentation of stockholder actions at an annual meeting of stockholders,
action on stockholder proposals may be further delayed.
The affirmative vote of the holders of a majority of the
outstanding Shares entitled to vote at the Meeting, assuming a quorum is
present, is necessary for approval of the Amendment. Therefore, abstentions
and broker non-votes (which may occur if a beneficial owner of Shares where
Shares are held in a brokerage or bank account fails to provide the broker
or the bank voting instructions as to such Shares) effectively count as
votes against the Amendment. Unless a contrary choice is specified, proxies
solicited by the Board of Directors will be voted for approval of the
Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF APPROVING THE
AMENDMENTS TO THE COMPANY'S CERTIFICATE OF INCORPORATION.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common
Stock as of March 15, 1999 by: (i) each person known by the Company to
beneficially own 5% or more of the outstanding Shares, (ii) each director
of the Company, (iii) each Named Executive Officer of the Company, and (iv)
all directors and executive officers of the Company as a group. Unless
otherwise indicated below, to the knowledge of the Company, all persons
listed below have sole voting and investment power with respect to their
Shares, except to the extent authority is shared by spouses under
applicable law. The information set forth in the table and accompanying
footnotes has been furnished by the named beneficial owners:
NAME OF BENEFICIAL OWNER NO. OF SHARES PERCENT (1)
- -------------------------------- --------------------- --------------
Joseph R. Wright, Jr. (2) 6,515,144 21.17%
Richard T. McNamar (3) 275,000 *
Richard S. Braddock (4) 231,092 *
James R. Lilley (5) 78,574 *
Michael H. Wilson (6) 125,722 *
Marvin S. Rosen (7) 1,276,530 4.58%
Michael J. Lim (8) 1,181,900 3.84%
Albert G. Pastino (9) 621,057 2.02%
James F. O'Brien (10) 446,875 1.45%
Xiao Jun (11) 525,000 1.71%
All executive officers and
directors as a group (12) 11,276,894 36.64%
Jenny Sun (13) 5,541,593 18.00%
Polmont Investments Limited (14) 5,541,593 18.00%
Occidental Worldwide Corporation (15) 5,541,593 18.00%
Max Chian Yi Sun (16) 5,541,593 18.00%
- -----------------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes
voting or investment power with respect to securities. Shares
subject to options currently exercisable, or exercisable within 60
days of March 15, 1999, are deemed outstanding for computing the
percentage of the person holding such options but are not deemed
outstanding for computing the percentage of any other person.
(2) Includes 42,148 Shares held by Austin Trading Partners, LP, of
which Mr. Wright is a limited partner. Also includes options to
purchase 6,000,000 Shares. The address of Mr. Wright is c/o AmTec,
Inc., 599 Lexington Avenue, 44th Floor, New York, New York 10022.
(3) Includes options to purchase 250,000 Shares.
(4) Includes options to purchase 52,500 Shares.
(5) Includes options to purchase 47,500 Shares.
(6) Includes options to purchase 52,500 Shares.
(7) Includes options to purchase 12,500 Shares.
(8) Includes options to purchase 1,125,000 Shares.
(9) Includes options to purchase 430,000 Shares.
(10) Includes options to purchase 446,875 Shares.
(11) Includes options to purchase 515,000 Shares.
(12) Includes options to purchase 9,201,017 Shares
(13) Includes 2,450,000 Shares held by Polmont Investments Limited and
2,797,691 Shares held by Occidental Worldwide Corporation entities
controlled by Ms. Sun. It also includes 293,402 Shares currently
held by Chian Jeng Sun & Chieh Siong Soon and 500 Shares held by
Max Sun. The address of Ms. Sun is 1052 North Beverly Drive,
Beverly Hills, CA 90210. The Company believes that Ms. Sun is
currently out of compliance with her required filings of
Statements of Beneficial Ownership based on available information
related to her ownership of the Company's securities.
(14) Includes 2,797,691 Shares held by Occidental Worldwide Corporation
and 293,402 Shares currently held by Chian Jeng Sun & Chieh Siong
Soon and 500 Shares held by Max Sun. The address of Polmont
Investments Limited is c/o Havelet Trust Company, P.O. Box 3136,
Road Town, Tortola, British Virgin Islands.
(15) Includes 2,450,000 Shares held by Polmont Investments Limited and
293,402 Shares currently held by Chian Jeng Sun & Chieh Siong Soon
and 500 Shares held by Max Sun. The address of Occidental
Worldwide Corporation is Mr. Vincent Lim, c/o Rabobank, Shell
Tower, 1 Raffles Place, Singapore.
(16) Includes 2,450,000 Shares held by Polmont Investments Limited and
2,797,691 Shares held by Occidental Worldwide Corporation of which
Mr. Sun has voting power. It also includes 293,402 Shares
currently held by Chian Jeng Sun & Chieh Siong Soon. The address
of Mr. Sun is 126 JLN DEDAP, Taman Ampang, Selangor, Malaysia. The
Company believes that Mr. Sun is currently out of compliance with
his required filings of Statements of Beneficial Ownership based
on available information related to his ownership of the Company's
securities.
MANAGEMENT
The directors of the Company serve until the next Meeting of
stockholders of the Company or until their successors are elected and
qualified, subject to their prior death, resignation or removal or if the
shareholders approve an amendment to the Company's Certificate of
Incorporation to classify the Board of Directors of the Company into three
classes with staggered terms of office, until the expiration of the
respective terms of office of each class. Officers are appointed by and
serve at the discretion of the Board of Directors, subject to the rights of
the officers under their respective employment agreements. There are no
family relationships among any of the Company's directors and executive
officers. Set forth below is certain information with respect to the
directors, director nominees and executive officers of the Company as of
March 15, 1999:
NAME AGE POSITION
- ---------------- --------- ------------------
Joseph R. Wright, Jr. 60 Chairman of the Board of Directors, Chief
Executive Officer and President
Richard T. McNamar 59 Vice Chairman of the Board of Directors
Richard S. Braddock 57 Director
James R. Lilley 70 Director
Michael H. Wilson 60 Director
Marvin S. Rosen 58 Director
Michael J. Lim 35 Executive Vice President
Albert G. Pastino 56 Senior Vice President, Chief Financial
Officer and Treasurer
James F. O'Brien 53 Senior Vice President, General Counsel
and Corporate Secretary (Resigned
March 31, 1999)
Xiao Jun 41 Executive Vice President - AmTec China
Joseph R. Wright, Jr. has served as the Company's Chairman of the
Board of Directors since May 1995, Chief Executive Officer since March 1996
and President since May 1996. Mr. Wright also serves as Chairman and member
of the Board of GRC International, Inc. a U.S. public company that provides
information technology support to government and private entities,
Co-Chairman and member of the Board of Baker & Taylor Holdings, Inc., an
international book and video distribution company. From 1989 to 1994, Mr.
Wright served as Executive Vice President, Vice Chairman and a member of
the board of W. R. Grace & Co., an international chemicals and health care
company, President of Grace Energy Corporation and Chairman of Grace
Environmental Company. From 1982 to 1989, Mr. Wright held the positions of
Director and Deputy Director of the Office of Management and Budget, and
was a member of President Reagan's cabinet. Prior to 1982, he served as
Deputy Secretary, United States Department of Commerce, President of
Citicorp Retail Services and Retail Consumer Services, held posts in the
United States Department of Agriculture and the United States Department of
Commerce, and was Vice President and Partner of Booz. Allen & Hamilton, a
management consulting firm. He is currently a member of the Board of GRC
International, Inc., PanAm Sat, Inc., Baker & Taylor Holdings, Inc., Real
Med, Inc., California Cedar Products Company and Barrington Capital
Corporation.
Richard T. McNamar has served as the Company's Vice Chairman of
the Board of Directors since September 1996. He was the founder and
Chairman of International Franchise, Inc., a firm that specialized in
international financial franchising transactions, from 1995 to 1997. He was
a Managing Director of Oppenheimer & Co. from 1991 to 1994. Formerly, he
was the Vice-Chairman of The Bank of New England Corporation and
subsidiaries from 1990 to 1991. Mr. McNamar served as Managing Director of
Conover & McNamar, a financial consulting and investment advisory firm,
from 1986 to 1990. Mr. McNamar served as Deputy Secretary of the United
States Treasury from 1981 to 1985. He served in the Nixon and Ford
Administrations from 1972 to 1977, where he served as the Executive
Director of the Federal Trade Commission from 1973 through 1977. Mr.
McNamar is also currently a member of the Executive Board of the Bretton
Woods Committee and the Board of the Institute of the Americas.
Richard S. Braddock has served as a Director of the Company since
August 1997. He has been the Chairman and Chief Executive Officer of
priceline.com since December 1997. He served as the Chairman of True North
Communications, Inc. (a public company) from 1997 to December 1998. He has
served as a principal of Clayton, Dubilier & Rice, Inc. from 1994 to 1995
and as the Chief Executive Officer of Medco Containment Services from
January 1993 to December 1993. Mr. Braddock held various positions at
Citicorp from 1973 through 1992 including that of President and Chief
Operating Officer of Citicorp and its principal subsidiary, Citibank, N.A.,
from January 1990 to November 1992 and as sector executive for worldwide
consumer activities from 1985 to 1990. Mr. Braddock served as a director of
Citicorp from 1985 to 1992. Mr. Braddock serves on the Board of Directors
of E*Trade Group, Inc., Eastman Kodak Company, Cadbury Schweppes plc adr
and True North Communications, Inc., all publicly-held companies,
priceline.com, New Sub Services, Inc. and Prime Response, Ltd., all private
companies, and of Lincoln Center for the Performing Arts. He is a trustee
of the Cancer Research Institute. Mr. Braddock received his bachelors
degree from Dartmouth College and his M.B.A from the Harvard Graduate
School of Business Administration.
James R. Lilley has served as a Director of the Company since May
1997. Ambassador Lilley is currently a resident fellow at the American
Enterprise Institute ("AEI") which he joined in January 1993, and a senior
advisor to the Institute for Global Chinese Affairs at the University of
Maryland since 1996. Prior to his joining AEI, Ambassador Lilley served in
President Bush's Administration as the Assistant Secretary of Defense for
International Security Affairs from November 1991 to January 1993.
Ambassador Lilley was U.S. Ambassador to the People's Republic of China
from April 1989 to May 1991, and to the Republic of Korea from 1986 to
1989. Ambassador Lilley is the co-editor of Beyond MFN: Trade with China
and American Interests and is the author of the forward for the AEI
publication, Chinese Military Modernization. He has represented Hunt Oil of
Texas and United Technologies of Hartford, Connecticut in 1979 to 1980.
Ambassador Lilley worked for Archer-Daniels-Midland Co. and Westinghouse as
a business consultant.
Michael H. Wilson has served as a Director of the Company since
May 1997. He has been Vice-Chairman of RBC Dominion Securities, Inc. in
Toronto, Canada since 1995. Prior to 1994, Mr. Wilson was the Government of
Canada's Minister of Industry, Science and Technology and Minister for
International Trade from 1991 to 1993, and the Minister of Finance from
1984 to 1991. Prior to his career in public service, Mr. Wilson was
Executive Vice-President of Dominion Securities Limited from 1993 to 1997.
Mr. Wilson also serves on the Board of Directors of Amoco Corporation and
Rio Algom Limited, both publicly held companies. He is also active in a
number of professional and community organizations, including The Center
for Addictions and Mental Health Foundation, The Aspen Institute and The
Institute of the Americas.
Marvin S. Rosen has served as Director of the Company since March
1999. Mr. Rosen is a Principal Shareholder and Member of the Executive
Committee of Greenberg Traurig, P.A., a national law firm. From September
1995 through January 1997, Mr. Rosen served as the Finance Chairman of the
Democratic National Committee. Mr. Rosen currently serves on the Board of
Directors of the Children's Health Fund (New York City) (since 1994), the
Robert F. Kennedy Memorial (since 1995), Bio-Medical Disposal, Inc. (since
1998) and Fusion Telecommunications International (since 1997), where he
has also been Vice- Chairman since December 1998. Mr. Rosen received his
B.S. in Commerce from the University of Virginia, LL.B. from Dickinson
School of Law and his LL.M. in Corporations from New York University Law
School.
Michael J. Lim has served as the Executive Vice President of the
Company since November 1995 and as the Chief Financial Officer from May
1996 through June 1997. Mr. Lim served as a Director of the Company from
December 1996 to April 1997. Prior to his joining the Company, Mr. Lim was
an investment banker with Bear, Stearns & Co., Inc. from 1986 to 1988 and
from 1991 to 1995. From 1993 to 1995, Mr. Lim served as Vice President of
Bear Stearns Asia Limited, where he advised Asian enterprises on a variety
of financing and merger and acquisition transactions, with particular focus
on telecommunications and infrastructure financings. Mr. Lim also worked as
an investment banker with the Chase Manhattan Bank from 1990 to 1991. Mr.
Lim received his A.B. from Harvard College in English Literature and his
M.B.A. from the Amos Tuck School of Business Administration at Dartmouth.
Albert G. Pastino has served as a Senior Vice President and Chief
Financial Officer of the Company since June 1997 and was appointed
Treasurer of the Company in December 1997. From 1993 to 1997, Mr. Pastino
served as the President of Kisco Capital Company, Inc., an affiliate of
Kohlberg & Company, a private equity investment company. He also served on
the boards of directors of a number of Kohlberg & Company's portfolio
companies. From 1989 through 1992, Mr. Pastino served as Senior Vice
President and Chief Operating Officer of Fortis Private Capital, Inc., a
private equity investment company investing in expansion financing and
management buyouts. Mr. Pastino began his business career at Deloitte &
Touche LLP where he served as senior partner, and gained his investment
banking experience at Alex Brown & Sons, Incorporated. Mr. Pastino received
an M.B.A. from Fairleigh Dickinson University and a B.S. from St. Joseph's
University.
James F. O'Brien has served as a Senior Vice President and General
Counsel of the Company from June 1997 to March 31, 1999 and was Corporate
Secretary of the Company from May 1998 to March 31, 1999. Mr. O'Brien was a
senior partner at the law firm of Goulston and Storrs in Boston,
Massachusetts where he founded the litigation practice in 1978 and
specialized in complex financial transactions. He has served as an advisor
to U.S. corporations seeking business opportunities in Southeast Asia. Mr.
O'Brien received a J.D. from Boston College Law School and an A.B. from St.
John's Seminary in Boston.
Xiao Jun has served as Executive Vice President - AmTec China
since December 1995. He also served as a Director from February 1995
through October 1997, the Company's Secretary from February 1995 to January
1996 and as Chief Financial Officer from June 1995 to May 1996. He has been
the President of Xiao Hua International, Inc., an international steel
trading business based in California since June 1993. He served as the Vice
President of ITV Communications, Inc. from December 1994 to January 1996.
From March 1990 to May 1993, Mr. Xiao was the Vice President of Chong Qing
Special Metals Industry Co. From 1985 to 1990, Mr. Xiao served as an
engineer and project manager at the representative office of IBM China/HK
Corp. (Beijing). Mr. Xiao received a bachelor's degree in physics from the
Beijing Polytechnic University in 1982.
CERTAIN RELATED PARTY TRANSACTIONS
On November 10, 1998, 38.5 shares of the Series E Shares were
acquired from an investment fund by the Company and investors known to the
Company. Mr. Marvin S. Rosen was one of the investors participating in the
acquisition and he acquired 7.7 Series E Shares with 134,142 Warrants for a
total consideration of $250,000.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE COMPENSATION
The following tables set forth certain information concerning
compensation for the fiscal years ended March 31, 1998, 1997 and 1996 of
certain of the Company's executive officers, including the Company's Chief
Executive Officer and all executive officers whose total annual salary and
bonus exceeded $100,000, for the fiscal year ended March 31, 1998 (the
"Named Executive Offices").
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
----------------------------------------- ----------------------------
Name and Other Annual Stock Options/
Principal Position Year Salary ($) Bonus ($) Compensation Awards ($) SARS (#)
- -------------------------------- -------- ----------- ----------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph R. Wright 1998 392, 967 50,000 (2) $30,000
Chief Executive Officer (1) 1997 256,250 (2) $30,000 $281,250 3,000,000
1996 143,750 (2) $30,000 3,000,000
R. T. McNamar 1998 100,000 (4) $37,500
Vice Chairman (3) 1997 500,000
1996
Michael J. Lim 1998 253,417 75,000 250,000
Executive Vice President (5) 1997 167,333
1996 79,615 1,000,000
Albert G, Pastino 1998 125,000 50,000 467,500
Senior Vice President, 1997
Chief Financial Officer & 1996
Treasurer (6)
James F. O'Brien 1998 125,000 50,000 467,500
Senior Vice President, 1997
General Counsel & 1996
Corporate Secretary (7)
Xiao Jun 1998 175,000
Executive Vice President - 1997 123,958
AVIC China (8) 1996 57,990 400,000
- ---------------------------
1. Mr. Wright has served as the Company's Chief Executive Officer
since March 14, 1996. He joined the Company as the Chairman of the
Board of Directors on May 1, 1995.
2. During fiscal 1996, 1997 and 1998, the Company paid approximately
$30,000 per year on behalf of Mr. Wright for certain personal tax
and accounting services rendered by third parties for Mr. Wright.
3. Mr. McNamar joined the Company on September 3, 1996 as Vice
Chairman of the Board of Directors.
4. Mr. McNamar received 25,000 Shares pursuant to his terms of
employment with the Company, such Shares having a value of $37,500
at the time of issuance in September 1997.
5. Mr. Lim joined the Company as the Executive Vice President -
Operations on November 7, 1995 and served as the Company's Chief
Financial Officer from May 1996 through June 15, 1997.
6. Mr. Pastino joined the Company as the Senior Vice President and
Chief Financial Officer on June 16, 1997.
He became the Treasurer of the Company on December 8, 1997.
7. Mr. O'Brien joined the Company as Senior Vice President and
General Counsel on June 16, 1997. He became the Secretary of the
Company on May 14, 1998. He resigned March 31, 1999.
8. Mr. Xiao joined the Company in 1995 as the Executive Vice
President of AVIC-China, AmTec's predecessor corporation.
</TABLE>
OPTION AND SAR GRANTS DURING LAST FISCAL YEAR
The following table sets forth certain information regarding
grants of options to the Named Executive Officers during the fiscal year
ended March 31, 1998:
<TABLE>
<CAPTION>
Number of % of Total
Securities Options Granted Exercise
Underlying to Employees Price
Name Options Granted (#) in Fiscal Year ($/Share) Expiration Date
- ------------- ----------------------- ----------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Michael J. Lim 250,000 21.10 $0.75 11/07/07
Albert G. Pastino 467,500 39.45 2.125 10/16/07
James F. O'Brien 467,500 39.45 2.125 10/16/07
</TABLE>
OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding
option exercises by the Named Executive Officers during the fiscal year
1998 and options held by such Named Executive Officers on March 31,
1998:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End at Fiscal Year End (1)
------------------------------ ----------------------------
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- ---------------- ------------ --------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Joseph R. Wright 6,000,000 $5,775,000
R.T. McNamar 250,000 250,000
Michael J. Lim 1,062,500 187,500 997,656 $105,469
Albert G. Pastino 300,625 166,875
James F. O'Brien 300,625 166,875
Xiao Jun 515,000 495,113
- ------------------
(1) Based on a per share price of $1.3125, the closing price of the
Common Stock as reported on the American Stock Exchange on August
27, 1998, minus the exercise price of the option, multiplied by
the number of shares underlying the Option.
</TABLE>
EMPLOYMENT AGREEMENTS
On December 15, 1998, the Compensation Committee of the Board of
Directors approved new contracts for three executives of the Company. These
contracts, which took effect on January 1, 1999, will supercede certain
contracts entered into between the Company and the three executives prior
to January 1, 1999. The three executives are: Joseph R. Wright, Jr.,
Chairman, Chief Executive Officer and President of the Company, Michael J.
Lim, Executive Vice President of the Company, and Albert G. Pastino, Senior
Vice President, Chief Financial Officer and Treasurer of the Company. The
terms of the new contracts establish reduced base salaries, and make bonus
payments and stock option grants to the executives completely subject to
the discretion of the Compensation Committee of the Company's Board of
Directors. Each contract is a three-year contract, which represents a
two-year reduction to the prior five-year contracts.
In the first year of Mr. Wright's contract he will be paid
$450,000, which represents a $50,000 reduction to his current base salary,
and he will receive a stock grant of 100,000 Shares and an option to
purchase 200,000 shares of the Company's Common Stock at $0.875 per share,
the market price on the date of signing the contract; the option has a two
year vesting period, by which 25% of said option will vest each six months
following the initial date of the contract.
In the first year of Mr. Lim's contract he will be paid $330,000,
which represents a reduction of $20,000 to his previously contracted base
salary, and he will receive a stock grant of 50,000 Shares and an option to
purchase 100,000 shares of the Company's Common Stock at $0.875 per share,
the market price on the date of signing the contract; the option has a two
year vesting period, by which 25% of said option will vest each six months
following the initial date of the contract.
In the first year of Mr. Pastino's contract he will be paid
$220,000, which represents a reduction of $30,000 to his previously
contracted base salary, and he will receive a stock grant of 30,000 Shares
and an option to purchase 50,000 shares of the Company's Common Stock at
$0.875 per share, the market price on the date of signing the contract; the
option has a two year vesting period, by which 25% of said option will vest
each six months following the initial date of the contract.
Further, the Company anticipates entering into revised contracts
for other senior executives of the Company. Such contracts are anticipated
to be completed in the first quarter of the Company's 2000 fiscal
year.
On September 6, 1996, the Company entered into a one year verbal
employment agreement with Richard T. McNamar pursuant to which Mr. McNamar
serves as Vice Chairman of the Company. He received 25,000 Shares upon
commencing employment. Initially, Mr. McNamar worked on part time bases,
and negotiated to receive a contingent success fee for financings he
introduced or arranged for the Company. On October 1, 1996 Mr. McNamar
became a full time employee and waived his rights to any success fees. In
his part time capacity, Mr. McNamar was issued an option to purchase
250,000 Shares at an exercise price of $1.50 per share on September 6,
1996. The exercise price of the options were based on the market value of
the Common Stock on the date of grant. Pending approval of the Compensation
Committee, which is expected during the quarter beginning April 1, 1999,
the Company will enter into a new three year employment agreement with Mr.
McNamar.
On October 15, 1997, the Company entered into a five-year
employment agreement with James F. O'Brien. Mr. O'Brien served as a Senior
Vice President, General Counsel and Secretary of the Company and received
an annual base salary of $250,000 and stock options to acquire 535,000
Shares at an exercise price of $2.125 per share. The exercise price of the
options for Mr. O'Brien was based on the market price of the Common Stock,
as reported on the American Stock Exchange, at the time the grant was made.
Mr. O'Brien resigned on march 31, 1999.
Directors Compensation.
The Company maintains a policy of compensating its outside
directors for serving as members of the Company's Board of Directors. The
compensation paid to unaffiliated directors is based on stock grants
and stock option grants through the Company's Stock Option Plans.
As of the date of this Proxy Statement, for their services as
Directors of the Company, 10,000 shares of the Common Stock and 52,500
options had been granted to each of Messrs. Braddock and Wilson, and Mr.
Lewis has 40,000 options and Mr. Lilley has 47,500 options. When Mr. Rosen
joined the Board on March 11, 1999, he received 10,000 shares and options
to purchase 10,000 shares at the market price on the day it was granted. He
received 2,500 options for his services at the board meeting.
Directors and Officers Liability Insurance. The Company has
obtained directors' and officers' liability insurance with an aggregate
liability for the policy year, inclusive of costs of defense, in the amount
of $3,000,000. The insurance policy ending April 3, 1998, was renewed as of
April 4, 1998 and will expire April 3, 1999.
Indemnification of Officers and Directors. The Company's
Certificate of Incorporation and Bylaws designate the relative duties and
responsibilities of the Company's officers, establish procedures for
actions by directors and stockholders and other items. The Company's
Certificate of Incorporation and Bylaws also contain extensive
indemnification provisions that will permit the Company to indemnify its
officers and directors to the maximum extent provided by Delaware law.
In addition, the Company has adopted a form of indemnification
agreement (the "Indemnification Agreement") which provides the indemnitee
with the maximum indemnification allowed under applicable law. The Company
has not entered into Indemnification Agreements with any of its directors,
executives, employees or consultants as of the date of this Report. Since
the Delaware statute is non-exclusive, it is possible that certain claims
beyond the scope of the statute may be indemnifiable. The Indemnification
Agreements provide a scheme of indemnification which may be broader than
that specifically provided by Delaware law. It has not yet been determined,
however, to what extent the indemnification expressly permitted by Delaware
law may be expanded, and therefore the scope of indemnification provided by
the Indemnification Agreements may be subject to future judicial
interpretation.
The Indemnification Agreement provides, in pertinent part, that
the Company shall indemnify an indemnitee who is or was a party or is
threatened, pending or completed action or proceeding whether civil,
criminal, administrative or investigative by reason of the fact that the
indemnitee is or was a director, officer, key employee or agent of the
Company or any subsidiary of the Company. The Company shall advance all
expenses, judgments, fines, penalties and amounts paid in settlement
(including taxes imposed on indemnitee on account of receipt of such
payouts) incurred by the indemnitee in connection with the investigation,
defense, settlement or appeal of any civil or criminal action or proceeding
as described above. The indemnitee shall repay such amounts advanced only
if it shall be ultimately determined that he or she is not entitled to be
indemnified by the Company. The advances paid to the indemnitee by the
Company shall be delivered within 20 days following a written request by
the indemnitee. Any award of indemnification to an indemnitee, if not
covered by insurance, would come directly from assets of the Company,
thereby affecting a stockholder's investment.
Termination of Employment and Change of Control Agreements. Except
as set forth in employment agreements and stock option agreements of
certain employees of the Company and its subsidiaries, the Company has no
compensatory plans or arrangements which relate to the resignation,
retirement or any other termination of an executive officer or key employee
with the Company or a change in control of the Company or a change in such
executive officer's or key employee's responsibilities following a change
in control.
STOCK OPTION PLANS
As of February 8, 1995, the Company's Board of Directors and
stockholders approved the Company's 1995 Stock Option Plan (the "1995 Stock
Option Plan") in connection with the closing of the transactions
contemplated by the Reorganization Agreement. The Company has reserved up
to 500,000 Shares for issuance under the 1995 Stock Option Plan. The
Company has granted options to purchase up to 321,800 Shares under the 1995
Stock Option Plan, 185,000 of which have been exercised as of August 27,
1998.
The 1996 Stock Option Plan (the "1996 Stock Option Plan" and
together with the 1995 Stock Option Plan, the "Stock Option Plans") was
adopted by the Board of Directors on March 14, 1996 and by the Company's
stockholders on May 7, 1996. The Company has reserved for issuance
thereunder an aggregate of 12,000,000 Shares. The Company has granted
options to purchase up to 9,350,000 Shares under the 1996 Stock Option
Plan, 10,000 of which have been exercised. Of the 9,350,000 options granted
as of the date of this Report, 8,578,750 options have vested, and the
remaining 771,250 options may vest subject to certain schedules. The Board
of Directors has approved a provision in the 1996 Stock Option Plan which
will place a 6,000,000 share limit on the number of options that may be
granted under the 1996 Stock Option Plan to an employee in the fiscal year
ended March 31, 1996, and a 1,500,000 share limit in each fiscal year
thereafter.
A description of each of the Company's Stock Option Plans is set
forth below. The description is intended to be a summary of the material
provisions of the Company's Stock Option Plans and does not purport to be
complete.
Administration of and Eligibility Under Stock Option Plans. Each
of the Stock Option Plans, as adopted, provides for the issuance of options
to purchase Shares to officers, directors, employees, independent
contractors and consultants of the Company and its subsidiaries. The Stock
Option Plans authorize the issuance of incentive stock options ("ISOs"),
and non-qualified stock options ("NSOs") and stock appreciation rights
("SARs") to be granted by a committee (the "Committee") to be established
by the Board of Directors to administer the Stock Option Plans.
Subject to the terms and conditions of the Stock Option Plans, the
Committee will have the sole authority to determine: (a) the persons
("optionees") to whom options to purchase Shares and SARs will be granted,
(b) the number of options and SARs to be granted to each such optionee, (c)
the price to be paid for each Share upon the exercise of such option, (d)
the period within which each option and SAR will be exercised and any
extensions thereof, and (e) the terms and conditions of each such stock
option agreement and SAR agreement which may be entered into between the
Company and any such optionee.
All officers, directors and employees of the Company and its
subsidiaries and certain consultants and other persons providing
significant services to the Company and its subsidiaries will be eligible
to receive grants of options and SARs under the Stock Option Plans.
However, only employees of the Company and its subsidiaries are eligible to
be granted ISOs.
Stock Option Agreements. All options granted under the Stock
Option Plans will be evidenced by an option agreement or SAR agreement
between the Company and the optionee receiving such option or SAR.
Provisions of such agreements entered into under the Stock Option Plans
need not be identical and may include any term or condition which is not
inconsistent with the respective Stock Option Plan and which the Committee
deems appropriate for inclusion.
Incentive Stock Options. Except for ISOs granted to stockholders
possessing more than ten percent (10%) of the total combined voting power
of all classes of the securities of the Company or its subsidiaries to whom
such ownership is attributed on the date of grant ("Ten Percent
Stockholders"), the exercise price of each ISO must be at least 100% of the
fair market value of the Company's Common Stock as determined on the date
of grant. ISOs granted to Ten Percent Stockholders must be at an exercise
price of not less than 110% of such fair market value. Each ISO must be
exercised, if at all, within ten (10) years from the date of grant, but,
within five (5) years of the date of grant in the case of ISOs granted to
Ten Percent Stockholders. An optionee of an ISO may not exercise an ISO
granted under the Stock Option Plans so long as such person holds a
previously granted and unexercised ISO. The aggregate fair market value
(determined as of time of the grant of the ISO) of the Common Stock with
respect to which the ISOs are exercisable for the first time by the
optionee during any calendar year shall not exceed $100,000.
Non-Qualified Stock Options. The exercise price of each NSO will
be determined by the Committee on the date of grant. However, the exercise
price for the NSOs under the 1995 Stock Option Plan will in no event be
less than 85% of the fair market value of the Common Stock on the date the
option is granted, or not less than 110% of the fair market value of the
Common Stock on the date such option is granted in the case of an option
granted to a Ten Percent Stockholder. No such restriction exists with
respect to the exercise prices of NSOs granted under the 1996 Stock Option
Plan. The exercise period for each NSO will be determined by the Committee
at the time such option is granted, but in no event will such exercise
period exceed ten (10) years from the date of the grant.
Stock Appreciation Rights. Each SAR granted under the Stock Option
Plans will entitle the holder thereof, upon exercise of the SAR, to receive
from the Company, in exchange therefor, an amount equal in value to the
excess of the fair market value on the date of exercise of one share of
Common Stock over its fair market value on the date of grant (or in the
case of an SAR granted in connection with an option, the excess of the fair
market value of one share of Common Stock at the time of exercise over the
option exercise price per share under the option to which the SAR relates),
multiplied by the number of Shares covered by the SAR or the option, or
portion thereof, that is surrendered.
SARs will be exercisable only at the time or times established by
the Committee. If an SAR is granted in connection with an option, the SAR
will be exercisable only to the extent and on the same conditions that the
related option could be exercised. The Committee may withdraw any SAR
granted under the Stock Option Plans at any time and may impose any
conditions upon the exercise of an SAR or adopt rules and regulations from
time to time affecting the rights of holders of SARs.
Termination of Option and Transferability. In general, any
unexpired options or SARs granted under the Stock Option Plans will
terminate: (a) in the event of death or disability, pursuant to the terms
of the option agreement or SAR agreement, but not less than six (6) months
or more than twelve (12) months after the applicable date of such event,
(b) in the event of retirement, pursuant to the terms of the option
agreement or SAR agreement, but no less than thirty (30) days or more than
three (3) months after such retirement date, or (c) in the event of
termination of such person other than for death, disability or retirement,
until thirty (30) days after the date of such termination. However, the
Committee may in its sole discretion accelerate the exercisability of any
or all options or SARs upon termination of employment or cessation of
services. The options and SARs granted under the Stock Option Plans
generally will be non-transferable, except by will or the laws of descent
and distribution.
Adjustments Resulting from Changes in Capitalization. The number
of Shares reserved under the Stock Option Plans and the number and price of
Common Stock covered by each outstanding option or SAR under the Stock
Option Plans will be proportionately adjusted by the Committee for any
increase or decrease in the number of issued and outstanding Shares
resulting from any stock dividends, split-ups, consolidations,
recapitalizations, reorganizations or like event.
Amendment or Discontinuance of Stock Option Plan. The Board of
Directors has the right to amend, suspend or terminate the Stock Option
Plans at any time. Unless sooner terminated by the Board of Directors, the
1995 Stock Option Plan and the 1996 Stock Option Plan will terminate on
February 8, 2005 and May 7, 2006, respectively, the tenth anniversary date
of the effectiveness of each such Stock Option Plan.
REPRICING OF OPTIONS
In October 1997, the Board of Directors determined to cancel
certain existing options issued to two senior vice presidents, Albert G.
Pastino and James F. O'Brien, of the Company as part of a renegotiation of
then existing contracts between the Company and the affected executives. As
part of the issuance of the new contracts, new options were issued to the
two executives at an exercise price which was the prevailing market price
of the Company's Common Stock at the time the new grants were made.
The original contracts, dated June 15, 1997, granted each of the
above named two executives an option to purchase 400,000 Shares at $3.00
per share. The revised contracts, dated October 15, 1997, cancelled these
options, and the executives were each issued a new option to purchase
467,500 Shares at $2.125. The cancellation of existing options and
reissuance of new options at a lower exercise price, which was the then
prevailing market price of the Common Stock, was deemed appropriate and
equitable to both the executives and the Company since the executives were
newly employed and would be inappropriately impacted by the decline of the
Common Stock at that time.
BOARD OF DIRECTORS' REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board determines the Company's
executive compensation policy and sets compensation for the Chief Executive
Officer and all other executive officers of the Company. The policy of the
Board is to maintain executive compensation at competitive levels that will
permit the Company to attract, motivate and retain individuals with
superior managerial abilities. The levels of compensation are intended to
reward individual initiative and achievement, while motivating executives
of the Company to increase shareholder value by improving performance and
profitability of the Company.
The Board reviews the base salary of Mr. Wright (as well as the
other executive officers including the executive officers named in the
Summary Compensation Table) annually, considering factors such as corporate
progress toward achieving objectives (without reference to any specific
performance-related targets) and individual performance experience and
expertise. In determining Mr. Wright's overall compensation as well as the
compensation of the other executive officers, the Board also reviews
certain compensation levels at other companies. Such other companies are
not necessarily the same as the companies, in the peer group index in the
performance graph section of this Proxy Statement because the Board
believes that the Company competes for executive talent with companies in
addition to those in its peer group. Additional factors reviewed by the
Board in determining appropriate compensation levels for executives
including Mr. Wright include subjective factors related to corporate and
the executive's individual performance.
The Compensation Committee adopted a policy during the fiscal year
ended March 31, 1998, which places executive compensation under an annual
review, by which bonuses and additional option grants, as well as increases
to salary, will be based on performance goals as established by the
Committee and the individual executives at the commencement of each year of
employment. Further, the Committee places the majority of executive
compensation in "at-risk" categories, including stock options and
performance bonuses. The Committee has adopted a policy by which options
granted pursuant to the Company's 1995 and 1996 Option Plans will be issued
with exercise prices set at the fair market value of the Common Stock at
the time of issue.
PERFORMANCE GRAPH
The following graph indicates AmTec's total return to its
shareholders for the period March 29, 1996 to March 31, 1998, as compared
to the returns for the Russell 2000 Index and a Peer Group. The Peer Group
consists of certain companies with stock trading on United States stock
exchanges, and which engage in business exclusively in China. The
information contained in this graph is not necessarily indicative of
AmTec's future performance.
COMPARATIVE TOTAL RETURNS*
AMTEC, INC., RUSSELL 2000, PEER GROUP
(PERFORMANCE RESULTS THROUGH 3/31/98)
[GRAPHIC OMITTED]
1996 1997 1998
AmTec, Inc. $ 100.00 $ 58.33 $ 14.39
Russell 2000 $ 100.00 $ 103.56 $ 145.32
Peer Group $ 100.00 $ 54.65 $ 39.53
- ----------------------
* Assumes $100 invested at the close of trading on the last day
preceding the first day of the third preceding fiscal year in
AmTec Common Stock, Russell 2000 Index, and the Peer Group. The
Cumulative total return assumes reinvestment of dividends.
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended March 31, 1998, the Board of
Directors of the Company met five times. Except for Liang Jiangli, who did
not attend one Board meeting of two scheduled during his tenure during the
fiscal year ended March 31, 1998, no incumbent member who was a director
during the past fiscal year attended fewer than 75% of the aggregate of all
meetings of the Board of Directors and all meetings of the committees of
the Board of Directors on which he served.
The Company's Audit Committee reviews the scope of the audit and
other accounting related matters. During the fiscal year ended March 31,
1998, Michael H. Wilson was the Chairman of the Audit Committee and James
R. Lilley and Richard T. McNamar were members of the Committee. The Company
also has a Compensation Committee chaired by Richard S. Braddock. Drew
Lewis and Joseph R. Wright, Jr. served as members of the Compensation
Committee during the fiscal year ending March 31, 1998. The Compensation
Committee had two telephonic meetings during the fiscal year ending March
31, 1998. The Audit Committee had two meetings during the fiscal year ended
March 31, 1998. There are no other committees of the Board of Directors.
Mr. Wright and Mr. McNamar will not stand for appointment to the
Audit Committee following the shareholders' meeting so that the Audit
Committee will subsequently be composed exclusively of outside directors.
Upon his election to the Board, Marvin Rosen was appointed to the
Compensation Committee.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors
and certain of its officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Commission. Officers, directors
and greater than 10% stockholders are required by the Commission's
regulations to furnish the Company with copies of all Section 16(a) forms
they file. Based solely upon a review of the copies of the forms furnished
to the Company and the representations made by the reporting persons to the
Company, the Company believes that during the fiscal year ended March 31,
1998, its directors, officers and 10% stockholders with the exception of
Jenny Sun and Max Sun complied with all filing requirements under Section
16(a) of the Exchange Act.
STOCKHOLDER PROPOSALS
Stockholders are advised that any stockholder proposal, including
nominations to the Board of Directors, intended for consideration at the
annual meeting for the fiscal year ended March 31, 1999 ("1999 Annual
Meeting") must be received by the Company no later than September 10, 1999
to be included in the proxy material for the 1999 Annual Meeting. It is
recommended that stockholders submitting proposals direct them to
Karin-Joyce Tjon, Vice President of the Company, and utilize certified
mail, return-receipt requested in order to ensure timely delivery.
OTHER INFORMATION
Management does not know of any items other than those referred to
in the accompanying Notice of Annual Meeting of Stockholders which may
properly come before the meeting or other matters incident to the conduct
of the meeting. As to any other item or proposal that may properly come
before the meeting, including voting on a proposal omitted from this Proxy
Statement pursuant to the rules of the Securities and Exchange Commission,
it is intended that proxies received will be voted in accordance with the
discretion of the proxy holders.
The form of proxy and this Proxy Statement have been approved by
the Board of Directors and are being mailed and delivered to stockholders
by its authority.
R. T. MCNAMAR
Secretary
New York, New York
September 7, 1999
---------------------------
THE ANNUAL REPORT TO STOCKHOLDERS OF THE COMPANY FOR THE FISCAL
YEAR ENDED MARCH 31, 1998, WHICH INCLUDES FINANCIAL STATEMENTS, HAS BEEN
MAILED TO STOCKHOLDERS OF THE COMPANY. THE ANNUAL REPORT DOES NOT FORM ANY
PART OF THE MATERIAL FOR THE SOLICITATION OF PROXIES.
---------------------------
AMTEC, INC.
PROXY FOR MEETING OF STOCKHOLDERS, SEPTEMBER 24, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph R. Wright, Jr. and Richard
T. McNamar, and each or either of them, as proxy holders with power to
appoint his substitute and hereby authorizes the proxy holders to represent
and vote, as designated below, all the shares of common stock of AmTec,
Inc. (the "Company") held of record by the undersigned on August 27, 1999
at the Meeting of Stockholders to be held on September 24, 1999 at 10:00
A.M. or any and all adjournments thereof.
1. ELECTION OF DIRECTORS:
( ) FOR all nominees listed below (except as
marked to the contrary below).
( ) WITHHOLD AUTHORITY to vote for all nominees
listed below.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, DRAW
A LINE THROUGH SUCH NOMINEE'S NAME.):
Joseph R. Wright, Jr.
Richard T. McNamar
James R. Lilley
Michael H. Wilson
Richard S. Braddock
Marvin S. Rosen
2. Proposal to ratify the appointment of Deloitte & Touche LLP
as independent auditors for the fiscal year ending March 31,
1999.
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. Proposal to approve the issuance of up to 8,000,000 shares of
the Common Stock pursuant to conversion of certain shares of
the Company's Series E Convertible Preferred Stock.
( ) FOR ( ) AGAINST ( ) ABSTAIN
4. Proposal to approve the amendment to the Certificate of
Incorporation of the Company to classify the Board of
Directors into these classes.
( ) FOR ( ) AGAINST ( ) ABSTAIN
5. Proposal to approve the amendment to the Certificate of
Incorporation of the Company to eliminate action by written
consent of stockholders.
( ) FOR ( ) AGAINST ( ) ABSTAIN
6. In their discretion, the proxy holders are authorized to vote
upon such other business as may properly be brought before
the Meeting or any and all adjournments thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED, FOR
EACH OF PROPOSAL 1, 2, 3, 4, 5 AND AS SAID PROXIES DEEM ADVISABLE ON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY AND ALL
ADJOURNMENTS THEREOF. IN THE EVENT ANY OF THE NOMINEES IS UNAVAILABLE FOR
ELECTION OR UNABLE TO SERVE, THE SHARES REPRESENTED BY THIS PROXY MAY BE
VOTED FOR A SUBSTITUTE NOMINEE SELECTED BY THE BOARD OF DIRECTORS.
Dated: ________________, 1999
Signature
(Signature, if held jointly)
Please sign exactly as your name appears
hereon. When shares are held by joint
tenants, both should sign. When signing as
attorney, executor, administrator, trustee
or guardian, please give full title as
such. If a corporation, please sign in
full corporate name by the President or
other authorized officer. If a
partnership, please sign in partnership
name by an authorized partner.
PLEASE PROMPTLY MARK, SIGN, DATE, AND RETURN THIS PROXY
USING THE ENCLOSED ENVELOPE.
APPENDIX 1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
AMTEC, INC.
This Restated Certificate of Incorporation (the "Certificate") of
AMTEC, 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 on December 8, 1997. 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 AMTEC, 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 19801.
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").
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.
The Board of Directors shall consist of three classes of
directors, such classes to be as nearly equal in number of directors as
possible, having staggered three-year terms of office, the term of office
of the directors of the first such class to expire at the first annual
meeting of the Corporation's stockholders following the Effective Date,
those of the second class to expire at the second annual meeting of the
Corporation's stockholders following the Effective Date, and those of the
third class at the third annual meeting of the Corporation's stockholders
following the Effective Date, such that at each such annual meeting of
stockholders, nominees will stand for election for three-year terms to
succeed those directors whose terms are to expire at such meeting.
Likewise, at each other annual meeting of stockholders held from and after
the Effective Date, those nominees elected at such meeting to succeed those
directors whose terms expire at such meeting, shall serve for a term
expiring at the third annual meeting of stockholders following their
election. Members of the Board of Directors shall hold office until the
annual meeting of stockholders for the year in which their term is
scheduled to expire as set forth above in this Article Seventh and their
respective successors are duly elected and qualified or until their earlier
death, incapacity, resignation, or removal. No decrease in the authorized
number of directors shall shorten the term of any incumbent director, and
additional directors elected 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.
Elections of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.
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.
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 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 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").
(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.
(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.
(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
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 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.
(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)
W 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 certificates) representing the shares of Series A Preferred Stock being
redeemed, and such shares shall not thereafter be transferred (except with
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.
(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 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 f or
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 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:
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 8 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 8W 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 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 certificates) 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
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) 85W 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, 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 25t or more from the Index
Price, then the Fixed Conversion Price shall be reset to equal
110!k 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 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 certificates) 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):
(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.
(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 (0.5t) each month thereafter until it equals zero
the end of the twenty-third month after the Final Closing Date, and the
terms 'IN", "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 75W 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 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]
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 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
herein 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.
TWENTIETH: The Corporation hereby provides for a series of
Preferred Stock designated as the Series C Convertible Preferred Stock, as
follows:
1. Definitions. For purposes hereof the following
Definitions shall apply:
"Average Stock Price" shall mean the lowest Market Price
for Shares of 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 C Preferred Stock.
"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, subject however to adjustment
as provided in Section 7 and 8 hereof and in Section 7 of the
Registration Rights Agreement executed by the Company in favor of
the holders of the Series C Preferred Stock as of the date of
issuance of the Series C Preferred Stock, which provisions are
hereafter incorporated herein.
"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 A, Series
C, and 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 C 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 C 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
(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 C Preferred Stock" shall mean the Series C
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 C Convertible Preferred Stock" (the "Series C Preferred
Stock"). The authorized number of shares constituting the Series C
Preferred Stock shall be 250 shares and each share of Series C
Preferred Stock shall rank equally in all respects.
3. Dividends. The holders of the then outstanding Series
C 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 C 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 C Preferred Stock
shall participate on an "as converted basis" in cash dividends
paid on Junior Stock and in other dividends on Common Stock as
provided in Section 8(b) below.
4. Liquidation Rights of Series C 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 C Preferred Stock then
outstanding shall be pari passu with the holders of Series D
Preferred Stock and 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 C 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 C Preferred Stock and to any holders of any series of
Preferred Stock that ranks pari passu with the Series C Preferred
Stock (including Series D 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
C 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 C 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 C 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 C 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 C 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 C 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 C
Preferred Stock (including, without limitation, by creating any
class or series of equity securities having a preference over the
Series C 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 C Preferred Stock), or (ii) any amendment to or
waiver of the terms of the Series C Preferred Stock or this
Certificate.
To the extent that under Delaware law the approval of the
holders of the Series C 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 C Preferred Stock shall constitute the
approval of such action by the class. To the extent that under
Delaware law the holders of the Series C Preferred Stock are
entitled to vote on a matter with holders of the Common Stock,
voting together as one class, each share of Series C Preferred
Stock shall be entitled to that number of votes as shall be equal
to the number of shares of Common Stock into which such shares of
Series C Preferred Stock could have been converted on the record
date for any meeting of stockholders or on the date of any written
consent of stockholders as applicable. Holders of the Series C
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. The holders of Series C Preferred Stock
shall have the following conversion rights.
(a) Holder's Right to Convert. Each share of Series C
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 C 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 Conversion Date Market
Price.
The number of shares of Common Stock into which each
share of Series C Preferred Stock may be converted pursuant to
this paragraph hereof is hereafter referred to as the "Conversion
Rate" for such Series C Preferred Stock.
(c) Mechanics of Conversion. In order to convert any or
all shares of Series C 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 C 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 C 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 indemnify the
Company from any loss incurred by it in connection with the loss
of such certificates.
Immediately on receipt of the Conversion Notice, 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. If the
holder and the Company cannot agree on the Conversion Rate within
two (2) business days, the Company shall, without delay, issue a
certificate or certificates for the number of shares of Common
Stock to which the holder is entitled according to the Company's
calculation of the Conversion Rate and in accordance with the
procedures set forth in this subparagraph (c). The disagreement as
to the Conversion Rate shall be submitted to a single arbitrator
agreeable to the Company and the holder within five (5) business
days and shall be decided by said arbitrator within two (2)
business days of submission of the dispute to such arbitrator. The
decision of the arbitrator shall be conclusive on the Company and
the holder. If there is no dispute with respect to the Conversion
Rate, the Company shall use its best efforts to issue and deliver
within three (3) business days after delivery to the Company of
the Conversion Notice, to such holder of Series C 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 C 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 C 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 C 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 C 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
Date Market 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 Date Market 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 C Preferred Stock pursuant to such conversion
notice. If the Conversion Date Market Price on a Holder Conversion
Date shall be less than the Minimum Additional Share Price, upon
the conversion of shares of Series C Preferred Stock on such
Holder Conversion Date, any rights to purchase Additional Shares
with respect to such shares of Series C 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) 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. The Minimum Additional Share Price
shall be appropriately adjusted upon any stock dividend, stock
split, combination, recapitalization, or other reorganization
affecting the Common Stock outstanding.
(e) In the event 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 in a transaction other than a Qualified Transaction (as
hereinafter defined), then the Minimum Additional Share Price for
any remaining and unconverted shares of Series C Preferred Stock
shall be adjusted, at the sole option of the Subscriber, to the
closing market price of the Company's Common Stock on the date of
such transaction. Qualified Transactions are defined as the
following: any of (i) the issuance of Equity Securities which
result in the issuance of the Company's Common Stock at an
effective purchase price greater than or equal to $5.00 per share,
(ii) shares or options issued or which may be issued pursuant to
the Company's employee or director option plans or otherwise
issued as compensation to employees or directors, or shares issued
upon exercise of options, warrants, or rights outstanding on the
Closing date listed in the Exchange Act Reports, (iii) any public
offering of the Company's securities underwritten by one of the
following underwriters which, together with their affiliates, are
generally known as: Goldman Sachs, Merrill Lynch, Morgan Stanley,
Credit Suisse First Boston, Lehman Brothers, Salomon Brothers,
Bear Stearns, J.P. Morgan, Donaldson, Lufkin & Jenrette, or Smith
Barney, or (iv) Equity Securities issued whose shares or
underlying shares of Common Stock are restricted from resale on
any national market system or any public stock market before March
1,1998.
(f) Mandatory Conversion. On the third anniversary of the
first date on which the Company issues any shares of Series C
Convertible Preferred Stock, each outstanding share of Series C
Convertible Preferred Stock shall be converted automatically and
without further action into fully paid and nonassessable shares of
Common Stock (as such shares of Common Stock may be constituted on
the Holder Conversion Date) at the rate specified in Section 7(b)
hereof, subject to adjustment in accordance with Section 8 hereof,
and a Conversion Notice shall be deemed to have been given by the
holder of each such outstanding share of Series C Convertible
Preferred Stock on such date.
8. Adjustments; Reorganizations.
(a) Adjustments 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 C 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 C
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 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 dividend or
distribution, provision shall be made so that the holders of the
Series C Preferred Stock shall thereafter be entitled (A) to
receive when paid to other holders of Common Stock, on an "as
converted" basis, the number of shares of stock (other than Common
Stock) or other securities or property to which a holder of the
number of shares of Common Stock deliverable would have been
entitled on such event and (B) to receive, to the extent that the
dividend or distribution is made within thirty days prior to a
conversion event, payable in Common Stock, upon conversion of the
Series C Preferred Stock, that number of shares of additional
Common Stock to which they would have been entitled if they were
holding Common Stock on the relevant date. 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 C 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.
(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 plans or otherwise issued as
compensation to employees or directors, or shares issued upon
exercise of options, warrants or rights outstanding on the Closing
Date listed in the Exchange Act Reports or shares or options
issued in consideration for business acquisitions or combinations
made by the Company) (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 C 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 or (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 C
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 C Preferred
Stock. The number of shares so reserved may be reduced by the
number of shares actually delivered pursuant to conversion of
Series C 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 C 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 C Preferred Stock upon
receipt of a Conversion Notice, or otherwise fails or refuses to
perfect conversion of any Series C Preferred Stock, with respect
to the Series C 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 C Preferred Stock shall have
the right to put the Preferred Stock to the Company at a price
which shall be equal to 125% of the Designated Price.
11. No Reissuance of Series C Preferred Stock. No share
or shares of Series C Preferred Stock acquired by the Company by
reason of redemption, purchase, conversion or otherwise shall be
reissued as Series C 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 C Preferred Stock shall be authorized or issued
without the consent of at least 66 2/3% in interest of the holders
of Series C 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 C 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
holder's shares of Series C 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 C Preferred Stock may not convert any
of the Series C Preferred Stock within the first 60 calendar days
following the date of issuance of the Series C Preferred Stock.
Thereafter, Holders of Series C Preferred Stock may convert the
Series C Preferred Stock as follows:
Calendar Days from Shares Convertible
Issuance
61 60
91 120
121 180
151 250
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 C 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 C Convertible Preferred Stock, none of
which has been issued, is 250 shares.
TWENTY-FIRST: The Corporation hereby provides for a series of
Preferred Stock designated as the Series D Convertible Preferred Stock, as
follows:
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.
"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-far 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
(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 hcre0f) 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 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 (330) 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, Right. 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.
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 Prefer-red 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 al' 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 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) 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.
(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 arc 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 ISO%
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 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 in 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 Stork 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 15O
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.
TWENTY-SECOND: The Corporation hereby provides for a series of
Preferred Stock designated as the Series E Convertible Preferred Stock, as
follows:
1. Designation and Amount. The shares of such series shall bc
designated as "Series E Convertible Preferred Stock" (the "Series
E Preferred Stock") and the number of shares constituting the
Series E Preferred Stock shall be 120. 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 E Preferred Stock to a number less than the number of
shares then outstanding plus the number of 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 E Preferred
Stock,
2. Rank. The Series E 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 that does not
specifically by its terms rank senior to or on parity with the
Series E Preferred Stock of whatever subdivision (collectively,
with the Common Stock, "Junior Securities"); (iii) on parity with
the Series C and Series D Preferred Stock of the Company ("Parity
Securities") in each case as to 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 any Preferred
Stock subsequently created specifically ranking senior to the
Series E Preferred Stock ("Senior Securities") in terms of
Distributions.
3. Dividends. The Series E Preferred Stock will bear no dividends,
and the holders of the Series E Preferred Stock shall not be
entitled to receive dividends on the Series E Preferred Stock.
4. Liquidation Preference.
(a) In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntary or involuntary,
the then holders of shares of Series E Preferred Stock shall be
entitled to receive, immediately after any distributions to Senior
Securities required by the Corporation's Certificate 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) $100,000 for each
outstanding share of Series E Preferred Stock (the "Issue Price")
and (ii) an amount equal to 8% of the Issue Price per annum, for
the period that has passed since the date of' issuance of the
Series E 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 E
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 E Preferred Stock and the
Parity Securities, respectively, then the entire assets and funds
of the Corporation legally available for distribution shall be
distributed among the holders of the Series E 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 Certificate 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 4(a) above) and Junior Securities in accordance with
the Corporation's Certificate 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 E Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. The record holder of the Series E
Preferred Stock shall be entitled, as set forth below. subject to
the restrictions on conversion set forth in Section 5(b) below, at
the office of the Company or any transfer agent for the Series E
Preferred Stock. to convert the shares of Series E 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, Holder may convert a Share of
Series E Preferred Stock in less than whole increments. The number
of shares of Common Stock into which this Series E Preferred Stock
may be converted is hereinafter referred to as the "Conversion
Rate" for such Series E Preferred Stock, and is computed as
follow:
Number of shares issued upon conversion of one share of Preferred
Stock equals
Issue Price + [(.08)(N/365)(Issue Price)]
Conversion Price
where
*N = the number of days between (i) the date that, in connection
with the consummation of the initial purchase of this Series E
Preferred Stock from the Company, the escrow agent first had in
its possession funds representing full payment for the Series E
Preferred Stock for which conversion is being elected, and (ii)
the applicable date of conversion for the Series E Preferred Stock
for which conversion is being elected.
*Issue Price = the 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
Adjustable Conversion Price.
For purposes hereof:
* "Fixed Conversion Price" shall equal 110% of the Index Price,
provided, however, that if on March 2, 1998, the average Closing
Bid Price for the prior 10 business days has declined 25% or more
from the Index Price, then the Fixed Conversion Price shall be
reset to equal 110% of that 10 day average Closing Bid Price,
* "Adjustable Conversion Price" shall equal:
(a) during the period beginning March 2, 1998 and
endings, April 30, 1998, 8.5% of the average Closing Bid Price of
the Company's Common Stock for the five (5) trading days
immediately preceding the Date of Conversion,
(b) during the period beginning May 1, 1998 and ending
May 3 1, 1998, 84% of the average Closing Bid Price of the
Company's Common Stock for the five (5) trading days immediately
preceding the Date of Conversion,
(c) during the period beginning June 1, 1998 and ending
June 30, 1998, 83% of the average Closing Bid Price of the
Company's Common Stock for the five (5) trading days immediately
preceding the Date of Conversion,
(d) during the period beginning July 1, 1998 and ending
July 31, 1998, 82% of the average Closing Did Price of the
Company's Common Stock for the five (5) trading days immediately
preceding the Date of Conversion,
(e) during the period beginning August 1, 1998 and ending
August 31, 1998, 91% of the average Closing Bid Price of the
Company's Common Stock for the five (5) trading days immediately
preceding the Date of Conversion,
(f) during the period beginning September 1, 1998, 80% of
the average Closing Bid Price of the Company's Common Stock for
the five (5) trading days immediately preceding the Date of
Conversion.
* "Index Price" equals the average Closing Bid Price for the ten
business days immediately preceding the Issue Date,
* "Closing Bid Price" shall mean the closing bid price of the
Company's Common Stock as reported by the American Stock Exchange
("AMEX") (or, if not reported by AMEX, as reported by such other
exchange or market where traded) on the applicable date.
* "Issue Date" shall mean the date that the Series E Preferred
Stock is first issued.
(b) Mechanics of Conversion. No fractional shares of
Common Stock shall be issued upon conversion of this Series E
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 E
Preferred Stock into full shares of Common Stock, the holder shall
surrender the certificate or certificates therefore duly endorsed,
by either overnight courier or 2 day courier, to the office of the
Company or of any transfer agent for the Series E 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 Series E 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 bc obligated to issue
certificates evidencing the shares of Common Stock issuable upon
such conversion unless either the certificates evidencing such
Series E 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 E 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, and a certificate for
any unconverted shares of Series E Preferred Stock. The date on
which conversion occurs (the "Date of Conversion") shall be deemed
to be the date set forth in the Notice 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 E 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 E 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 E 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 E
Preferred Stock outstanding an the second anniversary of the Issue
Date automatically shall be converted into Common Stock on such
date at the Conversion Price then in effect and the second
anniversary of the Issue Date shall be deemed the Date of
Conversion with respect to such Conversion.
(c) Adjustment to Fixed Conversion Price.
In computing the Fixed Conversion Price for purposes of Section
5(a):
(i) If, prior to the conversion of all of the
Series E 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 E
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 E Preferred Stock shall thereafter have the right to
purchase and receive upon conversion of Series E 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 E
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 E, 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 E Preferred Stock)
shall thereafter be applicable, as nearly as may be practicable in
relation to any shares of stock or of 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 E Preferred Stock such shares of stock
and/or securities as, in accordance with the foregoing provisions,
the holders of the Series E 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.
6. 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 all 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 E
Preferred Stock shall be assumed by the acquiring entity and
thereafter this Series E Preferred Stock shall be convertible into
such class, type and amount of securities as the holder would have
received had the holder converted this Series E Preferred Stock
immediately prior to such Corporate Change.
7. Protective Provisions. So long as shares of Series E 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 two-thirds of the then outstanding
shares of Series E Preferred Stock;
(a) alter or change the rights, preferences or privileges
of the shares of Series E Preferred Stock or any Senior Securities
so as to affect adversely the Series E Preferred Stock; or
(b) create any new class or series of stock having rights
preferential to those of the Series E Preferred Stock with respect
to Distributions (as defined in Section 2 above),
8. Redemption By Company.
(a) Company's Right to Redeem at its Election. At any
time, the Company shall have the right, in its sole discretion, to
redeem ("Redemption at Company's Election"), from time to time,
any or all of the Series E Preferred Stock provided the Company
shall first provide ten (10) days advance written notice. If the
Company elects to redeem some but not all of the Series E
Preferred Stock, the Company shall redeem a pro-rata amount from
each holder of the Series E Preferred Stock.
(b) Redemption Price At Company's Election. The
Redemption Price at Company's Election shall be an amount per
share equal to the Issue Price multiplied by the sum of one (1)
plus the Premium plus (one (1) minus the Adjustable Conversion
Price then in effect.)
(c) Mechanics of Redemption at Company's Election. The
Company shall effect each such redemption by giving at least ten
(10) days prior -,written notice ("Notice of Redemption at
Company's Election") to (a) the holders of the Series E Preferred
Stock selected for redemption, at the address and facsimile number
of such holder appearing in the Company's Series E Preferred Stock
register and (b) the transfer agent, which notice of Redemption at
Company's Election shall be deemed to have been delivered two (2)
business days after the Company's mailing (by overnight or two (2)
day courier, with a copy by facsimile) of such Notice, of
Redemption at Company's Election. Such Notice of Redemption at
Company's Election shall indicate (1) the number of shares of
Series E Preferred Stock that have been selected for redemption,
(ii) the date on which such redemption is to become effective (the
"Date of Redemption at Company's Election") and (iii) the
Applicable Redemption Price at Company's Election. Notwithstanding
the above, holder may convert into Common Stock pursuant to
Section 5 prior to the close of business on the Date of Redemption
at Company's Election, any Series E Preferred Stock which it is
otherwise entitled to convert, including Series E Preferred Stock
that has been selected for redemption at Company's Election
pursuant to this Section.
(d) Payment of Redemption Price. Each holder submitting
Series E Preferred Stock being redeemed under this section shall
send its Series E Preferred Stock Certificates so redeemed to the
Company or its transfer agent no later then the Date of Redemption
at Company's Election, and the Company shall pay the applicable
redemption price to that holder within five (5) business days of
the Date of Redemption at Company's Election. The Company shall
not be obligated to deliver the redemption price unless the
Preferred Stock Certificates so redeemed are delivered to the
Company or its transfer agent.
9. Status of Converted or Redeemed Stock, In the event any shares
of Series E Preferred Stock shall be converted or redeemed, 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 E Preferred Stock.
10. Miscellaneous. As used herein, the term "business day" means a
business day in the City of New York.
[The rest of this page was intentionally left blank.]
IN WITNESS WHEREOF AMTEC, INC. has caused this Restated
Certificate of Incorporation to be executed by its President and to be
attested to by its Secretary as of _______ ___, 1999.
AMTEC, INC.
By:____________________________________
Joseph R. Wright, Jr.
Chief Executive Officer
By:___________________________________
R. T. McNamar
Secretary
