25
As filed with the Securities and Exchange Commission November 20,
1996/ File No. 333-08615
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 1
HEADWAY CORPORATE RESOURCES, INC.
(Formerly AFGL International, Inc.)</R
(Exact name of registrant as specified in its charter)
Delaware 75-
2134871
(State or other jurisdiction (I.R.S.
Employer
of incorporation or organization)
Identification No.)
850 Third Avenue, 11th Floor
New York, NY 10022
(212) 508-3560
(Address and telephone number of registrant's principal offices)
Barry S. Roseman, Chief Operating Officer
Headway Corporate Resources, Inc.
850 Third Avenue, 11th Floor
New York, NY 10022
(212) 508-3560
(Name, address and telephone number of agent for service)
Copies to:
Mark E. Lehman, Esq.
Lehman, Jensen & Donahue, L.C.
8 East Broadway, Suite 620
Salt Lake City, UT 84111
(801) 532-7858
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes
effective.
If the only securities being registered on this Form are being
offered pursuant to a dividend reinvestment plan, please check
the following box. [ ]
If any of the securities being registered on the Form are to be
offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than the securities
offered only in connection with dividend or interest reinvestment
plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of Amount to Proposed Proposed Amount of
each be maximum maximum registratio
class of Registered offering aggregate n fee
securities price offering (3)
to be per share price(2)
registered (2)
Common 3,364,711(1 $3.37566 $11,355,899 $3,915.83
Stock ) .63
(1) The shares registered are issuable on conversion or exercise
of outstanding securities. The number of shares so issuable will
vary based on the market price of the Company's Common Stock.
Additional shares are being registered to take into account
variations in the number of shares issuable. The amount
registered also includes an indeterminate number of shares of
common stock that may be issuable by reason of stock splits,
stock dividends, or similar transactions in accordance with Rule
416 under the Securities Act of 1933.
(2) Estimated solely for purposes of determining the
registration fee. Based upon the average of the high and low
sales prices of the Company's Common Stock as reported in the
NASDAQ SmallCap Market for July 17, 1996, pursuant to Rule
457(c).
(3) Previously paid.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
[INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE
ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY
SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION, OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.]
SUBJECT TO COMPLETION:
NOVEMBER 20, 1996
PROSPECTUS
3,364,711 Shares
HEADWAY CORPORATE RESOURCES, INC.
(Formerly AFGL International, Inc.)
Common Stock
(Par value $.0001 per share)
This Prospectus relates to 3,364,711 shares of Common
Stock, $.0001 par value per share (hereinafter referred to as
"Shares" or "Common Stock"), of Headway Corporate Resources, Inc.
(the "Company"). Included in the Shares are (i) approximately
2,000,000 Shares issuable on conversion of the Company's Series D
Convertible Preferred Stock, (ii) approximately 160,000 Shares
issuable at the election of the Company in payment of accrued
dividends on conversion of the Series D Convertible Preferred
Stock, (iii) approximately 500,000 Shares issuable on exercise of
warrants the Company is obligated to issue on conversion of the
Company's Series D Convertible Preferred Stock (the "Series D
Warrants"), (iv) 129,711 Shares issuable on exercise of warrants
issued by the Company in 1993 (the "1993 Warrants"), and (v)
575,000 Shares issuable on exercise of warrants (the "Series E
Warrants") issued by the Company to purchase shares of Series E
Convertible Preferred Stock, each share of which is convertible
into one share of Common Stock.
All of the Shares offered hereunder will be acquired by
certain stockholders (the "Selling Stockholders") of the Company
as described herein. The Company will not receive any of the
proceeds from the sale of the Shares by the Selling Stockholders
but has agreed to bear certain expenses of registration of the
Shares. See "Selling Stockholders" and "Plan of Distribution."
The Shares may be re-offered by the Selling Stockholders in
transactions for their own account (which may include block
transaction) in the over-the-counter market, negotiated
transactions, or in a combination of such methods of sale, at
fixed prices which may be changed, at market prices prevailing at
the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Stockholders may
effect such transactions by selling Shares directly to purchasers
or to or through underwriters, agents or broker-dealers, and such
underwriters, agents or broker-dealers may receive compensation
in the form of discounts, concessions or commissions from the
Selling Stockholders or the purchasers of Shares for whom such
underwriters, agents or broker-dealers may act as agent or to
whom they sell as principal, or both (which compensation as to a
particular broker-dealer might be in excess of customary
commissions). The Shares may be offered from time to time
following the date of this Prospectus, subject to the right of
the Company to suspend (and later resume) the distribution of
Shares hereunder as required by law or upon the advice of counsel
(regarding violations of law or regulations). See "Selling
Stockholders."
The Selling Stockholders, any agents or brokers executing
sales orders on behalf of Selling Stockholders, and dealers to
whom the Shares may be sold, may, under certain circumstances, be
considered "underwriters" within the meaning of Section 2(11) of
the Securities Act of 1933, as amended (the "Securities Act"),
and any commissions received by them and any profit on the resale
of the Shares may be deemed to be underwriting commissions or
discounts under the Securities Act. See "Plan of Distribution"
herein for indemnification arrangements among the Company and the
Selling Stockholders.
The Company's Common Stock is traded in the over-the-
counter market and price quotations are listed in the NASDAQ
SmallCap Market under the symbol HDWY. On November 18, 1996, the
last reported sale price of the Common Stock, as reported in the
NASDAQ SmallCap Market, was $3.375 per share.
Investors should carefully consider the material risks set
forth under the caption "Risk Factors."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is ___________________, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements
and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and at the following Regional Offices of the Commission:
Northeast Regional Office, Suite 1300, Seven World Trade Center,
New York, New York 10048; and Midwest Regional Office, Suite
1400, 500 W. Madison Street, Chicago Illinois 60661-2511. Copies
of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, upon payment of prescribed rates.
The Company has filed with the Commission a Registration
Statement on Form S-3 (together with any amendments and exhibits
thereto, the "Registration Statement") under the Securities Act,
with respect to the Shares offered hereby. This Prospectus
constitutes a part of the Registration Statement. This
Prospectus omits certain of the information contained in the
Registration Statement, and reference is hereby made to the
Registration Statement and to the exhibits relating thereto for
further information with respect to the Company and the Shares.
Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in each instance,
reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this
Prospectus the following documents heretofore filed by the
Company with the Commission pursuant to the Exchange Act:
1. The Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1995;
2. The Company's Quarterly Reports on Form 10-QSB for
the fiscal quarters ended March 31, 1996 (and Amendment No. 1
thereto), June 30, 1996, and September 30, 1996;
3. The Company's Current Report on Form 8-K dated May 31,
1996 (and Amendment No. 1 thereto);
4. The Company's Current Report on Form 8-K dated
September 16, 1996;
5. The Company's Proxy Statement dated October 4, 1996,
for the Annual Meeting of Stockholders held November 6, 1996;
and
6. The description of the Company's Common Stock
contained in its Proxy Statement dated October 4, 1996, for the
Annual Meeting of Stockholders held November 6, 1996.
All documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the
date hereof and prior to the termination of the offering made
hereby shall be deemed to be incorporated herein by reference and
to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or
deemed to be incorporated herein by reference shall be deemed to
be modified or superseded for purposes hereof to the extent that
a statement contained herein or in any other subsequently filed
document which also is, or is deemed to be, incorporated herein
by reference modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed to
constitute a part hereof, except as so modified or superseded.
The Company hereby undertakes to provide without charge
to each person to whom a copy of this Prospectus has been
delivered, upon the written or oral request of any such person, a
copy of any or all of the documents referred to above which have
been or may be incorporated by reference in this Prospectus.
Requests for such copies should be directed to Julie Risi,
Investor Relations, Headway Corporate Resources, Inc., 850 Third
Avenue, 11th Floor, New York, NY 10022, telephone number: 212-
508-3560.
THE COMPANY
Headway Corporate Resources, Inc., formerly AFGL
International, Inc. ("the Company"), is a provider of human
resource management and strategic advisory services in the United
States and overseas. The Company provides these services through
its wholly-owned subsidiaries, Headway Corporate Staffing
Services, Inc. ("Headway"), Whitney Partners, Inc. ("Whitney"),
and Furash & Company, Inc. ("Furash"). Headway was formed in
1996 to acquire Irene Cohen Temps, Inc., Corporate Staffing
Alternatives, Inc., Certified Technical Staffing, Inc., and the
operating assets of Irene Cohen Personnel, Inc. (collectively the
"IC Group"), which was completed in May 1996. In October 1996,
Headway acquired the assets of Vogue Personnel Services, Inc., of
New York City ("Vogue"), which have been incorporated in
Headway's staffing services business. Whitney conducts
operations in Europe through its wholly-owned subsidiary, The
Whitney Group (Europe) Limited, based in London, which also
operates through an office in Hong Kong. Whitney also maintains
an office in Japan.
On November 6, 1996, the stockholders of the Company
approved a change in the state of incorporation of the Company
from Nevada to Delaware through a merger of the Company (then
AFGL International, Inc., a Nevada corporation) into Headway
Corporate Resources, Inc., a Delaware corporation formed for that
purpose. Documents of merger were filed with the states of
Nevada and Delaware on November 7, 1996, so that the change in
domicile is completed and the Company is now a Delaware
corporation with a new name, Headway Corporate Resources, Inc.
In the merger, all outstanding capital shares were exchanged on a
one share for one share basis, and the only change in the capital
of the Company was reduction of the par value for all capital
shares to $0.0001 per share. Hereinafter, the term "Company"
shall refer collectively to Headway Corporate Resources, Inc.,
Headway (including its subsidiaries), Whitney, and Furash, unless
the context otherwise indicates.
The human resource management services of the Company
provide businesses with staffing solutions and alternatives to
the complexities and high costs related to employment and human
resources. The Company offers a broad range of employment-related
services consisting of human resource administration (including
temporary and permanent placement services), executive search
services, employment regulatory compliance management, workers'
compensation coverage, health care, and other employee benefits.
The Company believes its services assist businesses in: (i)
locating and employing persons who will contribute to the owners'
business; (ii) meeting temporary staffing needs as they arise in
the business; (iii) managing escalating costs associated with
workers' compensation, health insurance coverage, workplace
safety programs, and employee-related litigation; (iv) providing
1099 consultants with competitive health care and related
benefits that are more characteristic of large employers; and (v)
reducing the time and effort required of business management to
deal with the increasingly complex legal and regulatory
environment affecting employment
The Company has traditionally focused its services, and
marketing effort for such services, on the financial services
industry consisting of investment banking firms, broker-dealers,
banks, and similar finance institutions. The Company intends to
continue to focus on this industry in the foreseeable future.
The acquisition of the IC Group and Vogue by Headway in 1996 will
enable the Company to further develop this core business. The
long term plan of the Company is to expand its services to the
financial services industry throughout the United States.
The Company's May 1996 acquisition of the IC Group was a
major step in establishing the Company as a full-service staffing
company serving the financial services industry, and marked the
Company's entrance into the temporary staffing industry. Based
on a market study obtained by the Company, the temporary staffing
industry is experiencing growth in revenues and earnings. Gross
revenues in the industry grew from $20 billion in 1991 to $40
billion in 1995, representing a compounded annual growth rate of
approximately 19%. It is estimated that this industry will grow
at an annual average rate of approximately 11% through the year
2000. This growth is attributable to a trend among employers to
control costs by reducing the number of employees and relying on
human resource management firms to provide temporary workers and
consultants as needed to satisfy staffing requirements as they
fluctuate between the peaks and valleys of the business cycle.
The temporary placement, permanent placement, and employee
management services of Headway are provided primarily to clients
in New York City and surrounding areas. Whitney focuses on
placement services for middle and upper sales and management
level positions in the finance industry, and provides this
service in the United States, Japan, Europe, and Hong Kong.
Management and strategic advisory services are offered by
the Company in the United States through Furash, which is based
in Washington, D.C. These services are provided by Furash
primarily to banks, thrifts, and holding companies ranging in
size from $1 billion to $100 billion in assets; mortgage banks;
investment and brokerage firms; law firms with financial services
clients; private investors; insurance companies; regulatory
agencies; trade associations representing the industry; new
groups entering the industry; and international firms. The
Company advises its clients on all aspects of the financial
services industry, including client operations, new products and
services, marketing of products and services, cost containment
strategies, mergers and acquisitions, turnaround of troubled
institutions, technology and information planning, and regulatory
developments and trends.
The principal offices of the Company are located at 850
Third Avenue, New York, New York, 10022, where its telephone
number is (212) 508-3560.
RISK FACTORS
Government Regulations
The Company's operations are affected by numerous federal,
state and local laws relating to labor, tax, insurance and
employment matters. By entering into an employment relationship
with employees who work at client company locations ("worksite
employees"), the Company assumes certain obligations and
responsibilities of an employer under these laws, which are
subject to varying interpretations. Uncertainties arising under
the Internal Revenue Code of 1986, as amended (the "Code")
include, but are not limited to, the qualified tax status and
favorable tax status of certain benefit plans provided by the
Company and other alternative employers and the status of 1099
worksite employees provided on a temporary basis. The
unfavorable resolution of these unsettled issues could have a
material adverse effect on the Company's results of operations
and financial condition.
The Internal Revenue Service is conducting a Market Segment
Study of the professional employer organization industry,
focusing on selected members of that industry (not including the
Company), in order to examine the relationships among provider
organizations, worksite employees, and owners of client
companies. The Company is unable to predict the timing or nature
of the findings of the Market Segment Study or the ultimate
outcome of such conclusions or findings, but the result could
impose restrictions or new regulations on the business of the
Company, adversely affect the current favored tax status of
Company employee plans, or disallow the current withholding and
reporting practices of the Company, any one or more of which
could adversely affect the business of the Company.
Expansion into Additional States
The Company operates primarily in New York. Future growth
of Company operations depends, in part, on its ability to offer
its services to prospective clients in additional states. In
order to operate effectively in a new state, the Company must
obtain all necessary regulatory approvals, achieve acceptance in
the local market, adapt its procedures to that state's regulatory
requirements and local market conditions, and enhance internal
controls that enable it to conduct operations in several
locations. The length of time required to obtain regulatory
approval to begin operations will vary from state to state, and
there can be no assurance that the Company will be able to
satisfy licensing requirements or other applicable regulations of
any particular state in which it is not currently operating, that
it will be able to provide the full range of services currently
offered in New York, or that it will be able to operate
profitably within the regulatory environment of any state in
which it does obtain regulatory approval. The absence of
required licenses would require the Company to restrict the
services it offers.
Geographic Market Concentration
The Company's New York operations currently account for a
majority of its revenues. Accordingly, while a primary aspect of
the Company's growth strategy involves expansion outside of New
York for the foreseeable future, a significant portion of the
Company's revenues will be subject to economic factors specific
to New York. In addition, while the Company believes that its
market expansion plans will eventually lessen or eliminate this
risk in addition to generating revenue growth, there can be no
assurance that the Company will be able to duplicate in other
markets the revenue growth and operating results experienced in
its New York market.
Effect of Financial Industry Conditions
The Company offers its services primarily to the financial
services industry. During periods of poor performance by the
economy and capital markets, members of the financial services
industry generally do not develop and market new financial
products, do not expand existing services and operations, and do
not employ new personnel or require the services of temporary
employees. Accordingly, during these periods of poor performance
the demand for the Company's services may decrease, which would
adversely affect its operations. Since the Company intends to
continue its emphasis on the financial services industry, it
should be expected that the Company's results of operations for
any given year will depend, to a certain extent, on the
performance of the financial services industry.
Dependence Upon Employees
The Company is dependent to a substantial extent upon the
continuing efforts and abilities of certain employees. The
Company has negotiated long-term employment agreements with
certain employees, but not with all employees who make
significant contributions to the Company. The Company possesses
key-man life insurance policies on the lives of certain
employees. The loss of services of certain employees, including
those with employment agreements, could have a material adverse
effect upon the Company's financial condition and results of
operations, notwithstanding any cash benefits the Company may
receive from key-man life insurance.
Financial Condition of Clients
The Company is obligated to pay the wages and salaries of
its worksite employees regardless of whether its clients pay on a
timely basis or at all. To the extent that any client
experiences financial difficulty, or is otherwise unable to meet
its obligations as they become due, the Company's financial
condition and results of operations could be materially adversely
affected.
Failure to Manage Growth
The Company intends to pursue internal growth and an
acquisition strategy. This growth may place a significant strain
on the Company's management, financial, operating, and technical
resources. The Company has limited acquisition experience in the
human resource management industry, and there can be no assurance
that suitable acquisition candidates can be found, that the
Company will have or be able to obtain the necessary financing to
consummate acquisitions, that acquisitions can be consummated on
favorable terms, or that any acquired companies can be
successfully integrated into the Company's operations. There can
be no assurance that management skills and systems currently in
place will be adequate to implement the Company's strategy, and
the failure to manage growth effectively or to implement its
strategy could have a material adverse effect on the Company's
results of operations and financial condition.
Liabilities for Client and Employee Actions
A number of legal issues remain uncertain with respect to
the co-employment arrangements among temporary placement
businesses, their clients and worksite employees, including
questions concerning the ultimate liability for violations of
employment and discrimination laws. The Company's standard client
service agreements establish a contractual division of
responsibilities for various human resource matters, including
compliance with and liability under various governmental
regulations. Nevertheless, the Company may be subject to
liability for violations of these or other laws despite these
contractual provisions, even if it does not participate in such
violations. Although such client service agreements generally
provide that the client is to indemnify the Company for any
liability attributable to the client's failure to comply with its
contractual obligations and the requirements imposed by law, the
Company may not be able to collect on such a contractual
indemnification claim and thus may be responsible for satisfying
such liabilities. In addition, worksite employees may be deemed
to be agents of the Company, subjecting the Company to liability
for the actions of such worksite employees.
Competition and New Market Entrants
The human resource management industry is highly fragmented,
with a very large number of companies providing similar
employment services. The Company encounters competition from
other employer organizations and from single-service and "fee for
service" companies such as payroll processing firms, insurance
companies and human resource consultants. In addition, the
Company may encounter substantial competition from new market
entrants. Some of the Company's current and future competitors
may be significantly larger, have greater name recognition and
have greater financial marketing and other resources than the
Company. There can be no assurance that the Company will be able
to compete effectively against such competitors in the future.
SELLING STOCKHOLDERS
The following table provides the names and the number of
Shares owned by each Selling Stockholder. Since the Selling
Stockholders may sell all, some or none of the Shares that may be
offered hereby, no estimate can be made of the aggregate number
of Shares that will actually be offered hereby or that will be
owned by each Selling Stockholder upon completion of the offering
to which this Prospectus relates.
The Shares offered by the Prospectus may be offered from
time to time by the Selling Stockholders named below:
Selling Stockholder Shares Percent Shares that
Beneficially of May Be
Owned Prior to Class Offered
the
Offering
Wood Gundy London 387,000 5.9 387,000
Ltd.
The Tail Wind Fund 727,000 10.5 387,000
Ltd.
Hull Overseas Ltd. 193,500 3.0 193,500
Leibel Stern 109,293 1.7 109,293
Jules Nordlicht 218,546 3.4 218,546
A. Zyskind 154,398 2.4 154,398
Halifax Fund, L.P. 357,314 5.5 357,314
Internationale 575,000 8.5 575,000
Nederlanden
(U.S.) Capital
Corporation
Ehud D. Laska 84,856 1.4 64,856
Richard S. Frary 32,428 0.5 32,428
Joel A. Mael 31,177 0.5 31,177
Karen J. Furst 1,250 Nil 1,250
On June 14, 1996, the Company completed a private
placement of Series D Convertible Preferred Stock. The Company
sold 80 shares of Series D Convertible Preferred Stock for
$4,000,000. Each of the Selling Stockholders listed above,
except INCC, Ehud D. Laska, Richard S. Frary, Joel A. Mael, and
Karen J. Furst, were purchasers in the private placement. The
face value for each share of Series D Convertible Preferred Stock
($50,000), is convertible to Common Stock of the Company at the
lesser of $5.210625 or 80% of the market price for the Company's
Common Stock on the date of conversion. Dividends are payable on
the Series D Convertible Preferred Stock at the rate of 8% per
annum. In the event of conversion, the Company may, at its
election, issue Common Stock in payment of the dividend. On
conversion, the holders of the Series D Convertible Preferred
Stock are entitled to receive a warrant to purchase one share of
Common Stock for every four shares of Common Stock issued on
conversion exercisable on or before May 1, 1999, at an exercise
price of $4.25 per share. The amounts reflected in the foregoing
table for the Shares owned by the Selling Stockholders who are
holders of Series D Convertible Preferred Stock assume that all
such preferred stock is converted six months following issuance
at an estimated price of $2.00 per Share. Based on this
assumption, a total of 2,080,000 Shares would be issued to
Selling Stockholders on conversion of the Series D Convertible
Preferred Stock (including Shares issued in payment of
dividends), and warrants to purchase an additional 500,000 Shares
would be issued to such Selling Stockholders.
In September 1996, Leibel Stern and Jules Nordlicht
converted all of their Series D Convertible Preferred Stock to
Common Stock, and A. Zyskind converted all but two shares of his
Series D Convertible Preferred Stock to Common Stock. In October
1996, the Halifax Fund, L.P., converted two shares of its Series
D Convertible Preferred Stock to Common Stock. The foregoing
conversions represent $1,900,000 in face value of Series D
Convertible Preferred Stock, and the average price of the
conversions was $2.92. The figures in the above table for
Messrs. Stern, Nordlicht, and Zyskind, and the Halifax Fund,
L.P., represent the number of shares of Common Stock held of
record, the number of warrants issued on conversion to purchase
additional shares of Common Stock, and the estimated number of
additional shares of Common Stock issuable on conversion of the
remaining shares of Series D Convertible Preferred Stock held, if
any, based on the assumptions set forth in the preceding
paragraph.
In connection with the placement of Series D Convertible
Preferred Stock, the Company entered into a registration rights
agreement in which it agreed to use its best efforts to file a
registration statement on Form S-3 covering the shares of Common
Stock issuable on conversion of the Series D Convertible
Preferred Stock. The Company has complied with that agreement.
The Tail Wind Fund Ltd., received a consulting fee in connection
with the private placement consisting of $200,000 in cash and
warrants to purchase 120,000 shares of the Company's Common Stock
exercisable over a period of five years commencing September 1,
1996, at a price of $4.25 per share. The Tail Wind Fund Ltd.,
holds an additional warrant to purchase 120,000 shares of the
Company's Common Stock exercisable over a period of five years
commencing June 1, 1996, at a price of $4.25 per share.
On May 31, 1996, the Company entered into a Credit Agreement
with Internationale Nederlanden (U.S.) Capital Corporation
("INCC"). Under the Credit Agreement, INCC made a term loan of
$9,000,000 to the Company, and established a $6,000,000 revolving
credit facility for the Company. In connection with this
financing arrangement, the Company granted to INCC the Series E
Warrant to purchase 575,000 shares of Series E Convertible
Preferred Stock of the Company at an exercise price of $0.02 per
share. The Series E Convertible Preferred Stock is convertible
at the election of the holder to Common Stock of the Company at
the rate of one share for one share, subject to adjustment based
on anti-dilution provisions. The Company also entered into a
Registration Rights Agreement with INCC pertaining to the Common
Stock of the Company issuable on conversion of the Series E
Convertible Preferred Stock. Under the terms of the Registration
Rights Agreement, the Company is required to file and keep
effective a shelf registration covering the Common Stock issuable
to INCC. In the Registration Rights Agreement, INCC agrees not
to make any private or public sale of the Common Stock prior to
May 31, 1997.
In July of 1993, the Company entered into a consulting
agreement with an investment banking and consulting firm. As
partial consideration under the agreement, the Company issued to
the consulting firm warrants to purchase 129,711 shares of the
Company's Common Stock at an exercise price of $1.25 per share
(the "1993 Warrants"). The 1993 Warrants were subsequently
transferred to affiliates of the consulting firm; Ehud D. Laska,
Richard S. Frary, Joel A. Mael, and Karen J. Furst. Mr. Laska
was subsequently elected a director of the Company. In addition,
Mr. Laska currently serves as the chairman of the board of a
member firm of the National Association of Securities Dealers,
Inc. ("NASD"). Messrs. Frary and Mael own stock in a general
partner of an NASD member firm.
For consulting services rendered in connection with the
Company's debt and equity financings in 1996, the Company paid to
a corporation owned by Mr. Laska and his associate, in equal
shares, a total of $582,500 in cash. In addition, the Company
granted to Mr. Laska and his associate warrants to purchase
240,000 shares of Common Stock exercisable over a period of four
years commencing May 31, 1997, at an exercise price of $4.25 per
share.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time by the Selling
Stockholders in transactions for their own account (which may
include block transactions) in the over-the-counter market,
negotiated transactions, or in a combination of such methods of
sale, at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The Selling
Stockholders may effect such transactions by selling Shares
directly to purchasers or to or through underwriters, agents or
broker-dealers, and such underwriters, agents or broker-dealers
my receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or the purchasers of
Shares for whom such underwriters, agents or broker-dealers may
act as agent or to whom they sell as principal, or both (which
compensation as to a particular broker-dealer might be in excess
of customary commissions). The Selling Stockholders, any agents
or brokers executing sales orders on behalf of Selling
Stockholders, and dealers to whom the Shares may be sold, may,
under certain circumstances, be considered "underwriters" within
the meaning of the Securities Act, and any commissions received
by such underwriters, agents or broker-dealers and any profit on
the resale of the Shares may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Shares may be offered from time to time following the
date of this Prospectus, subject to the right of the Company to
suspend (and later resume) the distribution of Shares hereunder
as required by law or upon the advice of counsel (regarding
violations of law or regulations). At the time a particular
offer is made, a Prospectus supplement, if required, will be
distributed that sets forth the name or names of underwriters,
agents or broker-dealers; the number of Shares involved; any
commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable; and other facts material to
the transaction. As of the date of this Prospectus, there are no
selling arrangements between the Selling Stockholders and any
underwriter, broker or dealer.
As required by the Registration Rights Agreement with the
holders of the Series D Convertible Preferred Stock, the
Registration Rights Agreement with the holder of the Series E
Warrant and the terms of the 1993 Warrants, the Company has filed
the Registration Statement, of which this Prospectus forms a
part, with respect to the sale of the Shares. The Company will
not receive any of the proceeds from the sale of the Shares. The
Company will bear the costs of registering the Shares under the
Securities Act, including the registration fee under the
Securities Act, legal and accounting fees (including legal fees
for counsel to the Selling Stockholders) and any printing
expenses. The Selling Stockholders will bear all other expenses
in connection with this offering, including selling commissions
and brokerage fees.
Pursuant to the terms of their respective agreements, the
Company and the Selling Stockholders have agreed to indemnify
each other and certain other related parties for certain
liabilities in connection with the registration of the Shares,
including liabilities under the Securities Act. The Selling
Stockholders and the Company may agree to indemnify any broker-
dealer or agent that participates in transactions involving the
Shares against certain liabilities, including liabilities under
the Securities Act.
LEGAL OPINION AND EXPERTS
The validity of the issuance of the Shares offered hereby is
being passed upon for the Company by Lehman, Jensen & Donahue,
L.C., counsel to the Company.
The financial statements of AFGL International, Inc., and
subsidiaries as of December 31, 1995, and for each of the fiscal
years in the two-year period ended December 31, 1995,
incorporated in this Prospectus by reference to the Company's
Annual Report on Form 10-KSB for the fiscal year ended December
31, 1995, have been so included in reliance on the report of
Moore Stephens, P.C. (formerly Mortenson and Associates, P.C.),
independent accountants, given on the authority of said firm as
experts in auditing and accounting. In such financial statements,
Moore Stephens, P.C., has relied on the report dated April 12,
1996, of Kingston Smith, Chartered Accountants, (incorporating
and formally Letchfords) with respect to the financial statements
of Whitney Group (Europe) Limited, given on the authority of said
firm as experts in auditing and accounting.
The combined financial statements of Irene Cohen Temps,
Inc., and Certified Technical Staffing, Inc., at December 31,
1995 and 1994 and for each of the two years in the period ended
December 31, 1995, and the combined financial statements of Irene
Cohen Personnel, Inc., and Corporate Staffing Alternatives, Inc.,
at December 31, 1995 and 1994 and for each of the two years in
the period ended December 31, 1995, incorporated by reference in
this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their
reports thereon, also incorporated herein by reference, in
reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
<PAGE>
[Outside Back Cover]
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED
IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR
ANY SELLING STOCKHOLDER. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR SINCE THE DATES
AS OF WHICH INFORMATION IS SET FORTH HEREIN. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER IN SUCH JURISDICTION.
TABLE OF CONTENTS
Page
AVAILABLE INFORMATION
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THE COMPANY
RISK FACTORS
SELLING STOCKHOLDERS
PLAN OF DISTRIBUTION
LEGAL OPINION AND EXPERTS
3,364,711 SHARES
HEADWAY CORPORATE RESOURCES, INC.
COMMON STOCK ($.0001 Par Value)
PROSPECTUS
____________________, 1996
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
SEC Registration Fee $
3,915.83
NASD Registration Fee
1,635.59
Blue Sky Registration Fees
10,000.00
Legal Fees
70,000.00
Auditors' Fees
50,000.00
Printing and Engraving Expenses
10,000.00
Miscellaneous
10,000.00
Total
$155,551.42
All of the above items are estimated except the SEC and NASD
Registration Fees.
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the state
of Delaware provides in relevant part as follows:
(a) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the corporation) by reason
of the fact that he is or was a director, officer, employee, or
agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other
enterprise, against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with such actions, suit,
or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any
criminal action or proceeding, he had reasonable cause to believe
that his conduct was unlawful.
(b) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture,
trust, or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with
the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue,
or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee, or
agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit, or proceeding referred
to in subsections (a) and (b), or in defense of any claim, issue,
or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
The Company's certificate of incorporation provides that the
Company may indemnify to the full extent of its power to do so
under Delaware law. Consequently, the Company intends to
indemnify its officers, directors, employees, and agents to the
full extent permitted by the statute noted above.
As permitted by section 102 of the General Corporation Law
of Delaware, the Company's certificate of incorporation contains
the following provision:
A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for
breach of a fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from which
the director derived any improper personal benefit. If the
Delaware General Corporation Law is amended hereafter to
authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so
amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at
the time of such repeal or modification.
Insofar as indemnification by the Company for liabilities
arising under the Securities Act may be permitted to officers and
directors of the Company the Company is aware that in the opinion
of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Company of expenses incurred or paid by an officer or
director in the successful defense of any action, suit, or
proceeding) is asserted by such officer or director in connection
with the securities being registered hereby, the Company will,
unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue. (See
"ITEM 17. UNDERTAKINGS.")
Item 16. Exhibits.
Exhibit SEC Ref. Title of Document Location
No. No.
1 (3)(i) Articles of Incorporation, Initial
as amended (AFGL) Filing
1.1 (3)(i) Certificate of Incorporation, This
Headway Corporate Resources, Filing
Inc.
2 (3)(ii) By-Laws, as amended (AFGL) Initial
Filing
2.1 (3)(ii) By-Laws, Headway Corporate This
Resources, Inc. Filing
3 (4) Series A Convertible Preferred Initial
Stock Designation Filing
4 (4) Series B Convertible Preferred Initial
Stock Designation Filing
5 (4) Series B Convertible Preferred Initial
Stock Designation Filing
(Correction)
5.1 (4) Certificate of Designation This
of Preferred Stock, Headway Filing
Corporate Resources, Inc.
6 (4) Form of Stock Purchase Initial
Agreement Filing
with purchasers of Series D
Convertible Preferred Stock
(2)
7 (4) Form of Registration Rights Initial
Agreement with purchasers of Filing
Series D Convertible
Preferred
Stock (2)
8 (4) Form of Warrant to be issued to Initial
purchasers of Series D Filing
Convertible Preferred Stock
(3)
9 (4) Warrant of Ehud D. Laska Initial
dated December 23, 1993 Filing
10 (4) Warrant of Ehud D. Laska Initial
dated November 10, 1994 Filing
11 (4) Warrant of Richard S. Frary Initial
dated December 23, 1993 Filing
12 (4) Warrant of Richard S. Frary Initial
dated November 10, 1994 Filing
13 (4) Warrant of Joel A. Mael Initial
dated December 23, 1993 Filing
14 (4) Warrant of Joel A. Mael Initial
dated November 10, 1994 Filing
15 (4) Warrant of Karen J. Furst Initial
dated December 23, 1993 Filing
16 (5) Opinion of Lehman, Jensen & This
Donahue, L.C. Filing
17 (23) Consent of Lehman, Jensen & This
Donahue, L.C. Filing
18 (23) Consent of More Stephens P.C. This
(formerly Mortenson and Filing
Associates, P.C.)
19 (23) Consent of Ernst & Young LLP This
Filing
20 (23) Consent of Kingston Smith, This
Chartered Accountants Filing
(incorporating and formally
Letchfords)
21 (24) Power of Attorney (4) This
Filing
22 (99) Warrant of Ehud D. Laska Initial
dated July 22, 1996 Filing
23 (99) Warrant of Ziad K. Abdelnour Initial
dated July 22, 1996 Filing
24 (99) Warrant of The Tail Wind Fund Initial
Ltd. Filing
dated April 8, 1996
25 (99) Warrant of The Tail Wind Fund Initial
Ltd. Filing
dated July 19, 1996
26 (2) Stock Purchase Agreement dated Fm8-K
April 10, 1996 (1) Ex#1
27 (2) Asset Purchase Agreement dated Fm8-K
May 31, 1996 (1) Ex#2
28 (4) Series C 8% Convertible Fm8-K
Preferred Ex#3
Stock Designation (1)
29 (4) Series D 8% Convertible Fm8-K
Preferred Ex#4
Stock Designation (1)
30 (4) Series E Convertible Preferred Fm8-K
Stock Designation (1) Ex#5
31 (4) Credit Agreement dated Fm8-K
May 31, 1996 (1) Ex#6
32 (4) Revolving Note dated May 31, Fm8-K
1996 Ex#7
33 (4) Term Note dated May 31, 1996 Fm8-K
Ex#8
34 (4) Security Agreement dated Fm8-K
May 31, 1996 Ex#9
35 (4) Warrant Agreement dated Fm8-K
May 31, 1996 Ex#10
36 (4) Registration Rights Agreement Fm8-K
dated May 31, 1996 Ex#11
(1) Each of these exhibits are included in the Company's current
report on Form 8-K, dated May 31, 1996, and filed with the
Commission on June 14, 1996, and are incorporated herein by this
reference. The reference under the column "Location" is to the
exhibit number in the report on Form 8-K.
(2) These exhibits are the forms of the agreements entered into
between the Company and purchasers of the Company's Series D
Convertible Preferred Stock, all of whom are Selling
Stockholders.
(3) This is the form of warrant to be issued to Selling
Stockholders who are holders of Series D Convertible Preferred
Stock on conversion of the Series D Convertible Preferred Stock.
(4) The power of attorney is located under Part II of this
registration statement under the caption "Signatures", below.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement: (i) to include any prospectus required by Section
10(a)(3) of the Securities Act; (ii) to reflect in the prospectus
any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in
the Registration Statement; (iii) to include any material
information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any
material change to such information in the Registration
Statement; provided, however, that paragraphs 1(i) and 1(ii) do
not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference
herein.
(2) That, for purposes of determining any liability under
the Securities Act, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered which
remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act,
each filing of the Registrant's Annual Report pursuant to Section
13(a) or Section 15(d) of the Exchange Act that is incorporated
by reference in this Registration Statement shall be deemed to be
a new Registration Statement relating to the securities offered
herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this Post-Effective Amendment No. 1 to
its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of New York,
state of New York on November 19, 1996.
HEADWAY CORPORATE RESOURCES, INC.
By: Barry S. Roseman, President
(Signature)
Power of Attorney
Each person whose signature appears below hereby constitutes
and appoints Gary S. Goldstein, and Barry S. Roseman, and each of
them, his true and lawful attorneys-in-fact and agents, for him
and in his name, place and stead, in any and all capacities, to
sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same with all
exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities indicated on November 19, 1996.
Signature Title
Gary S Goldstein Principal Executive
(Signature) Officer, and Director
Barry S Roseman Principal Financial and
(Signature) Accounting Officer, and
Director
Edward E. Furash Director
(Signature)
Ehud D. Laska Director
(Signature)
G. Chris Andersen Director
(Signature)
Richard B. Salomon Director
(Signature)
4
5
Exhibit No. 1.1
Headway Corporate Resources, Inc.
Form S-3/ Post-Eff. Am. No. 1
File No. 333-08616
CERTIFICATE OF INCORPORATION
OF
HEADWAY CORPORATE RESOURCES, INC.
ARTICLE I
NAME
The name of the Corporation is Headway Corporate Resources,
Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT FOR SERVICE
The address of the Corporation's registered office in the
State of Delaware is in the county of New Castle, at 1013 Centre
Road, Wilmington, Delaware 10805. The name of its registered
agent at such address is Corporation Service Company.
ARTICLE III
CORPORATE PURPOSES
The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
ARTICLE IV
CAPITAL STOCK
1. Shares, Classes and Series Authorized.
The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 25,000,000
shares. Stockholders shall not have any preemptive rights, nor
shall stockholders have the right to cumulative voting in the
election of directors or for any other purpose. The classes and
the aggregate number of shares of stock of each class which the
Corporation shall have authority to issue are as follows:
(a) 20,000,000 shares of Common Stock, $0.0001 par value
("Common Stock").
(b) 5,000,000 shares of Preferred Stock, $0.0001 par value
("Preferred Stock").
2. Powers and Rights of the Preferred Stock.
The Preferred Stock may be issued from time to time in one
or more series, with such distinctive serial designations as may
be stated or expressed in the resolution or resolutions providing
for the issue of such stock adopted from time to time by the
Board of Directors; and in such resolution or resolutions
providing for the issuance of shares of each particular series,
the Board of Directors is also expressly authorized to fix: the
right to vote, if any; the consideration for which the shares of
such series are to be issued; the number of shares constituting
such series, which number may be increased (except as otherwise
fixed by the Board of Directors) or decreased (but not below the
number of shares thereof then outstanding) from time to time by
action of the Board of Directors; the rate of dividends upon
which and the times at which dividends on shares of such series
shall be payable and the preference, if any, which such dividends
shall have relative to dividends on shares of any other class or
classes or any other series of stock of the Corporation; whether
such dividends shall be cumulative or noncumulative, and if
cumulative, the date or dates from which dividends on shares of
such series shall be cumulative; the rights, if any, which the
holders of shares of such series shall have in the event of any
voluntary or involuntary liquidation, merger, consolidation,
distribution or sale of assets, dissolution or winding up of the
affairs of the Corporation; the rights, if any, which the holders
of shares of such series shall have to convert such shares into
or exchange such shares for shares of any other class or classes
or any other series of stock of the Corporation or for any debt
securities of the Corporation and the terms and conditions,
including price and rate of exchange, of such conversion or
exchange; whether shares of such series shall be subject to
redemption, and the redemption price or prices and other terms of
redemption, if any, for shares of such series including, without
limitation, a redemption price or prices payable in shares of
Common Stock; the terms and amounts of any sinking fund for the
purchase or redemption of shares of such series; and any and all
other designations, preferences, and relative, participating,
optional or other special rights, qualifications, limitations or
restrictions thereof pertaining to shares of such series'
permitted by law.
3. Issuance of the Common Stock and the Preferred Stock.
The Board of Directors of the Corporation may from time to
time authorize by resolution the issuance of any or all shares of
the Common Stock and the Preferred Stock herein authorized in
accordance with the terms and conditions set forth in this
Certificate of Incorporation for such purposes, in such amounts,
to such persons, corporations or entities, for such
consideration, and in the case of the Preferred Stock, in one or
more series, all as the Board of Directors in its discretion may
determine and without any vote or other action by the
stockholders, except as otherwise required by law. The capital
stock, after the amount of the subscription price, or par value,
has been paid in shall not be subject to assessment to pay the
debts of the Corporation.
ARTICLE V
BOARD OF DIRECTORS
The governing board of the Corporation shall be known as
directors, and the number of directors may from time to time be
increased or decreased in such manner as shall be provided by the
Bylaws of the Corporation, provided that the number of directors
may not be less than one nor more than fifteen. Effective upon
filing of this Certificate, the members of the board of directors
shall be divided into three classes, designated as Class 1, Class
2, and Class 3 as follows:
Class 1
Gary S. Goldstein 850 Third Avenue, 11th Floor
New York, NY 10022
Barry S. Roseman 850 Third Avenue, 11th Floor
New York, NY 10022
Class 2
Ehud D. Laska 630 Third Avenue
New York, NY 10111
Edward E. Furash 2001 L Street, N. W.
Washington, DC 20036
Class 3
G. Chris Andersen 1330 Avenue of the Americas
New York, NY 10019
Richard B. Salomon 620 Fifth Avenue
New York, NY 10020
Each class shall consist, as nearly as may be possible, of
one-third of the total number of directors constituting the
entire board of directors. The Class 1 directors shall be deemed
elected for a three-year term, Class 2 Directors for a two-year
term, and Class 3 directors for a one-year term. At each
succeeding annual meeting of shareholders commencing in 1997,
successors to the Class of directors whose term expires at that
annual meeting of shareholders shall be elected for a three-year
term. If the number of directors has changed, any increase or
decrease shall be appointed among the Classes so as to maintain
the number of directors in each Class as nearly equal as
possible, and any additional director of any Class elected to
fill a vacancy resulting from an increase in such a Class shall
hold office for a term that shall coincide with the remaining
term of that Class, unless otherwise required by law, but in no
case shall a decrease in the number of directors in a Class
shorten the term of an incumbent director. A director shall hold
office until the date of the annual meeting of shareholders upon
which his term expires and until his successor shall be elected
and qualified, subject, however, to his prior death, resignation,
retirement, disqualification, or removal from office. A director
may be removed from office only for cause and at a meeting of
shareholders called expressly for that purpose, by a vote of the
holders of a majority of the shares entitled to vote at an
election of directors.
ARTICLE VI
POWERS OF BOARD OF DIRECTORS
The property and business of the Corporation shall be
controlled and managed by or under the direction of its Board of
Directors. In furtherance, and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of
Directors is expressly authorized:
(a) To make, alter, amend or repeal the Bylaws of the
Corporation; provided, that no adoption, amendment, or repeal of
the Bylaws shall invalidate any act of the board of directors
that would have been valid prior to such adoption, amendment, or
repeal.;
(b) To determine the rights, powers, duties, rules and
procedures that affect the power of the board of directors to
manage and direct the property, business, and affairs of the
Corporation, including the power to designate and empower
committees of the board of directors, to elect, appoint and
empower the officers and other agents of the Corporation, and to
determine the time and place of, and the notice requirements for
board meetings, as well as the manner of taking board action; and
(c) To exercise all such powers and do all such acts as may
be exercised by the Corporation, subject to the provisions of the
laws of the State of Delaware, this Certificate of Incorporation,
and the Bylaws of the Corporation.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify and may advance expenses to
its officers and directors to the fullest extent permitted by law
in existence either now or hereafter.
ARTICLE VIII
LIMITATION ON PERSONAL LIABILITY FOR DIRECTORS
A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for
breach of a fiduciary duty as a director, except for liability
(i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware
General Corporation Law or (iv) for any transaction from which
the director derived any improper personal benefit. If the
Delaware General Corporation Law is amended hereafter to
authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest
extent permitted by the Delaware General Corporation Law, as so
amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at
the time of such repeal or modification.
ARTICLE IX
CERTIFICATE SUBJECT TO AMENDMENT
The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute or by the Certificate of Incorporation, and except as
otherwise provided by this Certificate of Incorporation, all
rights conferred upon stockholders herein are granted subject to
this reservation.
ARTICLE X
INCORPORATOR
The sole incorporator of the Corporation is:
Mark E. Lehman 8 E. Broadway, Suite 620
Salt Lake City, UT 84111
IN WITNESS WHEREOF, the undersigned, acting as the sole
incorporator of the Corporation, signs this Certificate of
Incorporation as his act and deed this 7th day of October, 1996.
Mark E. Lehman (Signature)
18
17
Exhibit No. 2.1
Headway Corporate Resources, Inc.
Form S-3/ Post-Eff. Am. No. 1
File No. 333-08616
BYLAWS OF
HEADWAY CORPORATE RESOURCES, INC.
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of
the Corporation shall be in the county of New Castle, at 1013
Centre Road, Wilmington, Delaware 10805. The name of its
resident agent at such address is Corporation Service Company.
Section 2. Other Offices. Other offices may be
established by the Board of Directors at any place or places,
within or without the State of Delaware, as the Board of
Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of stockholders
shall be held either at the principal executive office or any
other place within or without the State of Delaware which may be
designated either by the Board of Directors pursuant to authority
hereinafter granted to said Board, or by the written consent of
all stockholders entitled to vote thereat, given either before or
after the meeting and filed with the Secretary of the
Corporation; provided, however, that if no place is designated or
so fixed, stockholder meetings shall be held at the principal
executive office of the Corporation.
Section 2. Annual Meetings. The annual meetings of the
stockholders shall be held each year on a date and a time
designated by the Board of Directors. At the annual meeting of
stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought
before an annual meeting, business must be specified in the
Notice of Meeting given by or at the direction of the Board of
Directors, otherwise properly brought before the meeting by or at
the direction of the Board of Directors or otherwise properly
brought before the meeting by a stockholder. For business to be
properly brought before the annual meeting by a stockholder,
including the nomination of a director, the stockholder must have
given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be
delivered to, or mailed and received at, the principal executive
offices of the Corporation not more than five business days after
the giving of notice of the date and place of the meeting to the
stockholders. A stockholder's notice to the Secretary shall
inform as to each matter the stockholder proposes to bring before
the annual meeting (i) a brief description of the business
desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name
and record address of the stockholder proposing such business,
(iii) the class and numbers of shares of the Corporation which
are beneficially owned by the stockholder and (iv) any material
interest of the stockholder in such business. Notwithstanding
anything in the Bylaws to the contrary, no business shall be
conducted at the annual meeting except in accordance with the
procedures set forth in this Section. The chairman of the annual
meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section, and if he
should so determine, he shall so declare to the meeting and any
such business not properly before the meeting shall not be
transacted.
Section 3. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes whatsoever, may be
called at any time by the Chairman of the Board, the President or
by a majority of the Board of Directors, or by such other person
as the Board of Directors may designate.
For business to be properly brought before a special meeting
by a stockholder, including the nomination of a director, the
stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's
notice must be delivered to, or mailed and received at, the
principal executive offices of the Corporation not more than five
business days after the giving of notice of the date and place of
the meeting to the stockholders. A stockholder's notice to the
Secretary shall inform as to each matter the stockholder proposes
to bring before a special meeting (i) a brief description of the
business desired to be brought before the special meeting and the
reasons for conducting such business at the special meeting, (ii)
the name and record address of the stockholder proposing such
business, (iii) the class and number of shares of the Corporation
which are beneficially owned by the stockholder and (iv) any
material interest of the stockholder in such business.
Section 4. Notice of Stockholders' Meetings. Written
notice of each annual or special meeting signed by the President
or a Vice President, or the Secretary, or an Assistant Secretary,
or by such other person or persons as the Directors shall
designate, shall be delivered personally to, or shall be mailed
postage prepaid, to each stockholder of record entitled to vote
at such meeting. If mailed, the notice shall be directed to the
stockholder at his address as it appears upon the records of the
Corporation, and service of such notice by mail shall be complete
upon such mailing, and the time of the notice shall begin to run
from the date it is deposited in the mail for transmission to
such stockholder. Personal delivery of any such notice to any
officer of a corporation or association, or to any member of a
partnership, shall constitute delivery of such notice to such
corporation, association or partnership. All such notices shall
be delivered or sent to each stockholder entitled thereto not
less than ten nor more than sixty days before each annual or
special meeting, and shall specify the purpose or purposes for
which the meeting is called, the place, the day and the hour of
such meeting.
Any stockholder may waive notice of any meeting by a writing
signed by him, or his duly authorized attorney, either before or
after the meeting.
Section 5. Voting. At all meetings of stockholders,
every stockholder entitled to vote shall have the right to vote
in person or by written proxy the number of shares standing in
his own name on the stock records of the Corporation. There
shall be no cumulative voting. Such vote may be viva voce or
ballot; provided, however, that all elections for Directors must
be by ballot upon demand made by a stockholder at any election
and before the voting begins.
Section 6. Quorum. The presence in person or by proxy
of the holders of a majority of the shares entitled to vote at
any meeting shall constitute a quorum for the transaction of
business. The stockholders present at a duly called or held
meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
Section 7. Ratification and Approval of Actions at
Meetings. Whenever the stockholders entitled to vote at any
meeting consent, either by: (a) A writing on the records of the
meeting or filed with the Secretary; (b) Presence at such meeting
and oral consent entered on the minutes; or (c) Taking part in
the deliberations at such meeting without objection; the doings
of such meeting shall be as valid as if had at a meeting
regularly called and noticed. At such meeting, any business may
be transacted which is not excepted from the written consent or
to the consideration of which no objection for want of notice is
made at the time. If any meeting be irregular for want of notice
or of such consent, provided a quorum was present at such
meeting, the proceedings of the meeting may be ratified and
approved and rendered likewise valid and the irregularity or
defect therein waived by a writing signed by all parties having
the right to vote at such meeting. Such consent or approval of
stockholders may be by proxy or attorney, but all such proxies
and powers of attorney must be in writing.
Section 8. Proxies. At any meeting of the stockholders,
any stockholder may be represented and vote by a proxy or proxies
appointed by an instrument in writing, which instrument shall be
filed with the Secretary of the Corporation. In the event that
any such instrument in writing shall designate two or more
persons to act as proxies, a majority of such persons present at
the meetings, or, if only one shall be present, then that one
shall have and may exercise all of the powers conferred by such
written instrument upon all of the persons so designated unless
the instrument shall otherwise provide. No such proxy shall be
valid after the expiration of six months from the date of its
execution, unless coupled with an interest, or unless the person
executing it specifies therein the length of time for which it is
to continue in force, which in no case shall exceed seven years
from the date of its execution. Subject to the above, any proxy
duly executed is not revoked and continues in full force and
effect until an instrument revoking it or a duly executed proxy
bearing a later date is filed with the Secretary of the
Corporation.
Section 9. Action Without a Meeting. Any action which
may be taken by the vote of stockholders at a meeting, may be
taken without a meeting if authorized by the written consent of
stockholders holding at least a majority of the voting power;
provided that if any greater proportion of voting power is
required for such action at a meeting, then such greater
proportion of written consents shall be required. This general
provision for action by written consent shall not supersede any
specific provision for action by written consent contained in the
Delaware General Corporation Law. In no instance where action is
authorized by written consent need a meeting of stockholders be
called or noticed.
ARTICLE III
DIRECTORS
Section 1. Powers. Incorporation, these Bylaws, and the
provisions of the Delaware General Corporation Law as to action
to be authorized or approved by the stockholders, and subject to
the duties of Directors as prescribed by these Bylaws, all
corporate powers shall be exercised by or under the authority of,
and the business and affairs of the Corporation must be managed
and controlled by, the Board of Directors. Without prejudice to
such general powers, but subject to the same limitations, it is
hereby expressly declared that the Directors shall have the
following powers:
First. To select and remove all officers, agents and
employees of the Corporation, prescribe such powers and duties
for them as may not be inconsistent with law, the Certificate of
Incorporation or the Bylaws, fix their compensation and require
from them security for faithful service.
Second. To conduct, manage and control the affairs and
business of the Corporation, and to make such rules and
regulations therefor not inconsistent with law, the Certificate
of Incorporation or the Bylaws, as they may deem best.
Third. To change the registered office of the Corporation
in the State of Delaware from one location to another, and the
registered agent in charge thereof, as provided in Article I,
Section 1, hereof; to fix and locate from time to time one or
more subsidiary offices of the Corporation within or without the
State of Delaware, as provided in Article I, Section 2, hereof,
to designate any place within or without the State of Delaware,
for the holding of any stockholders' meeting or meetings; and to
adopt, make and use a corporate seal, and to prescribe the forms
of certificates of stock, and to alter the form of such seal and
of such certificates from time to time, as in their judgment they
may deem best, provided such seal and such certificates shall at
all times comply with the provisions of law.
Fourth. To authorize the issuance of shares of stock of the
Corporation from time to time, upon such terms as may be lawful,
in consideration of cash, services rendered, personal property,
real property or leases thereof, or in the case of shares issued
as a dividend, against amounts transferred from surplus to
capital.
Fifth. To borrow money and incur indebtedness for the
purpose of the Corporation, and to cause to be executed and
delivered therefor, in the corporate name, promissory notes,
bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations or other evidence of debt and securities therefor.
Sixth. To make the Bylaws of the Corporation, subject to
the Bylaws, if any, adopted by the stockholders.
Seventh. To, by resolution or resolutions passed by a
majority of the whole Board, designate one or more committees,
each committee to consist of one or more of the Directors of the
Corporation, which, to the extent provided in the resolution or
resolutions, shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the
Corporation, and may have power to authorize the seal of the
Corporation to be affixed to all papers on which the Corporation
desires to place a seal. Such committee or committees shall have
such name or names as may be determined from time to time by
resolution adopted by the Board of Directors.
Section 2. Number and Qualification of Directors. The
number of Directors constituting the whole Board shall be not
less than one nor more than fifteen. The first Board shall
consist of six directors. Thereafter, within the limits above
specified, the number of Directors shall be determined by
resolution of the Board of Directors or by the stockholders at
the annual meeting. All directors must be at least 18 years of
age. Unless otherwise provided in the Certificate of
Incorporation, directors need not be stockholders.
Section 3. Election, Classification and Term of Office.
Each Director shall be elected at each annual meeting of
stockholders by a plurality of votes cast at the election, but if
for any reason the Directors are not elected at the annual
meeting of stockholders, each Director may be elected at any
special meeting of stockholders by a plurality of votes cast at
the election.
The Board of Directors shall be divided into three classes
to be designated as follows: Class 1, Class 2 and Class 3, each
of which shall be as nearly equal in number as possible. Each
Director shall serve for a term ending on the date of the third
annual meeting of stockholders following the meeting at which
such Director was elected; provided, however, that each initial
Director in Class 1 shall hold office until the annual meeting of
stockholders in 1999; each initial Director in Class 2 shall hold
office until the annual meeting of stockholders in 1998; and each
initial Director in Class 3 shall hold office until the annual
meeting of stockholders in 1997.
In the event of any increase or decrease in the authorized
number of Directors: (a) each Director then serving as such shall
nevertheless continue as a Director of the class of which he is a
member until the expiration of his current term, or his earlier
resignation, removal from office or death, and (b) the newly
created or eliminated directorships resulting from such increase
or decrease shall be apportioned by the Board of Directors (which
is in existence immediately prior to such an increase or
decrease) among the three classes of Directors so as to maintain
such classes as nearly equal as possible. Notwithstanding the
foregoing, each Director shall hold office until his successor is
elected and qualified.
Section 4. Vacancies. Vacancies in the Board of
Directors may be filled by a majority of the remaining Directors,
though less than a quorum, or by a sole remaining Director, and
each Director so elected shall hold office until his successor is
elected at an annual or a special meeting of the stockholders.
A vacancy or vacancies in the Board of Directors shall be
deemed to exist in case of the death, resignation or removal of
any Director, or if the authorized number of Directors be
increased.
If the Board of Directors accepts the resignation of a
Director tendered to take effect at a future time, the Board or
the stockholder shall have power to elect a successor to take
office when the resignation is to become effective, and such
successor shall hold office during the remainder of the resigning
Director's term of office.
Section 5. Place of Meeting. Regular meetings of the
Board of Directors shall be held at any place within or without
the State of Delaware as designated from time to time by
resolution of the Board or by written consent of all members of
the Board. In the absence of such designation regular meetings
shall be held at the principal executive office of the
Corporation. Special meetings of the Board may be held either at
a place so designated or at the principal executive office.
Members of the Board, or any committee designated by the
Board, may participate in a meeting of such Board or committee by
means of a conference telephone network or a similar
communications method by which all persons participating in the
meeting can hear each other. Such participation shall constitute
presence in person at such meeting. Each person participating in
such meeting shall sign the minutes thereof, which minutes may be
signed in counterparts.
Section 6. Organization Meeting. Immediately following
each annual meeting of stockholders, the Board of Directors shall
hold a regular meeting for the purpose of organization, election
of officers, and the transaction of other business. Notice of
such meetings is hereby dispensed with.
Section 7. Special Meetings. Special meetings of the
Board of Directors for any purpose or purposes may be called at
any time by the Chairman of the Board, President or by any two or
more Directors.
Written notice of the time and place of special meetings
shall be delivered personally to the Directors or sent to each
Director by mail or other form of written communication (such as
by telegraph, Federal Express package, or other similar forms of
written communication), charges prepaid, addressed to him at his
address as it is shown upon the records of the Corporation, or if
it is not so shown on such records or is not readily
ascertainable, at the place in which the meetings of the
Directors are regularly held. In case such notice is mailed or
otherwise communicated in writing, it shall be deposited in the
United States mail or delivered to the appropriate delivering
agent at least seventy-two hours prior to the time of the holding
of the meeting. In case such notice is Personally delivered, it
shall be so delivered at least twenty-four hours prior to the
time of the holding of the meeting. Such mailing, personal
delivery or other written communication as above provided shall
be due, legal and personal notice to such Director.
Section 8. Notice of Adjournment. Notice of the time
and place of holding an adjourned meeting need not be given to
absent Directors if the time and place be fixed at the meeting
adjourned.
Section 9. Ratification and Approval. Whenever all
Directors entitled to vote at any meeting consent, either by: (a)
A writing on the records of the meeting or filed with the
Secretary; (b) Presence at such meeting and oral consent entered
on the minutes; or (c) Taking part in the deliberations at such
meeting without objection; the doings of such meeting shall be as
valid as if had at a meeting regularly called and noticed. At
such meeting any business may be transacted which is not excepted
from the written consent or to the consideration of which no
objection for want of notice is made at the time.
If any meeting be irregular for want of notice or of such
consent, provided a quorum was present at such meeting, the
proceedings of the meeting may be ratified and approved and
rendered likewise valid and the irregularity or defect therein
waived by a writing signed by all Directors having the right to
vote at such meeting.
Section 10. Action Without a Meeting. Any action
required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof may be taken without a
meeting if a written consent thereto is signed by all the members
of the Board or of such committee. Such written consent shall be
filed with the minutes of proceedings of the Board or committee.
Section 11. Quorum. A majority of the authorized number
of Directors shall be necessary to constitute a quorum for the
transaction of business, except to adjourn as hereinafter
provided. Every act or decision done or made by a majority of
the Directors present at a meeting duly assembled at which a
quorum is present shall be regarded as the act of the Board of
Directors, unless a greater number be required by law or by the
Certificate of Incorporation.
Section 12. Adjournment. A quorum of the Directors may
adjourn any Directors' meeting to meet again at a stated day and
hour provided, however, that in the absence of a quorum, a
majority of the Directors present at any Directors' meeting,
either regular or special, may adjourn from time to time until a
quorum shall be present.
Section 13. Fees and Compensation. The Board shall have
the authority to fix the compensation of Directors. The
Directors may be paid their expenses, if any, of attendance at
each meeting of the Board and may be paid a fixed sum for
attendance at each meeting of the Board or a stated salary as
Director. No such payment shall preclude any Director from
serving the Corporation in any other capacity as an officer,
agent, employee or otherwise, and receiving the compensation
therefor. Members of committees may be compensated for attending
committee meetings.
Section 14. Removal. Any Director may be removed from
office with or without cause by the vote of stockholders
representing not less than two-thirds of the issued and
outstanding capital stock entitled to voting power.
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the Corporation
shall be a President, a Secretary and a Treasurer. The
Corporation may also have, at the discretion of the Board of
Directors, one or more additional Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, a
Chairman of the Board, and such other officers as may be
appointed in accordance with the provisions of Section 3 of this
Article. Officers other than the Chairman of the Board need not
be Directors. One person may hold two or more offices.
Section 2. Election. The officers of this Corporation,
except such officers as may be appointed in accordance with the
provisions of Section 3 or Section 5 of this Article, shall be
chosen annually the Board of Directors and each shall hold his
office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and
qualified.
Section 3. Subordinate Officers, Etc. The Board of
Directors may appoint such other officers as the business of the
Corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are
provided in these Bylaws or as the Board of Directors may from
time to time determine.
Section 4. Removal and Resignation. Any officer may be
removed, either with or without cause, by a majority of the
Directors at the time in office. Any officer may resign at any
time by giving written notice to the Board of Directors, the
President or the Secretary of the Corporation. Any such
resignation shall take effect at the date of the receipt of such
notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
Section 5. Vacancies. A vacancy in any office because
of death, resignation, removal, disqualification or any other
cause shall be filled in the manner prescribed in the Bylaws for
regular appointments to such office.
Section 6. Chairman of the Board. The Chairman of the
Board, if there be such a position, shall preside at all meetings
of the Board of Directors and exercise and perform such other
powers and duties as may be from time to time assigned to him by
the Board of Directors or prescribed by these Bylaws.
Section 7. President. Subject to such supervisory
powers, if any, as may be given by the Board of Directors to the
Chairman of the Board, the President shall, subject to the
control of the Board of Directors, have general supervision,
direction and control of the business and officers of the
Corporation. In the absence of the Chairman of the Board, or if
there be none, he shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors. He
shall be ex officio a member of all committees, including the
executive committee, if any, and shall have the general powers
and duties of management usually vested in the office of
president of a corporation, and shall have such other powers and
duties as may be prescribed by the Board of Directors or by these
Bylaws.
Section 8. Vice-President. In the absence or disability
of the President, the Vice Presidents, in order of their rank as
fixed by the Board of Directors, or if not ranked, the Vice
President designated by the Board of Directors, shall perform all
the duties of the President, and when so acting shall have all
the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and
perform such other duties as from time to time may be prescribed
for them respectively by the Board of Directors or these Bylaws.
Section 9. Secretary. The Secretary shall keep, or
cause to be kept, a book of minutes at the principal executive
office or such other place as the Board of Directors may order,
of all meetings of Directors, committees and stockholders, with
the time and place of holding, whether regular or special, and if
special, how authorized, the notice thereof given, the names of
those present at Directors' and committee meetings, the number of
shares present or represented at stockholders' meetings and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the
principal executive office (1) a share register, or a duplicate
share register, revised annually, showing the names of the
stockholders, alphabetically arranged, and their places of
residence, the number and classes of shares held by each, the
number and date of certificates issued for the same, and the
number and date of cancellation of every certificate surrendered
for cancellation; (2) a copy of the Certificate of Incorporation
and all amendments thereto certified by the Secretary of State;
and (3) a copy of the Bylaws and all amendments thereto certified
by the Secretary.
The Secretary shall give, or cause to be given, notice of
all the meetings of the stockholders, committees and Board of
Directors required by the Bylaws or by law to be given, and he
shall keep the seal of the Corporation in safe custody, and shall
have such other powers and perform such other duties as may be
prescribed by the Board of Directors or the Bylaws.
Section 10. Treasurer. The Treasurer shall keep and
maintain, or cause to be kept and maintained, adequate and
correct accounts of the properties and business transactions of
the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus, including earned surplus, paid-in surplus
and surplus arising from a reduction of stated capital, shall be
classified according to source and shown in a separate account.
The books of account shall at all times be open to inspection by
any Director.
The Treasurer shall deposit all monies and other valuables
in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He
shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, shall render to the President and
Directors, whenever they request it, an account of all of his
transactions as Treasurer and of the financial condition of the
Corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or
the Bylaws.
ARTICLE V
MISCELLANEOUS
Section 1. Record Date and Closing Stock Books. The
Board of Directors may fix a day, not more than sixty (60) days
prior to the holding of any meeting of stockholders, and not
exceeding thirty (30) days preceding the date fixed for the
payment of any dividend or distribution or for the allotment of
rights, or when any change or conversion or exchange of shares
shall go into effect, as a record date for the determination of
the stockholders entitled to notice of and to vote at any such
meeting, or entitled to receive any such dividend or
distribution, or any such allotment of rights, or to exercise the
rights in respect to any such change, conversion or exchange of
shares, and in such case only stockholders of record on the date
so fixed shall be entitled to notice of and to vote at such
meetings, or to receive such dividend, distribution or allotment
of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the
Corporation after any record date is fixed as aforesaid. The
Board of Directors may close the books of the Corporation against
transfers of shares during the whole or any part of any such
period.
Section 2. Inspection of Corporate Records.
Stockholders shall have the right to inspect such corporate
records at such times and based upon such limitations of such
rights as may be set forth in the Delaware General Corporation
Law from time to time.
Section 3. Checks, Drafts, Etc. All checks, drafts or
other orders for payment of money, notes or other evidences of
indebtedness, issued in the name of or payable to the
Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be
determined by resolution of the Board of Directors.
Section 4. Contract, Etc., How Executed. The Board of
Directors, except as otherwise provided in these Bylaws may
authorize any officer or officers, agent or agents to enter into
any contract, deed or lease or execute any instrument in the name
of and on behalf of the Corporation, and such authority may be
general or confined to specific instances; and unless so
authorized by the Board of Directors, no officer, agent or
employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit
to render it liable for any purpose or to any amount.
Section 5. Certificates of Stock. A certificate or
certificates for certificated shares of the capital stock of the
Corporation shall be issued to each stockholder when any such
shares are fully paid up. All such certificates shall be signed
by the Chairman of the Board, President or a Vice President, and
by the Treasurer, Secretary or an Assistant Secretary, or be
authenticated by facsimiles of their respective signatures;
provided, however, that every certificate authenticated by a
facsimile of a signature must be countersigned by a transfer
agent or transfer clerk, and by a registrar, which registrar
cannot be the Corporation itself.
Certificates for certificated shares may be issued prior to
full payment under such restrictions and for such purposes as the
Board of Directors or the Bylaws may provide; provided, however,
that any such certificate so issued prior to full payment shall
state the amount remaining unpaid and the terms of payment
thereof.
The Board of Directors is hereby authorized, pursuant to the
provisions of Delaware General Corporation Law Section 158, to
issue uncertificated shares of some or all of the shares of any
or all of its classes or series.
Section 6. Representation of the Shares of Other
Corporation. The President or any Vice President, and the
Secretary or Assistant Secretary, of this Corporation are
authorized to vote, represent and exercise on behalf of this
Corporation all rights incident to any and all shares of any
other corporation or corporations standing in the name of this
Corporation. The authority herein granted to said officers to
vote or represent on behalf of this Corporation any and all
shares held by this Corporation in any other corporation or
corporations may be exercised either by such officers in person
or by any person authorized so to do by proxy or power of
attorney duly executed by said officers.
ARTICLE VI
AMENDMENTS
Section 1. Power of Stockholders. New Bylaws may be
adopted or these Bylaws may be amended or repealed by the vote of
stockholders entitled to exercise a majority of the voting power
of the Corporation or by the written assent of such stockholders.
Section 2. Power of Directors. Subject to the right of
stockholders as provided in Section 1 of this Article VI to
adopt, amend or repeal Bylaws, Bylaws may be adopted, amended or
repealed by the Board of Directors.
ARTICLE VII
TRANSACTIONS INVOLVING DIRECTORS AND OFFICERS
Section 1. Validity of Contracts and Transactions. No
contract or transaction between the Corporation and one or more
of its Directors or officers, or between the Corporation and any
other corporation, firm, association, or other organization in
which one or more of its Directors or officers are Directors or
officers or are financially interested, shall be void or voidable
solely for this reason, or solely because the Director or officer
is present at or participates in the meeting of the Board of
Directors or committee that authorizes or approves the contract
or transaction, or because their votes are counted for such
purpose, provided that:
(a) the material facts as to his, her, or their
relationship or interest and as to the contract or transaction
are disclosed or are known to the Board of Directors or the
committee and noted in the minutes, and the Board of Directors or
committee, in good faith, authorizes the contract or transaction
in good faith by the affirmative vote of a majority of
disinterested directors, even though the disinterested directors
are less than a quorum;
(b) the material facts as to his, her, or their
relationship or interest and as to the contract or transaction
are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved
or ratified in good faith by the majority of shares entitled to
vote, counting the votes of the common or interested directors or
officers; or
(c) the contract or transaction is fair as to the
Corporation as of the time it is authorized or approved.
Section 2. Determining Quorum. Common or interested
directors may be counted in determining the presence of a quorum
at a meeting of the board of directors or of a committee which
authorizes, approves or ratifies the contract or transaction.
ARTICLE VIII
INSURANCE AND OTHER FINANCIAL ARRANGEMENTS
The Corporation may purchase and maintain insurance or make
other financial arrangements on behalf of any person who is or
was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise for any
liability asserted against him and liability and expenses
incurred by him in his capacity as a Director, officer, employee
or agent, or arising out of his status as such, whether or not
the Corporation has the authority to indemnify him against such
liability and expenses. The insurance or other financial
arrangements may be provided by the Corporation or by any other
person or entity approved by the Board of Directors including a
subsidiary of the corporation.
Such other financial arrangements made by the Corporation
may include the following:
(a) The creation of a trust fund;
(b) The establishment of a program of self-insurance;
(c) The securing of its obligation of indemnification by
granting a security interest or other lien on any assets of the
Corporation; or
(d) The establishment of a letter of credit, guaranty or
surety. No financial arrangement may provide protection for a
person adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for intentional
misconduct, fraud or a knowing violation of law, except with
respect to the advancement of expenses or indemnification ordered
by a court as provided in Article IX hereof.
ARTICLE IX
INDEMNIFICATION
Section 1. Action Not By Or On Behalf Of Corporation.
The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he is or
was a Director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), fees, judgments, fines, and
amounts paid in settlement, actually and reasonably incurred by
him in connection with the action, suit or proceeding if he acted
in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the Corporation, and with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent
does not, of itself, create an presumption that the person did
not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was
unlawful.
Section 2. Action By Or On Behalf Of Corporation. The
Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is
or was a Director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust, or other enterprise against
expenses, including amounts paid in settlement and attorneys'
fees actually and reasonably incurred by him in connection with
the defense or settlement of the action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, except that
indemnification may not be made for any claim, issue or matter as
to which such a person shall have been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable to the Corporation or for amounts paid in
settlement to the Corporation, unless and only to the extent that
the court in which the action or suit was brought or other court
of competent jurisdiction determines upon application that, in
view of all of the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as
the court deems proper.
Section 3. Successful Defense. To the extent that a
Director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in Section 1 or 2 of this Article
IX, or in defense of any claim, issue or matter therein, he must
be indemnified by the Corporation against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with the defense.
Section 4. Determination Of Right To Indemnification In
Certain Circumstances. Any indemnification under Section I or 2
of this Article IX, unless ordered by a court or advanced
pursuant to this Article IX, must be made by the Corporation only
as authorized in the specific case upon a determination that
indemnification of the Director, officer, employee or agent is
proper in the circumstances. The determination must be made by
the Stockholders, the Board of Directors by a majority vote of a
quorum consisting of Directors who were not parties to the act,
suit or proceeding, or if a majority vote of a quorum of
Directors who were not parties to the act, suit or proceeding so
orders, by independent legal counsel in a written opinion, or if
a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
Section 5. Advance Payment of Expenses. Expenses of
officers and Directors incurred in defending a civil or criminal
action, suit or proceeding must be paid by the Corporation as
they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or
on behalf of the Director or officer to repay the amount if it is
ultimately determined by a court of competent jurisdiction that
he is not entitled to be indemnified by the Corporation as
authorized in this Article. The provisions of this subsection
(5) of this Article IX shall not affect any rights to advancement
of expenses to which corporate personnel other than Directors or
officers may be entitled under any contract or otherwise by law.
Section 6. Not Exclusive.
(a) The indemnification and advancement of expenses
authorized in or ordered by a court pursuant to any other section
of this Article IX or any provision of law:
(i) does not exclude any other rights to which a person
seeking indemnification or advancement of expenses may be
entitled under the Certificate of Incorporation or any statute,
bylaw, agreement, vote of stockholders or disinterested Directors
or otherwise, for either an action in his official capacity or an
action in another capacity while holding his office, except that
indemnification, unless ordered by a court pursuant to subsection
2 of this Article IX or for the advancement of expenses made
pursuant to this Article IX may not be made to or on behalf of
any Director or officer if a final adjudication establishes that
his acts or omissions involved intentional misconduct, fraud or a
knowing violation of the law and was material to the cause of
action; and
(ii) continues for a person who has ceased to be a Director,
officer, employee or agent and inures to the benefit of the
heirs, executors and administrators of such a person.
(b) Without limiting the foregoing, the Corporation is
authorized to enter into an agreement with any Director, officer,
employee or agent of the Corporation providing indemnification
for such person against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement that result from
any threatened, pending or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative,
including any action by or in the right of the Corporation, that
arises by reason of the fact that such person is or was a
Director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, to the full extent
allowed by law, except that no such agreement shall provide for
indemnification for any actions that constitute intentional
misconduct, fraud, or a knowing violation of law and was material
to the cause of action.
Section 7. Certain Definitions. For the purposes of
this Article IX, (a) any Director, officer, employee or agent of
the Corporation who shall serve as a director, officer, employee
or agent of any other corporation, joint venture, trust or other
enterprise of which the Corporation, directly or indirectly, is
or was a stockholder or creditor, or in which the Corporation is
or was in any way interested, or (b) any Director, officer,
employee or agent of any subsidiary corporation, joint venture,
trust or other enterprise wholly owned by the Corporation, shall
be deemed to be serving as such Director, officer, employee or
agent at the request of the Corporation, unless the Board of
Directors of the Corporation shall determine otherwise. In all
other instances where any person shall serve as director,
officer, employee or agent of another corporation, joint venture,
trust or other enterprise of which the Corporation is or was a
stockholder or creditor, or in which it is or was otherwise
interested, if it is not otherwise established that such person
is or was serving as such director, officer, employee or agent at
the request of the Corporation, the Board of Directors of the
Corporation may determine whether such service is or was at the
request of the Corporation, and it shall not be necessary to show
any actual or prior request for such service. For purposes of
this Article IX references to a corporation include all
constituent corporations absorbed in a consolidation or merger as
well as the resulting or surviving corporation so that any person
who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or
agent of another corporation, joint venture, trust or other
enterprise shall stand in the same position under the provisions
of this Article IX with respect to the resulting or surviving
corporation as he would if he had served the resulting or
surviving corporation in the same capacity. For purposes of this
Article IX, references to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the
corporation" shall include any service as a Director, officer,
employee or agent of the Corporation which imposes duties on, or
involves services by, such Director, officer, employee, or agent
with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Article IX.
34
35
Exhibit No. 5.1
Headway Corporate Resources, Inc.
Form S-3/ Post-Eff. Am. No. 1
File No. 333-08616
HEADWAY CORPORATE RESOURCES, INC.
CERTIFICATE OF DESIGNATION OF NUMBER, POWERS, PREFERENCES
AND RELATIVE, PATICIPATING, OPTIONAL, AND OTHER SPECIAL
RIGHTS, AND THE QUALIFICATIONS LIMITATIONS, RESTRICTIONS,
AND OTHER DISTINGUICHING CHARACTERISTICS OF
SERIES A CONVERTIBLE PREFERRED STOCK
SERIES B CONVERTIBLE PREFERRED STOCK
SERIES C CONVERTIBLE PREFERRED STOCK
SERIES D CONVERTIBLE PREFERRED STOCK
SERIES E CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151(g) of the General Corporation Law of
the State of Delaware
HEADWAY CORPORATE RESOURCES, INC., a corporation organized
and existing under the laws of the state of Delaware (the
"Corporation"), in accordance with Section 151(g) of the General
Corporation Law of Delaware, DOES HEREBY CERTIFY:
1. The Certificate of Incorporation of the Corporation
(the "Certificate of Incorporation"), fixes the total number of
shares of all classes of capital stock which the Corporation
shall have the authority to issue at Twenty-Five Million
(25,000,000) shares, of which Five Million (5,000,000) shares
shall be shares of Preferred Stock, par value $.0001 per share
(herein referred to as "Preferred Stock"), and Twenty Million
(20,000,000) shares shall be shares of Common Stock, par value
$.0001 per share (herein referred to as "Common Stock").
2. The Certificate of Incorporation expressly grants to
the Board of Directors of the Corporation authority to provide
for the issuance of said Preferred Stock in one or more series,
with such voting powers, if any, and with such designations,
preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions
thereof, as shall be stated and expressed in the resolution or
revolutions providing for the issue thereof adopted by the Board
of Directors and as are not stated and expressed in the
Certificate of Incorporation.
3. Pursuant to authority conferred upon the Board of
Directors by the Certificate of Incorporation, the Board of
Directors, on October 18, 1996, by unanimous written consent,
duly authorized and adopted the following resolutions providing
for issue of the following series of its Preferred Stock
a series to be designated "Series A Convertible Preferred
Stock";
a series to be designated "Series B Convertible Preferred
Stock";
a series to be designated "Series C Convertible Preferred
Stock";
a series to be designated "Series D Convertible Preferred
Stock"; and
a series to be designated "Series E Convertible Preferred
Stock".
"RESOLVED, that issue of five series of Preferred Stock,
$.0001 par value per share, of the Corporation consisting of
Twenty-Eight Hundred (2,800) shares designated as "Series A
Preferred Stock", Sixty-Eight Hundred Fifty-Eight (6,858) shares
designated as "Series B Preferred Stock", Twenty-Four (24) shares
designated as "Series C Preferred Stock", Forty-Four (44) shares
designated as "Series D Preferred Stock", and Five Hundred
Seventy-Five Thousand (575,000) shares designated as "Series E
Preferred Stock", is hereby provided for, and the voting power,
designation, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or
restrictions thereof, of such series shall be as set forth below,
and upon the effective date each of said series' shall be deemed
to be included in and be a part of the Certificate of
Incorporation pursuant to the provisions of Sections 104 and 151
of the General Corporation Law of the State of Delaware:
SECTION I. SERIES A PREFERRED STOCK
Designation; Number of Shares. The designation of such
series of Preferred Stock shall be "Series A Convertible
Preferred Stock" (hereinafter referred to as the "Series A
Stock") and the number of authorized shares constituting the
Convertible Preferred Stock is Two Thousand Eight Hundred
(2,800). The Series A Stock shall be deemed a separate class of
Preferred Stock apart from any other series of Preferred Stock.
Part 1. Dividends.
1A. Entitlement. The holders of Series A Stock shall be
entitled to receive cumulative cash dividends when and as
declared by the Corporation's Board of Directors out of funds
available therefor under applicable law. Such dividends shall be
paid to the holders of record at the close of business on the
date specified by the Board of Directors at the time such
dividend is declared; provided, however, that such date shall not
be more than sixty (60) days nor less than ten (10) days prior to
each respective Dividend Payment Date (as defined below under
this Section I).
1B. Accrual Rate. Dividends on each share of Series A
Stock shall accrue cumulatively on a daily basis at the rate of
8.00% per annum of the Liquidation Value (as defined below under
this Section I) thereof, but not including such portion of the
Liquidation Value, if any, which constitutes accrued and unpaid
dividends, from and including the date of issuance of such share
to and including the date on which the Redemption Price (as
defined below under this Section I) of such share is paid or the
date on which such share in converted into Common Stock. Such
dividends shall accrue whether or not they have been declared and
whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends. The
date on which the Corporation initially issues any share of the
Series A Stock will be deemed to be its "date of issuance"
regardless of the number of times transfer of any such share is
made on the stock records maintained by or for the Corporation
and regardless of the number of certificates which may be issued
to evidence any such share.
1C. Dividend Payment Dates. Dividends on the Series A
Stock shall be payable semi-annually on June 30 and December 31
of each year (the "Dividend Payment Dates"). All dividends which
have accrued on each share of Series A Stock outstanding during
the six-month period ending upon each such Dividend Payment Date
will be added to the Liquidation Value of such share and will
remain a part thereof until such dividends are paid.
1D. Certain Restrictions. The Corporation shall not,
without the prior written consent of the holders of a majority of
Series A Stock, (i) declare, order or pay any dividend (other
than dividends payable solely in shares of stock) on any Junior
Securities (as defined below under this Section I) or (ii) redeem
any shares of Junior Securities, unless and until the Corporation
shall have redeemed all of the outstanding Series A Stock in
accordance with Part 3 of Section I, below.
1E. Distribution of Partial Dividend Payments; Fractional
Shares. If at any time the Corporation pays less than the total
amount of dividends then accrued with respect to the Series A
Stock, such payment will be distributed ratably among the holders
of such Series A Stock based upon the aggregate accrued but
unpaid dividends on such Series A Stock held by each holder.
Each fractional share of Series A Stock outstanding, if any,
shall be entitled to a ratably proportionate amount of all
dividends to which each outstanding full share of such Series A
Stock is entitled hereunder.
Part 2. Liquidation.
Upon any liquidation, dissolution or winding up of the
Corporation, the holders of Series A Stock will be entitled to be
paid, before any distribution or payment is made upon any Junior
Securities, an amount in cash equal to the aggregate Liquidation
Value of all shares of Series A Stock outstanding, and the
holders of Series A Stock will not be entitled to any further
payment. If upon any such liquidation, dissolution or winding up
of the Corporation, the Corporation's assets to be distributed
among the holders of Series A Stock are insufficient to permit
payment to such holders of the aggregate amount which they are
entitled to be paid, then the entire assets to be distributed
will be distributed ratably among such holders based upon the
aggregate Liquidation Value of the Series A Stock held by each
such holder. The Corporation will mail written notice of such
liquidation, dissolution or winding up not less than 30 days
prior to the payment date stated therein, to each record holder
of Series A Stock. Neither the consolidation or merger of the
Corporation into or with any other corporation or corporations,
nor the sale or transfer by the Corporation of all or any part of
its assets, nor the reduction of the capital stock of the
Corporation, will be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of Part 2 of
this Section I.
Part 3. Redemptions.
3A. For each share of Series A Stock which is to be
redeemed, the Corporation will be obligated on the Redemption
Date (as defined below) to pay to the holder thereof (upon
surrender by such holder at the Corporation's principal office or
to the corporation's transfer agent of the certificate(s)
representing such shares of Series A Stock) an amount in
immediately available funds equal to the Liquidation Value
thereof. If the funds of the Corporation legally available for
redemption of Series A Stock on any Redemption Date are
insufficient to redeem the total number of shares of Series A
Stock to be redeemed on such date, those funds which are legally
available will be used to redeem the maximum possible number of
shares of Series A Stock ratably among the holders of the Series
A Stock to be redeemed based upon the Liquidation Value of such
Series A Stock held by each such holder. At any time thereafter
when additional funds of the Corporation are legally available
for the redemption of Series A Stock, such funds will immediately
be used to redeem the balance of the Series A Stock which the
Corporation has become obligated to redeem on any Redemption Date
but which it has not redeemed.
3B. Notice of Redemption. The Corporation will mail
written notice of each redemption of Series A Stock to each
record holder of Series A Stock not more than sixty (60) nor less
then twenty (20) days prior to the date on which such redemption
in to be made. In case fewer than the total number of shares of
Series A Stock represented by any certificate are redeemed, a new
certificate representing the number of unredeemed shares of
Series A Stock will be issued to the holder thereof without cost
to such holder within ten business days after surrender of the
certificate representing the redeemed Series A Stock.
3C. Redemption Date. On the date on which the Liquidation
value of any Series A Stock is paid all rights, including, but
not limited to any right of conversion, of the holder of such
Series A Stock will cease, and such Series A Stock will not be
deemed to be outstanding.
3D. Redeemed or Otherwise Acquired Shares. Any shares of
Series A Stock which are redeemed or otherwise acquired by the
Corporation shall be canceled, may not be reissued as Series A
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series.
3E. Optional Redemption. The Corporation may at any time
redeem all or any portion of the Series A Stock at a price per
share equal to the Liquidation Value thereof, including any
accrued and unpaid dividends.
3F. Redemptions upon Certain Voluntary Corporate Actions.
Upon the occurrence of a Fundamental Change, the Corporation
shall redeem all of the outstanding Series A Stock at a price per
share equal to the Liquidation Value thereof including any
accrued and unpaid dividends to the Redemption Date. The term
"Fundamental Change" means (a) a sale or transfer of all or
substantially all of the assets of the Corporation on a
consolidated basis in any transaction or series of related
transactions (other than sales in the ordinary course of
business) and (b) any merger or consolidation to which the
Corporation is a party, except for a merger in which the
Corporation is the surviving corporation and, after giving effect
to such merger, the holders of the Corporation's outstanding
capital stock (on a fully-diluted basis) immediately prior to
such merger will own the Corporation's outstanding capital stock
(on a fully-diluted basis) having a majority of the ordinary
voting power to elect the Corporation's board of directors.
Part 4. Events of Noncompliance
4A. Definition. An Event of Noncompliance will be deemed
to have occurred if:
(i) the Corporation fails to make any redemption payment
with respect to the Series A Stock which it is obligated to make
hereunder, whether or not such payment in legally permissible;
(ii) the Corporation fails to pay dividends to the holders
of Series A Stock for two (2) consecutive Dividend Payment Dates;
(iii) the Corporation makes an assignment for the benefit
of creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree is
entered adjudicating the Corporation bankrupt or insolvent; or
any order for relief with respect to the Corporation is entered
under the Federal Bankruptcy Code; or the Corporation petitions
or applies to any tribunal for the appointment of a custodian,
trustee, receiver or liquidator of the Corporation or of any
substantial part of the assets of the Corporation, or commences
any proceeding relating to the, Corporation under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction or any such
petition or application is filed, or any such proceeding is
commenced, against the Corporation and either (a) the Corporation
by any act indicates its approval thereof, consent thereto or
acquiescence therein or (b) such petition, application or
proceeding is not dismissed within sixty (60) days.
4B. Consequences of Certain Events of Noncompliance.
(i) If an Event of Noncompliance has occurred and continued
for a period of 30 days, the holder or holders of a majority of
the Series A Stock then outstanding may demand (by written notice
delivered to the Corporation) (a) immediate acceleration of the
right to convert the Series A Stock into shares of Common Stock
under Part 6B of this Section I, below, such that 100% of the
Series A Stock shall be vested in such holder or holders and
eligible for conversion into Common Stock on the date of such
written notice, which notice may include a written notice of
conversion of all or a portion of such shares pursuant to Part 6A
of this Section I, below.
(ii) If an Event of Noncompliance has occurred and
continued for a period of 30 days, the holder or holders of a
majority of the Series A Stock then outstanding (the "Holder")
may also demand that the Board of Directors be deemed dissolved
and all positions vacated. In this connection, the Holder may
schedule a meeting of all stockholders of the Corporation upon at
least twenty-four (24) hours advance notice either in writing,
telegram or by a telephonic communication to all stockholders at
which meeting a new Board of Directors shall be elected.
Notwithstanding anything to the contrary in the herein or in the
Corporation's By-laws, it is expressly agreed that the Holder
acting in person or by proxy may elect a majority of the members
of the Board of Directors. The remaining members of the Board of
Directors may be elected or designated by holders of a majority
of the Common Stock. Upon such election, the Board of Directors,
by majority vote, may conduct the business and affairs of the
Corporation and may also terminate the employment of any employee
of the Corporation or his or her official position with the
Corporation, or both, subject to any existing employment
agreements. The Holders' directors shall serve as directors
until such time as the Event of Noncompliance has been remedied
or the Series A Stock converted entirely to Common Stock or
redeemed in full, at which time such directors shall resign.
(iii) If any Event of Noncompliance exists, each Holder
will also have any other rights which such holder may have been
afforded under any contract or agreement at any time and any
other rights which such Holder may have pursuant to applicable
law.
Part 5. Voting Rights. The voting powers of the holders of
Series A Stock include:
(i) the right, as a class, to elect two (2) directors to
the Corporation's Board of Directors; and
(ii) the exclusive right, as a class, to approve any
enlargement of the Corporation's Board of Directors in excess of
nine (9) directors.
Except an otherwise provided herein and as otherwise
provided by law, the Series A Stock will have no other voting
rights.
Part 6. Conversion Rights.
6A. Conversion Procedure. Subject to the provisions set
forth below, each share of Series A Stock shall be convertible at
the option of the holder thereof, in the manner hereinafter set
forth, into that number of fully paid and nonassessable shares of
Common Stock determined as set forth below.
Any holder of Series A Stock desiring to convert such shares
into shares of Common Stock shall surrender the certificate or
certificates for the shares being converted, duly endorsed or
assigned to the Corporation or in blank, at the principal office
of the Corporation or at a bank or trust company appointed by the
Corporation for that purpose, accompanied by a written notice of
conversion specifying the number of shares of Series A Stock to
be converted and the name or names in which such holder wishes
the certificate or certificates for shares of Common Stock to be
issued; in case such notice shall specify a name or names other
than that of such holder, such notice shall be accompanied by
payment of all transfer taxes payable upon the issue of shares of
Common Stock in such name or names. After receipt of such notice
of conversion, the Corporation shall either:
(i) within sixty (60) days after receipt of such notice,
issue and deliver or cause to be issued and delivered to such
holder a certificate or certificates for shares of Common Stock
resulting from such conversion; or
(ii) within sixty (60) days after receipt of such notice,
redeem all or any portion of the Series A Stock specified in the
aforementioned notice at an amount in immediately available funds
equal to the Liquidation Value thereof, including any accrued and
unpaid dividends.
In case less than all of the shares of Series A Stock represented
by a certificate are to be converted by a holder, upon such
conversion the Corporation shall also deliver or cause to be
delivered to such holder a certificate or certificates for the
shares of Series A Stock not so converted.
6B. Basic Conversion Rights. The right to convert the
Series A Stock into shares of Common Stock shall vest immediately
on issuance with respect to 26.27% of the shares of Series A
Stock issued to each holder, and shall vest with respect to the
remaining shares of Series A Stock of all holders outstanding on
August 31, 1997. If shares of Cumulative Preferred Stock are
held by more than one holder, each such holder shall be entitled
to convert only the applicable percentage of such shares held by
such holder. Each share of Series A Stock is convertible into
476 newly issued shares of Common Stock of the Corporation.
6C. Fundamental Changes. In case the Corporation shall
effect any capital reorganization of the Common Stock or shall
consolidate, merge or engage in a statutory share exchange with
or into any other corporation (other than a consolidation, merger
or share exchange in which the Corporation is the surviving
corporation and each share of Common Stock outstanding
immediately prior to such consolidation or merger is to remain
outstanding immediately after such consolidation or merger) or
shall sell or transfer all or substantially all its assets to any
other corporation, lawful provision shall be made as a part of
the terms of such transaction whereby the holders of shares of
the Series A Stock shall receive upon conversion thereof, in lieu
of each share of Common Stock which would have been issuable upon
conversion of such stock if converted immediately prior to the
consummation of such transaction, the same kind and amount of
stock (or other securities, cash or property, if any) as may be
issuable or distributable in connection with such transaction
with respect to each share of Common Stock outstanding at the
effective time of such transaction.
6D. Conversion Date. Conversion shall be deemed to have
been made as of the date of surrender of certificates for the
shares of Series A Stock to be converted, and the giving of
written notice, as prescribed in Part 6A of this Section I, or as
otherwise prescribed by Part 4B(i) of Section I, above, and the
person entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder
of such Common Stock on such date. The Corporation shall not be
required to deliver certificates for shares of its Common Stock
while the stock transfer books for such stock or for the Series A
Stock are duly closed for any purpose, but certificates for
shares of Common Stock shall be issued and delivered as soon as
practicable after the opening of such books.
6E. Converted Shares and Common Stock Held for Conversion.
Any shares of Series A Stock which at any time have been
converted shall be canceled, may not be reissued as Series A
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock, for the purpose of issuance upon conversion of shares of
Series A Stock, the full number of shares of Common Stock then
issuable or which may become issuable upon the conversion of all
shares of Series A Stock then outstanding and shall take all
action necessary so that shares of Common Stock so issued will be
validly issued, fully paid and nonassessable.
6F. Taxes. The Corporation will pay any and all stamp or
similar taxes that may be payable in respect of the issuance or
delivery of shares of Common Stock on conversion of shares of
Series A Stock. The Corporation shall not, however, be required
to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of shares of Common Stock
in a name other than that in which the shares of Series A Stock
so converted were registered, and no such issuance or delivery
shall be made unless and until the person requesting such
issuance has paid to the Corporation the amount of any such tax
or has established to the satisfaction of the Corporation that
such tax has been paid.
Part 7. Definitions Applicable to Section I.
"Business Day" shall mean a day other than a Saturday,
Sunday or other day on which commercial banks in New York, New
York are authorized or required by law to close.
"Common Stock" means the Common Stock, $0.0001 par value per
share, of the Corporation and any capital stock of any class of
the Corporation hereafter authorized which is not limited to a
fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or
winding up of the Corporation.
"Junior Securities" means any of the Corporation's equity
securities other than the Series A Stock.
"Liquidation Value" of any Series A Stock as of any
particular date will be equal to $250 per share plus all unpaid
cumulative dividends on the Series A Stock.
"Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture,
an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Redemption Date" as to any Series A Stock means the date
specified in the notice of any redemption at the Corporation's
option or the applicable date specified herein in the case of any
other redemption; provided that no such date will be a Redemption
Date unless the applicable Liquidation Value is actually paid in
full on such date, and, if not so paid in full, the Redemption
Date will be the date on which Such Liquidation Value is fully
paid.
Part 8. Amendment and Waiver. No amendment, modification or
waiver will be binding or effective with respect to any provision
of this Section I without the prior written consent of the
holders of a majority of the Series A Stock outstanding at the
time such action is taken; provided that no such action will
change the amount payable on redemption of the Series A Stock or
the times at which redemption of the Series A Stock is to occur,
or the percentage required to approve such change, without the
prior written consent of the holders of at least two-thirds of
the Series A Stock then outstanding; and, provided further, that
no change in the terms hereof may be accomplished by merger or
consolidation of the Corporation with another corporation unless
the Corporation has obtained the prior written consent of the
holders of the applicable percentage of the Series A Stock then
outstanding.
Part 9. Ranking. For purposes hereof, all Junior Securities
shall be deemed to rank junior to the Series A Stock as to
dividends or distribution of assets upon liquidation, dissolution
or winding up.
II. SERIES B PREFERRED STOCK
Designation; Number of Shares. The designation of such
series of Preferred Stock (which includes all sub-series) shall
be "Series B Convertible Preferred Stock" (hereinafter referred
to as the "Series B Stock") and the number of authorized shares
constituting the Series B Stock is Six Thousand Eight Hundred
Fifty-Eight (6,858). Of the Series B Stock, Six Thousand Two
Hundred Eighty-Six (6,286) shares are designated as "Series B-1
Convertible Preferred Stock" (hereinafter referred to as the
"Series B-1 Stock"), Three Hundred Forty-Three (343) shares are
designated as "Series B-2 Convertible Preferred Stock"
(hereinafter referred to as the "Series B-2 Stock"), and Two
Hundred Twenty-Nine (229) shares are designated as "Series B-3
Convertible Preferred Stock" (hereinafter referred to as the
"Series B-3 Stock"). The Series B Stock shall be deemed a
separate class of Preferred Stock, and each sub-series of the
Series B Stock shall be apart from any other series of Preferred
Stock.
Part 1. Liquidation.
Upon any liquidation, dissolution, or winding up of the
Corporation, the holders of Series B Stock will be entitled to be
paid, after any distribution or payment is made upon any Series A
Stock and before any distribution or payment is made upon Junior
Securities (as defined below under this Section II), an amount in
cash equal to the aggregate Liquidation Value (as defined below
under this Section II) of all shares of Series B Stock
outstanding, and the holders of Series B Stock will not be
entitled to any further payment. If upon any such liquidation,
dissolution, or winding up of the Corporation, the Corporation's
assets to be distributed among the holders of Series B Stock are
insufficient to permit payment to such holders of the aggregate
amount which they are entitled to be paid, then the entire assets
to be distributed will be distributed ratably among such holders
based upon the aggregate Liquidation Value of the Series B Stock
held by each such holder. The Corporation will mail written
notice of such liquidation, dissolution, or winding up not less
then 30 days prior to the payment date stated therein, to each
record holder of Series B Stock. Neither the consolidation or
merger of the Corporation into or with any other corporation or
corporations, nor the sale or transfer by the Corporation of all
or any part of its assets, nor the reduction of the capital stock
of the Corporation, will be deemed to be liquidation,
dissolution, or winding up of the Corporation within the meaning
of Part 1 of this Section II.
Part 2. Conversion Rights.
2A. Conversion Procedure. Subject to the provisions set
forth below, each share of Series B Stock shall be convertible at
the option of the holder thereof, in the manner hereinafter set
forth, into that number of fully paid and nonassessable shares of
Common Stock determined as set forth below.
Any holder of Series B Stock desiring to convert such shares
into shares of Common Stock shall surrender the certificate or
certificates for the shares being converted, duly endorsed or
assigned to the Corporation or in blank, at the principal office
of the Corporation or at the bank or trust company appointed by
the Corporation for that purpose, accompanied by a written notice
of conversion specifying the number of shares of Series B Stock
to be converted and the name or names in which such holder wishes
the certificate or certificates for shares of Common Stock to be
issued; in case such notice shall specify a name or names other
then that of such transfer taxes payable upon the issue of shares
of Common Stock in such name or names. After the receipt of such
notice of conversion, the Corporation shall, within thirty (30)
days after receipt of such notice, issue and deliver or cause to
be issued and delivered to such holder a certificate or
certificates for shares of Common Stock resulting from such
conversion. In case less than all of the shares of Series B
Stock represented by a certificate are to be converted by a
holder, upon such conversion the Corporation shall also deliver
or cause to be delivered to such holder a certificate or
certificates for the shares of Series B stock not so converted.
2B. Conversion of Series B-1 Stock. The right to convert
the Series B-1 Stock into shares of Common Stock shall vest
immediately on the date of issuance of the Series B-1 Stock.
Each share of Series B-1 Stock is convertible into One Hundred
(100) newly issued shares of Common Stock of the Corporation (the
"B-1 Conversion Rate").
2C. Conversion of Series B-2. The right to convert the
Series B-2 Stock into shares of Common Stock shall vest
immediately on the date of issuance of the Series B-2. Each
share of Series B-2 Stock is convertible into Twenty-Six (26)
newly issued share of Common Stock of the Corporation (the "B-2
Conversion Rate"), which is subject to adjustment as provided in
Part 2C of this Section II.
(i) In the event the gross revenue of Furash & Company,
Inc. ("FCI"), the wholly-owned subsidiary of the Corporation
acquired under that certain Agreement and Plan of Exchange dated
December 23, 1994, to which the Corporation and FCI are parties
("Exchange Agreement"), for the calendar year ending December 31,
1996, equals or exceeds $4,000,000, as determined by the
Corporation's independent accountants in accordance with
Generally Accepted Accounting Principles, the B-2 Conversion Rate
for each share of Series B-2 Stock shall automatically be
increased on April 30, 1997, by an amount equal to 8,572 divided
by the number of shares of Series B-2 Stock outstanding on April
30, 1997. In the event the gross revenue of FCI for the calendar
year ending December 31, 1996, exceeds $2,500,000 (but is less
than $4,000,000), as determined by the Corporation's independent
accountants in accordance with Generally Accepted Accounting
Principles, the B-2 Conversion Rate for each share of Series B-2
Stock shall automatically be increased on April 30, 1997, by an
amount determined by dividing 8,572 by the number of shares of
Series B-2 Stock outstanding on April 30, 1997, and multiplying
the result by a fraction, the numerator of which is the amount by
which gross revenues exceed $2,500,000 for the calendar year
ending December 31, 1996, and the denominator of which is
$1,500,000. In the event the gross revenue of FCI for the
calendar year ending December 31, 1996, does not exceed
$2,500,000, there will be no adjustment in the B-2 Conversion
Rate.
(ii) In the event the gross revenue of FCI for the calendar
year ending December 31, 1997, equals or exceeds $4,000,000, as
determined by the Corporation's independent accountants in
accordance with Generally Accepted Accounting Principles, the B-2
Conversion Rate for each share of Series B-2 Stock shall
automatically be increased on April 30, 1998, by an amount equal
to 8,572 divided by the number of shares of Series B-2 Stock
outstanding on April 30, 1998. In the event the gross revenue of
FCI for the calendar year ending December 31, 1997, exceeds
$2,500,000 (but is less than $4,000,000), as determined by the
Corporation's independent accountants in accordance with
Generally Accepted Accounting Principles, the B-2 Conversion Rate
for each share of Series B-2 Stock shall automatically be
increased on April 30, 1998, by an amount determined by dividing
8,572 by the number of shares of Series B-2 Stock outstanding on
April 30, 1998, and multiplying the result by a fraction, the
numerator of which is the amount by which gross revenues exceed
$2,500,000 for the calendar year ending December 31, 1997, and
the denominator of which is $1,500,000. In the event the gross
revenue of FCI for the calendar year ending December 31, 1997,
does not exceed $2,500,000, there will be no adjustment in the B-
2 Conversion Rate.
(iii) In the event the gross revenue of FCI for the
calendar year ending December 31, 1998, equals or exceeds
$4,000,000, as determined by the Corporation's independent
accountants in accordance with Generally Accepted Accounting
Principles, the B-2 Conversion Rate for each share of Series B-2
Stock shall automatically be increased on April 30, 1999, by an
amount equal to 8,572 divided by the number of shares of Series B-
2 Stock outstanding on April 30, 1999. In the event the gross
revenue of FCI for the calendar year ending December 31, 1998,
exceeds $2,500,000 (but is less than $4,000,000), as determined
by the Corporation's independent accountants in accordance with
Generally Accepted Accounting Principles, the B-2 Conversion Rate
for each share of Series B-2 Stock shall automatically be
increased on April 30, 1999, by an amount determined by dividing
8,572 by the number of shares of Series B-2 Stock outstanding on
April 30, 1999, and multiplying the result by a fraction, the
numerator of which is the amount by which gross revenues exceed
$2,500,000 for the calendar year ending December 31, 1998, and
the denominator of which is $1,500,000. In the event the gross
revenue of FCI for the calendar year ending December 31, 1998,
does not exceed $2,500,000, there will be no adjustment in the B-
2 Conversion Rate.
(iv) In the event the employment of Edward E. Furash
("Furash") under that certain employment agreement between FCI
and Furash included as an exhibit to the Exchange Agreement (the
"Employment Agreement"), is terminated by FCI during the initial
four year term thereof ("Initial Term") for reasons other than
cause as defined in paragraph 14 of the Employment Agreement, or
is terminated during the Initial Term by either FCI or Furash
pursuant to paragraph 15 of the Employment Agreement, the B-2
Conversion Rate for each share of Series B-2 Stock shall
automatically be increased on the date of such termination by an
amount determined by multiplying 8,572 by the number of calendar
years remaining in the unexpired Initial Term of the Employment
Agreement after the date of termination (with each partial
calendar year in the unexpired Initial Term counted as one full
year), and dividing the product by the number of shares of Series
B-2 Stock outstanding on the date of termination.
2D. Conversion of Series B-3. The right to convert the
Series B-3 Stock into shares of Common Stock shall vest
immediately on the date of issuance of the Series B-3. Each
share of Series B-3 Stock is convertible into Twenty-Six (26)
newly issued share of Common Stock of the Corporation (the "B-3
Conversion Rate"), which is subject to adjustment as provided in
Part 2D of this Section II.
(i) In the event the gross revenue of FCI for the calendar
year ending December 31, 1996, equals or exceeds $4,000,000, as
determined by the Corporation's independent accountants in
accordance with Generally Accepted Accounting Principles, the B-3
Conversion Rate for each share of Series B-3 Stock shall
automatically be increased on April 30, 1997, by an amount equal
to 5,714 divided by the number of shares of Series B-3 Stock
outstanding on April 30, 1997. In the event the gross revenue of
FCI for the calendar year ending December 31, 1996, exceeds
$2,500,000 (but is less than $4,000,000), as determined by the
Corporation's independent accountants in accordance with
Generally Accepted Accounting Principles, the B-3 Conversion Rate
for each share of Series B-3 Stock shall automatically be
increased on April 30, 1997, by an amount determined by dividing
5,714 by the number of shares of Series B-3 Stock outstanding on
April 30, 1997, and multiplying the result by a fraction, the
numerator of which is the amount by which gross revenues exceed
$2,500,000 for the calendar year ending December 31, 1996, and
the denominator of which is $1,500,000. In the event the gross
revenue of FCI for the calendar year ending December 31, 1996,
does not exceed $2,500,000, there will be no adjustment in the B-
3 Conversion Rate.
(ii) In the event the gross revenue of FCI for the calendar
year ending December 31, 1997, equals or exceeds $4,000,000, as
determined by the Corporation's independent accountants in
accordance with Generally Accepted Accounting Principles, the B-3
Conversion Rate for each share of Series B-3 Stock shall
automatically be increased on April 30, 1998, by an amount equal
to 5,714 divided by the number of shares of Series B-3 Stock
outstanding on April 30, 1998. In the event the gross revenue of
FCI for the calendar year ending December 31, 1997, exceeds
$2,500,000 (but is less than $4,000,000), as determined by the
Corporation's independent accountants in accordance with
Generally Accepted Accounting Principles, the B-3 Conversion Rate
for each share of Series B-3 Stock shall automatically be
increased on April 30, 1998, by an amount determined by dividing
5,714 by the number of shares of Series B-3 Stock outstanding on
April 30, 1998, and multiplying the result by a fraction, the
numerator of which is the amount by which gross revenues exceed
$2,500,000 for the calendar year ending December 31, 1997, and
the denominator of which is $1,500,000. In the event the gross
revenue of FCI for the calendar year ending December 31, 1997,
does not exceed $2,500,000, there will be no adjustment in the B-
3 Conversion Rate.
(iii) In the event the gross revenue of FCI for the
calendar year ending December 31, 1998, equals or exceeds
$4,000,000, as determined by the Corporation's independent
accountants in accordance with Generally Accepted Accounting
Principles, the B-3 Conversion Rate for each share of Series B-3
Stock shall automatically be increased on April 30, 1999, by an
amount equal to 5,714 divided by the number of shares of Series B-
3 Stock outstanding on April 30, 1999. In the event the gross
revenue of FCI for the calendar year ending December 31, 1998,
exceeds $2,500,000 (but is less than $4,000,000), as determined
by the Corporation's independent accountants in accordance with
Generally Accepted Accounting Principles, the B-3 Conversion Rate
for each share of Series B-3 Stock shall automatically be
increased on April 30, 1999, by an amount determined by dividing
5,714 by the number of shares of Series B-3 Stock outstanding on
April 30, 1999, and multiplying the result by a fraction, the
numerator of which is the amount by which gross revenues exceed
$2,500,000 for the calendar year ending December 31, 1998, and
the denominator of which is $1,500,000. In the event the gross
revenue of FCI for the calendar year ending December 31, 1998,
does not exceed $2,500,000, there will be no adjustment in the B-
3 Conversion Rate.
(iv) In the event the employment of Furash under the
Employment Agreement, is terminated by FCI during the initial
four year term thereof ("Initial Term") for reasons other than
cause as defined in paragraph 14 of the Employment Agreement, or
is terminated during the Initial Term by FCI pursuant to
paragraph 15 of the Employment Agreement, the B-3 Conversion Rate
for each share of Series B-3 Stock shall automatically be
increased on the date of such termination by an amount determined
by multiplying 5,714 by the number of calendar years remaining in
the unexpired Initial Term of the Employment Agreement after the
date of termination (with each partial calendar year in the
unexpired Initial Term counted as one full year), and dividing
the product by the number of shares of Series B-3 Stock
outstanding on the date of termination.
2E. Fundamental Changes. In case the Corporation shall
effect any stock split, reverse stock split, or capital
reorganization of the Common Stock, or shall consolidate, merge,
or engage in a statutory share exchange with or into any other
corporation (other than a consolidation, merger, or share
exchange in which the Corporation is the surviving corporation
and each share of Common Stock outstanding immediately prior to
such consolidation or merger is to remain outstanding immediately
after such consolidation or merger) or shall sell or transfer all
or substantially all its assets to any other corporation, lawful
provision shall be made as a part of the terms of such
transaction whereby the holders of shares of the Series B Stock
shall receive upon conversion thereof, in lieu of each share of
Common Stock which would have been issuable upon conversion of
such stock if converted immediately prior to the consummation of
such transaction, the same kind and amount of stock (or other
securities, cash, or property, if any) as may be issuable or
distributable in connection with such transaction with respect to
each share of Common Stock outstanding at the effective time of
such transaction.
2F. Conversion Date. Conversion shall be deemed to have
been made as of the date of surrender of certificates for the
shares of Series B Stock to be converted, and the giving of
written notice as prescribed in Part 2A of this Section II, and
the person entitled to receive the Common Stock issuable upon
such conversion shall be treated for all purposes as the record
holder of such Common Stock on such date. The Corporation shall
not be required to deliver certificates for shares of its Common
Stock while the stock transfer books for such stock or for the
Series B Stock are duly closed for any purpose, but certificates
for shares of Common Stock shall be issued and delivered as soon
as practicable after the opening of such books.
2G. Converted Shares and Common Stock Held for Conversion.
Any shares of Series B Stock which at any time have been
converted shall be canceled, may not be reissued as Series B
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock, for the purpose of issuance upon conversion of shares of
Series B Stock then outstanding and shall take all action
necessary so that shares of Common Stock so issued will be
validly issued, fully paid and nonassessable.
2H. Taxes. The Corporation will pay any and all stamp or
similar taxes that may be payable in respect of the issuance or
delivery of shares of Common Stock on conversion of shares of
Series B Stock. The Corporation shall not, however, be required
to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of shares of Convertible
Stock so converted were registered, and no such issuance or
delivery shall be made unless and until the person requesting
such issuance has paid to the Corporation the amount of any such
tax or has established to the satisfaction of the Corporation
that such tax has been paid.
Part 3. Dividends.
The holders of Series B Stock shall be entitled to
participate fully with the Common Stock in all dividends, whether
payable in cash, Common Stock, or other property of the
Corporation, when and as declared by the Corporation's Board of
Directors. The dividend payable on each share of Series B-1, B-
2, and B-3 Stock outstanding on the record date for determining
those persons entitled to receive a dividend on Common Stock (or
on the date the dividend is paid if no record date is set), shall
be equal to the product of the dividend per share of Common Stock
multiplied by the B-1, B-2, and B-3 Conversion Rates, as the case
may be, in effect on such record date (or on the date the
dividend is paid if no record date is set) after giving taking
into account all adjustments to such Conversion Rates required to
be made under Part 2 of this Section II, above, as of such record
date (or on the date the dividend is paid if no record date is
set). No dividends shall be paid on the Series B Stock unless
all dividends on the Corporation's Series A Convertible Preferred
Stock ("Series A Stock"), have been paid or reserved in
accordance with the terms of the Series A Stock.
Part 4. Voting Rights.
Each share of Series B Stock shall have that number of votes
equal to the number of shares of Common Stock issuable on
conversion of the Series B Stock as of the record date or any
such other date with respect to which a determination is made of
the Persons and number of shares entitled to be voted at any
meeting of the stockholders of the Corporation or sign a written
consent to action without a meeting, after giving taking into
account all adjustments to such Conversion Rates required to be
made under Part 2 of this Section II, above. The holders thereof
shall have the right to vote (but not as a separate class, except
to the extent required by law) on all matters subject to vote at
any meeting of the stockholders of the Corporation or submitted
for stockholder approval by written consent.
Part 5. Definitions Applicable to Section II.
"Business Day" shall mean a day other than a Saturday,
Sunday or other day on which commercial banks in New York, New
York are authorized by law to close.
"Common Stock" means the Common Stock, $0.0001 par value per
share, of the Corporation and any capital stock of any class of
the Corporation hereafter authorized which is not limited to a
fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in
the distribution or assets upon any liquidation, dissolution, or
winding up of the Corporation.
"Junior Securities" means any of the Corporation's equity
securities other than the Series A Stock and Series B Stock.
"Liquidation Value" of any Series B Stock as of any
particular date will be equal to $350 per share.
"Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture,
an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
III. SERIES C PREFERRED STOCK
Designation; Number of Shares. The designation of such
series of Preferred Stock (which includes all sub-series) shall
be "Series C Convertible Preferred Stock" (hereinafter referred
to as the "Series C Stock") and the number of authorized shares
constituting the Series C Stock is Twenty-Four (24). The Series
C Stock shall be deemed a separate class of Preferred Stock, and
shall be apart from any other series of Preferred Stock.
Part 1. Liquidation.
Upon any liquidation, dissolution, or winding up of the
Corporation, the holders of Series C Stock will be entitled to be
paid, after any distribution or payment is made upon any Series A
Stock and Series B Stock and before any distribution or payment
is made upon Junior Securities (as defined below under this
Section III), an amount in cash equal to the aggregate
Liquidation Value (as defined below under this Section III) of
all shares of Series C Stock outstanding, and the holders of
Series C Stock will not be entitled to any further payment. If
upon any such liquidation, dissolution, or winding up of the
Corporation, the Corporation's assets to be distributed among the
holders of Series C Stock are insufficient to permit payment to
such holders of the aggregate amount which they are entitled to
be paid, then the entire assets to be distributed will be
distributed ratably among such holders based upon the aggregate
Liquidation Value of the Series C Stock held by each such holder.
The Corporation will mail written notice of such liquidation,
dissolution, or winding up not less then 30 days prior to the
payment date stated therein, to each record holder of Series C
Stock. Neither the consolidation or merger of the Corporation
into or with any other corporation or corporations, nor the sale
or transfer by the Corporation of all or any part of its assets,
nor the reduction of the capital stock of the Corporation, will
be deemed to be liquidation, dissolution, or winding up of the
Corporation within the meaning of Part 1 of this Section III.
Part 2. Dividends.
2A. Entitlement. The holders of Series C Stock, shall be
entitled to receive cumulative dividends. Such dividends shall
be paid to the holders in cash or in-kind through the issuance of
Common Stock, as determined at the election of the Corporation,
on conversion of the Series C Stock in accordance with Part 3 of
Section III, below, except as provided in Part 5 of Section III,
below.
2B. Accrual Rate. Dividends on each share of Series C
Stock shall accrue on a daily basis at the rate of 8.000% per
annum of the Face Value (as defined below under this Section
III), from and including the Date of Issuance of such share to
and including the date on which the Redemption Price (as defined
below) of such share is paid or the date on which such share is
converted into Common Stock. Such dividends shall accrue whether
or not they have been declared and whether or not there are
profits, surplus or other funds of the Corporation legally
available for the payment of dividends. The date on which the
Corporation initially issues any share of the Series C Stock will
be deemed to be its "Date of Issuance" as that term is uses
herein, regardless of the number of times transfer of any such
share is made on the stock records maintained by or for the
Corporation and regardless of the number of certificates which
may be issued to evidence any such share.
Part 3. Conversion Rights.
3A. Conversion Procedure. Subject to the provisions set
forth below, each share of Series C Stock shall be convertible at
the option of the holder thereof, in the manner hereinafter set
forth, into that number of fully paid and nonassessable shares of
Common Stock determined as set forth below. Any holder of Series
C Stock desiring to convert such shares into shares of Common
Stock shall surrender the certificate or certificates for the
shares being converted, duly endorsed or assigned to the
Corporation or in blank, at the principal office of the
Corporation or at the bank or trust company appointed by the
Corporation for that purpose, accompanied by a written notice of
conversion specifying the number of shares of Series C Stock to
be converted (provided that the number of shares tendered for
conversion at any one time shall not be less than $100,000 in
Face Value) and the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be
issued. The date of execution of the notice of conversion and
delivery thereof to the Corporation by facsimile transmission at
(212) 508-3540 shall be the "Conversion Date"; provided, that if
the certificate representing the shares of Series C Stock to be
converted as stated in the notice of conversion is not received
by the Corporation or its designated agent within three business
days of receiving said facsimile transmission, the Conversion
Date shall be the date on which the Series C Stock certificates
are actually received by the Corporation or agent. After the
receipt of such notice of conversion and the certificates for the
Series C Stock converted, the Corporation shall promptly issue
and deliver or cause to be issued and delivered to such holder a
certificate or certificates for shares of Common Stock resulting
from such conversion. In case less than all of the shares of
Series C Stock represented by a certificate are to be converted
by a holder, upon such conversion the Corporation shall also
deliver or cause to be delivered to such holder a certificate or
certificates for the shares of Series C Stock not so converted.
The Corporation shall pay all transfer agent fees and expenses
payable upon the conversion of Series C Stock.
3B. Conversion Rate. The number of shares issuable on
conversion of the Series C Stock shall be determined by dividing
the Face Value of the Series C Stock being converted plus (if the
Corporation elects to paid accrued dividends in-kind with Common
Stock) the amount of accrued dividends on such Face Amount as of
the Conversion Date, by the lesser of (i) $4.558125, or (ii) 80%
of the market price on the Conversion Date. For purposes of Part
3B of this Section III, "market price" on a given date shall be
the average closing bid prices of the Common Stock for the five
NASDAQ trading days immediately preceding the applicable date as
reported by the National Association of Securities Dealers
Automated Quotation System or such other inter-dealer quotation
system as may report quotations on the Common Stock. In the
event any fractional share of Common Stock would become issuable
under the calculation contained in Part 3B of this Section III,
the number of shares issuable shall be rounded up to the nearest
whole number.
3C. Conversion Dates The right to convert the Series C
Stock into shares of Common Stock shall vest over a 95-day period
following the Date of Issuance as set forth below:
(i) With respect to 33% of the shares of Series C Stock
held, 42 days following the Date of Issuance;
(ii) With respect to 33% of the shares of Series C Stock
held, 65 days following the Date of Issuance; and
(iii) With respect to 34% of the shares of Series C
Stock held, 95 days following the Date of Issuance.
3D. Fundamental Changes. In case the Corporation shall
effect any stock split, reverse stock split, or capital
reorganization of the Common Stock, or shall consolidate, merge,
or engage in a statutory share exchange with or into any other
corporation (other than a consolidation, merger, or share
exchange in which the Corporation is the surviving corporation
and each share of Common Stock outstanding immediately prior to
such consolidation or merger is to remain outstanding immediately
after such consolidation or merger) or shall sell or transfer all
or substantially all its assets to any other corporation, lawful
provision shall be made as a part of the terms of such
transaction whereby the holders of shares of the Series C Stock
shall receive upon conversion thereof, in lieu of each share of
Common Stock which would have been issuable upon conversion of
such stock if converted immediately prior to the consummation of
such transaction, the same kind and amount of stock (or other
securities, cash, or property, if any) as may be issuable or
distributable in connection with such transaction with respect to
each share of Common Stock outstanding at the effective time of
such transaction.
3E. Converted Shares and Common Stock Held for Conversion.
Any shares of Series C Stock which at any time have been
converted shall be canceled, may not be reissued as Series C
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock, for the purpose of issuance upon conversion of shares of
Series C Stock then outstanding and shall take all action
necessary so that shares of Common Stock so issued will be
validly issued, fully paid and nonassessable.
Part 4. Voting Rights.
The Series C Stock shall have no voting rights, except as
required in the specific instance by the Delaware Revise Statutes
and except the right to approve by majority vote of the holders
of the Series C Stock: the authorization and issuance of any
class or series of Preferred Stock senior to the Series C Stock
which is not authorized and issued as of March 1, 1996; any
amendment, modification, or repeal of the articles of
incorporation of the Corporation if the powers, preferences, or
special rights of the Series C Stock would be adversely affected;
and, the imposition of any restriction on the Series C Stock,
other than restrictions arising under the Delaware Revised
Statutes or existing under the articles of incorporation as in
effect at March 1, 1996.
Part 5. Redemption.
5A. Redemption Price. For each share of Series C Stock
which is to be redeemed, the Corporation will be obligated on the
Redemption Date (as defined below) to pay to the holder thereof
(upon surrender by such holder at the Corporation's principal
office or to the Corporation's transfer agent of the certificates
representing such shares of Series C Stock) an amount in
immediately available funds equal to the Face Value thereof plus
all accrued dividends as of the Redemption Date; provided, that
if redemption is effected pursuant to Part 5F of this Section
III, the amount payable on the Redemption Date shall be 120% of
the Face Value plus all accrued dividends as of that date.
5B. Notice of Redemption. The Corporation will mail
written notice of each redemption of Series C Stock to each
record holder of Series C Stock not more than sixty (60) nor less
than ten (10) days prior to the date on which such redemption is
to be made. The date specified in such notice for redemption is
herein referred to as the "Redemption Date."
5C. Termination of Rights. On the Redemption Date all
rights pertaining to the Series C Stock, including, but not
limited to, any right of conversion, will cease, and such Series
C Stock will not be deemed to be outstanding.
5D. Redeemed or Otherwise Acquire Shares. Any shares of
Series C Stock which are redeemed or otherwise acquired by the
Corporation shall be canceled, may not be reissued as Series C
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series.
5E. Optional Redemption. Except as provided in Part 5F of
this Section III, the Corporation may, at any time after April 1,
1997, redeem all or any portion of the Series C Stock.
5F. Redemption upon Specific Event. In the event any
shares of the Series C Stock are submitted for conversion under
Part 3 of this Section III and the market price for the Common
Stock on the Conversion Date as determined under Part 3B of this
Section III is less than $2.00 per share, the Corporation may, at
its option, elect to redeem the Series C Stock tendered for
conversion rather than convert the shares.
Part 6. Definitions Applicable to Section III.
"Business Day" shall mean a day other than a Saturday,
Sunday or other day on which commercial banks in New York, New
York are authorized by law to close.
"Common Stock" means the Common Stock, $0.0001 par value per
share, of the Corporation and any capital stock of any class of
the Corporation hereafter authorized which is not limited to a
fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in
the distribution or assets upon any liquidation, dissolution, or
winding up of the Corporation.
"Face Value" of any Series C Stock as of any particular date
will be equal to $20,000 per share.
"Junior Securities" means any of the Corporation's equity
securities other than the Series A Stock and Series B Stock.
"Liquidation Value" of any Series C Stock as of any
particular date will be equal to $20,000 per share.
"Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture,
an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
IV. SERIES D PREFERRED STOCK
Designation; Number of Shares. The designation of such
series of Preferred Stock shall be "Series D Convertible
Preferred Stock" (hereinafter referred to as the "Series D
Stock") and the number of authorized shares constituting the
Series D Stock is Forty-Four (44). The Series D Stock shall be
deemed a separate class of Preferred Stock, and shall be apart
from any other series of Preferred Stock.
Part 1. Liquidation.
Upon any liquidation, dissolution, or winding up of the
Corporation, the holders of Series D Stock will be entitled to be
paid, after any distribution or payment is made upon any Senior
Securities and before any distribution or payment is made upon
Junior Securities (as defined below under this Section IV), an
amount in cash equal to the aggregate Liquidation Value (as
defined below under this Section IV) of all shares of Series D
Stock outstanding, and the holders of Series D Stock will not be
entitled to any further payment. If upon any such liquidation,
dissolution, or winding up of the Corporation, the Corporation's
assets to be distributed among the holders of Series D Stock are
insufficient to permit payment to such holders of the aggregate
amount which they are entitled to be paid, then the entire assets
to be distributed will be distributed ratably among such holders
based upon the aggregate Liquidation Value of the Series D Stock
held by each such holder. The Corporation will mail written
notice of such liquidation, dissolution, or winding up not less
then 30 days prior to the payment date stated therein, to each
record holder of Series D Stock. Neither the consolidation or
merger of the Corporation into or with any other corporation or
corporations, nor the sale or transfer by the Corporation of all
or any part of its assets, nor the reduction of the capital stock
of the Corporation, will be deemed to be liquidation,
dissolution, or winding up of the Corporation within the meaning
of Part 1 of this Section IV.
Part 2. Dividends.
2A. Entitlement. The holders of Series D Stock, shall be
entitled to receive cumulative dividends. Such dividends shall
be paid to the holders in cash or in-kind through the issuance of
Common Stock, as determined at the election of the Corporation,
on conversion of the Series D Stock in accordance with Part 3 of
Section IV, below, except as provided in Part 5 of Section IV,
below.
2B. Accrual Rate. Dividends on each share of Series D
Stock shall accrue on a daily basis at the rate of 8.000% per
annum of the Face Value (as defined below under this Section IV),
from and including the Date of Issuance of such share to and
including the date on which the Redemption Price (as defined
below) of such share is paid or the date on which such share is
converted into Common Stock. Such dividends shall accrue whether
or not they have been declared and whether or not there are
profits, surplus or other funds of the Corporation legally
available for the payment of dividends. The date on which the
Corporation initially issues any share of the Series D Stock will
be deemed to be its "Date of Issuance" as that term is used
herein, regardless of the number of times transfer of any such
share is made on the stock records maintained by or for the
Corporation and regardless of the number of certificates which
may be issued to evidence any such share.
Part 3. Conversion Rights.
3A. Conversion Procedure. Subject to the provisions set
forth below, each share of Series D Stock shall be convertible at
the option of the holder thereof, in the manner hereinafter set
forth, into that number of fully paid and nonassessable shares of
Common Stock determined as set forth below. Any holder of Series
D Stock desiring to convert such shares into shares of Common
Stock shall surrender the certificate or certificates for the
shares being converted, duly endorsed or assigned to the
Corporation or in blank, at the principal office of the
Corporation or at the bank or trust company appointed by the
Corporation for that purpose, accompanied by a written notice of
conversion specifying the number of shares of Series D Stock to
be converted (provided that the number of shares tendered for
conversion at any one time shall not be less than $100,000 in
Face Value) and the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be
issued. The date of execution of the notice of conversion and
delivery thereof to the Corporation by facsimile transmission at
(212) 508-3540 shall be the "Conversion Date"; provided, that if
the certificate representing the shares of Series D Stock to be
converted as stated in the notice of conversion is not received
by the Corporation or its designated agent within three business
days of receiving said facsimile transmission, the Conversion
Date shall be the date on which the Series D Stock certificates
are actually received by the Corporation or agent. After the
receipt of such notice of conversion and the certificates for the
Series D Stock converted, the Corporation shall promptly issue
and deliver or cause to be issued and delivered to such holder a
certificate or certificates for shares of Common Stock resulting
from such conversion. In case less than all of the shares of
Series D Stock represented by a certificate are to be converted
by a holder, upon such conversion the Corporation shall also
deliver or cause to be delivered to such holder a certificate or
certificates for the shares of Series D Stock not so converted.
The Corporation shall pay all transfer agent fees and expenses
payable upon the conversion of Series D Stock.
3B. Conversion Rate. The number of shares issuable on
conversion of the Series D Stock shall be determined by dividing
the Face Value of the Series D Stock being converted plus (if the
Corporation elects to paid accrued dividends in-kind with Common
Stock) the amount of accrued dividends on such Face Amount as of
the Conversion Date, by the lesser of (i) $5.210625, or (ii) 80%
of the market price on the Conversion Date. For purposes of Part
3B of this Section IV, "market price" on a given date shall be
the average closing bid prices of the Common Stock for the five
NASDAQ trading days immediately preceding the applicable date as
reported by the National Association of Securities Dealers
Automated Quotation System or such other inter-dealer quotation
system as may report quotations on the Common Stock. In the
event any fractional share of Common Stock would become issuable
under the calculation contained in this Part 3B of this Section
IV, the number of shares issuable shall be rounded up to the
nearest whole number.
3C. Conversion Dates The right to convert the Series D
Stock into shares of Common Stock shall vest over a 100-day
period following the Date of Issuance as set forth below:
(i) With respect to 50% of the shares of Series D Stock
held, shall commence 70 days following the Date of Issuance; and
(ii) With respect to any remaining shares of Series D Stock
held, shall commence 100 days following the Date of Issuance.
Any shares of Series D Stock that remain outstanding at 12:01
a.m., New York City time on June 1, 1998, shall there upon be
automatically converted to Common Stock without any action on the
part of the holder thereof, and all certificates that theretofore
represented shares of Series D Stock shall represent only the
right to receive shares of Common Stock on surrender of the
certificates to the Corporation as provided in Part 3 of this
Section IV.
3D. Fundamental Changes. In case the Corporation shall
effect any stock split, reverse stock split, or capital
reorganization of the Common Stock, or shall consolidate, merge,
or engage in a statutory share exchange with or into any other
corporation (other than a consolidation, merger, or share
exchange in which the Corporation is the surviving corporation
and each share of Common Stock outstanding immediately prior to
such consolidation or merger is to remain outstanding immediately
after such consolidation or merger) or shall sell or transfer all
or substantially all its assets to any other corporation, lawful
provision shall be made as a part of the terms of such
transaction whereby the holders of shares of the Series D Stock
shall receive upon conversion thereof, in lieu of each share of
Common Stock which would have been issuable upon conversion of
such stock if converted immediately prior to the consummation of
such transaction, the same kind and amount of stock (or other
securities, cash, or property, if any) as may be issuable or
distributable in connection with such transaction with respect to
each share of Common Stock outstanding at the effective time of
such transaction.
3E. Converted Shares and Common Stock Held for Conversion.
Any shares of Series D Stock which at any time have been
converted shall be canceled, may not be reissued as Series D
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series.. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock, for the purpose of issuance upon conversion of shares of
Series D Stock then outstanding and shall take all action
necessary so that shares of Common Stock so issued will be
validly issued, fully paid and nonassessable.
Part 4. Voting Rights.
The Series D Stock shall have no voting rights, except as
required in the specific instance by the Delaware Revise Statutes
and except the right to approve by majority vote of the holders
of the Series D Stock: the authorization and issuance of any
class or series of Preferred Stock senior to the Series D Stock
which is not authorized as of June 1, 1996; any amendment,
modification, or repeal of the articles of incorporation of the
Corporation if the powers, preferences, or special rights of the
Series D Stock would be adversely affected; and, the imposition
of any restriction on the Series D Stock, other than restrictions
arising under the Delaware Revised Statutes or existing under the
articles of incorporation as in effect at June 1, 1996.
Part 5. Redemption.
5A. Redemption Price. For each share of Series D Stock
which is to be redeemed, the Corporation will be obligated on the
Redemption Date (as defined below) to pay to the holder thereof
(upon surrender by such holder at the Corporation's principal
office or to the Corporation's transfer agent of the certificates
representing such shares of Series D Stock) an amount in
immediately available funds equal to 120% of the Liquidation
Value thereof plus all accrued dividends as of the Redemption
Date.
5B. Redemption upon Specific Event. In the event any
shares of the Series D Stock are submitted for conversion under
Part 3 of this Section IV and the market price for the Common
Stock on the Conversion Date as determined under Part 3B of this
Section IV is less than $2.00 per share, the Corporation may, at
its option, elect to redeem the Series D Stock tendered for
conversion rather than convert the shares.
5C. Notice of Redemption. The Corporation will mail
written notice of redemption of Series D Stock to the record
holder submitting the Series D Stock to the Corporation for
conversion not later than the close of the next Business Day
following the date on which the shares of Series D Stock are
tendered to the Corporation for conversion. The date specified
in such notice for redemption is herein referred to as the
"Redemption Date."
5D. Termination of Rights. On the Redemption Date all
rights pertaining to the Series D Stock, including, but not
limited to, any right of conversion, will cease, and such Series
D Stock will not be deemed to be outstanding.
5E. Redeemed or Otherwise Acquire Shares. Any shares of
Series D Stock which are redeemed or otherwise acquired by the
Corporation shall be canceled, may not be reissued as Series D
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series.
Part 6. Definitions Applicable to Section IV.
"Business Day" shall mean a day other than a Saturday,
Sunday or other day on which commercial banks in New York, New
York are authorized by law to close.
"Common Stock" means the Common Stock, $0.0001 par value per
share, of the Corporation and any capital stock of any class of
the Corporation hereafter authorized which is not limited to a
fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in
the distribution or assets upon any liquidation, dissolution, or
winding up of the Corporation.
"Junior Securities" means any of the Corporation's equity
securities other than the Senior Securities.
"Liquidation Value" of any Series D Stock as of any
particular date will be equal to $50,000 per share.
"Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture,
an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Senior Securities" means the Corporation's Series A Stock,
Series B Stock, and Series C Stock.
V. SERIES E PREFERRED STOCK
Designation; Number of Shares. The designation of such
series of Preferred Stock shall be "Series E Convertible
Preferred Stock" (hereinafter referred to as the "Series E
Stock") and the number of authorized shares constituting the
Series E Stock is Five Hundred Seventy-Five Thousand (575,000).
The Series E Stock shall be deemed a separate class of Preferred
Stock, and shall be apart from any other series of Preferred
Stock.
Part 1. Liquidation.
Upon any liquidation, dissolution, or winding up of the
Corporation, the holders of Series E Stock will be entitled to be
paid, after any distribution or payment is made upon any Senior
Securities and before any distribution or payment is made upon
Junior Securities (as defined below under this Section V), an
amount in cash equal to the aggregate Liquidation Value (as
defined below under this Section V) of all shares of Series E
Stock outstanding, and the holders of Series E Stock will not be
entitled to any further payment. If upon any such liquidation,
dissolution, or winding up of the Corporation, the Corporation's
assets to be distributed among the holders of Series E Stock are
insufficient to permit payment to such holders of the aggregate
amount which they are entitled to be paid, then the entire assets
to be distributed will be distributed ratably among such holders
based upon the aggregate Liquidation Value of the Series E Stock
held by each such holder. The Corporation will mail written
notice of such liquidation, dissolution, or winding up not less
than 30 days prior to the payment date stated therein, to each
record holder of Series E Stock. Neither the consolidation or
merger of the Corporation into or with any other corporation or
corporations, nor the sale or transfer by the Corporation of all
or any part of its assets, nor the reduction of the capital stock
of the Corporation, will be deemed to be liquidation,
dissolution, or winding up of the Corporation within the meaning
of Part 1 of this Section V.
Part 2. Conversion Rights.
2A. Conversion Procedure. Subject to the provisions set
forth below, each share of Series E Stock shall be convertible at
the option of the holder thereof, in the manner hereinafter set
forth, into that number of fully paid and nonassessable shares of
Common Stock determined as set forth below. Any holder of Series
E Stock desiring to convert such shares into shares of Common
Stock shall surrender the certificate or certificates for the
shares being converted, duly endorsed or assigned to the
Corporation or in blank, at the principal office of the
Corporation or at the bank or trust company appointed by the
Corporation for that purpose, accompanied by a written notice of
conversion specifying the number of shares of Series E Stock to
be converted and the name or names in which such holder wishes
the certificate or certificates for shares of Common Stock to be
issued; in case such notice shall specify a name or names other
than that of such transfer taxes payable upon the issue of shares
of Common Stock in such name or names. After the receipt of such
notice of conversion, the Corporation shall, within thirty (30)
days after receipt of such notice, issue and deliver or cause to
be issued and delivered to such holder a certificate or
certificates for shares of Common Stock resulting from such
conversion. In case less than all of the shares of Series E
Stock represented by a certificate are to be converted by a
holder, upon such conversion the Corporation shall also deliver
or cause to be delivered to such holder a certificate or
certificates for the shares of Series E stock not so converted.
2B. Conversion Privilege and Rate. The right to convert
the Series E Stock into shares of Common Stock shall vest
immediately on the date of issuance of the Series E Stock. Each
share of Series E Stock is convertible into One (1) newly issued
share of Common Stock of the Corporation (the "Conversion Rate"),
which is subject to adjustment as provided in Part 2C of this
Section V, below; provided, however, that shares of Series E
Stock may be converted into shares of Common Stock only after the
holder of such shares of Series E Stock shall have certified to
the Corporation that it is not a "bank holding company" or a
"subsidiary" of a "bank holding company" within the meaning of
Section 4 of the Bank Holding Company Act of 1954, as amended,
and Regulation Y promulgated thereunder, or one of the following
shall have occurred: (1) the bona fide sale to any purchaser
(including, without limitation, any underwriter) of such shares
of Series E Stock (x) pursuant to a registration statement
declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"),
covering the offer and sale of the Corporation's common stock in
a bona fide public offering, or (y) pursuant to Rules 144 and
144A promulgated under the Act, or in a public distribution
pursuant to Regulation A of the General Rules and Regulations
under the Act; (2) the bona fide sale to any purchaser of such
shares of Series E Stock in a transaction not involving a sale of
the Corporation's common stock to the public, provided that such
purchaser does not immediately after such transaction hold shares
of Common Stock (including any shares converting to Common Stock
in accordance herewith) equaling two percent (2%) or more of the
then-outstanding shares of Common Stock; or (3) the receipt by
the Corporation of (y) a staff opinion, ruling or other written
advice from the Board of Governors of the Federal Reserve System,
or from the appropriate Federal Reserve Bank, or (z) an opinion
of counsel experienced in bank regulatory matters, in each case
to the effect that such shares of Series E Stock may be converted
into shares of Common Stock without violation of Section 4 of the
Bank Holding Company Act of 1954, as amended, and Regulation Y
promulgated thereunder.
2C. Adjustment of Conversion Rate. The Conversion Rate is
subject to adjustment from time to time upon the occurrence of
any of the events enumerated in Part 2C of this Section V. Such
adjustments shall be made in respect of any such events occurring
from and after the date on which any warrants to purchase shares
of Series E Stock are first issued and shall be applicable to all
authorized shares of Series E Stock whether or not any such
shares are issued and outstanding.
a. Adjustment for Change in Capital Stock of the
Corporation. If the Corporation (i) pays a dividend or makes a
distribution on any class of its Common Stock in shares of any
class of its Common Stock, (ii) subdivides its outstanding shares
of any class of Common Stock into a greater number of shares,
(iii) combines its outstanding shares of any class of Common
Stock into a smaller number of shares, (iv) makes a distribution
on any class of its Common Stock in shares of its Stock other
than Common Stock, or (v) issues by reclassification of any class
of its Common Stock any shares of its Stock, then the Conversion
Rate in effect immediately prior to such action shall be
proportionately adjusted so that any holder of any Series E Stock
(a "Holder") thereafter exercised may receive the aggregate
number and kind of shares of capital stock of the Corporation
which it would have owned immediately following such action if
such Series E Stock had been issued and outstanding (if not then
issued and outstanding) and converted immediately prior to such
action. Such adjustment shall be made successively whenever any
event listed above shall occur, and shall become effective
immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case
of a subdivision, combination or reclassification. If after an
adjustment a Holder may receive shares of two or more classes of
capital stock of the Corporation, the Board of Directors of the
Corporation shall determine in the good faith exercise of its
reasonable business judgment the allocation of the adjusted
Conversion Rate between the classes of capital stock. After such
allocation, the exercise privilege and the Conversion Rate of
each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those in Part 2C of this
Section V.
b. Adjustment for Common Stock Issues. If the Corporation
issues shares of Common Stock for a consideration per share less
than the Fair Market Value per Share (as defined in paragraph (1)
of Part 2C of this Section V) on the date the Corporation fixes
the offering price of such additional shares, the Conversion Rate
shall be adjusted in accordance with the following formula:
E' = E x A
______
P
_
O + M
where:
E' = the adjusted Conversion Rate;
E = the then current Conversion Rate;
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares;
P = the aggregate consideration received for the issuance of such
additional shares;
M = the Fair Market Value per Share on the date the Corporation
fixes the offering price of such additional shares; and
A = the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares.
The adjustment shall be made successively whenever any such
issuance is made, and shall become effective immediately after
such issuance. The provisions of this subsection (b) do not
apply (i) to any of the transactions described in subsection (a)
of Part 2C of this Section V or (ii) any transaction for which an
adjustment has been made pursuant to the provisions of paragraphs
(c) or (d) of Part 2C of this Section V or (iii) the issuance of
any Excluded Shares (as defined in paragraph (l) of Part 2C of
this Section V).
c. Adjustment for Convertible Securities Issues. If the
Corporation issues any evidences of indebtedness, shares of stock
or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or
property, for shares of Stock, either immediately or upon the
occurrence of a specified date or a specified event ("Convertible
Securities"), other than shares of Series E Stock for which an
adjustment has been made pursuant to the provisions of subsection
(d) of Part 2C of this Section V, whether or not the right to
convert or exchange thereunder is immediately exercisable or is
conditioned upon the passage of time, the occurrence or
non-occurrence of some other event, or both, for a consideration
per share of Stock initially deliverable upon conversion or
exchange of such Convertible Securities less than the Fair Market
Value per Share on the date of issuance of such Convertible
Securities, the Conversion Rate shall be adjusted in accordance
with this formula:
E' = E x O + D
_____
P
_
O + M
where:
E' = the adjusted Conversion Rate;
E = the then current Conversion Rate;
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such Convertible Securities;
P = the aggregate consideration received for the issuance of such
Convertible Securities; and
M = the Fair Market Value per Share on the date of issuance of
such Convertible Securities; and
D = the maximum number of shares of Common Stock deliverable upon
exercise, conversion or in exchange of such Convertible
Securities at the Minimum Price.
In this subsection (c), the term "Minimum Price" means the lowest
price at which the Convertible Securities can be converted into
or exchanged for Common Stock, regardless of whether that is the
initial rate or is conditioned upon the passage of time, the
occurrence or non-occurrence of some other event, or both. The
adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such
issuance. If all of the Stock deliverable upon conversion or
exchange of such Convertible Securities has not been issued when
such Convertible Securities are no longer outstanding, then the
Conversion Rate shall promptly be readjusted to the Conversion
Rate which would then be in effect had the adjustment upon the
issuance of such Convertible Securities been made on the basis of
the actual number of shares of Stock issued upon conversion or
exchange of such Convertible Securities.
d. Adjustment for Right, Option and Warrant Issues. If
the Corporation issues any rights, options or warrants to
subscribe for or purchase or otherwise acquire Stock, whether or
not the right to exercise such rights, options or warrants is
immediately exercisable or is conditioned upon the passage of
time, the occurrence or non-occurrence of some other event, or
both (the "Option Securities"), for a consideration per share of
Stock initially deliverable upon exercise of such Option
Securities less than the Fair Market Value per Share on the date
of issuance of such Option Securities, the Conversion Rate shall
be adjusted in accordance with this formula:
E' = E x O + D
_____
P
_
O + M
where:
E' = the adjusted Conversion Rate;
E = the then current Conversion Rate;
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such Option Securities;
P = the aggregate consideration received for the issuance of such
Option Securities;
M = the Fair Market Value per Share on the date of issuance of
such Option Securities; and
D = the maximum number of shares of Common Stock deliverable upon
exercise, conversion or in exchange of such Option Securities at
the Minimum Price.
As used in this subsection (d), the term "Minimum Price" means
the lowest price at which the Option Securities may be exercised
to purchase or otherwise acquire Common Stock, regardless of
whether that is the initial price or is conditioned upon the
passage of time, the occurrence or non-occurrence of some other
event, or both. The adjustment shall be made successively
whenever any such issuance is made, and shall become effective
immediately after such issuance. If all of the Common Stock
deliverable upon exercise of such Option Securities has not been
issued when such Option Securities are no longer outstanding,
then the Conversion Rate shall promptly be readjusted to the
Conversion Rate which would then be in effect had the adjustment
upon the issuance of such Option Securities been made on the
basis of the actual number of shares of Common Stock issued upon
such exercise of such Option Securities.
e. Consideration Received. For purposes of any
computation respecting consideration received pursuant to any
subsection of Part 2C of this Section V, the following shall
apply:
(1) in the case of the issuance of shares of Common Stock
for cash, the consideration received shall be the amount of cash
received by the Corporation therefor, without deduction therefrom
of any reasonable expenses incurred by the Corporation in
connection therewith or any reasonable underwriters' discounts,
fees and commissions paid or allowed by the Corporation in
connection therewith.
(2) in the case of the issuance of shares of Common Stock
for a consideration consisting in whole or in part of other than
cash, the consideration other than cash shall be deemed to be the
fair market value thereof as determined by the Board of Directors
of the Corporation in the good faith exercise of its business
judgment, without deduction therefrom of any reasonable expenses
incurred by the Corporation in connection therewith. In any
circumstances in which the fair market value of any such
consideration is to be determined pursuant to this paragraph (2),
the Corporation shall give to the Holders (or, if such
determination affects less than all of the Holders, to the
Holders so affected) written notice of the proposed fair market
value, as determined in good faith by the Board of Directors of
the Corporation. If, within thirty (30) days after the date such
notice is given, the Corporation and such Holders agree upon the
fair market value then the fair market value for purposes of this
paragraph (2) shall be as so agreed. If such Holders and the
Corporation do not agree upon such fair market value within such
30-day period, then the Required Holders (as defined in paragraph
(l) of Part 2C of this Section V) and the Corporation shall
appoint a recognized investment banking firm of national
reputation, reasonably acceptable to the Required Holders and the
Corporation. If the Corporation and the Required Holders cannot
agree on the appointment of a mutually acceptable investment
banking firm, or if the firm so appointed declines or fails to
serve, then the Required Holders and the Corporation shall each
choose one such investment banking firm and the respective firms
so chosen shall appoint another recognized investment banking
firm of national reputation. The investment banking firm so
selected shall appraise the fair market value for the purposes of
this paragraph (2), and such investment banking firm shall make
such appraisal (which shall be in the form of a written report
signed by such investment banking firm) and, for the purposes of
determining the fair market value pursuant to this paragraph (2),
such appraised fair market value determined as herein provided
shall be final and conclusive on the Corporation and the Holders.
If the fair market value of the consideration as determined by
such investment banking firm is equal to or less than that
determined by the Board of Directors of the Corporation in
accordance with this paragraph (2), then all fees and expenses of
such investment banking firm shall be paid by the Required
Holders requesting such appraisal. If the appraised fair market
value of the consideration as determined by such investment
banking firm is greater than that determined by the Board of
Directors in accordance with this paragraph (2), then all fees
and expenses of such investment banking firm shall be paid by the
Corporation.
(3) in the case of the issuance of Convertible Securities
or securities issuable upon the exercise of Option Securities,
the aggregate consideration received therefor shall be deemed to
be the consideration received by the Corporation for the issuance
of such Convertible Securities, plus the consideration, if any,
received by the Corporation for the issuance of such Option
Securities, plus the additional minimum consideration, if any, to
be received by the Corporation upon the conversion, exchange or
exercise thereof (the consideration in each case to be determined
in the same manner as provided in clauses (1) and (2) of this
subsection (e)).
f. Special Adjustments. If the purchase price provided
for in any Option Securities, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible
Securities or the rate at which any Convertible Securities are
convertible into or exchangeable for Stock shall change, the
Conversion Rate in effect at the time of such event shall
forthwith be readjusted. The Conversion Rate shall be adjusted
to those amounts which would have been in effect at such time had
such Option Securities or Convertible Securities outstanding at
such time initially been granted, issued or sold and the
Conversion Rate initially adjusted as provided in the applicable
subsection of Part 2C of this Section V, whichever was
applicable, except that the minimum amount of additional
consideration payable and the total maximum number of shares
issuable shall be determined after giving effect to such event
(and any prior event or events).
g. When No Adjustment Required. No adjustment need be
made for a change in the par value or absence of par value of any
Common Stock. No adjustment in the Conversion Rate need be made
unless adjustment would require an increase or decrease of at
least 1% of the Conversion Rate. Any adjustments that are not
made but deferred pursuant to this subsection shall be carried
forward and taken into account in any subsequent adjustment.
h. Determination of Fair Market Value per Share; Notice of
Adjustment. Prior to issuing any shares of Common Stock, any
Convertible Securities or any Option Securities, the Corporation
shall cause the Board of Directors of the Corporation to
determine in good faith the Fair Market Value per Share, as of
the date on which the Corporation fixes the offering price of
such shares or as of the date of issuance of such Convertible
Securities or Option Securities, as the case may be. Within five
(5) days of such determination by the Board of Directors of the
Corporation, but in no event later than thirty (30) days prior to
issuance of such Common Stock, Convertible Securities or Option
Securities, the Corporation shall give the Holders written notice
of the proposed Fair Market Value per Share. If within such
thirty (30) day period, the Corporation and such Holders agree
upon the Fair Market Value per Share, then the Fair Market Value
per Share shall be as so agreed. If, within such thirty (30) day
period, the Corporation and the Required Holders (as defined in
paragraph (l) of Part 2C of this Section V) do not agree upon
such Fair Market Value per Share, then the Fair Market Value per
Share shall be determined as provided in clause (b) of the
definition thereof.
i. When Issuance or Payment May Be Deferred. In any case
in which Part 2C of this Section V shall require that an
adjustment in the Conversion Rate be made effective as of a
record date for a specified event, the Corporation may elect to
defer until the occurrence of such event (i) issuing to the
Holder of any Series E Stock converted after such record date the
shares of Stock issuable upon such conversion over and above the
shares of Stock issuable upon such conversion on the basis of the
Conversion Rate prior to such adjustment and (ii) paying to such
Holder any amount in cash in lieu of a fractional share pursuant
to paragraph (j), provided, however, that the Corporation shall
deliver to such Holder a bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares
of stock and cash upon the occurrence of the event requiring such
adjustment.
j. Fractional Interests. The Corporation shall not be
required to issue fractional shares of Common Stock on the
conversion of the Series E Stock. If more than one share
certificate shall be presented for conversion in full at the same
time by the same Holder, the number of full shares of Common
Stock which shall be issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares issuable
on conversion of the Series E Stock evidenced by all share
certificates so presented. If any fraction of the shares of
Common Stock would, except for the provisions of Part 2C of this
Section V, be issuable on conversion of any shares of Series E
Stock (or specified portion thereof), the Corporation shall pay
an amount in cash equal to the Fair Market Value per Share on the
day immediately preceding the date the share certificate
evidencing such Series E Stock is presented for conversion,
multiplied by such fraction.
k. Par Value of Common Stock. Before taking any action
which (i) would cause an adjustment in the Conversion Rate
pursuant to Part 2C of this Section V such that the aggregate par
value of the shares of Common Stock (including fractional shares)
into which a share of Series E Stock is convertible is greater
than $0.02 per share or (ii) would otherwise result in the par
value of the Common Stock increasing to greater than $0.02 per
share, the Corporation shall receive the consent of the Required
Holders to such adjustment or change in the par value of the
Common Stock and shall take any corporate action necessary in
order that the Corporation may validly and legally issue fully
paid and nonassessable shares of Common Stock on the basis of the
Conversion Rate as so adjusted.
l. Definitions. For purposes of Part 2C of this Section
V, the following terms shall have the following meanings:
(1) "Excluded Shares" means (i) shares of Common Stock to
be issued upon exercise or conversion of the Corporation's Series
A Convertible Preferred Stock, Series B Convertible Preferred
Stock, Series C Convertible Preferred Stock, Series D Convertible
Preferred Stock, Series E Stock, and warrants to purchase Series
E Stock, (ii) shares of Stock issued on exercise of warrants to
purchase Common Stock which the Board of Directors has, by
resolution duly adopted prior to May 31, 1996, authorized to be
granted or issued, not to exceed 809,711 shares, and (iii) shares
of Stock issued to officers, directors, or employees of, or
consultants to, the Corporation upon exercise of any stock option
granted on or prior to May 31, 1996, not in excess of 1,151,113
shares, plus shares issued or options granted to employees
pursuant to a stock option plan approved in good faith by the
Board of Directors of the Corporation after May 31, 1996, not
exceeding 500,000 shares.
(2) "Fair Market Value per Share" means the fair market
value of a share of Common Stock of the Corporation, and shall be
equal to the quotient of (i) the fair market value of the
Corporation and its subsidiaries taken as a whole on the date of
determination, taking into account all the factors relevant
thereto, including, without limitation, the highest of the prices
that could be obtained from an arms' length sale without time
constraints of (A) all or substantially all of the assets of the
Corporation and the subsidiaries subject to or after satisfaction
of all liabilities of the Corporation and the subsidiaries or (B)
all of the Fully Diluted Shares of Common Stock of the
Corporation, whether by stock sale, merger, consolidation or
otherwise, divided by (ii) the number of Fully Diluted Shares of
Common Stock on the date of determination. In no event shall the
Fair Market Value per Share be reduced or discounted on the basis
that any securities to be valued on the basis of such Fair Market
Value per Share may represent the fight to acquire a minority
interest in the Corporation or may not be freely transferable
under federal or state securities laws, or for any other reason.
The Fair Market Value per Share shall be determined as provided
in clause (X) or (Y) below, as applicable.
(X) In any circumstances in which the Fair Market
Value per Share is required to be determined, not later than ten
(10) days following the date as of which such determination is
required to be made, the Board of Directors of the Corporation
shall determine in good faith the Fair Market Value per Share,
and the Corporation shall give to the Holders (or, if such
determination affects less than all of the Holders, to the
Holders so affected) prompt written notice of such determination.
If within thirty (30) days after the date such notice is given,
the Corporation and the Required Holders agree upon the Fair
Value per Share, then the Fair Market Value per Share shall be as
so agreed. If within such 30-day period, the Corporation and the
Required Holders do not agree upon such Fair Market Value per
Share, then the Fair Market Value per Share shall be determined
as provided in clause (Y) of this definition.
(Y) If the Required Holders and the Corporation do not
agree upon such Fair Market Value per Share within the 30-day
period specified in clause (X) of this definition, then the
Required Holders and the Corporation shall appoint a recognized
investment banking firm of national reputation, reasonably
acceptable to the Required Holders and the Corporation. If the
Corporation and the Required Holders cannot agree on the
appointment of a mutually acceptable investment banking firm, or
if the firm so appointed declines or fails to serve, then the
Required Holders and the Corporation shall each choose one such
investment banking firm and the respective firms so chosen shall
appoint another recognized investment banking firm of national
reputation. The investment banking firm so selected shall
appraise the value of the Corporation (which shall be in the form
of a written report signed by such investment banking firm), and
such appraised value of the Corporation determined as herein
provided shall be final and conclusive and binding on the
Corporation and the Holders. If the appraised value of the
Corporation as determined by such investment banking firm is
equal to or less than that determined by the Board of Directors
of the Corporation in accordance with clause (X) of this
definition, then all fees and expenses of such investment banking
firm shall be paid by the Required Holders requesting such
appraisal. If the appraised value of the Corporation as
determined by such investment banking firm is greater than that
determined by the Board of Directors in accordance with clause
(X) of this definition, then all fees and expenses of such
investment banking firm shall be paid by the Corporation.
(3) "Fully Diluted Shares" means, as of any date of
determination, the number of shares of Common Stock of the
Corporation equal to the sum of (i) the number of shares of
Common Stock outstanding on such date of determination, plus (ii)
the number of shares issuable upon conversion of the Series E
Stock as of such date of determination, plus (iii) the number of
shares of Common Stock that would be issued in respect of all
Option Securities of the Corporation outstanding and immediately
exercisable as of such date of determination if such Option
Securities were to be converted into shares of Common Stock in
accordance with the following formula:
X = Y(A-B)
______
A
where:
X = the number of shares to be issued to the holders of such
Option Securities;
Y = the number of shares for which such Option Securities are
exercisable;
A = the Fair Market Value per Share determined on the basis of
the then outstanding Common Stock and assuming that all Option
Securities outstanding are converted to Common Stock as of the
date of determination: and
B = the exercise price for such Option Securities.
(4) "Required Holders" means the Holders holding at least
66-2/3% of the Series E Stock outstanding.
(5) "Stock" means any capital stock of the Corporation.
2D. Conversion Date. Conversion shall be deemed to have
been made as of the date of surrender of certificates for the
shares of Series E Stock to be converted, and the giving of
written notice as prescribed in Part 2A of this Section V, and
the person entitled to receive the Common Stock issuable upon
such conversion shall be treated for all purposes as the record
holder of such Common Stock on such date. The Corporation shall
not be required to deliver certificates for shares of its Common
Stock while the stock transfer books for such stock or for the
Series E Stock are duly closed for any purpose, but certificates
for shares of Common Stock shall be issued and delivered as soon
as practicable after the opening of such books.
2E. Converted Shares and Common Stock Held for Conversion.
Any shares of Series E Stock which at any time have been
converted shall be canceled, may not be reissued as Series E
Stock, and shall be returned to the status of authorized and
unissued shares of Preferred Stock without designation as to
series. The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common
Stock, for the purpose of issuance upon conversion of shares of
Series E Stock then outstanding and shall take all action
necessary so that shares of Common Stock so issued will be
validly issued, fully paid and nonassessable.
2F. Taxes. The Corporation will pay any and all stamp or
similar taxes that may be payable in respect of the issuance or
delivery of shares of Common Stock on conversion of shares of
Series E Stock. The Corporation shall not, however, be required
to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of shares of Common Stock
in a name other than that in which the shares of Series E Stock
so converted were registered, and no such issuance or delivery
shall be made unless and until the person requesting such
issuance has paid to the Corporation the amount of any such tax
or has established to the satisfaction of the Corporation that
such tax has been paid.
Part 3. Dividends.
If the Corporation pays a dividend or makes a distribution
to the holders of its Common Stock of any securities (other than
capital stock for which an adjustment in the Conversion Rate is
made pursuant to Part 2C of this Section V) or property
(including cash or securities of other companies) of the
Corporation, or any rights, options or warrants to subscribe for
or purchase securities or property (including securities of other
companies) of the Corporation, then, simultaneously with the
payment of such dividend or the making of such distribution the
Corporation will pay or distribute to the holders of record of
the Series E Stock an amount of property (including, without
limitation, cash) and/or securities (including, without
limitation, securities of other companies) of the Corporation as
would have been received by such holders had they exercised their
conversion rights and converted such shares of Series E Stock
into Common Stock immediately prior to the record date used for
determining stockholders of the Corporation entitled to receive
such dividend or distribution. The dividend payable on each
share of Series E Stock outstanding on the record date for
determining those persons entitled to receive a dividend on
Common Stock (or on the date the dividend is paid if no record
date is set), shall be equal to the product of the dividend per
share of Common Stock multiplied by the Conversion Rate in effect
on such record date (or on the date the dividend is paid if no
record date is set) after giving taking into account all
adjustments to such Conversion Rates required to be made under
Part 2 of this Section V, above, as of such record date (or on
the date the dividend is paid if no record date is set). No
dividends shall be paid on the Series E Stock unless all
dividends on the Senior Securities have been paid or reserved in
accordance with the terms thereof.
Part 4. Voting Rights.
Each share of Series E Stock shall have no voting rights
with respect to any matter submitted to the stockholders of the
Corporation, except to the extent required by the Delaware
Revised Statutes and except the right to approve by majority vote
of the holders of the Series E Stock, (i) any amendment,
modification or repeal of the articles of incorporation of the
Corporation if the powers, preferences or special rights of the
Series E Stock would be adversely affected, and (ii) the
imposition of any restriction on the Series E Stock, other than
restrictions arising under the articles of incorporation as in
effect at June 1, 1996; provided, that no voting right
attributable to the Series E Stock shall impose, or be construed
to impose, any limitation on the power of the Corporation to
create, authorize or issue, without the vote or approval of the
Series E Stock, shares of any class or series of Preferred Stock
with rights, powers, privileges and preferences superior or equal
to the Series E Stock.
Part 5. Definitions Applicable to Section V.
"Business Day" shall mean a day other than a Saturday,
Sunday or other day on which commercial banks in New York, New
York, are authorized by law to close.
"Common Stock" means the Common Stock, $0.0001 par value per
share, of the Corporation and any capital stock of any class of
the Corporation hereafter authorized which is not limited to a
fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in
the distribution or assets upon any liquidation, dissolution, or
winding up of the Corporation.
"Junior Securities" means any of the Corporation's equity
securities other than Senior Securities and the Series E Stock.
"Liquidation Value" of any Series E Stock as of any
particular date will be equal to $0.02 per share.
"Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture,
an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Senior Securities" means the Corporation's Series A
Convertible Preferred Stock, Series B Convertible Preferred
Stock, Series C 8% Convertible Preferred Stock, Series D 8%
Convertible Preferred Stock, and any other class or series of
Preferred Stock hereafter created, authorized, and issued with
rights, powers, privileges and preferences superior or equal to
the Series E Stock.
* * *
IN WITNESS WHEREOF, the Corporation has caused this
certificate to be executed by Barry S. Roseman, its President,
and attested to by Philicia Levinson, its Secretary, this 18th
day of October, 1996.
HEADWAY CORPORATE SERVICES, INC.
By Barry S. Roseman, President
(Signature)
ATTEST
By Philicia Levinson, Secretary
(Signature)
Exhibit No. 16
Headway Corporate Resources, Inc.
Form S-3/ Post-Eff. Am. No. 1
File No. 333-08616
November 19, 1996
The Board of Directors
Headway Corporate Resources, Inc.
850 Third Avenue, 11th Floor
New York, New York 10022
Gentlemen:
We have been retained by Headway Corporate Resources, Inc.
(the "Company"), in connection with the Registration Statement on
Form S-3 filed by the Company with the Securities and Exchange
Commission as amended by Post-Effective Amendment No. 1 thereto
(collectively the "Registration Statement") relating to
approximately 3,364,711 shares of common stock, par value $0.0001
per share ("Common Stock"). You have requested that we render an
opinion as to whether the Common Stock covered by the
Registration Statement will be validly issued, fully paid and non-
assessable, when issued in accordance with the terms of the
securities convertible into, or exerciseable for, the Common
stock. In connection with this engagement, we have examined the
following:
1. the certificate of incorporation of the Company;
2. the Registration Statement;
3. the bylaws of the Company; and
4. minutes of meetings and unanimous consents of the board
of directors.
We have examined such other corporate records and documents
and have made such other examinations as we deemed relevant.
Based upon the above examination, we are of the opinion that
the shares of Common Stock proposed to be registered under the
Registration Statement are validly authorized and, when issued in
accordance with the terms of the securities convertible into, or
exerciseable for, the Common Stock, will be validly issued, fully
paid, and non-assessable.
The Board of Directors
Headway Corporate Resources, Inc.
November 19, 1996
Page 2
We hereby consent to being named in the Prospectus included
in the Registration Statement as having rendered the foregoing
opinion and as having represented the Company in connection with
the Registration Statement.
Sincerely yours,
LEHMAN, JENSEN & DONAHUE, L.C.
Exhibit No. 17
Headway Corporate Resources, Inc.
Form S-3/ Post-Eff. Am. No. 1
File No. 333-08616
The consent of Lehman, Jensen & Donahue, L.C., required by Item
601(23) of Regulation S-B is contained in Exhibit 16 to the
Registration Statement on Form S-3, and is incorporated herein by
this reference.
Exhibit No. 18
Headway Corporate Resources, Inc.
Form S-3/ Post-Eff. Am. No. 1
File No. 333-08615
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the heading
"Experts" and to the incorporation by reference of our report
dated March 27, 1996 [except as to Note 18B for which the date is
April 10, 1996] in this Registration Statement [Form S-3] for
Headway Corporate Resources, Inc., [formerly AFGL International,
Inc.]
On July 1, 1996, the firm of Mortenson and Associates, P.C.
changed its name to Moore Stephens, P.C.
MOORE STEPHENS, P.C.
Certified Public Accountants
Cranford, New Jersey
November 18, 1996
Exhibit No. 19
Headway Corporate Resources, Inc.
Form S-3/ Post-Eff. Am. No. 1
File No. 333-08616
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" in Post-Effective Amendment No. 1 to the Registration
Statement (Form S-3 No. 333-08615) and related Prospectus of
HEADWAY CORPORATE RESOURCES, INC., (formerly AFGL International,
Inc.) for the registration of and to the incorporation by
reference therein of our report dated May 31, 1996 with respect
to the combined financial statements of Irene Cohen Temps, Inc.
and Certified Technical Staffing, Inc. and our report dated June
3, 1996 with respect to the combined financial statements of
Irene Cohen Personnel, Inc. and Corporate Staffing Alternatives,
Inc., both included in HEADWAY CORPORATE RESOURCES, INC.'s,
(formerly AFGL International, Inc.) Form 8-K as amended dated May
31, 1996, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
New York, New York
November 18, 1996
Exhibit No. 20
Headway Corporate Resources, Inc.
Form S-3/ Post-Eff. Am. No. 1
File No. 333-08616
KINGSTON
SMITH
Chartered Accountants
Incorporating
Letchfords
Mr. Barry Roseman
Headway Corporate Resources, Inc.
850 Third Avenue
NEW YORK
NY 10022
USA
November 13, 1996
RE: FORM S-3
HEADWAY CORPORATE RESOURCES, INC.
Consent of Independent Chartered Accountants
We hereby consent to the use in the Registration Statement of our
report dated 12 April 1996, relating to the financial statements
(not presented separately in the Registration Statement) of
Whitney Group (Europe) Limited, and to the reference to our Firm
under the caption "Experts" in the Prospectus.
Yours faithfully
KINGSTON SMITH
