SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14-a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
TECHNICAL CHEMICALS AND PRODUCTS, INC.
(Name of Registrant as Specified in its Charter)
TECHNICAL CHEMICALS AND PRODUCTS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing. 1)
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[LETTERHEAD OF TCPI]
July ___, 1998
Dear Shareholder:
You are invited to attend a Special Meeting of Shareholders of Technical
Chemicals and Products, Inc. (the "Company"), which will be held at the
corporate offices of the Company, 3341 S.W. 15th Street, Pompano Beach, Florida
33069, on Friday, August 28, 1998, at 10:00 a.m., local time.
The notice of meeting and proxy statement on the following pages covers the
formal business of the meeting. Whether or not you expect to attend the meeting,
please sign, date, and promptly return your proxy in the enclosed envelope to
assure your shares will be represented at the meeting. If you decide to attend
the annual meeting and vote in person, you will, of course, have that
opportunity.
The continuing interest of the shareholders in the business of the Company
is gratefully acknowledged.
Sincerely,
Jack L. Aronowitz
President, Chief Executive Officer
and Chairman of the Board of Directors
<PAGE>
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 28, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Special Meeting") of Technical Chemicals and Products, Inc., a Florida
corporation (the "Company"), will be held at the corporate offices of the
Company, 3341 S.W. 15th Street, Pompano Beach, Florida 33069, on Friday, August
28, 1998, at 10:00 a.m., local time, for the sole purpose of approving and
ratifying the issuance of shares of Common Stock upon the conversion of the
outstanding shares of the Company's Series A Convertible Preferred Stock, as
more fully described in the accompanying Proxy Statement.
The Board of Directors has fixed the close of business on July 25, 1998
as the record date for the determination of shareholders entitled to notice of
and to vote at the Special Meeting and at any and all adjournments or
postponements thereof.
Shareholders are requested to vote, date, sign and promptly return the
enclosed proxy in the envelope provided for that purpose, WHETHER OR NOT THEY
INTEND TO BE PRESENT AT THE MEETING.
By Order of the Board of Directors,
Martin Gurkin, Ph.D.
Secretary
Pompano Beach, Florida
July ___, 1998
<PAGE>
TECHNICAL CHEMICALS AND PRODUCTS, INC.
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 28, 1998
This proxy statement is first being sent to shareholders on or about
July ___, 1998, in connection with the solicitation of proxies by the Board of
Directors of Technical Chemicals and Products, Inc. (the "Company"), to be voted
at the Special Meeting of Shareholders to be held on Friday, August 28, 1998,
and at any adjournment or postponement thereof (the "Meeting"). At the Meeting,
the shareholders will be asked to consider and vote upon a single proposal (the
"Preferred Stock Proposal") to approve and ratify the issuance of shares of the
Company's Common Stock, $.001 par value (the "Common Stock"), upon the
conversion of the outstanding shares of the Company's Series A Convertible
Preferred Stock (the "Proposal"). The close of business on July 25, 1998, has
been fixed as the record date (the "Record Date") of the determination of
shareholders entitled to notice of and to vote at the Meeting. At the close of
business on the Record Date, the Company had outstanding 10,015,036 shares of
Common Stock, entitled to one vote per share. The presence, either in person or
by proxy, of the holders of a majority of the shares of Common Stock outstanding
on the Record Date is necessary to constitute a quorum at the Special Meeting.
All abstentions and broker non-votes, if any, will be included as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum at the Special Meeting.
Shares represented by duly executed proxies in the accompanying form
received by the Company prior to the Meeting will be voted at the Meeting. If
shareholders specify in the proxy a choice with respect to any matter to be
acted upon, the shares represented by such proxies will be voted as specified.
If a proxy card is signed and returned without specifying a vote or an
abstention on any proposal, it will be voted according to the recommendation of
the Board of Directors on the Proposal. The Board of Directors recommends a vote
FOR the Proposal. No business other than as set forth in the Notice of Special
Meeting accompanying this Proxy Statement may be properly brought before the
Meeting.
Shareholders who hold their shares through an intermediary must provide
instructions on voting as requested by their bank or broker. A shareholder who
signs and returns a proxy may revoke it at any time before it is voted by taking
one of the following three actions: (i) giving written notice of the revocation
to the Secretary of the Company; (ii) executing and delivering a proxy with a
later date; or (iii) voting in person at the Meeting.
Approval of the Proposal will require the affirmative vote of a
majority of the votes cast at the Meeting, provided a quorum is present. Votes
cast by proxy or in person at the Meeting will be tabulated by one or more
inspectors of election appointed at the Meeting, who will also determine whether
a quorum is present for the transaction of business. With respect to the matter
to be acted upon at the Meeting, abstentions and broker non-votes will not be
counted for the purpose of determining whether the Proposal has been approved.
Under applicable Florida law, none of the holders of Common Stock are
entitled to dissenter's appraisal rights in connection with te Proposal to be
acted on at the Meeting.
The expense of preparing, printing and mailing proxy materials to
shareholders of the Company will be borne by the Company. In addition to
solicitations by mail, regular employees of the Company may solicit proxies on
behalf of the Board of Directors in person or by telephone. The Company will
reimburse brokerage houses and other nominees for their expenses in forwarding
proxy material to beneficial owners of the Common Stock.
The executive offices of the Company are located at 3341 S.W. 15th Street,
Pompano Beach, Florida 33069. The Company's telephone number is (954) 979-0400.
<PAGE>
BACKGROUND OF THE ISSUANCE OF THE PREFERRED STOCK
The Company has been exploring various financing opportunities to
improve its financial flexibility and recently consummated the transaction
described herein. On May 18, 1998, the Company completed the sale (the "Initial
Sale") of 15,000 shares of its Series A Convertible Preferred Stock ("Preferred
Stock") to a single institutional purchaser (the "Purchaser"). Such transaction
resulted in gross proceeds of $15 million and net proceeds of approximately
$14,512,500 million to the Company. The Preferred Stock was sold through
Preferred Capital Markets, Inc. ("PCM") and Cardinal Investment Services, Inc.
(together with PCM, the "Placement Agents"), each of which is a brokerage and
management firm, in a private placement and may not be offered or sold in the
United States absent an effective registration under the Securities Act of 1933,
as amended (the "Securities Act"), or an applicable exemption from the
registration requirements. The Placement Agents received an aggregate fee in the
amount of $487,500 in connection with the initial sale. The Company also issued
PCM a warrant which permits PCM until December 31, 1998, to purchase 1,200
shares of Preferred Stock at $1,000 per share. In addition to the Preferred
Stock, the Company granted the Purchaser a warrant to purchase up to 150,000
additional shares of Common Stock at an exercise price of $11.89 with a term of
five years (the "Warrant"). In connection with the Company's obligations
pursuant to the initial sale, the Company has filed a registration statement
under the Securities Act (the "Registration Statement") for, among other things,
registration of the resale of the Common Stock underlying the Preferred Stock
and the Warrant by the holders thereof.
SUMMARY OF TERMS OF PREFERRED STOCK
The following is a summary of certain of the material terms of the
Preferred Stock. The Company's Articles of Incorporation include the Articles of
Amendment, attached hereto as Appendix A and incorporated by reference hereto
(the "Articles of Amendment"), which define the dividend rates, liquidation
preferences, voting rights, redemption and conversion terms and privileges of
the Preferred Stock. The following summary of the Preferred Stock is not
intended to be a complete description of all of the terms of the Preferred Stock
and is qualified in its entirety by the full text of the Articles of Amendment.
Terms of Series A Preferred Stock
---------------------------------
Of the 16,200 shares of Preferred Stock authorized by the
Board, 15,000 shares are currently issued and outstanding. The stated value per
share of the Preferred Stock is $1,000. With respect to rights upon liquidation,
winding up or dissolution and redemption rights, the Preferred Stock will rank:
(i) prior to the Common Stock; (ii) prior to any class or series of capital
stock of the Company hereafter created (unless, with the consent of the holders
of Preferred Stock in accordance with the Articles of Amendment, such class or
series of capital stock specifically, by its terms, ranks senior to or pari
passu with the Preferred Stock) (collectively, with the Common Stock, "Junior
Securities"); (iii) pari passu with any class or series of capital stock of the
Company hereafter created (with the consent of the holders of Preferred Stock
obtained in accordance with the Articles of Amendment) specifically ranking, by
its terms, on parity with the Preferred Stock ("Pari Passu Securities"); and
(iv) junior to any class or series of capital stock of the Company hereafter
created (with the consent of the holders of Preferred Stock obtained in
accordance with the Articles of Amendment) specifically ranking, by its terms,
senior to the Preferred Stock ("Senior Securities"), in each case as to
distribution of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary.
Dividends. Holders of the Preferred Stock are not entitled to receive
dividends. So long as any shares of the Preferred Stock are outstanding,
however, no dividends may be declared or paid on, nor shall any distribution be
made on, any Junior Securities, the Company may not redeem or repurchase any
Junior Securities, nor may any moneys be paid to or made available for a sinking
fund for the benefit of any Junior Securities, without the written consent of
the holders of a majority of the outstanding shares of Preferred Stock.
Liquidation. In the event of any dissolution, liquidation or winding up
of the Company, whether voluntary or involuntary, or any bankruptcy, insolvency
or similar proceedings, whether voluntary or involuntary, shall be commenced
with respect to the Company (a "Liquidation"), the holders of shares of
Preferred Stock shall be entitled to receive out of the assets of the Company
legally available for distribution to shareholders (whether representing capital
or surplus), before any payment or distribution shall be made on the Common
Stock or any other Junior Securities (but after distribution of such assets
among, or payment thereof over to, creditors of the Company and to holders of
any Senior Securities), the stated value per share ($1,000) plus an amount equal
to 6% per annum for the period beginning May 19, 1998 and ending on the date of
final distribution to the holder thereof (pro rated for any portion of such
period) (the "Preferred Stock Liquidation Distribution"). If the assets
distributable upon such dissolution, liquidation or winding up (as provided
above) shall be insufficient to pay cash in an amount equal to the amount of the
Preferred Stock Liquidation Distribution to the holders of shares of Preferred
Stock and holders of any Pari Passu Securities, then such assets or the proceeds
thereof shall be distributed among the holders of the Preferred Stock ratably in
proportion to the respective amounts of the Preferred Stock Liquidation
Distribution to which they otherwise would be entitled. The merger or
consolidation of the Company into or with another corporation, a merger or
consolidation of any other corporation with or into the Company upon the
completion of which the shareholders of the Company prior to the merger or
consolidation no longer holds a majority of the outstanding equity securities of
the Company or the sale, conveyance, exchange or transfer of all or
substantially all of the property or assets of the Company (any such event, a
"Reorganization Event") shall, at the option of any holder of Preferred Stock,
be deemed to be a Liquidation of the Company pursuant to which the Company shall
be required to distribute to the holders of Preferred Stock 115% of the
Preferred Stock Liquidation Distribution.
Voting Rights. The holders of the Preferred Stock shall be entitled to
notice of all shareholders meetings in accordance with the Company's bylaws and
to receive copies of proxy materials and other information sent to shareholders.
Except as otherwise provided by the Florida Business Corporation Act (the
"Florida Act"), the holders of the Preferred Stock have no voting power
whatsoever. The Preferred Stock terms include what are customarily called
"protective provisions." Under these provisions, a vote of the holders of at
least a majority of the outstanding Preferred Stock is required before the
Company can: (i) alter or change the rights, preferences or privileges of the
Preferred Stock or any Senior Securities so as to adversely affect the Preferred
Stock; (ii) create any new class or series of Senior Securities; (iii) create
any new class or series of Pari Passu Securities; (iv) increase the number of
shares of Preferred Stock or (v) intentionally do any act or thing which would
result in taxation to the holders of the Preferred Stock under Section 305 of
the Internal Revenue Code of 1986, as amended.
Conversion. Each share of Preferred Stock is convertible into the
number of shares of the Company's Common Stock, equal to (i) the stated value
($1,000) plus a premium of 6% per annum of the stated value from May 19,1998
(the "Issue Date"), divided by (ii) the Conversion Price (as hereinafter
defined). The Conversion Price is equal to the lesser of (A) the Applicable
Percentage (as hereinafter defined) of the Market Price (as hereinafter defined)
and (B) $11.89. The Market Price is defined as the average of the closing bid
prices of the Common Stock on the Nasdaq National Market (the "Closing Bid
Price"), as reported by Bloomberg Financial Markets ("Bloomberg"), for any five
consecutive trading days during the thirty trading day period ending on the day
prior to the date of conversion (the "Average Closing Bid Price"). The
Applicable Percentage is equal to 92% unless the Closing Bid Price on the day of
conversion (the "Conversion Date") is below 70% of the Market Price, in which
case the applicable percentage shall be 115%. The Conversion Price is also
subject to standard anti-dilution adjustments.
If on the Conversion Date, the last sale price of the Common Stock on
the Nasdaq National Market, as reported by Bloomberg (the "Closing Price") is
below 70% of the average of the Closing Bid Prices for the five (5) consecutive
trading days ending one day prior to the Issue Date, then the Company may, at
its option, (i) redeem in cash (a "Cash Redemption") the Preferred Stock
submitted for conversion for an amount equal to the number of shares of Common
Stock that the Company would have issued had it not opted for the Cash
Redemption multiplied by the Redemption Market Price (as defined below), or (ii)
redeem the Preferred Stock by issuing a Convertible Note, in the principal
amount equal to 115% of the amount payable in a Cash Redemption, bearing
interest at the rate of 10% per annum (the "Redemption Note"), provided that the
Company has sufficient shares of Common Stock authorized and reserved to cover
the full conversion thereof and a registration statement under the Securities
Act covering the shares of Common Stock issuable pursuant to the Redemption Note
is effective.
Subject to certain limited exceptions, the holders of the Preferred
Stock may not convert any Preferred Stock prior to October 18, 1998. The
Preferred Stock is subject to mandatory redemption under certain circumstances
and, under certain circumstances, it also redeemable at the Company's option,
beginning one year after the effective date of the Registration Statement.
Furthermore, any shares of Preferred Stock outstanding on May 18, 2003 shall
automatically be converted into Common Stock at the then effective Conversion
Price.
The issuance of the Preferred Stock is subject to NASDAQ's Rule 4460(i)
and the holders of the Preferred Stock have agreed that the Company will not
issue more than 19.99% of the Common Stock upon conversion of the Preferred
Stock in the absence of (i) the approval of such issuance by the Company's
shareholders, or (ii) a waiver by NASDAQ of the provisions of Rule 4460(i).
PURPOSE OF SOLICITATION
Approval of the issuance of Common Stock upon the conversion of the
Preferred Stock is being sought in accordance with the requirements of Section
4460(i) of the Nasdaq Marketplace Rules, which requires, as a prerequisite to
listing additional shares on the Nasdaq Stock Market, shareholder approval when
such shares are to be issued in connection with a transaction involving the sale
or issuance by the Company of Common Stock (or securities convertible into
Common Stock) equal to 20% or more of presently outstanding Common Stock for
less than the greater of book or market value of the Common Stock. The Preferred
Stock was considered to be issued for less than the greater of book or market
value of the Common Stock as the Conversion Price is set at a discount to market
at the date of issuance of 92%.
The terms of the Preferred Stock provide that if, at the time of
conversion, the aggregate number of shares of Common Stock issuable equals or
exceeds 20% of the outstanding Common Stock on the date of issuance of the
Preferred Stock (the "Issuable Maximum"), then the Company will be obligated to
either (i) obtain shareholder approval for such issuance within thirty days of
receipt of the conversion notice in accordance with the requirements of the
Nasdaq Stock Market or (ii) redeem the outstanding shares of Preferred Stock.
THE PREFERRED STOCK PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF THE
HOLDERS OF A MAJORITY OF THE SHARES OF COMMON STOCK PRESENT IN PERSON OR BY
PROXY AT THE MEETING. THE BOARD OF DIRECTORS BELIEVES THAT THE APPROVAL OF SUCH
ISSUANCE IS IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS A VOTE FOR SUCH PROPOSAL.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
As of July 25, 1998, the Record Date, the outstanding Common Stock was held
of record by ______ shareholders. The following table sets forth certain
information as of June 30, 1998 with respect to the Common Stock owned by (1)
any person who is known to the Company to be the beneficial owner of more than
five percent of any class of the Company's voting securities, (2) each director,
(3) each named executive officer and (4) all directors and executive officers as
a group.
<PAGE>
<TABLE>
<S> <C> <C>
Name and Address of Beneficial Owner (a) Ownership (b) Percent
Jack L. Aronowitz 4,561,666(c) 43.4%
Capital Group Companies 600,000 6.0%
Capital Research and Management Company
333 South Hope Street, 52nd Floor
Los Angeles, California 90071
Martin Gurkin 34,534(d) *
Stuart R. Streger 17,667(e) *
Kathryn R. Harrigan 1,000(e) *
Clayton Rautbord 1,200(d) *
Noel Buterbaugh 0
*
All Directors and Executive Officers as a group (6 4,631,767 43.8%
persons)
- - - - -----------------------
</TABLE>
(a) The business address for Messrs. Aronowitz, Gurkin, Streger, Rautbord,
Buterbaugh, and Ms. Harrigan is 3341 S.W. 15th Street, Pompano Beach,
Florida 33069.
(b) Beneficial ownership of shares, as determined in accordance with applicable
Securities and Exchange Commission rules, includes shares as to which a
person has or shares voting power and/or investment power.
(c) Includes 500,000 shares that may be acquired upon
exercise of a currently exercisable warrant and 370,000 shares as to which
Mr. Aronowitz holds a voting proxy.
(d) Includes options that are currently exercisable in the following amounts:
Mr. Gurkin - 34,334; and Mr. Rautbord - 1,000.
(e) Represents shares that may be acquired upon exercise of currently
outstanding stock options.
* Less than 0.5%
<PAGE>
APPENDIX A
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
of
TECHNICAL CHEMICALS AND PRODUCTS, INC.
(Pursuant to Section 607.0602 of the
Florida Business Corporation Act)
Technical Chemicals and Products, Inc., a corporation organized and
existing under Florida Law (the "Corporation"), hereby certifies that the
following resolutions were adopted by the Board of Directors of the Corporation
on May 18, 1998 pursuant to authority of the Board of Directors as required by
Section 607.0602 of the Florida Business Corporation Act ("FBCA"). A vote of
Shareholders was not needed for the adoption of these Articles of Amendment.
RESOLVED, that pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (the "Board of Directors" or the "Board") in
accordance with the provisions of its Articles of Incorporation, the Board of
Directors hereby authorizes a series of the Corporation's previously authorized
Preferred Stock, par value $.001 per share (the "Preferred Stock"), and hereby
states the designation and number of shares, and fixes the relative rights,
preferences, privileges, powers and restrictions thereof as follows:
Series A Convertible Preferred Stock:
I. Designation and Amount
-------------------------
The designation of this series, which consists of 16,200 shares of
Preferred Stock, is Series A Convertible Preferred Stock (the "Series A
Preferred Stock") and the stated value shall be One Thousand Dollars ($1,000)
per share (the "Stated Value").
II. Rank
The Series A Preferred Stock shall rank (i) prior to the
Corporation's common stock, par value $.001 per share (the "Common Stock"); (ii)
prior to any class or series of capital stock of the Corporation hereafter
created (unless, with the consent of the holders of Series A Preferred Stock
obtained in accordance with Article IX hereof, such class or series of capital
stock specifically, by its terms, ranks senior to or pari passu with the Series
A Preferred Stock) (collectively, with the Common Stock, "Junior Securities");
(iii) pari passu with any class or series of capital stock of the Corporation
hereafter created (with the consent of the holders of Series A Preferred Stock
obtained in accordance with Article IX hereof) specifically ranking, by its
terms, on parity with the Series A Preferred Stock ("Pari Passu Securities");
and (iv) junior to any class or series of capital stock of the Corporation
hereafter created (with the consent of the holders of Series A Preferred Stock
obtained in accordance with Article IX hereof) specifically ranking, by its
terms, senior to the Series A Preferred Stock ("Senior Securities"), in each
case as to distribution of assets upon liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary.
III. Dividends
The Series A Preferred Stock shall not bear any dividends. In
no event, so long as any Series A Preferred Stock shall remain outstanding,
shall any dividend whatsoever be declared or paid upon, nor shall any
distribution be made upon, any Junior Securities, nor shall any shares of Junior
Securities be purchased or redeemed by the Corporation nor shall any moneys be
paid to or made available for a sinking fund for the purchase or redemption of
any Junior Securities (other than a distribution of Junior Securities), without,
in each such case, the written consent of the holders of a majority of the
outstanding shares of Series A Preferred Stock, voting together as a class.
IV. Liquidation Preference
A. If the Corporation shall commence a voluntary case under
the Federal bankruptcy laws or any other applicable Federal or State bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of thirty (30) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"Liquidation Event"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation (other than Senior Securities) upon
liquidation, dissolution or winding up unless prior thereto, the holders of
shares of Series A Preferred Stock, subject to Article VI, shall have received
the Liquidation Preference (as defined in Article IV.C) with respect to each
share. If upon the occurrence of a Liquidation Event, the assets and funds
available for distribution among the holders of the Series A Preferred Stock and
holders of Pari Passu Securities (including any dividends or distribution paid
on any Pari Passu Securities after the date of filing of these Articles of
Amendment) shall be insufficient to permit the payment to such holders of the
preferential amounts payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Series A Preferred Stock
and the Pari Passu Securities shall be distributed ratably among such shares in
proportion to the ratio that the Liquidation Preference payable on each such
share bears to the aggregate liquidation preference payable on all such shares.
Any prior dividends or distribution made after the date of filing of these
Articles of Amendment shall offset, dollar for dollar, the amount payable to the
class or series to which such distribution was made.
B. At the option of any holder of Series A Preferred Stock,
the sale, conveyance or disposition of all or substantially all of the assets of
the Corporation, the effectuation by the Corporation of a transaction or series
of related transactions in which more than 50% of the voting power of the
Corporation is disposed of, or the consolidation, merger or other business
combination of the Corporation with or into any other Person (as defined below)
or Persons when the Corporation is not the survivor (not including any internal
reorganization, reincorporation, merger or consolidation which does not involve
a change of (i) 50% of the Corporation's board of directors or (ii) 50% of the
Corporation's voting power prior to such transaction or series of related
transactions) shall either: (i) be deemed to be a liquidation, dissolution or
winding up of the Corporation pursuant to which the Corporation shall be
required to distribute upon consummation of such transaction an amount equal to
115% of the Liquidation Preference with respect to each outstanding share of
Series A Preferred Stock in accordance with and subject to the terms of this
Article IV or (ii) be treated pursuant to Article VI.C(b) hereof. "Person" shall
mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.
C. For purposes hereof, the "Liquidation Preference" with
respect to a share of the Series A Preferred Stock shall mean an amount equal to
the sum of (i) the Stated Value thereof plus (ii) and amount equal to six
percent (6%) per annum of such Stated Value for the period beginning on the date
of issuance of the Series A Preferred Stock (the "Issue Date") and ending on the
date of final distribution to the holder thereof (prorated for any portion of
such period). The liquidation preference with respect to any Pari Passu
Securities shall be as set forth in the Articles of Amendment filed in respect
thereof.
V. Redemption
A. If any of the following events (each, a "Mandatory Redemption
Event") shall occur:
(i) The Corporation fails to issue shares of Common Stock to the
holders of Series A Preferred Stock upon exercise by the holders of their
conversion rights in accordance with the terms of these Articles of
Amendment (for a period of at least sixty (60) days if such failure is
solely as a result of the circumstances governed by the second paragraph of
Article VI.F below and the Corporation is using all commercially reasonable
efforts to authorize a sufficient number of shares of Common Stock as soon
as practicable), fails to transfer or to cause its transfer agent to
transfer (electronically or in certificated form) any certificate for
shares of Common Stock issued to the holders upon conversion of the Series
A Preferred Stock as and when required by these Articles of Amendment or
the Registration Rights Agreement, dated as of May 18, 1998, by and among
the Corporation and the other signatories thereto (the "Registration Rights
Agreement"), fails to remove any restrictive legend (or to withdraw any
stop transfer instructions in respect thereof) on any certificate or any
shares of Common Stock issued to the holders of Series A Preferred Stock
upon conversion of the Series A Preferred Stock as and when required by
these Articles of Amendment, the Securities Purchase Agreement dated as of
May 18, 1998, by and between the Corporation and the other signatories
thereto (the "Purchase Agreement") or the Registration Rights Agreement, or
fails to fulfill its material obligations pursuant to Sections 4(c), 4(e),
4(h), 4(i), 4(j), 4(o) or 5 of the Purchase Agreement (or makes any
announcement, statement or threat that it does not intend to honor the
obligations described in this paragraph) and any such failure shall
continue uncured (or any announcement, statement or threat not to honor its
obligations shall not be rescinded in writing) for ten (10) business days
following written notice of such alleged failure (but, in the case of
failure to deliver Common Stock without legend, not more than thirteen (13)
business days following the Conversion Date);
(ii) The Corporation fails to obtain effectiveness with the Securities
and Exchange Commission (the "SEC") of the Registration Statement (as
defined in the Registration Rights Agreement) prior to December 15, 1998 or
such Registration Statement lapses in effect (or sales otherwise cannot be
made thereunder, whether by reason of the Company's failure to amend or
supplement the prospectus included therein in accordance with the
Registration Rights Agreement or otherwise) for more than forty-five (45)
consecutive days or seventy-five (75) days in any twelve (12) month period
after such Registration Statement becomes effective;
(iii) The Corporation shall make an assignment for the benefit of
creditors, or apply for or consent to the appointment of a receiver or
trustee for it or for all or substantially all of its property or business;
or such a receiver or trustee shall otherwise be appointed;
(iv) Bankruptcy, insolvency, reorganization or liquidation proceedings
or other proceedings for relief under any bankruptcy law or any law for the
relief of debtors shall be instituted by or against the Corporation or any
material subsidiary of the Corporation and such proceeding shall be
unstayed and in effect for a period of thirty (30) consecutive days;
(v) The Corporation shall fail to maintain the listing of the Common
Stock on the Nasdaq National Market ("Nasdaq"), the Nasdaq SmallCap Market
("Nasdaq SmallCap"), the New York Stock Exchange ("NYSE") or the American
Stock Exchange ("AMEX") and such failure shall remain uncured for at least
ten (10) business days; or
(vi) Jack Aronowitz breaches any provision of that certain letter
agreement dated May 18, 1998 between Jack Aronowitz and the Buyer of Series
A Preferred Stock under the Purchase Agreement; or an aggregate of
1,000,000 (to be adjusted in the event of a stock split, dividend or other
similar transaction) or more shares of Common Stock owned, directly or
indirectly, by Jack Aronowitz which are subject to any pledge agreement,
placed in a margin account or subject to any similar arrangement, are sold
by the pledgee or such pledgee's assignee or other person with an interest
in such pledged or margined shares,
then, upon the occurrence and during the continuation of any Mandatory
Redemption Event specified in subparagraphs (i), (ii), (v) or (vi) at the
option of the holders of a majority in interest of the then outstanding
shares of Series A Preferred Stock by written notice (the "Mandatory
Redemption Notice") to the Corporation of such Mandatory Redemption Event,
or upon the occurrence of any Mandatory Redemption Event specified in
subparagraphs (iii) or (iv), the Corporation shall purchase each holder's
shares of Series A Preferred Stock for an amount per share equal to the
greater of (1) 120% multiplied by the sum of (a) the Stated Value of the
shares to be redeemed plus (b) an amount equal to six percent (6%) per
annum of such Stated Value for the period beginning on the Issue Date and
ending on the date of payment of the Mandatory Redemption Amount (the
"Mandatory Redemption Date"), and (2) the "parity value" of the shares to
be redeemed, where parity value means the product of (a) the number of
shares of Common Stock issuable upon conversion of such shares in
accordance with Article VI below (without giving any effect to any
limitations or conversions of shares set forth in Article VI.A(b) below,
and treating the Trading Day (as defined in Article VI.B.) immediately
preceding the Mandatory Redemption Date as the "Conversion Date" (as
defined in Article VI.B(a)) unless the Mandatory Redemption Event arises as
a result of a breach in respect of a specific Conversion Date in which case
such Conversion Date shall be the Conversion Date), multiplied by (b) the
Closing Price (as defined in Article VI.A(b)) for the Common Stock on such
"Conversion Date" (the greater of such amounts being referred to as the
"Mandatory Redemption Amount").
<PAGE>
In the case of a Mandatory Redemption Event, if the
Corporation fails to pay the Mandatory Redemption Amount for each share within
five (5) business days of written notice that such amount is due and payable,
then (assuming there are sufficient authorized shares) in addition to all other
available remedies, each holder of Series A Preferred Stock shall have the right
at any time, so long as the Mandatory Redemption Event continues, to require the
Corporation, upon written notice, to immediately issue (in accordance with and
subject to the terms of Article VI below), in lieu of the Mandatory Redemption
Amount, with respect to each outstanding share of Series A Preferred Stock held
by such holder, the number of shares of Common Stock of the Corporation equal to
the Mandatory Redemption Amount divided by the Conversion Price then in effect.
B. If the Series A Preferred Stock ceases to be convertible as
a result of the limitations described in the second paragraph of Article VI.A
below (a "19.99% Redemption Event"), and the Corporation has not prior to, or
within thirty (30) days of, the date that such 19.99% Redemption Event arises,
(i) obtained approval of the issuance of the additional shares of Common Stock
by the requisite vote of the holders of the then-outstanding Common Stock (not
including any shares of Common Stock held by present or former holders of Series
A Preferred Stock that were issued upon conversion of Series A Preferred Stock)
or (ii) received other permission pursuant to the Nasdaq National Market Rule
4460(i) allowing the Corporation to resume issuances of shares of Common Stock
upon conversion of Series A Preferred Stock, then the Corporation shall be
obligated to redeem immediately all of the then outstanding Series A Preferred
Stock, in accordance with this Article V.B. An irrevocable Redemption Notice
shall be delivered promptly to the holders of Series A Preferred Stock at their
registered address appearing on the records of the Corporation and shall state
(1) that 19.99% of the Outstanding Common Amount (as defined in Article VI.A)
has been issued upon exercise of the Series A Preferred Stock, (2) that the
Corporation is obligated to redeem all of the outstanding Series A Preferred
Stock and (3) the Mandatory Redemption Date, which shall be a date within five
(5) business days of the date of the Redemption Notice. On the Mandatory
Redemption Date, the Corporation shall make payment of the Mandatory Redemption
Amount (as defined in Article V.A. above) in cash.
C. Notwithstanding anything to the contrary contained in this
Article V, beginning on the one year anniversary date of the effectiveness with
the SEC of the Registration Statement (as defined in the Registration Rights
Agreement), so long as (i) no Mandatory Redemption Event shall have occurred and
be continuing, (ii) the Registration Statement is then in effect and has been in
effect and sales can be made thereunder for at least twenty (20) days prior to
the Optional Redemption Date (as defined below) and (iii) the Closing Price (as
defined in Article VI.A(b) below) for Common Stock is greater than 150% of the
Fixed Conversion Price (as defined in Article VI.A.(b) below) for a period of at
least ten (10) consecutive Trading Days, then the Corporation shall have the
right, exercisable on not less than five (5) Trading Days prior written notice
to the holders of Series A Preferred Stock (which notice may not be sent to the
holders of the Series A Preferred Stock until the Corporation is permitted to
redeem the Series A Preferred Stock pursuant to this Article V.C.), to redeem
all of the outstanding shares of Series A Preferred Stock in accordance with
this Article V. Any notice of redemption hereunder (an "Optional Redemption")
shall be delivered to the holders of Series A Preferred Stock at their
registered addresses appearing on the books and records of the Corporation and
shall state (1) that the Corporation is exercising its right to redeem all of
the outstanding shares of Series A Preferred Stock issued on the Issue Date and
(2) the date of redemption (the "Optional Redemption Notice"). On the date fixed
for redemption (the "Optional Redemption Date"), the Corporation shall make
payment of the Optional Redemption Amount (as defined below) to or upon the
order of the holders as specified by the holders in writing to the Corporation
at least one (1) business day prior to the Optional Redemption Date. If the
Corporation exercises its right to redeem the Series A Preferred Stock, the
Corporation shall make payment to the holders of an amount in cash (the
"Optional Redemption Amount") equal to 115% multiplied by the sum of (i) the
Stated Value of the shares of Series A Preferred Stock to be redeemed and (ii)
an amount equal to six percent (6%) per annum of such Stated Value for the
period beginning on the Issue Date and ending on the Optional Redemption Date,
for each share of Series A Preferred Stock then held. Notwithstanding notice of
an Optional Redemption, the holders shall at all times prior to the Optional
Redemption Date maintain the right to convert all or any shares of Series A
Preferred Stock in accordance with Article VI and any shares of Series A
Preferred Stock so converted after receipt of an Optional Redemption Notice and
prior to the Optional Redemption Date set forth in such notice and payment of
the aggregate Optional Redemption Amount shall be deducted from the shares of
Series A Preferred Stock which are otherwise subject to redemption pursuant to
such notice.
From time to time following the Issue Date, the holders may
request advance notice as to whether the Corporation intends to redeem the
shares of Series A Preferred Stock. Such request shall be made in writing and
the Corporation shall respond in writing as promptly as practicable but prior to
5:00 p.m. Eastern Standard Time one (1) business day after receipt of the
request. The Corporation will be bound by such response for a period of twenty
(20) Trading Days (the "Term") from the date of its response. A failure to
respond within one (1) business day shall be deemed to be an election not to
redeem the Series A Preferred Stock during the Term. The holders may not request
such notice in the event that the Corporation files a registration statement
where the use of proceeds set forth in such registration statement are
identified for purposes of redemption of the outstanding Series A Preferred
Stock.
VI. Conversion at the Option of the Holder
A. (a) Each holder of shares of Series A Preferred Stock may,
at its option at any time and from time to time, upon surrender of the
certificates therefor, convert any or all of its shares of Series A Preferred
Stock into Common Stock as follows (an "Optional Conversion"). Each share of
Series A Preferred Stock shall be convertible into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing (1) the sum of
(a) the Stated Value thereof plus (b) the Premium Amount (as defined below), by
(2) the then effective Conversion Price (as defined in Article VI.B.(a) below);
provided, however, that no holder of shares of Series A Preferred Stock may
convert any or all or of its shares of Series A Preferred Stock into Common
Stock prior to October 18, 1998, except for conversions (i) at the Fixed
Conversion Price (as defined in Article VI.B.(a) below), (ii) on a Conversion
Date (as defined in Article VI.B.(a) below) occurring on or after the date of a
public announcement by the Corporation that the Corporation intends to
consolidate or merge with any other corporation (other than a merger in which
the Corporation is the surviving or continuing corporation and its capital stock
is unchanged) or sell or transfer all or substantially all of the assets of the
Corporation or other similar transaction, (iii) on a Conversion Date (as defined
in Article VI.B.(a) below) occurring on or after a date on which any person,
group or entity (including the Corporation) publicly announces a tender offer to
purchase 50% or more of the Corporation's Common Stock or otherwise publicly
announces an intention to replace a majority of the Corporation's Board of
Directors by waging a proxy battle or otherwise, or (iv) on a Conversion Date
(as defined in Article VI.B.(a) below) occurring on or after the date of a
material adverse change in the Corporation's business or financial condition,
taken as a whole, provided, further, however, that, unless the holder delivers a
waiver in accordance with the immediately following sentence, in no event (other
than pursuant to the Automatic Conversion (as defined herein)) shall a holder of
shares of Series A Preferred Stock be entitled to convert any such shares in
excess of that number of shares upon conversion of which the sum of (x) the
number of shares of Common Stock beneficially owned by the holder and its
affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the shares of Series A
Preferred Stock) and (y) the number of shares of Common Stock issuable upon the
conversion of the shares of Series A Preferred Stock with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by a holder and such holder's affiliates of more than 4.9% of the
outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, (i) beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder, except as otherwise provided in clause
(x) of such proviso and (ii) a holder may waive the limitations set forth
therein by written notice to the Corporation upon not less than sixty-one (61)
days prior written notice (with such waiver taking effect only upon the
expiration of such sixty-one (61) day notice period). The "Premium Amount" means
the product of the Stated Value, multiplied by .06, multiplied by (N/365), where
"N" equals the number of days elapsed from the Issue Date to and including the
Conversion Date.
(b) If on the Conversion Date, the Closing Price (as defined below) is
below 70% of the average Closing Bid Prices (as defined in Article VI.B.(a)
below) for the five (5) consecutive Trading Days ending one day prior to the
Issue Date, then the Corporation may, at its option (i) redeem in cash (a "Cash
Redemption") the Series A Preferred Stock submitted for conversion for an amount
equal to the number of shares of Common Stock that the Corporation would have
issued had it not opted for the Cash Redemption multiplied by the Redemption
Market Price (as defined below), or (ii) redeem shares of Series A Preferred
Stock by issuing a Convertible Note, in the principal amount equal to 115% of
the amount payable in a Cash Redemption, bearing interest at the rate of 10% per
annum and otherwise in the form attached as Exhibit E to the Purchase Agreement
(the "Redemption Note"), provided that the Corporation has sufficient shares of
Common Stock authorized and reserved to cover the full conversion thereof and
the Registration Statement covering the shares of Common Stock issuable pursuant
to the Redemption Note is effective. At any time, and from time to time, each
holder of Series A Preferred Stock shall have the right to receive, upon such
holder's written request, notice from the Corporation (a "Requested Notice") as
to whether the Corporation will redeem a specified number of shares of the
Series A Preferred Stock by issuing Common Stock, making a Cash Redemption or
issuing a Redemption Note. The Corporation shall be obligated to comply with the
method of redemption set forth in the Requested Notice for such number of shares
of Series A Preferred Stock as set forth in such Requested Notice for a period
of thirty (30) Trading Days (as defined below). The Requested Notice shall be
issued within two (2) business days of receipt of the holder's written request.
A failure to timely issue a Requested Notice shall be deemed to be an election
to issue Common Stock. The "Redemption Market Price" equals the Closing Price on
the Conversion Date. "Closing Price," as of any date, means the last sale price
of the Common Stock on the Nasdaq National Market as reported by Bloomberg
Financial Markets or an equivalent reliable reporting service mutually
acceptable to and hereafter designated by the holders of a majority in interest
of the shares of Series A Preferred Stock and the Corporation ("Bloomberg") or,
if the Nasdaq National Market is not the principal trading market for such
security, the last sale price of such security on the principal securities
exchange or trading market where such security is listed or traded as reported
by Bloomberg, or if the foregoing do not apply, the last sale price of such
security in the over-the-counter market on the electronic bulletin board for
such security as reported by Bloomberg, or, if no last sale price of such
security or in the over-the-counter market on the electronic bulletin board for
such security in any of the foregoing manners the average of the bid prices of
any market makers for such or security as reported in the "pink sheets" by the
National Quotation Bureau, Inc. If the Closing Price cannot be calculated for
such security on such date in the manner provided above, the Closing Price shall
be the fair market value as mutually determined by the Corporation and the
holders of a majority in interest of shares of Series A Preferred Stock being
converted for which the calculation of the Closing Price is required in order to
determine the Conversion Price of such Series A Preferred Stock.
(c) So long as the Common Stock is listed for trading on the Nasdaq
National Market or an exchange or quotation system with a rule substantially
similar to Rule 4460(i) then, notwithstanding anything to the contrary contained
herein if, at any time, the aggregate number of shares of Common Stock then
issued upon conversion of the Series A Preferred Stock (including any shares of
capital stock or rights to acquire shares of capital stock issued by the
Corporation which are aggregated or integrated with the Common Stock issued or
issuable upon conversion of the Series A Preferred Stock for purposes of such
rule) equals 19.99% of the "Outstanding Common Amount" (as hereinafter defined),
the Series A Preferred Stock shall, from that time forward, cease to be
convertible into Common Stock in accordance with the terms of this Article VI
and Article VII below, unless the Corporation (i) has obtained approval of the
issuance of the Common Stock upon conversion of the Series A Preferred Stock by
a majority of the total votes cast on such proposal, in person or by proxy, by
the holders of the then-outstanding Common Stock (not including any shares of
Common Stock held by present or former holders of Series A Preferred Stock that
were issued upon conversion of Series A Preferred Stock), or (ii) shall have
otherwise obtained permission to allow such issuances from the Nasdaq National
Market in accordance with the Nasdaq National Market Rule 4460(i). If the
Corporation's Common Stock is not then listed on the Nasdaq National Market or
an exchange or quotation system that has a rule substantially similar to Rule
4460(i), the limitations set forth herein shall be inapplicable and of no force
and effect. For purposes of this paragraph, "Outstanding Common Amount" means
(i) the number of shares of the Common Stock outstanding on the date of issuance
of the Series A Preferred Stock pursuant to the Purchase Agreement plus (ii) any
additional shares of Common Stock issued thereafter in respect of such shares
pursuant to a stock dividend, stock split or similar event. The maximum number
of shares of Common Stock issuable as a result of the 19.99% limitation set
forth herein is hereinafter referred to as the "Maximum Share Amount." With
respect to each holder of Series A Preferred Stock, the Maximum Share Amount
shall refer to such holder's pro rata share thereof determined in accordance
with Article X below. In the event that the Corporation obtains Stockholder
Approval or the approval of the Nasdaq National Market, by reason of the
inapplicability of the rules of the Nasdaq National Market or otherwise and
concludes that it is able to increase the number of shares to be issued above
the Maximum Share Amount (such increased number being the "New Maximum Share
Amount"), the references to Maximum Share Amount, above, shall be deemed to be,
instead, references to the greater New Maximum Share Amount. In the event that
Stockholder Approval is not obtained, there are insufficient reserved or
authorized shares or a registration statement covering the additional shares of
Common Stock which constitute the New Maximum Share Amount is not effective
prior to the Maximum Share Amount being issued (if such registration statement
is necessary to allow for the public resale of such securities), the Maximum
Share Amount shall remain unchanged; provided, however, that the Holder may
grant an extension to obtain a sufficient reserved or authorized amount of
shares or of the effective date of such registration statement. In the event
that (a) the aggregate number of shares of Common Stock issued pursuant to the
outstanding Series A Preferred Stock represents at least twenty percent (20%) of
the Maximum Share Amount and (b) the sum of (x) the aggregate number of shares
of Common Stock then issued upon conversion of Series A Preferred Stock plus (y)
the aggregate number of shares of Common Stock that remain issuable upon
conversion of Series A Preferred Stock, represents at least one hundred percent
(100%) of the Maximum Share Amount (the "Triggering Event"), the Corporation
will use its best efforts to seek and obtain Stockholder Approval (or obtain
such other relief as will allow conversions hereunder in excess of the Maximum
Share Amount) as soon as practicable following the Triggering Event and before
the Mandatory Redemption Date.
B. The "Conversion Price" shall be the lesser of (i) the
Applicable Percentage (as defined herein) of the Market Price (as defined
herein) and (ii) the Fixed Conversion Price (as defined herein), subject to
adjustments pursuant to the provisions of Article VI.C below. The Applicable
Percentage means 92%, unless on the Conversion Date the Closing Bid Price is
below 70% of the Average Closing Bid Prices for the five (5) consecutive Trading
Days ending one day prior to the Issue Date, in which case the Applicable
Percentage shall be one hundred fifteen percent (115%) of the Market Price.
"Market Price" shall mean the average Closing Bid Prices for any five (5)
consecutive Trading Days (the "Market Price Days"), during the thirty (30)
Trading Day period ending one (1) Trading Day prior to the date (the "Conversion
Date") the Conversion Notice is sent by a holder to the Corporation via
facsimile (the "Pricing Period"). On the Conversion Date, the converting holder
shall select the Market Price Days from the Trading Days comprising the Pricing
Period, and such selection shall be indicated in the Notice of Conversion.
"Fixed Conversion Price" shall mean $11.89. "Closing Bid Price" means, for any
security as of any date, the closing bid price on the Nasdaq National Market as
reported by Bloomberg or, if the Nasdaq National Market is not the principal
trading market for such security, the closing bid price of such security on the
principal securities exchange or trading market where such security is listed or
traded as reported by Bloomberg, or if the foregoing do not apply, the closing
bid price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no closing bid
price of such security in the over-the-counter market on the electronic bulletin
board for such security or in any of the foregoing manners, the average of the
bid prices of any market makers for such security or as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Bid Price cannot
be calculated for such security on such date in the manner provided above, the
Closing Bid Price shall be the fair market value as mutually determined by the
Corporation and the holders of a majority in interest of shares of Series A
Preferred Stock being converted for which the calculation of the Closing Bid
Price is required in order to determine the Conversion Price of such Series A
Preferred Stock. "Trading Day" shall mean any day on which the Common Stock is
traded for any period on the Nasdaq National Market, or on the principal
securities exchange or other securities market on which the Common Stock is then
being traded.
C. The Conversion Price shall be subject to adjustment from
time to time as follows:
(a) Adjustment to Conversion Price Due to Stock Split, Stock Dividend, Etc.
If at any time when Series A Preferred Stock is issued and outstanding, the
number of outstanding shares of Common Stock is increased or decreased by a
stock split, stock dividend, combination, reclassification, rights offering
below the Trading Price (as defined below) to all holders of Common Stock or
other similar event, which event shall have taken place during the reference
period for determination of the Conversion Price for any Optional Conversion or
Automatic Conversion of the Series A Preferred Stock, then the Conversion Price
shall be calculated giving appropriate effect to the stock split, stock
dividend, combination, reclassification or other similar event. In such event,
the Corporation shall notify the Transfer Agent of such change on or before the
effective date thereof.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when
Series A Preferred Stock is issued and outstanding and prior to the conversion
of all Series A Preferred Stock, there shall be any merger, consolidation,
exchange of shares, recapitalization, reorganization, or other similar event, as
a result of which shares of Common Stock of the Corporation shall be changed
into the same or a different number of shares of another class or classes of
stock or securities of the Corporation or another entity, or in case of any sale
or conveyance of all or substantially all of the assets of the Corporation other
than in connection with a plan of complete liquidation of the Corporation, then
the holders of Series A Preferred Stock shall thereafter have the right to
receive upon conversion of the Series A Preferred Stock, upon the bases and upon
the terms and conditions specified herein and in lieu of the shares of Common
Stock immediately theretofore issuable upon conversion, such stock, securities
or assets which the holders of Series A Preferred Stock would have been entitled
to receive in such transaction had the Series A Preferred Stock been converted
in full (without regard to any limitations on conversion contained herein)
immediately prior to such transaction, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the holders
of Series A Preferred Stock to the end that the provisions hereof (including,
without limitation, provisions for adjustment of the Conversion Price and of the
number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock) shall thereafter be applicable, as nearly as may be practicable
in relation to any securities or assets thereafter deliverable upon the
conversion of Series A Preferred Stock. The Corporation shall not effect any
transaction described in this subsection (b) unless (a) it first gives prior
written notice to the holders of Series A Preferred Stock, at the same time and
in the same form that the Corporation gives such notice to its holders of Common
Stock then outstanding, of such merger, consolidation, exchange of shares,
recapitalization, reorganization or other similar event or sale of assets
(during which time the holders of Series A Preferred Stock shall be entitled to
convert the Series A Preferred Stock) and (b) the resulting successor or
acquiring entity (if not the Corporation) assumes by written instrument the
obligations of this subsection (b). The above provisions shall similarly apply
to successive consolidations, mergers, sales, transfers or share exchanges.
(c) Adjustment Due to Distribution. Subject to Article III, if the
Corporation shall declare or make any distribution of its assets (or rights to
acquire its assets) to holders of Common Stock as a dividend, stock repurchase,
by way of return of capital or otherwise (including any dividend or distribution
to the Corporation's shareholders in cash or shares (or rights to acquire
shares) of capital stock of a subsidiary (i.e., a spin-off)) (a "Distribution"),
then the holders of Series A Preferred Stock shall be entitled, upon any
conversion of shares of Series A Preferred Stock after the date of record for
determining shareholders entitled to such Distribution, to receive the amount of
such assets which would have been payable to the holder with respect to the
shares of Common Stock issuable upon such conversion had such holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such Distribution.
(d) Purchase Rights. Subject to Article III, if at any time when any Series
A Preferred Stock is issued and outstanding, the Corporation issues any
convertible securities or rights to purchase stock, warrants, securities or
other property (the "Purchase Rights") pro rata to the record holders of any
class of Common Stock, then the holders of Series A Preferred Stock will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Common Stock acquirable upon complete
conversion of the Series A Preferred Stock (without regard to any limitations on
conversion contained herein) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.
(e) Adjustment for Restricted Periods. In the event that (1) the
Corporation fails to obtain effectiveness with the Securities and Exchange
Commission of the Registration Statement (as defined in the Registration Rights
Agreement) prior to one hundred twenty (120) days following the Issue Date, or
(2) such Registration Statement lapses in effect, or sales otherwise cannot be
made thereunder, whether by reason of the Corporation's failure or inability to
amend or supplement the prospectus (the "Prospectus") included therein in
accordance with the Registration Rights Agreement or otherwise, after such
Registration Statement becomes effective (including, without limitation, during
an Allowed Delay (as defined in Section 3(f) of the Registration Rights
Agreement), then the Pricing Period shall be comprised of, (i) in the case of an
event described in clause (1), the thirty (30) Trading Days preceding the 120th
day following the Issue Date plus all Trading Days through and including the
third Trading Day following the date of effectiveness of the Registration
Statement; and (ii) in the case of an event described in clause (2), the number
of Trading Days preceding the date on which the holder of the Series A Preferred
Stock is first notified (or otherwise reasonably determines) that sales may not
be made under the Prospectus that would otherwise then be included in the
Pricing Period in accordance with the definition thereof set forth in Article
VI.B(a), plus all Trading Days through and including the third Trading Day
following the date on which the Holder is first notified that such sales may
again be made under the Prospectus. If a holder of Series A Preferred Stock
determines that sales may not be made pursuant to the Prospectus (whether by
reason of the Corporation's failure or inability to amend or supplement the
Prospectus) it shall so notify the Corporation in writing and, unless the
Corporation provides such holder with a written opinion of the Corporation's
counsel to the contrary, such determination shall be binding for purposes of
this paragraph. (f) Notice of Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Article
VI.C, the Corporation, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to each holder of Series A Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
A Preferred Stock, furnish to such holder a like certificate setting forth (i)
such adjustment or readjustment, (ii) the Conversion Price at the time in effect
and (iii) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of a
share of Series A Preferred Stock.
D. For purposes of Article VI.C(a) above, "Trading Price,"
which shall be measured as of the record date in respect of the rights offering
means (i) the average of the last reported sale prices for the shares of Common
Stock on the Nasdaq National Market as reported by Bloomberg, as applicable, for
the five (5) Trading Days immediately preceding such date, or (ii) if the Nasdaq
National Market is not the principal trading market for the shares of Common
Stock, the average of the last reported sale prices on the principal trading
market for the Common Stock during the same period as reported by Bloomberg, or
(iii) if market value cannot be calculated as of such date on any of the
foregoing bases, the Trading Price shall be the fair market value as reasonably
determined in good faith by (a) the Board of Directors of the Corporation or,
(b) at the option of a majority-in-interest of the holders of the outstanding
Series A Preferred Stock by an independent investment bank of nationally
recognized standing in the valuation of businesses similar to the business of
the Corporation.
E. In order to convert Series A Preferred Stock into full
shares of Common Stock, a holder of Series A Preferred Stock shall: (i) submit a
copy of the fully executed notice of conversion in the form attached hereto as
Exhibit A ("Notice of Conversion") to the Corporation by facsimile dispatched on
the Conversion Date (or by other means resulting in notice to the Corporation on
the Conversion Date) at the office of the Corporation or its designated Transfer
Agent for the Series A Preferred Stock that the holder elects to convert the
same, which notice shall specify the number of shares of Series A Preferred
Stock to be converted, the applicable Conversion Price and a calculation of the
number of shares of Common Stock issuable upon such conversion (together with a
copy of the first page of each certificate to be converted) prior to Midnight,
New York City time (the "Conversion Notice Deadline") on the date of conversion
specified on the Notice of Conversion; and (ii) surrender the original
certificates representing the Series A Preferred Stock being converted (the
"Preferred Stock Certificates"), duly endorsed, along with a copy of the Notice
of Conversion to the office of the Corporation or the Transfer Agent for the
Series A Preferred Stock as soon as practicable thereafter. The Corporation
shall not be obligated to issue certificates evidencing the shares of Common
Stock issuable upon such conversion, unless either the Preferred Stock
Certificates are delivered to the Company or its Transfer Agent as provided
above, or the holder notifies the Corporation or its Transfer Agent that such
certificates have been lost, stolen or destroyed (subject to the requirements of
subparagraph (a) below). In the case of a dispute as to the calculation of the
Conversion Price, the Corporation shall promptly issue such number of shares of
Common Stock that are not disputed in accordance with subparagraph (b) below.
The Corporation shall submit the disputed calculations to its outside accountant
via facsimile within two (2) business days of receipt of the Notice of
Conversion. The accountant shall audit the calculations and notify the
Corporation and the holder of the results no later than 48 hours from the time
it receives the disputed calculations. The accountant's calculation shall be
deemed conclusive absent manifest error.
(a) Lost or Stolen Certificates. Upon receipt by the Corporation of
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificates representing shares of Series A Preferred Stock, and (in the case
of loss, theft or destruction) of indemnity reasonably satisfactory to the
Corporation, and upon surrender and cancellation of the Preferred Stock
Certificate(s), if mutilated, the Corporation shall execute and deliver new
Preferred Stock Certificate(s) of like tenor and date.
(b) Delivery of Common Stock Upon Conversion. Upon the surrender of
certificates as described above together with a Notice of Conversion, the
Corporation shall issue and, within two (2) business days after such surrender
(or, in the case of lost, stolen or destroyed certificates, after provision of
agreement and indemnification pursuant to subparagraph (a) above) (the "Delivery
Period"), deliver (or cause its Transfer Agent to so issue and deliver) to or
upon the order of the holder (i) that number of shares of Common Stock for the
portion of the shares of Series A Preferred Stock converted as shall be
determined in accordance herewith and (ii) a certificate representing the
balance of the shares of Series A Preferred Stock not converted, if any. In
addition to any other remedies available to the holder, including actual damages
and/or equitable relief, the Corporation shall pay to a holder $1,000 per day in
cash for each day beyond a three (3) day grace period following the Delivery
Period that the Corporation fails to deliver Common Stock (a "Conversion
Default") issuable upon surrender of shares of Series A Preferred Stock with a
Notice of Conversion until such time as the Corporation has delivered all such
Common Stock (the "Conversion Default Payments"). Such cash amount shall be paid
to such holder by the fifth day of the month following the month in which it has
accrued or, at the option of the holder (by written notice to the Corporation by
the first day of the month following the month in which it has accrued), shall
be convertible into Common Stock in accordance with the terms of this Article
VI.
In lieu of delivering physical certificates representing the Common Stock
issuable upon conversion, provided the Corporation's Transfer Agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer ("FAST") program, upon request of the holder and its compliance with
the provisions contained in Article VI.A. and in this Article VI.E., the
Corporation shall use its best efforts to cause its Transfer Agent to
electronically transmit the Common Stock issuable upon conversion to the holder
by crediting the account of holder's Prime Broker with DTC through its Deposit
Withdrawal Agent Commission ("DWAC") system. The time periods for delivery and
penalties described in the immediately preceding paragraph shall apply to the
electronic transmittals described herein.
(c) No Fractional Shares. If any conversion of Series A Preferred Stock
would result in a fractional share of Common Stock or the right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares of Common Stock issuable upon Conversion of the Series A
Preferred Stock shall be the next higher number of shares.
(d) Conversion Date. The "Conversion Date" shall be the date specified in
the Notice of Conversion, provided that the Notice of Conversion is submitted by
facsimile (or by other means resulting in notice) to the Corporation or its
Transfer Agent before Midnight, New York City time, on the Conversion Date. The
person or persons entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such securities as of the Conversion Date and all rights with respect to the
shares of Series A Preferred Stock surrendered shall forthwith terminate except
the right to receive the shares of Common Stock or other securities or property
issuable on such conversion and except that the holders preferential rights as a
holder of Series A Preferred Stock shall survive to the extent the corporation
fails to deliver such securities.
F. A number of shares of the authorized but unissued Common Stock
sufficient to provide for the conversion of the Series A Preferred Stock
outstanding at the then current Conversion Price shall at all times be reserved
by the Corporation, free from preemptive rights, for such conversion or
exercise. As of the date of issuance of the Series A Preferred Stock, 3,406,045
authorized and unissued shares of Common Stock have been duly reserved for
issuance upon conversion of the Series A Preferred Stock (the "Reserved
Amount"). The Reserved Amount shall be increased from time to time in accordance
with the Company's obligations pursuant to Section 4(h) of the Purchase
Agreement. In addition, if the Corporation shall issue any securities or make
any change in its capital structure which would change the number of shares of
Common Stock into which each share of the Series A Preferred Stock shall be
convertible at the then current Conversion Price, the Corporation shall at the
same time also make proper provision so that thereafter there shall be a
sufficient number of shares of Common Stock authorized and reserved, free from
preemptive rights, for conversion of the outstanding Series A Preferred Stock.
If at any time a holder of shares of Series A Preferred Stock
submits a Notice of Conversion, and the Corporation does not have sufficient
authorized but unissued shares of Common Stock available to effect such
conversion in accordance with the provisions of this Article VI (a "Conversion
Default"), the Corporation shall issue to the holder (or holders, if more than
one holder submits a Notice of Conversion in respect of the same Conversion
Date, pro rata based on the ratio that the number of shares of Series A
Preferred Stock then held by each such holder bears to the aggregate number of
such shares held by such holders) all of the shares of Common Stock which are
available to effect such conversion. The number of shares of Series A Preferred
Stock included in the Notice of Conversion which exceeds the amount which is
then convertible into available shares of Common Stock (the "Excess Amount")
shall, notwithstanding anything to the contrary contained herein, not be
convertible into Common Stock in accordance with the terms hereof until (and at
the holder's option at any time after) the date additional shares of Common
Stock are authorized by the Corporation to permit such conversion, at which time
the Conversion Price in respect thereof shall be the lesser of (i) the
Conversion Price on the Conversion Default Date (as defined below) and (ii) the
Conversion Price on the Conversion Date elected by the holder in respect
thereof. The Corporation shall use its best efforts to effect an increase in the
authorized number of shares of Common Stock as soon as possible following a
Conversion Default. In addition, the Corporation shall pay to the holder
payments ("Conversion Default Payments") for a Conversion Default in the amount
of (a) (N/365), multiplied by (b) the sum of the Stated Value plus the Premium
Amount per share of Series A Preferred Stock through the Authorization Date (as
defined below), multiplied by (c) the Excess Amount on the day the holder
submits a Notice of Conversion giving rise to a Conversion Default (the
"Conversion Default Date"), multiplied by (d) .24, where (i) N = the number of
days from the Conversion Default Date to the date (the "Authorization Date")
that the Corporation authorizes a sufficient number of shares of Common Stock to
effect conversion of the full number of shares of Series A Preferred Stock. The
Corporation shall send notice to the holder of the authorization of additional
shares of Common Stock, the Authorization Date and the amount of holder's
accrued Conversion Default Payments. The accrued Conversion Default Payment for
each calendar month shall be paid in cash or shall be convertible into Common
Stock at the Conversion Price, at the holder's option, as follows:
(a) In the event the holder elects to take such payment in cash,
cash payment shall be made to holder by the fifth day of the month
following the month in which it has accrued; and
(b) In the event the holder elects to take such payment in Common
Stock, the holder may convert such payment amount into Common Stock at
the Conversion Price (as in effect at the time of Conversion) at any
time after the fifth day of the month following the month in which it
has accrued in accordance with the terms of this Article VI (so long
as there is then a sufficient number of authorized shares).
Nothing herein shall limit the holder's right to pursue actual
damages for the Corporation's failure to maintain a sufficient number
of authorized shares of Common Stock, and each holder shall have the
right to pursue all remedies available at law or in equity (including
a decree of specific performance and/or injunctive relief).
G. Upon the occurrence of each adjustment or readjustment of
the Conversion Price pursuant to this Article VI, the Corporation, at its
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series A
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
Series A Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time
would be received upon conversion of a share of Series A Preferred Stock.
H. Upon submission of a Notice of Conversion by a holder of
Series A Preferred Stock, (i) the shares covered thereby (other than the shares,
if any, which cannot be issued because their issuance would exceed such holder's
allocated portion of the Reserved Amount) shall be deemed converted into shares
of Common Stock and (ii) the holder's rights as a holder of such converted
shares of Series A Preferred Stock shall cease and terminate, excepting only the
right to receive certificates for such shares of Common Stock and to any
remedies provided herein or otherwise available at law or in equity to such
holder because of a failure by the Corporation to comply with the terms of these
Articles of Amendment. Notwithstanding the foregoing, if a holder has not
received certificates for all shares of Common Stock prior to the tenth (10th)
business day after the expiration of the Delivery Period with respect to a
conversion of shares of Series A Preferred Stock for any reason, then (unless
the holder otherwise elects to retain its status as a holder of Common Stock by
so notifying the Corporation) the holder shall regain the rights of a holder of
such shares of Series A Preferred Stock with respect to such unconverted shares
of Series A Preferred Stock and the Corporation shall, as soon as practicable,
return such unconverted shares of Series A Preferred Stock to the holder or, if
such shares of Series A Preferred Stock have not been surrendered, adjust its
records to reflect that such shares of Series A Preferred Stock have not been
converted. In all cases, the holder shall retain all of its rights and remedies
(including, without limitation, the right to receive Conversion Default Payments
pursuant to Article IV.E. to the extent required thereby for such Conversion
Default and any subsequent Conversion Default).
VII. Automatic Conversion
So long as the Registration Statement is effective and there
is not then a continuing Mandatory Redemption Event, each share of Series A
Preferred Stock issued and outstanding on May 18, 2003 (the "Automatic
Conversion Date"), automatically shall be converted into shares of Common Stock
on such date at the then effective Conversion Price in accordance with, and
subject to, the provisions of Article VI hereof (the "Automatic Conversion").
The Automatic Conversion Date shall be delayed by one (1) Trading Day each for
each Trading Day occurring prior thereto and prior to the full conversion of the
Series A Preferred Stock that (i) sales cannot be made pursuant to the
Registration Statement (whether by reason of the Company's failure to properly
supplement or amend the prospectus included therein in accordance with the terms
of the Registration Rights Agreement or otherwise including any Allowed Delays
(as defined in Section 2(f) of the Registration Rights Agreement) but not due
solely to the fault of the holder) or (ii) any Default Event (as defined in
Article V.A.) exists, without regard to whether any cure periods shall have run.
The Automatic Conversion Date shall be the Conversion Date for purposes of
determining the Conversion Price and the time within which certificates
representing the Common Stock must be delivered to the holder.
VIII. Voting Rights
The holders of the Series A Preferred Stock have no voting
power whatsoever, except as otherwise provided by the FBCA, in this Article
VIII, and in Article IX below.
Notwithstanding the above, the Corporation shall provide each
holder of Series A Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed sale, lease or conveyance
of all or substantially all of the assets of the Corporation, or any proposed
liquidation, dissolution or winding up of the Corporation, the Corporation shall
mail a notice to each holder, at least ten (10) days prior to the record date
specified therein (or thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
To the extent that under the FBCA the vote of the holders of
the Series A Preferred Stock, voting separately as a class or series as
applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the holders of at least a majority of the shares
of the Series A Preferred Stock represented at a duly held meeting at which a
quorum is present or by written consent of a majority of the shares of Series A
Preferred Stock (except as otherwise may be required under the FBCA) shall
constitute the approval of such action by the class. To the extent that under
the FBCA holders of the Series A Preferred Stock are entitled to vote on a
matter with holders of Common Stock, voting together as one class, each share of
Series A Preferred Stock shall be entitled to a number of votes equal to the
number of shares of Common Stock into which it is then convertible using the
record date for the taking of such vote of shareholders as the date as of which
the Conversion Price is calculated. Holders of the Series A Preferred Stock
shall be entitled to notice of all shareholder meetings or written consents (and
copies of proxy materials and other information sent to shareholders) with
respect to which they would be entitled to vote, which notice would be provided
pursuant to the Corporation's bylaws and the FBCA.
IX. Protective Provisions
So long as shares of Series A Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval (by vote or
written consent, as provided by the FBCA) of the holders of at least a majority
of the then outstanding shares of Series A Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
Series A Preferred Stock or any Senior Securities so as to
affect adversely the Series A Preferred Stock;
(b) create any new class or series of capital stock having a
preference over the Series A Preferred Stock as to
distribution of assets upon liquidation, dissolution or
winding up of the Corporation (as previously defined in
Article II hereof, "Senior Securities");
(c) create any new class or series of capital stock ranking pari
passu with the Series A Preferred Stock as to distribution
of assets upon liquidation, dissolution or winding up of the
Corporation (as previously defined in Article II hereof,
"Pari Passu Securities");
(d) increase the authorized number of shares of Series A
Preferred Stock; or
(e) intentionally do any act or thing not authorized or
contemplated by these Articles of Amendment which would
result in taxation of the holders of shares of the Series A
Preferred Stock under Section 305 of the Internal Revenue
Code of 1986, as amended (or any comparable provision of the
Internal Revenue Code as hereafter from time to time
amended).
In the event holders of at least a majority of the then
outstanding shares of Series A Preferred Stock agree to allow the Corporation to
alter or change the rights, preferences or privileges of the shares of Series A
Preferred Stock, pursuant to subsection (a) above, so as to affect the Series A
Preferred Stock, then the Corporation will deliver notice of such approved
change to the holders of the Series A Preferred Stock that did not agree to such
alteration or change (the "Dissenting Holders") and Dissenting Holders shall
have the right for a period of thirty (30) days to convert pursuant to the terms
of these Articles of Amendment as they exist prior to such alteration or change
or continue to hold their shares of Series A Preferred Stock.
X. Pro Rata Allocations
The Maximum Share Amount and the Reserved Amount (including
any increases thereto) shall be allocated by the Corporation pro rata among the
holders of Series A Preferred Stock based on the number of shares of Series A
Preferred Stock then held by each holder relative to the total aggregate number
of shares of Series A Preferred Stock then outstanding.
IN WITNESS WHEREOF, these Articles of Amendment is executed on
behalf of the Corporation this 18th day of May, 1998.
TECHNICAL CHEMICALS AND
PRODUCTS, INC.
By:
Name: Jack Aronowitz
Title: President and Chairman of the Board
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series A Preferred Stock)
The undersigned hereby irrevocably elects to convert ______
shares of Series A Preferred Stock, represented by stock certificate No(s).
__________ (the "Preferred Stock Certificates") into shares of common stock
("Common Stock") of _______________________ (the "Corporation") according to the
conditions of the Articles of Amendment of Series A Preferred Stock, as of the
date written below. If securities are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates. No fee will be
charged to the Holder for any conversion, except for transfer taxes, if any. A
copy of each Preferred Stock Certificate is attached hereto (or evidence of
loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and
sales by the undersigned of the securities issuable to the undersigned upon
conversion of the Series A Preferred Stock shall be made pursuant to
registration of the securities under the Securities Act of 1933, as amended (the
"Act"), or pursuant to an exemption from registration under the Act.
Date of Conversion:___________________________
Market Price Days:_____________________________
Applicable Conversion Price:____________________
Number of Shares of
Common Stock to be Issued:_____________________
Signature:____________________________________
Name:_______________________________________
Address:______________________________________
*The Corporation is not required to issue shares of Common Stock until the
original Series A Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Corporation or its
Transfer Agent. The Corporation shall issue and deliver shares of Common Stock
to an overnight courier not later than two (2) business days following receipt
of the original Preferred Stock Certificate(s) to be converted, and shall make
payments pursuant to the Articles of Amendment for the number of business days
such issuance and delivery is late.
