Exhibit 4.2
CERTIFICATE OF DESIGNATION OF THE RELATIVE RIGHTS AND PREFERENCES
OF THE
SERIES A CONVERTIBLE PREFERRED STOCK
OF
GLOBUS WIRELESS, LTD.
The undersigned, the Chief Executive Officer and President of Globus
Wireless, Ltd., a Nevada corporation (the "Company"), in accordance with the
provisions of the General Corporation Law of the State of Nevada (the "Nevada
Law"), does hereby certify that, pursuant to the authority conferred upon the
Board of Directors by the Articles of Incorporation of the Company, as amended,
and pursuant to Section 78.195 and following Sections of the Nevada Law, the
following resolution creating a series of Convertible Preferred Stock, was duly
adopted on ______, 2000:
RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Company by provisions of the Articles of
Incorporation of the Company, as amended (the "Articles of Incorporation"),
there hereby is created out of the shares of Preferred Stock, $.001 par value,
of the Company authorized in the Certificate of Amendment of the Articles of
Incorporation, filed with the Secretary of State of the State of Nevada on July
31, 1989 (the "Preferred Stock,"), a series of Preferred Stock of the Company,
to be named "Series A Convertible Preferred Stock," consisting of Two Thousand
(2,000) shares, which series shall have the following designations, powers,
preferences and relative and other special rights and the following
qualifications, limitations and restrictions:
ARTICLE XVIII Designation and Rank.
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The designation of such series of the Preferred Stock shall be the
Series A Convertible Preferred Stock, $.001 par value (the "Series A Preferred
Stock"). The maximum number of shares of Series A Preferred Stock shall be Two
Thousand (2,000) shares. The Series A Preferred Stock shall rank (i) prior to
the common stock, $.001 par value (the "Common Stock"), and to all other classes
and series of equity securities of the Company which by their terms do not rank
senior to the Series A Preferred Stock ("Junior Stock") and (ii) junior to any
class or series of equity securities which by its terms shall rank senior to the
Series A Preferred Stock. The Series A Preferred Stock shall be subordinate to
and rank junior to all indebtedness of the Company now or hereafter outstanding.
ARTICLE XIX Dividends.
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Section 19.1 Payment of Dividends. The holders of record of shares of
Series A Preferred Stock (each a "Holder" and collectively, the "Holders") shall
be entitled to receive, per quarter annum out of any assets at the time legally
available therefor, dividends at the rate of twelve percent (12%) of the stated
Liquidation Preference Amount (as defined below) per share per annum (the
"Dividend Payment"), and no more, payable at the option of the Holders in cash
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or as an accrual to the Liquidation Preference Amount. In the case of shares of
Series A Preferred Stock outstanding for less than a full year, dividends shall
be pro rated based on the portion of each year during which such shares are
outstanding. Dividends on the Series A Preferred Stock shall be cumulative,
shall accrue and be payable at conversion of the Series A Preferred Stock into
shares of Common Stock, and shall accrue until the Mandatory Conversion Date (as
defined in Section 5(c)(ii) below without regard to Section 5(c)(ii)(x)(A)).
Dividends on the Series A Preferred Stock are prior and in preference to any
declaration or payment of any distribution (as defined below) on any outstanding
shares of Common Stock or any other equity securities of the Company ranking
junior to the Series A Preferred Stock as to the payment of dividends. Such
dividends shall accrue on each share of Series A Preferred Stock from day to day
from the date of initial issuance thereof whether or not earned or declared so
that if such dividends with respect to any previous dividend period at the rate
provided for herein have not been paid on, or declared and set apart for, all
shares of Series A Preferred Stock at the time outstanding, the deficiency shall
be fully paid on, or declared and set apart for, such shares on a pro rata basis
with all other equity securities of the Company ranking on a parity with the
Series A Preferred Stock as to the payment of dividends before any distribution
shall be paid on, or declared and set apart for Common Stock or any other equity
securities of the Company ranking junior to the Series A Preferred Stock as to
the payment of dividends.
Section 19.2 So long as any shares of Series A Preferred Stock are
outstanding, the Company shall not declare, pay or set apart for payment any
dividend or make any distribution on any Junior Stock (other than dividends or
distributions payable in additional shares of Junior Stock), unless at the time
of such dividend or distribution the Company shall have paid all accrued and
unpaid dividends on the outstanding shares of Series A Preferred Stock.
Section 19.3 In the event of a dissolution, liquidation or winding up
of the Company pursuant to Section 4 hereof, all accrued and unpaid dividends on
the Series A Preferred Stock shall be payable on the day immediately preceding
the date of payment of the preferential amount to the holders of Series A
Preferred Stock. In the event of (i) a mandatory redemption pursuant to Section
9 hereof, or (ii) a redemption upon the occurrence of a Major Transaction (as
defined in Section 8(c) hereof) or a Triggering Event (as defined in Section
8(d) hereof) or at the election of the Company pursuant to Section 8(h) hereof,
all accrued and unpaid dividends on the Series A Preferred Stock shall be
payable on the day immediately preceding the date of such redemption. In the
event of a voluntary conversion pursuant to Section 5(a) hereof, all accrued and
unpaid dividends on the Series A Preferred Stock being converted shall be
payable on the day immediately preceding the Voluntary Conversion Date (as
defined in Section 5(b)(i) hereof) and in the event of a mandatory conversion
pursuant to Section 5(c) hereof, all accrued and unpaid dividends on the Series
A Preferred Stock being converted shall be payable on the day immediately
preceding the Mandatory Conversion Date (as defined in Section 5(c)(ii) hereof).
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Section 19.4 For purposes hereof, unless the context otherwise
requires, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
shares of Common Stock or other equity securities of the Company, or the
purchase or redemption of shares of the Company (other than redemptions set
forth in Section 8 below or repurchases of Common Stock held by employees or
consultants of the Corporation upon termination of their employment or services
pursuant to agreements providing for such repurchase or upon the cashless
exercise of options held by employees or consultants) for cash or property.
ARTICLE XX Voting Rights.
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Section 20.1 Class Voting Rights. The Series A Preferred Stock shall
have the following class voting rights (in addition to the voting rights set
forth in Section 3(b) hereof). So long as any shares of the Series A Preferred
Stock remain outstanding, the Company shall not, without the affirmative vote or
consent of the holders of at least three-fourths (3/4) of the shares of the
Series A Preferred Stock outstanding at the time, given in person or by proxy,
either in writing or at a meeting, in which the holders of the Series A
Preferred Stock vote separately as class: (i) authorize, create, issue or
increase the authorized or issued amount of any class or series of stock,
including but not limited to the issuance of any more shares of previously
authorized Common Stock or Preferred Stock, ranking prior to the Series A
Preferred Stock, with respect to the distribution of assets on liquidation,
dissolution or winding up; (ii) amend, alter or repeal the provisions of the
Series A Preferred Stock, whether by merger, consolidation or otherwise, so as
to adversely affect any right, preference, privilege or voting power of the
Series A Preferred Stock; provided, however, that any creation and issuance of
another series of Junior Stock shall not be deemed to adversely affect such
rights, preferences, privileges or voting powers; (iii) repurchase, redeem or
pay dividends on, shares of the Company's Junior Stock; (iv) amend the Articles
of Incorporation or By-Laws of the Company so as to affect materially and
adversely any right, preference, privilege or voting power of the Series A
Preferred Stock; provided, however, that any creation and issuance of another
series of Junior Stock or any other class or series of equity securities which
by its terms shall rank on parity with the Series A Preferred Stock shall not be
deemed to materially and adversely affect such rights, preferences privileges or
voting powers; (v) effect any distribution with respect to Junior Stock; or (vi)
reclassify the Company's outstanding securities.
Section 20.2 General Voting Rights. Except with respect to
transactions upon which the Series A Preferred Stock shall be entitled to vote
separately as a class pursuant to Section 3(a) above and except as otherwise
required by Nevada law, the Series A Preferred Stock shall have no voting
rights. The Common Stock into which the Series A Preferred Stock is convertible
shall, upon issuance, have all of the same voting rights as other issued and
outstanding Common Stock of the Company.
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ARTICLE XXI Liquidation Preference.
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Section 21.1 In the event of the liquidation, dissolution or winding
up of the affairs of the Company, whether voluntary or involuntary, after
payment or provision for payment of the debts and other liabilities of the
Company, the holders of shares of the Series A Preferred Stock then outstanding
shall be entitled to receive, out of the assets of the Company whether such
assets are capital or surplus of any nature, an amount equal to One Thousand
Dollars ($1,000) per share of the Series A Preferred Stock plus any accrued and
unpaid dividends (the "Liquidation Preference Amount") before any payment shall
be made or any assets distributed to the holders of the Common Stock or any
other Junior Stock. If the assets of the Company are not sufficient to pay in
full the Liquidation Preference Amount plus any accrued and unpaid dividends
payable to the holders of outstanding shares of the Series A Preferred Stock and
any series of preferred stock or any other class of stock on a parity, as to
rights on liquidation, dissolution or winding up, with the Series A Preferred
Stock, then all of said assets will be distributed among the holders of the
Series A Preferred Stock and the other classes of stock on a parity with the
Series A Preferred Stock, if any, ratably in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon were
paid in full. The liquidation payment with respect to each outstanding
fractional share of Series A Preferred Stock shall be equal to a ratably
proportionate amount of the liquidation payment with respect to each outstanding
share of Series A Preferred Stock. All payments for which this Section 4(a)
provides shall be in cash, property (valued at its fair market value as
determined by the Company's independent, outside accountant acceptable to the
holders of the Series A Preferred Stock) or a combination thereof; provided,
however, that no cash shall be paid to holders of Junior Stock unless each
holder of the outstanding shares of Series A Preferred Stock has been paid in
cash the full Liquidation Preference Amount plus any accrued and unpaid
dividends to which such holder is entitled as provided herein. After payment of
the full Liquidation Preference Amount plus any accrued and unpaid dividends to
which each holder is entitled, such holders of shares of Series A Preferred
Stock will not be entitled to any further participation as such in any
distribution of the assets of the Company.
Section 21.2 A consolidation or merger of the Company with or into any
other corporation or corporations, or a sale of all or substantially all of the
assets of the Company, or the effectuation by the Company of a transaction or
series of transactions in which more than 50% of the voting shares of the
Company is disposed of or conveyed, shall not be deemed to be a liquidation,
dissolution, or winding up within the meaning of this Section 4. In the event of
the merger or consolidation of the Company with or into another corporation, the
Series A Preferred Stock shall maintain its relative powers, designations and
preferences provided for herein and no merger shall result inconsistent
therewith.
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Section 21.3 Written notice of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, stating a
payment date and the place where the distributable amounts shall be payable,
shall be given by mail, postage prepaid, no less than thirty (30) days prior to
the payment date stated therein, to the holders of record of the Series A
Preferred Stock at their respective addresses as the same shall appear on the
books of the Company.
ARTICLE XXII Conversion.
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The holder of Series A Preferred Stock shall have the following
conversion rights (the "Conversion Rights"):
Section 22.1 Right to Convert. At any time on or after one hundred
twenty (120) days from the Closing Date (as such term is defined in the Series A
Convertible Preferred Stock Purchase Agreement dated as of __________________,
2000 between the Company and the initial holders of the Series A Preferred Stock
(the "Securities Purchase Agreement")), the Holder of any such shares of Series
A Preferred Stock may, at such Holder's option, subject to the limitations set
forth in Section 7 herein, elect to convert (a "Voluntary Conversion") all or
any portion of the shares of Series A Preferred Stock held by such person into a
number of fully paid and nonassessable shares of Common Stock (the "Conversion
Rate") equal to the quotient of (i) the Liquidation Preference Amount of the
shares of Series A Preferred Stock being converted divided by (ii) the
Conversion Price (as defined in Section 5(d)(iii) below) then in effect as of
the date of the delivery by such Holder of its notice of election to convert;
provided, however, that a Holder may not convert more than 50% of the Series A
Preferred Stock originally purchased by such person in any period of 30
consecutive calendar days, cumulatively.
Section 22.2 Mechanics of Voluntary Conversion. The Voluntary
Conversion of Series A Preferred Stock shall be conducted in the following
manner:
(a) Holder's Delivery Requirements. To convert Series A Preferred
Stock into full shares of Common Stock on any date (the "Voluntary Conversion
Date"), the Holder thereof shall (A) transmit by facsimile (or otherwise
deliver), for receipt on or prior to 5:00 p.m., Pacific Time on such date, a
copy of a fully executed notice of conversion in the form attached hereto as
Exhibit I (the "Conversion Notice"), to the Company, and (B) surrender to a
common carrier for delivery to the Company as soon as practicable following such
Voluntary Conversion Date but in no event later than three (3) business days
after such date the original certificates representing the shares of Series A
Preferred Stock being converted (or an indemnification undertaking with respect
to such shares in the case of their loss, theft or destruction) (the "Preferred
Stock Certificates") and the originally executed Conversion Notice.
(b) Company's Response. Upon receipt by the Company of a facsimile
copy of a Conversion Notice, the Company shall immediately send, via facsimile,
a confirmation of receipt of such Conversion Notice to such holder. Upon receipt
by the Company of the Preferred Stock Certificates to be converted pursuant to a
Conversion Notice, together with the originally executed Conversion Notice, the
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Company or its designated transfer agent (the "Transfer Agent"), as applicable,
shall, within three (3) business days following the date of receipt by the
Company of both, issue and surrender to a common carrier for overnight delivery
to the address as specified in the Conversion Notice, a certificate, registered
in the name of the Holder or its designee, for the number of shares of Common
Stock to which the Holder shall be entitled. If the number of shares of
Preferred Stock represented by the Preferred Stock Certificate(s) submitted for
conversion is greater than the number of shares of Series A Preferred Stock
being converted, then the Company shall, as soon as practicable and in no event
later than three (3) business days after receipt of the Preferred Stock
Certificate(s) and at the Company's expense, issue and deliver to the holder a
new Preferred Stock Certificate representing the number of shares of Series A
Preferred Stock not converted.
(c) Dispute Resolution. In the case of a dispute as to the
determination of the Average Share Price (as defined in Section 5(d) below) or
the Conversion Price or the arithmetic calculation of the number of shares of
Common Stock to be issued upon conversion, the Company shall promptly issue to
the Holder the number of shares of Common Stock that is not disputed and shall
submit the disputed determinations or arithmetic calculations to the Holder via
facsimile as soon as possible, but in no event later than two (2) business days
after receipt of such holder's Conversion Notice. If such Holder and the Company
are unable to agree upon the determination of the Average Share Price or the
Conversion Price or the arithmetic calculation of the number of shares of Common
Stock to be issued upon such conversion within one (1) business day of such
disputed determination or arithmetic calculation being submitted to the Holder,
then the Company shall within one (1) business day submit via facsimile (A) the
disputed determination of the Average Share Price or the Conversion Price to an
independent, reputable investment bank reasonably acceptable to the applicable
Holder or (B) the disputed arithmetic calculation of the number of shares of
Common Stock to be issued upon such conversion to an independent, outside
accountant reasonably acceptable to the applicable Holder. The Company shall
cause the investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the Holder of the
results no later than three (3) business days from the time it receives the
disputed determinations or calculations. Such investment bank's or accountant's
determination or calculation, as the case may be, shall be binding upon all
parties absent manifest error. The reasonable expenses of such investment bank
or accountant in making such determination shall be paid by the Company, in the
event the Holder's calculation or determination was correct, or by the holder,
in the event the Company's calculation or determination was correct, or equally
by the Company and the holder in the event that neither the Company's or the
Holder's calculation or determination was correct. The period of time in which
the Company is required to effect conversions or redemptions under this
Certificate of Designation shall be tolled with respect to the subject
conversion or redemption pending resolution of any dispute by the Company made
in good faith and in accordance with this Section 5(b)(iii).
(d) Record Holder. The person or persons entitled to receive the
shares of Common Stock issuable upon a conversion of the Series A Preferred
Stock shall be treated for all purposes as the record holder or holders of such
shares of Common Stock on the Conversion Date.
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(e) Company's Failure to Timely Convert. If within three (3) business
days of the Company's receipt of the Conversion Notice and the Preferred Stock
Certificates to be converted (the "Share Delivery Period") the Company shall
fail to issue a certificate to a Holder for the number of shares of Common Stock
to which such holder is entitled upon such Holder's conversion of the Series A
Preferred Stock or to issue a new Preferred Stock Certificate representing the
number of shares of Series A Preferred Stock to which such Holder is entitled
pursuant to Section 5(b)(ii) (a "Conversion Failure"), in addition to all other
available remedies which such Holder may pursue hereunder and under the
Securities Purchase Agreement (including indemnification pursuant to Article VI
thereof), the Company shall pay additional damages to such Holder on each
business day after such third (3rd) business day that such conversion is not
timely effected in an amount equal to one percent (1%) of the product of (A) the
sum of the number of shares of Common Stock not issued to the holder on a timely
basis pursuant to Section 5(b)(ii) and to which such Holder is entitled and, in
the event the Company has failed to deliver a Preferred Stock Certificate to the
Holder on a timely basis pursuant to Section 5(b)(ii), the number of shares of
Common Stock issuable upon conversion of the shares of Series A Preferred Stock
represented by such Preferred Stock Certificate, as of the last possible date
which the Company could have issued such Preferred Stock Certificate to such
Holder without violating Section 5(b)(ii) and (B) the Closing Bid Price (as
defined in Section 5(d) below) of the Common Stock on the last possible date
which the Company could have issued such Common Stock and such Preferred Stock
Certificate, as the case may be, to such Holder without violating Section
5(b)(ii). If the Company fails to pay the additional damages set forth in this
Section 5(b)(v) within five (5) business days of the date incurred, then such
payment shall bear interest at the rate of two percent (2%) per month (pro rated
for partial months) until such payments are made.
(f) Buy-in. The Company shall pay any payments incurred under this
Section 5(b) in immediately available funds upon demand. Nothing herein shall
limit a Holder's right to pursue injunctive relief and/or actual damages for the
Company's failure to issue and deliver Common Stock to the Holder, including,
without limitation, the Holder's actual losses occasioned by any "buy-in" of
Common Stock necessitated by such late delivery. Furthermore, in addition to any
other remedies which may be available to the Holder, in the event that the
Company fails for any reason to effect delivery of such shares of Common Stock
within three (3) business days of the date of receipt of the Conversion Notice,
the Holder will be entitled to revoke the relevant Conversion Notice by
delivering a notice to such effect to the Company whereupon the Company and the
Holder shall each be restored to their respective positions immediately prior to
delivery of such Conversion Notice except that holder shall retain the right to
receive both the late payment amounts set forth above plus the actual documented
cost of any "buy-in." As used herein, "buy-in" shall mean the purchase by a
holder of Series A Preferred Stock of shares of Common Stock in an open market
transaction or otherwise in order to meet its delivery obligations in connection
with the sale of Common Stock, which delivery obligation the holder intended to
satisfy with the shares of Common Stock to be delivered within the Share
Delivery Period.
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Section 22.3 Mandatory Conversion.
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(a) Subject to the Exchange Cap (as defined in Section 7 hereof), each
share of Series A Preferred Stock outstanding on the Mandatory Conversion Date
shall, automatically and without any action on the part of the holder thereof,
convert into a number of fully paid and nonassessable shares of Common Stock
equal to the quotient of (i) the Liquidation Preference Amount of the shares of
Series A Preferred Stock outstanding on the Mandatory Conversion Date divided by
(ii) the Conversion Price in effect on the Mandatory Conversion Date.
(b) As used herein, a "Mandatory Conversion Date" shall be the date
which is three (3) years after the Closing Date, provided that the Mandatory
Conversion Date shall be extended for the following periods for any shares of
Series A Preferred Stock: (x) for as long as (A) the conversion of such share of
Preferred Stock would violate Section 7, (B) a Triggering Event (as defined in
Section 8(d) hereof) shall have occurred and be continuing or (C) any event
shall have occurred and be continuing which with the passage of time and the
failure to cure would result in a Triggering Event, (y) for those number of days
that the Registration Statement was not in effect during the period between the
Effectiveness Date (as defined in the Registration Rights Agreement) and the
third (3rd) anniversary of the Closing Date and (z) one day for each day in any
Blackout Period (as defined in Section 3(n) of the Registration Rights
Agreement). The Mandatory Conversion Date and the Voluntary Conversion Date
collectively are referred to in this Certificate of Designation as the
"Conversion Date."
(c) On the Mandatory Conversion Date, the outstanding shares of Series
A Preferred Stock shall be converted automatically without any further action by
the holders of such shares and whether or not the certificates representing such
shares are surrendered to the Company or its transfer agent; provided, however,
that the Company shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon conversion of any shares of Series A
Preferred Stock unless certificates evidencing such shares of Series A Preferred
Stock are either delivered to the Company or the Holder notifies the Company
that such certificates have been lost, stolen, or destroyed, and executes an
agreement satisfactory to the Company to indemnify the Company from any loss
incurred by it in connection therewith. Upon the occurrence of the automatic
conversion of the Series A Preferred Stock pursuant to this Section 5, the
Holders shall surrender the Preferred Stock Certificates representing the Series
A Preferred Stock for which the Mandatory Conversion Date has occurred to the
Company and the Company shall deliver the shares of Common Stock issuable upon
such conversion (in the same manner set forth in Section 5(b)(ii)) to the holder
within three (3) business days of the Holder's delivery of the applicable
Preferred Stock Certificates.
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Section 22.4 Conversion Price.
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(a) The term "Average Share Price" shall mean the average of the three
(3) lowest Closing Bid Prices of the Company's shares of Common Stock (as
reported by Bloomberg Financial Markets ("Bloomberg")) in the over-the-counter
market on the electronic bulletin board for such security (the "OTC Bulletin
Board") (or on such other United States stock exchange or public trading market
("Alternative Exchange") on which the shares of the Company trade if, at the
time of the conversion, they are not trading in the OTC Bulletin Board), during
the twenty (20) consecutive trading days ending on the trading day immediately
preceding the Conversion Date.
(b) The term "Fixed Conversion Price" shall mean the lower of (i)
$4.00, and (ii) the average of the five (5) Closing Bid Prices of the Company's
shares of Common Stock (as reported by Bloomberg on the OTC Bulletin Board or an
Alternative Exchange) during the five (5) consecutive trading days ending on the
trading day immediately preceding the Closing Date.
(c) The term "Conversion Price" shall mean, with respect to any
conversion of Series A Preferred Stock, the lesser of (A) the Fixed Conversion
Price, or (B) one hundred percent (100%) of the "Floating Conversion Price"
where "Floating Conversion Price" shall mean eighty percent (80%) of the Average
Share Price on the Voluntary Conversion Date or Mandatory Conversion Date for
such conversion, as applicable.
(d) The term "Closing Bid Price" shall mean, for any security as of
any date, the last closing bid price of such security in the OTC Bulletin Board
for such security as reported by Bloomberg, or, if no closing bid price is
reported for such security by Bloomberg, the last closing trade price of such
security as reported by Bloomberg, or, if no last closing trade price is
reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security 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 on any of the foregoing bases, the Closing Bid Price of
such security on such date shall be the fair market value as mutually determined
by the Company and the holders of a majority of the outstanding shares of Series
A Preferred Stock. If the Company and the holders of a majority of the
outstanding shares of Series A Preferred Stock are unable to agree upon the fair
market value of the Common Stock, then such dispute shall be resolved pursuant
to Section 5(b)(iii) above with the term "Closing Bid Price" being substituted
for the term "Average Share Price." (All such determinations to be appropriately
adjusted for any stock dividend, stock split or other similar transaction during
such period).
Section 22.5 Adjustments of Conversion Price.
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(a) Adjustments for Stock Splits and Combinations. If the Company
shall at any time or from time to time after the date of issuance of Series A
Preferred Stock (the "Issuance Date"), effect a stock split of the outstanding
Common Stock, the applicable Conversion Price in effect immediately prior to the
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stock split shall be proportionately decreased. If the Company shall at any time
or from time to time after the Issuance Date, combine the outstanding shares of
Common Stock, the applicable Conversion Price in effect immediately prior to the
combination shall be proportionately increased. Any adjustments under this
Section 5(e)(i) shall be effective at the close of business on the date the
stock split or combination occurs.
(b) Adjustments for Certain Dividends and Distributions. If the
Company shall at any time or from time to time after the Issuance Date, make or
issue or set a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in shares of Common
Stock, then, and in each event, the applicable Conversion Price in effect
immediately prior to such event shall be decreased as of the time of such
issuance or, in the event such record date shall have been fixed, as of the
close of business on such record date, by multiplying, as applicable, the
applicable Conversion Price then in effect by a fraction:
(1) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date;
and
(2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date
plus the number of shares of Common Stock issuable in payment of such
dividend or distribution.
(c) Adjustment for Other Dividends and Distributions. If the Company
shall at any time or from time to time after the Issuance Date, make or issue or
set a record date for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in other than shares of Common
Stock, then, and in each event, an appropriate revision to the applicable
Conversion Price shall be made and provision shall be made (by adjustments of
the Conversion Price or otherwise) so that the Holders of Series A Preferred
Stock shall receive upon conversions thereof, in addition to the number of
shares of Common Stock receivable thereon, the number of securities of the
Company which they would have received had their Series A Preferred Stock been
converted into Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the Conversion Date,
retained such securities (together with any distributions payable thereon during
such period), giving application to all adjustments called for during such
period under this Section 5(e)(iii) with respect to the rights of the Holders of
the Series A Preferred Stock.
(d) Adjustments for Reclassification, Exchange or Substitution. If the
Common Stock issuable upon conversion of the Series A Preferred Stock at any
time or from time to time after the Issuance Date shall be changed to the same
or different number of shares of any class or classes of stock, whether by
reclassification, exchange, substitution or otherwise (other than by way of a
stock split or combination of shares or stock dividends provided for in Sections
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5(e)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale of
assets provided for in Section 5(e)(v)), then, and in each event, an appropriate
revision to the Conversion Price shall be made and provisions shall be made (by
adjustments of the Conversion Price or otherwise) so that the holder of each
share of Series A Preferred Stock shall have the right thereafter to convert
such share of Series A Preferred Stock into the kind and amount of shares of
stock and other securities receivable upon reclassification, exchange,
substitution or other change, by holders of the number of shares of Common Stock
into which such share of Series A Preferred Stock might have been converted
immediately prior to such reclassification, exchange, substitution or other
change, all subject to further adjustment as provided herein.
(e) Adjustments for Reorganization, Merger, Consolidation or Sales of
Assets. If at any time or from time to time after the Issuance Date there shall
be a capital reorganization of the Company (other than by way of a stock split
or combination of shares or stock dividends or distributions provided for in
Section 5(e)(i), (ii) and (iii), or a reclassification, exchange or substitution
of shares provided for in Section 5(e)(iv)), or a merger or consolidation of the
Company with or into another corporation, or the sale of all or substantially
all of the Company's properties or assets to any other person (an "Organic
Change"), then as a part of such Organic Change an appropriate revision to the
Conversion Price shall be made and provision shall be made (by adjustments of
the Conversion Price or otherwise) so that the Holder of each share of Series A
Preferred Stock shall have the right thereafter to convert such share of Series
A Preferred Stock into the kind and amount of shares of stock and other
securities or property of the Company or any successor corporation resulting
from Organic Change. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 5(e)(v) with respect to the
rights of the Holders of the Series A Preferred Stock after the Organic Change
to the end that the provisions of this Section 5(e)(v) (including any adjustment
in the applicable Conversion Price then in effect and the number of shares of
stock or other securities deliverable upon conversion of the Series A Preferred
Stock) shall be applied after that event in as nearly an equivalent manner as
may be practicable.
(f) Adjustments for Issuance of Additional Shares of Common Stock. If
the Company, at any time after the Issuance Date, shall issue any additional
shares of Common Stock (otherwise than as provided in the foregoing subsections
(i) through (v) of this Section 5(e)) (the "Additional Shares of Common Stock"),
at a price per share less than the applicable Conversion Price then in effect or
without consideration, then the applicable Conversion Price upon each such
issuance shall be adjusted to that price (rounded to the nearest cent)
determined by multiplying the applicable Conversion Price then in effect by a
fraction:
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(i) the numerator of which shall be equal to the sum of (A) the
number of shares of Common Stock outstanding immediately prior to the issuance
of such Additional Shares of Common Stock plus (B) the number of shares of
Common Stock (rounded to the nearest whole share) which the aggregate
consideration for the total number of such Additional Shares of Common Stock so
issued would purchase at a price per share equal to the applicable Conversion
Price then in effect, and
(ii) the denominator of which shall be equal to the number of
shares of Common Stock outstanding immediately after the issuance of such
Additional Shares of Common Stock.
The provisions of this subsection (vi) shall not apply under any of the
circumstances for which an adjustment is provided in subsections (i), (ii),
(iii), (iv) or (v) of this Section 5(e). No adjustment of the applicable
Conversion Price shall be made under this subsection (e)(vi) upon the issuance
of any Additional Shares of Common Stock which are issued pursuant to any Common
Stock Equivalent (as such term is defined hereinafter) if upon the issuance of
such Common Stock Equivalent (x) any adjustment shall have been made pursuant to
subsection (vii) of this Section 5(e) or (y) no adjustment was required pursuant
to subsection (vii) of this Section 5(e). No adjustment of the applicable
Conversion Price shall be made under this subsection (vi) in an amount less than
$.01 per share, but any such lesser adjustment shall be carried forward and
shall be made at the time and together with the next subsequent adjustment, if
any, which together with any adjustments so carried forward shall amount to $.01
per share or more; provided that upon any adjustment of the applicable
Conversion Price as a result of any dividend or distribution payable in Common
Stock or Convertible Securities (as defined below) or the reclassification,
subdivision or combination of Common Stock into a greater or smaller number of
shares, the foregoing figure of $.01 per share (or such figure as last adjusted)
shall be adjusted (to the nearest one-half cent) in proportion to the adjustment
in the applicable Conversion Price.
(g) Issuance of Common Stock Equivalents. If the Company, at any time after the
Issuance Date, shall issue any securities convertible into or exchangeable for,
directly or indirectly, Common Stock ("Convertible Securities"), other than the
Series A Preferred Stock, or any rights or warrants or options to purchase any
such Common Stock or Convertible Securities, shall be issued or sold
(collectively, the "Common Stock Equivalents") and the price per share for which
Additional Shares of Common Stock may be issuable thereafter pursuant to such
Common Stock Equivalent shall be less than the applicable Conversion Price then
in effect, or if, after any such issuance of Common Stock Equivalents, the price
per share for which Additional Shares of Common Stock may be issuable thereafter
is amended or adjusted, and such price as so amended shall be less than the
applicable Conversion Price in effect at the time of such amendment, then the
applicable Conversion Price upon each such issuance or amendment shall be
adjusted as provided in the first sentence of subsection (vi) of this Section
5(e) on the basis that (1) the maximum number of Additional Shares of Common
Stock issuable pursuant to all such Common Stock Equivalents shall be deemed to
have been issued (whether or not such Common Stock Equivalents are actually then
exercisable, convertible or exchangeable in whole or in part) as of the earlier
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of (A) the date on which the Company shall enter into a firm contract for the
issuance of such Common Stock Equivalent, or (B) the date of actual issuance of
such Common Stock Equivalent, and (2) the aggregate consideration for such
maximum number of Additional Shares of Common Stock shall be deemed to be the
minimum consideration received or receivable by the Company for the issuance of
such Additional Shares of Common Stock pursuant to such Common Stock Equivalent.
No adjustment of the applicable Conversion Price shall be made under this
subsection (vii) upon the issuance of any Convertible Security which is issued
pursuant to the exercise of any warrants or other subscription or purchase
rights therefor, if any adjustment shall previously have been made to the
exercise price of such warrants then in effect upon the issuance of such
warrants or other rights pursuant to this subsection (vii).
(h) Consideration for Stock. In case any shares of Common Stock or any
securities convertible into or exchangeable for, directly or indirectly, Common
Stock ("Convertible Securities"), other than the Series A Preferred Stock, or
any rights or warrants or options to purchase any such Common Stock or
Convertible Securities, shall be issued or sold:
(1) in connection with any merger or consolidation in which
the Company is the surviving corporation (other than any consolidation
or merger in which the previously outstanding shares of Common Stock
of the Company shall be changed to or exchanged for the stock or other
securities of another corporation), the amount of consideration
therefore shall be deemed to be the fair value, as determined
reasonably and in good faith by the Board of Directors of the Company,
of such portion of the assets and business of the nonsurviving
corporation as such Board may determine to be attributable to such
shares of Common Stock, Convertible Securities, rights or warrants or
options, as the case may be; or
(2) in the event of any consolidation or merger of the
Company in which the Company is not the surviving corporation or in
which the previously outstanding shares of Common Stock of the Company
shall be changed into or exchanged for the stock or other securities
of another corporation, or in the event of any sale of all or
substantially all of the assets of the Company for stock or other
securities of any corporation, the Company shall be deemed to have
issued a number of shares of its Common Stock for stock or securities
or other property of the other corporation computed on the basis of
the actual exchange ratio on which the transaction was predicated, and
for a consideration equal to the fair market value on the date of such
transaction of all such stock or securities or other property of the
other corporation. If any such calculation results in adjustment of
the applicable Conversion Price, or the number of shares of Common
Stock issuable upon conversion of the Series A Preferred Stock, the
determination of the applicable Conversion Price or the number of
shares of Common Stock issuable upon conversion of the Series A
Preferred Stock immediately prior to such merger, consolidation or
sale, shall be made after giving effect to such adjustment of the
number of shares of Common Stock issuable upon conversion of the
Series A Preferred Stock.
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(i) Record Date. In case the Company shall take record of the holders
of its Common Stock or any other Preferred Stock for the purpose of entitling
them to subscribe for or purchase Common Stock or Convertible Securities, then
the date of the issue or sale of the shares of Common Stock shall be deemed to
be such record date.
(j) Certain Issues Excepted. Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of the
number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock upon the grant after the Issuance Date of, or the exercise after
the Issuance Date of, options or warrants or rights to purchase stock under the
Company's stock option plan.
Section 22.6 No Impairment. The Company shall not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith, assist in the carrying out of all the provisions of this
Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock against impairment. In the event a Holder shall elect
to convert any shares of Series A Preferred Stock as provided herein, the
Company cannot refuse conversion based on any claim that such Holder or any one
associated or affiliated with such holder has been engaged in any violation of
law, unless, an injunction from a court, on notice, restraining and/or adjoining
conversion of all or of said shares of Series A Preferred Stock shall have been
issued and the Company posts a surety bond for the benefit of such Holder in the
amount of the difference between the Conversion Price and the Closing Bid Price
on the trading day preceding the date of the attempted conversion multiplied by
the number of shares of Series A Preferred Stock sought to be converted, which
bond shall remain in effect until the completion of arbitration/litigation of
the dispute and the proceeds of which shall be payable to such holder in the
event it obtains judgment.
Section 22.7 Certificates as to Adjustments. Upon occurrence of each
adjustment or readjustment of the Conversion Price or number of shares of Common
Stock issuable upon conversion of the Series A Preferred Stock pursuant to this
Section 5, the Company at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
such Series A Preferred Stock a certificate setting forth such adjustment and
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon written request of the Holder of
such affected Series A Preferred Stock, at any time, furnish or cause to be
furnished to such Holder a like certificate setting forth such adjustments and
readjustments, the applicable Conversion Price in effect at the time, and 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 the conversion of a share of
such Series A Preferred Stock. Notwithstanding the foregoing, the Company shall
not be obligated to deliver a certificate unless such certificate would reflect
an increase or decrease of at least one percent of such adjusted amount.
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Section 22.8 Issue Taxes. The Company shall pay any and all issue and
other taxes, excluding federal, state or local income taxes, that may be payable
in respect of any issue or delivery of shares of Common Stock on conversion of
shares of Series A Preferred Stock pursuant thereto; provided, however, that the
Company shall not be obligated to pay any transfer taxes resulting from any
transfer requested by any holder in connection with any such conversion.
Section 22.9 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
facsimile or three (3) business days following being mailed by certified or
registered mail, postage prepaid, return-receipt requested, addressed to the
holder of record at its address appearing on the books of the Company. The
Company will give written notice to each Holder at least twenty (20) days prior
to the date on which the Company closes its books or takes a record (I) with
respect to any dividend or distribution upon the Common Stock, (II) with respect
to any pro rata subscription offer to holders of Common Stock or (III) for
determining rights to vote with respect to any Organic Change, dissolution,
liquidation or winding-up and in no event shall such notice be provided to such
holder prior to such information being made known to the public. The Company
will also give written notice to each Holder at least twenty (20) days prior to
the date on which any Organic Change, dissolution, liquidation or winding-up
will take place and in no event shall such notice be provided to such holder
prior to such information being made known to the public.
Section 22.10 Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of the Series A Preferred Stock. All fractional
shares to which the Holder would otherwise be entitled shall be rounded up to
the nearest whole number of shares.
Section 22.11 Reservation of Common Stock. Beginning on the date that
is one hundred twenty (120) days after the date hereof, so long as any shares of
Series A Preferred Stock are outstanding, reserve and keep available out of its
authorized and unissued Common Stock, solely for the purpose of effecting the
conversion of the Series A Preferred Stock, such number of shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
of the Series A Preferred Stock then outstanding; provided that the number of
shares of Common Stock so reserved shall at no time be less than two hundred
percent (200%) of the number of shares of Common Stock for which the shares of
Series A Preferred Stock are at any time convertible. The initial number of
shares of Common Stock reserved for conversions of the Series A Preferred Stock
and each increase in the number of shares so reserved shall be allocated pro
rata among the Holders based on the number of shares of Series A Preferred Stock
held by each Holder at the time of issuance of the Series A Preferred Stock or
increase in the number of reserved shares, as the case may be. In the event a
Holder shall sell or otherwise transfer any of such Holder's shares of Series A
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Preferred Stock, each transferee shall be allocated a pro rata portion of the
number of reserved shares of Common Stock reserved for such transferor. Any
shares of Common Stock reserved and which remain allocated to any person or
entity which does not hold any shares of Series A Preferred Stock shall be
allocated to the remaining Holders, pro rata based on the number of shares of
Series A Preferred Stock then held by such Holder. The Company shall, from time
to time in accordance with the Nevada Law, as amended, increase the authorized
number of shares of Common Stock if at any time the unissued number of
authorized shares shall not be sufficient to satisfy the Company's obligations
under this Section 5(k).
Section 22.12 Retirement of Series A Preferred Stock. Conversion of
Series A Preferred Stock shall be deemed to have been effected on the applicable
Voluntary Conversion Date or Mandatory Conversion Date, and such date is
referred to herein as the "Conversion Date". Upon conversion of only a portion
of the number of shares of Series A Preferred Stock represented by a certificate
surrendered for conversion, the Company shall issue and deliver to such Holder
at the expense of the Company, a new certificate covering the number of shares
of Series A Preferred Stock representing the unconverted portion of the
certificate so surrendered as required by Section 5(b)(ii).
Section 22.13 Regulatory Compliance. If any shares of Common Stock to
be reserved for the purpose of conversion of Series A Preferred Stock require
registration or listing with or approval of any governmental authority, stock
exchange or other regulatory body under any federal or state law or regulation
or otherwise before such shares may be validly issued or delivered upon
conversion, the Company shall, at its sole cost and expense, in good faith and
as expeditiously as possible, endeavor to secure such registration, listing or
approval, as the case may be.
ARTICLE XXIII No Preemptive Rights.
--------------------
Except as provided in Section 5 hereof and in the Securities Purchase
Agreement, no holder of the Series A Preferred Stock shall be entitled to rights
to subscribe for, purchase or receive any part of any new or additional shares
of any class, whether now or hereinafter authorized, or of bonds or debentures,
or other evidences of indebtedness convertible into or exchangeable for shares
of any class, but all such new or additional shares of any class, or any bond,
debentures or other evidences of indebtedness convertible into or exchangeable
for shares, may be issued and disposed of by the Board of Directors on such
terms and for such consideration (to the extent permitted by law), and to such
person or persons as the Board of Directors in their absolute discretion may
deem advisable.
ARTICLE XXIV Conversion Restrictions.
-----------------------
Section 24.1 Notwithstanding any other provision herein, the Company
shall not be obligated to issue any shares of Common Stock upon conversion of
the Series A Preferred Stock if the issuance of such shares of Common Stock
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would exceed that number of shares of Common Stock which the Company may issue
upon conversion of the Series A Preferred Stock (the "Exchange Cap") without
breaching the Company's obligations under the rules or regulations of the OTC
Bulletin Board or any Alternative Exchange, except that such limitation shall
not apply in the event that the Company (a) obtains the approval of its
stockholders as required by applicable rules of the OTC Bulletin Board or any
Alternative Exchange, for issuances of Common Stock in excess of such amount
(the "Shareholder Approval") or (b) obtains a written opinion from outside
counsel to the Company that such approval is not required, which opinion shall
be reasonably satisfactory to the holders of a majority of the shares of Series
A Preferred Stock then outstanding; provided, however, that notwithstanding
anything herein to the contrary, the Company, will issue such number of shares
of Common Stock issuable upon conversion of the Series A Preferred Stock at the
then current Conversion Price up to the Exchange Cap. If the conversion of any
shares of Series A Preferred Stock would result in the issuance of Common Stock
which in the aggregate would equal or exceed the Exchange Cap, the Company shall
within fifteen (15) days of the such conversion request, (i) call a meeting of
its stockholders in order to seek the Shareholder Approval as may be required by
the applicable rules or regulations of the OTC Bulletin Board or the Alternative
Exchange, as applicable (the "Stockholders Meeting"), which Stockholders Meeting
shall take place within sixty (60) days after such meeting is called and (ii)
file a proxy statement with the Securities and Exchange Commission. Until such
approval or written opinion is obtained, no Holder of Series A Convertible
Preferred Stock pursuant to the Securities Purchase Agreement shall be issued,
upon conversion of shares of Series A Preferred Stock, shares of Common Stock in
an amount greater than the product of (i) the Exchange Cap amount multiplied by
(ii) a fraction, the numerator of which is the number of shares of Series A
Preferred Stock issued to such Holder pursuant to the Securities Purchase
Agreement and the denominator of which is the aggregate amount of all the shares
of Series A Preferred Stock issued to the Holders pursuant to the Securities
Purchase Agreement (the "Cap Allocation Amount"). In the event that any Holder
shall convert all of such Holder's shares of Series A Preferred Stock into a
number of shares of Common Stock which, in the aggregate, is less than such
Holder's Cap Allocation Amount, then the difference between such Holder's Cap
Allocation Amount and the number of shares of Common Stock actually issued to
such Holder shall be allocated to the respective Cap Allocation Amounts of the
remaining Holders of Series A Preferred Stock on a pro rata basis in proportion
to the number of shares of Series A Preferred Stock then held by each such
Holder. If the Company obtains the Shareholder Approval, the Company shall be
obligated to issue upon conversion of the Series A Preferred Stock, in the
aggregate, shares of Common Stock in excess of the Exchange Cap. If the Company
fails to obtain the Shareholder Approval or call the Stockholder Meeting within
the time period set forth herein, any Holder may exercise its rights pursuant to
Section 9(a) hereof. Nothing in this Section 7(a) shall limit a Holder's right
to request conversion of its shares of Series A Preferred Stock or such Holder's
rights under Section 9 hereof.
Section 24.2 Notwithstanding anything to the contrary set forth in
Section 5 of this Certificate of Designation, at no time may a Holder convert
shares of the Series A Preferred Stock if the number of shares of Common Stock
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to be issued pursuant to such conversion would exceed, when aggregated with all
other shares of Common Stock owned by such Holder at such time, the number of
shares of Common Stock which would result in such Holder owning more than 9.99%
of all of the Common Stock outstanding at such time; provided, however, that
upon a Holder of Series A Preferred Stock providing the Company with
seventy-five (75) days notice (pursuant to Section 5(i) hereof) (the "Waiver
Notice") that such Holder would like to waive Section 7(b) of this Certificate
of Designation with regard to any or all shares of Common Stock issuable upon
conversion of Series A Preferred Stock, this Section 7(b) shall be of no force
or effect with regard to those shares of Series A Preferred Stock referenced in
the Waiver Notice.
ARTICLE XXV Redemption.
----------
Section 25.1 Redemption Option Upon Major Transaction. In addition to
all other rights of the Holders contained herein, simultaneous with the
occurrence of a Major Transaction (as defined below), each Holder shall have the
right, at such Holder's option, to require the Company to redeem all or a
portion of such Holder's shares of Series A Preferred Stock at a price per share
of Series A Preferred Stock equal to the greater of (i) one hundred twenty five
percent (125%) of the Liquidation Preference Amount and (ii) the product of (A)
the Conversion Rate and (B) the Closing Bid Price of the Common Stock on the
trading date immediately preceding such Major Transaction (the "Major
Transaction Redemption Price").
Section 25.2 Redemption Option Upon Triggering Event. In addition to
all other rights of the holders of Series A Preferred Stock contained herein,
after a Triggering Event (as defined below), each Holder shall have the right,
at such Holder's option, to require the Company to redeem all or a portion of
such Holder's shares of Series A Preferred Stock at a price per share of Series
A Preferred Stock equal to the greater of (i) one hundred twenty five percent
(125%) of the Liquidation Preference Amount and (ii) the product of (A) the
Conversion Rate (as defined in Section 5(a)) at such time and (B) the Closing
Bid Price of the Common Stock calculated as of the date immediately preceding
such Triggering Event on which the exchange or market on which the Common Stock
is traded is open (the "Triggering Event Redemption Price" and, collectively
with the "Major Transaction Redemption Price," the "Redemption Price").
Section 25.3 "Major Transaction". A "Major Transaction" shall be
deemed to have occurred at such time as any of the following events:
(a) the consolidation, merger or other business combination of the
Company with or into another Person (other than (A) pursuant to a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company or (B) a consolidation, merger or other business
combination in which holders of the Company's voting power immediately prior to
the transaction continue after the transaction to hold, directly or indirectly,
the voting power of the surviving entity or entities necessary to elect a
majority of the members of the board of directors (or their equivalent if other
than a corporation) of such entity or entities).
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(b) the sale or transfer of all or substantially all of the Company's
assets; or
(c) consummation of a purchase, tender or exchange offer made to the
holders of more than 30% of the outstanding shares of Common Stock.
Section 25.4 "Triggering Event". A "Triggering Event" shall be deemed
to have occurred at such time as any of the following events:
(a) the failure of the Registration Statement to be declared effective
by the SEC on or prior to the date which is two hundred seventy (270) days after
the Closing Date;
(b) while the Registration Statement is required to be maintained
effective pursuant to the terms of the Registration Rights Agreement, the
effectiveness of the Registration Statement lapses for any reason (including,
without limitation, the issuance of a stop order) or is unavailable to the
Holder for sale of the Registrable Securities (as defined in the Registration
Rights Agreement) in accordance with the terms of the Registration Rights
Agreement, and such lapse or unavailability continues for a period of ten
consecutive trading days, provided that the cause of such lapse or
unavailability is not due to factors solely within the control of such Holder;
(c) the suspension from listing or the failure of the Common Stock to
be listed on the OTC Bulletin Board, the Nasdaq SmallCap Market, the Nasdaq
National Market, The New York Stock Exchange, Inc. or The American Stock
Exchange, Inc., as applicable, for a period of five (5) consecutive days;
(d) the Company's notice to any Holder, including by way of public
announcement, at any time, of its inability to comply (including for any of the
reasons described in Section 9) or its intention not to comply with proper
requests for conversion of any Series A Preferred Stock into shares of Common
Stock;
(e) the Company's failure to comply with a Conversion Notice tendered
in accordance with the provisions of this Certificate of Designation within ten
(10) business days after the receipt by the Company of the Conversion Notice and
the Preferred Stock Certificates;
(f) the Company's failure for any reason to pay in full the amount of
cash due pursuant to a "buy-in" within five (5) business days after notice
therefor is delivered hereunder or shall fail to pay all amounts owed on account
of a default within five (5) business days of the date due; or
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(g) the Company breaches any material representation, warranty,
covenant or other term or condition of the Securities Purchase Agreement, the
Registration Rights Agreement, this Certificate of Designation or any other
agreement, document, certificate or other instrument delivered in connection
with the transactions contemplated thereby or hereby.
Section 25.5 Mechanics of Redemption at Option of Buyer Upon Major
Transaction. No sooner than twenty (20) days nor later than five (5) days prior
to the consummation of a Major Transaction, but not prior to the public
announcement of such Major Transaction, the Company shall deliver written notice
thereof via facsimile and overnight courier ("Notice of Major Transaction") to
each Holder. At any time after receipt of a Notice of Major Transaction (or, in
the event a Notice of Major Transaction is not delivered at least five (5) days
prior to a Major Transaction, at any time within five (5) days prior to a Major
Transaction), any Holder of Series A Preferred Stock then outstanding may
require the Company to redeem, effective immediately prior to the consummation
of such Major Transaction, all of the Holder's Series A Preferred Stock then
outstanding by delivering written notice thereof via facsimile and overnight
courier ("Notice of Redemption at Option of Buyer Upon Major Transaction") to
the Company, which Notice of Redemption at Option of Buyer Upon Major
Transaction shall indicate (i) the number of shares of Series A Preferred Stock
that such Holder is electing to redeem and (ii) the applicable Major Transaction
Redemption Price, as calculated pursuant to Section 8(a) above.
Section 25.6 Mechanics of Redemption at Option of Buyer Upon
Triggering Event. Within one (1) day after the occurrence of a Triggering Event,
the Company shall deliver written notice thereof via facsimile and overnight
courier ("Notice of Triggering Event") to each Holder. At any time after the
earlier of a Holder's receipt of a Notice of Triggering Event and such holder
becoming aware of a Triggering Event, any Holder of Series A Preferred Stock
then outstanding may require the Company to redeem all of the Series A Preferred
Stock by delivering written notice thereof via facsimile and overnight courier
("Notice of Redemption at Option of Buyer Upon Triggering Event") to the
Company, which Notice of Redemption at Option of Buyer Upon Triggering Event
shall indicate (i) the number of shares of Series A Preferred Stock that such
Holder is electing to redeem and (ii) the applicable Triggering Event Redemption
Price, as calculated pursuant to Section 8(b) above.
Section 25.7 Payment of Redemption Price. Upon the Company's receipt
of a Notice(s) of Redemption at Option of Buyer Upon Triggering Event or a
Notice(s) of Redemption at Option of Buyer Upon Major Transaction from any
Holder, the Company shall immediately notify each Holder by facsimile of the
Company's receipt of such Notice(s) of Redemption at Option of Buyer Upon
Triggering Event or Notice(s) of Redemption at Option of Buyer Upon Major
Transaction and each Holder which has sent such a notice shall promptly submit
to the Company such Holder's Preferred Stock Certificates which such Holder has
elected to have redeemed. The Company shall deliver the applicable Triggering
Event Redemption Price, in the case of a redemption pursuant to Section 8(f), to
such Holder within five (5) business days after the Company's receipt of a
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Notice of Redemption at Option of Buyer Upon Triggering Event and, in the case
of a redemption pursuant to Section 8(e), the Company shall deliver the
applicable Major Transaction Redemption Price immediately prior to the
consummation of the Major Transaction; provided that a Holder's Preferred Stock
Certificates shall have been so delivered to the Company; provided further that
if the Company is unable to redeem all of the Series A Preferred Stock to be
redeemed, the Company shall redeem an amount from each Holder of Series A
Preferred Stock being redeemed equal to such Holder's pro-rata amount (based on
the number of shares of Series A Preferred Stock held by such Holder relative to
the number of shares of Series A Preferred Stock outstanding) of all Series A
Preferred Stock being redeemed. If the Company shall fail to redeem all of the
Series A Preferred Stock submitted for redemption (other than pursuant to a
dispute as to the arithmetic calculation of the Redemption Price), in addition
to any remedy such Holder of Series A Preferred Stock may have under this
Certificate of Designation and the Securities Purchase Agreement, the applicable
Redemption Price payable in respect of such unredeemed Series A Preferred Stock
shall bear interest at the rate of 2.0% per month (prorated for partial months)
until paid in full. Until the Company pays such unpaid applicable Redemption
Price in full to a Holder of shares of Series A Preferred Stock submitted for
redemption, such Holder shall have the option (the "Void Optional Redemption
Option") to, in lieu of redemption, require the Company to promptly return to
such Holder(s) all of the shares of Series A Preferred Stock that were submitted
for redemption by such Holder(s) under this Section 8 and for which the
applicable Redemption Price has not been paid, by sending written notice thereof
to the Company via facsimile (the "Void Optional Redemption Notice"). Upon the
Company's receipt of such Void Optional Redemption Notice(s) and prior to
payment of the full applicable Redemption Price to such Holder, (i) the
Notice(s) of Redemption at Option of Buyer Upon Triggering Event or the
Notice(s) of Redemption at Option of Buyer Upon Major Transaction, as the case
may be, shall be null and void with respect to those shares of Series A
Preferred Stock submitted for redemption and for which the applicable Redemption
Price has not been paid, (ii) the Company shall immediately return any Series A
Preferred Stock submitted to the Company by each Holder for redemption under
this Section 8(g) and for which the applicable Redemption Price has not been
paid and (iii) the Fixed Conversion Price of such returned shares of Series A
Preferred Stock shall be adjusted to the lesser of (A) the Fixed Conversion
Price as in effect on the date on which the Void Optional Redemption Notice(s)
is delivered to the Company and (B) the lowest Closing Bid Price during the
period beginning on the date on which the Notice(s) of Redemption of Option of
Buyer Upon Major Transaction or the Notice(s) of Redemption at Option of Buyer
Upon Triggering event, as the case may be, is delivered to the Company and
ending on the date on which the Void Optional Redemption Notice(s) is delivered
to the Company; provided that no adjustment shall be made if such adjustment
would result in an increase of the Fixed Conversion Price then in effect.
Notwithstanding the foregoing, in the event of a dispute as to the determination
of the Closing Bid Price or the arithmetic calculation of the Redemption Price,
such dispute shall be resolved pursuant to Section 5(b)(iii) above with the term
"Closing Bid Price" being substituted for the term "Average Share Price" and the
term "Redemption Price" being substituted for the term "Conversion Price". A
Holder's delivery of a Void Optional Redemption Notice and exercise of its
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rights following such notice shall not effect the Company's obligations to make
any payments which have accrued prior to the date of such notice. Payments
provided for in this Section 8 shall have priority to payments to other
stockholders in connection with a Major Transaction.
Section 25.8 Company's Redemption Option. (x) After the Company has
actually drawn down not less than $300,000 under the Common Stock Purchase
Agreement by and between the Company and Torneaux Fund Ltd., dated as of October
6, 2000, as amended through the date hereof (the "Equity Line"), the Company
shall apply at least one-half (1/2) of the proceeds of amounts subsequently
drawn down by it under the Equity Line toward the redemption of all of the
outstanding Preferred Shares (as defined in the Securities Purchase Agreement)
until all of the Preferred Shares have been redeemed.
(y) Subject to the foregoing, the Company may redeem all or a
portion of the Series A Preferred Stock outstanding upon two (2) trading days
prior written notice (the "Company's Redemption Notice") at a price per share of
Series A Preferred Stock equal to:
(a) if redeemed within sixty (60) days from the Closing Date, at 105%
of the Liquidation Preference Amount plus any accrued but unpaid dividends (the
"Company's Redemption Price");
(b) if redeemed between and including the sixty-first (61st) day and
the one hundred twentieth (120th) day after the Closing Date, at 106% of the
Liquidation Preference Amount plus any accrued but unpaid dividends;
(c) if redeemed between and including the one hundred twenty-first
(121st) day and the one hundred eightieth (180th) day from the Closing Date, at
107% of the Liquidation Preference Amount plus any accrued but unpaid dividends;
and
(d) if redeemed on or after the one hundred eighty-first (181st) day
from the Closing Date, at one hundred eight percent (108%) of the Liquidation
Preference Amount plus any accrued but unpaid dividends (the "Company's
Redemption Price");
provided, that (i) if the Company's Redemption Notice is received after 120 days
after the Closing Date and (ii) a Holder has delivered a Conversion Notice to
the Company or delivers a Conversion Notice within twenty-four (24) of receipt
of the Company's Redemption Notice, up to fifty percent (50%) of the shares of
Series A Preferred Stock designated to be redeemed may be converted by such
Holder; provided further that if during the period between delivery of the
Company's Redemption Notice and the Redemption Date a Holder shall become
entitled to deliver a Notice of Redemption at Option of Buyer Upon Major
Transaction or Notice of Redemption at Option of Buyer upon Triggering Event,
then the right of such holder shall take precedence over the previously
delivered Company Redemption Notice. The Company's Redemption Notice shall state
the date of redemption which date shall be the fifth (5th) trading day after the
Company has delivered the Company's Redemption Notice (the "Company's Redemption
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Date"), the Company's Redemption Price and the number of shares to be redeemed
by the Company. The Company shall not send a Company's Redemption Notice unless
it has good and clear funds for a minimum of the amount it intends to redeem in
a bank account controlled by the Company; provided that if the redemption is
expected to be made contemporaneous with the closing of a public underwritten
offering of the Company, then the Company may not have good and clear funds in
the bank account at the time of the Company's Redemption Notice and may not send
any such Company's Redemption Notice earlier than the day immediately prior to
the date the public offering is priced. The Company shall deliver the Company's
Redemption Price to the counsel to the Purchasers (as defined in the Securities
Purchase Agreement) within five (5) trading days after the Company has delivered
the Company's Redemption Notice, provided, that if the Holder(s) deliver(s) a
Conversion Notice before the Company's Redemption Date, then the portion of the
Company's Redemption Price which would be paid to redeem the shares of Series A
Preferred Stock covered by such Conversion Notice shall be returned to the
Company upon delivery of the Common Stock issuable in connection with such
Conversion Notice to the Holder(s). On the Redemption Date, the counsel to the
Purchasers shall pay the Company's Redemption Price, subject to any adjustment
pursuant to the immediately preceding sentence, to the Holder(s) on a pro rata
basis, provided, however, that upon receipt by the counsel to the Purchasers of
the Preferred Stock Certificates to be redeemed pursuant to this Section 8(h),
the counsel to the Purchasers shall, on the next business day following the date
of receipt by the counsel to the Purchasers of such Preferred Stock
Certificates, pay the Company's Redemption Price to the Holder(s) on a pro rata
basis. If the Company fails to pay the Company's Redemption Price by the sixth
(6th) trading day after the Company has delivered the Company's Redemption
Notice (or in the case of a public offering, the closing of the public
offering), the redemption will be declared null and void and the Company shall
lose its right to serve a Company's Redemption Notice in the future.
ARTICLE XXVI Inability to Fully Convert.
--------------------------
Section 26.1 Holder's Option if Company Cannot Fully Convert. If, upon
the Company's receipt of a Conversion Notice or on the Mandatory Conversion
Date, the Company cannot issue shares of Common Stock registered for resale
under the Registration Statement for any reason, including, without limitation,
because the Company (w) does not have a sufficient number of shares of Common
Stock authorized and available, (x) failed to call the Stockholder Meeting
within the time period set forth in Section 7 hereof, (y) is otherwise
prohibited by applicable law or by the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Company or its securities from issuing all of the
Common Stock which is to be issued to a Holder pursuant to a Conversion Notice
or (z) fails to have a sufficient number of shares of Common Stock registered
for resale under the Registration Statement, then the Company shall issue as
many shares of Common Stock as it is able to issue in accordance with such
Holder's Conversion Notice and pursuant to Section 5(b)(ii) above and, with
respect to the unconverted Series A Preferred Stock, the Holder, solely at such
holder's option, can elect, within five (5) business days after receipt of
notice from the Company thereof to:
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(a) require the Company to redeem from such Holder those Series A
Preferred Stock for which the Company is unable to issue Common Stock in
accordance with such Holder's Conversion Notice ("Mandatory Redemption") at a
price per share equal to the Triggering Event Redemption Price as of such
Conversion Date (the "Mandatory Redemption Price");
(b) if the Company's inability to fully convert Series A Preferred
Stock is pursuant to Section 9(a)(z) above, require the Company to issue
restricted shares of Common Stock in accordance with such Holder's Conversion
Notice and pursuant to Section 5(b)(ii) above; or
(c) void its Conversion Notice and retain or have returned, as the
case may be, the shares of Series A Preferred Stock that were to be converted
pursuant to such Holder's Conversion Notice (provided that a Holder's voiding
its Conversion Notice shall not effect the Company's obligations to make any
payments which have accrued prior to the date of such notice).
Section 26.2 Mechanics of Fulfilling Holder's Election. The Company
shall immediately send via facsimile to a Holder, upon receipt of a facsimile
copy of a Conversion Notice from such Holder which cannot be fully satisfied as
described in Section 9(a) above, a notice of the Company's inability to fully
satisfy such Holder's Conversion Notice (the "Inability to Fully Convert
Notice"). Such Inability to Fully Convert Notice shall indicate (i) the reason
why the Company is unable to fully satisfy such Holder's Conversion Notice, (ii)
the number of Series A Preferred Stock which cannot be converted and (iii) the
applicable Mandatory Redemption Price. Such Holder shall notify the Company of
its election pursuant to Section 9(a) above by delivering written notice via
facsimile to the Company ("Notice in Response to Inability to Convert").
Section 26.3 Payment of Redemption Price. If such Holder shall elect
to have its shares redeemed pursuant to Section 9(a)(i) above, the Company shall
pay the Mandatory Redemption Price in cash to such Holder within thirty (30)
days of the Company's receipt of the Holder's Notice in Response to Inability to
Convert, provided that prior to the Company's receipt of the Holder's Notice in
Response to Inability to Convert the Company has not delivered a notice to such
Holder stating, to the satisfaction of the Holder, that the event or condition
resulting in the Mandatory Redemption has been cured and all Conversion Shares
issuable to such Holder can and will be delivered to the Holder in accordance
with the terms of Section 2(g). If the Company shall fail to pay the applicable
Mandatory Redemption Price to such Holder on a timely basis as described in this
Section 9(c) (other than pursuant to a dispute as to the determination of the
arithmetic calculation of the Redemption Price), in addition to any remedy such
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Holder may have under this Certificate of Designation and the Securities
Purchase Agreement, such unpaid amount shall bear interest at the rate of 2.0%
per month (prorated for partial months) until paid in full. Until the full
Mandatory Redemption Price is paid in full to such Holder, such Holder may (i)
void the Mandatory Redemption with respect to those Series A Preferred Stock for
which the full Mandatory Redemption Price has not been paid, (ii) receive back
such Series A Preferred Stock, and (iii) require that the Conversion Price of
such returned Series A Preferred Stock be adjusted to the lesser of (A) the
Conversion Price as in effect on the date on which the Holder voided the
Mandatory Redemption and (B) the lowest Closing Bid Price during the period
beginning on the Conversion Date and ending on the date the Holder voided the
Mandatory Redemption. Notwithstanding the foregoing, if the Company fails to pay
the applicable Mandatory Redemption Price within such thirty (30) days time
period due to a dispute as to the determination of the arithmetic calculation of
the Redemption Rate, such dispute shall be resolved pursuant to Section
5(b)(iii) above with the term "Redemption Price" being substituted for the term
"Conversion Price".
Section 26.4 Pro-rata Conversion and Redemption. In the event the
Company receives a Conversion Notice from more than one Holder on the same day
and the Company can convert and redeem some, but not all, of the Series A
Preferred Stock pursuant to this Section 9, the Company shall convert and redeem
from each Holder electing to have Series A Preferred Stock converted and
redeemed at such time an amount equal to such Holder's pro-rata amount (based on
the number shares of Series A Preferred Stock held by such Holder relative to
the number shares of Series A Preferred Stock outstanding) of all shares of
Series A Preferred Stock being converted and redeemed at such time.
ARTICLE XXVII
Vote to Change the Terms of or Issue Preferred Stock.
----------------------------------------------------
The affirmative vote at a meeting duly called for such purpose or the
written consent without a meeting, of the Holders of not less than three-fourths
(3/4) of the then outstanding shares of Series A Preferred Stock, shall be
required (a) for any change to this Certificate of Designation or the Company's
Articles of Incorporation which would amend, alter, change or repeal any of the
powers, designations, preferences and rights of the Series A Preferred Stock or
(b) for the issuance of shares of Series A Preferred Stock other than pursuant
to the Securities Purchase Agreement.
ARTICLE XXVIII Lost or Stolen Certificates.
---------------------------
Upon receipt by the Company of evidence satisfactory to the Company of
the loss, theft, destruction or mutilation of any Preferred Stock Certificates
representing the shares of Series A Preferred Stock, and, in the case of loss,
theft or destruction, of any indemnification undertaking by the Holder to the
Company and, in the case of mutilation, upon surrender and cancellation of the
Preferred Stock Certificate(s), the Company shall execute and deliver new
preferred stock certificate(s) of like tenor and date; provided, however, the
Company shall not be obligated to re-issue Preferred Stock Certificates if the
Holder contemporaneously requests the Company to convert such shares of Series A
Preferred Stock into Common Stock.
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ARTICLE XXIX Remedies, Characterizations, Other Obligations, Breaches and
------------------------------------------------------------
Injunctive Relief.
-----------------
The remedies provided in this Certificate of Designation shall be
cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a Holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designation. Amounts set forth or provided for herein with respect to payments,
conversion and the like (and the computation thereof) shall be the amounts to be
received by the Holder thereof and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or the performance
thereof). The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the holders of the Series A Preferred
Stock and that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or threatened
breach, the Holders shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.
ARTICLE XXX Specific Shall Not Limit General; Construction.
----------------------------------------------
No specific provision contained in this Certificate of Designation
shall limit or modify any more general provision contained herein. This
Certificate of Designation shall be deemed to be jointly drafted by the Company
and all initial purchasers of the Series A Preferred Stock and shall not be
construed against any person as the drafter hereof.
ARTICLE XXXI Failure or Indulgence Not Waiver.
--------------------------------
No failure or delay on the part of a Holder in the exercise of any
power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege.
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IN WITNESS WHEREOF, the undersigned has executed and subscribed this
Certificate and does affirm the foregoing as true this ___ day of _____, 2000.
GLOBUS WIRELESS, LTD.
By:_______________________________
Name:
Title: Chief Executive Officer
and President
By:_______________________________
Name:
Title: Secretary
STATE OF )
COUNTY OF )ss.:
On _______________________, 2000, before me, the undersigned, a Notary
Public in and for said State, personally appeared _________________, personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual whose name is subscribed to the within instrument and acknowledged to
me that he executed the same and that by his signature on the instrument, the
individual executed the instrument.
---------------------------------
Notary Public
STATE OF )
COUNTY OF )ss.:
On _______________________, 2000, before me, the undersigned, a Notary
Public in and for said State, personally appeared _________________, personally
known to me or proved to me on the basis of satisfactory evidence to be the
individual whose name is subscribed to the within instrument and acknowledged to
me that he executed the same and that by his signature on the instrument, the
individual executed the instrument.
---------------------------------
Notary Public
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Exhibit1
GLOBUS WIRELESS, LTD.
CONVERSION NOTICE
Reference is made to the Certificate of Designation of the Relative Rights and
Preferences of the Series A Preferred Stock of Globus Wireless, Ltd. (the
"Certificate of Designation"). In accordance with and pursuant to the
Certificate of Designation, the undersigned hereby elects to convert the number
of shares of Series A Preferred Stock, par value $.001 per share (the "Preferred
Shares"), of Globus Wireless, Ltd., a Nevada corporation (the "Company"),
indicated below into shares of Common Stock, $.001 par value (the "Common
Stock"), of the Company, by tendering the stock certificate(s) representing the
share(s) of Preferred Shares specified below as of the date specified below.
Date of Conversion: __________________________
Number of Preferred Shares to be converted:__________________________
Stock certificate no(s). of Preferred Shares to be converted:________
The Common Stock have been sold pursuant to the Registration Statement
(as defined in the Registration Rights Agreement)YES_____ NO_____
Please confirm the following information:
Conversion Price: ___________________________
Number of shares of Common Stock
to be issued: ___________________________
Please issue the Common Stock into which the Preferred Shares are being
converted and, if applicable, any check drawn on an account of the Company in
the following name and to the following address:
Issue to: ___________________________
___________________________
Facsimile Number: ___________________________
Authorization: ___________________________
By:___________________________
Title:________________________
Dated:
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PRICES ATTACHED
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