ANNEX I
TO
SUBSCRIPTION
AGREEMENT
AMERICAN BINGO & GAMING CORP.
CERTIFICATE OF DESIGNATIONS OF
SERIES A CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
American Bingo & Gaming Corp., a Delaware corporation (the
"Corporation"), in accordance with the provisions of Section 103 of the
General Corporation Law of the State of Delaware (the "DGCL") DOES HEREBY
CERTIFY:
That pursuant to authority vested in the Board of Directors of the
Corporation (the "Board of Directors" or the "Board") by the Certificate of
Incorporation, as amended, of the Corporation, the Board of Directors, by
unanimous written consent dated July 29, 1997, adopted a resolution providing
for the creation of a series of the Corporation's Preferred Stock, $.01 par
value, which series is designated "Series A Convertible Preferred Stock",
which resolution is as follows:
63.03.04.02 --
RESOLVED, that pursuant to authority vested in the Board of
Directors by the Certificate of Incorporation, as amended, the Board of
Directors does hereby provide for the creation of a series of the Preferred
Stock, $.01 par value (hereafter called the "Preferred Stock"), of the
Corporation, and to the extent that the voting powers and the designations,
preferences and relative, participating, optional or other special rights
thereof and the qualifications, limitations or restrictions of such rights
have not been set forth in the Certificate of Incorporation, as amended, of
the Corporation, does hereby fix the same as follows:
63.03.04.02 --
The rights, preferences, privileges, and limitations granted to and
imposed on the Series A Convertible Preferred Stock (the "Series A Convertible
Preferred Stock"), which series shall consist of 3,000 shares, are as set
forth below. The following rights, preferences, privileges, and limitations
are subject to the designation, description, and terms of one or more
subsequent series of Preferred Stock by the Board of Directors of American
Bingo & Gaming Corp. (the "Corporation") pursuant to authority granted by the
Certificate of Incorporation. To the extent that the rights, preferences,
privileges, and limitations of any such subsequent series conflict or are
inconsistent with any of the rights, preferences, privileges, and limitations
of the Series A Convertible Preferred Stock, the designation and description
of terms of the subsequent series which is the latest so designated shall
control and prevail over the rights, preferences, privileges, and limitations
of the Series A Convertible Preferred Stock.
SECTION 1. DEFINITIONS. As used herein, the following terms
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shall have the following meanings:
"AMEX" shall mean the American Stock Exchange, Inc.
"Board of Directors" or "Board" shall mean the Board of Directors of
the Corporation.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in The City of New York are authorized or
required by law to remain closed.
"Common Stock" shall mean the Common Stock, $.001 par value, of the
Corporation.
"Computed Price" of one share of Common Stock on any date shall mean
the product obtained by multiplying (a) the Conversion Percentage applicable
on such date times (b) the arithmetic average of the per share Market Price of
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the Common Stock for the Measurement Period with respect to the applicable
dividend payment date; provided, however, that in no event shall the Computed
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Price determined in accordance with this clause (2) be greater than $5.50
(subject to equitable adjustments for stock splits, stock dividends,
combinations, recapitalizations, reclassifications and similar events
occurring on or after the date of filing of this Certificate of Designations
with the Secretary of State of the State of Delaware).
"Conversion Agent" shall mean American Stock Transfer & Trust
Company, or its duly appointed successor.
"Conversion Amount" initially shall be equal to $1,000.00, subject
to adjustment as hereinafter provided.
"Conversion Date" shall mean the date on which the notice of
conversion is actually received by the Conversion Agent, whether by mail,
courier, personal service, telephone line facsimile transmission or other
means, in case of a conversion at the option of the holder pursuant to Section
10(a).
"Conversion Deferral Notice" shall mean a notice given by the
Corporation to the holders of Series A Convertible Preferred Stock pursuant to
Section 10(a)(iii), which notice shall state (1) that the Corporation is
exercising its right to defer conversion of all or a portion of the Excess
Shares pursuant to Section 10(a)(iii), (2) the number of Excess Shares held by
such holder as to which conversion is deferred, and (3) the Conversion Value
per unredeemed Excess Share or the formula for determining the same,
determined in accordance with Section 10(a)(iii).
"Conversion Notice" shall mean a written notice, duly signed by or
on behalf of the holder, stating the number of shares of Series A Convertible
Preferred Stock to be converted in the form specified in the Subscription
Agreement.
"Conversion Percentage" shall mean 80%.
"Conversion Rate" shall have the meaning provided in Section 10(a).
"Conversion Value" initially shall be equal to $1,000.00, subject to
adjustment as provided in Section 10(a)(iii).
"Converting Holder" shall mean a holder of Series A Preferred Stock
who delivers to the Corporation a Conversion Notice.
"Current Market Price" shall mean with respect to any date the
arithmetic average of the Market Price of the Common Stock on the 30
consecutive trading days commencing 45 trading days before such date.
"Excess Shares" shall have the meaning set forth in Section 9.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"First Conversion Period" shall mean the period beginning on the
90th day after the Issuance Date and ending on the 134th day after the
Issuance Date.
"Floor Price" shall mean $4.00 per share subject to equitable
adjustment from time to time, on terms reasonably acceptable to the holders of
a majority of the outstanding shares of Series A Convertible Preferred Stock,
for (i) stock splits, (ii) stock dividends, (iii) combinations, (iv) capital
reorganizations, (v) issuance to all holders of Common Stock of rights or
warrants to purchase shares of Common Stock at a price per share less than the
Market Price which would otherwise be applicable, (vi) the distribution by the
Company to all holders of Common Stock of evidences of indebtedness of the
Company or cash (other than regular quarterly cash dividends), (vii) tender
offers by the Company or any subsidiary of the Company or other repurchases of
shares of Common Stock on one or more transaction which, individually or in
the aggregate, result in the purchase of more than 10% or the Common Stock
outstanding and (viii) similar events relating to the Common Stock, in each
such case which occur during the Measurement Period.
"Floor Price Amount" shall mean the number of shares of Common Stock
which would be issuable to a Converting Holder on any Conversion Date,
assuming that the Preferred Shares surrendered for conversion by such
Converting Holder were converted at the Floor Price.
"Floor Price Shares" shall mean the number of shares of Series A
Preferred Stock which, if converted at the Conversion Price, would be
convertible into a number of shares of Common Stock equal to the Floor Price
Amount.
"Fourth Conversion Period" shall mean the period beginning on the
240th day after the Issuance Date.
"Inconvertibility Notice" shall have the meaning provided in Section
7(a)(2).
"Issuance Date" shall mean the first date of original issuance of
any shares of Series A Convertible Preferred Stock.
"Junior Dividend Stock" shall mean, collectively, the Common Stock
and any other class or series of capital stock of the Corporation, ranking
junior as to dividends to the Series A Convertible Preferred Stock.
"Junior Liquidation Stock" shall mean the Common Stock or any other
class or series of the Corporation's capital stock, ranking junior as to
liquidation rights to the Series A Convertible Preferred Stock.
"Liquidation Preference" shall mean, for each share of Series A
Convertible Preferred Stock, the sum of (i) all dividends accrued and unpaid
thereon to the date of final distribution to such holders, (ii) accrued and
unpaid interest on dividends in arrears (computed in accordance with Section
5(a)) to the date of distribution, and (iii) $1,000.00.
"Market Price" of any security on any date shall mean the closing
high bid price of such security on such date on the principal securities
exchange or other market on which such security is listed for trading, as
reported by such exchange or other market; provided, however, that if during
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any Measurement Period:
63.03.04.02 --
(i) The Corporation shall declare or pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares of
Common Stock or fix any record date for any such action, then the Market Price
of the Common Stock for each day in such Measurement Period prior to the
earlier of (1) the date fixed for the determination of stockholders entitled
to receive such dividend or other distribution and (2) the date on which
ex-dividend trading in the Common Stock with respect to such dividend or
distribution begins shall be reduced by multiplying the Market Price
(determined without regard to this proviso) for each such day in such
Measurement Period by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the earlier of
(1) the record date fixed for such determination and (2) the date on which
ex-dividend trading in the Common Stock with respect to such dividend or
distribution begins and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution;
(ii) The Corporation shall issue rights or warrants to all holders of
its outstanding shares of Common Stock, or fix a record date for such
issuance, which rights or warrants entitle such holders (for a period expiring
within forty-five (45) days after the date fixed for the determination of
stockholders entitled to receive such rights or warrants) to subscribe for or
purchase shares of Common Stock at a price per share less than the Market
Price (determined without regard to this proviso) for any day in such
Measurement Period which is prior to the end of such 45-day period, then the
Market Price for such day shall be reduced so that the same shall equal the
price determined by multiplying the Market Price (determined without regard to
this proviso) by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the record date
fixed for the determination of stockholders entitled to receive such rights or
warrants plus the number of shares which the aggregate offering price of the
total number of shares so offered would purchase at such Market Price, and of
which the denominator shall be the number of shares of Common Stock
outstanding on the close of business on such record date plus the total number
of additional shares of Common Stock so offered for subscription or purchase.
In determining whether any rights or warrants entitle the holders to subscribe
for or purchase shares of Common Stock at less than the Market Price
(determined without regard to this proviso), and in determining the aggregate
offering price of such shares of Common Stock, there shall be taken into
account any consideration received for such rights or warrants, the value of
such consideration, if other than cash, to be determined in good faith by a
resolution of the Board of Directors of the Corporation;
(iii) The outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock or a record date for any such
subdivision shall be fixed, then the Market Price of the Common Stock for each
day in such Measurement Period prior to the earlier of (1) the day upon which
such subdivision becomes effective and (2) the date on which ex-dividend
trading in the Common Stock with respect to such subdivision begins shall be
proportionately reduced, and conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares of Common
Stock, the Market Price for each day in such Measurement Period prior to the
day upon which such combination becomes effective shall be proportionately
increased;
(iv) The Corporation shall, by dividend or otherwise, distribute to
all holders of its Common Stock shares of any class of capital stock of the
Corporation (other than any dividends or distributions to which clause (i) of
this proviso applies) or evidences of its indebtedness, cash or other assets
(including securities, but excluding any rights or warrants referred to in
clause (ii) of this proviso and dividends and distributions paid exclusively
in cash and excluding any capital stock, evidences of indebtedness, cash or
assets distributed upon a merger or consolidation) (the foregoing hereinafter
in this clause (iv) of this proviso called the "Securities"), or fix a record
date for any such distribution, then, in each such case, the Market Price for
any day in such Measurement Period prior to the earlier of (1) the record date
for such distribution and (2) the date on which ex-dividend trading in the
Common Stock with respect to such distribution begins shall be reduced so that
the same shall be equal to the price determined by multiplying the Market
Price (determined without regard to this proviso) by a fraction of which the
numerator shall be the Market Price (determined without regard to this
proviso) on such date less the fair market value (as determined in good faith
by resolution of the Board of Directors of the Corporation) on such date of
the portion of the Securities so distributed or to be distributed applicable
to one share of Common Stock and the denominator shall be the Market Price
(determined without regard to this proviso); provided, however, that in the
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event the then fair market value (as so determined) of the portion of the
Securities so distributed applicable to one share of Common Stock is equal to
or greater than the Market Price (determined without regard to this clause
(iv) of this proviso) on any such day, in lieu of the foregoing adjustment,
adequate provision shall be made so that the holders of shares of Series A
Convertible Preferred Stock shall have the right to receive in payment of
dividends on the shares of Series A Convertible Preferred Stock or upon
conversion of the shares of Series A Convertible Preferred Stock, as the case
may be, the amount of Securities the holders of shares of Series A Convertible
Preferred Stock would have received had the number of shares of Common Stock
to be issued in payment of such dividends on the shares of Series A
Convertible Preferred Stock, or had the holders of shares of Series A
Convertible Preferred Stock converted the shares of Series A Convertible
Preferred Stock, in either such case immediately prior to the record date for
such distribution. If the Board of Directors of the Corporation determines
the fair market value of any distribution for purposes of this clause (iv) by
reference to the actual or when issued trading market for any securities
comprising all or part of such distribution, it must in doing so consider the
prices in such market on the same day for which an adjustment in the Market
Price is being determined.
For purposes of this clause (iv) and clauses (i) and (ii) of this
proviso, any dividend or distribution to which this clause (iv) is applicable
that also includes shares of Common Stock, or rights or warrants to subscribe
for or purchase shares of Common Stock to which clause (ii) of this proviso
applies (or both), shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, assets, shares of capital
stock, rights or warrants other than such shares of Common Stock or rights or
warrants to which clause (ii) of this proviso applies (and any Market Price
reduction required by this clause (iv) with respect to such dividend or
distribution shall then be made) immediately followed by (2) a dividend or
distribution of such shares of Common Stock or such rights or warrants (and
any further Market Price reduction required by clauses (i) and (ii) of this
proviso with respect to such dividend or distribution shall then be made),
except that any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of clause (i) of this
proviso;
(v) The Corporation or any subsidiary of the Corporation shall (x) by
dividend or otherwise, distribute to all holders of its Common Stock cash in
(or fix any record date for any such distribution), or (y) repurchase or
reacquire shares of its Common Stock (other than shares surrendered in payment
of the exercise price or tax obligations incurred in connection with the
exercise of a stock option issued to any of the Corporation's employees,
directors, or consultants; each, an "Option Share Surrender") for, in either
case, an aggregate amount that, combined with (1) the aggregate amount of any
other such distributions to all holders of its Common Stock made exclusively
in cash after the Issuance Date and within the twelve (12) months preceding
the date of payment of such distribution, and in respect of which no
adjustment pursuant to this clause (v) has been made, (2) the aggregate amount
of any cash plus the fair market value (as determined in good faith by a
resolution of the Board of Directors of the Corporation) of consideration paid
in respect of any repurchase or other reacquisition by the Corporation or any
subsidiary of the Corporation of any shares of Common Stock (other than an
Option Share Surrender) made after the Issuance Date and within the twelve
(12) months preceding the date of payment of such distribution or making of
such repurchase or reacquisition, as the case may be, and in respect of which
no adjustment pursuant to this clause (v) has been made, and (3) the aggregate
of any cash plus the fair market value (as determined in good faith by a
resolution of the Board of Directors of the Corporation) of consideration
payable in respect of any tender offer by the Corporation or any of its
subsidiaries for all or any portion of the Common Stock concluded within the
twelve (12) months preceding the date of payment of such distribution or
completion of such repurchase or reacquisition, as the case may be, and in
respect of which no adjustment pursuant to clause (vi) of this proviso has
been made, exceeds 10% of the product of the Market Price (determined without
regard to this proviso) on any day in such Measurement Period prior to the
earlier of (1) the record date with respect to such distribution and (2) the
date on which ex-dividend trading in the Common Stock with respect to such
distribution begins or the date of such repurchase or reacquisition, as the
case may be, times the number of shares of Common Stock outstanding on such
date, then, and in each such case, the Market Price for such day shall be
reduced so that the same shall equal the price determined by multiplying the
Market Price (determined without regard to this proviso) for such day by a
fraction (i) the numerator of which shall be equal to the Market Price
(determined without regard to this proviso) for such day less an amount equal
to the quotient of (x) the excess of such combined amount over such 10% and
(y) the number of shares of Common Stock outstanding on such day and (ii) the
denominator of which shall be equal to the Market Price (determined without
regard to this proviso) on such day; provided, however, that in the event the
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portion of the cash so distributed or paid for the repurchase or reacquisition
of shares (determined per share based on the number of shares of Common Stock
outstanding) applicable to one share of Common Stock is equal to or greater
than the Market Price (determined without regard to this clause (v) of this
proviso) of the Common Stock on any such day, in lieu of the foregoing
adjustment, adequate provision shall be made so that the holders of shares of
Series A Convertible Preferred Stock shall have the right to receive in
payment of dividends on shares of Series A Convertible Preferred Stock or upon
conversion of shares of Series A Convertible Preferred Stock, as the case may
be, the amount of cash the holders of shares of Series A Convertible Preferred
Stock would have received had the number of shares of Common Stock to be
issued in payment of such dividends on shares of Series A Convertible
Preferred Stock, or had the holders of shares of Series A Convertible
Preferred Stock converted shares of Series A Convertible Preferred Stock, in
either such case, immediately prior to the record date for such distribution
or the payment date of such repurchase, as applicable; or
(vi) A tender offer made by the Corporation or any of its
subsidiaries for all or any portion of the Common Stock shall expire and such
tender offer (as amended upon the expiration thereof) shall require the
payment to stockholders (based on the acceptance (up to any maximum specified
in the terms of the tender offer) of Purchased Shares (as defined below)) of
an aggregate consideration having a fair market value (as determined in good
faith by resolution of the Board of Directors of the Corporation) that
combined together with (1) the aggregate of the cash plus the fair market
value (as determined in good faith by a resolution of the Board of Directors
of the Corporation), as of the expiration of such tender offer, of
consideration payable in respect of any other tender offers, by the
Corporation or any of its subsidiaries for all or any portion of the Common
Stock expiring within the twelve (12) months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to this clause
(vi) has been made, (2) the aggregate amount of any cash plus the fair market
value (as determined in good faith by a resolution of the Board of Directors
of the Corporation) of consideration paid in respect of any repurchase or
other reacquisition by the Corporation or any subsidiary of the Corporation of
any shares of Common Stock (other than an Option Share Surrender) made after
the Issuance Date and within the twelve (12) months preceding the expiration
of such tender offer and in respect of which no adjustment pursuant to this
clause (vi) has been made, and (3) the aggregate amount of any distributions
to all holders of the Corporation's Common Stock made exclusively in cash
within twelve (12) months preceding the expiration of such tender offer and in
respect of which no adjustment pursuant to clause (v) of this proviso has been
made, exceeds 10% of the product of the Market Price (determined without
regard to this proviso) on any day in such period times the number of shares
of Common Stock outstanding on such day, then, and in each such case, the
Market Price for such day shall be reduced so that the same shall equal the
price determined by multiplying the Market Price (determined without regard to
this proviso) for such day by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding on such day multiplied by the
Market Price (determined without regard to this proviso) for such day and the
denominator shall be the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender offer) of
all shares validly tendered and not withdrawn as of the last time tenders
could have been made pursuant to such tender offer (the "Expiration Time")
(the shares deemed so accepted, up to any such maximum, being referred to as
the "Purchased Shares") and (y) the product of the number of shares of Common
Stock outstanding (less any Purchased Shares) on such day and the Market Price
(determined without regard to this proviso) of the Common Stock on the trading
day next succeeding the Expiration Time. If the application of this clause
(vi) to any tender offer would result in an increase in the Market Price
(determined without regard to this proviso) for any day, no adjustment shall
be made for such tender offer under this clause (vi) for such day;
63.03.04.02 --
provided further, however, that if on any date there shall be no reported
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closing high bid price of such security, the "Market Price" on such date shall
be the closing high bid of such security on the date next preceding such date
on which a closing high bid price for such security has been so reported;
provided further, however, that if on any date there shall be no reported
closing high bid price of such security and at the time the closing high bid
price for such date is being determined there shall be known a closing high
bid price so reported for the date next subsequent to such date on which a
closing high bid price shall have been so reported, then the Market Price on
such date for which there shall have been no reported closing high bid price
shall be the lower of (x) the Market Price as determined pursuant to the
second proviso to this definition and (y) the closing high bid price as so
reported for such succeeding day for which a closing high bid price as so
reported is known.
"Maximum Share Amount" shall mean 937,450 shares, or such greater
number as would be permitted by the rules which are proposed to be adopted by
the Nasdaq (such amount to be subject to equitable adjustment from time to
time for stock splits, stock dividends, combinations, capital reorganizations
and similar events relating to the Common Stock occurring after the date of
filing this Certificate of Designations with the Secretary of State of the
State of Delaware), of Common Stock.
"Measurement Period" shall mean, with respect to any date, the
period of twenty (20) consecutive days ending one day prior to such date.
"Nasdaq" shall mean the Nasdaq Small Cap Market.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Parity Dividend Stock" shall mean any class or series or the
Corporation's capital stock ranking, as to dividends, on a parity with the
Series A Convertible Preferred Stock.
"Parity Liquidation Stock" shall mean any class or series of the
Corporation's capital stock having parity as to liquidation rights with the
Series A Convertible Preferred Stock.
"Redemption Date" shall mean the date of a redemption of shares of
Series A Convertible Preferred Stock pursuant to Section 9, determined in
accordance therewith.
"Redemption Notice" shall mean a notice given by the Corporation to
the holders of Series A Convertible Preferred Stock pursuant to Section 9,
which notice shall state (1) that the Corporation is exercising its right to
redeem all or a portion of the Excess Shares pursuant to Section 9, (2) the
number of Excess Shares held by such holder which are to be redeemed, (3) the
Redemption Price per share of Series A Convertible Preferred Stock to be
redeemed or the formula for determining the same, determined in accordance
herewith and (4) the applicable Redemption Date.
"Redemption Price" shall mean the greater of (i) the sum of (a) the
sum of (1) the Conversion Value, (2) an amount equal to the accrued but
unpaid dividends on such share of Series A Convertible Preferred Stock, and
(3) an amount equal to the accrued and unpaid interest on dividends in arrears
(determined as provided in Section 5) through the Redemption Date plus (b) an
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amount equal to the product obtained by multiplying (x) the sum stated in the
immediately preceding clause (a) times (y) the quotient (expressed as a
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percentage) obtained by dividing (A) the amount determined by subtracting from
100 percent the Conversion Percentage in effect on the Redemption Date by (B)
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the Conversion Percentage in effect on the Redemption Date and (ii) an amount
equal to the product obtained by multiplying (x) the number of shares of
Common Stock which would, but for the redemption pursuant to Section 9, be
issuable on conversion in accordance with Section 10(a) of one share of Series
A Convertible Preferred Stock and any accrued and unpaid dividends thereon and
any accrued and unpaid interest on dividends thereon in arrears if a
Conversion Notice were given by the holder of such share of Series A
Convertible Preferred Stock on the Redemption Date (determined without regard
to any limitation on conversion contained in Section 10(a)) times (y) the
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arithmetic average of the Market Price of the Common Stock for the twenty
consecutive trading days ending one trading day prior to the Redemption Date.
"Restricted Person" shall have the meaning provided in Section
10(a).
"Second Conversion Period" shall mean the period beginning on the
135th day after the Issuance Date and ending on the 179th day after the
Issuance Date.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Senior Dividend Stock" shall mean any class or series of capital
stock of the Corporation ranking senior as to dividends to the Series A
Convertible Preferred Stock.
"Senior Liquidation Stock" shall mean any class or series of capital
stock of the Corporation ranking senior as to liquidation rights to the Series
A Convertible Preferred Stock.
"Series A Convertible Preferred Stock" shall mean the Series A
Convertible Preferred Stock of the Corporation.
"Share Limitation Redemption Date" shall mean each date on which the
Corporation is required to redeem shares of Series A Convertible Preferred
Stock as provided in this Section 7(a).
"Share Limitation Redemption Price" shall mean the greater of (i)
the sum of (a) the sum of (1) the Conversion Value, (2) an amount equal to
the accrued but unpaid dividends on the share of Series A Convertible
Preferred Stock to be redeemed pursuant to Section 7(a), and (3) an amount
equal to the accrued and unpaid interest on dividends in arrears on such share
of Series A Convertible Preferred Stock through the applicable Share
Limitation Redemption Date (as provided in Section 5) plus (b) an amount equal
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to the product obtained by multiplying (x) the sum stated in the immediately
preceding clause (a) times (y) the quotient (expressed as a percentage)
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obtained by dividing (A) the amount determined by subtracting from 100 percent
the Conversion Percentage in effect on the applicable Share Limitation
Redemption Date by (B) the Conversion Percentage in effect on the applicable
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Share Limitation Redemption Date and (ii) an amount equal to the product
obtained by multiplying (x) the number of shares of Common Stock which would,
but for the redemption pursuant to Section 7(a), be issuable on conversion in
accordance with Section 10(a) of one share of Series A Convertible Preferred
Stock and any accrued and unpaid dividends thereon and any accrued and unpaid
interest on dividends thereon in arrears if a Conversion Notice were given by
the holder of such share of Series A Convertible Preferred Stock on the
applicable Share Limitation Redemption Date (determined without regard to any
limitation on conversion contained in Section 10(a)) times (y) the arithmetic
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average of the Market Price of the Common Stock for the five consecutive
trading days ending one trading day prior to the applicable Share Limitation
Redemption Date.
"Stockholder Approval" shall mean the approval by a majority of the
votes cast by the holders of shares of Common Stock (in person or by proxy) at
a meeting of the stockholders of the Corporation (duly convened at which a
quorum was present), or a written consent of holders of shares of Common Stock
entitled to such number of votes given without a meeting, of the issuance by
the Corporation of 20% or more of the Common Stock of the Corporation
outstanding on the Issuance Date for less than the greater of the book or
market value of such Common Stock on conversion of the Series A Convertible
Preferred Stock, as and to the extent required under rules proposed to be
adopted by the Nasdaq.
"Subscription Agreement" shall mean the Subscription Agreement
between the Corporation and the original holder of shares of Series A
Convertible Preferred Stock pursuant to which the shares of Series A
Convertible Preferred Stock were issued.
"Tender Offer" means a tender offer or exchange offer.
"Third Conversion Period" shall mean the period beginning on the
180th day after the Issuance Date and ending on the 239th day after the
Issuance Date.
SECTION 2. DESIGNATION AND AMOUNT. The shares of such series
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shall be designated as "Series A Convertible Preferred Stock", and the number
of shares constituting the Series A Convertible Preferred Stock shall be
3,000, and shall not be subject to increase.
SECTION 3. STATED CAPITAL. The amount to be represented in
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stated capital at all times for each share of Series A Convertible Preferred
Stock shall be the greater of (i) the sum of (a) the sum of (1) $1,000, (2)
to the extent legally available, the accrued but unpaid dividends on such
share of Series A Convertible Preferred Stock, and (3) an amount equal to the
accrued and unpaid interest on dividends in arrears (as provided in Section 5)
through the date of determination plus (b) an amount equal to the product
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obtained by multiplying (x) the sum stated in the immediately preceding clause
(a) times (y) the quotient (expressed as a percentage) obtained by dividing
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(A) the amount determined by subtracting from 100 percent the Conversion
Percentage in effect on such date of determination by (B) the Conversion
--
Percentage in effect on such date of determination and (ii) an amount equal to
the product obtained by multiplying (x) the number of shares of Common Stock
which would, at the time of such determination, be issuable on conversion in
accordance with Section 10(a) of one share of Series A Convertible Preferred
Stock and any accrued and unpaid dividends thereon and any accrued and unpaid
interest on dividends thereon in arrears if a Conversion Notice (as defined
herein) were given by the holder of such share of Series A Convertible
Preferred Stock on the date of such determination (determined without regard
to any limitation on conversion contained in 10(a)) times (y) the arithmetic
-----
average of the Market Price of the Common Stock for the five consecutive
trading days ending one trading day prior to the date of such determination.
The Corporation shall take such action as may be required to maintain the
amount required by this Section 3 to be represented in stated capital for the
Series A Convertible Preferred Stock not less frequently than monthly.
SECTION 4. RANK. All Series A Convertible Preferred Stock shall
----
rank (i) senior to the Common Stock, now or hereafter issued, as to payment of
dividends and distribution of assets upon liquidation, dissolution, or winding
up of the Corporation, whether voluntary or involuntary, (ii) on a parity with
any additional series of the class of Preferred Stock which series the Board
of Directors may from time to time authorize, both as to payment of dividends
and as to distributions of assets upon liquidation, dissolution, or winding up
of the Corporation, whether voluntary or involuntary, (iii) on a parity with
the shares of any additional class of preferred stock (or series of preferred
stock of such class) which the Board of Directors or the stockholders may from
time to time authorize in accordance herewith, which class (or series thereof)
by its terms ranks on a parity with the shares of Series A Convertible
Preferred Stock and (iv) senior to any other class or series of preferred
stock (other than as stated in the immediately preceding clauses (ii) and
(iii)) of the Corporation.
SECTION 5. DIVIDENDS AND DISTRIBUTIONS. (a) The holders of
---------------------------
shares of Series A Convertible Preferred Stock shall be entitled to receive,
when, as, and if declared by the Board of Directors out of funds legally
available for such purpose, dividends at the rate of $70.00 per annum per
share, and no more, which shall be fully cumulative, shall accrue without
interest (except as otherwise provided herein as to dividends in arrears) from
the date of original issuance until the second anniversary of the Issuance
Date and shall be payable quarterly on February 1, May 1, August 1, and
November 1 of each year commencing November 1, 1997 (except that if any such
date is a Saturday, Sunday, or legal holiday, then such dividend shall be
payable on the next succeeding day that is not a Saturday, Sunday, or legal
holiday) to holders of record as they appear on the stock books of the
Corporation on such record dates, not more than 20 nor less than 10 days
preceding the payment dates for such dividends, as shall be fixed by the
Board. Dividends on the Series A Convertible Preferred Stock shall be paid in
cash or, subject to the limitations in Section 5(b) hereof, shares of Common
Stock of the Corporation or any combination of cash and shares of Common
Stock, at the option of the Corporation as hereinafter provided. The amount
of the dividends payable per share of Series A Convertible Preferred Stock for
each quarterly dividend period shall be computed by dividing the annual
dividend amount by four. The amount of dividends payable for the initial
dividend period and any period shorter than a full quarterly dividend period
shall be computed on the basis of a 360-day year of twelve 30-day months.
Dividends not paid on a payment date, whether or not such dividends have been
declared, will bear interest at the rate of 12% per annum until paid. No
dividends or other distributions, other than the dividends payable solely in
shares of any Junior Dividend Stock, shall be paid or set apart for payment on
any shares of Junior Dividend Stock, and no purchase, redemption, or other
acquisition shall be made by the Corporation of any shares of Junior Dividend
Stock unless and until all accrued and unpaid dividends on the Series A
Convertible Preferred Stock and interest on dividends in arrears at the rate
specified herein shall have been paid or declared and set apart for payment.
If at any time any dividend on any the Senior Dividend Stock shall
be in default, in whole or in part, no dividend shall be paid or declared and
set apart for payment on the Series A Convertible Preferred Stock unless and
until all accrued and unpaid dividends with respect to the Senior Dividend
Stock, including the full dividends for the then current dividend period,
shall have been paid or declared and set apart for payment, without interest.
No full dividends shall be paid or declared and set apart for payment on any
Parity Dividend Stock for any period unless all accrued but unpaid dividends
(and interest on dividends in arrears at the rate specified herein) have been,
or contemporaneously are, paid or declared and set apart for such payment on
the Series A Convertible Preferred Stock. No full dividends shall be paid or
declared and set apart for payment on the Series A Convertible Preferred Stock
for any period unless all accrued but unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the
Parity Dividend Stock for all dividend periods terminating on or prior to the
date of payment of such full dividends. When dividends are not paid in full
upon the Series A Convertible Preferred Stock and the Parity Dividend Stock,
all dividends paid or declared and set apart for payment upon shares of Series
A Convertible Preferred Stock (and interest on dividends in arrears at the
rate specified herein) and the Parity Dividend Stock shall be paid or declared
and set apart for payment pro rata, so that the amount of dividends paid or
declared and set apart for payment per share on the Series A Convertible
Preferred Stock and the Parity Dividend Stock shall in all cases bear to each
other the same ratio that accrued and unpaid dividends per share on the shares
of Series A Convertible Preferred Stock and the Parity Dividend Stock bear to
each other.
Any references to "distribution" contained in this Section 5 shall
not be deemed to include any stock dividend or distributions made in
connection with any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary.
(b) If the Corporation elects in the exercise of its sole
discretion to issue shares of Common Stock in payment of dividends on the
Series A Convertible Preferred Stock, the Corporation shall issue and
dispatch, or cause to be issued and dispatched, by the fifth trading day after
such dividend payment date to each holder of such shares a certificate
representing the number of whole shares of Common Stock arrived at by dividing
the per share Computed Price of such shares of Common Stock into the total
amount of cash dividends such holder would be entitled to receive if the
aggregate dividends on the Series A Convertible Preferred Stock held by such
holder which are being paid in shares of Common Stock were being paid in cash;
provided, however, that if certificates representing shares of Common Stock
-------- -------
are issued and dispatched to holders of Series A Convertible Preferred Stock
--
subsequent to the fifth trading day after a dividend payment date, the
percentage used to calculate the Computed Price will be reduced by one
percentage point for each trading day after the third trading day following
such dividend payment date to the date of dispatch of shares of Common Stock.
No fractional shares of Common Stock shall be issued in payment of dividends.
In lieu thereof, the Corporation shall pay cash in an amount equal to the
product of (x) the Market Price of the Common Stock for the Measurement Period
applicable to such dividend times (y) the fraction of a share of Common Stock
-----
which would otherwise be issuable by the Corporation. The Corporation shall
not exercise its right to issue shares of Common Stock in payment of dividends
on Series A Convertible Preferred Stock if:
63.03.04.02 --
(i) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all purposes, or held in the Corporation's
treasury, is insufficient to pay the portion of such dividends to be paid in
shares of Common Stock;
(ii) the issuance or delivery of shares of Common Stock as a dividend
payment would require registration with or approval of any governmental
authority under any law or regulation, and such registration or approval has
not been effected or obtained;
(iii) the shares of Common Stock to be issued as a dividend payment
have not been authorized for listing, upon official notice of issuance, on any
securities exchange or market on which the Common Stock is then listed; or
have not been approved for quotation if the Common Stock is traded in the
over-the-counter market;
(iv) the Computed Price (determined without regard to the proviso to
the definition thereof) is less than the par value of one share of Common
Stock;
(v) the shares of Common Stock (A) cannot be sold or transferred
without restriction by unaffiliated holders who receive such shares of Common
Stock as a dividend payment or (B) are no longer listed on a national
securities exchange, on the Nasdaq National Market or the Nasdaq SmallCap
Market; or
(vi) the issuance of shares of Common Stock in payment of dividends
on Series A Convertible Preferred Stock held by any Restricted Person would
result in any Restricted Person beneficially owning more than 4.9% of the
Common Stock, determined as provided in the proviso to the second sentence of
Section 10(a) hereof.
63.03.04.02 --
Shares of Common Stock issued in payment of dividends on Series A
Convertible Preferred Stock pursuant to this Section shall be, and for all
purposes shall be deemed to be, validly issued, fully paid and nonassessable
shares of Common Stock of the Corporation; the issuance and delivery thereof
is hereby authorized; and the dispatch thereof will be, and for all purposes
shall be deemed to be, payment in full of the cumulative dividends to which
holders are entitled on the applicable dividend payment date.
(c) Neither the Corporation nor any subsidiary of the
Corporation shall redeem, repurchase or otherwise acquire in any one
transaction or series of related transactions any shares of Common Stock,
Junior Dividend Stock or Junior Liquidation Stock if the number of shares so
repurchased, redeemed or otherwise acquired in such transaction or series of
related transactions (excluding any Option Share Surrender) is more than
either (x) 5.0% of the number of shares of Common Stock, Junior Dividend Stock
or Junior Liquidation Stock, as the case may be, outstanding immediately prior
to such transaction or series of related transactions or (y) 1% of the number
of shares of Common Stock, Junior Dividend Stock or Junior Liquidation Stock,
as the case may be, outstanding immediately prior to such transaction or
series of related transactions if such transaction or series of related
transactions is with any one person or group of affiliated persons, unless the
Corporation or such subsidiary offers to purchase for cash from each holder of
shares of Series A Convertible Preferred Stock at the time of such redemption,
repurchase or acquisition the same percentage of such holder's shares of
Series A Convertible Preferred Stock as the percentage of the number of
outstanding shares of Common Stock, Junior Dividend Stock or Junior
Liquidation Stock, as the case may be, to be so redeemed, repurchased or
acquired at a purchase price per share of Series A Convertible Preferred Stock
equal to the greater of (i) the sum of (a) the sum of (1) the Conversion
Value, (2) an amount equal to the accrued but unpaid dividends on such share
of Series A Convertible Preferred Stock, plus (3) an amount equal to the
----
accrued and unpaid interest on dividends in arrears (determined as provided in
Section 5) through the date of purchase pursuant to this Section 5(c) plus (b)
----
an amount equal to the product obtained by multiplying (x) the sum stated in
the immediately preceding clause (a) times (y) the quotient (expressed as a
-----
percentage) obtained by dividing (A) the amount determined by subtracting from
100 percent the Conversion Percentage in effect on the date of purchase
pursuant to this Section 5(c) by (B) the Conversion Percentage in effect on
--
the date of purchase pursuant to this Section 5(c) and (ii) an amount equal to
the product obtained by multiplying (x) the number of shares of Common Stock
which would, but for the purchase pursuant to this Section 5(c), be issuable
on conversion in accordance with Section 10(a) of one share of Series A
Convertible Preferred Stock and any accrued and unpaid dividends thereon and
any accrued and unpaid interest on dividends thereon in arrears if a
Conversion Notice were given by the holder of such share of Series A
Convertible Preferred Stock on the date of purchase pursuant to this Section
5(c) (determined without regard to any limitation on conversion contained in
Section 10(a)) times (y) the arithmetic average of the Market Price of the
-----
Common Stock for the Measurement Period with respect to the date of purchase
pursuant to this Section 5(c).
(d) Neither the Corporation nor any subsidiary of the
Corporation shall (1) make any Tender Offer for outstanding shares of Common
Stock, unless the Corporation contemporaneously therewith makes an offer, or
(2) enter into an agreement regarding a Tender Offer for outstanding shares of
Common Stock by any person other than the Corporation or any subsidiary of the
Corporation, unless such person agrees with the Corporation to make an offer,
in either such case to each holder of outstanding shares of Series B
Convertible Preferred Stock to purchase for cash at the time of purchase in
such Tender Offer the same percentage of shares of Series A Convertible
Preferred Stock held by such holder as the percentage of outstanding shares of
Common Stock offered to be purchased in such Tender Offer at a price per share
of Series A Convertible Preferred Stock equal to the greater of (i) the sum of
(a) the sum of (1) the Conversion Value, (2) an amount equal to the accrued
but unpaid dividends on such share of Series A Convertible Preferred Stock,
and (3) an amount equal to the accrued and unpaid interest on dividends in
arrears (determined as provided in Section 5) through the date of purchase
pursuant to this Section 5(d) plus (b) an amount equal to the product obtained
----
by multiplying (x) the sum stated in the immediately preceding clause (a)
times (y) the quotient (expressed as a percentage) obtained by dividing (A)
-
the amount determined by subtracting from 100 percent the Conversion
Percentage in effect on the date of purchase pursuant to this Section 5(d) by
--
(B) the Conversion Percentage in effect on the date of purchase pursuant to
this Section 5(d) and (ii) an amount equal to the product obtained by
multiplying (x) the number of shares of Common Stock which would, but for the
purchase pursuant to this Section 5(d), be issuable on conversion in
accordance with Section 10(a) of one share of Series A Convertible Preferred
Stock and any accrued and unpaid dividends thereon and any accrued and unpaid
interest on dividends thereon in arrears if a Conversion Notice were given by
the holder of such share of Series A Convertible Preferred Stock on the date
of purchase pursuant to this Section 5(d) (determined without regard to any
limitation on conversion contained in Section 10(a)) times (y) the price per
-----
share of Common Stock offered in such Tender Offer.
SECTION 6. LIQUIDATION PREFERENCE. In the event of a
-----------------------
liquidation, dissolution, or winding up of the Corporation, whether voluntary
or involuntary, the holders of Series A Convertible Preferred Stock shall be
entitled to receive out of the assets of the Corporation, whether such assets
constitute stated capital or surplus of any nature, an amount per share of
Series A Convertible Preferred Stock equal to the Liquidation Preference, and
no more, before any payment shall be made or any assets distributed to the
holders of Junior Liquidation Stock; provided, however, that such rights shall
-------- -------
accrue to the holders of Series A Convertible Preferred Stock only in the
event that the Corporation's payments with respect to the liquidation
preference of the holders of Senior Liquidation Stock are fully met. After
the liquidation preferences of the Senior Liquidation Stock are fully met, the
entire assets of the Corporation available for distribution shall be
distributed ratably among the holders of the Series A Convertible Preferred
Stock and any Parity Liquidation Stock in proportion to the respective
preferential amounts to which each is entitled (but only to the extent of such
preferential amounts). After payment in full of the liquidation price of the
shares of the Series A Convertible Preferred Stock and the Parity Liquidation
Stock, the holders of such shares shall not be entitled to any further
participation in any distribution of assets by the Corporation. Neither a
consolidation or merger of the Corporation with another corporation nor a sale
or transfer of all or part of the Corporation's assets for cash, securities,
or other property in and of itself will be considered a liquidation,
dissolution, or winding up of the Corporation.
SECTION 7. MANDATORY REDEMPTION BASED ON MAXIMUM SHARE AMOUNT.
--------------------------------------------------
(1) If rules of the Nasdaq SmallCap Market ("Nasdaq") relating to stockholder
approval of certain matters which rules, at the date of filing this
Certificate of Designations, are proposed to be adopted by the Nasdaq, are
adopted by the Nasdaq and are applicable to conversion of shares of Series A
Convertible Preferred Stock so as to limit the number of shares of Common
Stock which the Corporation may issue upon conversion of shares of Series A
Convertible Preferred Stock and payment of dividends on shares of Series A
Convertible Preferred Stock, then the provisions of this Section 7 shall be
applicable. Notwithstanding any other provision herein, unless the
Stockholder Approval shall have been obtained from the stockholders of the
Corporation or waived by the Nasdaq, the Corporation shall not be required to
issue upon conversion of shares of Series A Convertible Preferred Stock
pursuant to Section 10 more than the Maximum Share Amount, less the aggregate
number of shares of Common Stock issued by the Corporation pursuant to Section
5 as dividends on the Series A Convertible Preferred Stock. The Maximum Share
Amount shall be allocated among the shares of Series A Convertible Preferred
Stock at the time of initial issuance thereof pro rata based on the total
number of authorized shares of Series A Convertible Preferred Stock provided
in Section 2. Each certificate for shares of Series A Convertible Preferred
Stock initially issued shall bear a notation as to the number of shares
constituting the portion of the Maximum Share Amount allocated to the shares
of Series A Convertible Preferred Stock represented by such certificate for
purposes of conversion thereof. The Corporation shall maintain records which
show the number of shares of Common Stock issued by the Corporation pursuant
to Section 5 as dividends on the shares of Series A Convertible Preferred
Stock represented by each certificate, which records shall be controlling in
the absence of manifest error. Upon surrender of any certificate for shares
of Series A Convertible Preferred Stock for transfer or re-registration
thereof (or, at the option of the holder, for conversion pursuant to Section
10(a) of less than all of the shares of Series A Convertible Preferred Stock
represented thereby), the Corporation shall make a notation on the new
certificate issued upon such transfer or re-registration or evidencing such
unconverted shares, as the case may be, as to the remaining number of shares
of Common Stock from the Maximum Share Amount remaining available for
conversion of the shares of Series A Convertible Preferred Stock evidenced by
such new certificate (including, without limitation, by taking into account
the number of shares of Common Stock issued by the Corporation pursuant to
Section 5 as a dividend on the shares of Series A Convertible Preferred Stock
represented by the certificate so surrendered and not previously reflected on
the certificate so surrendered, as shown on the records maintained by the
Corporation). If any certificate for shares of Series A Convertible Preferred
Stock is surrendered for split-up into two or more certificates representing
an aggregate number of shares of Series A Convertible Preferred Stock equal to
the number of shares of Series A Convertible Preferred Stock represented by
the certificate so surrendered (as reduced by any contemporaneous conversion
of shares of Series A Convertible Preferred Stock represented by the
certificate so surrendered), each certificate issued on such split-up shall
bear a notation of the portion of the Maximum Share Amount allocated thereto
determined by pro rata allocation from among the remaining portion of the
Maximum Share Amount allocated to the certificate so surrendered. If any
shares of Series A Convertible Preferred Stock represented by a single
certificate are converted in full pursuant to Section 10, all of the portion
of the Maximum Share Amount allocated to such shares of Series A Convertible
Preferred Stock which remains unissued after such conversion shall be
re-allocated pro rata to the outstanding shares of Series A Convertible
Preferred Stock held of record by the holder of record at the close of
business on the date of such conversion of the shares of Series A Convertible
Preferred Stock so converted, and if there shall be no other shares of Series
A Convertible Preferred Stock held of record by such holder at the close of
business on such date, then such portion of the Maximum Share Amount shall be
allocated pro rata among the shares of Series A Convertible Preferred Stock
outstanding on such date.
(2) The Corporation shall promptly, but in no event later than
five business days after the occurrence, give notice to each holder (by
telephone line facsimile transmission at such number as such holder has
specified in writing to the Corporation for such purposes or, if such holder
shall not have specified any such number, by overnight courier or first class
mail, postage prepaid, at such holder's address as the same appears on the
stock books of the Corporation) and any holder may at any time after the
occurrence give notice to the Corporation, in either case, if on any ten
trading days within any period of 20 consecutive trading days the Corporation
would not have been required to convert shares of Series A Convertible
Preferred Stock of such holder in accordance with Section 10(a) as a
consequence of the limitations set forth in Section 7(a)(1) had all
outstanding shares of Series A Convertible Preferred Stock held by such holder
been converted into Common Stock on each such day, determined without regard
to the limitation, if any, on such holder contained in the proviso to the
second sentence of Section 10(a) (any such notice, whether given by the
Corporation or a holder, an "Inconvertibility Notice"). If the Corporation
shall have given or been required to give any Inconvertibility Notice, or if a
holder shall have given any Inconvertibility Notice, then within ten business
days after such Inconvertibility Notice is given or was required to be given,
the holder receiving or giving, as the case may be, the Inconvertibility
Notice shall have the right by written notice to the Corporation (which
written notice may be contained in the Inconvertibility Notice given by the
holder) to direct the Corporation to redeem the portion of such holder's
outstanding shares of Series A Convertible Preferred Stock (which, if
applicable, shall be all of such holder's outstanding shares of Series A
Convertible Preferred Stock) as shall not, on the business day prior to the
date of such redemption, be convertible into shares of Common Stock by reason
of the limitations set forth in Section 7(a)(1) (determined without regard to
the limitation, if any, on such holder contained in the proviso to the second
sentence of Section 10(a)), within ten business days after such holder so
directs the Corporation, at a price per share equal to the Share Limitation
Redemption Price. If a holder directs the Corporation to redeem outstanding
shares of Series A Convertible Preferred Stock and, prior to the date the
Corporation is required to redeem such shares of Series A Convertible
Preferred Stock, the Corporation would have been able, within the limitations
set forth in Section 7(a)(1), to convert all of such holder's outstanding
shares of Series A Convertible Preferred Stock (determined without regard to
the limitation, if any, on such holder contained in the proviso to the second
sentence of Section 10(a)) on any ten trading days within any period of 20
consecutive trading days commencing after the period of 20 consecutive trading
days which gave rise to the applicable Inconvertibility Notice from the
Corporation or such holder of shares of Series A Convertible Preferred Stock,
as the case may be, had all of such holder's outstanding shares of Series A
Convertible Preferred Stock been surrendered for conversion into Common Stock
on each of such ten trading days within such 20 trading day period, then the
Corporation shall not be required to redeem any shares of Series A Convertible
Preferred Stock by reason of such Inconvertibility Notice.
(3) Notwithstanding the giving of any notice by the Corporation
to the holders of Series A Convertible Preferred Stock pursuant to Section
7(a)(2) or the giving or the absence of any notice by the holders of the
Series A Convertible Preferred Stock in response thereto or any redemption of
shares of Series A Convertible Preferred Stock pursuant to Section 7(a)(2),
thereafter the provisions of Section 7(a)(2) shall continue to be applicable
on any occasion unless the Stockholder Approval shall have been obtained from
the stockholders of the Corporation or waived by the Nasdaq.
(4) On each Share Limitation Redemption Date, the Corporation
shall make payment in immediately available funds of the applicable Share
Limitation Redemption Price to such holder of shares of Series A Convertible
Preferred Stock to be redeemed to or upon the order of such holder as
specified by such holder in writing to the Corporation at least one business
day prior to such Share Limitation Redemption Date. If the Corporation is
required to redeem all or any portion of a holder's outstanding shares of
Series A Convertible Preferred Stock pursuant to this Section 7(a), the
Corporation shall make payment to such holder of the shares of Series A
Convertible Preferred Stock to be redeemed in respect of each share of Series
A Convertible Preferred Stock to be redeemed of an amount equal to the Share
Limitation Redemption Price. Upon redemption of less than all of the shares
of Series A Convertible Preferred Stock evidenced by a particular certificate,
promptly, but in no event later than three business days after surrender of
such certificate to the Corporation, the Corporation shall issue a replacement
certificate for the shares of Series A Convertible Preferred Stock evidenced
by such certificate which have not been redeemed. Only whole shares of Series
A Convertible Preferred Stock may be redeemed.
SECTION 8. NO SINKING FUND. The shares of Series A Convertible
---------------
Preferred Stock shall not be subject to the operation of a purchase,
retirement, or sinking fund.
SECTION 9. REDEMPTION BASED ON FLOOR PRICE AMOUNT. (1) Except
--------------------------------------
as required by Section 10(a)(iv), the Corporation shall not be required to
issue upon conversion of shares of Series A Convertible Preferred Stock
pursuant to Section 10 more than the Floor Price Amount. Upon receiving a
Conversion Notice, the Corporation shall promptly determine whether the
Conversion Price is less than the Floor Price. If the Conversion Price is
less than the Floor Price, the Corporation shall have the right, exercisable
by written notice to the holders of record of the shares of Series A
Convertible Preferred Stock who delivered such Conversion Notice ("Converting
Holders"), to redeem any shares ("Excess Shares") of Series A Convertible
Preferred Stock as to which the Converting Holders delivered a Conversion
Notice which are in excess of the Floor Price Shares. If the Corporation does
not exercise its right of redemption as to all of the Excess Shares, it shall
deliver a Conversion Deferral Notice to each Converting Holder pursuant to
Section 10(a)(iii). Any Redemption Notice under this Section shall be
delivered to the Converting Holders at their addresses appearing on the
records of the Corporation within one Business Day after receipt of the
applicable Conversion Notice and shall specify a date for completing the
redemption (the "Redemption Date") within three Business Days after receipt of
the Conversion Notice; provided, however, that any failure or defect in the
-------- -------
giving of notice to any such holder shall not affect the validity of notice to
or the redemption of shares of Series A Convertible Preferred Stock of any
other holder.
(2) On the Redemption Date and after receipt by the Corporation of
certificates for shares of Series A Preferred Stock to be redeemed pursuant to
this Section 9, the Corporation shall make payment, in immediately available
funds, of the applicable Redemption Price to each holder of Excess Shares to
be redeemed to or upon the order of such holder as specified by such holder in
writing to the Corporation at least one business day prior to the Redemption
Date. Upon redemption of less than all of the shares of Series A Convertible
Preferred Stock evidenced by a particular certificate, promptly, but in no
event later than three business days after surrender of such certificate to
the Corporation, the Corporation shall issue and deliver to the holder of
record of the surrendered certificate (or such holder's assignee) a
replacement certificate for the shares of Series A Convertible Preferred Stock
which have not been redeemed. Only whole shares of Series A Convertible
Preferred Stock may be redeemed. If the Corporation exercises its right to
redeem less than all Excess Shares of Series A Convertible Preferred Stock,
then such redemption shall be made, as nearly as practical, pro rata among the
Converting Holders.
SECTION 10. CONVERSION.
----------
(A) CONVERSION AT OPTION OF HOLDER. (i) Subject to the
----------------------------------
limitation set forth in Section 9, the limitations set forth in the legends to
appear on the certificates for the shares of Series A Preferred Stock as
provided in Section 10(a)(ii), and the provisions of Section 10(a)(iii)
regarding conversion of Excess Shares, the holders of the Series A Convertible
Preferred Stock may convert any or all of their shares of Series A Convertible
Preferred Stock into fully paid and nonassessable shares of Common Stock and
such other securities and property as hereinafter provided. Subject to the
limitations referred to in the preceding sentence, each share of Series A
Convertible Preferred Stock may be converted at the office of the Conversion
Agent or at such other additional office or offices, if any, as the Board of
Directors may designate, initially into such number of fully paid and
nonassessable shares of Common Stock (calculated as to each conversion to the
nearest 1/100th of a share) determined by dividing (x) the sum of (i) the
Conversion Value, (ii) accrued but unpaid dividends to the applicable
Conversion Date on the share of Series A Convertible Preferred Stock being
converted, and (iii) accrued but unpaid interest on the dividends on the share
of Series A Convertible Preferred Stock being converted in arrears to the
applicable Conversion Date at the rate provided in Section 5 (such sum, the
"Conversion Amount") by (y) the product of (I) the Conversion Percentage with
respect to the applicable Conversion Date times (II) the arithmetic average of
-----
the Market Price of the Common Stock for the Measurement Period with respect
to the applicable Conversion Date; provided, however, that in no event shall
-------- -------
the amount determined in accordance with this clause be greater than $5.50
nor, except as provided by Sections 9, 10(a)(iii) and (iv), less than $4.00
U.S. per share of Common Stock (the "Floor Price") (subject to equitable
adjustments for stock splits, stock dividends, combinations,
recapitalizations, reclassifications and similar events occurring on or after
the date of filing of this Certificate of Designations with the Secretary of
State of the State of Delaware), in each case subject to adjustment as
hereinafter provided (the "Conversion Rate"); provided further, however, that
---------------- -------
in no event shall any holder of shares of Series A Convertible Preferred Stock
be entitled to convert any shares of Series A Convertible Preferred Stock in
excess of that number of shares of Series A Convertible Preferred Stock upon
conversion of which the sum of (1) the number of shares of Common Stock
beneficially owned by such holder and any person whose beneficial ownership of
shares of Common Stock would be aggregated with such holder's beneficial
ownership of shares of Common Stock for purposes of Section 13(d) of the
Exchange Act, and Regulation 13D-G thereunder (each a "Restricted Person" and
collectively, the "Restricted Persons") (other than shares of Common Stock
deemed beneficially owned through the ownership of unconverted shares of
Series A Convertible Preferred Stock) and (2) the number of shares of Common
Stock issuable upon the conversion of the number of shares of Series A
Convertible Preferred Stock with respect to which the determination in this
proviso is being made, would result in beneficial ownership by such holder and
all Restricted Persons of such holder of more than 4.9% of the outstanding
shares of Common Stock. For purposes of the proviso to the immediately
preceding sentence, beneficial ownership shall be determined in accordance
with Section 13(d) of the Exchange Act and Regulation 13D-G thereunder, except
as otherwise provided in clause (1) of the proviso to the immediately
preceding sentence.
(ii) (A) 15% of the certificates for shares of Series A
Convertible Preferred Stock shall, until such time as such legend, by its
terms, no longer applies, contain the following legend:
"THESE SECURITIES ARE NOT CONVERTIBLE AT THE OPTION OF THE HOLDER HEREOF UNTIL
ON OR AFTER THE 90TH DAY FOLLOWING THE ORIGINAL ISSUANCE THEREOF."
(B) 25% of the certificates for shares of Series A Convertible
Preferred Stock shall, until such time as such legend, by its terms, no longer
applies, contain the following legend:
"THESE SECURITIES ARE NOT CONVERTIBLE AT THE OPTION OF THE HOLDER HEREOF UNTIL
ON OR AFTER THE 135TH DAY FOLLOWING THE ORIGINAL ISSUANCE THEREOF."
(C) 30% of the certificates for shares of Series A Convertible
Preferred Stock shall, until such time as such legend, by its terms, no longer
applies, contain the following legend:
"THESE SECURITIES ARE NOT CONVERTIBLE AT THE OPTION OF THE HOLDER HEREOF UNTIL
ON OR AFTER THE 180TH DAY FOLLOWING THE ORIGINAL ISSUANCE THEREOF."
(D) 30% of the certificates for shares of Series A Convertible
Preferred Stock shall, until such time as such legend, by its terms, no longer
applies, contain the following legend:
"THESE SECURITIES ARE NOT CONVERTIBLE AT THE OPTION OF THE HOLDER HEREOF UNTIL
ON OR AFTER THE 240TH DAY FOLLOWING THE ORIGINAL ISSUANCE THEREOF."
Any new certificate issued upon transfer of any shares of Series A Convertible
Preferred Stock or, in connection with a conversion of shares of Series A
Convertible Preferred Stock, to evidence the unconverted balance of shares of
Series A Convertible Preferred Stock shall bear the same legend as the
certificate surrendered to the Corporation in connection herewith, if
applicable.
(iii) If the Corporation does not exercise its right to redeem
all Excess Shares pursuant to Section 9, the Corporation shall, during the
First Conversion Period, the Second Conversion Period and the Third Conversion
Period, have the right to defer conversion of such Excess Shares by delivering
to the Converting Holders, with a copy to the Transfer Agent, a Conversion
Deferral Notice within one Business Day after receipt of the Conversion Notice
to which such Conversion Deferral Notice relates. Any Conversion Deferral
Notice shall be delivered to the Converting Holders at their addresses
appearing on the records of the Corporation. If the Corporation elects to
defer conversion of Excess Shares instead of redeeming them, the Conversion
Value for each unredeemed Excess Share shall be multiplied by 105%; provided,
--------
however, that the Conversion Value for each Excess Share may be adjusted
-------
pursuant to this Section 10(a)(iii) only once during each of the First
Conversion Period, the Second Conversion Period, and the Third Conversion
Period, although the Conversion Value for any Excess Share may be adjusted
pursuant to this Section 10(a)(iii) during successive conversion periods.
Each certificate for shares of Series A convertible Preferred Stock shall,
until such time as such legend no longer applies, contain the following
legend:
"THE CONVERSION VALUE OF THESE SECURITIES IS SUBJECT TO ADJUSTMENT AS PROVIDED
IN SECTION 10(a)(iii) OF THE CERTIFICATE OF DESIGNATIONS."
(iv) The Corporation shall have no right to defer conversion of
any Excess Shares during the Fourth Conversion Period. If the Corporation
receives a Conversion Notice during the Fourth Conversion Period, and does not
deliver a Redemption Notice to the Converting Holders in accordance with
Section 9, then the Converting Holders shall have the right to proceed with
the conversion described in the Conversion Notice notwithstanding the
limitation set forth in Section 9.
(B) OTHER PROVISIONS. (1) Notwithstanding anything in this
----------------
Section 10(b) to the contrary, no change in the Conversion Amount pursuant to
Section 10(b) shall actually be made until the cumulative effect of the
adjustments called for by this Section 10(b) since the date of the last change
in the Conversion Amount would change the Conversion Amount by more than 1%.
However, once the cumulative effect would result in such a change, then the
Conversion Rate shall actually be changed to reflect all adjustments called
for by this Section 10(b) and not previously made. Notwithstanding anything
in this Section 10(b), no change in the Conversion Amount shall be made that
would result in a Conversion Price of less than the par value of the Common
Stock into which shares of Series A Convertible Preferred Stock are at the
time convertible.
(2) The holders of shares of Series A Convertible Preferred
Stock at the close of business on the record date for any dividend payment to
holders of Series A Convertible Preferred Stock shall be entitled to receive
the dividend payable on such shares on the corresponding dividend payment date
notwithstanding the conversion thereof after such dividend payment record date
or the Corporation's default in payment of the dividend due on such dividend
payment date; provided, however, that the holder of shares of Series A
-------- -------
Convertible Preferred Stock surrendered for conversion during the period
between the close of business on any record date for a dividend payment and
the opening of business on the corresponding dividend payment date must pay to
the Corporation, within five days after receipt by such holder, an amount
equal to the dividend payable on such shares on such dividend payment date if
such dividend is paid by the Corporation to such holder. A holder of shares
of Series A Convertible Preferred Stock on a record date for a dividend
payment who (or whose transferee) tenders any of such shares for conversion
into shares of Common Stock on or after such dividend payment date will
receive the dividend payable by the Corporation on such shares of Series A
Convertible Preferred Stock on such date, and the converting holder need not
make any payment of the amount of such dividend in connection with such
conversion of shares of Series A Convertible Preferred Stock. Except as
provided above, no adjustment shall be made in respect of cash dividends on
Common Stock or Series A Convertible Preferred Stock that may be accrued and
unpaid at the date of surrender of shares of Series A Convertible Preferred
Stock.
(3) (A) The right of the holders of Series A Convertible
Preferred Stock to convert their shares shall be exercised by delivering
(which may be done by telephone line facsimile transmission) a Conversion
Notice to the Conversion Agent, as provided above. If a holder of Series A
Convertible Preferred Stock elects to convert any shares of Series A
Convertible Preferred Stock in accordance with Section 10(a), such holder
shall not be required to physically surrender the certificate(s) representing
such shares of Series A Convertible Preferred Stock to the Corporation unless
all of the shares of Series A Convertible Preferred Stock represented thereby
are so converted. Each holder of shares of Series A Convertible Preferred
Stock and the Corporation shall maintain records showing the number of shares
so converted and the dates of such conversions or shall use such other method,
satisfactory to such holder and the Corporation, so as to not require physical
surrender of such certificates upon each such conversion. In the event of any
dispute or discrepancy, such records of the Corporation shall be controlling
and determinative in the absence of manifest error. Notwithstanding the
foregoing, if any shares of Series A Convertible Preferred Stock evidenced by
a particular certificate therefor are converted as aforesaid, the holder of
Series A Convertible Preferred Stock may not transfer the certificate(s)
representing such shares of Series A Convertible Preferred Stock unless such
holder first physically surrenders such certificate(s) to the Corporation,
whereupon the Corporation will forthwith issue and deliver upon the order of
such holder of shares of Series A Convertible Preferred Stock new
certificate(s) of like tenor, registered as such holder of shares of Series A
Convertible Preferred Stock (upon payment by such holder of shares of Series A
Convertible Preferred Stock of any applicable transfer taxes) may request,
representing in the aggregate the remaining number of shares of Series A
Convertible Preferred Stock represented by such certificate(s). Each holder
of shares of Series A Convertible Preferred Stock, by acceptance of a
certificate for such shares, acknowledges and agrees that (1) by reason of the
provisions of this paragraph, following conversion of any shares of Series A
Convertible Preferred Stock represented by such certificate, the number of
shares of Series A Convertible Preferred Stock represented by such certificate
may be less than the number of shares stated on such certificate and by reason
of Section 7(a), the number of shares of Common Stock from the Maximum Share
Amount allocated to the shares of Series A Convertible Preferred Stock
represented by such certificate for purposes of conversion of such shares may
be less than the number thereof stated on such certificate and (2) the
Corporation may place a legend on the certificates for shares of Series A
Convertible Preferred Stock which refers to or describes the provisions of
this paragraph.
(B) The Corporation shall pay any transfer tax arising in
connection with any conversion of shares of Series A Convertible Preferred
Stock except that the Corporation shall not, however, be required to pay any
tax which may be payable in respect of any transfer involved in the issue and
delivery upon conversion of shares of Common Stock or other securities or
property in a name other than that of the holder of the shares of the Series A
Convertible Preferred Stock being converted, and the Corporation shall not be
required to issue or deliver any such shares or other securities or property
unless and until the person or persons requesting the issuance thereof shall
have paid to the Corporation the amount of any such tax or shall have
established to the satisfaction of the Corporation that such tax has been
paid. The number of shares of Common Stock to be issued upon each conversion
of shares of Series C Convertible Preferred Stock shall be the number set
forth in the applicable Conversion Notice which number shall be conclusive
absent manifest error. The Corporation shall notify a holder who has given a
Conversion Notice of any claim of manifest error within one business day after
such holder gives such Conversion Notice and no such claim of error shall
limit or delay performance of the Corporation's obligation to issue upon such
conversion the number of shares of Common Stock which are not in dispute. A
Conversion Notice shall be deemed for all purposes to be in proper form unless
the Corporation notifies a holder of shares of Series A Convertible Preferred
Stock being converted within one business day after a Conversion Notice has
been given (which notice shall specify all defects in the Conversion Notice)
and any Conversion Notice containing any such defect shall nonetheless be
effective on the date given if the converting holder promptly corrects all
such defects.
(4) The Corporation (and any successor corporation) shall take
all action necessary so that a number of shares of the authorized but unissued
Common Stock (or common stock in the case of any successor corporation)
sufficient to provide for the conversion of the Series A Convertible Preferred
Stock outstanding upon the basis herein before provided are at all times
reserved by the Corporation (or any successor corporation), free from
preemptive rights, for such conversion, subject to the provisions of the next
succeeding paragraph. 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 Convertible Preferred Stock
shall be convertible as herein provided, 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 Convertible Preferred Stock
on the new basis. If at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all of the
outstanding shares of Series A Convertible Preferred Stock, the Corporation
promptly shall seek such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(5) In case of any consolidation or merger of the Corporation
with any other corporation (other than a wholly-owned subsidiary of the
Corporation) in which the Corporation is not the surviving corporation, or in
case of any sale or transfer of all or substantially all of the assets of the
Corporation, or in the case of any share exchange pursuant to which all of the
outstanding shares of Common Stock are converted into other securities or
property, the Corporation shall make appropriate provision or cause
appropriate provision to be made so that each holder of shares of Series A
Convertible Preferred Stock then outstanding shall have the right thereafter
to convert such shares of Series A Convertible Preferred Stock into the kind
of shares of stock and other securities and property receivable upon such
consolidation, merger, sale, transfer, or share exchange by a holder of shares
of Common Stock into which such shares of Series A Convertible Preferred Stock
could have been converted immediately prior to the effective date of such
consolidation, merger, sale, transfer, or share exchange and on a basis which
preserves the economic benefits of the conversion rights of the holders of
shares of Series A Convertible Preferred Stock on a basis as nearly as
practical as such rights exist hereunder prior thereto. If, in connection
with any such consolidation, merger, sale, transfer, or share exchange, each
holder of shares of Common Stock is entitled to elect to receive securities,
cash, or other assets upon completion of such transaction, the Corporation
shall provide or cause to be provided to each holder of Series A Convertible
Preferred Stock the right to elect the securities, cash, or other assets into
which the Series A Convertible Preferred Stock held by such holder shall be
convertible after completion of any such transaction on the same terms and
subject to the same conditions applicable to holders of the Common Stock
(including, without limitation, notice of the right to elect, limitations on
the period in which such election shall be made, and the effect of failing to
exercise the election). The Corporation shall not effect any such transaction
unless the provisions of this paragraph have been complied with. The above
provisions shall similarly apply to successive consolidations, mergers, sales,
transfers, or share exchanges.
(6) If a holder shall have given a Conversion Notice for shares
of Series A Convertible Preferred Stock and the Corporation shall not have
given a Redemption Notice pursuant to Section 9(a) or a Conversion Deferral
Notice pursuant to Section 10(a)(iii), the Corporation shall issue and deliver
to such person certificates for the Common Stock issuable upon such conversion
within three business days after such Conversion Notice is given and the
person converting shall be deemed to be the holder of record of the Common
Stock issuable upon such conversion, and all rights with respect to the shares
surrendered shall forthwith terminate except the right to receive the Common
Stock or other securities, cash, or other assets as herein provided. If a
holder shall have given a Conversion Notice as provided herein, the
Corporation's obligation to issue and deliver the certificates for Common
Stock shall be absolute and unconditional, irrespective of any action or
inaction by the converting holder to enforce the same, any waiver or consent
with respect to any provision thereof, the recovery of any judgment against
any person or any action to enforce the same, any failure or delay in the
enforcement of any other obligation of the Corporation to the holder of
record, or any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by the holder of any obligation to the
Corporation, and irrespective of any other circumstance which might otherwise
limit such obligation of the Corporation to the holder in connection with such
conversion. If the Corporation fails to issue and deliver the certificates
for the Common Stock to the holder converting shares of Series A Convertible
Preferred Stock pursuant to the first sentence of this paragraph as and when
required to do so, in addition to any other liabilities the Corporation may
have hereunder and under applicable law (1) the Corporation shall pay or
reimburse such holder on demand for all out-of-pocket expenses including,
without limitation, reasonable fees and expenses of legal counsel incurred by
such holder as a result of such failure, (2) the Conversion Percentage
applicable to such conversion shall be reduced by two-and-one-half percentage
points from the Conversion Percentage otherwise applicable to such conversion
and (3) such holder may by written notice (which may be given by mail,
courier, personal service or telephone line facsimile transmission) or oral
notice (promptly confirmed in writing) given at any time prior to delivery to
such holder of the certificates for the shares of Common Stock issuable upon
such conversion of shares of Series A Convertible Preferred Stock, rescind
such conversion, whereupon such holder shall have the right to convert such
shares of Series A Convertible Preferred Stock thereafter in accordance
herewith.
(7) No fractional shares of Common Stock shall be issued upon
conversion of Series A Convertible Preferred Stock but, in lieu of any
fraction of a share of Common Stock to purchase fractional shares of Common
Stock which would otherwise be issuable in respect of the aggregate number of
such shares surrendered for conversion at one time by the same holder, the
Corporation shall pay in cash an amount equal to the product of (i) the
arithmetic average of the Market Price of a share of Common Stock on the three
consecutive trading days ending on the trading day immediately preceding the
Conversion Date and (ii) such fraction of a share.
(8) The Conversion Amount shall be adjusted from time to time
under certain circumstances, subject to the provisions of Section 10(b)(1), as
follows:
(i) In case the Corporation shall issue rights or warrants on a
pro rata basis to all holders of the Common Stock entitling such holders to
subscribe for or purchase Common Stock on the record date referred to below at
a price per share less than the Current Market Price for such record date,
then in each such case the Conversion Amount in effect on such record date
shall be adjusted in accordance with the formula
C1 = C x O + N
-------
O + N x P
-------
M
where
C1 = the adjusted Conversion Amount
C = the current Conversion Amount
O = the number of shares of Common Stock outstanding on the record date.
N = the number of additional shares of Common Stock issuable pursuant to
the exercise of such rights or warrants.
P = the offering price per share of the additional shares (which amount
shall include amounts received by the Corporation in respect of
the issuance and the exercise of such rights or warrants).
M = the Current Market Price per share of Common Stock on the record date.
Such adjustment shall become effective immediately after the record date for
the determination of stockholders entitled to receive such rights or warrants.
If any or all such rights or warrants are not so issued or expire or terminate
before being exercised, the Conversion Amount then in effect shall be
readjusted appropriately.
(ii) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its Junior Stock (as hereinafter defined)
evidences of its indebtedness or assets (including securities, but excluding
any warrants or subscription rights referred to in subparagraph (i) above and
any dividend or distribution paid in cash out of the retained earnings of the
Corporation), then in each such case the Conversion Amount then in effect
shall be adjusted in accordance with the formula
C1 = C x M
-----
M - F
where
C1= the adjusted Conversion Amount
C = the current Conversion Amount
M = the Current Market Price per share of Common Stock on the record date
mentioned below.
F = the aggregate amount of such cash dividend and/or the fair market value
on the record date of the assets or securities to be distributed divided
by the number of shares of Common Stock outstanding on the record date.
The Board of Directors shall determine such fair market value, which
determination shall be conclusive.
Such adjustment shall become effective immediately after the record date for
the determination of stockholders entitled to receive such dividend or
distribution. For purposes of this subparagraph (ii), "Junior Stock" shall
include any class of capital stock ranking junior as to dividends or upon
liquidation to the Series A Convertible Preferred Stock.
(iii) All calculations hereunder shall be made to the nearest
cent or to the nearest 1/100 of a share, as the case may be.
(iv) If at any time as a result of an adjustment made pursuant
to Section 10(b)(5), the holder of any Series A Convertible Preferred Stock
thereafter surrendered for conversion shall become entitled to receive
securities, cash, or assets other than Common Stock, the number or amount of
such securities or property so receivable upon conversion shall be subject to
adjustment from time to time in a manner and on terms nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
subparagraphs (i) to (iii) above.
(9) Except as otherwise provided above in this Section 10, no
adjustment in the Conversion Amount shall be made in respect of any conversion
for share distributions or dividends theretofore declared and paid or payable
on the Common Stock.
(10) Whenever the Conversion Amount is adjusted as herein
provided, the Corporation shall send to each holder and each transfer agent,
if any, for the Series A Convertible Preferred Stock and the Common Stock, a
statement signed by the Chairman of the Board, the President, or any Vice
President of the Corporation and by its Treasurer or its Secretary or an
Assistant Secretary stating the adjusted Conversion Amount determined as
provided in this Section 10, and any adjustment so evidenced, given in good
faith, shall be binding upon all stockholders and upon the Corporation.
Whenever the Conversion Amount is adjusted, the Corporation will give notice
by mail to the holders of record of Series A Convertible Preferred Stock,
which notice shall be made within 15 days after the effective date of such
adjustment and shall state the adjustment and the Conversion Amount.
Notwithstanding the foregoing notice provisions, failure by the Corporation to
give such notice or a defect in such notice shall not affect the binding
nature of such corporate action of the Corporation.
(11) Whenever the Corporation shall propose to take any of the
actions specified in Section 10(b)(5) or in subparagraphs (i) or (ii) of
Section 10(b)(8) which would result in any adjustment in the Conversion Amount
under this Section 10(b), the Corporation shall cause a notice to be mailed at
least 20 days prior to the date on which the books of the Corporation will
close or on which a record will be taken for such action, to the holders of
record of the outstanding Series A Convertible Preferred Stock on the date of
such notice. Such notice shall specify the action proposed to be taken by the
Corporation and the date as of which holders of record of the Common Stock
shall participate in any such actions or be entitled to exchange their Common
Stock for securities or other property, as the case may be. Failure by the
Corporation to mail the notice or any defect in such notice shall not affect
the validity of the transaction.
(C) MANDATORY CONVERSION. There shall be no mandatory
---------------------
conversion of the Series A Convertible Preferred Stock.
SECTION 11. REDEMPTION AT OPTION OF HOLDERS. The holders of
-------------------------------
shares of Series A Convertible Preferred Stock shall not be entitled to
require the Corporation to redeem any of such shares.
SECTION 12. VOTING RIGHTS. Except as otherwise required by law
-------------
or expressly provided herein, shares of Series A Convertible Preferred Stock
shall not be entitled to vote on any matter.
The affirmative vote or consent of the holders of a majority of the
outstanding shares of the Series A Convertible Preferred Stock, voting
separately as a class, will be required for (1) any amendment, alteration, or
repeal, whether by merger or consolidation or otherwise, of the Corporation's
Restated Certificate of Incorporation if the amendment, alteration, or repeal
materially and adversely affects the powers, preferences, or special rights of
the Series A Convertible Preferred Stock, or (2) the creation and issuance of
any Senior Dividend Stock or Senior Liquidation Stock; provided, however, that
-------- -------
any increase in the authorized Preferred Stock of the Corporation or the
creation and issuance of any stock which is both Junior Dividend Stock and
Junior Liquidation Stock shall not be deemed to affect materially and
adversely such powers, preferences, or special rights and any such increase or
creation and issuance may be made without any such vote by the holders of
Series A Convertible Preferred Stock except as otherwise required by law.
SECTION 13. OUTSTANDING SHARES. For purposes of this
-------------------
Certificate of Designations, all shares of Series A Convertible Preferred
Stock shall be deemed outstanding except (i) from the date of surrender of
certificates representing shares of Series A Convertible Preferred Stock for
conversion into Common Stock, all shares of Series A Convertible Preferred
Stock converted into Common Stock; (ii) from the date of registration of
transfer, all shares of Series A Convertible Preferred Stock held of record by
the Corporation or any subsidiary or Affiliate (as defined herein) of the
Corporation and (iii) from the Share Limitation Redemption Date, Redemption
Date or Optional Redemption Date all shares of Series A Convertible Preferred
Stock which are redeemed, so long as in each case the Share Limitation
Redemption Price, the Redemption Price or the Optional Redemption Price, as
the case may be, of such shares of Series A Convertible Preferred Stock shall
have been paid by the Corporation as and when required hereby. For the
purposes of this Certificate of Designations, "Affiliate" means any person,
other than the original holders of the shares of Series A Convertible
Preferred Stock, directly or indirectly controlling or controlled by or under
direct or indirect common control with the Corporation. "Control" is the
power to direct the management and policies of a person, directly or through
one or more intermediaries, whether through the ownership of voting
securities, by contract, or otherwise.
IN WITNESS WHEREOF, American Bingo & Gaming Corp., has caused this
certificate to be signed as of the day of July, 1997.
AMERICAN BINGO & GAMING CORP.
Attest:
By: -----------------------
BY: Chief Executive Officer