EXHIBIT 10.31.3
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (this "AGREEMENT") made as of this
27th day of March, 2003, by and between XXXXXXXX LLC, an entity organized and
existing under the laws of the Cayman Islands ("XXXXXXXX") and EUROTECH, LTD., a
District of Columbia corporation ("EUROTECH" or the "COMPANY"), and
When used in this Agreement, the following terms shall have
the specified definitions, unless the context otherwise requires:
"SERIES D STOCK" shall mean the Series D Preferred Stock of
Xxxxxxxx Technologies, Inc.("XXXXXXXX"), $.0001 par value.
"PREFERRED STOCK" shall mean the Series A 3% Convertible
Preferred Stock, $.01 par value, and Series B 5% Convertible Preferred Stock,
$.01 par value of Eurotech.
R E C I T A L S
X. Xxxxxxxx is the (i) owner of good and marketable title to
2,500 shares of the Eurotech Series A Preferred Stock, and (ii) holder of the
right to have issued to it 8,000 shares of the Eurotech Series B Preferred
Stock, in each case free and clear of all liens and encumbrances (such shares
and rights, the "EXCHANGED STOCK").
B. Eurotech wishes to (i) acquire the Series A Preferred Stock
from Xxxxxxxx for the purpose of retiring such shares, and (ii) accept
Xxxxxxxx'x termination of its rights to acquire the Series B Preferred Stock ,
in each case in exchange for 16,000 shares of the Series D Stock, and Xxxxxxxx
and Eurotech desire to effect such exchange (such transaction, the
"EXCHANGE"), in each case on the terms set forth herein.
NOW, THEREFORE, for and in consideration of the premises and
the mutual agreement contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. EXCHANGE. In consideration of the mutual benefits to be
gained by the parties hereto pursuant to the Exchange, at the Closing (as
defined below), Xxxxxxxx agrees to exchange with Eurotech, and Eurotech agrees
to exchange with Xxxxxxxx, respectively, the Exchanged Stock for the Series D
Stock.
2. CLOSING DATE. Subject to the satisfaction (or waiver) of
the conditions thereto set forth in Section 7 and Section 8 below, the date of
the closing of the Exchange pursuant to this Agreement (the "CLOSING DATE")
shall be on April 15, 2003 or such other mutually agreed upon time. The closing
of the transactions contemplated by this Agreement (the "CLOSING") shall occur
on the Closing Date at the offices of Xxxxxxx & Xxxxxx, 00 Xxxxxxxx, Xxxxx 0000,
Xxx Xxxx, Xxx Xxxx or at such other location as may be agreed to by the parties.
3. MUTUAL DELIVERIES. Upon the delivery by Xxxxxxxx of the
Series A Stock duly endorsed for transfer, and the release and surrender of its
rights to receive the unissued Series B Stock, Eurotech shall deliver to
Xxxxxxxx the Series D Stock, registered in the name of Xxxxxxxx or its designee,
bearing substantially the following legend:
THE SECURITIES REPRESENTED HEREBY (THE "SECURITIES") HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE
AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
ACCEPTABLE TO THE CORPORATION THAT SUCH REGISTRATION IS NOT
REQUIRED.
The delivery by Eurotech to Xxxxxxxx of the Series D Stock at the
Closing shall coincide with and shall be deemed evidence of Xxxxxxxx'x release
and termination of it rights to receive Eurotech Series B Preferred Stock, as
referenced in that certain Termination and Release Agreement between the
parties, which agreement shall be delivered at the Closing (the "TERMINATION
AGREEMENT").
4. REPRESENTATIONS AND WARRANTIES OF EUROTECH. EUROTECH
represents and warrants to Xxxxxxxx that:
(a) The Company has the corporate power and authority to enter
into this Agreement, and to perform its obligations hereunder. The execution and
delivery by the Company of this Agreement and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitute a valid and binding
obligations of the Company enforceable against it in accordance with its terms,
subject to the effects of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and to the
application of equitable principles in any proceeding (legal or equitable).
(b) There is no pending, or to the knowledge of the Company,
threatened, judicial, administrative or arbitral action, claim, suit, proceeding
or investigation which might affect the validity or enforceability of this
Agreement or which involves the Company and which if adversely
determined, could reasonably be expected to have a material adverse effect on
the Company.
(c) Except for filings required by any applicable securities
law, no consent or approval of, or exemption by, or filing with, any party or
governmental or public body or authority is required in connection with the
execution, delivery and performance of the Company under this Agreement or the
taking of any action contemplated hereunder.
(d) The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby, will not (i) conflict with or result in a violation of any
provision of its certificate of incorporation, bylaws or other organizational
documents, or (ii) violate or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which with notice or lapse of
time or both could become a default) under, or give to others any rights of
termination, amendment, acceleration, modification or cancellation of, any
contract, agreement, note, bond, indenture or other instrument to which the
Company is a party or under which the Company, its assets or its capital stock
is or may be effected, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and regulations of any self-regulatory organizations)
applicable to the Company or by which any property of the Company, including,
without limitation, the Series D Stock, will be bound or affected. Except as
specifically contemplated by this Agreement and as required under the Securities
Act of 1933, as amended (the "SECURITIES ACT"), and any applicable federal and
state securities laws, Eurotech is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency, regulatory agency, self regulatory organization or stock
market or any third party in order for it to
execute, deliver or perform any of its obligations under this Agreement in
accordance with the terms hereof. Except for filings that may be required under
applicable federal and state securities laws, all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof.
(e) Eurotech is the owner of good and marketable title to the
shares of Series D Stock held by it, free and clear of all liens, pledges and
encumbrances or any other stop transfer orders (except as may be required by the
applicable securities laws).
(f) Annexed hereto as Exhibit A is a true and complete copy of
the Certificate of Designations of the Series D Stock as filed with the
Secretary of State of the State of Florida prior to the Closing.
5. REPRESENTATIONS AND WARRANTIES OF XXXXXXXX. Xxxxxxxx hereby
represents and warrants to the Company that:
(a) Xxxxxxxx has the corporate power and authority to enter
into this Agreement and to perform its obligations hereunder. The execution and
delivery by Xxxxxxxx of this Agreement, and the consummation by Xxxxxxxx of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action on the part of the Xxxxxxxx. This Agreement has been duly
executed and delivered by Xxxxxxxx and constitute valid and binding obligations
of Xxxxxxxx, enforceable against it in accordance with their respective terms,
subject to the effects of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and to the
application of equitable principles in any proceeding (legal or equitable).
(b) There is no pending, or to the knowledge of Xxxxxxxx,
threatened, judicial, administrative or arbitral action, claim, suit, proceeding
or investigation which might affect the validity or enforceability of this
Agreement or which involves Xxxxxxxx, and which if adversely determined, could
reasonably be expected to have a material adverse effect on Xxxxxxxx.
(c) No consent or approval of, or exemption by, or filing
with, any party or governmental or public body or authority is required in
connection with the execution, delivery and performance by Xxxxxxxx under this
Agreement or the taking of any action contemplated hereunder.
(d) The execution, delivery and performance of this Agreement
by Xxxxxxxx and the consummation by Xxxxxxxx of the transactions contemplated
hereby, will not (i) conflict with or result in a violation of any provision of
its certificate of incorporation, bylaws or other organizational documents, or
(ii) violate or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which with notice or lapse of time or both
could become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, note, bond, indenture
or other instrument to which Xxxxxxxx is a party, or (iii) result in a violation
of any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and regulations of any self-regulatory
organizations) applicable to Xxxxxxxx or by which any property of Xxxxxxxx are
bound or affected. Except as specifically contemplated by this Agreement and as
required under the Securities Act and any applicable federal and state
securities laws, Xxxxxxxx is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court, governmental
agency, regulatory agency, self
regulatory organization or stock market or any third party in order for it to
execute, deliver or perform any of its obligations under this Agreement in
accordance with the terms hereof. Except for filings that may be required under
applicable federal and state securities laws in connection with the exchange of
the Exchanged Stock, all consents, authorizations, orders, filings and
registrations which Xxxxxxxx is required to obtain pursuant to the preceding
sentence have been obtained or effected on or prior to the date hereof.
(e) Xxxxxxxx is a sophisticated investor (as described in Rule
506(b)(2)(ii) of Regulation D) and an accredited investor (as defined in Rule
501 of Regulation D), and Xxxxxxxx has such experience in business and financial
matters that it is capable of evaluating the merits and risks of an investment
in the Series D Stock. Xxxxxxxx acknowledges that an investment in the Series D
Stock is speculative and involves a high degree of risk.
(f) Xxxxxxxx has received all documents, records, books and
other information pertaining to Xxxxxxxx'x acquisition of the Series D Stock
pursuant to the Exchange that have been requested by Xxxxxxxx.
(g) Eurotech has made available to Xxxxxxxx, through
electronic filings on XXXXX, each registration statement, report, proxy
statement or information statement prepared by Xxxxxxxx since June 30, 2001,
including its Annual Report on Form 10-KSB for the years ended June 30, 2001 and
June 30, 2002 and its Quarterly Reports on Form 10-QSB for the quarters ended
since June 30, 2002, in the form (including exhibits, annexes and any amendments
thereto) filed with the Securities and Exchange Commission ("SEC") subsequent to
the Agreement Date, its "REPORTS").
(h) Xxxxxxxx understands that (i) the sale or resale of the
shares of Series D Stock has not been and is not being registered under the
Securities Act or any applicable state securities laws, and the Series D Stock
may not be transferred unless (a) the Series D Stock are sold pursuant to an
effective registration statement under the Securities Act, (b) the Series D
Stock are sold or transferred pursuant to an exemption from such registration,
(c) the Series D Stock are sold or transferred to an "affiliate" (as defined in
Rule 144 promulgated under the Securities Act (or a successor rule) ("RULE
144")) who agrees to sell or otherwise transfer the Series D Stock only in
accordance with this section and who is an "accredited investor" (as defined
under the Securities Act"), or (d) the shares of Series D Stock are sold
pursuant to Rule 144, if such rule is available; (ii) any sale of such shares of
Series D Stock made in reliance on Rule 144 may be made only in accordance with
the terms of said rule and further, if said rule is not applicable, any resale
of such shares of Series D Stock under circumstances in which the seller (or the
person through whom the sale is made) may be deemed to be an underwriter (as
that term is defined in the Securities Act) may require compliance with some
other exemption under the Securities Act or the rules and regulations of the SEC
thereunder; and (iii) neither the Company nor any other person is under any
obligation to comply with the terms and conditions of any exemption under the
Securities Act. As used in this paragraph (g), Series D Stock includes the
shares of Common Stock issuable upon conversion of the Series D Stock.
(i) Xxxxxxxx is the owner of good and marketable title to the
Exchanged Stock, free and clear of all liens, pledges, and encumbrances.
6. Nothing contained herein shall in any way otherwise limit
Xxxxxxxx'x right
to sell or transfer the Common Stock to be delivered to Xxxxxxxx upon conversion
of the Series D Stock.
7. CONDITIONS TO EUROTECH'S OBLIGATIONS. The obligations of
the Company hereunder to exchange and deliver the certificate(s) representing
the Series D Stock to Xxxxxxxx at the Closing is subject to the satisfaction, at
or before the Closing Date of each of the following conditions thereto, provided
that these conditions are for Eurotech's sole benefit and may be waived by
Eurotech at any time in its sole discretion:
(a) Xxxxxxxx shall have executed this Agreement and delivered
same to Eurotech.
(b) Xxxxxxxx shall have delivered the Exchanged Stock in
accordance with Section 3 above.
(c) The representations and warranties of Xxxxxxxx shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and Xxxxxxxx shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by Xxxxxxxx at or prior to the Closing Date.
(d) No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
(e) Xxxxxxxx shall have executed and delivered to Eurotech the
Termination Agreement, which relates to that certain Pledge and Security
Agreement dated December 19, 2002, between Eurotech and Xxxxxxxx (the "Security
Agreement"), in a form reasonably acceptable to Eurotech, and shall have
additionally executed and delivered to Eurotech such forms of UCC-3 termination
statements as are necessary to terminate the security interest of Xxxxxxxx
contemplated by the Security Agreement.
8. CONDITIONS TO XXXXXXXX'X OBLIGATIONS. The obligations of
Xxxxxxxx hereunder to exchange and deliver the certificate(s) representing the
Exchanged Stock to Eurotech at the Closing is subject to the satisfaction, at or
before the Closing Date of each of the following conditions, provided that these
conditions are for Xxxxxxxx'x sole benefit and may be waived by Xxxxxxxx at any
time in its sole discretion.
(a) Eurotech shall have executed this Agreement and delivered
the same to Xxxxxxxx.
(b) Eurotech shall have delivered to Xxxxxxxx duly executed
certificate(s) representing the Series D Stock in accordance with Section 3
above.
(c) The representations and warranties of Eurotech shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and Eurotech shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by Eurotech at
or prior to the Closing Date.
(d) No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
9. GOVERNING LAW; MISCELLANEOUS
(a) Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE
ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITH SUCH
STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO
HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES FEDERAL COURTS
LOCATED IN THE CITY OF NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE ARISING
UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES IRREVOCABLY WAIVE THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING.
BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST
CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT ANY
PARTY'S RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. THE PARTIES AGREE THAT A FINAL
NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTIES HEREBY WAIVE A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE
OTHER IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT.
(b) Jury Trial Waiver. The parties hereby waive a trial by
jury in any action, proceeding or counterclaim brought by either of the parties
hereto against the other in respect of any matter arising out of or in
connection with the Transaction Documents.
(c) Counterparts. This Agreement may be executed in one or
more counterparts and by facsimile transmission, each of which shall be deemed
an original but all of which shall constitute one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
(d) Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(e) Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
(f) Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Purchaser
make any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived other than by an
instrument in writing signed by the party to be charged with enforcement and no
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Purchaser.
(g) Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier, overnight
delivery service or by confirmed facsimile transmission, and shall be effective
five days after being placed in the mail, if mailed, or upon receipt or refusal
of receipt, if delivered personally or by courier, overnight delivery service or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Eurotech, Ltd.
00000 Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxx Xxxxxxxxx, President
Fax: 000-000-0000
with a copy (which shall not constitute notice) to:
Ellenoff, Grossman, Schole & Cyruli, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Telecopier No.: 000-000-0000
If to Xxxxxxxx:
Xxxxxxxx LLC
X.X. Xxx 000, Xxxxxx Xxxx
Xxxxxxxx Square Building
Grand Cayman, Cayman Islands
Attention: Director
Telecopier No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxx & Prager, LLP
00 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
Each party shall provide notice to the other parties of any
change in address.
(h) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Purchaser shall assign this Agreement or any rights
or obligations hereunder without the prior written consent of the other.
(i) Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
(j) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
(k) Termination by Mutual Consent. This Agreement may be
terminated and the
Exchange may be abandoned at any time prior to the Closing Date by mutual
written consent of Eurotech and the Company, through action of their respective
Boards of Directors.
11. Fees. Each party hereto agrees to assume their respective
legal fees and other expenses incurred by them in connection with the
negotiation, preparation, execution and implementation of this Agreement.
12. Publicity. The initial press release with respect to the
Exchange shall be a joint, mutually agreed press release. Thereafter, Eurotech
and the Company shall consult with each other prior to making any filings with
any third party and/or any Governmental Entity (including any securities
exchange) with respect thereto, except as may otherwise be required by Law or by
obligations pursuant to any listing agreement with or rules of any securities
exchange.
13. Further Assurances. Each party shall do and perform or
cause to be done and perform, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
EUROTECH LTD.
By: /s/ Xxx X. Xxxxxxxxx
-----------------------------------
Name: Xxx X. Xxxxxxxxx
Title: President
XXXXXXXX LLC
By: /s/ Xxxxx Xxxx
-----------------------------------
Name: Xxxxx Xxxx, for Navigator
Management, Ltd.
Title: Director
EXHIBIT A
FORM OF CERTIFICATE OF DESIGNATIONS OF
SERIES D PREFERRED STOCK
CERTIFICATE OF DESIGNATIONS
OF RIGHTS AND PREFERENCES OF THE
SERIES D CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
XXXXXXXX TECHNOLOGIES, INC.
Pursuant to the authority expressly granted and vested in the Board of
Directors (the "BOARD OF DIRECTORS" or the "BOARD") of XXXXXXXX TECHNOLOGIES,
INC. (the "COMPANY") by the Florida General Corporation Law (the "CORPORATION
LAW") and the provisions of the Company's Certificate of Incorporation, as
amended, the Board of Directors adopted the following resolution setting forth
the designations, powers, preferences and rights of its Series D Cumulative
Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATIONS") on
______________, 2003:
RESOLVED: That the designations, powers, preferences and rights of the
Series D Cumulative Convertible Preferred Stock be, and they hereby are, as set
forth below:
I. DESIGNATION AND AMOUNT
The designation of this series, which consists of 20,000 shares of
Preferred Stock, par value $.0001 per share, is the Series D Cumulative
Convertible Preferred Stock (the "DESIGNATED PREFERRED STOCK").
II. CERTAIN DEFINITIONS
For purposes of this Certificate of Designation, the following terms
shall have the following meanings:.
A. "BUY-IN ADJUSTMENT AMOUNT" means the amount equal to the excess, if
any, of (i) the Converting Holder's total purchase price (including brokerage
commissions, if any) for the Covering Shares (as those terms are defined in
Article IV Paragraph B(6)) over (ii) the net proceeds (after brokerage
commissions, if any) received by the Converting Holder from the sale of the Sold
Shares. By way of illustration and not in limitation of the foregoing, if the
Converting Holder purchases shares of Common Stock having a total purchase price
(including brokerage commissions) of $11,000 to cover a Buy-In (as defined in
Article IV Paragraph B(6)) with respect to shares of Common Stock it sold for
net proceeds of $10,000, the Buy-In Adjustment Amount which the Company will be
required to pay to the Converting Holder will be $1,000.
B. "CLOSING DATE" means _____________ ,2003.
C. "CLOSING BID PRICE" means the closing bid price during regular
trading hours of the Common Stock (in U.S. Dollars) on the Principal Trading
Market, as reported by the Reporting Service (as defined below).
D. "COMMON STOCK" means the Company's common stock, par value $.0001
per share.
E. "CONVERSION CERTIFICATES" means certificates representing the shares
of Common Stock issuable on conversion of the Designated Preferred Stock.
F. "CONVERSION DATE" has the meaning ascribed to it in Paragraph B of
Article IV hereof.
G. "CONVERSION PRICE" means as of the Conversion Date, the variable
conversion price designated as follows: (a) if the price for the Common Stock is
less than or equal to $0.25, then eighty percent (80%) of the Market Price, (b)
if the price for the Common Stock is greater than $0.25 but less than or equal
to $0.50, then seventy five percent (75%) of the Market Price, (c) if the price
for the Common Stock is greater than $0.50 but less than or equal to $0.75, then
seventy percent (70%) of the Market Price, (d) if the price for the Common Stock
is greater than $0.75, then sixty five percent (65%) of the Market Price,
subject to adjustment as provided herein.
H. "HOLDER" means a person or entity holding shares of the Designated
Preferred Stock.
I. "JUNIOR SECURITIES" means (i) any class or series of capital stock
of the Company authorized prior to the filing of this Certificate of
Designations that, by its terms, ranks junior to the Designated Preferred Stock
as to distribution of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary and (ii) all classes or series of
capital stock of the Company authorized after the filing of this Certificate of
Designations, unless consented to as provided herein in each instance, each of
which shall rank junior to the Designated Preferred Stock as to distribution of
assets upon liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary.
J. "LIQUIDATION PREFERENCE" means, with respect to a share of
Designated Preferred Stock, an amount equal to the Stated Value thereof.
K. "MARKET PRICE" means the average Closing Bid Prices during the five
(5) trading days ending on the trading day immediately preceding the Conversion
Date.
L. "PARI PASSU SECURITIES" means any class or series of capital stock
of the Company hereafter created specifically ranking, by its terms, on parity
with the Designated Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary.
M. "PRINCIPAL TRADING MARKET" means The NASD/OTCBB Market or if the
Common Stock is no longer listed on that market, the principal securities
exchange or trading market on which the Common Stock is listed or traded,
including the pink sheets.
N. "REDEMPTION PRICE" means 120% of the Stated Value, plus accrued
dividends during the first 180 days subsequent to the Closing Date; 125% of the
Stated Value, plus accrued dividends beginning 181 days and ending 270 days
subsequent to the Closing Date; 130% of the Stated Value, plus accrued dividends
beginning 271 days and ending 360 days subsequent to the Closing Date; 135% of
the Stated Value, plus accrued dividends thereafter.
O. "REPORTING SERVICE" means Bloomberg LP or if that service is not
then reporting the relevant information regarding the Common Stock, a comparable
reporting service of national reputation selected by the Holders of the
Designated Preferred Stock and reasonably acceptable to the Company.
-2-
P. "SEC" means the United States Securities and Exchange Commission.
Q. "SECURITIES" means the shares of Designated Preferred Stock or the
Common Stock of the Company into which such shares are converted or convertible,
as contemplated hereby.
R. "SENIOR SECURITIES" means each class or series of capital stock of
the Company authorized prior to the original filing of this Certificate of
Designations that, by its terms, is senior to the Designated Preferred Stock as
to distribution of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary if, but only if, securities from such
class or series have been issued prior to the Closing Date and such issuance was
disclosed in the filings made by the Company with the SEC and available on the
SEC's XXXXX system.
S. "STATED VALUE" for the Designated Preferred Stock shall be $1,000.00
per share.
T. "TRADING DAY" means any day during which the Principal Trading
Market shall be open for business.
III. DIVIDENDS
A. GENERALLY. The holders of shares of Designated Preferred Stock shall
not be entitled to receive dividends on shares of Designated Preferred Stock
IV. CONVERSION
A. CONVERSION AT THE OPTION OF THE HOLDER. Each Holder of shares of
Designated Preferred Stock may, at any time after the Closing Date and from time
to time thereafter, convert (an "OPTIONAL CONVERSION") each of its shares of
Designated Preferred Stock into a number of fully paid and nonassessable shares
of Common Stock determined in accordance with the following formula:
STATED VALUE OF SHARES TO BE CONVERTED
--------------------------------------
APPLICABLE CONVERSION PRICE
B. MECHANICS OF CONVERSION. To effect a conversion of shares of the
Designated Preferred Stock, the Holder must deliver or fax a Notice of
Conversion in the form attached hereto as Exhibit A ("NOTICE OF CONVERSION") to
the Company (to the attention of the President or such other officer as may
identified by notice given by the Company to the Holder from time to time) as
provided in this Paragraph. The Notice of Conversion shall be executed by the
Holder of one or more shares of Designated Preferred Stock and shall evidence
such Holder's intention to convert all or a portion of such shares. The date of
conversion (the "CONVERSION DATE") shall be deemed to be the date on which the
Holder faxes or otherwise delivers a Notice of Conversion to the Company.
1. DELIVERY OF COMMON STOCK UPON CONVERSION. The Conversion
Certificates will be delivered to the Converting Holder at the address
specified in the Notice of Conversion, via express courier, by
-3-
electronic transfer or otherwise, within five (5) business days (such
fifth business day, a "DELIVERY DATE") after the date on which the
Notice of Conversion is delivered to the Company as contemplated in
this Paragraph.
2. TAXES. The Company shall pay any and all taxes which may be
imposed upon the Company with respect to the issuance and delivery of
the shares of Common Stock upon the conversion of the Designated
Preferred Stock other than transfer taxes due upon conversion, if such
Holder has transferred to another party the Designated Preferred Stock
or the right to receive Common Stock upon the Holder's conversion
thereof or any or income taxes due on the part of the Holder. The
Company shall have the right to withhold any taxes as required by the
United States federal or state tax laws.
3. NO FRACTIONAL SHARES. If any conversion of Designated
Preferred Stock would result in the issuance of a fractional share of
Common Stock, such fractional share shall be disregarded and the number
of shares of Common Stock issuable upon conversion of the Designated
Preferred Stock shall be rounded up or down to the nearest whole share,
it being understood that .5 of one share shall be rounded up to the
next highest share.
4. CONVERSION DISPUTES. In the case of any dispute with
respect to a conversion, the Company shall promptly issue such number
of shares of Common Stock as are not disputed in accordance with
Paragraph A of this Article IV. If such dispute involves the
calculation of the Conversion Price, the Company shall first discuss
such discrepancy with the Converting Holder. If the Company and the
Converting Holder are unable to agree upon the Conversion Price
calculation, the Company shall promptly submit the disputed
calculations to independent auditors to be selected by the Holder
(unless the Holders and the Company mutually agree to a different
firm). The auditors, at the expense of the party or parties in error
(as determined by the auditors), shall audit the calculations and
notify the Company and the Holder of the results within five (5)
business days following the date it receives the disputed calculations.
The auditor's calculation shall be deemed conclusive, absent manifest
error. The Company shall then issue the appropriate number of shares of
Common Stock in accordance with Paragraph A of Article IV above.
5. DELAY IN DELIVERING CONVERSION CERTIFICATES. The Company
understands that a delay in the delivery of the Conversion Certificates
beyond the Delivery Date could result in economic loss to a Holder. As
compensation to a Holder for such loss, the Company agrees if there is
a delay in the delivery of the Conversion Certificates (as adjusted in
accordance with this provision) so that such Conversion Certificates
are not received within five (5) business days after the Delivery Date,
to pay late payments to such Holder for late delivery of Conversion
Certificates in accordance with the following schedule (where "No.
Business Days Late" is defined as the number of business days beyond
five (5) business days after the Delivery Date):
-4-
No. Business Days Late Payment For Each $10,000 of
Late Stated Value Being Converted
-------------------- ------------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Paragraph in
immediately available funds upon demand. Nothing herein shall limit the
Holder's right to pursue actual damages for the Company's failure to
issue and deliver the Conversion Certificates to the Holder within a
reasonable time. Furthermore, in addition to any other remedies which
may be available to a Holder, in the event that the Company fails for
any reason to effect delivery of such Conversion Certificates within
five (5) business days after the Delivery Date, the Converting Holder
will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such effect to the Company whereupon the Company
and the Converting Holder shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion;
provided, however, that any payments contemplated by this Paragraph
B(5) of this Article IV which have accrued through the date of such
revocation notice shall remain due and owing to the Converting Holder
notwithstanding such revocation.
6. BUY-IN. If, by the relevant Delivery Date, the Company
fails for any reason to deliver the Conversion Certificates and after
such Delivery Date, the Holder of the Designated Preferred Stock being
converted (a "CONVERTING HOLDER") purchases, in an arm's-length open
market transaction or otherwise, shares of Common Stock (the "COVERING
SHARES") in order to make delivery in satisfaction of a sale of Common
Stock by the Converting Holder (the "SOLD SHARES"), which delivery such
Converting Holder anticipated to make using the shares to be issued
upon such conversion (a "BUY-IN"), the Converting Holder shall have the
right to require the Company to pay to the Converting Holder, in
addition to and not in lieu of the amounts due under Paragraph B(5) of
Article IV hereof (and in addition to all other amounts contemplated in
other provisions of the other agreements between the Company and the
Holder, and not in lieu of any such other amounts), the Buy-In
Adjustment Amount. The Company shall pay the Buy-In Adjustment Amount
to the Converting Holder in immediately available funds immediately
upon demand by the Converting Holder.
-5-
7. DWAC CERTIFICATE DELIVERY. In lieu of delivering physical
certificates representing the Common Stock issuable upon conversion,
provided the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer
program, upon request of a Converting Holder and his/her compliance
with the provisions contained in this paragraph, so long as the
certificates therefor do not bear a legend and the Converting Holder
thereof is not obligated to return such certificate for the placement
of a legend thereon, the Company shall use its best efforts to cause
its transfer agent to electronically transmit the Common Stock issuable
upon conversion to the Converting Holder by crediting the account of
Converting Holder's prime broker with DTC through its Deposit
Withdrawal Agent Commission system.
8. CONVERSION OBLIGATIONS AND DEFAULT. If, at any time the
Company challenges, disputes or denies the right of a Holder of
Designated Preferred Stock to effect a conversion of the Designated
Preferred Stock into Common Stock or otherwise dishonors or rejects any
Notice of Conversion delivered in accordance with the terms of this
Certificate of Designations (subject to the provisions of Paragraph
B(4) of this Article IV with respect to certain disputes relating to
calculations of the number of shares to be issued), then such Holder
shall have the right, by written notice to the Company, to require the
Company to redeem each share of Designated Preferred Stock for which a
Notice of Conversion has been refused pursuant to this Paragraph B(8)
for cash, at an amount per share equal to the Holder Redemption Price.
9. CONVERSION IN BANKRUPTCY. The Holder of any Designated
Preferred Stock shall be entitled to exercise its conversion privilege
with respect to the Designated Preferred Stock notwithstanding the
commencement of any case under 11 U.S.C. ss.101 ET SEQ. (the
"BANKRUPTCY CODE"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives, to the fullest extent
permitted, any rights to relief it may have under 11 U.S.C. ss.362 in
respect of such Holder's right to convert the Designated Preferred
Stock. The Company agrees, without cost or expense to such Holder, to
take or to consent to any and all action necessary to effectuate relief
under 11 U.S.C. ss.362.
V. RESERVATION OF SHARES OF COMMON STOCK
A. RESERVED AMOUNT. Upon the initial issuance of the shares of
Designated Preferred Stock, the Company shall reserve, out of the authorized but
unissued shares of Common Stock, 50,000,000 shares of Common Stock (the
"RESERVED AMOUNT"; subject to adjustment as provided below) for issuance upon
conversion of the Designated Preferred Stock. Thereafter the number of
authorized but unissued shares of Common Stock so reserved shall cover at least
a number of shares equal to the sum of two hundred percent (200%) of (A) the
-6-
number of shares of Common Stock as would then be issuable upon a conversion in
full of the then outstanding Designated Preferred Stock, and (B) the number of
shares of Common Stock as would be issuable as payment of dividends on the
Designated Preferred Stock. The Reserved Amount shall be adjusted as and when
the Conversion Price is adjusted pursuant to Article VIII hereof. The Reserved
Amount shall be allocated to the holders of Designated Preferred Stock as
provided in Article XI Paragraph D.
VI. REDEMPTION
A. REDEMPTION BY THE COMPANY.
1. Notwithstanding any other provision hereof to the contrary, at any
time the Company shall have the right to redeem all or any portion of the then
outstanding principal amount of the Designated Preferred Stock then held by the
Holder (a "COMPANY REDEMPTION") in cash for an amount (the "COMPANY REDEMPTION
AMOUNT") equal to Redemption Price.
2. If the Company elects to make a Company Redemption, the Company
shall give written notice of such redemption to the Holder (the "COMPANY NOTICE
OF REDEMPTION"). The date on which the Company shall pay the Company Redemption
Amount (the "COMPANY REDEMPTION PAYMENT DATE") shall be no fewer than five (5)
business days and no later than ten (10) business days after the Company Notice
of Redemption is given by the Company.
3. Upon receipt of the Company Notice of Redemption, the Holder's right
to effect a Conversion with respect to shares of Designated Preferred Stock
being specified as being redeemed in such Company Notice of Redemption shall
continue at the until the Company Redemption Payment Date.
4. Restriction on Redemption. The Company shall not be entitled to send
Company Notice of Redemption under Section (2) hereof unless it has:
A. (i) The full amount of the applicable Redemption Price in cash or
cash equivalents, available in a demand or other immediately
available account in one or more banks or similar financial
institutions;
(ii) Immediately available credit facilities in the full amount of
the applicable Redemption Price with one or more banks or
similar financial institutions;
(iii) An agreement with a standby underwriter willing to purchase
from the Company a sufficient number of shares of stock to
provide proceeds equal to the applicable Redemption Price; or
(iv) A combination of the items set forth in (i), (ii) and (iii)
above, aggregating the full amount of the applicable
Redemption Price.
B. Certified to the Holder, in writing, that it is not aware of the existence or
imminent existence or likelihood of any event described in Article VIII. A.
5. At the election of the Holder at any time prior to the date on which
the Company pays the Company Redemption Amount to the Holder, the Holder shall
have the right to convert the Designated Preferred Stock as if such Company
Notice of Redemption had never been given.
-7-
VII. LIQUIDATION PREFERENCE
A. LIQUIDATION, DISSOLUTION, WINDING UP OR CERTAIN MERGERS OR
CONSOLIDATIONS. If the Company shall adopt a plan of liquidation or of
dissolution, or commence a voluntary case under the federal bankruptcy laws or
any other applicable state or federal bankruptcy, insolvency or similar law, or
consent to the entry of an order for relief in any involuntary case under such
law or to the appointment of a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or similar official) of the Company or of any
substantial part of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as they
become due and on account of such event the Company shall liquidate, dissolve or
wind up, or if the Company shall otherwise liquidate, dissolve or wind up,
including but not limited to the sale or transfer of all or substantially all of
the Company's assets in one transaction or in a series of related transactions
(a "Liquidation Event"), then and in that event, no distribution shall be made
to the holders of Junior Securities, unless, prior thereto, the holders of the
Designated Preferred Stock shall have first received an amount in cash or
equivalent value in securities or other consideration equal to the Liquidation
Preference thereof. If upon any liquidation, dissolution, winding up, merger,
plan of reorganization or consolidation, the amount so payable or distributable
does not equal or exceed the Liquidation Preference of the Designated Preferred
Stock, then, and in that event, the amount of cash so payable, and amount of
securities or other consideration so distributable, shall be shared ratably
among the holders of the Designated Preferred Stock.
VIII. ADJUSTMENTS TO PRICES
A. SALE. The Conversion Price shall be subject to adjustment from time
to time as follows: If, for as long as any shares of Designated Preferred Stock
remain outstanding, the Company enters into a merger (other than where the
Company is the surviving entity) or consolidation with, or acquisition by,
another corporation or other entity or a sale or transfer of all or
substantially all of the assets of the Company to another person, or there is an
outstanding tender offer for the Common Stock of the Company or the Company
enters into a transaction that could result in a change in control of the
Company (collectively, a "SALE"), the Company will require, in the agreements
reflecting such transaction, that the surviving entity expressly assume the
obligations of the Company hereunder. Notwithstanding the foregoing, if the
Company enters into a Sale and the holders of the Common Stock are entitled to
receive stock, securities or property in respect of or in exchange for Common
Stock, then as a condition of such Sale, the Company and any such successor,
purchaser or transferee will agree that the Designated Preferred Stock may
thereafter be converted on the terms and subject to the conditions set forth
above into the kind and amount of stock, securities or property receivable upon
such merger, acquisition, consolidation, sale or transfer by a Holder of the
number of shares of Common Stock into which then outstanding shares of
Designated Preferred Stock might have been, pursuant to this Certificate,
converted immediately before such merger, acquisition, consolidation, sale or
transfer at the Conversion Price, subject to any adjustments which shall be as
nearly equivalent as may be practicable. In the event of any such proposed Sale,
the Holder hereof shall have the right to either (i) convert all of any of the
outstanding Designated Preferred Stock by delivering a Notice of Conversion to
the Company at the Conversion Price within 15 days of receipt of notice of such
Sale from the Company or (ii) if the surviving entity in the transaction is not
a publicly traded entity listed on a Principal Trading Market, demand a
redemption of all or any of the outstanding Designated Preferred Stock at the
Redemption Price by delivering a notice to such effect to the Company within
fifteen (15) days of receipt of notice of such Sale from the Company.
-8-
B. SPIN OFF. If, at any time prior to the Conversion Date or the
date of payment of the Company Redemption Amount hereunder, the Company
consummates a spin off or otherwise divest itself of a part of its business or
operations or disposes all or of a part of its assets in a transaction (the
"SPIN OFF") in which the Company does not receive just compensation for such
business, operations or assets, but causes securities of another entity (the
"SPIN OFF SECURITIES") to be issued to security holders of the Company, then the
Company shall cause (i) to be reserved Spin Off Securities equal to the number
thereof which would have been issued to the Holder had all of the holder's
shares of Designated Preferred Stock outstanding on the record date (the "RECORD
DATE") for determining the amount and number of Spin Off Securities to be issued
to security holders of the Company (the "OUTSTANDING DESIGNATED PREFERRED
STOCK") been converted as of the close of business on the trading day
immediately before the Record Date (the "RESERVED SPIN OFF SHARES"), and (ii) to
be issued to the Holder on the conversion of all or any of the outstanding
Designated Preferred Stock, such amount of the Reserved Spin Off Shares equal to
(x) the Reserved Spin Off Shares multiplied by (y) a fraction, of which (a) the
numerator is the principal amount of the outstanding Designated Preferred Stock
then being converted, and (b) the denominator is the principal amount of the
outstanding Designated Preferred Stock.
C. STOCK SPLITS, ETC. If, at any time while any shares of Designated
Preferred Stock remain outstanding, the Company effectuates a stock split or
reverse stock split of its Common Stock or issues a dividend on its Common Stock
consisting of shares of Common Stock, the Conversion Price shall be equitably
adjusted to reflect such action. By way of illustration, and not in limitation,
of the foregoing (i) if the Company effectuates a 2:1 split of its Common Stock,
the Conversion Price shall be deemed to be one-half of what it had been
calculated to be immediately prior to such split; (ii) if the Company
effectuates a 1:10 reverse split of its Common Stock, thereafter, with respect
to any conversion for which the Company issues the shares after the record date
of such reverse split, the Conversion Price shall be deemed to be ten times what
it had been calculated to be immediately prior to such split; and (iii) if the
Company declares a stock dividend of one share of Common Stock for every 10
shares outstanding, thereafter the Conversion Price shall be deemed to be the
amount it had been calculated to be immediately prior to such dividend
multiplied by a fraction, of which (x) the numerator is the number of shares (10
in the example) for which a dividend share will be issued and (y) the
denominator is such number of shares plus the dividend share(s) issuable or
issued thereon (11 in the example).
D. NOTICE OF ADJUSTMENTS. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article VIII, the Company,
at its expense, shall promptly compute such adjustment or readjustment and
prepare and furnish to each Holder of Designated Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request at any time of any Holder of Designated Preferred Stock, furnish
to such Holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon conversion of a share of
Designated Preferred Stock.
-9-
IX. VOTING RIGHTS
A. GENERALLY. The holders of the Designated Preferred Stock shall not
be entitled to vote with the holders of Common Stock, except as otherwise
provided by the Florida Corporation Law or otherwise contemplated by this
Certificate of Designations. To the extent that either Florida Corporation Law
or the Company's Articles of Incorporation allows or requires the vote of the
holders of the Designated Preferred Stock, voting separately as a class or
series, as applicable, to authorize a given action of the Company, the
affirmative vote or consent of the holders of 67% of the outstanding shares of
Designated Preferred Stock shall constitute the approval of such action by the
class.
X. CONVERSTION RESTRICTIONS
A. CERTAIN CONVERSION RESTRICTIONS. Notwithstanding anything to the
contrary contained herein other than a conversion pursuant to Paragraphs A or B
of Article VIII, the number of shares of Common Stock that may be acquired by a
Holder upon any conversion of Designated Preferred Stock (or otherwise in
respect hereof) shall be limited to the extent necessary to insure that,
following such conversion (or other issuance), the total number of shares of
Common Stock then beneficially owned by such Holder and its Affiliates and any
other Persons whose beneficial ownership of Common Stock would be aggregated
with such Holder's for purposes of Section 13(d) of the Exchange Act, does not
exceed 9.999% of the total number of issued and outstanding shares of Common
Stock. For such purposes, beneficial ownership shall be determined in accordance
with Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder. Each delivery of a Conversion Notice hereunder will constitute a
representation by the applicable Holder that it has evaluated the limitation set
forth in this section and determined that issuance of the full number of
Underlying Shares requested in such Conversion Notice is permitted. This
provision shall not restrict the number of shares of Common Stock which a Holder
may receive or beneficially own in order to determine the amount of securities
or other consideration that such Holder may receive in the event of a merger or
other business combination or reclassification involving the Company as
contemplated in Article VIII herein.
XI. MISCELLANEOUS
A. RANK. The Designated Preferred Stock shall rank (i) prior to the
Company's Common Stock; (ii) prior to any Junior Securities; (iii) junior to any
Senior Securities; and (iv) PARI PASSU with any Pari Passu Securities; PROVIDED,
HOWEVER, that no additional Senior Securities or Pari Passu Securities shall be
created without the written consent of two thirds of the holders of the
outstanding Designated Preferred Stock.
-10-
B. CANCELLATION OF DESIGNATED PREFERRED STOCK. If any shares of
Designated Preferred Stock are converted or redeemed pursuant to this
Certificate of Designations, the shares so converted shall be canceled, shall
return to the status of authorized, but unissued preferred stock of no
designated series, and shall not be issuable by the Company as Designated
Preferred Stock.
C. LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of (i)
evidence of the loss, theft, destruction or mutilation of any Designated
Preferred Stock certificate(s) and (ii) (y) in the case of loss, theft or
destruction, of indemnity (without any bond or other security) reasonably
satisfactory to the Company, or (z) in the case of mutilation, upon surrender
and cancellation of the Designated Preferred Stock certificate(s), the Company
shall execute and deliver new Designated Preferred Stock certificate(s) of like
tenor and date. However, the Company shall not be obligated to reissue such lost
or stolen Designated Preferred Stock certificate(s) if the Holder
contemporaneously requests the Company to convert such Designated Preferred
Stock.
D. ALLOCATION OF RESERVED AMOUNT. The Reserved Amount shall be
allocated pro rata among the holders of Designated Preferred Stock based on the
number of shares of Designated Preferred Stock issued to each Holder. Each
increase to the Reserved Amount shall be allocated pro rata among the holders of
Designated Preferred Stock based on the number of shares of Designated Preferred
Stock held by each Holder at the time of the increase in the Reserved Amount. In
the event a Holder shall sell or otherwise transfer any of such holder's shares
of Designated Preferred Stock, each transferee shall be allocated a pro rata
portion of such transferor's Reserved Amount. Any portion of the Reserved Amount
which remains allocated to any person or entity which does not hold any
Designated Preferred Stock shall be allocated to the remaining holders of shares
of Designated Preferred Stock, pro rata based on the number of shares of
Designated Preferred Stock then held by such holders.
E. PAYMENT OF CASH; DEFAULTS. Whenever the Company is required to make
any cash payment to a Holder under this Certificate of Designations (upon
redemption or otherwise), such cash payment shall be made to the Holder in good
funds on the date specified herein or, if not so specified, within five (5)
business days after delivery by such Holder of a notice specifying that the
Holder elects to receive such payment in cash and the method (E.G., by check,
wire transfer) in which such payment should be made. If such payment is not
delivered within the relevant time period, such Holder shall thereafter be
entitled to interest on the unpaid amount at a per annum rate equal to the lower
of 15% and the highest interest rate permitted by applicable law until such
amount is paid in full to the Holder.
F. STATUS AS STOCKHOLDER. Upon submission of a Notice of Conversion by
a Holder of Designated Preferred Stock, (i) the shares covered thereby (other
than the shares, if any, which cannot be issued because their listing or
issuance would exceed any applicable legal or regulatory limitation) shall be
deemed converted into shares of Common Stock and (ii) the holder's rights as a
Holder of such converted shares of Designated Preferred Stock shall cease and
terminate, excepting only the right to receive certificates for such shares of
Common Stock and to any remedies provided herein or otherwise available at law
or in equity to such Holder because of a failure by the Company to comply with
the terms of this Certificate of Designations.
-11-
G. JURY TRIAL WAIVER. The Company and, by its acceptance of the shares
of the Designated Preferred Stock, the Holder hereby waive a trial by jury in
any action, proceeding or counterclaim brought by either of the Parties hereto
against the other in respect of any matter arising out or in connection with
this Certificate of Designations.
H. AMENDMENTS. This Certificate of Designations may only be amended
with the written consent of the holders of sixty-seven (67%) percent of the
outstanding Designated Preferred Stock and the vote or action of any other party
or class entitled to vote or act thereon.
XXXXXXXX TECHNOLOGIES, INC.
By:
------------------------------------
Authorized Officer
-12-
EXHIBIT A
XXXXXXXX TECHNOLOGIES, INC.
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series D Cumulative Convertible Preferred Stock)
TO: XXXXXXXX TECHNOLOGIES, INC. VIA TELECOPIER ( )
Attn:
FROM: _______________________________________________________________ ("Holder")
DATE: _______________________________________________________ "Conversion Date")
RE: Conversion of $_______ Stated Value (the "Converted Preferred Stock")
of the SERIES D Cumulative Convertible Preferred Stock (the "Designated
Preferred Stock") of XXXXXXXX TECHNOLIGIES, INC. (the "Company") into
_______ shares (the "Conversion Shares") of Common Stock (defined
below)
The captioned Holder hereby gives notice to the Company, pursuant to
the Certificate of Designations (the "Certificate of Designations") for the
Designated Preferred Stock of the Company that the Holder elects to convert the
Converted Preferred Stock into fully paid and non-assessable shares of Common
Stock, par value $.0001 per share (the "Common Stock"), of the Company as of the
Conversion Date specified above. Said conversion shall be based on the following
Conversion Price (CHECK ONE):
|_| $_____________; or
|_| Other $_______, based on adjustment(s) contemplated by the
Certificate of Designations
Based on this Conversion Price, the number of Conversion Shares indicated above
should be issued in the following name(s):
Name and Record Address Conversion Shares
____________________________________
____________________________________
____________________________________
____________________________________
(Print name of Holder)
By:
