EXHIBIT 4.2
Annex II
to
Subscription
Agreement
e4L, INC.
CERTIFICATE OF DESIGNATIONS OF
SERIES H CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
e4L, Inc., a Delaware corporation (the "Corporation"), in accordance
with the provisions of Section 103 of the General Corporation Law of the State
of Delaware, DOES HEREBY CERTIFY:
That pursuant to authority vested in the Board of Directors of the
Corporation by the Certificate of Incorporation of the Corporation, the Board of
Directors of the Corporation, by unanimous written consent dated March 21, 2000,
adopted a resolution providing for the creation of a series of the Corporation's
Preferred Stock, $.01 par value, which series is designated as "Series H
Convertible Preferred Stock," which resolution is as follows:
RESOLVED, that pursuant to authority vested in the Board of
Directors by the Certificate of Incorporation of the Corporation, the Board of
Directors does hereby provide for the creation of a series of the Preferred
Stock, $.01 par value (hereinafter 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 of the Corporation, does
hereby fix the same as follows:
SERIES H CONVERTIBLE PREFERRED STOCK
Section 1. Definitions. As used herein, the following terms shall
have the following meanings:
"Accrual Amount" means with respect to any share of Series H
Convertible Preferred Stock on any date the amount of all accrued but unpaid
dividends, including the amount of dividends not required to be paid in cash
pursuant to Section 5(b), on such share from the Issuance Date to the date of
determination.
"Affiliate" means, with respect to any person, any other person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the subject person; for purposes
of this definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to any
person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
whether through the ownership of voting securities or by contract or otherwise.
"Aggregated Person" means, with respect to any person, any person
whose beneficial ownership of shares of Common Stock would be aggregated with
the beneficial ownership of shares of Common Stock by such person for purposes
of Section 13(d) of the Exchange Act, and Regulation 13D-G thereunder.
"AMEX" means the American Stock Exchange, Inc.
"Average Market Price" for any date means the arithmetic average of
the Market Price for each of the ten Trading Days, whether or not consecutive,
during the applicable Measurement Period on which the lowest Market Prices
occurred.
"Biannual Reset Date" means the date occurring every six months
after the Initial Reset Date on the same day of each sixth month as the Initial
Reset Date through the third anniversary of the Issuance Date (for example, if
the Issuance Date is March 20, 2000 and the Initial Reset Date is December 20,
2000, Biannual Reset Dates shall occur on each June 20 and December 20
thereafter through March 20, 2003).
"Blackout Period" means any period of one or more consecutive
Trading Days, but not in excess of 15 Trading Days, occurring after the SEC
Effective Date as to which the Corporation has notified the holders of shares of
Series H Convertible Preferred Stock on or prior to such Trading Day in
accordance with Section 3(f) of the Registration Rights Agreements that they are
required, pursuant to Section 3(f) of the Registration Rights Agreements, to
suspend offers and sales of shares of Common Stock pursuant to the Registration
Statement as a result of an event of circumstance which relates to a development
concerning the business of the Corporation which development occurred subsequent
to the later of (x) the SEC Effective Date and (y) the latest date prior to such
notice on which the Corporation has amended or supplemented the Registration
Statement and as to which the Board of Directors shall have determined in good
faith that public disclosure of such event or circumstance at such time would
not be in the best interests of the Company, which determination shall be set
forth in a resolution duly adopted by the Board of Directors and copies of which
shall be furnished to the holders of shares of Series H Convertible Preferred
Stock; provided, however, that (i) no more than 15 Trading Days in the aggregate
may occur during all Blackout Periods commencing in any period of 365
consecutive days, (ii) no more than two Blackout Periods may commence in any
period of 365 consecutive days and (iii) at least 30 Trading Days must elapse
between the end of a Blackout Period and the commencement of the next Blackout
Period.
"Board of Directors" or "Board" means 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.
"BuyItNow Warrants" means the warrants to purchase limited liability
company common unit interests in XxxXxXxx.xxx LLC, a Delaware limited liability
company, issued by the Corporation in connection with the issuance of the shares
of Series G Convertible Preferred Stock and Series H Convertible Preferred
Stock.
"Closing Price" of the Common Stock on any date means the closing
sale price for one share of Common Stock on such date on the first applicable
among the following: (a) the NYSE or other national securities exchange on which
the shares of Common Stock are listed which constitutes the principal securities
market for the Common Stock, (b) the Nasdaq, if the Nasdaq constitutes the
principal securities market for the Common Stock on such date, or (c) the Nasdaq
SmallCap, if the Nasdaq SmallCap constitutes the principal securities market for
the Common Stock on such date, in any such case as reported by Bloomberg, L.P.
(subject to equitable adjustments from time to time on terms reasonably
acceptable to the Majority Holders for stock splits, stock dividends,
combinations, recapitalizations, reclassifications, distributions, Tender Offers
and similar events relating to the Common Stock occurring or with respect to
which "ex-" trading commences on or after the date of filing of this Certificate
of Designations with the Secretary of State of Delaware).
"Common Stock" means the Common Stock, $.01 par value, of the
Corporation.
"Control Notice" means a notice given by the Corporation to the
holders of shares of the Series H Convertible Preferred Stock, in accordance
with Section 7(a)(5) or Section 11(b)(4), (i) stating that an Inconvertibility
Day or an Optional Redemption Event, as the case may be, has
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occurred by reason of events which are not solely within the control of the
Corporation and (ii) enclosing an executed Control Opinion.
"Control Opinion" means a legal opinion of independent legal counsel
selected by the Company and reasonably acceptable to the Majority Holders
(notice of which acceptance or nonacceptance is given by the Majority Holders to
the Company within two Business Days of being advised of the name of such other
counsel), addressed to the holders of Series H Convertible Preferred Stock
stating that an Inconvertibility Day or an Optional Redemption Event, as the
case may be, which is the subject of a Control Notice has occurred by reason of
events which are not solely within the control of the Corporation.
"Conversion Agent" means ChaseMellon Shareholder Services, L.L.C.,
or its duly appointed successor, as conversion agent for the Series H
Convertible Preferred Stock pursuant to the Transfer Agent Agreement.
"Conversion Amount" initially shall be equal to $1,000.00, subject
to adjustment as herein provided.
"Conversion Date" means, with respect to each conversion of shares
of Series H Convertible Preferred Stock pursuant to Section 10, the date on
which the Conversion Notice relating to such conversion is actually received by
the Conversion Agent, whether by mail, courier, personal service, telephone line
facsimile transmission or other means.
"Conversion Notice" means a written notice, duly signed by or on
behalf of a holder of shares of Series H Convertible Preferred Stock, stating
the number of shares of Series H Convertible Preferred Stock to be converted in
the form specified in the Subscription Agreements.
"Conversion Price" means:
(1) for any Conversion Date during the period from the Issuance Date
through the day immediately prior to the Initial Reset Date, the Fixed
Conversion Price; and
(2) for any Conversion Date during the Reset Period commencing on
each Reset Date, the lesser of:
(a) the Fixed Conversion Price; and
(b) the Average Market Price during the Measurement Period for
such Reset Date;
provided, however, that
(A) notwithstanding clause (2) of this definition, if (i) for any 20
consecutive Trading Days commencing after the Initial Reset Date the Closing
Price of the Common Stock is greater than $5.50 per share (subject to equitable
adjustments from time to time on terms reasonably acceptable to the Majority
Holders for stock splits, stock dividends, combinations, recapitalizations,
reclassifications and similar events occurring or with respect to which "ex-"
trading commences on or after the date of filing of this Certificate of
Designations with the Secretary of State of Delaware), (ii) during such 20
Trading-Day period the Corporation shall be in compliance in all material
respects with its obligations to the holders of shares of Series G Convertible
Preferred Stock and Series H Convertible Preferred Stock (including, without
limitation, its obligations under the Subscription Agreements, the Registration
Rights Agreement, the Warrants, and the provisions of this Certificate of
Designations and the Series G Certificate of Designations), (iii) during such 20
Trading Day period the Registration Statement remains effective and available
for use by each holder of shares of Series G Convertible Preferred Stock and
Series H Convertible Preferred Stock for the resale of shares of Common Stock
acquired by such holder upon conversion of all shares of each
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such series of Preferred Stock held by such holder and (iv) no Share Limitation
Event shall have occurred and be continuing, the Conversion Price shall
thereafter be the Fixed Conversion Price; and
(B) If on any Reset Date a Share Limitation Event shall have
occurred and be continuing, (i) the Conversion Price in effect immediately prior
to such Reset Date shall continue in effect on and after such Reset Date until
the Delayed Reset Date following such Reset Date and (ii) for any Conversion
Date during the period commencing on such Delayed Reset Date and ending on the
day immediately prior to the next Biannual Reset Date, the Conversion Price
shall be the lesser of:
(x) the Fixed Conversion Price; and
(y) the Average Market Price during the Measurement Period for
such Delayed Reset Date; and
provided further, however, that the Conversion Price applicable to a particular
conversion shall be subject to reduction as provided in Section 10(b)(6).
"Conversion Rate" shall have the meaning provided in Section 10(a).
"Converted Market Price" means, for any share of Series H
Convertible Preferred Stock as of any date of determination, 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 H Convertible Preferred
Stock if a Conversion Notice were given by the holder of such share of Series H
Convertible Preferred Stock on the date of such determination (determined
without regard to any limitation on conversion based on beneficial ownership
contained in Section 10(a)) times (y) the average Closing Price of the Common
Stock during the five Trading Days immediately prior to the date of such
determination.
"Corporation Optional Redemption Notice" means a notice given by the
Corporation to the holders of shares of Series H Convertible Preferred Stock
pursuant to Section 9(a) which notice shall state (1) that the Corporation is
exercising its right to redeem all or a portion of the outstanding shares of
Series H Convertible Preferred Stock pursuant to Section 9(a), (2) the number of
shares of Series H Convertible Preferred Stock held by such holder which are to
be redeemed, (3) the Redemption Price per share of Series H Convertible
Preferred Stock to be redeemed or the formula for determining the same,
determined in accordance herewith, and (4) the applicable Redemption Date.
"Current Price" means with respect to any date the arithmetic
average of the Closing Price of the Common Stock on the 30 consecutive Trading
Days commencing 45 Trading Days before such date.
"Delayed Reset Date" means the date which is 60 days after a Reset
Date on which Reset Date a Share Limitation Event shall have occurred and be
continuing.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Final Redemption Date" means the date or dates of redemption of
shares of Series H Convertible Preferred Stock pursuant to Section 9(b),
determined in accordance therewith.
"Final Redemption Notice" means a notice given by the Corporation to
each holder of Series H Convertible Preferred Stock pursuant to Section 9(b),
which notice shall state (1) that the Corporation is exercising its right to
redeem outstanding shares of Series H Convertible Preferred Stock pursuant to
Section 9(b), (2) the number of shares of Series H Convertible Preferred Stock
held by such holder which are to be redeemed, (3) the Final Redemption Price per
share of Series H Convertible Preferred Stock held by such holder which are to
be redeemed, determined in
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accordance herewith, and (4) the Final Redemption Date.
"Final Redemption Price" means, for any share of Series H
Convertible Preferred Stock on any date, an amount equal to the sum of (i)
$1,000 plus (ii) an amount equal to the Accrual Amount on the share of Series H
Convertible Preferred Stock to be redeemed to the Final Redemption Date.
"Fixed Conversion Price" means $2.9575 (subject to equitable
adjustments from time to time on terms reasonably acceptable to the Majority
Holders for stock splits, stock dividends, combinations, recapitalizations,
reclassifications, distributions, Tender Offers and similar events relating to
the Common Stock occurring or with respect to which "ex-" trading commences on
or after the date of filing of this Certificate of Designations with the
Secretary of State of the State of Delaware).
"Generally Accepted Accounting Principles" for any person means the
generally accepted accounting principles and practices applied on a consistent
basis by such person from time to time in the preparation of its audited
financial statements.
"Inconvertibility Day" means any Reset Date on which the Corporation
would not have been required to convert in accordance with Section 10(a) any
shares of Series H Convertible Preferred Stock as a consequence of the
limitations set forth in Section 7(a)(1) had all outstanding shares of Series H
Convertible Preferred Stock held by such holder on such Trading Day been
converted into Common Stock on such Trading Day (without regard to the
limitation, if any, on beneficial ownership by such holder contained in Section
10(a)).
"Inconvertibility Notice" shall have the meaning provided in Section
7(a)(2).
"Initial Reset Date" means December 21, 2000.
"Issuance Date" means the first date of original issuance of any
shares of Series H Convertible Preferred Stock.
"Junior Dividend Stock" means, collectively, the Common Stock and
any other class or series of capital stock of the Corporation ranking junior as
to dividends to the Series H Convertible Preferred Stock.
"Junior Liquidation Stock" means the Common Stock or any other class
or series of the Corporation's capital stock ranking junior as to liquidation
rights to the Series H Convertible Preferred Stock.
"Junior Stock" shall have the meaning provided in Section 10(b)(8).
"Liquidation Preference" means, for each share of Series H
Convertible Preferred Stock, the sum of (i) an amount equal to the Accrual
Amount thereon to the date of final distribution to the holders of shares of
Series H Convertible Preferred Stock in connection with the liquidation,
dissolution or winding up of the Corporation plus (ii) accrued and unpaid
interest on cash dividends in arrears (computed in accordance with Section 5(a))
to the date of such distribution plus (iii) $1,000.00.
"Majority Holders" means at any time the holders of shares of Series
G Convertible Preferred Stock and Series H Convertible Preferred Stock which
shares constitute a majority of the outstanding shares of Series G Convertible
Preferred Stock and Series H Convertible Preferred Stock.
"Market Price" of the Common Stock on any date means the lowest sale
price for one share of Common Stock on such date on the first applicable among
the following: (a) the NYSE or
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other national securities exchange on which the shares of Common Stock are
listed which constitutes the principal securities market for the Common Stock,
(b) the Nasdaq, if the Nasdaq constitutes the principal securities market for
the Common Stock on such date, or (c) the Nasdaq SmallCap, if the Nasdaq
SmallCap constitutes the principal securities market for the Common Stock on
such date, in any such case as reported by Bloomberg, L.P. (subject to equitable
adjustments from time to time on terms reasonably acceptable to the Majority
Holders for stock splits, stock dividends, combinations, recapitalizations,
reclassifications, distributions, Tender Offers and similar events relating to
the Common Stock occurring or with respect to which "ex-" trading commences on
or after the date of filing of this Certificate of Designations with the
Secretary of State of the State of Delaware).
"Maximum Share Amount" means 7,581,160 shares of Common Stock, or
such greater number of shares as permitted by the rules of the NYSE or such
other securities market on which the Common Stock is then listed for trading
(such amount to be subject to equitable adjustment from time to time on terms
reasonably acceptable to the Majority Holders for stock splits, stock dividends,
combinations, recapitalizations, reclassifications, distributions, Tender Offers
and similar events relating to the Common Stock occurring or with respect to
which "ex-" trading commences after the date of filing of this Certificate of
Designations with the Secretary of State of the State of Delaware).
"Measurement Period" means, with respect to any date, the period of
20 consecutive Trading Days ending on the Trading Day prior to such date.
"Nasdaq" means the Nasdaq National Market.
"Nasdaq SmallCap" means the Nasdaq SmallCap Market.
"1933 Act" means the Securities Act of 1933, as amended.
"NYSE" means the New York Stock Exchange, Inc.
"Option Share Surrender" means the surrender of shares of Common
Stock to the Corporation in payment of the exercise price or tax obligations
incurred in connection with the exercise of a stock option granted by the
Corporation to any of its employees, directors or consultants.
"Optional Redemption Event" means any one of the following events:
(1) For any period of five consecutive Trading Days there shall be
no closing bid price of the Common Stock on the NYSE, the AMEX, the Nasdaq
or the Nasdaq SmallCap;
(2) The Common Stock ceases to be listed for trading on any of the
NYSE, the AMEX, the Nasdaq or the Nasdaq SmallCap;
(3) The inability for 30 or more Trading Days (whether or not
consecutive) commencing on or after the SEC Effective Date of any holder
of shares of Series H Convertible Preferred Stock to sell any shares of
Common Stock issued or issuable on conversion of shares of Series H
Convertible Preferred Stock pursuant to the Registration Statement for any
reason other than a Blackout Period on each of such 30 Trading Days;
(4) The Corporation shall (A) default in the timely performance of
the obligation to issue shares of Common Stock upon conversion of shares
of Series H Convertible Preferred Stock as and when required by Section 10
or (B) fail or default in the timely performance of any material
obligation (other than as specifically set forth elsewhere in this
definition) to a holder of shares of Series H Convertible Preferred Stock
under the terms of this Certificate of Designations or under the
Subscription Agreements, the Registration
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Rights Agreements, the Warrants or any other agreement or document entered
into in connection with the issuance of shares of Series H Convertible
Preferred Stock, as such instruments may be amended from time to time;
(5) Any consolidation or merger of the Corporation with or into
another entity (other than a merger or consolidation of a subsidiary of
the Corporation into the Corporation or a wholly-owned subsidiary of the
Corporation) where the shareholders of the Corporation immediately prior
to such transaction do not collectively own at least 51% of the
outstanding voting securities of the surviving corporation of such
consolidation or merger immediately following such transaction or the
common stock of such surviving corporation is not listed for trading on
the NYSE, the AMEX, the Nasdaq or the Nasdaq SmallCap; or any sale or
other transfer of all or substantially all of the assets of the
Corporation; or
(6) The taking of any action, including any amendment to the
Corporation's Certificate of Incorporation, without the consent of the
Majority Holders which materially and adversely affects the rights of any
holder of shares of Series H Convertible Preferred Stock.
"Optional Redemption Notice" means a notice from a holder of shares
of Series H Convertible Preferred Stock to the Corporation which states (1) that
the holder delivering such notice is thereby requiring the Corporation to redeem
shares of Series H Convertible Preferred Stock pursuant to Section 11, (2) in
general terms the Optional Redemption Event giving rise to such redemption, and
(3) the number of shares of Series H Convertible Preferred Stock held by such
holder which are to be redeemed.
"Parity Dividend Stock" means any class or series of the
Corporation's capital stock ranking, as to dividends, on a parity with the
Series H Convertible Preferred Stock, including, without limitation, the Series
G Convertible Preferred Stock.
"Parity Liquidation Stock" means any class or series of the
Corporation's capital stock having parity as to liquidation rights with the
Series H Convertible Preferred Stock, including, without limitation, the Series
G Convertible Preferred Stock.
"Premium Percentage" means 120%.
"Premium Price" means, for any share of Series H Convertible
Preferred Stock as of any date of determination, the product obtained by
multiplying (a) the sum of (1) the Conversion Amount plus (2) an amount equal to
the Accrual Amount on such share of Series H Convertible Preferred Stock to the
date of determination, plus (3) an amount equal to the accrued and unpaid
interest on cash dividends in arrears (as provided in Section 5) to the date of
determination times (b) the Premium Percentage.
"Redemption Date" means the date of a redemption of shares of Series
H Convertible Preferred Stock pursuant to Section 9(a) or 11(a), as the case may
be, determined in accordance therewith.
"Redemption Limitation Price" means, for any share of Series H
Convertible Preferred Stock as of any date of determination, 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 H Convertible Preferred
Stock if the Conversion Price was the Fixed Conversion Price (determined without
regard to any limitation on conversion based on beneficial ownership contained
in Section 10(a)) times (y) the average Closing Price of the Common Stock during
the five Trading Days immediately prior to the date of such determination.
"Redemption Price" means the greater of (i) the Premium Price on the
applicable
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Redemption Date or Share Limitation Redemption Date and (ii) the Converted
Market Price on the applicable Redemption Date or Share Limitation Redemption
Date; provided, however, that the Redemption Price per share of Series H
Convertible Preferred Stock may not exceed (i) 150% of the Redemption Limitation
Price, if the Redemption Date or Share Limitation Redemption Date is prior to
the first anniversary of the Issuance Date, and (ii) 200% of the Redemption
Limitation Price, if the Redemption Date or Share Limitation Redemption Date is
on or after the first anniversary of the Issuance Date.
"Registration Rights Agreements" means the several Registration
Rights Agreements entered into between the Corporation and the original holders
of the shares of Series G Convertible Preferred Stock and Series H Convertible
Preferred Stock, as amended or modified from time to time in accordance with
their respective terms.
"Registration Statement" means the Registration Statement required
to be filed by the Corporation with the SEC pursuant to Section 2(a) of the
Registration Rights Agreements.
"Reset Date" means the Initial Reset Date and each Biannual Reset
Date thereafter.
"Reset Period" means the applicable six month period commencing on
the Initial Reset Date and on each Biannual Reset Date thereafter and ending on
the day immediately prior to the next Biannual Reset Date.
"Rights Agreement" means the Rights Agreement, dated as of January
3, 1994, as amended, between the Corporation and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent.
"SEC" means the United States Securities and Exchange Commission.
"SEC Effective Date" means the date the Registration Statement is
first declared effective by the SEC.
"Senior Dividend Stock" means any class or series of capital stock
of the Corporation ranking senior as to dividends to the Series H Convertible
Preferred Stock.
"Senior Liquidation Stock" means any class or series of capital
stock of the Corporation ranking senior as to liquidation rights to the Series H
Convertible Preferred Stock.
"Series B Convertible Preferred Stock" means the Series B
Convertible Preferred Stock, $.01 par value, of the Corporation.
"Series D Convertible Preferred Stock" means the Series D
Convertible Preferred Stock, $.01 par value, of the Corporation.
"Series E Convertible Preferred Stock" means the Series E
Convertible Preferred Stock, $.01 par value, of the Corporation.
"Series F Convertible Preferred Stock" means the Series F
Convertible Preferred Stock, $.01 par value, of the Corporation.
"Series G Convertible Preferred Stock" means the Series H
Convertible Preferred Stock, $.01 par value, of the Corporation.
"Series G Certificate of Designations" means the Certificate of
Designations for the Series G Convertible Preferred Stock.
"Series H Convertible Preferred Stock" means the Series H
Convertible Preferred Stock, $.01 par value, of the Corporation.
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"Share Limitation Event" means a time at which the Corporation is
unable to issue all shares of Common Stock otherwise required to be issued upon
conversion of shares of Series H Convertible Preferred Stock by reason of the
restrictions set forth in the Stockholder Approval Rule and the Corporation has
not obtained a waiver thereof.
"Share Limitation Redemption Date" means each date on which the
Corporation is required to redeem shares of Series H Convertible Preferred Stock
as provided in Section 7(a).
"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 G Convertible Preferred Stock and the
Series H Convertible Preferred Stock, as and to the extent required under the
Stockholder Approval Rule.
"Stockholder Approval Rule" means Paragraph 312.03(c) of the NYSE
Listed Company Manual as in effect from time to time or any successor,
replacement or similar rule or regulation of the NYSE or any other principal
securities market on which the Common Stock is listed for trading.
"Subscription Agreements" means the several Subscription Agreements
by and between the Corporation and the original holders of shares of Series G
Convertible Preferred Stock and Series H Convertible Preferred Stock pursuant to
which the shares of Series G Convertible Preferred Stock and Series H
Convertible Preferred Stock were issued.
"Tender Offer" means a tender offer or exchange offer.
"Trading Day" means a day on whichever of (x) the national
securities exchange, (y) the Nasdaq or (z) the Nasdaq SmallCap which at the time
constitutes the principal securities market for the Common Stock is open for
general trading.
"Transfer Agent Agreement" means the Transfer Agent Agreement, dated
as of March 21, 2000, by and among the Corporation, the Conversion Agent and the
original holders of the Series G Convertible Preferred Stock and the Series H
Convertible Preferred Stock for the benefit of the holders from time to time of
shares of Series G Convertible Preferred Stock and Series H Convertible
Preferred Stock.
"Warrants" means the Common Stock Purchase Warrants and the BuyItNow
Warrants issued by the Corporation in connection with the issuance of the shares
of Series G Convertible Preferred Stock and Series H Convertible Preferred
Stock.
Section 2. Designation and Amount. The shares of such series shall
be designated as "Series H Convertible Preferred Stock", and the number of
shares constituting the Series H Convertible Preferred Stock shall be 5,000, and
shall not be subject to increase. The Corporation shall not issue any shares of
Series H Convertible Preferred Stock other than pursuant to the Subscription
Agreements, unless such issuance shall have been approved by the Majority
Holders. Any shares of Series H Convertible Preferred Stock which are redeemed
by the Corporation and retired and any shares of Series H Convertible Preferred
Stock which are converted in accordance with Section 10 shall be restored to the
status of authorized, unissued and undesignated shares of the Corporation's
class of Preferred Stock and shall not be subject to issuance, and may not
thereafter be outstanding, as shares of Series H Convertible Preferred Stock.
Section 3. Series H Convertible Preferred Stock Capital. The amount
to be represented in the Series H Convertible Preferred Stock capital of the
Corporation at all times for
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each outstanding share of Series H Convertible Preferred Stock shall be the
greater of (i) the Premium Price and (ii) the Converted Market Price. 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 H
Convertible Preferred Stock capital not less frequently than quarterly.
Section 4. Rank. All Series H 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
all other series or classes of Preferred Stock outstanding immediately prior to
the Issuance Date, including, without limitation, the Series B Convertible
Preferred Stock, the Series D Convertible Preferred Stock, the Series E
Convertible Preferred Stock and the Series F Convertible Preferred Stock, both
as to payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
(iii) on a parity with the Series G Convertible Preferred Stock both as to
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
(iv) senior to 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,
and (v) senior to 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.
Section 5. Dividends and Distributions. (a) The holders of shares of
Series H 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 $40.00 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
of each share of Series H Convertible Preferred Stock and shall be payable
quarterly on March 1, June 1, September 1 and December 1 of each year commencing
June 1, 2000 (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 H Convertible Preferred Stock shall
be paid in cash or, in lieu of paying such dividends and subject to the
limitations in Section 5(b) hereof, the amount of such dividends shall be
included in the Accrual Amount for each share, at the option of the Corporation
as hereinafter provided. The amount of the dividends payable per share of Series
H 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 required to be paid in cash pursuant to Section
5(b) which are not paid within five days of a payment date, whether or not such
dividends have been declared, will bear interest at the rate of 14% per annum
until paid (or such lesser rate as shall be the maximum rate allowable by
applicable law). Except as provided in the Rights Agreement, 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 (except for
Option Share Surrenders), unless and until all accrued and unpaid cash dividends
on the Series H 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 Senior Dividend Stock shall be in
arrears, in whole or in part, no dividend shall be paid or declared and set
apart for payment on the Series H 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
10
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 H Convertible Preferred Stock. No
full dividends shall be paid or declared and set apart for payment on the Series
H 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 H Convertible Preferred Stock and the Parity
Dividend Stock, all dividends paid or declared and set apart for payment upon
shares of Series H 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 H
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 H 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 (x) prior to any dividend payment date the Corporation
notifies the holders of Series H Convertible Preferred Stock that the dividends
with respect to such date will be paid in cash or (y) on any dividend payment
date the Corporation is not in compliance in all material respects with its
obligations to the holders of the Series G Convertible Preferred Stock and the
Series H Convertible Preferred Stock (including, without limitation, its
obligations under the Subscription Agreements, the Registration Rights
Agreements, the Warrants, this Certificate of Designations and the Series G
Certificate of Designations), such dividends must be timely paid in cash. If
clauses (x) or (y) of the foregoing sentence do not apply on any dividend
payment date, the Corporation may, but shall not be required to, pay the
applicable dividends in cash. The amount of any dividends not paid in cash shall
be included in the Accrual Amount for each share of Series H Convertible
Preferred Stock.
(c) Except as provided in the Rights Agreement, 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, Parity Dividend Stock, Parity Liquidation 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% of the number of shares of Common Stock, Parity Dividend Stock, Parity
Liquidation 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, Parity
Dividend Stock, Parity Liquidation 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 H Convertible Preferred Stock at the time of such
redemption, repurchase or acquisition the same percentage of such holder's
shares of Series H Convertible Preferred Stock as the percentage of the number
of outstanding shares of Common Stock, Parity Dividend Stock, Parity Liquidation
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
H Convertible Preferred Stock equal to the greater of (i) the Premium Price in
effect on the date of purchase pursuant to this Section 5(c) and (ii) the
Converted Market Price on 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
11
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 H Convertible Preferred Stock to purchase for cash
at the time of purchase in such Tender Offer the same percentage of shares of
Series H 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 H Convertible Preferred Stock equal to the
greater of (i) the Premium Price in effect on the date of purchase pursuant to
this Section 5(d) and (ii) the Converted Market Price on the date of purchase
pursuant to this Section 5(d).
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 H 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 H 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 H 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 H 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 H 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.
(a) Mandatory Redemption Based on Maximum Share Amount. (1)
Notwithstanding any other provision herein, unless the Stockholder Approval
shall have been obtained from the stockholders of the Corporation or waived by
the NYSE or other securities market on which the Common Stock is then listed, so
long as the Common Stock is listed on the NYSE, the AMEX, the Nasdaq or the
Nasdaq SmallCap, the Corporation shall not be required to issue upon conversion
of shares of Series H Convertible Preferred Stock pursuant to Section 10 and
upon conversion of shares of Series G Convertible Preferred Stock pursuant to
Section 10 of the Series G Certificate of Designations more than the Maximum
Share Amount. The Maximum Share Amount shall be allocated among the shares of
Series G Convertible Preferred Stock and Series H Convertible Preferred Stock at
the time of initial issuance thereof pro rata based on the initial issuance of
5,000 shares of each such series. Each certificate for shares of Series H
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 H Convertible Preferred Stock represented by such
certificate for purposes of conversion thereof. Upon surrender of any
certificate for shares of Series H 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 H 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 H Convertible Preferred Stock evidenced by
such new certificate. If any certificate for shares of Series H Convertible
Preferred Stock is surrendered for split-up into two or more certificates
representing an aggregate number of shares of Series H Convertible Preferred
Stock equal to the number of shares of Series H Convertible Preferred Stock
represented by the certificate so surrendered (as reduced by any contemporaneous
conversion of shares of Series H Convertible Preferred Stock represented by
12
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 H 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 H Convertible Preferred Stock
which remains unissued after such conversion shall be re-allocated pro rata to
the outstanding shares of Series H 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 H Convertible Preferred Stock so converted, and if there
shall be no other shares of Series H 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 H
Convertible Preferred Stock outstanding on such date.
(2) On an applicable Reset Date or as soon as possible thereafter,
but in no event later than three Business Days thereafter, the Corporation shall
give notice to each holder of shares of Series H Convertible Preferred Stock (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 of shares of Series H Convertible
Preferred Stock may at any time after the occurrence give notice to the
Corporation, in either case, if on any Reset Date the Corporation would not have
been required to convert shares of Series H 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 the shares of Series H Convertible Preferred Stock
held by such holder been converted in full 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 on the
Delayed Reset Date resulting from such Share Limitation Event, or, if no
Inconvertibility Notice has been received or given by a holder, on such date
thereafter when a holder first receives or gives an Inconvertibility Notice, the
holder receiving or giving, as the case may be, such Inconvertibility Notice
shall have the right by written notice to the Corporation (which written notice
may be contained in the Inconvertibility Notice given by such holder) to direct
the Corporation to redeem the portion of such holder's outstanding shares of
Series H Convertible Preferred Stock (which, if applicable, shall be all of such
holder's outstanding shares of Series H 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 beneficial
ownership of Common Stock by such holder contained in the proviso to the second
sentence of Section 10(a)), within five Business Days after such holder so
directs the Corporation, at a price per share equal to the Redemption Price;
provided, however, that if (i) on or before such Delayed Reset Date the
Corporation gives notice to each holder that it has elected to seek to obtain
Stockholder Approval, (ii) thereafter the Corporation complies with the
procedures for seeking Stockholder Approval set forth in Section 7(a)(5)(A) and
uses its best efforts to obtain Stockholder Approval and (iii) Stockholder
Approval is obtained within 60 days after the Delayed Reset Date, then the
Corporation shall not be required to redeem any shares of Series H Convertible
Preferred Stock by reason of such Inconvertibility Notice. If for any reason the
Corporation fails to obtain such Stockholder Approval within such 60-day period,
within five Business Days after the occurrence of such failure the Corporation
shall redeem all shares which at any time prior thereto have been directed to be
redeemed by holders of Series H Convertible Preferred Stock in accordance with
the immediately preceding sentence. If a holder of shares of Series H
Convertible Preferred Stock directs the Corporation to redeem outstanding shares
of Series H Convertible Preferred Stock and, on the Trading Day prior to the
date the Corporation is required to redeem such shares of Series H 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 shares of Series H
Convertible Preferred Stock (determined without regard to the limitation, if
any, on beneficial ownership of shares of Common Stock by such holder contained
in the proviso to the second
13
sentence of Section 10(a)) had all of such holder's shares of Series H
Convertible Preferred Stock been surrendered for conversion into Common Stock on
such Trading Day, then the Corporation shall not be required to redeem any
shares of Series H Convertible Preferred Stock by reason of such
Inconvertibility Notice.
(3) Notwithstanding the giving of any Inconvertibility Notice by the
Corporation to the holders of Series H Convertible Preferred Stock pursuant to
Section 7(a)(2) or the giving or the absence of any notice by the holders of the
Series H Convertible Preferred Stock in response thereto or any redemption of
shares of Series H 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 NYSE, the Nasdaq or other
securities market on which the Common Stock is listed for trading.
(4) On each Share Limitation Redemption Date (or such later date as
a holder of shares of Series H Convertible Preferred Stock shall surrender to
the Corporation the certificate(s) for the shares of Series H Convertible
Preferred Stock being redeemed pursuant to this Section 7(a)), the Corporation
shall make payment in immediately available funds of the applicable Redemption
Price to such holder of shares of Series H 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. Upon redemption of less than all of the shares of
Series H 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 H Convertible Preferred Stock evidenced by
such certificate which have not been redeemed. Only whole shares of Series H
Convertible Preferred Stock may be redeemed.
(5) (A) Notwithstanding any other provision of this Certificate of
Designations, if an Inconvertibility Day occurs by reason of events which are
not solely within the control of the Corporation, the Corporation shall have the
right to give a Control Notice to the holders of Series H Convertible Preferred
Stock at any time after such Inconvertibility Day occurs and prior to the
earlier of (1) the date on which all holders of shares of Series H Convertible
Preferred Stock who had the right (other than as limited by this Section
7(a)(5)) to require redemption of any shares of Series H Convertible Preferred
Stock by reason of the occurrence of such Inconvertibility Day no longer have
such right and (2) the applicable Share Limitation Redemption Date by reason of
the earliest notice given by any holder of shares of Series H Convertible
Preferred Stock directing the Corporation to redeem such shares in accordance
with Section 7(a)(2) by reason of such Inconvertibility Day. For purposes of
this Section 7(a)(5), an Inconvertibility Day shall be deemed to have occurred
by reason of events which are not solely within the control of the Corporation
if a requirement of the Corporation to redeem, or a right of any holder of
shares of Series H Convertible Preferred Stock to require redemption of, shares
of Series H Convertible Preferred Stock by reason thereof would result in the
Corporation being required to classify the Series H Convertible Preferred Stock
as redeemable preferred stock on a balance sheet of the Corporation prepared in
accordance with Generally Accepted Accounting Principles and Regulation S-X of
the SEC. If the Corporation timely gives a Control Notice to the holders of
shares of Series H Convertible Preferred Stock, then, in lieu of payment of the
Redemption Price pursuant to a redemption notice given by any holder of shares
of Series H Convertible Preferred Stock in accordance with Section 7(a)(2) by
reason of such Inconvertibility Day and commencing on such Inconvertibility Day,
the Conversion Price for all outstanding shares of Series H Convertible
Preferred Stock will be 80% of the amount the Conversion Price would otherwise
be. Such adjustment of the Conversion Price shall continue in effect until the
earliest of (x) the date which is 90 days after the Stockholder Approval shall
have been obtained from the stockholders of the Corporation or waived by the
NYSE or other securities market on which the Common Stock is then listed, (y)
the date any further adjustments are made following a failure to obtain the
Stockholder Approval as provided below, and (z) the date when shares of Series H
Convertible Preferred Stock are no longer outstanding. On or after the date the
Corporation gives such Control Notice, upon
14
notice from the Majority Holders, the Corporation promptly shall call a special
meeting of its stockholders, to be held not later than 60 days after such notice
is given, to seek the Stockholder Approval and shall use its best efforts to
obtain the Stockholder Approval. The Corporation shall prepare and file with the
SEC within 20 days after such notice is given preliminary proxy materials which
set forth a proposal to seek such Stockholder Approval. The Corporation shall
provide the Majority Holders an opportunity to consult with the Corporation
regarding the content of such proxy materials insofar as it relates to the
Stockholder Approval by providing copies of such preliminary proxy materials and
any revised preliminary proxy materials to the Majority Holders a reasonable
period of time prior to their filing with the SEC. The Corporation shall furnish
to each holder of shares of Series H Convertible Preferred Stock a copy of its
definitive proxy materials for such special meeting and any amendments or
supplements thereto promptly after the same are mailed to stockholders or filed
with the SEC. To the extent holders of shares of Series H Convertible Preferred
Stock are authorized or required by law to vote such shares at such special
meeting, the holders shall vote in favor of the Stockholder Approval proposal.
Upon the earlier of (i) the failure to obtain the Stockholder Approval at the
special meeting or (ii) the failure to hold the special meeting within such
60-day period, the Corporation shall so notify the holders of shares of Series H
Convertible Preferred Stock and, if requested by notice to the Corporation from
the Majority Holders, commencing on the Business Day following the Corporation's
receipt of such notice, the Conversion Price of the outstanding shares of Series
H Convertible Preferred Stock will be 60% of the amount the Conversion Price
would otherwise be without regard to other adjustments pursuant to this Section
7(a)(5) or Section 11(b)(4).
(B) If and for so long as an adjustment of the Conversion Price is
simultaneously required by this Section 7(a)(5) and by Section 11(b)(4), the
applicable Conversion Price shall be the lower of the two amounts required by
each such section.
(C) The rights of holders of shares of Series H Convertible
Preferred Stock to require redemption of their shares and exercise other rights
pursuant to Sections 7(a)(1) through 7(a)(4) by reason of an Inconvertibility
Day as to which the Corporation does not have a right to give a Control Notice,
or fails to exercise such right on a timely basis, shall not be limited by the
operation of this Section 7(a)(5).
(b) No Other Mandatory Redemption. The shares of Series H
Convertible Preferred Stock shall not be subject to mandatory redemption by the
Corporation at the option of the Holders except as provided in Section 7(a) and
Section 11.
Section 8. No Sinking Fund. The shares of Series H Convertible
Preferred Stock shall not be subject to the operation of a purchase, retirement
or sinking fund.
Section 9. Optional Redemption.
(a) Corporation Optional Redemption. If (1) the Corporation shall be
in compliance in all material respects with its obligations to the holders of
shares of Series G Convertible Preferred Stock and Series H Convertible
Preferred Stock (including, without limitation, its obligations under the
Subscription Agreements, the Registration Rights Agreements, the Warrants and
the provisions of this Certificate of Designations and the Series G Certificate
of Designations), (2) on the date the Corporation Optional Redemption Notice is
given and at all times until the Redemption Date, the Registration Statement is
effective and available for use by each holder of shares of Series G Convertible
Preferred Stock and Series H Convertible Preferred Stock for the resale of
shares of Common Stock acquired by such holder upon conversion of all shares of
Series G Convertible Preferred Stock and Series H Convertible Preferred Stock
held by such holder and (3) no Optional Redemption Event shall have occurred
with respect to which, on the date a Corporation Optional Redemption Notice is
to be given or on the Redemption Date, any holder of shares of Series H
Convertible Preferred Stock (A) shall be entitled to exercise optional
redemption rights under Section 11 by reason of such Optional Redemption Event
or (B) shall have exercised optional redemption rights under Section 11 by
reason of such Optional Redemption Event and the
15
Corporation shall not have paid the Redemption Price to such holder, then the
Corporation shall have the right, exercisable by giving a Corporation Optional
Redemption Notice not less than 15 Trading Days or more than 25 Trading Days
prior to the Redemption Date to all holders of record of the shares of Series H
Convertible Preferred Stock, at any time to redeem all or from time to time to
redeem any part of the outstanding shares of Series H Convertible Preferred
Stock in accordance with this Section 9(a). If the Corporation shall redeem less
than all outstanding shares of Series H Convertible Preferred Stock, such
redemption shall be made as nearly as practical pro rata from all holders of
shares of Series H Convertible Preferred Stock. Any Corporation Optional
Redemption Notice under this Section 9(a) shall be given to the holders of
record of the shares of Series H Convertible Preferred Stock at their addresses
appearing on the records of the Corporation; provided, however, that any failure
or defect in the giving of such notice to any such holder shall not affect the
validity of notice to or the redemption of shares of Series H Convertible
Preferred Stock of any other holder. On the Redemption Date (or such later date
as a holder of shares of Series H Convertible Preferred Stock surrenders to the
Corporation the certificate(s) for shares of Series H Convertible Preferred
Stock to be redeemed pursuant to this Section 9(a)), the Corporation shall make
payment of the applicable Redemption Price to each holder of shares of Series H
Convertible Preferred Stock to be redeemed in immediately available funds to
such account as specified by such holder in writing to the Corporation at least
one Business Day prior to the Redemption Date. A holder of shares of Series H
Convertible Preferred Stock to be redeemed pursuant to this Section 9(a) shall
be entitled to convert in accordance with Section 10 such shares of Series H
Convertible Preferred Stock (x) through the day prior to the Redemption Date and
(y) if the Corporation shall fail to pay the Redemption Price of any share of
Series H Convertible Preferred Stock when due, at any time after the due date
thereof until such date as the Corporation pays the Redemption Price of such
share of Series H Convertible Preferred Stock. No share of Series H Convertible
Preferred Stock as to which the holder exercises the right of conversion
pursuant to Section 10 or the optional redemption right pursuant to Section 11
may be redeemed by the Corporation pursuant to this Section 9(a) on or after the
date of exercise of such conversion right or optional redemption right, as the
case may be, regardless of whether the Corporation Optional Redemption Notice
shall have been given prior to, on or after the date of exercise of such
conversion right or optional redemption right, as the case may be.
(b) Final Redemption. The Corporation shall have the right to redeem
all or from time to time any part of the outstanding shares of Series H
Convertible Preferred Stock at any time on or after the date which is 1,096 days
after the Issuance Date so long as (1) the Corporation shall be in compliance in
all material respects with its obligations to the holders of the Series G
Convertible Preferred Stock and Series H Convertible Preferred Stock (including,
without limitation, its obligations under the Subscription Agreements, the
Registration Rights Agreements, the Warrants, this Certificate of Designations
and the Series G Certificate of Designations) and (2) no Optional Redemption
Event shall have occurred with respect to which on the date a Final Redemption
Notice is to be given or on the Final Redemption Date, any holder of shares of
Series H Convertible Preferred Stock (a) shall be entitled to exercise optional
redemption rights under Section 11 by reason of such Optional Redemption Event
or (b) shall have exercised optional redemption rights under Section 11 by
reason of such Optional Redemption Event and the Corporation shall not have paid
the Redemption Price to such holder. In order to exercise its rights under this
Section 9(b), the Corporation shall give a Final Redemption Notice not less than
30 Trading Days or more than 50 Trading Days prior to the Final Redemption Date
to all holders of record of the shares of Series H Convertible Preferred Stock.
Any Final Redemption Notice shall be given to the holders of record of the
shares of Series H Convertible Preferred Stock by telephone line facsimile
transmission to such number as shown on the records of the Corporation for such
purpose; provided, however, that any failure or defect in the giving of such
notice to any such holder shall not affect the validity of notice to or the
redemption of shares of Series H Convertible Preferred Stock of any other
holder. On the Final Redemption Date (or such later date as a holder of shares
of Series H Convertible Preferred Stock surrenders to the Corporation the
certificate(s) for shares of Series H Convertible Preferred Stock to be redeemed
pursuant to this Section 9(b)), the Corporation shall make payment of the
applicable Final Redemption Price to each holder of shares of Series H
Convertible Preferred Stock to be redeemed in immediately available funds to
such
16
account as specified by such holder in writing to the Corporation at least one
Business Day prior to the Final Redemption Date. A holder of shares of Series H
Convertible Preferred Stock to be redeemed pursuant to this Section 9(b) shall
be entitled to convert in accordance with Section 10 such shares of Series H
Convertible Preferred Stock (x) through the day prior to the Final Redemption
Date and (y) if the Corporation shall fail to pay the Final Redemption Price of
any share of Series H Convertible Preferred Stock when due, at any time after
the due date thereof until such date as the Corporation pays the Final
Redemption Price of such share of Series H Convertible Preferred Stock to such
holder. No share of Series H Convertible Preferred Stock as to which a holder
exercises the right of conversion pursuant to Section 10 or the optional
redemption right pursuant to Section 11 may be redeemed by the Corporation
pursuant to this Section 9(b) on or after the date of exercise of such
conversion right or optional redemption right, as the case may be, regardless of
whether the Final Redemption Notice shall have been given prior to, on or after
the date of exercise of such conversion right or optional redemption right, as
the case may be.
(c) Redemption of Other Series of Preferred Stock. Any redemption of
shares of Series H Convertible Preferred Stock pursuant to this Section 9 shall
be made at the same time as a redemption by the Company of a pro rata portion of
the shares of Series G Convertible Preferred Stock outstanding at the time a
redemption notice is given pursuant to this Section 9. The Company shall not
redeem any of the shares of Series G Convertible Preferred Stock pursuant to the
provisions thereof similar to this Section 9 or repurchase or otherwise acquire
any shares of Series G Convertible Preferred Stock unless the Company offers
simultaneously to redeem, repurchase or otherwise acquire a pro rata portion of
the outstanding shares of Series H Convertible Preferred Stock for cash at the
same price as such shares of Series G Convertible Preferred Stock.
(d) No Other Optional Redemption. The shares of Series H Convertible
Preferred Stock shall not be subject to redemption at the option of the
Corporation except as provided in Sections 9(a) and 9(b).
Section 10. Conversion.
(a) Conversion at Option of Holder. The holders of the Series H
Convertible Preferred Stock may at any time on or after the Issuance Date
convert at any time all or from time to time any part of their shares of Series
H Convertible Preferred Stock into fully paid and nonassessable shares of Common
Stock and such other securities and property as herein provided, except that no
such conversion shall be for less than 50 shares of Series H Convertible
Preferred Stock unless the holder so converting holds less than 50 shares of
Series H Convertible Preferred Stock and is converting all of such shares held
by such holder. Holders of shares of Series H Convertible Preferred Stock shall
be entitled, with respect to the shares of Common Stock or other securities
issued or issuable upon conversion thereof, to the benefits available to the
holders of Common Stock under the Rights Agreement or any similar plan or
arrangement. Each share of Series H 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, 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 Amount, (ii) an amount equal to the Accrual Amount on the
share of Series H Convertible Preferred Stock being converted to the applicable
Conversion Date, and (iii) accrued but unpaid interest on the dividends required
to be paid in cash on the share of Series H Convertible Preferred Stock being
converted in arrears to the applicable Conversion Date at the rate provided in
Section 5 by (y) the Conversion Price for such Conversion Date (the "Conversion
Rate"); provided, however, that in no event shall any holder of shares of Series
H Convertible Preferred Stock be entitled to convert any shares of Series H
Convertible Preferred Stock in excess of that number of shares of Series H
Convertible Preferred Stock upon conversion of which the sum of (1) the number
of shares of Common Stock beneficially owned by such holder and all Aggregated
Persons of such holder (other than shares of Common Stock deemed beneficially
owned through the ownership of (x) unconverted shares of Series H Convertible
Preferred Stock and (y) the unconverted or unexercised portion of any
instrument, including, without limitation, the Series G Convertible Preferred
Stock and the Warrants,
17
which contains limitations similar to those set forth in this sentence) and (2)
the number of shares of Common Stock issuable upon the conversion of the number
of shares of Series H 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 Aggregated 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.
(b) Other Provisions. (1) Notwithstanding anything in this Section
10(b) to the contrary, no change in the Conversion Amount pursuant to this
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 Amount 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 the price at which a share of Series H Convertible Preferred Stock is
converted being less than the par value of the Common Stock into which shares of
Series H Convertible Preferred Stock are at the time convertible.
(2) The holders of shares of Series H Convertible Preferred Stock at
the close of business on the record date for any dividend payment to holders of
Series H 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 H
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
H 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 H 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 H
Convertible Preferred Stock. Except as provided above, no adjustment shall be
made in respect of cash dividends on Common Stock or Series H Convertible
Preferred Stock that may be accrued and unpaid at the date of surrender of
shares of Series H Convertible Preferred Stock.
(3) (A) The right of the holders of Series H Convertible Preferred
Stock to convert their shares shall be exercised by giving (which may be done by
telephone line facsimile transmission) a Conversion Notice to the Conversion
Agent, with a copy to the Corporation. If a holder of Series H Convertible
Preferred Stock elects to convert any shares of Series H Convertible Preferred
Stock in accordance with Section 10(a), such holder shall not be required to
surrender the certificate(s) representing such shares of Series H Convertible
Preferred Stock to the Corporation unless all of the shares of Series H
Convertible Preferred Stock represented thereby are so converted. Each holder of
shares of Series H 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 H
Convertible Preferred Stock evidenced by a particular certificate therefor are
converted as aforesaid, the holder of Series H Convertible Preferred Stock may
not transfer the certificate(s) representing such shares of Series H 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
18
holder of shares of Series H Convertible Preferred Stock new certificate(s) of
like tenor, registered as such holder of shares of Series H Convertible
Preferred Stock (upon payment by such holder of shares of Series H Convertible
Preferred Stock of any applicable transfer taxes) may request, representing in
the aggregate the remaining number of shares of Series H Convertible Preferred
Stock represented by such certificate(s). Each holder of shares of Series H
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 H Convertible Preferred Stock
represented by such certificate, the number of shares of Series H Convertible
Preferred Stock represented by such certificate may be less than the number of
shares stated on such certificate, and (2) the Corporation may place a legend on
the certificates for shares of Series H 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 H 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 H 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 H
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 two Trading Days 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 H Convertible Preferred Stock being converted within two
Trading Days 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 H Convertible Preferred
Stock outstanding upon the basis hereinbefore 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 H 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 H 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 H Convertible Preferred Stock, the Corporation promptly shall
seek, and use its best efforts to obtain and complete, 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
19
appropriate provision or cause appropriate provision to be made so that each
holder of shares of Series H Convertible Preferred Stock then outstanding shall
have the right thereafter to convert such shares of Series H 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
H 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 H 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 H
Convertible Preferred Stock the right to elect the securities, cash, or other
assets into which the Series H 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 H Convertible Preferred Stock, the Corporation shall issue and deliver to
such person certificates for the Common Stock issuable upon such conversion
within three Trading 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 such holder, or any setoff, counterclaim,
recoupment, limitation or termination, or any breach or alleged breach by such
holder or any other person of any obligation to the Corporation or any violation
or alleged violation of law by such holder or any other person, 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 H Convertible Preferred Stock pursuant to the first
sentence of this paragraph within three Trading Days after such Conversion
Notice is given, 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) for each Trading Day thereafter on which
the Corporation so fails to deliver such certificates, the Conversion Price
applicable to such conversion shall be reduced by an amount equal to one percent
of the amount that the Conversion Price would otherwise be, 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
H Convertible Preferred Stock, rescind such conversion, whereupon such holder
shall have the right to convert such shares of Series H Convertible Preferred
Stock thereafter in accordance herewith.
(7) No fractional shares of Common Stock shall be issued upon
conversion of Series H 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
20
Corporation shall pay in cash an amount equal to the product of (i) the
arithmetic average of the Closing Price of one share of Common Stock on the
three consecutive Trading Days ending on the Trading Day immediately preceding
the Conversion Date times (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 (other than pursuant to the Rights
Agreement) 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
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 following
formula:
C(1) = C x O + N
-----
O + N x P
-----
M
where
C(1) = 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 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 (other than pursuant to the
Rights Agreement), 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 Sthe retained earnings of the Corporation), then in each such case
the Conversion Amount then in effect shall be adjusted in accordance with the
formula
C(1) = C x M
-----
M - F
where
C(1) = the adjusted Conversion Amount
C = the current Conversion Amount
21
M = the Current 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 H 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 shares of Series H 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 H Convertible Preferred Stock and the transfer agent for 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 H 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
ten 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 H 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) Notice to Holder Prior to Certain Actions. In case on or after
the Issuance Date:
(i) the Corporation shall declare a dividend (or any other
distribution) on its Common Stock (other than in cash out of retained
earnings); or
22
(ii) the Corporation shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
share of any class or any other rights or warrants; or
(iii) the Board of Directors shall authorize any reclassification of
the Common Stock (other than a subdivision or combination of its
outstanding Common Stock, or a change in par value, or from par value to
no par value, or from no par value to par value), or any consolidation or
merger or other business combination transaction to which the Corporation
is a party and for which approval of any stockholders of the Corporation
is required, or the sale or transfer of all or substantially all of the
assets of the Corporation; or
(iv) there shall be pending the voluntary or involuntary
dissolution, liquidation or winding-up of the Corporation;
the Corporation shall give the Holders as promptly as possible but in any event
at least ten Trading Days prior to the applicable date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined, or (y) the date
on which such reclassification, consolidation, merger, other business
combination transaction, sale, transfer, dissolution, liquidation or winding-up
is expected to become effective or occur, and the date as of which it is
expected that holders of Common Stock of record who shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reclassification, consolidation, merger, other business combination
transaction, sale, transfer, dissolution, liquidation or winding-up shall be
determined. Such notice shall not include any information which would be
material non-public information for purposes of the 1934 Act. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
such dividend, distribution, reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding-up. In the case of any such action
of which the Corporation gives such notice to the Holders or is required to give
such notice to the Holders, the Holders shall be entitled to give a Conversion
Notice which is contingent on the completion of such action.
Section 11. Redemption at Option of Holders.
(a) Redemption Right. If an Optional Redemption Event occurs, then,
in addition to any other right or remedy of any holder of shares of Series H
Convertible Preferred Stock, each holder of shares of Series H Convertible
Preferred Stock shall have the right, at such holder's option, to require the
Corporation to redeem all of such holder's shares of Series H Convertible
Preferred Stock, or any portion thereof, on the date which is three Business
Days after the date such holder gives the Corporation an Optional Redemption
Notice with respect to such Optional Redemption Event at any time while any of
such holder's shares of Series H Convertible Preferred Stock are outstanding, at
a price equal to the Redemption Price.
(b) Notices; Method of Exercising Optional Redemption Rights, Etc.
(1) On or before the fifth Business Day after the occurrence of an Optional
Redemption Event, the Corporation shall give to each holder of outstanding
shares of Series H Convertible Preferred Stock a notice of the occurrence of
such Optional Redemption Event and of the redemption right set forth herein
arising as a result thereof. Such notice from the Corporation shall set forth:
(i) the date by which the optional redemption right must be
exercised, and
(ii) a description of the procedure (set forth below) which each
such holder must follow to exercise such holder's optional redemption
right.
No failure of the Corporation to give such notice or defect therein shall limit
the right of any holder of shares of Series H Convertible Preferred Stock to
exercise the optional redemption right or affect
23
the validity of the proceedings for the redemption of such holder's shares of
Series H Convertible Preferred Stock.
(2) To exercise its optional redemption right, each holder of
outstanding shares of Series H Convertible Preferred Stock shall deliver to the
Corporation on or before the 30th day after the notice required by Section
11(b)(1) is given to such holder (or if no such notice has been given by the
Corporation to such holder, within 40 days after such holder first learns of
such Optional Redemption Event) an Optional Redemption Notice to the
Corporation. An Optional Redemption Notice may be revoked by such holder giving
such Optional Redemption Notice by giving notice of such revocation to the
Corporation at any time prior to the time the Corporation pays the Redemption
Price to such holder.
(3) If a holder of shares of Series H Convertible Preferred Stock
shall have given an Optional Redemption Notice, on the date which is three
Business Days after the date such Optional Redemption Notice is given (or such
later date as such holder surrenders such holder's certificates for the shares
of Series H Convertible Preferred Stock to be redeemed) the Corporation shall
make payment in immediately available funds of the applicable Redemption Price
to such account as specified by such holder in writing to the Corporation at
least one Business Day prior to the applicable redemption date.
(4) Notwithstanding any other provision of this Certificate of
Designations, if an Optional Redemption Event occurs by reason of events which
are not solely within the control of the Corporation, the Corporation shall have
the right to give a Control Notice to the holders of shares of Series H
Convertible Preferred Stock at any time after such Optional Redemption Event
occurs and prior to the earlier of (1) the date on which all holders of shares
of Series H Convertible Preferred Stock who had the right (other than as limited
by this Section 11(b)(4)) to require redemption of any shares of Series H
Convertible Preferred Stock by reason of the occurrence of such Optional
Redemption Event no longer have such right and (2) the applicable Redemption
Date by reason of the earliest Optional Redemption Notice given by any holder of
shares of Series H Convertible Preferred Stock by reason of such Optional
Redemption Event. If the Corporation timely gives such Control Notice to the
holders of shares of Series H Convertible Preferred Stock, then in lieu of
payment of the Redemption Price by reason of any such Optional Redemption Event
and commencing on the first date on which such Optional Redemption Event occurs
the following adjustments shall take effect (subject to the provisions of
Section 7(a)(5)(B)):
(A) In the case of an Optional Redemption Event described in clauses
(1), (2), (3), (4) or (6) of the definition of the term Optional
Redemption Event, for so long as such Optional Redemption Event continues
and for a period of 60 days thereafter the Conversion Price will be 70% of
the amount which the Conversion Price would otherwise be; and
(B) In the case of an Optional Redemption Event described in clause
(5) of the definition of the term Optional Redemption Event, for so long
as any shares of Series H Convertible Preferred Stock are outstanding the
Conversion Price will be 70% of the amount which the Conversion Price
would otherwise be.
For purposes of this Section 11(b)(4), an Optional Redemption Event shall be
deemed to have occurred by reason of events which are not solely within the
control of the Corporation if a requirement of the Corporation to redeem, or a
right of any holder of shares of Series H Convertible Preferred Stock to require
redemption of, shares of Series H Convertible Preferred Stock by reason thereof
would result in the Corporation being required to classify the Series H
Convertible Preferred Stock as redeemable preferred stock on a balance sheet of
the Corporation prepared in accordance with Generally Accepted Accounting
Principles and Regulation S-X of the SEC, and, in the case of an Optional
Redemption Event described in clause (5) of the definition of the term Optional
Redemption Event, the Board or the stockholders of the Corporation do not have
the right to approve or disapprove the transactions resulting in such event.
24
(c) Other. (1) In connection with a redemption pursuant to this
Section 11 of less than all of the shares of Series H Convertible Preferred
Stock evidenced by a particular certificate, promptly, but in no event later
than five Business Days after surrender of such certificate to the Corporation,
the Corporation shall issue and deliver to such holder a replacement certificate
for the shares of Series H Convertible Preferred Stock evidenced by such
certificate which have not been redeemed.
(2) An Optional Redemption Notice given by a holder of shares of
Series H Convertible Preferred Stock shall be deemed for all purposes to be in
proper form unless the Corporation notifies such holder in writing within three
Business Days after such Optional Redemption Notice has been given (which notice
shall specify all defects in such Optional Redemption Notice), and any Optional
Redemption Notice containing any such defect shall nonetheless be effective on
the date given if such holder promptly undertakes to correct all such defects.
No such claim of error shall limit or delay performance of the Corporation's
obligation to redeem all shares of Series H Convertible Preferred Stock not in
dispute whether or not such holder makes such undertaking.
Section 12. Voting Rights; Certain Restrictions.
(a) Voting Rights. Except as otherwise required by law or expressly
provided herein, shares of Series H Convertible Preferred Stock shall not be
entitled to vote on any matter.
(b) Certificate of Incorporation; Certain Stock. The affirmative
vote or consent of the Majority Holders, 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 Certificate of Incorporation if
the amendment, alteration, or repeal materially and adversely affects the
powers, preferences, or special rights of the Series G Convertible Preferred
Stock or the Series H 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
H Convertible Preferred Stock except as otherwise required by law.
(c) Other. So long as any shares of Series H Convertible Preferred
Stock are outstanding:
(1) Payment of Obligations. The Corporation will pay and discharge,
and will cause each subsidiary of the Corporation to pay and discharge, when due
all their respective obligations and liabilities which are material to the
Corporation and its subsidiaries taken as a whole, including, without
limitation, tax liabilities, except where the same may be contested in good
faith by appropriate proceedings.
(2) Maintenance of Property; Insurance. (A) The Corporation will
keep, and will cause each subsidiary of the Corporation to keep, all material
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted.
(B) The Corporation will maintain, and will cause each subsidiary of
the Corporation to maintain, with financially sound and responsible insurance
companies, insurance against loss or damage by fire or other casualty and such
other insurance, including but not limited to, product liability insurance, in
such amounts and covering such risks as is reasonably adequate for the conduct
of their businesses and the value of their properties.
(3) Conduct of Business and Maintenance of Existence. The
Corporation will continue, and will cause each subsidiary of the Corporation to
continue, to engage in business of the
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same general type as conducted by the Corporation and its operating subsidiaries
at the time this Certificate of Designations is filed with the Secretary of
State of the State of Delaware, and will preserve, renew and keep in full force
and effect, and will cause each subsidiary of the Corporation to preserve, renew
and keep in full force and effect, their respective corporate existence and
their respective material rights, privileges and franchises necessary or
desirable in the normal conduct of business.
(4) Compliance with Laws. The Corporation will comply, and will
cause each subsidiary of the Corporation to comply, in all material respects
with all applicable laws, ordinances, rules, regulations, decisions, orders and
requirements of governmental authorities and courts (including, without
limitation, environmental laws) except (i) where compliance therewith is
contested in good faith by appropriate proceedings or (ii) where non-compliance
therewith could not reasonably be expected to have a material adverse effect on
the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Corporation and its subsidiaries taken as a
whole.
(5) Investment Company Act. The Corporation will not be or become an
open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended, or any successor provision.
(6) Transactions with Affiliates. The Corporation will not, and will
not permit any subsidiary of the Corporation, directly or indirectly, to pay any
funds to or for the account of, make any investment (whether by acquisition of
stock or indebtedness, by loan, advance, transfer of property, guarantee or
other agreement to pay, purchase or service, directly or indirectly, any
indebtedness, or otherwise) in, lease, sell, transfer or otherwise dispose of
any assets, tangible or intangible, to, or participate in, or effect any
transaction in connection with, any joint enterprise or other joint arrangement
with, any Affiliate of the Corporation, except, on terms to the Corporation or
such subsidiary no less favorable than terms that could be obtained by the
Corporation or such subsidiary from a person that is not an Affiliate of the
Corporation, as determined in good faith by the Board of Directors.
Section 13. Outstanding Shares. For purposes of this Certificate of
Designations, all authorized and issued shares of Series H Convertible Preferred
Stock shall be deemed outstanding except (i) from the applicable Conversion
Date, each share of Series H Convertible Preferred Stock converted into Common
Stock, unless the Corporation shall default in its obligation to issue and
deliver shares of Common Stock upon such conversion as and when required by
Section 10; (ii) from the date of registration of transfer, all shares of Series
H Convertible Preferred Stock held of record by the Corporation or any
subsidiary or Affiliate of the Corporation (other than any original holder of
shares of Series H Convertible Preferred Stock) and (iii) from the applicable
Redemption Date, Share Limitation Redemption Date, Final Redemption Date or date
of redemption pursuant to Section 11, all shares of Series H Convertible
Preferred Stock which are redeemed or repurchased, so long as in each case the
Redemption Price, the Final Redemption Price or other repurchase price, as the
case may be, of such shares of Series H Convertible Preferred Stock shall have
been paid by the Corporation as and when due hereunder.
Section 14. Miscellaneous.
(a) Notices. Any notices required or permitted to be given under the
terms of this Certificate of Designations shall be in writing and shall be
delivered personally (which shall include telephone line facsimile transmission)
or by courier and shall be deemed given upon receipt, if delivered personally or
by courier (a) in the case of the Corporation, addressed to the Corporation at
00000 Xxxxxxx Xxxxxxxxx, 0xx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, Attention:
Chief Financial Officer (telephone line facsimile transmission number (818)
461-6330), or (b) in the case of any holder of shares of Series H Convertible
Preferred Stock, at such holder's address or telephone line facsimile
transmission number shown on the stock books maintained by the Corporation with
respect to the Series H Convertible Preferred Stock or such other address as the
Corporation shall have provided by notice to the holders of shares of Series H
Convertible Preferred Stock in accordance with this Section or any holder of
shares of Series H Convertible Preferred Stock shall have provided to the
Corporation in accordance with this Section.
(b) Replacement of Certificates. Upon receipt by the Corporation of
evidence reasonably satisfactory to the Corporation of the ownership of and the
loss, theft, destruction or mutilation of any certificate for shares of Series H
Convertible Preferred Stock and (1) in the case of loss, theft or destruction,
of indemnity from the record holder of the certificate for such shares of Series
H Convertible Preferred Stock reasonably satisfactory in form to the Corporation
(and without the requirement to post any bond or other security) or (2) in the
case of mutilation, upon surrender and cancellation of the certificate for such
shares of Series H Convertible Preferred Stock, the Corporation will execute and
deliver to such holder a new certificate for such shares of Series H Convertible
Preferred Stock at the sole cost of such holder.
(c) Overdue Amounts. Except as otherwise specifically provided in
Section 5 with respect to dividends in arrears on the Series H Convertible
Preferred Stock, whenever any amount which is due to any holder of shares of
Series H Convertible Preferred Stock is not paid to such holder when due, such
amount shall bear interest at the rate of 14% per annum (or such other rate as
shall be the maximum rate allowable by applicable law) until paid in full.
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IN WITNESS WHEREOF, e4L, Inc. has caused this Certificate of
Designations to be signed by _____________, its ____________, as of the ____ day
of March, 2000.
______________________________
e4L, INC.
By:______________________________________
Title:
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