Annual Report — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K Annual Report 43 267K
2: EX-3.8 Certificate of Amendment 25 100K
3: EX-10.24 Stock Purchase Agreement 132 469K
4: EX-10.25 First Amendment to Registration Rights Agreement 4 17K
5: EX-10.26 First Amendment to Stockholders' Agreement 5 16K
6: EX-21 Subsidiaries of the Registrant 1 4K
7: EX-23.1 Consent of Bdo Seidman, LLP 1 6K
EX-3.8 — Certificate of Amendment
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Exhibit 3.8
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CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
HUDSON TECHNOLOGIES, INC.
-----------------------------------
February 16, 2001
-----------------------------------
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
HUDSON TECHNOLOGIES, INC.
under Section 805 of the Business Corporation Law
------------------------------
The undersigned, being the Chairman and Chief Executive Officer and
Secretary, respectively, of Hudson Technologies, Inc. (the "Corporation") hereby
certify that:
A. The name of the Corporation is HUDSON TECHNOLOGIES, INC. The Corporation
was formed under the name REFRIGERANT RECLAMATION INDUSTRIES, INC.
B. The Certificate of Incorporation was filed with the Department of State
on January 10, 1991.
C. On March 30, 1999, the Board of Directors of the Corporation duly
adopted resolutions in order to designate seventy-five thousand (75,000) shares
as Series A Preferred Stock.
D. On February 15, 2001, the Board of Directors of the Corporation duly
adopted resolutions in order to increase the number of shares designated as
Series A Preferred Stock (as set forth in the resolution below) from
seventy-five thousand (75,000) to one hundred fifty thousand (150,000).
E. The resolution contained herein has not been modified, altered or
amended and is presently in full force and effect.
F. To effectuate the foregoing, Paragraph (5) of the Certificate of
Incorporation, which refers to the authorized shares of the Corporation, is
hereby amended by adding the following to the end of said Paragraph (5):
RESOLVED, that pursuant to the authority expressly vested in the Board of
Directors of the Corporation by Paragraph 5 of the Certificate of Incorporation
of the Corporation, the Board of Directors hereby fixes and determines the
voting rights, designations, preferences, qualifications, privileges,
limitations, restrictions, options, conversion rights and other special or
relative rights of the foregoing series of the preferred stock, par value $.01
per share, which shall be designated as Series A Convertible Preferred Stock
(the "Series A Preferred Stock").
1. Designation. One hundred fifty thousand (150,000) shares of preferred
stock, par value $.01 per share, of the Corporation are hereby constituted as a
series of the preferred stock designated as "Series A Convertible Preferred
Stock"; provided, however, that the Corporation shall issue any such shares in
excess of ninety-five thousand (95,000) only to pay dividends on the Series A
Preferred Stock as provided in Section 2(a)(i).
2. Dividends.
(a) Dividends on Series A Preferred Stock. The Corporation shall pay, when
and as declared by the Corporation's Board of Directors, to the holders of the
Series A Preferred Stock, out of the assets of the Corporation legally available
therefor, dividends at the times, in the amounts and with such priorities as
follows:
(i) Dividend Rate. Dividends on shares of Series A Preferred Stock
will be payable in arrears in cash or, at the option of the Corporation, in
additional shares of Series A Preferred Stock, at a rate per annum equal to (x)
until March 31, 2004, 7.00% of the Preferred Liquidation Value thereof on the
Dividend Payment Date and (y) on and after March 31, 2004, 16.00% of the
Preferred Liquidation Value thereof on the Dividend Payment Date. Dividends will
be calculated on the basis of a 360-day year.
(ii) Accrual of Dividends.
(A) Dividends on each share of Series A Preferred Stock shall accrue
cumulatively on a daily basis from the Issue Date to the date on which the
redemption or conversion of such share of Series A Preferred Stock shall
have been effected, whether or not such dividends have been declared and
whether or not there shall be (at the time such dividends became or become
payable or any other time) profits, surpluses or other funds of the
Corporation legally available for the payment of dividends.
(B) To the extent not paid on any Dividend Payment Date for any reason
other than the Corporation's compliance with Section 2(b) hereof, all
dividends which have accrued on any share of Series A Preferred Stock then
outstanding during the period from and including the preceding Dividend
Payment Date (or from and including the Issue Date in the case of the
initial Dividend Payment Date) to (but excluding) such Dividend Payment
Date shall be added on such Dividend Payment Date to the Preferred
Liquidation Value of such share of Series A Preferred Stock (so that,
without limitation, dividends shall thereafter accrue in respect of the
amount of such accrued but unpaid dividends) and shall remain a part
thereof until (but only until) such dividends are paid.
(iii) Payment Dates. Full cumulative dividends on the Series A
Preferred Stock shall be payable semi-annually, on March 31 and September 30, in
each year (each, a "Dividend Payment Date"). If any Dividend Payment Date shall
be on a day other than a Business Day, then the Dividend Payment Date shall be
on the next succeeding Business Day. An amount equal to the full cumulative
dividends shall also be payable, in satisfaction of such dividend obligation,
upon liquidation as provided under Section 3 hereof, and upon redemption as
provided under Section 6 hereof. The Board of Directors may fix a record date
for the determination of holders
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of shares of Series A Preferred Stock entitled to receive payment of the
dividends payable pursuant to this Section 2, which record date shall not be
more than 60 days prior to the Dividend Payment Date.
(iv) Amounts Payable. The amount of dividends payable on Series A
Preferred Stock on each Dividend Payment Date shall be the full cumulative
dividends which are unpaid through and including such Dividend Payment Date.
Dividends which are not paid for any reason whatsoever on a Dividend Payment
Date shall cumulate until paid and shall be payable on the next Dividend Payment
Date on which payment can lawfully be made (or upon liquidation or redemption as
provided herein). Holders of shares of Series A Preferred Stock called for
redemption on a redemption date falling between the close of business on a
dividend payment record date and the opening of business on the corresponding
Dividend Payment Date shall, in lieu of receiving such dividend payment on the
Dividend Payment Date fixed therefor, receive an amount equal to such dividend
payment (consisting of all accumulated and unpaid dividends through the
redemption date) on the date fixed for redemption. If for whatever reason all
payments have not been made with respect to any share of Series A Preferred
Stock as required by Section 3 on a distribution date or all payments have not
been made with respect to any share of Series A Preferred Stock as required by
Section 6 on a redemption date (other than because of a failure by the holder
thereof to tender such shares for payment on such date), then, notwithstanding
any other provision hereof, dividends shall continue to accumulate on such
outstanding shares until paid.
(v) Compliance with Section 2(b). Notwithstanding any other provision
hereof, any dividend not paid by the Corporation under this Section 2(a) because
of the Corporation's compliance with Section 2(b) will be deemed paid under the
provision of this Certificate of Amendment.
(b) Dividends on Common Stock. In the event that (i) the Corporation shall
at any time or from time to time declare, order, pay or make a dividend or other
distribution (whether in cash, securities, rights to purchase securities or
other property) on its Common Stock and (ii) such dividend or other distribution
exceeds on a per share of Common Stock equivalent basis the amount payable on a
share of Series A Preferred Stock on the Dividend Payment Date immediately
following the declaration of such dividend or other distribution on the Common
Stock, the holders of the Series A Preferred Stock shall receive, in lieu of the
dividend payable under Section 2(a) on such Dividend Payment Date, from the
Corporation, with respect to each share of Series A Preferred Stock held, a
dividend or distribution that is the same dividend or distribution that would be
received by a holder of the number of shares of Common Stock into which such
share of Series A Preferred Stock is convertible pursuant to the provisions of
Section 5 hereof on the record date for such dividend or distribution. Any such
dividend or distribution shall be declared, ordered, paid or made on the Series
A Preferred Stock at the same time such dividend or distribution is declared,
ordered, paid or made on the Common Stock.
(c) Limitation on Dividends, Repurchases and Redemptions. So long as any
shares of Series A Preferred Stock shall be outstanding, the Corporation shall
not declare or pay or set apart for payment any dividends or make any other
distributions on any Junior Securities, whether in cash, securities, rights to
purchase securities or other property (other than dividends or distributions
payable in shares of the class or series upon which such dividends or
distributions are declared or paid), nor shall the Corporation or any of its
Subsidiaries purchase, redeem or otherwise acquire for any consideration or make
payment on account of the purchase, redemption or other retirement of any Parity
Securities or Junior Securities, nor shall any monies be paid or made available
for a sinking
3
fund for the purchase or redemption of any Parity Securities or Junior
Securities, unless with respect to all of the foregoing all dividends or other
distributions to which the holders of Series A Preferred Stock shall have been
entitled, pursuant to Sections 2(a) and 2(b) hereof, shall have been paid or
declared and a sum of money has been set apart for the full payment thereof.
(d) Pro Rata Payments. In the event that full dividends are not paid or
made available to the holders of all outstanding shares of Series A Preferred
Stock and of any Parity Securities and funds available for payment of dividends
shall be insufficient to permit payment in full to holders of all such stock of
the full preferential amounts to which they are then entitled, then the entire
amount available for payment of dividends shall be distributed ratably among all
such holders of Series A Preferred Stock and of any Parity Securities in
proportion to the full amount to which they would otherwise be respectively
entitled.
3. Preference on Liquidation.
(a) Liquidation Preference for Series A Preferred Stock. In the event that
the Corporation shall liquidate, dissolve or wind up, whether voluntarily or
involuntarily, no distribution shall be made to the holders of shares of Common
Stock or other Junior Securities (and no monies shall be set apart for such
purpose) unless prior thereto, the holders of shares of Series A Preferred Stock
shall have received an amount per share equal to the greater of (i) the sum of
(x) the Liquidation Value, plus (y) all declared but unpaid dividends thereon
through the date of distribution, (ii) ratable distributions determined with
respect to the holders of Series A Preferred Stock and Common Stock on the basis
of the number of shares of Common Stock into which such Series A Preferred Stock
could be converted pursuant to the provisions of Section 5 hereof immediately
prior to such distribution and (iii) the Payment Amount, on a per share basis
(the greater of (i), (ii) and (iii) above is herein referred to as the "Series A
Liquidation Preference").
(b) Pro Rata Payments. If, upon any such liquidation, dissolution or other
winding up of the affairs of the Corporation, the assets of the Corporation
shall be insufficient to permit the payment in full of the Series A Liquidation
Preference for each share of Series A Preferred Stock then outstanding and the
full liquidating payments on all Parity Securities, then the assets of the
Corporation remaining shall be ratably distributed among the holders of Series A
Preferred Stock and of any Parity Securities in proportion to the full amounts
to which they would otherwise be respectively entitled if all amounts thereon
were paid in full.
(c) Sale Not a Liquidation. Neither the voluntary sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets of the
Corporation nor the consolidation, merger or other business combination of the
Corporation with or into one or more corporations shall be deemed to be a
liquidation, dissolution or winding-up, voluntary or involuntary, of the
Corporation.
(d) Notice of Liquidation. Written notice of any liquidation, dissolution
or winding up of the Corporation, stating the payment date or dates when and the
place or places where amounts distributable in such circumstances shall be
payable, shall be given by first class mail, postage prepaid, not less than
thirty (30) days prior to any payment date specified therein, to the holders of
record of the Series D Preferred Stock at their respective addresses as shall
appear on the records of the Corporation.
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4. Voting.
(a) General. In addition to any voting rights provided in the Corporation's
Certificate of Incorporation or by law, the Series A Preferred Stock shall vote
together with the Common Stock as a single class on all actions to be voted on
by the stockholders of the Corporation. Each share of Series A Preferred Stock
shall entitle the holder thereof to such number of votes per share on each such
action as shall equal the number of shares of Common Stock (including fractions
of a share) into which each share of Series A Preferred Stock is then
convertible; provided, however, that each holder of Series A Preferred Stock and
Conversion Shares (as defined below in the definition of "Fleming Holders")
hereby irrevocably constitutes Kevin J. Zugibe and Stephen P. Mandracchia, and
each of them, as such holder's proxy, with full power of substitution in each of
them, in the name, place and stead of such holder, to vote at all meetings of
the stockholders of the Corporation (other than with respect to matters
requiring a separate class vote of holders of the Series A Preferred Stock) that
number of voting shares of the Corporation of all classes, including any now
owned or hereafter acquired shares held by such holder and its Affiliates, in
the aggregate, as shall exceed twenty-nine percent (29%) of the votes entitled
to be cast by all stockholders of the Corporation (as contemplated in the first
sentence of this Section 4(a)). Each such proxy is coupled with an interest. The
holders of Series A Preferred Stock shall be entitled to notice of any
stockholder's meeting in accordance with the By-Laws of the Corporation.
(b) Board of Directors. The Corporation shall not, without the written
consent or affirmative vote of the holders representing at least a majority of
the shares of Series A Preferred Stock then outstanding, given in writing or by
vote at a meeting, consenting or voting (as the case may be) separately as a
class, increase the maximum number of directors constituting the Board of
Directors to a number in excess of nine (9).
(c) Election of Directors. So long as the Fleming Holders hold at least
thirty-five percent (35%) of the shares of Series A Preferred Stock originally
issued on March 30, 1999, the Fleming Holders (or if no such shares are held by
a Fleming Holder, any transferee of shares of Series A Preferred Stock consented
to by the Corporation (which consent shall not be unreasonably withheld) (the
"Permitted Preferred Transferee)), shall be entitled, but not required, to elect
up to two (2) directors of the Corporation. So long as the Fleming Holders hold
at least twenty percent (20%), but less than thirty-five (35%) percent, of the
shares of Series A Preferred Stock originally issued on March 30, 1999, the
Fleming Holders (or if no such shares are held by a Fleming Holder, any
Permitted Preferred Transferee"), shall be entitled, but not required, to elect
one (1) director of the Corporation. A director elected in accordance with this
Section 4 is referred to as a "Preferred Director".
Holders of at least a majority of the outstanding shares of Series A
Preferred Stock shall exercise their right, as described above, to elect each
Preferred Director by written notice to the Corporation of the identity of the
person nominated to serve as Preferred Director, and requesting the Corporation
to call a meeting of the holders of Series A Preferred Stock to act upon such
nomination. Each such nomination shall be subject to approval by the
Corporation, such approval not to be unreasonably withheld. Promptly upon such
request, the holders of Series A Preferred Stock, consenting or voting as a
class (as the case may be), shall be entitled to elect a Preferred Director at
any meeting (or in a written consent in lieu thereof) held for the purpose of
electing directors until such time as holders of at least a majority of the
outstanding shares of Series A Preferred Stock shall
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notify the Corporation in writing that they no longer wish to exercise their
right to elect a Preferred Director.
At any meeting (or in a written consent in lieu thereof) held for the
purpose of electing directors, (x) the presence in person or by proxy (or the
written consent) of the holders representing a majority of the shares of Series
A Preferred Stock then outstanding shall constitute a quorum of such class for
the election of a Preferred Director; and (y) the absence of the presence in
person or by proxy (or written consent) of the holders representing less than a
majority of the shares of Common Stock then outstanding shall not affect the
right of a quorum of holders of Series A Preferred Stock to elect a Preferred
Director. Any Preferred Director may be removed with or without cause by, and
shall not be removed except by, the holders representing a majority of the
shares of Series A Preferred Stock then outstanding, present in person or by
proxy and voting at a meeting of stockholders, or of the holders of Series A
Preferred Stock called for that purpose, or by written consent signed by the
holders representing a majority of the shares of Series A Preferred Stock then
outstanding.
A vacancy in the directorship to be held by a Preferred Director shall be
filled only by vote or written consent of the holders of the Series A Preferred
Stock as provided above. Unless otherwise required by the laws of the State of
New York, any holder or holders of at least a majority of the outstanding shares
of Series A Preferred Stock shall have the right to call a meeting of the
holders of Series A Preferred Stock of the Corporation for the purpose of
electing a Preferred Director and filling vacancies of Preferred Directors.
5. Conversion. The holders of shares of Series A Preferred Stock shall have
the right to convert all or a portion of such shares into fully paid and
nonassessable shares of Common Stock or any capital stock or other securities
into which such Common Stock shall have been changed or any capital stock or
other securities resulting from a reclassification thereof as follows:
(a) Right to Convert. Subject to and upon compliance with the provisions of
this Section 5, a holder of shares of Series A Preferred Stock shall have the
right, at the option of such holder, at any time, to convert any or all of such
shares into the number of fully paid and nonassessable shares of Common Stock
(calculated as to each conversion rounded down to the nearest 1/100th of a
share) obtained by dividing (i) the aggregate Liquidation Value of the shares to
be converted, plus all declared but unpaid dividends thereon through the date of
conversion (unless the holder of shares of Series A Preferred Stock being so
converted shall have elected to receive any such dividends in respect of the
shares being converted subsequent to conversion), by (ii) the Conversion Price,
and by surrender of such shares, such surrender to be made in the manner
provided in paragraph (b) of this Section 5. The Common Stock issuable upon
conversion of the shares of Series A Preferred Stock, when such Common Stock
shall be issued in accordance with the terms hereof, is hereby declared to be
and shall be duly authorized, validly issued, fully paid and nonassessable
Common Stock held by the holders thereof.
(b) Mechanics of Conversion. Each holder of Series A Preferred Stock that
desires to convert the same into shares of Common Stock shall surrender the
certificate or certificates therefor, duly endorsed, at the principal office of
the Corporation or of any transfer agent for the Series A Preferred Stock or
Common Stock, accompanied by written notice to the Corporation that such holder
elects to convert the same and stating therein the number of shares of Series A
Preferred Stock being converted and whether all declared and unpaid dividends in
respect of such shares shall be included in the calculation set forth in Section
5(a) hereof, and setting forth the name or names
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in which such holder wishes the certificate or certificates for shares of Common
Stock to be issued if such name or names shall be different from that of such
holder. Thereupon, the Corporation shall issue and deliver at such office on the
fifth succeeding Business Day after receipt of such certificate and notice
(unless such conversion is in connection with an underwritten public offering of
Common Stock, in which event concurrently with such conversion) to such holder
or on such holder's written order, (i) a certificate or certificates for the
number of validly issued, fully paid and nonassessable full shares of Common
Stock to which such holder is entitled and (ii) if less than the full number of
shares of Series A Preferred Stock evidenced by the surrendered certificate or
certificates being converted, a new certificate or certificates, of like tenor,
for the number of shares evidenced by such surrendered certificate or
certificates less the number of shares converted.
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date of such surrender of the shares to be
converted (except that if such conversion is in connection with an underwritten
public offering of Common Stock, then such conversion shall be deemed to have
been effected upon such surrender) so that the rights of the holder thereof as
to the shares being converted shall cease at such time except for (x) the right
to receive shares of Common Stock and (y) if the holder of the shares being so
converted shall have elected to receive dividends subsequent to such conversion,
all accrued and unpaid dividends in accordance herewith, and the person entitled
to receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder of such shares of Common Stock at
such time.
(c) Conditional Conversion. Notwithstanding any other provision hereof, if
conversion of any shares of Series A Preferred Stock is to be made in connection
with a public offering of Common Stock or any transaction described in Section
5(d)(vii) hereof, the conversion of any shares of Series A Preferred Stock may,
at the election of the holder thereof, be conditioned upon the consummation of
the public offering or such transaction, in which case such conversion shall not
be deemed to be effective until the consummation of such public offering or
transaction.
(d) Adjustment of the Conversion Price. The Conversion Price shall be
adjusted from time to time as follows:
(i) Adjustment for Stock Splits and Combinations. If the Corporation
at any time or from time to time after the Issue Date, pays a stock
dividend in shares of its Common Stock, issues any convertible debt
securities, effects a subdivision of the outstanding Common Stock, combines
the outstanding shares of Common Stock, issues by reclassification of
shares of its Common Stock any shares of capital stock of the Corporation,
makes a distribution of any of its assets (other than cash dividends
payable out of earnings or retained earnings in the ordinary course of
business) then, in each such case, the Conversion Price in effect
immediately prior to such event shall be adjusted so that each holder of
shares of Series A Preferred Stock shall have the right to convert its
shares of Series A Preferred Stock into the number of shares of Common
Stock which it would have owned after the event had such shares of Series A
Preferred Stock been converted immediately before the happening of such
event. Any adjustment under this Section 5(d)(i) shall become effective
retroactively immediately after the record date in the case of a dividend
and distribution and shall become effective immediately after the effective
date in the case of a issuance, subdivision, combination or
reclassification. If the Corporation pays a stock dividend in shares of its
Common Stock and the holders of the Series A Preferred Stock received such
stock dividend
7
pursuant to Section 2(b) hereof, the Conversion Price shall not be adjusted
for such stock dividend under this Section 5(d)(i).
(ii) Issuance of Additional Shares of Stock. If the Corporation shall
(except as hereinafter provided) issue or sell Additional Shares of Stock
in exchange for consideration in an amount per Additional Share of Stock
less than the Conversion Price in effect immediately prior to such issuance
or sale of Additional Shares of Stock, then the Conversion Price as to the
Common Stock into which the Series A Preferred Stock is convertible
immediately prior to such adjustment shall be adjusted to equal the
consideration paid per Additional Share of Stock. The provisions of this
Section 5(d)(ii) shall not apply to any issuance of Additional Shares of
Common Stock for which an adjustment is provided under Section 5(d)(i) or
which are dividends or distributions received by the holders of the Series
A Preferred Stock pursuant to Section 2(b) hereof.
(iii) (A) Issuance of Warrants or Other Rights. If at any time (i) the
Corporation shall in any manner (whether directly or by assumption in a
merger in which the Corporation is the surviving corporation) issue or sell
any warrants or other rights to subscribe for or purchase any Additional
Shares of Stock or any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the
consideration received for such warrants or other rights or such
Convertible Securities shall be less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then the Conversion
Price shall be adjusted as provided in Section 5(d)(ii). No further
adjustments of the Conversion Price shall be made upon the actual issue of
such Common Stock or of such Convertible Securities, upon exercise of such
warrants or other rights or upon the actual issue of such Common Stock upon
such conversion or exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. If at any time the Corporation
shall in any manner (whether directly or by assumption in a merger in which
the Corporation is the surviving corporation) issue or sell, any
Convertible Securities, whether or not the rights to convert thereunder are
immediately exercisable, and the consideration received for such
Convertible Securities shall be less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then the Conversion
Price shall be adjusted as provided in Section 5(d)(ii). No adjustment of
the Conversion Price shall be made under this Section 5(d)(iii)(B) upon the
issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor,
if any such adjustment shall previously have been made upon the issuance of
such warrants or other rights pursuant to Section 5(d)(iii)(A). No further
adjustments of the Conversion Price shall be made upon the actual issue of
such Common Stock upon conversion of such Convertible Securities and, if
any issue or sale of such Convertible Securities is made upon exercise of
any warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the Conversion Price have
been or are to be made pursuant to other provisions of this Section 5(d),
no further adjustments of the Conversion Price shall be made by reason of
such issue or sale.
(iv) Superseding Adjustments. If, at any time after any adjustment of
the Conversion Price at which the Series A Preferred Stock is convertible
shall have been made pursuant to Section 5(d)(iii) as a result of any
issuance of warrants, rights or Convertible Securities,
8
(A) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire, and all
or a portion of such warrants or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible
Securities, as the case may be, shall not have been exercised, or
(B) the consideration per share for which Additional Shares of
Stock are issuable pursuant to such warrants or rights, or the terms
of such other Convertible Securities, shall be increased (to an amount
greater than that which triggered the adjustment of the Conversion
Price pursuant to Section 5(d)(iii)) solely by virtue of provisions
therein contained for an automatic increase in such consideration per
share upon the occurrence of a specified date or event,
then such previous adjustment shall be rescinded and annulled and the
Additional Shares of Stock which were deemed to have been issued by virtue
of the computation made in connection with the adjustment so rescinded and
annulled shall no longer be deemed to have been issued by virtue of such
computation. Thereupon, a recomputation shall be made of the effect of such
warrants or rights or other Convertible Securities on the basis of
(C) treating the number of Additional Shares of Stock or other
property, if any, theretofore actually issued or issuable pursuant to
the previous exercise of any such warrants or rights or any such right
of conversion or exchange, as having been issued on the date or dates
of any such exercise and for the consideration actually received and
receivable therefor, and
(D) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of such increase of the
consideration per share for which Additional Shares of Stock or other
property are issuable under such warrants or rights or other
Convertible Securities;
whereupon a new adjustment of the Conversion Price at which the Series A
Preferred Stock is convertible shall be made, which new adjustment shall
supersede the previous adjustment so rescinded and annulled.
(v) Antidilution Adjustments Under Other Securities. Without limiting
any other rights available hereunder to the holders of the Series A
Preferred Stock, if there is an antidilution adjustment (i) under any
Convertible Securities, whether issued prior to or after the Issue Date, or
(ii) under any rights, options or warrants to purchase Additional Shares of
Stock, whether issued prior to or after the Issue Date which, in either
case, results in a reduction in the exercise or purchase price with respect
to such security or rights or results in an increase in the number of
Additional Shares of Stock obtainable under such Convertible Security,
right, option or warrant, then an adjustment shall be made to the
Conversion Price hereunder. Any such adjustment pursuant to this Section
5(d)(v) shall be by whichever of the following methods results in a lower
Conversion Price: (A) a reduction in the Conversion Price equal to the
percentage reduction in such exercise or purchase price with respect to
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such Convertible Security, right, option or warrant or (B) a reduction in
the Conversion Price which will result in the same percentage increase in
the number of shares of Common Stock available hereunder as the percentage
increase in the number of Additional Shares of Stock available under such
Convertible Security, right, option or warrant. Any such adjustment under
this Section 5(d)(v) shall only be made if it would result in a lower
Conversion Price than that which would be determined pursuant to any other
antidilution adjustment otherwise required hereunder as a result of the
event or circumstance which triggered the adjustment to such Convertible
Security, right, option or warrant, and if an adjustment is made pursuant
to this Section 5(d)(v), such other antidilution adjustment otherwise
required hereunder shall not be made as a result of such event or
circumstance.
(vi) Other Provisions Applicable to Adjustments under this Section.
The following provisions shall be applicable to making adjustments to the
shares of Common Stock into which the Series A Preferred Stock is
convertible and the Conversion Price at which the Series A Preferred Stock
is convertible provided for in this Section 5(d):
(A) Computation of Consideration. To the extent that any
Additional Shares of Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any Additional
Shares of Stock or any Convertible Securities shall be issued for cash
consideration, the consideration received by the Corporation therefor
shall be the amount of the cash received by the Corporation therefor,
or, if such Additional Shares of Stock or Convertible Securities are
offered by the Corporation for subscription, the subscription price,
or, if such Additional Shares of Stock or Convertible Securities are
sold to underwriters or dealers for public offering without a
subscription offering, the public offering price (in any such case
subtracting any amounts paid or receivable for accrued interest or
accrued dividends and any compensation, discounts or expenses paid or
incurred by the Corporation for and in the underwriting of, or
otherwise in connection with, the issuance thereof, to the extent such
amounts shall exceed in any such case five percent (5%) of the amount
of cash received, subscription price or public offering price). To the
extent that such issuance shall be for a consideration other than
cash, then except as herein otherwise expressly provided, the amount
of such consideration shall be deemed to be the fair value of such
consideration at the time of such issuance as determined in good faith
by the Board of Directors of the Corporation. In case any Additional
Shares of Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase such Additional Shares of Stock or
Convertible Securities shall be issued in connection with any merger
in which the Corporation issues any securities, the amount of
consideration therefor shall be deemed to be the fair value, as
determined in good faith by the Board of Directors of the Corporation,
of such portion of the assets and business of the nonsurviving
corporation as such Board in good faith shall determine to be
attributable to such Additional Shares of Stock, Convertible
Securities, warrants or other rights, as the case may be. The
consideration for any Additional Shares of Stock issuable pursuant to
any warrants or other rights to subscribe for or purchase the same
shall be the consideration received by the Corporation for issuing
such warrants or other rights plus the additional consideration
payable to the Corporation upon exercise of such warrants or other
rights. The consideration for any Additional Shares of Stock issuable
pursuant to the terms of any Convertible Securities shall be the
consideration received by the Corporation for issuing warrants or
other rights to subscribe for or
10
purchase such Convertible Securities, plus the consideration paid or
payable to the Corporation in respect of the subscription for or
purchase of such Convertible Securities, plus the additional
consideration, if any, payable to the Corporation upon the exercise of
the right of conversion or exchange in such Convertible Securities. In
case of the issuance at any time of any Additional Shares of Stock or
Convertible Securities in payment or satisfaction of any dividends
upon any class of stock other than Common Stock, the Corporation shall
be deemed to have received for such Additional Shares of Stock or
Convertible Securities a consideration equal to the amount of such
dividend so paid or satisfied.
(B) When Adjustments to Be Made. The adjustments required by this
Section 5(d) shall be made whenever and as often as any event
requiring an adjustment shall occur, except that any adjustment of the
Conversion Price that would otherwise be required may be postponed
(except in the case of a subdivision or combination of shares of the
Common Stock, as provided for in Section 5(d)(i)) up to, but not
beyond, the date of exercise if such adjustment either by itself or
with other adjustments not previously made amount to a change in the
Conversion Price of less than $.05. Any adjustment representing a
change of less than such minimum amount (except as aforesaid) which is
postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this Section
5(d) and not previously made, would result in a minimum adjustment or
on the date of conversion. For the purpose of any adjustment, any
event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(C) Fractional Interests. In computing adjustments under this
Section 5(d), fractional interests in the Common Stock shall be taken
into account to the nearest 1/100th of a share.
(D) Challenge to Good Faith Determination. Whenever the Board of
Directors of the Corporation shall be required to make a determination
in good faith of the fair value of any item under this Section 5(d),
such determination may be challenged in good faith by (1) any holder
of thirty percent (30%) or more of Series A Preferred Stock or (2) a
Designated Entity, and any dispute shall be resolved by an investment
banking firm of recognized national standing jointly selected by the
Corporation and such holder or Designated Entity. The fees of such
investment banker shall be borne by such holder or Designated Entity
unless the Corporation's calculation is determined to be understated
by five percent (5%) or more.
(vii) Reorganization, Reclassification, Merger or Consolidation. If
the Corporation shall at any time reorganize or reclassify the outstanding
shares of Common Stock (other than a change in par value, or from no par
value to par value, or from par value to no par value, or as a result of a
subdivision or combination) or consolidate with or merge into another
corporation (where the Corporation is not the continuing corporation after
such merger or consolidation), the holders of Series A Preferred Stock
shall thereafter be entitled to receive upon conversion of the Series A
Preferred Stock in whole or in part, the same kind and number of shares of
stock and other securities, cash or other property (and upon the same terms
and with the same rights) as would have been distributed to a holder upon
such reorganization, reclassification, consolidation or merger had such
holder converted its
11
Series A Preferred Stock immediately prior to such reorganization,
reclassification, consolidation or merger (subject to subsequent
adjustments under Section 5(d) hereof). The Conversion Price upon such
conversion shall be the Conversion Price that would otherwise be in effect
pursuant to the terms hereof. Notwithstanding anything herein to the
contrary, the Corporation will not effect any such reorganization,
reclassification, merger or consolidation unless prior to the consummation
thereof, the corporation which may be required to deliver any stock,
securities or other assets upon the conversion of the Series A Preferred
Stock shall agree by an instrument in writing to deliver such stock, cash,
securities or other assets to the holders of the Series A Preferred Stock.
A sale, transfer or lease of all or substantially all of the assets of the
Corporation to another person shall be deemed a reorganization,
reclassification, consolidation or merger for the foregoing purposes.
(viii) Exceptions to Adjustment of Conversion Price. Anything herein
to the contrary notwithstanding, the Corporation shall not make any
adjustment of the Conversion Price in the case of Additional Shares of
Stock.
(ix) Chief Financial Officer's Opinion. Upon each adjustment of the
Conversion Price, and in the event of any change in the rights of a holder
of Series A Preferred Stock by reason of other events herein set forth,
then and in each such case, the Corporation will promptly obtain an opinion
of the chief financial officer of the Corporation, stating the adjusted
Conversion Price, or specifying the other shares of the Common Stock,
securities or assets and the amount thereof receivable as a result of such
change in rights, and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. The
Corporation will promptly mail a copy of such opinion to the holders of
Series A Preferred Stock. If a holder of thirty percent (30%) or more of
Series A Preferred Stock or a Designated Entity disagrees with such
calculation, the Corporation agrees to obtain within forty-five (45)
Business Days an opinion of a firm of independent certified public
accountants selected by the Corporation's Board of Directors and acceptable
to such holder to review such calculation and the opinion of such firm of
independent certified public accountants shall be final and binding on the
parties and shall be conclusive evidence of the correctness of the
computation with respect to any such adjustment of the Conversion Price.
The fees of such accountants shall be borne by such holder or Designated
Entity unless the calculation of the chief financial officer of the
Corporation is determined to be understated by five percent (5%) or more.
(x) Corporation to Prevent Dilution. In case at any time or from time
to time conditions arise by reason of action taken by the Corporation,
which in the good faith opinion of its Board of Directors or a majority of
the holders of the Series A Preferred Stock are not adequately covered by
the provisions of this Section 5(d), and which might materially and
adversely affect the exercise rights of the holders of the Series A
Preferred Stock, the Board of Directors of the Corporation shall appoint
such firm of independent certified public accountants acceptable to a
majority of the holders of the Series A Preferred Stock, which shall give
their opinion upon the adjustment, if any, on a basis consistent with the
standards established in the other provisions of this Section 5(d),
necessary with respect to the Conversion Price, so as to preserve, without
dilution (other than as specifically contemplated by the Certificate of
Incorporation), the exercise rights of the holders of the Series A
Preferred Stock. Upon receipt of such opinion, the Board of Directors of
the Corporation shall forthwith make the adjustments described therein.
12
(e) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of Section 5 hereof and in the taking of all such action as
may be necessary or appropriate in order to protect the conversion rights of the
holders of the Series A Preferred Stock against impairment.
(f) No Fractional Share Adjustments. No fractional shares shall be issued
upon conversion of the Series A Preferred Stock. If more than one share of the
Series A Preferred Stock is to be converted at one time by the same stockholder,
the number of full shares issuable upon such conversion shall be computed on the
basis of the aggregate amount of the shares to be converted. Instead of any
fractional shares of Common Stock which would otherwise be issuable upon
conversion of any shares of Series A Preferred Stock, the Corporation will pay a
cash adjustment in respect of such fractional interest in an amount equal to the
same fraction of the Market Price per share of Common Stock at the close of
business on the day of conversion which such shares of Series A Preferred Stock
would be convertible into on such date.
(g) Shares to be Reserved. The Corporation shall at all times reserve and
keep available, out of its authorized and unissued stock, solely for the purpose
of effecting the conversion of the Series A Preferred Stock, such number of
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Series A Preferred Stock from time to time outstanding.
The Corporation shall from time to time, in accordance with the laws of the
State of New York, increase the authorized number of shares of Common Stock if
at any time the number of shares of authorized but unissued Common Stock shall
be insufficient to permit the conversion in full of the Series A Preferred
Stock.
(h) Taxes and Charges. The Corporation will pay any and all issue or other
taxes that may be payable in respect of any issuance or delivery of shares of
Common Stock on conversion of the Series A Preferred Stock. The Corporation
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issuance or delivery of Common Stock in a name
other than that of the Series A Preferred Stock, and no such issuance or
delivery shall be made unless and until the Person requesting such issuance has
paid to the Corporation the amount of such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(i) Accrued Dividends. Upon conversion of any shares of Series A Preferred
Stock, the holder thereof shall be entitled to receive any accrued but unpaid
dividends in respect of the shares of Series A Preferred Stock so converted to
the date of such conversion.
(j) Closing of Books. The Corporation will at no time close its transfer
books against the transfer of any shares of Series A Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Series A Preferred Stock in any manner which interferes with the timely
conversion of such shares of Series A Preferred Stock.
13
6. Redemption
(a) Redemption Price. Any redemption of the Series A Preferred Stock
pursuant to Section 6(b) shall be at a price per share equal to the Liquidation
Value plus all declared but unpaid dividends thereon through the redemption date
(the "Mandatory Redemption Price"). Any redemption of the Series A Preferred
Stock pursuant to Section 6(d) shall be at a price per share equal to the Series
A Liquidation Preference, except that, for purposes of calculation of the
redemption price under this Section 6(a), clause (ii) of the definition of
Series A Liquidation Preference in Section 3(a) hereof shall provide for the
amount per share such holders would have received if such holders had converted
their shares of Series A Preferred Stock into shares of Common Stock immediately
prior to the Fundamental Change (the "Optional Redemption Price"). The Mandatory
Redemption Price shall be paid, at the election of the Corporation, in cash or
shares of Common Stock which have been registered under a registration statement
under the Securities Act of 1933, as amended, which registration statement is
effective, provided, that, for purposes of calculating the number of shares of
Common Stock to be received by each holder of Series A Preferred Stock, each
such share of Common Stock shall be valued at 90% of the Market Price.
(b) Redemption at the Corporation's Option. Subject to Section 6(a) hereof,
the Corporation may, it its option, redeem all, but not less than all, of the
then outstanding shares of Series A Preferred Stock at the Mandatory Redemption
Price on March 31, 2004.
(c) Procedures for Redemption at the Corporation's Option. In the event the
Corporation shall redeem shares of Series A Preferred Stock pursuant to Section
6(b), the Corporation shall give written notice of such redemption by first
class mail, postage prepaid, mailed not less than thirty (30) nor more than
ninety (90) days prior to the redemption date, to each holder of record of the
shares to be redeemed, at such holder's address as the same appears on the stock
records of the Corporation. Each such notice shall state: (i) the redemption
date; (ii) the number of shares of Series A Preferred Stock to be redeemed;
(iii) the Mandatory Redemption Price or Optional Redemption Price, as the case
may be; (iv) the place or places where certificates for such shares are to be
surrendered for payment of the Mandatory Redemption Price or Optional Redemption
Price, as the case may be; (v) that payment will be made upon presentation and
surrender of such Series A Preferred Stock; (vi) the then current Conversion
Price; (vii) that dividends on the shares to be redeemed shall cease to accrue
following such redemption date; (viii) that such redemption is mandatory, if
pursuant to Section 6(b); and (ix) that dividends, if any, accrued to and
including the date fixed for redemption will be paid as specified in such
notice. Notice having been mailed as aforesaid, from and after the redemption
date, unless the Corporation shall be in default in the payment of the Mandatory
Redemption Price or Optional Redemption Price, as the case may be (including any
accrued and unpaid dividends to (and including) the date fixed for redemption),
(A) dividends on the shares of the Series A Preferred Stock so called for
redemption shall cease to accrue, (B) such shares shall be deemed no longer
outstanding and (C) all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation (i) any moneys
payable upon redemption without interest thereon and (ii) any shares of Series A
Preferred Stock and Common Stock pursuant to Section 6(a) hereof) shall cease.
Upon surrender in accordance with such notice of the certificates for any
such shares so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the notice shall so state), such shares
shall be redeemed by the Corporation at the applicable Mandatory Redemption
Price.
14
Notwithstanding the foregoing, if notice of redemption has been given
pursuant to this Section 6 and any holder of shares of Series A Preferred Stock
shall, prior to the close of business on the third (3rd) Business Day preceding
the redemption date, give written notice to the Corporation pursuant to Section
5(b) hereof of the conversion of any or all of the shares to be redeemed held by
such holder (accompanied by a certificate or certificates for such shares, duly
endorsed or assigned to the Corporation), then the conversion of such shares to
be redeemed shall become effective as provided in Section 5 hereof.
(d) Redemption at Option of Holder Upon a Fundamental Change. Subject to
Section 6(a) hereof, if a Fundamental Change occurs, each holder of Series A
Preferred Stock shall have the right, at the holder's option, to require the
Corporation to repurchase all of such holder's Series A Preferred Stock, or any
portion thereof, on the date (the "Repurchase Date") selected by the Corporation
that is not less than ten (10) nor more than twenty (20) days after the Final
Surrender Date, at a price per share equal to the Optional Redemption Price. The
Corporation agrees that it will not complete any Fundamental Change unless
proper provision has been made to satisfy its obligations under this Section
6(d).
(e) Notice of Fundamental Change. Within thirty (30) days after the
occurrence of a Fundamental Change, the Corporation shall mail to all holders of
record of the Series A Preferred Stock a notice in the manner and containing the
information set out in Section 6(c), except that, for purposes of this Section
6(e), such notice shall also describe the occurrence of such Fundamental Change
and the repurchase right arising as a result thereof. To exercise the repurchase
right, a holder of Series A Preferred Stock must surrender, on or before the
date which is, subject to any contrary requirements of applicable law, thirty
(30) days after the date of mailing of the notice from the Corporation (the
"Final Surrender Date"), the certificates representing the Series A Preferred
Stock with respect to which the right is being exercised, duly endorsed for
transfer to the Corporation, together with a written notice of election.
(f) Election Irrevocable. An election by a holder of Series A Preferred
Stock to have the Corporation repurchase shares of Series A Preferred Stock
pursuant to Section 6(d) shall become irrevocable at the close of business on
the relevant Repurchase Date.
7. Shares to be Retired. Any share of Series A Preferred Stock converted,
redeemed, repurchased or otherwise acquired by the Corporation shall be retired
and cancelled and shall upon cancellation be restored to the status of
authorized but unissued shares of preferred stock, subject to reissuance by the
Board of Directors as shares of preferred stock of one or more other series but
not as shares of Series A Preferred Stock.
8. Preemptive Rights.
(a) Except (i) for issuances of pro rata dividends to all holders of Common
Stock, (ii) stock issued to employees, officers or directors in connection with
management options or incentive plans approved by the Board of Directors, (iii)
stock issued in connection with any merger, acquisition or business combination
or (iv) stock issued for consideration amounting to less than $500,000 in any
single transaction where the purchase price is not less than the then applicable
Conversion Price, provided that the aggregate amount of all such transactions
shall not exceed $1,000,000, the holders of the Series A Preferred Stock, in
order to enable such holders to maintain
15
their fully diluted percentage ownership of the Corporation, shall have
preemptive rights, as hereinafter set forth, to purchase any capital stock,
including any warrants or securities convertible into capital stock, of the
Corporation hereafter issued by the Corporation so that a holder of the Series A
Preferred Stock shall hereafter be entitled to acquire a percentage of capital
stock which is hereafter issued equal to the same percentage of the issued and
outstanding Common Stock of the Corporation as is held (directly or obtainable
upon conversion of the Series A Preferred Stock) by such holder of Series A
Preferred Stock immediately prior to the date on which the capital stock is to
be issued. As used herein, "issue" (and variations thereof) includes sales and
transfers by the Corporation of treasury shares.
(b) The Corporation shall, before issuing any additional capital stock
(other than the exceptions referred to in Section 8(a) hereof), give written
notice thereof to the holders of the Series A Preferred Stock. Such notice shall
specify what type of instrument the Corporation intends to issue and the
consideration which the Corporation intends to receive therefor. For a period of
twenty (20) days following receipt by the holders of the Series A Preferred
Stock of such notice, the Corporation shall be deemed to have irrevocably
offered to sell to the holders of the Series A Preferred Stock a sufficient
number of shares of such capital stock so that the holders of the Series A
Preferred Stock, if such holders elect to acquire such shares as hereinafter set
forth, shall be capable of acquiring the same percentage of such shares as the
percentage of Common Stock beneficially owned (directly or obtainable upon
conversion of the Series A Preferred Stock) by such holders immediately prior to
the proposed issuance. In the event any such offer is accepted, in whole or in
part, by the holders of the Series A Preferred Stock, the Corporation shall sell
such shares to holders of the Series A Preferred Stock for the consideration and
on the precise terms set forth in the Corporation's notice (given under the
first two sentences of this paragraph). In the event that one or more holders of
the Series A Preferred Stock elects not to, or fails to, exercise its rights
under this Section 8(b) within the twenty (20) day period, then the Corporation
may issue the remaining shares of capital stock to third persons but only for
the same consideration set forth in the Corporation's notice (given under the
first two sentences of this paragraph) and no later than sixty (60) days after
the expiration of such twenty (20) day period. The closing for such transaction
shall take place as proposed by the Corporation with respect to the shares of
capital stock proposed to be issued, at which closing the Corporation shall
deliver certificates for the shares of capital stock in the respective names of
the holders of the Series A Preferred Stock against receipt of the consideration
therefor.
(c) Notwithstanding any other provision hereof, (i) the preemptive rights
granted to holders of Series A Preferred Stock by this Section 8 shall terminate
with respect to a share of Series A Preferred Stock upon the conversion or
redemption of such share of Series A Preferred Stock in accordance with the
provisions hereof and (ii) the holders of Series A Preferred Stock and
Conversion Shares shall not increase the fully diluted percentage ownership of
the Corporation beyond such level as exists immediately following the Issue
Date, whether by operation of the provisions of Section 2 or 5 hereof, through
an open market purchase or otherwise, except where the Corporation (a)
determines to pay dividends in additional shares of Series A Preferred Stock as
permitted by Section 2(a)(i), (b) is in financial distress and chooses to issue
securities to such holders, (c) repurchases outstanding shares of its capital
stock or takes other corporate action having a similar effect or (d) pursuant to
Section 5(d), has issued or sold Additional Shares of Stock in exchange for
consideration in an amount per Additional Share of Stock less than the
Conversion Price in effect immediately prior to such issuance or sale.
16
9. Call
(a) Call at the Corporation's Option. Subject to the other provisions of
this Section 9, on any date after March 30, 2001, the Corporation shall have the
right to purchase all (but not less than all) outstanding shares of Series A
Preferred Stock (the "Call"), provided, however, that (i) the Market Price of a
share of Common Stock is equal to, or greater than, an amount equal to 250% of
the then applicable Conversion Price and (ii) the Common Stock has traded, on
the principal market for the Common Stock, with an average daily volume in
excess of 20,000 shares for a period of 30 consecutive days ending on the day
immediately prior to such date. Any purchase of the Series A Preferred Stock
pursuant to this Section 9(a) shall be at a price per share of Series A
Preferred Stock equal to the Mandatory Redemption Price.
(b) Procedures for Call at the Corporation's Option. The Corporation's
right to Call the Series A Preferred Stock pursuant to Section 9(a) shall be
conditioned upon the Corporation giving notice (the "Call Notice"), by first
class mail, postage prepaid, of the exercise of the Call to the holders of the
Series A Preferred Stock not less than twenty five (25) days prior to the date
of the exercise of the Call (the "Call Date"). Each Call Notice shall state: (i)
the Call Date; (ii) the Mandatory Redemption Price; (iii) the place or places
where certificates for such shares are to be surrendered for payment of the
Mandatory Redemption Price; (iv) that payment will be made upon presentation and
surrender of such Series A Preferred Stock; (v) the then current Conversion
Price and the date on which the right to convert such shares of Series A
Preferred Stock will expire; (vi) that dividends on the shares to be purchased
shall cease to accrue following such Call Date; (vii) that such Call is
mandatory; and (viii) that dividends, if any, accrued to and including the Call
Date will be paid as specified in such notice. Notice having been mailed as
aforesaid, from and after the Call Date, unless the Corporation shall be in
default in the payment of the Mandatory Redemption Price (including any accrued
and unpaid dividends to (and including) the Call Date), (A) dividends on the
shares of the Series A Preferred Stock shall cease to accrue, (B) such shares
shall be deemed no longer outstanding and (C) all rights of the holders thereof
as stockholders of the Corporation (except the right to receive from the
Corporation (i) any moneys payable upon exercise of the Call without interest
thereon and (ii) any shares of Common Stock pursuant to Section 5 hereof) shall
cease.
Upon surrender in accordance with the Call Notice of the certificates for
any such shares so purchased (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the Call Notice shall so state), such
shares shall be purchased by the Corporation at the applicable Mandatory
Redemption Price.
Notwithstanding the foregoing, if the Call Notice has been given pursuant
to this Section 9 and any holder of shares of Series A Preferred Stock shall,
prior to the close of business on the twentieth (20th) day after receipt of such
Call Notice, give written notice to the Corporation pursuant to Section 5(b)
hereof of the conversion of any or all of the shares to be purchased held by
such holder (accompanied by a certificate or certificates for such shares, duly
endorsed or assigned to the Corporation), then (i) the conversion of such shares
to be purchased shall become effective as provided in Section 5 hereof and (ii)
the Corporation's right to Call such shares to be purchased shall terminate.
10 Definitions. As used herein, the following terms shall have the
respective meanings set forth below:
17
"Additional Shares of Stock" means all shares of Common Stock issued
by the Corporation after the Issue Date, other than (i) Common Stock to be
issued upon conversion of the Series A Preferred Stock, (ii) 500,000 shares
of Common Stock reserved for issuance under future stock option plans that
may be approved and (iii) 1,857,664 shares of Common Stock reserved or to
be reserved for issuance under stock options, stock option plans or
warrants in effect as of the date of the resolution pursuant to which this
Certificate of Amendment has been adopted.
"Affiliate", when used with respect to any Person, means (i) if such
Person is a corporation, any officer or director thereof (other than a
director elected pursuant to Section 4 hereof) and any Person which is,
directly or indirectly, the beneficial owner (by itself or as part of any
group) of more than five percent (5%) of any class of any equity security
(within the meaning of the Securities Exchange Act of 1934, as amended)
thereof, and, if such beneficial owner is a partnership, any general
partner thereof, or if such beneficial owner is a corporation, any Person
controlling, controlled by or under common control with such beneficial
owner, or any officer or director of such beneficial owner or of any
corporation occupying any such control relationship, (ii) if such Person is
a partnership, any general or limited partner thereof, and (iii) any other
Person which, directly or indirectly, controls or is controlled by or is
under common control with such Person. For purposes of this definition,
"control" (including the correlative terms "controlling", "controlled by"
and "under common control with"), with respect to any Person, shall mean
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.
"Business Day" means any day other than a Saturday, Sunday or any day
on which banks in the State of New York are authorized or obligated to
close.
"Call" shall have the meaning set forth in Section 9(a).
"Call Date" shall have the meaning set forth in Section 9(b).
"Call Notice" shall have the meaning set forth in Section 9(b).
"Common Stock" means the Corporation's Common Stock, par value $.01
per share, and shall also include any common stock of the Corporation
hereafter authorized and any capital stock of the Corporation of any other
class hereafter authorized which is not preferred as to dividends or assets
over any other class of capital stock of the Corporation or which has
ordinary voting power for the election of directors of the Corporation.
"Conversion Price" means the Conversion Price per share of Common
Stock into which the Series A Preferred Stock is convertible, as such
Conversion Price may be adjusted pursuant to Section 5 hereof. The initial
Conversion Price will be $2.375.
18
"Convertible Securities" means evidences of indebtedness, shares of
preferred stock or other securities which are convertible into or
exchangeable, with or without payment of additional consideration in cash
or property, for Additional Shares of Stock, either immediately or upon the
occurrence of a specified date or a specified event, other than the Series
A Preferred Stock.
"Designated Entity" means, in connection with the rights of any Person
holding less than thirty percent (30%), in the aggregate, of the Shares and
Conversion Shares (as such terms are defined below in the definition of
"Fleming Holders"), (i) as long as any Shares or Conversion Shares are held
by any Person identified in clause (i) or (ii) of the definition of
"Fleming Holders", Fleming Capital Management, 320 Park Avenue, New York,
NY 10022, Attention: Robert L. Burr and (ii) if no Shares or Conversion
Shares are held by a Person identified in clause (i) or (ii) of the
definition of "Fleming Holders", the entity designated by the Transferee
holding the largest number of such shares, provided, that such Transferee
owns thirty percent (30%) or more, in the aggregate, of the Shares and
Conversion Shares (in which case such Transferee shall provide notice to
the Corporation of such entity). For so long as no Shares or Conversion
Shares are held by any Person identified in clause (i) or (ii) of the
definition of "Fleming Holders" and no Person holds thirty percent (30%) or
more, in the aggregate, of the Shares and Conversion Shares, there shall be
no Designated Entity. For purposes of this definition of "Designated
Entity," the calculation of a Person's percentage holdings of Conversion
Shares shall be determined based upon the number of Shares from which such
Conversion Shares derived.
"Final Surrender Date" shall have the meaning set forth in Section
6(e).
"Fleming Funds" means Fleming US Discovery Fund III, L.P. and Fleming
US Discovery Offshore Fund III, L.P.
"Fleming Holders" means (i) the Fleming Funds, (ii) any Affiliate,
officer or employee of an Affiliate or investment fund managed by an
Affiliate of the Fleming Funds to which the Fleming Funds may transfer
record and/or beneficial ownership of any shares of Series A Preferred
Stock (the "Shares") or any shares of Common Stock obtained or obtainable
upon conversion of the Shares (the "Conversion Shares") and (iii) any
transferee of Shares or Conversion Shares from a Person named in clause (i)
or (ii) hereof (provided that such transferee is consented to by the
Corporation, such consent not to be unreasonably withheld), other than a
transferee of Shares or Conversion Shares sold in either a public offering
pursuant to a registration statement under the Securities Act or pursuant
to Rule 144 under the Securities Act. The "Conversion Shares" shall include
any capital stock or other securities into which Conversion Shares are
changed and any capital stock or other securities resulting from or
comprising a reclassification, combination or subdivision of, or a stock
dividend on, any Conversion Shares.
"Fundamental Change" means any of the following events:
(i) the sale (or functional equivalent of a sale) of all or
substantially all of the assets of the Corporation;
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(ii) any event (A) which results in the registration of the
Corporation's Common Stock under the Securities Exchange Act of 1934,
as amended, to be no longer required; (B) requiring the Corporation to
make a filing under Section 13(e) of the Securities Exchange Act of
1934, as amended; (C) reducing substantially or eliminating the public
market for shares of Common Stock of the Corporation; or (D) causing a
delisting of the Corporation's Common Stock from the Nasdaq Stock
Market, except if such delisting is a result of the transactions
contemplated by the Stock Purchase Agreements, in which event the
Company shall use its best efforts to cause its Common Stock to be
relisted on the NASDAQ Stock Market;
(iii) any consolidation of the Corporation with, or merger of the
Corporation into, any other person, any merger of another person into
the Corporation or any other business combination involving the
Corporation which results in the holders of the Corporation's stock
immediately prior to giving effect to such transaction owning shares
of capital stock of the surviving corporation in such transaction
representing (x) fifty percent (50%) or less of the total voting power
of all shares of capital stock of such surviving corporation entitled
to vote generally in the election of directors or (y) fifty percent
(50%) or less of the total value of all capital stock of such
surviving corporation; or
(iv) the commencement by the Corporation of a voluntary case
under the Federal bankruptcy laws or any other applicable Federal or
state bankruptcy, insolvency or similar law; the consent by the
Corporation to the entry of an order for relief in an involuntary case
under such law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official)
of the Corporation or of any substantial part of its property; any
assignment by the Corporation for the benefit of its creditors; any
admission by the Corporation in writing of its inability to pay its
debts generally as they become due; the entry of a decree or order for
relief in respect of the Corporation by a court having jurisdiction in
the premises in an involuntary case under Federal bankruptcy laws or
any other applicable Federal or state bankruptcy, insolvency or
similar law appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or ordering the winding up
or liquidation of its affairs, and on account of any such event the
Corporation shall liquidate, dissolve or wind up; or the liquidation,
dissolution or winding up of the Corporation under any other
circumstances.
"Issue Date" means, as to any share of Series A Preferred Stock,
the date of original issuance thereof by the Corporation.
"Junior Securities" mean the Common Stock and any other class of
capital stock or series of preferred stock existing on the date hereof
or hereafter created by the Corporation which does not expressly
provide that it ranks senior to or pari passu
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with the Series A Preferred Stock as to dividends, other
distributions, liquidation preference or otherwise.
"Liquidation Value" means $100 per share with respect to the
Series A Preferred Stock.
"Mandatory Redemption Price" shall have the meaning set forth in
Section 6(a).
"Market Price" means, as to any security on the date of
determination thereof, the average of the closing prices of such
security's sales on all principal United States securities exchanges
on which such security may at the time be listed, or, if there shall
have been no sales on any such exchange on any day, the last trading
price of such security on such day, or if such there is no such price,
the average of the bid and asked prices at the end of such day, on the
Nasdaq Stock Market, in each such case averaged for a period of thirty
(30) consecutive calendar days prior to the day when the Market Price
is being determined. Notwithstanding the foregoing, with respect to
the issuance of any security by the Corporation in an underwritten
public offering, the Market Price shall be the per share purchase
price paid by the underwriters. If at any time such security is not
listed on any exchange or the Nasdaq Stock Market, the Market Price
shall be deemed to be the fair value thereof determined by an
investment banking firm of nationally recognized standing selected by
the Board of Directors of the Corporation and acceptable to holders of
a majority of the Series A Preferred Stock, as of the most recent
practicable date when the determination is to be made, taking into
account the value of the Corporation as a going concern, and without
taking into account any lack of liquidity of such security or any
discount for a minority interest.
"Optional Redemption Price" shall have the meaning set forth in
Section 6(a).
"Parity Securities" mean any class of capital stock or series of
preferred stock existing on the date hereof or hereafter created by
the Corporation, with the prior written consent of the Fleming
Holders, which expressly provides that it ranks pari passu with the
Series A Preferred Stock as to dividends, other distributions,
liquidation preference or otherwise.
"Payment Amount" means such amount as is necessary to cause the
net present value to equal zero as of any date of all Cash Inflows and
all Cash Outflows (each as defined below) with respect to the Series A
Preferred Stock being repurchased pursuant to Section 6 or held on the
date of the distribution pursuant to Section 3, as the case may be,
when calculated with an annual interest rate (compounded annually)
equal to twelve percent (12%). "Cash Inflows" as used herein means all
cash payments, including the Payment Amount, received by the holders
of the Series A Preferred Stock as a dividend or distribution with
respect to, or as consideration for the sale of, such Series A
Preferred Stock (whether such payments are received from the
21
Corporation or any other Person). "Cash Outflows" as used herein means
the sum of all cash payments made by the holders of the Series A
Preferred Stock to the Corporation to acquire such Series A Preferred
Stock. (For the avoidance of doubt, Cash Inflows and Cash Outflows
with respect to any Series A Preferred Stock not included in the
Series A Preferred Stock being repurchased pursuant to Section 6
hereof as part of the transaction for which the Payment Amount is then
being calculated shall not be included in the Cash Inflows and Cash
Outflows used to make such calculation (for purposes of Section 6
only), and only the Cash Inflows and Cash Outflows with respect to the
Series A Preferred Stock which are then being repurchased pursuant to
Section 6 hereof in the transaction for which the Payment Amount is
then being calculated shall be used in the Cash Inflows and Cash
Outflows used to make such calculation (for purposes of Section 6
only).)
"Permitted Preferred Transferee" shall have the meaning set forth
in Section 4(c).
"Person or "person" shall mean an individual, partnership,
corporation, trust, unincorporated organization, joint venture,
government or agency, political subdivision thereof, or any other
entity of any kind.
"Preferred Director" or "Preferred Directors" shall have the
meaning set forth in Section 4(c).
"Preferred Liquidation Value", with respect to any share of
Series A Preferred Stock as of a particular date, means the sum of
$100 plus an amount equal to any accrued and unpaid dividends on such
share of Series A Preferred Stock added to the Preferred Liquidation
Value of such share of Series A Preferred Stock on any Dividend
Payment Date pursuant to Section 2(a)(ii)(B) and not thereafter paid.
"Repurchase Date" shall have the meaning set forth in Section
6(d).
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Series A Liquidation Preference" shall have the meaning set
forth in Section 3(a).
"Series A Preferred Stock" shall have the meaning set forth in
the resolution paragraph in the preamble.
"Stock Purchase Agreements" mean (i) each of the two Stock
Purchase Agreements dated as March 30, 1999 between the Corporation
and the purchaser listed on the signature page of each such Agreement,
and (ii) each of the two Stock Purchase Agreements dated as of
February 16, 2001 between the Corporation and the purchaser listed on
the signature page of each such Agreement,
22
"Subsidiary", with respect to any Person, means any corporation,
association or other entity of which more than 50% of the total voting
power of shares of stock or other equity interests (without regard to
the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is, at the time as of which
any determination is being made, owned or controlled, directly or
indirectly, by such Person or one or more of its Subsidiaries, or
both. The term "Subsidiary" or "Subsidiaries" when used herein without
reference to any particular Person, means a Subsidiary or Subsidiaries
of the Corporation.
"Transferees" shall mean any transferee (except for a Fleming
Holder) of Shares or Conversion Shares (as such terms are defined
within the definition of "Fleming Holders") from a Fleming Holder.
Transferees shall not include a transferee of Shares or Conversion
Shares sold in either a public offering pursuant to a registration
statement under the Securities Act or pursuant to Rule 144 under the
Securities Act.
11. Notices. Except as may otherwise be provided for herein, all notices
referred to herein shall be in writing, and all notices hereunder shall be
deemed to have been given and received (i) upon receipt, in the case of a notice
of conversion given to the Corporation as contemplated in Section 5(b) hereof or
in the case of a notice of redemption at the holder's option given to the
Corporation as contemplated in Section 6(d) hereof, or (ii) in all other cases,
upon the earlier of (x) receipt of such notice, (y) three Business Days after
the mailing of such notice if sent by registered mail (unless first-class mail
shall be specifically permitted for such notice under the terms hereof) or (z)
the Business Day following sending such notice by overnight courier, in any case
with postage or delivery charges prepaid, addressed: if to the Corporation, to
its offices at 275 North Middletown Road, Pearl River, NY 10965, Attention:
Stephen P. Mandracchia, or to an agent of the Corporation designated as
permitted by the Certificate of Incorporation, or, if to any holder of the
Series A Preferred Stock, to such holder at the address of such holder of the
Series A Preferred Stock as listed in the stock record books of the Corporation,
or to such other address as the Corporation or holder, as the case may be, shall
have designated by notice similarly given.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, we have hereunto executed this Certificate of
Amendment and do affirm the foregoing as true under the penalties of perjury
this 16th day of February, 2001.
HUDSON TECHNOLOGIES, INC.
By: /s/ Kevin J. Zugibe
----------------------------------
Name: Kevin J. Zugibe
Title: Chairman and Chief Executive Officer
By: /s/ Stephen P. Mandracchia
----------------------------------
Name: Stephen P. Mandracchia
Title: Secretary
Dates Referenced Herein and Documents Incorporated by Reference
6 Subsequent Filings that Reference this Filing
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