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. G. LIMITATION ON CONVERSIONS. The conversion of shares of Preferred
Stock shall be subject to the following limitations (each of which limitations
shall be applied independently):
(i) CAP AMOUNT. Prior to Stockholder Approval (as herein
defined), in no event shall the total number of shares of Common Stock issued
upon conversion of the Preferred Stock exceed the maximum number of shares of
Common Stock that the Company can without stockholder approval so issue pursuant
to Nasdaq Rule 4460(i) (or any successor rule) to the extent such rule remains
applicable to Company (the "CAP AMOUNT") upon the conversion (or any such higher
number as the rules permit) of the Preferred Stock and Series A Convertible
Participating Preferred Stock (the "SERIES A PREFERRED STOCK"), and exercise of
the Warrants (as defined in the Amended and Restated Securities Purchase
Agreement, dated as of December 11, 1998, by and among the Company and the other
signatories thereto (the "SECURITIES PURCHASE AGREEMENT")), which as of July 27,
1998 shall be 5,071,913 shares (or any such higher number as the rules permit).
The Cap Amount shall be allocated pro-rata to the Holders as provided in Article
XIV.C. In the event the Company is prohibited from issuing shares of Common
Stock as a result of the operation of this subparagraph (i), the Company shall
comply with Article VIII. The foregoing restriction shall not apply to the
extent waived, modified or otherwise permitted by the Nasdaq National Market
System or the Nasdaq SmallCap Market. To the extent the foregoing limitation
applies, the determination of whether Preferred Stock shall be convertible
(vis-a-vis other securities owned by such Holder) and of which Preferred Stock
shall be convertible (as among shares of Preferred Stock) shall, subject to such
aggregate percentage limitation, be on a first submission basis.
(ii) FIVE PERCENT HOLDINGS. Notwithstanding anything to the
contrary contained herein, the Preferred Stock shall not be convertible by a
Holder to the extent (but only to the extent) that, if convertible by such
Holder, such Holder, or any of its affiliates (as defined under Rule 12b-2 of
the Securities Exchange Act of 1934, as amended), would beneficially own in
excess of 4.9% of the shares of Common Stock. To the extent the foregoing
limitation applies, the determination of whether Preferred Stock shall be
convertible (vis-a-vis other securities owned by such Holder) and of which
Preferred Stock shall be convertible (as among shares of Preferred Stock) shall,
subject to such aggregate percentage limitation, be on a first submission basis.
No prior inability to convert Preferred Stock pursuant to this Section shall
have any effect 4.<PAGE>
on the applicability of the provisions of this Section with respect to any
subsequent determination of convertibility. For the purposes of this Section,
beneficial ownership and all determinations and calculations, including without
limitation, with respect to calculations of percentage ownership, shall be made
in accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D and G thereunder. The provisions of this Section
shall be implemented in a manner otherwise than in strict conformity with the
terms of this Section: (i) to correct this subsection (or any portion thereof)
which may be defective or inconsistent with the intended 4.9% beneficial
ownership limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such 4.9% limitation; and (ii)
with respect to any other matter, with the consent of the holders of majority of
the then outstanding shares of Common Stock. The limitations contained in this
Section shall apply to a successor Holder of Preferred Stock.
H. REQUIRED CONVERSION AT MATURITY. Subject to the limitations set forth
in Section IV.G. and provided all shares of Common Stock issuable upon
conversion of all outstanding shares of Preferred Stock and exercise of all
outstanding Warrants (in each case, without giving effect to any limitation on
conversion or exercise) are then (i) authorized and reserved for issuance, (ii)
registered under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (collectively the "SECURITIES ACT"), for resale by all
holders of such shares of Preferred Stock and Warrants, (iii) eligible to be
traded on either, the Nasdaq National Market System, the Nasdaq SmallCap Market,
the New York Stock Exchange or the American Stock Exchange, each share of
Preferred Stock outstanding on July 27, 2001 (the "MATURITY DATE") (and any
accrued and unpaid Conversion Default Payments), automatically shall be
converted into shares of Common Stock on such date in accordance with the
conversion formula set forth in Section IV.A (the "REQUIRED CONVERSION AT
MATURITY"), except as to any Holder who elects otherwise in the event that (x) a
Bankruptcy Event, (y) the occurrence of a material adverse change or development
in the business, properties, operations, financial condition, results of
operations or prospects of the Company, or (z) a Redemption Event, has occurred
and is continuing. If a Required Conversion at Maturity occurs, the Company and
the Holders shall follow the applicable conversion procedures set forth in this
Article IV; provided, however, that a Notice of Conversion shall be deemed to be
delivered to the Company on the Maturity Date.
I. ELECTRONIC TRANSMISSION. In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion, upon request of a
Holder, the Company shall use its reasonable best efforts to cause its transfer
agent to electronically transmit the Common Stock issuable upon conversion to
the Holder by crediting the account of Holder's prime broker with DTC through
its Deposit Withdrawal Agent Commission ("DWAC") system or other electronic
delivery system selected by Holder.
V. RESERVATION OF AUTHORIZED
SHARES OF COMMON STOCK
A. RESERVED AMOUNT. The Company shall have authorized and reserved and
keep available for issuance not less than 4,000,000 shares of Common Stock (such
number to be subject to equitable adjustment for any stock splits, stock
dividends, reclassification or similar events) (the "RESERVED AMOUNT") solely
for the purpose of effecting the conversion of the Preferred Stock and the
Warrants. The Company shall at all times reserve and keep available out
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of its authorized but unissued shares of Common Stock a sufficient number of
shares of Common Stock to provide for the full conversion of all outstanding
Preferred Stock and exercise of the Warrants and issuance of the shares of
Common Stock in connection therewith. The Reserved Amount shall be allocated
among the Holders as provided in Section XIV.C.
B. INCREASES TO RESERVED AMOUNT. Without limiting any other provision of
this Article V, if the Reserved Amount for any three (3) consecutive trading
days (the last of such three (3) trading days being the "AUTHORIZATION TRIGGER
DATE") is less than two hundred percent (200%) of the number of shares of Common
Stock issuable on such trading days upon conversion of the outstanding Preferred
Stock (without giving effect to any limitation on conversion or exercise
thereof) then the Company shall immediately notify the Holders of such
occurrence and shall immediately take all necessary action (including
stockholder approval to authorize the issuance of additional shares of Common
Stock) to increase the Reserved Amount to two hundred percent (200%) of the
number of shares of Common Stock issuable upon conversion of the outstanding
Preferred Stock, without giving effect to any limitation on conversion or
exercise thereof. VI. COMPLIANCE WITH CAP
AMOUNT RESTRICTIONS
A. SHARE AUTHORIZATION. The Company shall, in the Proxy Statement
circulated by the Company in connection with the Company's next annual meeting
of stockholders, but in any event not later than February 8, 1999, solicit by
proxy the authorization (the "STOCKHOLDER APPROVAL") by the stockholders of the
Company of the issuance of shares of Common Stock upon conversion of shares of
Preferred Stock pursuant to the terms hereof in the aggregate in excess of
twenty (20) percent of the outstanding shares of Common Stock and to eliminate
any prohibitions under the rules or regulations of any stock exchange,
interdealer quotation system or other self-regulatory organization with
jurisdiction over the Company or any of its securities on the Company's ability
to issue shares of Common Stock in excess of the Cap Amount and use its best
efforts to obtain the Stockholder Approval no later than February 8, 1999.
B. OBLIGATION TO NOTIFY. If at any time after July 27, 1999 the then
unissued portion of any Holder's Cap Amount is less than two hundred percent
(200%) of the number of shares of Common Stock then issuable upon conversion of
such Holder's shares of Preferred Stock (without giving effect to any limitation
on conversion or exercise thereof) (a "TRADING MARKET TRIGGER EVENT"), the
Company shall immediately notify the Holders of such occurrence.
VII. FAILURE TO SATISFY CONVERSIONS
A. CONVERSION DEFAULT PAYMENTS. If, at any time, (x) a Holder submits a
Notice of Conversion (or is deemed to submit such notice pursuant to Section
IV.H) and the Company fails for any reason (other than because such issuance
would exceed such Holder's allocated portion of the Cap Amount, for which
failure the Holders shall have the remedies set forth elsewhere herein) to
deliver, on or prior to the expiration of the Delivery Period for such
conversion, such number of shares of Common Stock to which such Holder is
entitled upon such conversion, or (y) the Company provides notice (including by
way of public announcement) to any Holder at any time of its intention not to
issue shares of Common Stock upon exercise by any Holder of its
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conversion rights in accordance with the terms of this Certificate of
Designation (other than because such issuance would exceed such Holder's
allocated portion of the Cap Amount) (each of (x) and (y) being a "CONVERSION
DEFAULT"), then the Company shall pay to the affected Holder, in the case of a
Conversion Default described in clause (x) above, and to all Holders, in the
case of a Conversion Default described in clause (y) above, an amount equal to
five hundred dollars ($500) for each day such Conversion Default exists until
the fifth (5th) business day following the receipt by facsimile by the Company
of the Notice of Conversion; PROVIDED, HOWEVER, that if the Company is obligated
to pay any such Holder a similar amount under the certificate of designations
governing the Series A Preferred Stock, and pays such amount in accordance
therewith, then no such payment shall be made hereunder. If, following the fifth
(5th) business day following receipt by facsimile by the Company of the Notice
of Conversion, the Company continues to fail for any reason to deliver such
shares of Common Stock to which such Holder is entitled upon such conversion,
then the Company shall pay to the affected Holder, in the case of a Conversion
Default described in clause (x) above, and to all Holders, in the case of a
Conversion Default described in clause (y) above, an amount equal to (i) one
percent (1%) of the Face Amount of the Preferred Stock with respect to which the
Conversion Default exists (which amount shall be deemed to be the aggregate Face
Amount of all outstanding Preferred Stock in the case of a Conversion Default
described in clause (y) above) for each day such Conversion Default exists (ii)
plus any Premium with respect thereto.
The payments to which a Holder shall be entitled pursuant to this Section
VII.A are referred to herein as "CONVERSION DEFAULT PAYMENTS." Conversion
Default Payments shall be made the fifth (5th) business day following written
demand by a Holder for payment therefor and otherwise in accordance with and
subject to the provisions of Section XIV.E. "CURE DATE" means (i) with respect
to a Conversion Default described in clause (x) of its definition, the date the
Company effects the conversion of the portion of the Preferred Stock submitted
for conversion and (ii) with respect to a Conversion Default described in clause
(y) of its definition, the date the Company undertakes in writing to issue
Common Stock in satisfaction of all conversions of Preferred Stock in accordance
with the terms of this Certificate of Designation (provided the Company in fact
thereafter so satisfies such conversions).
B. BUY-IN CURE. If (i) the Company fails for any reason to deliver
during the Delivery Period shares of Common Stock to a Holder upon a conversion
of shares of Preferred Stock in accordance with the terms of Article IV and (ii)
after the applicable Delivery Period with respect to such conversion, such
Holder purchases (in an open market transaction or otherwise) shares of Common
Stock to make delivery in satisfaction of a sale by such Holder of shares of
Common Stock (the "SOLD SHARES") as to which delivery such Holder anticipated
using shares of Common Stock to be received upon such conversion (a "BUY-IN"),
the Company shall pay such Holder (in addition to any other remedies available
to the Holder) the amount by which (x) such Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common Stock so
purchased exceeds (y) the net proceeds received by such Holder from the sale of
the Sold Shares. For example, if a Holder purchases shares of Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to
shares of Common Stock it sold for $10,000, the Company will be required to pay
the Holder $1,000. A Holder shall provide the Company written notification
indicating any amounts payable to such Holder pursuant to this Section VII.B.
The Company shall make any payments required pursuant to this Section VII.B in
accordance with and subject to the provisions of Section XIV.E. |
