ERC INDUSTRIES, INC.
___________________________________________________________________
CERTIFICATE OF DESIGNATIONS
OF PREFERRED STOCK
TO BE DESIGNATED
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
___________________________________________________________________
Pursuant to Section 151(g) of the
General Company Law of the State of Delaware
The undersigned DO HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors of ERC Industries, Inc., a Delaware
corporation (the "Company"), in accordance with Section 141(f) of the General
Corporation Law of the State of Delaware (the "DGCL"):
"RESOLVED, that pursuant to the authority conferred on the Board of
Directors of the Company by the Company's Certificate of Incorporation, the
issuance of a series of preferred stock, par value $1.00 per share, of the
Company (the "Preferred Stock") which shall consist of an aggregate of up to
1,850,000 shares of Preferred Stock be, and the same hereby is, authorized; and
the Chairman and Chief Executive Officer and Secretary of the Company be, and
they hereby are, authorized and directed to execute and file with the Secretary
of State of the State of Delaware the Certificate of Designations of Series A
Cumulative Convertible Preferred Stock of the Company fixing the designations,
powers, preferences and rights of the shares of such Preferred Stock, and the
qualifications, limitations or restrictions thereof (in addition to the
designations, powers, preferences and rights, and the qualifications,
limitations or restrictions thereof, set forth in the Certificate of
Incorporation which may be applicable to the Company's Preferred Stock), as
follows:
1. DESIGNATION
The distinctive serial designation of the series of Preferred Stock
authorized by this resolution shall be "Series A Cumulative Convertible
Preferred Stock" (the "Series A-Convertible Preferred Stock"). The number of
shares of Series A Convertible Preferred Stock shall initially be 1,850,000,
which number may from time to time be increased or decreased (but not below the
number then outstanding) by the Board of Directors.
2. RANK
The Series A Convertible Preferred Stock shall, with respect to payment of
dividends, redemption payments and rights upon liquidation, dissolution or
winding up of the affairs of the Company, rank (a) senior and prior to (i) the
Common Stock, par value $0.01 per share, of the Company (the "Common Stock"),
and (ii) any preferred stock convertible into or exchangeable for other equity
securities of the Company that may in the future be issued by the Company, and
(b) pari passu with any additional preferred stock which may in the future be
issued by the Company that is not convertible into or exchangeable for other
equity securities of the Company (all shares identified in this clause (b) which
are pari passu with the shares of the Series A Convertible Preferred Stock with
respect to the payment of dividends are hereinafter referred to as "Parity
Dividend Shares" and all shares identified in this clause (b) which are pari
passu with the shares of the Series A Convertible Preferred Stock with respect
to redemption, payment and rights upon liquidation, dissolution or winding up of
the affairs of the Company are hereinafter referred to as "Parity Liquidation
Shares"), but only to the extent any such non-convertible preferred stock is not
stated to be junior to the Series A Convertible Preferred Stock in the related
Certificate of Designations or amendment to the Company's Certificate of
Incorporation (all shares identified in this clause (b) and in clause (a) above
which are junior to the shares of the Series A Convertible Preferred Stock with
respect to the payment of dividends are hereinafter referred to as "Junior
Dividend Shares" and all shares identified in this clause (b) and in clause (a)
above which are junior to the shares of the Series A Convertible Preferred Stock
with respect to redemption, payment and rights upon liquidation, dissolution or
winding up of the affairs of the Company are hereinafter referred to as "Junior
Liquidation Shares"). The Company shall not, without the consent of the holders
of at least two-thirds (2/3) of the outstanding shares of Series A Convertible
Preferred Stock, create, authorize or issue, or reclassify any authorized
Capital Stock of the Company into, or create, authorize or issue any obligation
or security convertible or exchangeable into or evidencing a right to purchase,
any shares of any class of Capital Stock of the Company ranking senior to the
Series A Convertible Preferred Stock. The Company may issue additional series
of Preferred Stock ranking on parity with or junior to the Series A Convertible
Preferred Stock without the consent of the holders of the Series A Convertible
Preferred Stock.
3. DIVIDENDS
(a) The cash dividend rate on shares of the Series A Convertible Preferred
Stock shall be 1% per annum ($0.01 per share) beginning on January 1, 2000 (the
"Dividend Date") if the Series A Convertible Preferred Stock shall not be
convertible into shares of Common Stock in accordance with Section 9 hereof.
Dividends on shares of the Series A Convertible Preferred Stock shall be fully
cumulative, accruing, without interest, from the Dividend Date and shall be
payable quarterly in arrears, when, as and if declared by the Board of Directors
out of funds legally available for the payment of cash dividends, on March 31,
June 30, September 30 and December 31 of each year, except that if such date is
not a business day then the dividend shall be payable on the first immediately
succeeding business day (as used herein, the term "business day" shall mean any
day except a Saturday, Sunday or day on which banking institutions are
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legally authorized to close in New York, New York) (each such period being
hereinafter referred to as a "Quarterly Dividend Period"). Each dividend shall
be paid to the holders of record of shares of the Series A Convertible Preferred
Stock as they appear on the stock register of the Company on the record date,
which shall be not less than 10 nor more than 60 days preceding the payment date
thereof, as shall be fixed by the Board of Directors of the Company. Dividends
payable for each Quarterly Dividend Period shall be computed by dividing the
annual dividend by four (rounded to the nearest cent). Dividends payable for any
partial Quarterly Dividend Period shall be computed on the basis of a 360-day
year of twelve 30-day months. Dividends on account of arrearages for any past
Quarterly Dividend Period may be declared and paid at any time, without
reference to any regular dividend payment date, to holders of record on such
date, not exceeding 45 days preceding the payment date thereof, as may be fixed
by the Board of Directors of the Company. No interest shall be payable with
respect to any dividend payment that may be in arrears. Holders of shares of the
Series A Convertible Preferred Stock called for redemption between the close of
business on a dividend payment record date and the close of business on the
corresponding dividend payment date shall, in lieu of receiving such dividend on
the dividend payment date fixed therefor, receive such dividend payment on the
date fixed for redemption together with all other accrued and unpaid dividends
to the date fixed for redemption. The holders of shares of the Series A
Convertible Preferred Stock shall not be entitled to any dividends other than
the cash dividends provided for in this paragraph.
(b) No dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any Parity Dividend Shares
for any period unless full cumulative dividends have been or contemporaneously
are declared and paid or declared and set apart for payment with respect to the
Series A Convertible Preferred Stock through the most recent Quarterly Dividend
Period ending on or prior to the date of payment (or the date of setting apart
for payment) of such dividends on such Parity Dividend Shares. Unless dividends
accrued and payable but unpaid on shares of the Series A Convertible Preferred
Stock and any Parity Dividend Shares at the time outstanding have been paid in
full, all dividends declared by the Company upon shares of the Series A
Convertible Preferred Stock or Parity Dividend Shares shall be declared pro rata
with respect to all such shares, so that the amounts of any dividends declared
on shares of the Series A Convertible Preferred Stock and the Parity Dividend
Shares shall in all cases bear to each other the same ratio that, at the time of
the declaration, all accrued but unpaid dividends on shares of the Series A
Convertible Preferred Stock and the other Parity Dividend Shares, respectively,
bear to each other.
(c) If at any time the Company has failed to pay or set apart for payment
all accrued dividends on any shares of the Series A Convertible Preferred Stock
through the then most recent Quarterly Dividend Period, the Company shall not:
(i) declare or pay or set aside for payment any dividend or other
distribution on or with respect to any Junior Dividend Shares, whether in
cash, securities, obligations or otherwise (other than dividends or
distributions paid in shares, options, warrants or rights to subscribe for
or purchase shares of Capital Stock, which are both Junior Dividend Shares
and Junior Liquidation Shares); or
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(ii) redeem, purchase or otherwise acquire, or set apart money for a
sinking or other analogous fund for the redemption, purchase or other
acquisition of any Parity Dividend Shares, Junior Dividend Shares, Parity
Liquidation Shares or Junior Liquidation Shares for any consideration
(except by conversion into or exchange for shares which are both Junior
Liquidation Shares and Junior Dividend Shares)
unless, in each case, all dividends accrued on shares of the Series A
Convertible Preferred Stock through the most recent Quarterly Dividend Period
and on any Parity Dividend Shares have been or contemporaneously are declared
and paid in full or are declared and a sum sufficient for the payment thereof is
set aside for such payment. Notwithstanding anything to the contrary contained
in this paragraph 3, the foregoing shall not affect in any respect the ability
of the Company or holders of any stock options of the Company to surrender or
have withheld any shares of Common Stock in payment of the exercise price of any
such stock option(s) or any tax withholding obligations in connection therewith.
(d) Any reference to "distribution" contained in this paragraph 3 shall not
be deemed to include any distribution made in connection with any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary.
4. LIQUIDATION
(a) The liquidation value of shares of the Series A Convertible Preferred
Stock, in case of the voluntary or involuntary liquidation, dissolution or
winding up of the Company, shall be $1.00 per share, plus an amount equal to the
dividends accrued and unpaid thereon, whether or not earned or declared, to the
payment date (such aggregate total being hereinafter referred to as the
"Aggregate Liquidation Preference").
(b) In the event of any voluntary liquidation, dissolution or winding up of
the Company, the holders of such shares of the Series A Convertible Preferred
Stock shall be entitled to receive the liquidation value of such shares held by
them in preference to and in priority over distributions upon the Junior
Liquidation Shares. Upon payment in full of the liquidation value to which the
holders of shares of the Series A Convertible Preferred Stock are entitled, the
holders of shares of the Series A Convertible Preferred Stock will not be
entitled to any further participation in any distribution of assets by the
Company. If the assets of the Company are not sufficient to pay in full the
liquidation value payable to the holders of shares of the Series A Convertible
Preferred Stock and the liquidation value payable to the holders of any Parity
Liquidation Shares, the holders of all such shares shall share ratably in such
distributions of assets in proportion to and in accordance with the amounts that
would be payable on the distribution if the amounts to which the holders of
shares of the Series A Convertible Preferred Stock and the holders of Parity
Liquidation Shares are entitled were paid in full.
(c) Neither a consolidation or merger of the Company with or into any
other entity, nor a merger of any other entity with or into the Company, nor a
share exchange involving the
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Company, nor a sale or transfer of all or any part of the Company's assets for
cash or securities or other property shall be considered a liquidation,
dissolution or winding up of the Company within the meaning of this paragraph 4.
(d) Written notice of any liquidation, dissolution or winding up of the
Company, stating the payment date or dates when and the place or places where
the amounts distributable in such circumstances shall be payable, shall be given
by first-class mail, postage prepaid, not less than 30 days prior to any payment
date stated therein, to the holders of record of shares of the Series A
Convertible Preferred Stock at their respective addresses as the same shall
appear on the books of the Company or the transfer agent for the Series A
Convertible Preferred Stock.
5. OPTIONAL REDEMPTIONS
(a) Subject to the restrictions in paragraph 3 above, shares of the Series
A Convertible Preferred Stock will be redeemable at the option of the Company,
in whole or in part, from and after December 31, 2000 at a redemption price per
share of $1.00 (in each case, together with an amount equal to the dividends
accrued and unpaid thereon, whether or not declared, to the redemption date).
(b) Not less than 30 nor more than 60 days prior to the date fixed for any
redemption of shares of the Series A Convertible Preferred Stock pursuant to
this paragraph 5, a notice specifying the time and place of the redemption and
the number of shares to be redeemed shall be given by first-class mail, postage
prepaid, to the holders of record of the shares of the Series A Convertible
Preferred Stock to be redeemed at their respective addresses as the same shall
appear on the books of the Company or the transfer agent for the Series A
Convertible Preferred Stock, calling upon each holder of record to surrender to
the Company at such place as shall be designated in such notice on the
redemption date such holder's certificate or certificates representing the
number of shares specified in the notice of redemption. Neither failure to mail
such notice, nor any defect therein or in the mailing thereof, to any particular
holder shall affect the sufficiency of the notice or the validity of the
proceedings for redemption with respect to any other holder. Any notice mailed
in the manner herein provided shall be conclusively presumed to have been duly
given whether or not the holder receives the notice. On or after the redemption
date, each holder of shares of the Series A Convertible Preferred Stock to be
redeemed shall present and surrender such holder's certificate or certificates
for such shares to the Company at the place designated in the redemption notice
and thereupon the redemption price of the shares shall be paid to or on the
order of the Person whose name appears on such certificate or certificates as
the owner thereof, and each surrendered certificate shall be canceled. In case
less than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued to the holder representing the unredeemed shares of
the Series A Convertible Preferred Stock.
(c) If a notice of redemption has been given pursuant to this paragraph 5
and if, on or before the date fixed for redemption, the funds necessary for such
redemption shall have been
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set aside by the Company, separate and apart from its other funds, in trust for
the pro rata benefit of the holders of the shares of the Series A Convertible
Preferred Stock so called for redemption, then, notwithstanding that any
certificates for such shares have not been surrendered for cancellation, on the
redemption date dividends shall cease to accrue on the shares of the Series A
Convertible Preferred Stock to be redeemed, and at the close of business on the
redemption date the holders of such shares shall cease to be stockholders with
respect to those shares, shall have no interest in or claims against the Company
by virtue thereof and shall have no voting or other rights with respect thereto,
except the right to receive the money payable upon such redemption, without
interest thereon, upon surrender (and endorsement, if required by the Company)
of their certificates, and the shares evidenced thereby shall no longer be
outstanding. Subject to applicable escheat laws, any money so set aside by the
Company and unclaimed at the end of two years from the redemption date shall
revert to the general funds of the Company, after which reversion the holders of
such shares so called for redemption shall look only to the general funds of the
Company for the payment of the redemption price. Any interest accrued on funds
so deposited shall be paid to the Company from time to time.
(d) In every case of redemption of less than all of the outstanding shares
of the Series A Convertible Preferred Stock pursuant to this paragraph 5, the
shares to be redeemed shall be selected pro rata or by lot or in such other
manner as the Board of Directors may equitably determine, as may be prescribed
by resolution of the Board of Directors of the Company, provided that only whole
shares shall be selected for redemption. Notwithstanding the foregoing, the
Company shall not redeem any of the shares of the Series A Convertible Preferred
Stock at any time outstanding until all dividends accrued and in arrears upon
all shares of the Series A Convertible Preferred Stock then outstanding shall
have been paid for all past dividend periods.
6. STATUS OF SHARES
All shares of the Series A Convertible Preferred Stock that are at any time
redeemed pursuant to paragraph 5 above, and all shares of the Series A
Convertible Preferred Stock that are otherwise reacquired by the Company and
subsequently canceled by the Board of Directors, shall have the status of
authorized but unissued shares of Preferred Stock, without designation as to
series, subject to reissuance by the Board of Directors as shares of any one or
more other series. Notwithstanding the foregoing, shares of Series A
Convertible Preferred Stock redeemed or otherwise reacquired by the Company may
be put in Treasury by the Company and would be available for subsequent issuance
upon a vote of the Board of Directors.
7. VOTING RIGHTS
(a) General. Holders of the Series A Convertible Preferred Stock shall
have no right to vote on any matter voted on by the stockholders of the Company,
except as may otherwise be provided by law.
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(b) So long as any shares of the Series A Convertible Preferred Stock
remain outstanding, the consent of the holders of at least two-thirds (2/3) of
the shares of the Series A Convertible Preferred Stock outstanding at the time,
given in person or by proxy either in writing (as permitted by law and the
Certificate of Incorporation and Bylaws of the Company) or at any special or
annual meeting, shall be necessary to permit, effect or validate any one or more
of the following:
(i) the creation, authorization, issuance or reclassification of any
authorized stock of the Company into (or the creation, authorization or
issuance of any obligation or security convertible or exchangeable into or
evidencing a right to purchase) any share of Capital Stock of the Company
ranking senior to the Series A Convertible Preferred Stock as to dividends
or the distribution of assets upon liquidation, dissolution or winding up;
or
(ii) the amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Certificate of
Incorporation (including this Certificate of Designations) or the Bylaws of
the Company which would adversely affect the relative rights, preferences,
qualifications, limitations or restrictions of the Series A Convertible
Preferred Stock or of the holders thereof.
8. MANDATORY REDEMPTION
The shares of the Series A Convertible Preferred Stock are not subject to
mandatory redemption or sinking fund requirements.
9. CONVERSION
The shares of the Series A Convertible Preferred Stock shall be
convertible, in whole or in part, at the election of each of the preferred
stockholders, into an equal number of shares of Common Stock at any time
following the approval of the issuance of such shares of Common Stock by a
majority of the holders of the issued and outstanding Common Stock at the next
annual or special meeting of stockholders called for this purpose.
10. CERTAIN DEFINITIONS
As used in this Certificate, the following terms shall have the following
respective meanings:
"Capital Stock" of any Person means the common stock or preferred stock of
such Person. Unless otherwise stated herein or the context otherwise requires,
"Capital Stock" means Capital Stock of the Company.
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"Person" means any individual, corporation, partnership, association, trust
or other entity or organization, including a government or political subdivision
or any agency or instrumentality thereof.
* * * *
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IN WITNESS WHEREOF, the Company has caused this Certificate to be duly
executed on its behalf by its undersigned President and Chief Executive Officer
and attested to by its Secretary this 8th day of May, 1999.
[Corporate Seal] ERC INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Chief Executive Officer
ATTEST:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
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Secretary
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