SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ___)
[X] Preliminary information statement [_] Confidential, for the use of the
Commission only (as permitted by Rule 14c-5(d)(2)).
[_] Definitive information statement
(Name of Registrant as Specified in Its Charter)
TRANSIT GROUP, INC.
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total Fee Paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing Party:
(4) Date Filed:
TRANSIT GROUP, INC.
2859 Paces Ferry, Suite 1740
Atlanta, Georgia 30339
(770) 444-0240
INFORMATION STATEMENT
This Information Statement is being furnished to the shareholders of
Transit Group, Inc., a Florida corporation ("Company"), in connection with the
approval of Amended and Restated Articles of Incorporation of the Company,
attached hereto as Exhibit A, (the "Amended and Restated Articles") and an
amendment to the Company's 1998 Stock Incentive Plan (the "Stock Plan
Amendment") by the written consent of the holders of a majority of the issued
and outstanding shares of the Company's common stock and each series of
preferred stock. The Amended and Restated Articles amend the Company's current
articles of incorporation by increasing the number of the Company's authorized
common stock to 500,000,000 and revising the indemnification provisions to
reflect the intent of the Company to indemnify its officers and directors to the
fullest extent provided by Florida law as more specifically set forth in the
text of the Amended and Restated Articles attached hereto. The Stock Plan
Amendment amends the Company's 1998 Stock Incentive Plan by increasing the
number of shares of common stock available for issuance thereunder by 30,000,000
shares.
Only common and preferred shareholders of record at the close of business
on June 8, 2001 (the "Record Date") are entitled to notice of the action taken
by written consent. At the close of business on the Record Date, the Company had
31,959,674 shares of its common stock issued and outstanding, 5,000,000 shares
of its Series A convertible preferred stock issued and outstanding and 2,970,000
shares of Series B convertible preferred stock issued and outstanding.
Written consent of the holders of a majority of the issued and outstanding
common and preferred shares was required to approve the Amended and Restated
Articles and the Stock Plan Amendment. All holders of record as of the Record
Date may submit written consents to the Company with respect to the Amended and
Restated Articles and the Stock Plan Amendment; however, no such consents are
being solicited. No appraisal or other similar rights are available to
dissenters of the Amended and Restated Articles or the Stock Plan Amendment. The
holders of a majority of the outstanding shares of common stock and preferred
stock of the Company have executed a consent to the Amended and Restated
Articles and to the Stock Plan Amendment. Therefore, the Amended and Restated
Articles and the Stock Plan Amendment have been approved by the Company's
shareholders.
The Company will bear all of the costs of the preparation and dissemination
of this Information Statement. No consideration has been or will be paid to any
officer, director, or employee of the Company in connection with the proposed
Amended and Restated Articles or the Stock Plan Amendment or the preparation and
dissemination of this Information Statement or otherwise in connection with the
proposed Amended and Restated Articles and the Stock Plan Amendment.
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Correspondence with respect to the proposed Amended and Restated Articles
and Stock Plan Amendment should be addressed to James G. Overley, Senior Vice
President of Finance and Chief Financial Officer of the Company at the Company's
principal executive offices at 2859 Paces Ferry, Suite 1740, Atlanta, Georgia
30339.
We are not asking you for a proxy and you are requested not to send us a
proxy. This Information Statement has not been approved or disapproved by the
Securities and Exchange Commission nor has the Commission passed upon the
fairness or merits of the Amended and Restated Articles or the Stock Plan
Amendment or the accuracy or adequacy of the information contained in this
Information Statement. Any representation to the contrary is unlawful.
PURPOSE OF THE AMENDED AND RESTATED ARTICLES
Increase in Authorized Shares of Common Stock
The authorized capital of the Company currently consists of 100,000,000
shares of common stock, $0.01 par value per share. The Amended and Restated
Articles provide for authorized capital of 500,000,000 shares of common stock,
$0.01 par value per share. There are currently 31,959,674 shares of common stock
issued and outstanding, 5,000,000 shares of Series A convertible preferred stock
issued and outstanding and 2,970,000 shares of Series B convertible preferred
stock issued and outstanding.
The increase in authorized common stock is necessary so that there will be
sufficient shares of common stock available for issuance upon conversion of the
preferred stock to common stock. The increase in authorized common stock to
500,000,000 shares would also provide the Company with flexibility for future
financings or acquisitions. No specific issuances are presently contemplated for
financings or acquisitions. Any such issuances could be authorized by the Board
of Directors without further action by the shareholders.
Expansion of Indemnification Provisions
The Amended and Restated Articles include an additional indemnification
provision as allowed under Florida law. The Amended and Restated Articles
contain this provision to reflect the intent of the Board of Directors that the
Company indemnify to the fullest extent allowed under Florida law any person who
is or was a director, officer, employee or agent of the Company who is a party
to any proceeding, including an action by or in the right of the Company, by
reason of the fact that such person is or was a director, officer, employee or
agent of the Company.
Proposed Amended and Restated Articles
The Company's Board of Directors has unanimously adopted resolutions
approving and recommending that shareholders approve and adopt the Amended and
Restated Articles.
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PURPOSE OF THE STOCK PLAN AMENDMENT
Purpose and Administration of Stock Incentive Plan
In March 1998, the Board of Directors adopted, and our shareholders
approved, the 1998 Stock Incentive Plan of Transit Group, Inc. (the "Plan"). The
purpose of the Plan is to encourage and enable our employees, directors and
independent contractors and those of our related corporations to acquire or
increase their holdings of our common stock and other proprietary interests in
order to promote a closer identification of their interests with those of us and
our shareholders, thereby further stimulating their efforts to enhance our
efficiency, soundness, profitability, growth and shareholder value.
Our Board of Directors has approved an amendment to the Plan, attached
hereto as Exhibit B, that increases the number of shares of our common stock we
are authorized to issue under the Plan by 30,000,000. By written consent in lieu
of a special meeting, shareholders owning a majority of our outstanding shares
of common stock have also approved the Plan. The Plan, as amended, is intended
to be effective as of June 29, 2001. The discussion that follows is qualified in
its entirety by reference to the Plan, as amended.
The Plan is administered by the Compensation Committee or by our Board of
Directors (both the Board and the Compensation Committee are referred to in this
discussion as the "Committee"). The Committee may make the following types of
grants under the Plan, each of which is referred to as an "award":
. incentive stock options ("ISOs");
. nonqualified stock options ("NQSOs");
. restricted stock awards ("restricted stock awards");
. stock appreciation rights ("SARs"); and
. restricted units ("restricted units").
The material terms of each type of award are discussed below. See "Awards."
Our officers, employees, employee directors, consultants and other
independent contractors or agents are eligible for selection by the Committee to
participate in the Plan, provided, however, that ISOs may be granted only to our
employees. As of June __, 2001, the approximate number of persons in each class
of participants were as follows: employees (approximately 2,400 persons);
employee directors ( two persons); nonemployee directors (two persons); and,
consultants or other independent contractors (approximately 20 persons).
When the amendment to the Plan is effective, we will have authorized and
reserved for issuance an additional 30,000,000 shares of our common stock under
the Plan. The shares of common stock or treasury shares issuable under the Plan
may be authorized but unissued shares, treasury shares or shares purchased in
the open market by private purchase. If any of the awards granted under the Plan
expire, terminate or are forfeited for any reason before they have been
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exercised, vested or issued in full, the unused shares subject to those expired,
terminated or forfeited awards will again be available for grant under the Plan.
Our Board may amend or terminate the Plan at any time, although shareholder
approval is required if required by applicable law, rule or regulation, and the
request of a recipient is required if his or her rights with respect to an
outstanding award would be adversely affected by amendment or termination. The
Plan will continue in effect until February 29, 2008 unless sooner terminated
under the provisions of the Plan. The Plan also provides that the number of
shares underlying the Plan be adjusted in the event of a change in the shares of
common stock as a result of a merger, consolidation, reorganization, a stock
dividend or stock split or other similar change in the capital structure and
that the terms of awards may also be adjusted.
As of June ___, 2001, the last sale reported of our common stock on the
Over the Counter Bulletin Board was $___.
Awards
As noted above, our Plan authorizes the granting of ISOs, NQSOs, SARs,
restricted stock awards and restricted units. A summary of the material terms of
each type of award is provided below.
Options. Our Plan authorizes the grant of both ISOs and NQSOs, both of
which are exercisable for shares of common stock. The Committee will determine
at the time of grant the option price at which an option may be exercised. In
the case of ISOs, which may only be granted to our employees, the option price
must be at least equal to 100% of the fair market value per share of the common
stock on the date of grant. The option price of NQSOs must be at least 85% of
the fair market value per share of the common stock on the date of grant. The
Committee will determine at the time of grant the term of an option and the
periods and conditions for exercise. In the case of ISOs, the option term may
not exceed 10 years. Unless an individual agreement provides otherwise, payment
of the option price may be made by cash or check and, if permitted by the
Committee, by delivery of shares of common stock, "cashless exercise" or a
combination of these methods. Options are subject to certain restrictions on
exercise if the participant terminates employment or service. The Committee also
has authority to establish other terms and conditions related to options.
Stock Appreciation Rights. Under the terms of our Plan, SARs may be granted
to an optionee of an option (a "related option") with respect to all or a
portion of the shares of common stock subject to the related option (a "tandem
SAR") or may be granted separately (a "freestanding SAR"). The consideration to
be received by the holder of an SAR may be paid in cash, shares of common stock
(valued at fair market value on the date of the SAR exercise), or a combination
of cash and shares of common stock, as the Committee may determine. The
Committee may establish a maximum value payable for an SAR. The consideration we
pay upon exercise of an SAR may be paid currently or on a deferred basis.
SARs are exercisable according to the terms stated in the related
agreement. No SAR may be exercised more than 10 years after it was granted, or
such shorter period as may apply to
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related options in the case of tandem SARs. SAR holders are subject to the same
restrictions on exercise during employment and following termination of
employment or service as optionees.
Restricted Awards. Subject to the limitations of the Plan, the Committee
may in its sole discretion grant restricted awards to such eligible individuals
in such numbers, upon such terms and at such times as the Committee determines.
A restricted award may consist of a restricted stock award or a restricted unit,
or both. Restricted awards may be payable in cash or whole shares of common
stock (including restricted stock), or partly in cash and partly in whole shares
of common stock, in accordance with the terms of the Plan and the Committee's
discretion.
The Committee has authority to determine the nature, length and starting
date of the period, if any, during which the restricted award may be earned (the
"restricted period") for each restricted award, and will determine the
conditions that must be met in order for a restricted award to be granted or to
vest or be earned in whole or in part. These conditions may include, but are not
limited to, attainment of performance objectives, completion of the restriction
period (or a combination of attainment of performance objectives and completion
of the restriction period), retirement, displacement, disability, death or any
combination of these conditions. In the case of restricted awards based upon
performance criteria, or a combination of performance criteria and continued
service, the Committee will determine the performance objectives to be used in
valuing restricted awards and determine the extent to which such awards have
been earned. Performance objectives may vary from participant to participant and
between groups of participants and will be based upon those company, business
unit or individual performance factors and criteria as the Committee in its sole
discretion may deem appropriate, including but not limited to sales targets,
earnings per share, return on equity, return on assets, total revenues, total
return to shareholders or any combination of these factors.
The Committee has authority to determine whether and to what degree
restricted awards have been earned and are payable, as well as to determine the
forms and terms of restricted awards. If a participant's employment or service
is terminated before the participant has earned all or part of a restricted
award, the unearned portion of the award will be forfeited, unless the Committee
elects to accelerate vesting of the award or his individual agreement provides
otherwise.
Summary of Amendment to the Plan
On May 16, 2001, our Board of Directors approved the amendment to the Plan
that would increase the number of shares of common stock issuable under the Plan
by 30,000,000. On June 8, 2001, by written consent in lieu of a special meeting,
shareholders owning a majority of our outstanding shares of common stock also
approved the amendment to the Plan.
In order for the Plan to continue to provide an incentive for highly
qualified individuals to serve or continue service with us, to more closely
align the interests of such individuals with our shareholders, and to provide
stock-based compensation comparable to that offered by other similar companies,
our Board of Directors believes that the number of shares of common stock
authorized for issuance under the Plan needed to be increased as described
herein.
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Our Board believes that the amendment to increase the number of shares
available for issuance under the Plan is necessary in order for the Plan to
continue to serve as a strong stock-based incentive for our employees and other
eligible individuals now and in the future.
Performance-Based Compensation -- Section 162(m) Requirements
The Plan is intended to preserve our tax deduction for certain awards paid
under the Plan by complying with the terms of Section 162(m) of the Internal
Revenue Code (the "Code") and related regulations. Section 162(m) of the Code
denies an employer a deduction for compensation paid to covered employees
(generally, the Named Executive Officers) of a publicly-held corporation in
excess of $1,000,000 unless the compensation is exempt from the $1,000,000
limitation because it is performance-based compensation or paid on a commission
basis. Although the $1,000,000 deduction limitation is not applicable at this
time to any of our Named Executive Officers, the Plan is structured to comply
with the requirements imposed by Section 162(m) of the Code in order to
preserve, to the extent practicable, our tax deduction for awards made under the
Plan.
In order to qualify as performance-based compensation, the compensation
paid to covered employees must be paid under pre-established objective
performance goals determined and certified by a committee comprised of outside
directors. In addition to other requirements for the performance-based
exception, shareholders must be advised of, and must approve, the material terms
or change in material terms of the performance goal under which compensation is
to be paid. Material terms include the individuals eligible to receive
compensation, a description of the business criteria on which the performance
goal is based, and either the maximum amount of the compensation to be paid or
the formula used to calculate the amount of compensation if the performance goal
is met.
Restricted awards that are performance-based will be based upon such
company, business unit or individual performance factors and criteria as the
Committee determines, including but not limited to sales targets, earnings per
share, return on equity, return on assets, total revenue, total return to
shareholders or any combination of these factors. See "Awards -- Restricted
Awards," above.
New Plan Benefits
The amount of compensation that will be paid pursuant to the grant of
awards under the Plan in the current year to the following persons is not yet
determinable due to vesting, performance and other requirements. However, the
following table sets forth the number of options that were granted in 2000 under
the Plan, which were granted at exercise prices from $.17 per share to $1.28
per share, to each of the following:
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New Plan Benefits
Number of Shares
Subject to
Name and Position Dollar Value ($)(1) Options (#)
---------------------------------------------------- ------------------- ----------------
T. Wayne Davis
Chairman...................................... 0 0
Philip A. Belyew
President and Chief Executive Officer......... 0 0
Mark DiLuzio(2)
Senior Vice President, Finance, Mergers and
Acquisitions.................................. 0 100,000
Kim Mattingly
Vice President, Human Resources............... 0 40,000
Wayne N. Nellums(3)
Senior Vice President, Chief Financial Officer
and Secretary................................. 0 0
Donna Raines (4)
Vice President, Corporate Tax................. 0 0
Executive Group (5)................................. 0 100,000
Non-Executive Director Group........................ 0 0
Non-Executive Officer Employee Group................ 0 595,000
_________________
(1) The dollar value is based on a per share price of $___ (the last sale
reported of our common stock as reported on the Over the Counter Bulletin
Board on June __, 2001).
(2) Mr. DiLuzio is no longer an employee.
(3) Mr. Nellums is no longer an employee.
(4) Ms. Raines is no longer an employee.
(5) Includes an option to purchase 60,000 shares of our common stock granted to
James G. Overley in October, 2000 in connection with the commencement of
his employment with us as Senior Vice President of Finance, Chief Financial
Officer and Treasurer.
Certain Federal Income Tax Consequences
The following summary generally describes the principal federal (and not
state and local) income tax consequences of awards granted under the Plan. The
summary is general in nature and is not intended to cover all tax consequences
that may apply to a particular participant or to us. The provisions of the Code
and related regulations are complicated and their impact in any one case may
depend upon the particular circumstances.
Incentive Stock Options. ISOs granted under the Plan are intended to
qualify as incentive stock options under Section 422 of the Code. Pursuant to
Section 422, the grant and exercise of an incentive stock option will generally
not result in taxable income to the optionee (with the possible exception of
alternative minimum tax liability) if the optionee does not dispose of shares
received upon exercise of such option less than one year after the date of
exercise and two years after the date of grant, and if the optionee has
continuously been our employee or an employee of
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a related corporation from the date of grant to three months before the date of
exercise (or 12 months in the event of death or disability). We will not be
entitled to a deduction for income tax purposes in connection with the exercise
of an incentive stock option. Upon the disposition of shares acquired pursuant
to exercise of an incentive stock option, the optionee will be taxed on the
amount by which the amount realized upon such disposition exceeds the option
exercise price, and such amount will be treated as long-term capital gain or
loss. If the holding period requirements for incentive stock option treatment
described above are not met, the option will be treated as a nonqualified stock
option.
Pursuant to the Code and the terms of the Plan, in no event can there first
become exercisable by an optionee in any one calendar year ISOs we grant or any
related corporation grants with respect to shares having an aggregate fair
market value (determined at the time an option is granted) greater than
$100,000. To the extent an ISO exceeds the foregoing limitation, it will be
treated under the Plan as a NQSO. In addition, no ISO may be granted to an
individual who owns, immediately before the time that the option is granted,
stock possessing more than 10% of the total combined voting power of all classes
of our stock or that of a related corporation (unless certain requirements are
met, including an option exercise price greater than or equal to 110% of the
fair market value of the shares and an option period of five years or less).
Nonqualified Stock Options. If an optionee receives an NQSO, the difference
between the market value of the stock on the date of exercise and the option
exercise price will constitute taxable ordinary income to the optionee on the
date of exercise. We will be entitled to a deduction in the same year in an
amount equal to the income taxable to the optionee. The optionee's basis in
shares of our common stock acquired upon exercise of an option will equal the
option exercise price plus the amount of income taxable at the time of exercise.
Any subsequent disposition of the stock by the optionee will be taxed as a
capital gain or loss to the optionee, and will be long-term capital gain or loss
if the optionee has held the stock for more than one year at the time of sale.
Pursuant to the terms of the Plan, we will require any recipient of shares
of our common stock to pay us the amount of any tax or other amount required by
any governmental authority to be withheld and paid over by us to such authority
for the account of such recipient. We also will withhold all required taxes from
any amount payable with respect to an award.
Stock Appreciation Rights. For federal income tax purposes, the grant of
an SAR will not result in taxable income to the holder or a tax deduction to us.
At the time of exercise of an SAR, the SAR holder will forfeit the right to
benefit from any future appreciation of the stock subject to the SAR.
Accordingly, taxable income to the SAR holder is deferred until the SAR is
exercised. Upon exercise, the amount of cash and fair market value of shares
received by the SAR holder, less cash or other consideration paid (if any), is
taxed to the SAR holder as ordinary income and we will receive a corresponding
income tax deduction to the extent the amount represents reasonable compensation
and an ordinary and necessary business expense, subject to any required income
tax withholding.
Restricted Stock Subject to Restricted Awards. Similar to SARs, awards for
restricted stock generally will not result in taxable income to the employee or
a tax deduction to us for federal income tax purposes. Upon expiration of the
restricted period applicable to the restricted
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stock award, the fair market value of such shares at such date and any cash
amount awarded, less cash or other consideration paid (if any), will be included
in the recipient's ordinary income as compensation, except that, in the case of
restricted stock issued at the beginning of the restriction period, the
recipient may elect to include in his ordinary income as compensation at the
time the restricted stock is awarded, the fair market value of such shares at
such time, less any amount paid therefor. We will be entitled to a corresponding
income tax deduction to the extent that the amount represents reasonable
compensation and an ordinary and necessary business expense, subject to any
required income tax withholding.
Restricted Units and Restricted Awards Other Than Restricted Stock. The
federal income tax consequences of the award of restricted units and other
restricted awards other than restricted stock will depend on the conditions of
the award. Generally, the transfer of cash or property will result in ordinary
income to the recipient and a tax deduction to us. If there is a substantial
risk that the property transferred will be forfeited (for example, because
receipt of the property is conditioned upon the performance of substantial
future services), the taxable event is deferred until the risk of forfeiture
lapses. However, the recipient may generally elect to accelerate the taxable
event to the date of transfer, even if the property is subject to a substantial
risk of forfeiture. If this election is made, subsequent appreciation is not
taxed until the property is sold or exchanged (and the lapse of the forfeiture
restriction does not create a taxable event). Generally, any deduction to us
occurs only when ordinary income in respect of an award is recognized by the
employee (and then the deduction is subject to reasonable compensation and
withholding requirements). Because restricted stock awards will be subject to
such conditions as the Committee may determine, the federal income tax
consequences to the recipient and to us will depend on the specific conditions
of the award.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June ___, 2001, certain information
regarding ownership of our common stock on an "as converted" basis. The
information is presented for each person we know to be a beneficial owner of 5%
or more of our securities, each of our directors and executive officers and all
of our executive officers and directors as a group.
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Amount And Nature of Percentage of
Beneficial Ownership of Common Stock
Name and Address of Beneficial Owner Common Stock (1) Owned(2)
------------------------------------------------------------- ------------------------- ----------------
T. Wayne Davis............................................... 120,312,875 (3) 29.66%
Philip A. Belyew............................................. 6,473,971 (4) 1.59%
Mark DiLuzio................................................. 7,732 (5) *
Kim Mattingly................................................ 67,300 (6) *
Wayne N. Nellums............................................. 2,577 (5) *
Derek E. Dewan............................................... 100,000 (7) *
Ford G. Pearson.............................................. 1,199,000 (8) *
GE Capital Corporation....................................... 141,258,846 (9) 34.83%
All executive officers and directors as a group (7 persons).. 128,163,455 31.51%
___________________________________
* Represents less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power
with respect to shares beneficially owned. Shares of common stock issuable
upon the conversion of options or warrants currently exercisable, or
exercisable within 60 days of June ___, 2001, are deemed to be beneficially
owned.
(2) On June __, 2001, there were 31,959,674 shares of our common stock issued
and outstanding. We have also assumed that options to purchase
approximately 53,507,568 shares of our common stock at $.05 per share
issued to our lenders and to a certain lessor in connection with the
restructuring of our debt have been exercised, that 5,000,000 shares of our
Series A Preferred Stock and 2,970,000 shares of Series B Preferred Stock
have been converted into an aggregate of 320,065,847 shares of our common
stock. In addition, we have assumed that options that have been issued to
directors and executive officers individually and as a group and vested as
of June ___, 2001 (or within 60 days after June ___, 2001), have been
converted into 1,175,000 shares of common stock.
(3) Consists of 6,934,731 shares owned by the ECD Trust, of which Mr. Davis is
Trustee; 1,577,614 shares of our common stock owned directly; 1,276,396
shares owned by the TWD Trust for ECD, of which Mr. Davis is Trustee;
186,602 shares owned by the TWD Trust for DDL, of which Mr. Davis is
Trustee; 171,497 shares owned by the TWD Trust for TDD, of which Mr. Davis
is Trustee; 20,438 shares owned by the TWD Trust for TWD, Jr., of which Mr.
Davis is Trustee; 14,997 shares owned by Redwing Properties, Inc., of which
Mr. Davis is President; 4,912 shares owned by Mr. Davis' wife, Mary O.
Davis; and an aggregate of 50,688 shares of our common stock held by Mr.
Davis as custodian for Mr. Davis' children, C. Rebecca Davis, Elizabeth
Davis and Katherine C. Davis. Additionally, consists of 70,000,000 shares
of our common stock issuable upon the conversion of the Series B Preferred
Stock owned by the ECD Trust, of which Mr. Davis is Trustee, 40,000,000
shares of our common stock issuable on the conversion of the Series B
Preferred Stock issued as a placement fee to Mr. Davis, and 75,000 shares
of our common stock issuable on the exercise of presently exercisable
options.
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(4) Consists of 228,571 shares of our common stock owned directly, 5,000,000
shares of our common stock issuable on the conversion Series B Preferred
Stock received in consideration of indebtedness forgiveness, 345,400 shares
issuable on conversion of purchased Series B Preferred Stock and 900,000
shares of our common stock issuable on the exercise of presently
exercisable options.
(5) Consists of shares of our common stock owned directly.
(6) Consists of 500 shares of our common stock owned directly and 66,800 shares
of our common stock issuable on the exercise of presently exercisable
options.
(7) Consists of shares of our common stock issuable on the exercise of
presently exercisable options.
(8) Consists of 1,099,000 shares of our common stock issuable on conversion of
purchased Series B Preferred Stock and 100,000 shares of our common stock
issuable on the exercise of presently exercisable options.
(9) Consists of 23,065,847 shares of our common stock issuable on the
conversion of our Series A Convertible Preferred Stock following the
offering, 37,500,000 shares of our common stock issuable on the conversion
of past accrued dividends on Series A Preferred Stock; 40,000,000 shares
of our common stock issuable on conversion of the new GE Capital Equity
Investments, Inc. investment in Series B Preferred Stock, 22,857,143 shares
of our common stock issuable on conversion of the Series B Preferred Stock
issued as placement fee to GE Capital Equity Investments, Inc., and
17,835,856 shares of our common stock issuable on conversion of our Series
B Preferred Stock issuable on the exercise of a presently exercisable
option granted to GE Leasing, Inc. The address of GE Capital Corporation is
120 Long Ridge Road, Stamford, Connecticut 06927.
ACTIONS TAKEN
On June __, 2001, holders of ___________ shares, or ____%, of our common
stock approved and adopted by written consent the Amended and Restated
Articles and Stock Plan Amendment. No further votes are required or necessary to
approve the Amended and Restated Articles or the Stock Plan Amendment. You are
being provided with this Information Statement pursuant to Section 14(c) of the
Securities Exchange Act of 1934, as amended, and Regulation 14C and Schedule 14C
thereunder. The Amended and Restated Articles and Stock Plan Amendment will not
become effective until at least 20 days after the mailing of this Information
Statement. This Information Statement is being mailed to the stockholders on or
about June ___, 2001.
By Order of the Board of Directors
/s/ T. Wayne Davis
---------------------------------------
Chairman
Dated June ___, 2001
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EXHIBIT "A"
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
TRANSIT GROUP, INC.
Pursuant to Section 607.1007 of the Florida Business Corporation Act,
Transit Group, Inc., (the "Corporation") hereby amends and restates its Articles
of Incorporation to read as follows:
ARTICLE I. NAME
The name of this Corporation is TRANSIT GROUP, INC. (the "Corporation").
ARTICLE II. PURPOSE
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any and all lawful act or activity for which
corporations may be organized under the Florida Business Corporation Act as now
or hereinafter in force. The Corporation shall possess and exercise all of the
powers and privileges granted by the Florida Business Corporation Act, by any
other law or by these Articles, together with all such powers and privileges
incidental thereto as may be necessary or convenient to the conduct, promotion
or attainment of the purposes of the Corporation.
ARTICLE III. SHARE STRUCTURE
(a) This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation is authorized to issue is 520,000,000
shares, of which 500,000,000 shares are Common Stock, $.01 par value per share,
and 20,000,000 shares are Preferred Stock, no par value per share. The rights
and preferences of all outstanding shares of Common Stock shall be identical.
The holders of outstanding shares of Common Stock shall have the right to vote
on all matters submitted to a vote of the stockholders of the Corporation, on
the basis of one vote per share of Common Stock owned.
(b) The Preferred Stock may be issued from time to time in one or more
classes and series pursuant to a resolution or resolutions providing for such
issue duly adopted by the Board of Directors (authority to do so being hereby
expressly vested in the Board of Directors), and such resolution or resolutions
shall also set forth the voting powers, full or limited or none, of each such
class and/or series of Preferred Stock and shall fix the preferences,
limitations and relative rights thereof. The Board of Directors is further
authorized to determine or alter the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued class or series of
Preferred Stock and to fix the number of shares of any class or series of
Preferred Stock and the designation of any such class or series of Preferred
Stock to the fullest extent permitted by the Florida Business Corporation Act.
The Board of Directors, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally fixing the number
of shares constituting any class or series, may increase or decrease (but not
below the number of shares in any such series then outstanding) the number of
shares thereof subsequent to the issue of shares of that series.
(c) Five million (5,000,000) of the authorized shares of Preferred Stock
have been and are hereby designated "Series A Convertible Preferred Stock." The
rights, preferences, privileges, restrictions and other matters relating to the
Series A Convertible Preferred Stock are as set forth in Exhibit "A" attached
hereto and incorporated herein.
(d) Four million (4,000,000) of the authorized shares of Preferred Stock
have been and are hereby designated "Series B Convertible Preferred Stock." The
rights, preferences, privileges, restrictions and other matters relating to the
Series B Convertible Preferred Stock are as set forth in Exhibit "B" attached
hereto and incorporated herein.
13
ARTICLE IV. DURATION
The Corporation shall have perpetual existence.
ARTICLE V. BOARD OF DIRECTORS
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors, which shall exercise all powers
conferred under the laws of the State of Florida. The number of directors shall
be determined in accordance with the Bylaws of the Corporation. The election of
directors of the Corporation may, but need not, be by ballot.
ARTICLE VI. LIABILITY OF DIRECTORS
To the fullest extent permitted by the Florida Business Corporation Act, as
the same now exists or may hereafter be amended in a manner more favorable to
directors, a director of the Corporation shall not be personally liable to the
Corporation, its stockholders or any other person for monetary damages for
breach of fiduciary duty as a director. If the law of the State of Florida is
amended after the filing of these Articles to authorize corporate action further
limiting or eliminating the personal liability of directors of the Corporation,
then the liability of directors to the Corporation or its stockholders shall be
limited or eliminated to the fullest extent permitted by law of the State of
Florida, as so amended from time to time. Any repeal or modification of the
provisions of this Article VI, either directly or by the adoption of an
inconsistent provision of these Articles, shall be prospective only and shall
not adversely affect any right or protection set forth herein existing in favor
of a particular individual at the time of such repeal or modification.
ARTICLE VII. INDEMNIFICATION
(a) The Corporation shall indemnify, and upon request shall advance
expenses (including attorneys' fees), in the manner and to the fullest extent
permitted by law, to any person who was or is an officer or director of the
Corporation (or the estate of any such person) and who was or is a party to any
threatened, pending or completed action, suit or other type of proceeding,
whether civil, criminal, administrative, or investigative whether formal or
informal (a "proceeding") (other than an action by or in the right of the
Corporation), by reason of the fact that such person is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, other enterprise or employee
benefit plan (an "indemnitee") against liability incurred, including obligations
to pay a judgment, settlement, penalty, fine (including an excise tax assessed
with respect to any employee benefit plan), and expenses actually and reasonably
incurred (including attorneys' fees), in connection with such proceeding,
including any appeal thereof, if he or she acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interest of
the Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is an officer
or director of the Corporation (or the estate of any such person) and who was or
is a party to any threatened, pending or completed action, suit or other type of
proceeding, whether civil, criminal, administrative, investigative and whether
formal or informal (a "proceeding") by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that the person is or was
a director, officer, employee, or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses and amounts paid in settlement not exceeding, in the judgment
of the board of directors, the estimated expense of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding, including any appeal thereof, if such person
acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the best interests of the Corporation, except that no
indemnification shall be made under this subsection in respect of any claim,
issue, or matter as to which such person shall have been adjudged to be liable
unless, and only to the extent that, the court in which such proceeding was
brought, or any other court of competent jurisdiction, shall determine upon
application that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
(c) To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in subsection (a) or subsection (b) above, or in
14
defense of any claim, issue, or matter therein, he or she shall be indemnified
against expenses actually and reasonably incurred by him or her in connection
therewith.
(d) The indemnification provided herein shall not be deemed to limit the
right of the Corporation to indemnify any other person for any liability,
including obligations to pay a judgment, settlement, penalty, fine (including
and excise tax assessed with respect to any employee benefit plan), and expenses
actually and reasonably incurred (including attorneys' fees), to the fullest
extent permitted by law, both as to action in such person's official capacity
and as to action in another capacity while holding such office.
(e) Notwithstanding any provision of this Article VII to the contrary, the
Corporation shall indemnify any indemnitee named above in connection with a
proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation.
(f) Neither any amendment nor repeal of this Article VII, nor the adoption
of any provision of this Corporation's Articles of Incorporation inconsistent
with this Article VII, shall eliminate or reduce the effect of this Article VII,
with respect to any matter occurring, or any action or proceeding accruing or
arising or that, but for this Article VII, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
ARTICLE VIII. BYLAWS
The Board of Directors of the Corporation is expressly authorized to make,
alter or repeal bylaws of the Corporation.
ARTICLE IX. CORPORATE BOOKS
The books of the Corporation may be kept (subject to any provision of law)
outside the State of Florida at such place or places as may be designated from
time to time by the Board of Directors or in the bylaws of the Corporation.
ARTICLE X. STOCKHOLDER PROPOSALS
Advance notice of new business to be brought before any meeting of the
stockholders and stockholder nominations for the election of directors shall be
given in the manner and to the extent provided in the Bylaws of the Corporation.
IN WITNESS WHEREOF, the undersigned has duly executed these Amended and
Restated Articles of Incorporation on the ______ day of ________, 2001.
TRANSIT GROUP, INC.
ATTEST: BY: _____________________________________________
Philip A. Belyew, Chief Executive Officer
_______________________________
James Overley, Secretary
15
TRANSIT GROUP, INC.
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS THEREOF
____________________
Pursuant to Section 607.1004 of the
Florida Business Corporation Act
____________________
TRANSIT GROUP, INC. (the "Company"), a corporation organized and existing
under the laws of the State of Florida, hereby certifies that pursuant to the
provisions of Section 607.1004 of the Florida Business Corporation Act, its
Board of Directors, by action taken April 10, 2001, adopted the following
resolution, which resolution remains in full force and effect as of the date
hereof:
WHEREAS, the Board of Directors of the Company is authorized, within the
limitations and restrictions stated in the articles of incorporation, to fix by
resolution or resolutions the designation of preferred stock and the powers,
preferences and relative participating, optional or other special rights and
qualifications, limitations or restrictions thereof, including, without limiting
the generality of the foregoing, such provisions as may be desired concerning
voting, redemption, dividends, dissolution or the distribution of assets,
conversion or exchange, and such other subjects or matters as may be fixed by
resolution or resolutions of the Board of Directors under the Florida Business
Corporation Act; and
WHEREAS, the Board of Directors has previously created and fixed the terms
of the Series A Preferred Stock; and
WHEREAS, it is the desire of the Board of Directors of the Company,
pursuant to its authority as aforesaid, to amend the terms of the Series A
Convertible Preferred Stock of the Company and the number of shares constituting
such preferred stock;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized the Series
A Convertible Preferred Stock on the terms and with the provisions herein set
forth:
16
AMENDED AND RESTATED
TERMS, PREFERENCES, RIGHTS AND LIMITATIONS
of
SERIES A CONVERTIBLE PREFERRED STOCK
of
TRANSIT GROUP, INC.
The relative rights, preferences, powers, qualifications, limitations and
restrictions granted to or imposed upon the Series A Convertible Preferred Stock
or the holders thereof are as follows:
1. Definitions. For purposes of this Designation, the following
-----------
definitions shall apply:
"Amendment Date" shall mean the date this amended and restated
certificate is filed with the Florida Department of State.
"Board" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Common Stock" shall mean the Common Stock, $.01 par value per share,
of the Company.
"Company" shall mean Transit Group, Inc., a Florida corporation.
"Conversion Price" shall mean the amount computed by dividing the
Liquidation Preference by the Conversion Ratio.
"Conversion Ratio" has the meaning set forth in Section 7 hereof.
"Convertible Preferred Stock" shall refer to shares of Series A
Convertible Preferred Stock, no par value per share, of the Company.
"Current Market Price," when used with reference to shares of Common
Stock or other securities on any date, shall mean the average of the daily
market prices for the 10 consecutive Trading Days immediately prior to such
date. The daily market price for each such Trading Day shall be (i) the last
sale price on such day on the principal stock exchange or NASDAQ Stock Market on
which such Common Stock is then listed or admitted to trading, (ii) if no sale
takes place on such day on any such exchange or market, the average of the last
reported closing bid and asked prices on such day as officially quoted on any
such exchange or market, (iii) if the Common Stock is not then listed or
admitted to trading on any stock exchange or such market, the average of the
last reported closing bid and asked prices on such day in the over-the-counter
market, as furnished by NASDAQ or the National Quotation Bureau, Inc., (iv) if
neither such corporation at the time is engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in such business, or
(v) if there is no such firm, as furnished by any member of the National
Association of Securities Dealers ("NASD") selected mutually by the Required
Holders and Company or, if they cannot agree upon such selection, as selected by
two such members of the NASD, one of which shall be selected by the Required
Holders and one of which shall be selected by Company.
"Dividend Rate" shall mean 9% per annum.
17
"Event of Default" shall have the meaning assigned to it in the
Purchase Agreement and shall also mean the failure of the Company to redeem
shares of Convertible Stock pursuant to Section 6 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of the Securities Exchange
Act of 1934, as amended, shall include reference to the comparable section, if
any, of any such similar Federal statute.
"Fair Market Value" shall mean the amount which a willing buyer would
pay a willing seller in an arm's-length transaction, with neither being under
any compulsion to buy or sell.
"Fully Diluted Outstanding" shall mean, with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all shares of Common Stock outstanding at such date and all shares of Common
Stock issuable upon the conversion of the Convertible Preferred Stock
outstanding on such date, and other options or warrants to purchase, or
securities convertible into, shares of Common Stock outstanding on such date
which would be deemed outstanding in accordance with GAAP for purposes of
determining book value or net income per share.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"Liquidation Preference" shall mean $5.00 per share.
"Organic Change" shall mean (A) any sale, lease, exchange or other
transfer of all or substantially all of the property and assets of the Company,
(B) any liquidation, dissolution or winding up of the Company, whether voluntary
or involuntary, (C) any merger or consolidation to which the Company is a party
and which the holders of the voting securities of the Company immediately prior
thereto own less than a majority of the outstanding voting securities of the
surviving entity immediately following such transaction, or (D) any transaction,
other than the conversion of accrued and unpaid dividends on the Series B
Preferred Stock into additional shares of Series B Preferred Stock, following
which any Person or group of Persons (as such term is used in Section 13(d) of
the Exchange Act) shall beneficially own (as defined in Rule 13d-3 under the
Exchange Act) securities of the Company representing 50% or more of the voting
securities of the Company then outstanding. For purposes of the preceding
sentence, "voting securities" shall mean securities, the holders of which are
ordinarily, in the absence of contingencies, entitled to elect the corporate
directors (or Persons performing similar functions).
"Original Issue Date" shall mean the date of the original issuance of
shares of Convertible Preferred Stock.
"Permitted Issuances" shall mean issuances of shares of Common Stock
(i) upon the exercise or conversion of warrants or convertible securities of the
Company outstanding on the Original Issue Date (including the Convertible
Preferred Stock), (ii) upon the exercise of employee stock options issued with
the approval of the Company's Board of Directors pursuant to Company's current
stock option plans, (iii) as consideration in connection with Permitted
Acquisitions (as such term is defined in the Purchase Agreement) at a price (or
deemed price) per share equal to or greater than the lower of (x) the Current
Market Price per share of Common Stock (calculated as of the date on which such
price per share is agreed upon whether upon the signing of a letter of intent,
if so provided therein, or the signing of a definitive purchase agreement) and
(y) the Conversion Price, (iv) upon the exercise of options to purchase up to an
additional 30,000,000 shares of Common Stock issued with approval of the
Company's Board of Directors, (v) upon the exercise of options to purchase
shares of Common Stock issued to the bank group led by Bank One, N.A., the
Company's primary lender, and General Electric Capital Corporation, and (vi)
18
issued upon the conversion of Series B Preferred Stock. "Permitted Issuances"
shall also include the issuance of Series B Preferred Stock (i) as a placement
fee relating to the purchase of the Series B Preferred Stock and as a deferral
fee to certain members of the Carroll Fulmer family in an aggregate amount up to
1,100,000 shares, (ii) as a dividend to holders of the Series B Preferred Stock,
(iii) in connection with the conversion of certain indebtedness owed by the
Company to Philip A. Belyew and certain other individuals in an amount up to
95,000 shares, and (iv) to holders of the Convertible Preferred Stock for
dividends accrued prior to January 31, 2001.
"Person" shall mean any individual, firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of
May 13, 1999, by and between the Company and Purchaser named therein, as amended
on the Amendment Date, and as it may be amended from time to time, a copy of
which is on file at the principal office of the Company.
"Redemption Date" shall mean the date on which any shares of
Convertible Preferred Stock are redeemed by the Company.
"Redemption Price" has the meaning set forth in Section 6(a) (i) of
this Certificate of Designation.
"Required Holders" shall mean the holders of at least a majority of
the outstanding shares of Convertible Preferred Stock.
"Series B Preferred Stock" shall mean the Series B Convertible
Preferred Stock , no par value, of the Company.
"Subsidiary" of any Person means any corporation or other entity of
which a majority of the voting power or the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
"Trading Day" shall mean a Business Day or, if the Common Stock is
listed or admitted to trading on any national securities exchange or NASDAQ
market, a day on which such exchange or market is open for the transaction of
business.
2. Designation: Number of Shares. The designation of the preferred stock
-----------------------------
authorized by this resolution shall be "Series A Convertible Preferred Stock"
and the number of shares of Convertible Preferred Stock authorized hereby shall
be 5,000,000 shares.
3. Dividends.
---------
(a) So long as any shares of Convertible Preferred Stock shall be
outstanding, the holders of such Convertible Preferred Stock
shall be entitled to receive out of any funds legally available
therefor, when, as and if declared by the Board of Directors of
the Company, preferential dividends in cash at the Dividend Rate
on the Liquidation Preference hereunder. Such dividends shall be
cumulative and begin to accrue from January 31, 2001 whether or
not declared and whether or not there shall be net profits or net
assets of the Company legally available for the payment of those
dividends. All dividends that have accrued through January 31,
2001, totaling $1,875,000, have been converted into Series B
Preferred Stock at a price of $5.00 per share, which conversion
satisfies all dividend obligations of the Company through such
date.
19
(b) So long as any shares of Convertible Preferred Stock shall be
outstanding, (i) no dividend whatsoever shall be paid or
declared, and no distribution shall be made, on account of any
Common Stock, and (ii) no shares of Common Stock shall be
purchased, redeemed or acquired by the Company and no funds shall
be paid into or set aside or made available for a sinking fund
for the purchase, redemption or acquisition thereof, other than
redemptions of shares of Common Stock pursuant to contractual
obligations in existence on the Amendment Date and the Series B
Preferred Stock.
(c) Notwithstanding anything to the contrary herein, the Company
shall be entitled to pay preferential dividends in cash at 10.5 %
per annum on the liquidation preference of the Series B Preferred
Stock of the Company, when and as declared by the Board.
4. Liquidation Rights of Convertible Preferred Stock.
-------------------------------------------------
(a) In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, the holders of
Convertible Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Company available for
distribution to its stockholders, whether such assets are
capital, surplus or earnings, before any payment or declaration
and setting apart for payment of any amount shall be made in
respect of any shares of Common Stock or any share of any other
class or series of the Company's preferred stock ranking junior
to the Convertible Preferred Stock with respect to the payment of
dividends or distribution of assets on liquidation, dissolution
or winding up of the Company, and after the payment in full of
the liquidation preference on the Series B Preferred Stock, an
amount equal to the Liquidation Preference plus all declared or
accrued and unpaid dividends in respect of any liquidation,
dissolution or winding up consummated.
(b) If upon any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, the remaining assets
to be distributed among the holders of Convertible Preferred
Stock shall be insufficient to permit the payment to such
stockholders of the full preferential amounts aforesaid, then the
entire assets of the Company remaining to be distributed shall be
distributed ratably among the holders of Convertible Preferred
Stock, based on the full preferential amounts for the number of
shares of Convertible Preferred Stock held by each holder.
(c) After payment to the holders of Convertible Preferred Stock of
the amounts set forth in Section 4(a) hereof, the entire
remaining assets and funds of the Company legally available for
distribution, if any, shall be distributed among the holders of
any Company stock entitled to a preference over the Common Stock
in accordance with the terms thereof and, thereafter, to the
holders of Common Stock, in which distribution the holders of
Convertible Preferred Stock and the Series B Preferred Stock
shall participate on an as if converted basis.
(d) If there is an Organic Change of the type referred to in clauses
(a) or (c) of the definition of Organic Change, then such
transaction shall be deemed a liquidation for purposes of
distributions to stockholders of the consideration received in
such transaction, subject, however, to the provisions of Section
5(b)(iii) hereof; provided, however, that solely for the purposes
of this Section 4(d), an Organic Change of the type referred to
in such clause (c) shall not be deemed a liquidation for purposes
of this Section 4(d) if, immediately after consummation of the
Organic Change, the stockholders of Company (as determined
immediately prior to such Organic Change) own at least 35% of the
voting capital stock of the surviving entity.
20
5. Voting Rights. In addition to any voting rights provided by law, the
-------------
holders of shares of Convertible Preferred Stock shall have the following voting
rights:
(a) So long as any of the Convertible Preferred Stock is outstanding,
each share of Convertible Preferred Stock shall entitle the
holder thereof to vote on all matters voted on by the holders of
Common Stock, voting together as a single and not separate class
with other shares entitled to vote at all meetings of the
stockholders of the Company. With respect to any such vote, each
share of Convertible Preferred Stock shall entitle the holder
thereof to cast the number of votes equal to the number of votes
which could be cast in such vote by a holder of the number of
shares of Common Stock of the Company into which such share of
Convertible Preferred Stock is convertible on the record date for
such vote.
(b) The affirmative vote of the Required Holders, voting together as
a class, in person or by proxy, at a special or annual meeting of
stockholders called for the purpose, or pursuant to a written
consent of stockholders shall be necessary to
(i) authorize, adopt or approve an amendment to the articles
of incorporation of the Company which would alter or
change in any manner the terms, powers, preferences or
special rights of the shares of Convertible Preferred
Stock or grant waivers thereof, or which would otherwise
adversely affect the rights of the Convertible Preferred
Stock, provided that no such modification or amendment
may, without the consent of each holder of Convertible
Preferred Stock affected thereby, (A) change the
redemption date of the Convertible Preferred Stock; (B)
raise the Conversion Price or reduce the Liquidation
Preference, Dividend Rate or Redemption Price of the
Convertible Preferred Stock; (C) adversely affect any of
the conversion features of the Convertible Preferred Stock
set forth in Section 7 hereof; or (D) reduce the
percentage of outstanding Convertible Preferred Stock
necessary to modify or amend the terms thereof or to grant
waivers thereof;
(ii) issue any shares of the capital stock of the Company
ranking senior to, or pari passu with (either as to
dividends or upon voluntary or involuntary liquidation,
dissolution or winding up) the Convertible Preferred
Stock, or issue any securities convertible into or
exchangeable for such shares, except shares of Common
Stock; or
(iii) take any action which is in violation of Article V of the
Purchase Agreement.
(c) The holders of shares of Convertible Preferred Stock shall have,
in addition to their other voting rights set forth herein, the
exclusive right, voting separately as a single class, to elect
two directors of the Company in accordance with this Section 5,
and if, on any date after the Amendment Date, an Event of Default
shall have occurred and be continuing, then the holders of the
Convertible Preferred Stock shall have the right to elect one
additional member of the Board.
(d) (i) The foregoing rights of holders of shares of Convertible
Preferred Stock to take any actions as provided in this
Section 5 may be exercised at any annual meeting of
stockholders or at a special meeting of stockholders held
for such purpose as hereinafter provided or at any
adjournment thereof or pursuant to any written consent of
stockholders.
(ii) If the holders of the Convertible Preferred Stock have the
right to elect one director pursuant to Section 5(c)
above, or at any time with respect to the two directors
the holder of the Convertible Preferred Stock is entitled
to elect pursuant to Section 5(c)
21
above, a proper officer of the Company, upon the written request
of the holders of record of at least ten percent (10%) of the
shares of Convertible Preferred Stock then outstanding, addressed
to the Secretary of the Company, shall call a special meeting in
lieu of the annual meeting of stockholders or a special meeting
of the holders of Convertible Preferred Stock, for the purpose of
electing directors. Any such meeting shall be held at the
earliest practicable date at the place for the holding of the
annual meetings of stockholders. If such meeting shall not be
called by the proper officer of the Company within twenty (20)
days after personal service of said written request upon the
Secretary of the Company, or within twenty (20) days after
mailing the same within the United States by certified mail,
addressed to the Secretary of the Company at its principal
executive offices, then the holders of record of at least ten
percent (10%) of the outstanding shares of Convertible Preferred
Stock may designate in writing one of their number to call such
meeting at the expense of the Company, and such meeting may be
called by the person so designated upon the notice required for
the annual meetings of stockholders of the Company and shall be
held at the place for holding the annual meetings of
stockholders. Any holder of Convertible Preferred Stock so
designated shall have access to the lists of stockholders to be
called pursuant to the provisions hereof.
(e) Any vacancy occurring in the office of director to be elected by the
holders of Convertible Preferred Stock pursuant to Section 5(d) above
may be filled by the remaining director elected by the holders of
Convertible Preferred Stock unless and until such vacancy shall be
filled by the holders of Convertible Preferred Stock. The term of
office of the directors elected by the holders of Convertible
Preferred Stock shall terminate upon the election of their successors
at any meeting of stockholders held for the purpose of electing
directors, and the rights of the holders of the Convertible Preferred
Stock to elect members of the Board of Directors of the Company as
provided herein shall terminate at such time as less than five percent
(5%) of the Convertible Preferred Stock remains outstanding.
(f) The directors elected by the holders of shares of Convertible
Preferred Stock voting separately as a single class may be removed
from office with or without cause by the vote of the holders of at
least a majority of the outstanding shares of Convertible Preferred
Stock. A special meeting of the holders of shares of Convertible
Preferred Stock may be called in accordance with the procedures set
forth in subparagraph (d) of this Section 5.
6. Redemption of Convertible Preferred Stock.
-----------------------------------------
(a) Upon at least thirty (30) Business Days prior written notice to the
Company by any of the holders of the Convertible Preferred Stock (the
"Redemption Notice"), which written notice may not be sent for a
redemption prior to fifty-four months from the Amendment Date, the
Company shall redeem, at the redemption price equal to the sum of the
Liquidation Preference per share plus an amount equal to all accrued
and unpaid dividends per share thereon (the "Redemption Price"), the
number of shares of Convertible Preferred Stock specified in such
notice, up to one-third of the shares issued on the Original Issue
Date if the Redemption Notice is given for a redemption on or after
fifty-four months from the Amendment Date, up to two-thirds of such
amount if given for a redemption on or after sixty-six months from the
Amendment Date and up to all such shares if given for a redemption on
or after seventy-eight months from the Amendment Date and for a period
of one year thereafter. If the Required Holders so elect, on or after
seventy-eight months from the Amendment Date but before one hundred
fourteen months from the Amendment Date or at any time upon the
occurrence of an Organic Change, the Company shall redeem all of the
outstanding shares of Convertible Preferred Stock;
22
provided, however, that solely for the purposes of this Section 6(a), an
Organic Change of the type referred to in clause (c) of the definition of
Organic Change shall not be deemed an Organic Change for purposes of this
Section 6(a) if, immediately after consummation of the Organic Change, the
stockholders of Company (as determined immediately prior to such Organic
Change) own at least 35% of the voting capital stock of the surviving
entity. Such redemption rights shall expire one hundred fourteen months
from the Amendment Date except upon the occurrence of an Organic Change.
(b) Upon receipt of a Redemption Notice, the Company shall fix a date for
redemption (the "Redemption Date"), which shall be no later than thirty
(30) Business Days after the date of the Redemption Notice. Within five
(5) business days following receipt of any Redemption Notice, the Company
shall notify each other holder of record of shares of Convertible Preferred
Stock and Series B Preferred Stock which has not made a redemption request
at such time, specifying the name of the holder or holders who have given
the Redemption Notice and the number of shares covered by such request.
Each other holder shall then have a period of fifteen (15) Business Days
following the date of such notice from the Company in which to provide to
the Company a Redemption Notice in order for the Company to simultaneously
redeem their shares of Convertible Preferred Stock and Series B Preferred
Stock which are then subject to redemption. The redemption of any shares
of Series B Preferred Stock will be made pursuant to the terms set forth in
the Certificate of Designations with respect thereto. Each holder of
Convertible Preferred Stock who has given the Company a Redemption Notice
shall surrender the certificate or certificates representing such shares of
Convertible Preferred Stock to the Company, duly endorsed for transfer in
the manner and at the place designated by the Company in a notice to the
redeeming holders, and thereupon the Redemption Price for such shares shall
be payable in cash on the Redemption Date to the person whose name appears
on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be cancelled and retired. In the event that
less than all of the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed
shares.
(c) Unless the Company defaults in the payment in full of the Redemption Price,
dividends on the Convertible Preferred Stock called for redemption shall
cease to accumulate on the Redemption Date, and the holders of such shares
redeemed shall cease to have any further rights with respect thereto on the
Redemption Date, other than to receive the Redemption Price without
interest.
(d) If, at the time of any redemption pursuant to this Section 6, the funds of
the Company legally available for redemption of Convertible Preferred Stock
are insufficient to redeem the number of shares required to be redeemed,
those funds which are legally available shall be used to redeem the maximum
possible number of such shares, pro rata based upon the number of shares to
be redeemed. At any time thereafter when additional funds of the Company
become legally available for the redemption of Convertible Preferred Stock,
such funds shall immediately be used to redeem the balance of the shares of
Convertible Preferred Stock which the Company has become obligated to
redeem pursuant to this subparagraph, but which it has not redeemed.
(e) The Company may not otherwise redeem or repurchase the Convertible
Preferred Stock.
(f) Notwithstanding anything to the contrary herein, the rights granted under
this Section 6 shall be subordinate to the redemption rights of the holders
of the Series B Preferred Stock. In the event the holders of the Series B
Preferred Stock exercise the redemption rights provided for in the
Certificate of Designations of the Series B Preferred Stock, the
23
available funds of the Company shall first be used to satisfy such
redemption request. Any funds available after satisfaction in full of
the redemption rights of the holders of the Series B Preferred Stock
shall be available for redemption of the Convertible Preferred Stock
pursuant to this Section 6.
7. Conversion.
----------
(a) Subject to the provisions for adjustment hereinafter set forth, each
share of Convertible Preferred Stock shall be convertible at any time
after the earlier of (i) the ninetieth (90/th/) day following the
Amendment Date, or (ii) the effective date of an amendment to the
Articles of Incorporation of the Company increasing the number of
authorized shares of Common Stock to 500,000,000 and from time to time
thereafter, at the option of the holder thereof (such conversion, an
"Optional Conversion") into fully paid and nonassessable shares of
Common Stock. The number of shares of Common Stock deliverable upon
conversion of a share of Convertible Preferred Stock, adjusted as
hereinafter provided, is referred to herein as the "Conversion Ratio."
The Conversion Ratio shall initially be one (1), subject to adjustment
from time to time pursuant to paragraph (f) of this Section 7. No
fractional shares shall be issued upon the conversion of any shares of
Convertible Preferred Stock. All shares of Common Stock (including
fractions thereof) issuable upon conversion of more than one share of
Convertible Preferred Stock by a holder thereof shall be aggregated for
purposes of determining whether conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of a fraction of a share of
Common Stock, the Company shall, in lieu of issuing any fractional
share, pay the holder otherwise entitled to such fraction a sum in cash
equal to the Current Market Price of such fraction on the date of
conversion.
(b) (i) An Optional Conversion of the Convertible Preferred Stock may be
effected by any such holder upon the surrender to the Company at
the principal office of the Company of the certificate for such
Convertible Preferred Stock to be converted accompanied by a
written notice stating that such holder elects to convert all or
a specified number of such shares (which may be fractional
shares) in accordance with the provisions of this Section 7 and
specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be
issued. Upon an Optional Conversion of any shares of Convertible
Preferred Stock, dividends on the Convertible Preferred Stock so
converted shall cease to accumulate, and the Company shall pay
the holder thereof all accrued and unpaid dividends owing in
respect of such shares so converted, which dividends shall be
paid when declared by the Board.
(ii) In case the written notice specifying the name or name in which
such holder wishes the certificate or certificates for shares of
Common Stock to be issued shall specify a name or names other
than that of such holder, such notice shall be accompanied by
payment of all transfer taxes payable upon the issuance of shares
of Common Stock in such name or names. Other than such taxes, the
Company will pay any and all issue and other taxes (other than
taxes based on income) that may be payable in respect of any
issue or delivery of shares of Common Stock on conversion of
Convertible Preferred Stock pursuant hereto. As promptly as
practicable, and in any event within five Business Days after the
surrender of such certificate or certificates and the receipt of
such notice relating thereto and, if applicable, payment of all
transfer taxes (or the demonstration to the satisfaction of the
Company that such taxes have been paid), the Company shall
deliver or cause to be delivered (i) certificates representing
the number of validly issued, fully paid and nonassessable full
shares of
24
Common Stock to which the holder of shares of Convertible
Preferred Stock being converted shall be entitled and (ii) if
less than the full number of shares of Convertible Preferred
Stock evidenced by the surrendered certificate or certificates
is 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 being
converted.
(iii) In the case of an Optional Conversion, such conversion shall be
deemed to have been made at the close of business on the date
of giving the written notice referred to in the first sentence
of (b)(i) above and of such surrender of the certificate or
certificates representing the shares of Convertible Preferred
Stock to be converted so that the rights of the holder thereof
as to the shares being converted shall cease except for the
right to receive shares of Common Stock in accordance herewith,
and the person entitled to receive the shares of Common Stock
shall be treated for all purposes as having become the record
holder of such shares of Common Stock at such time.
(c) In case any shares of Convertible Preferred Stock are to be redeemed
pursuant to Section 6, all rights of conversion shall cease and
terminate as to the shares of Convertible Preferred Stock to be
redeemed at the close of business on the Business Day next preceding
the date fixed for redemption unless the Company shall default in the
payment of the Redemption Price.
(d) The Conversion Ratio shall be subject to adjustment from time to time
in certain instances as hereinafter provided.
(e) The Company shall at all times reserve, and keep available for
issuance upon the conversion of the Convertible Preferred Stock, such
number of its authorized but unissued shares of Common Stock as will
from time to time be sufficient to permit the conversion of all
outstanding shares of Convertible Preferred Stock, and shall take all
action required to increase the authorized number of shares of Common
Stock if necessary to permit the conversion of all outstanding shares
of Convertible Preferred Stock.
(f) The Conversion Ratio will be subject to adjustment from time to time
as follows:
(i) In case the Company shall at any time or from time to time after
the Original Issue Date (A) pay a dividend, or make a
distribution, on the outstanding shares of Common Stock in shares
of Common Stock, (B) subdivide the outstanding shares of Common
Stock, (C) combine the outstanding shares of Common Stock into a
smaller number of shares or (D) issue by reclassification of the
shares of Common Stock any shares of capital stock of the
Company, then, and in each such case, the Conversion Ratio in
effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the
holder of any shares of Convertible Preferred Stock thereafter
surrendered for conversion shall be entitled to receive the
number of shares of Common Stock or other securities of the
Company which such holder would have owned or have been entitled
to receive after the happening of any of the events described
above, had such shares of Convertible Preferred Stock been
surrendered for conversion immediately prior to the happening of
such event or the record date therefor, whichever is earlier. An
adjustment made pursuant to this clause (i) shall become
effective (x) in the case of any such dividend or distribution,
immediately after the close of business on the record date for
the determination of holders of shares of Common Stock entitled
to receive such dividend or distribution, or (y) in the case of
such subdivision, reclassification or combination, at the close
of
25
business on the day upon which such corporate action becomes
effective. No adjustment shall be made pursuant to this clause
(i) in connection with any transaction to which paragraph (g)
applies.
(ii) In case the Company shall issue shares of Common Stock (or
rights, warrants or other securities convertible into or
exchangeable for shares of Common Stock) after the Original Issue
Date, other than issuances covered by clause (i) above and
Permitted Issuances, at a price per share (or having an exercise,
conversion or exchange price per share) less than the Conversion
Price as of the date of issuance of such shares or of such
rights, warrants or other convertible or exchangeable securities,
then, and in each such case, the Conversion Price shall be
reduced (but not increased) to a price determined by dividing (A)
an amount equal to the sum of (x) the number of shares of Fully
Diluted Outstanding Common Stock outstanding immediately prior to
such issue multiplied by the then existing Conversion Price, plus
(y) the consideration, if any, received by Company upon such
issue, by (B) the total number of shares of Fully Diluted
Outstanding Common Stock outstanding immediately after such issue
or sale. The Conversion Ratio shall be adjusted to equal the
Liquidation Preference divided by the Conversion Price. For the
purpose of determining the consideration received by the Company
upon any such issue pursuant to clause (y) above, if the
consideration received by the Company is other than cash, its
value will be deemed its Fair Market Value, as determined in good
faith by the Board of Directors of the Company.
(iii) An adjustment made pursuant to clause (ii) above shall be made on
the next Business Day following the date on which any such
issuance is made and shall be effective retroactively immediately
after the close of business on such date. For purposes of clause
(ii), the aggregate consideration received by the Company in
connection with the issuance of shares of Common Stock or of
rights, warrants or other securities exchangeable or convertible
into shares of Common Stock shall be deemed to be equal to the
sum of the aggregate offering price of all such Common Stock and
such rights, warrants, or other exchangeable or convertible
securities plus the minimum aggregate amount, if any, receivable
upon exchange or conversion of any such exchangeable or
convertible securities into shares of Common Stock.
(iv) In case the Company shall at any time or from time to time after
the Original Issue Date declare, order, pay or make a dividend or
other distribution (including, without limitation, any
distribution of stock or other securities or property or rights
or warrants to subscribe for securities of the Company or any of
its Subsidiaries by way of dividend or spinoff), on its Common
Stock, other than dividends or distributions of shares of Common
Stock which are referred to in clause (i) of this paragraph (f),
then, and in each such case, the Conversion Ratio shall be
adjusted so that the holder of each share of Convertible
Preferred Stock shall be entitled to receive, upon the conversion
thereof, the number of shares of Common Stock determined by
multiplying (1) the applicable Conversion Ratio on the day
immediately prior to the record date fixed for the determination
of stockholders entitled to receive such dividend or distribution
by (2) a fraction, the numerator of which shall be the Current
Market Price per share of Common Stock at such record date, and
the denominator of which shall be such Current Market Price per
share of Common Stock less the Fair Market Value of such dividend
or distribution per share of Common Stock. No adjustment shall be
made pursuant to this clause (v) in connection with any
transaction to which paragraph (g) applies.
26
(v) For purposes of this paragraph (f), the number of shares of
Common Stock at any time outstanding shall not include any
shares of Common Stock then owned or held by or for the account
of the Company or any of its subsidiaries.
(vi) If the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend
or other distribution, and shall thereafter and before the
distribution to stockholders thereof legally abandon its plan
to pay or deliver such dividend or distribution, then
thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted
by this paragraph (f) or in the Conversion Ratio then in effect
shall be required by reason of the taking of such record.
(vii) Anything in this paragraph (f) to the contrary notwithstanding,
the Company shall not be required to give effect to any
adjustment in the Conversion Ratio unless and until the net
effect of one or more adjustments (each of which shall be
carried forward), determined as above provided, shall have
resulted in a change of the Conversion Ratio by at least one-
tenth of one share of Common Stock, and when the cumulative net
effect of more than one adjustment so determined shall be to
change the Conversion Ratio by at least one-tenth of one share
of Common Stock, such change in Conversion Ratio shall
thereupon be given effect.
(viii) If any option or warrant expires or is cancelled without having
been exercised, then, for the purposes of the adjustments set
forth above, such option or warrant shall have been deemed not
to have been issued and the Conversion Ratio shall be adjusted
accordingly. No holder of Common Stock which was previously
issued upon conversion of Convertible Preferred Stock shall
have any obligation to redeem or cancel any such shares of
Common Stock as a result of the operation of this paragraph
(viii).
(g) In case of any Organic Change (or any other merger or consolidation to
which the Company is a party, which for purposes of this paragraph (g)
shall be deemed an Organic Change), each share of Convertible
Preferred Stock then outstanding, other than those shares to be
redeemed pursuant to Section 6 hereof, shall thereafter be convertible
into, in lieu of the Common Stock issuable upon such conversion prior
to consummation of such Organic Change, the kind and amount of shares
of stock and other securities and property receivable (including cash)
upon the consummation of such Organic Change by a holder of that
number of shares of Common Stock into which one share of Convertible
Preferred Stock was convertible immediately prior to such Organic
Change (including, on a pro rata basis, the cash, securities or
property received by holders of Common Stock in any tender or exchange
offer that is a step in such Organic Change). In case securities or
property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this Section 7 shall
be deemed to apply, so far as appropriate and nearly as may be, to
such other securities or property.
(h) In case at any time or from time to time the Company shall pay any
stock dividend or make any other non-cash distribution to the holders
of its Common Stock, or shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any
class or any other right, or there shall be any capital reorganization
or reclassification of the Common Stock of the Company or
consolidation or merger of the Company with or into another
corporation, or any sale or conveyance to another corporation of the
property of the Company as an entirety or substantially as an
entirety, or there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company, then, in any one or more of
said cases, the Company shall give at least 20
27
days' prior written notice to the registered holders of the
Convertible Preferred Stock at the addresses of each as shown on
the books of the Company as of the date on which (i) the books of
the Company shall close or a record shall be taken for such stock
dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, sale or
conveyance, dissolution, liquidation or winding up shall take
place, as the case may be, provided that in the case of any
Organic Change to which paragraph (g) applies the Company shall
give at least 30 days' prior written notice as aforesaid. Such
notice shall also specify the date as of which the holders of the
Common Stock of record shall participate in said dividend,
distribution or subscription rights or shall be entitled to
exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification,
consolidation, merger, sale or conveyance or participate in such
dissolution, liquidation or winding up, as the case may be.
Failure to give such notice shall not invalidate any action so
taken.
8. Reports as to Adjustments. Upon any adjustment of the Conversion Ratio
-------------------------
then in effect and any increase or decrease in the number of shares of Common
Stock issuable upon the operation of the conversion set forth in Section 7,
then, and in each such case, the Company shall promptly deliver to each holder
of the Convertible Preferred Stock, a certificate signed by the President or a
Vice President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Company setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the Conversion Ratio then in effect following such
adjustment and the increased or decreased number of shares issuable upon the
conversion granted by Section 7, and shall set forth in reasonable detail the
method of calculation of each and a brief statement of the facts requiring such
adjustment. Where appropriate, such notice to holders of the Convertible
Preferred Stock may be given in advance.
9. Certain Covenants. Any registered holder of Convertible Preferred
-----------------
Stock may proceed to protect and enforce its rights and the rights of such
holders by any available remedy by proceeding at law or in equity to protect and
enforce any such rights, whether for the specific enforcement of any provision
in this Certificate of Designation or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
10. No Reissuance of Preferred Stock. No Convertible Preferred Stock
--------------------------------
acquired by the Company by reason of redemption, purchase, or otherwise shall be
reissued, and all such shares shall be cancelled, retired and eliminated from
the shares which the Company shall be authorized to issue.
11. Notices. All notices to the Company permitted hereunder shall be
-------
personally delivered or sent by first class mail, postage prepaid, addressed to
its principal office located at 2859 Paces Ferry Road, Suite 1740, Atlanta,
Georgia 30339, or to such other address at which its principal office is located
and as to which notice thereof is similarly given to the holders of the
Convertible Preferred Stock at their addresses appearing on the books of the
Company.
IN WITNESS WHEREOF, TRANSIT GROUP, INC. has caused this Certificate to be
signed by its President and Secretary, respectively, on this 10/th/ day of
April, 2001.
/s/ Philip A. Belyew
-----------------------------
PHILIP A. BELYEW, President
/s/ James G. Overley
-----------------------------
JAMES G. OVERLEY, Secretary
28
TRANSIT GROUP, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND
OTHER SPECIAL RIGHTS OF PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS AND
RESTRICTIONS THEREOF
____________________
Pursuant to Section 607.1004 of the
Florida Business Corporation Act
____________________
TRANSIT GROUP, INC. (the "Company"), a corporation organized and existing
under the laws of the State of Florida, hereby certifies that pursuant to the
provisions of Section 607.1004 of the Florida Business Corporation Act, its
Board of Directors, by action taken April 10, 2001, adopted the following
resolution, which resolution remains in full force and effect as of the date
hereof:
WHEREAS, the Board of Directors of the Company is authorized, within the
limitations and restrictions stated in the articles of incorporation, to fix by
resolution or resolutions the designation of preferred stock and the powers,
preferences and relative participating, optional or other special rights and
qualifications, limitations or restrictions thereof, including, without limiting
the generality of the foregoing, such provisions as may be desired concerning
voting, redemption, dividends, dissolution or the distribution of assets,
conversion or exchange, and such other subjects or matters as may be fixed by
resolution or resolutions of the Board of Directors under the Florida Business
Corporation Act; and
WHEREAS, it is the desire of the Board of Directors of the Company,
pursuant to its authority as aforesaid, to authorize and fix the terms of the
preferred stock to be designated the Series B Convertible Preferred Stock of the
Company and the number of shares constituting such preferred stock;
NOW, THEREFORE, BE IT RESOLVED, that there is hereby authorized the Series
B Convertible Preferred Stock on the terms and with the provisions herein set
forth:
29
TERMS, PREFERENCES, RIGHTS AND LIMITATIONS
of
SERIES B CONVERTIBLE PREFERRED STOCK
of
TRANSIT GROUP, INC.
The relative rights, preferences, powers, qualifications, limitations and
restrictions granted to or imposed upon the Series B Convertible Preferred Stock
or the holders thereof are as follows:
1. Definitions. For purposes of this Certificate, the following
-----------
definitions shall apply:
"Board" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day other than a Saturday, Sunday, or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Common Stock" shall mean the Common Stock, $.01 par value per share,
of the Company.
"Company" shall mean Transit Group, Inc., a Florida corporation.
"Conversion Price" shall mean the amount computed by dividing the
Liquidation Preference by the Conversion Ratio.
"Conversion Ratio" has the meaning set forth in Section 7 hereof, and
shall initially be one hundred (100).
"Convertible Preferred Stock" shall refer to shares of Series B
Convertible Preferred Stock, no par value per share, of the Company.
"Current Market Price," when used with reference to shares of Common
Stock or other securities on any date, shall mean the average of the daily
market prices for the 10 consecutive Trading Days immediately prior to such
date. The daily market price for each such Trading Day shall be (i) the last
sale price on such day on the principal stock exchange or NASDAQ Stock Market on
which such Common Stock is then listed or admitted to trading, (ii) if no sale
takes place on such day on any such exchange or market, the average of the last
reported closing bid and asked prices on such day as officially quoted on any
such exchange or market, (iii) if the Common Stock is not then listed or
admitted to trading on any stock exchange or such market, the average of the
last reported closing bid and asked prices on such day in the over-the-counter
market, as furnished by NASDAQ or the National Quotation Bureau, Inc., (iv) if
neither such corporation at the time is engaged in the business of reporting
such prices, as furnished by any similar firm then engaged in such business, or
(v) if there is no such firm, as furnished by any member of the National
Association of Securities Dealers ("NASD") selected mutually by the Required
Holders and Company or, if they cannot agree upon such selection, as selected by
two such members of the NASD, one of which shall be selected by the Required
30
Holders and one of which shall be selected by Company.
"Dividend Rate" shall mean 10.5% per annum.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Securities and Exchange Commission thereunder, all as the same shall be in
effect at the time. Reference to a particular section of the Securities Exchange
Act of 1934, as amended, shall include reference to the comparable section, if
any, of any such similar Federal statute.
"Fair Market Value" shall mean the amount which a willing buyer would pay
a willing seller in an arm's-length transaction, with neither being under any
compulsion to buy or sell.
"Fully Diluted Outstanding" shall mean, with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined, all
shares of Common Stock outstanding at such date and all shares of Common Stock
issuable upon the conversion of the Convertible Preferred Stock outstanding on
such date, and other options or warrants to purchase, or securities convertible
into, shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining book value or
net income per share.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect from time to time.
"Liquidation Preference" shall mean $5.00 per share.
"Organic Change" shall mean (A) any sale, lease, exchange or other
transfer of all or substantially all of the property and assets of the Company,
(B) any liquidation, dissolution or winding up of the Company, whether voluntary
or involuntary, (C) any merger or consolidation to which the Company is a party
and which the holders of the voting securities of the Company immediately prior
thereto own less than a majority of the outstanding voting securities of the
surviving entity immediately following such transaction, or (D) any transaction,
other than the conversion of accrued and unpaid dividends into shares of
Convertible Preferred Stock as contemplated in Section 3(a) below, following
which any Person or group of Persons (as such term is used in Section 13(d) of
the Exchange Act) shall beneficially own (as defined in Rule 13d-3 under the
Exchange Act) securities of the Company representing 50% or more of the voting
securities of the Company then outstanding. For purposes of the preceding
sentence, "voting securities" shall mean securities, the holders of which are
ordinarily, in the absence of contingencies, entitled to elect the corporate
directors (or Persons performing similar functions).
"Original Issue Date" shall mean the date of the original issuance of
shares of Convertible Preferred Stock.
"Permitted Issuances" shall mean issuances of shares of Common Stock (i)
upon the exercise or conversion of warrants or convertible securities of the
Company outstanding on the Original Issue Date (including the Series A Preferred
Stock and the Convertible Preferred Stock), (ii) upon the exercise of employee
stock options issued with the approval of the Company's Board of Directors
pursuant to Company's current stock option plans, (iii) upon the exercise of
options to purchase up to an additional 30,000,000 shares of Common Stock issued
with
31
approval of the Company's Board of Directors, and (iv) upon the exercise of
options to purchase shares of Common Stock issued to the bank group led by Bank
One, N.A., the Company's primary lender, and General Electric Capital
Corporation. "Permitted Issuances" shall also include the issuance of
Convertible Preferred Stock (i) as a placement fee relating to the purchase of
the Convertible Preferred Stock and as a deferral fee to certain members of the
Carroll Fulmer family, in an aggregate amount up to 1,100,000 shares, (ii) as a
dividend to holders of the Convertible Preferred Stock, and (iii) to holders of
the Series A Preferred Stock for dividends accrued prior to January 31, 2001.
"Person" shall mean any individual, firm, corporation or other entity,
and shall include any successor (by merger or otherwise) of such entity.
"Redemption Date" shall mean the date on which any shares of Convertible
Preferred Stock are redeemed by the Company.
"Redemption Price" has the meaning set forth in Section 6(a) (i) of this
Certificate of Designation.
"Required Holders" shall mean the holders of at least a majority of the
outstanding shares of Convertible Preferred Stock.
"Series A Preferred Stock" shall mean the Series A Convertible Preferred
Stock, no par value, of the Company.
"Subsidiary" of any Person means any corporation or other entity of which
a majority of the voting power or the voting equity securities or equity
interest is owned, directly or indirectly, by such Person.
"Trading Day" shall mean a Business Day or, if the Common Stock is listed
or admitted to trading on any national securities exchange or NASDAQ market, a
day on which such exchange or market is open for the transaction of business.
2. Designation: Number of Shares. The designation of the preferred stock
-----------------------------
authorized by this resolution shall be "Series B Convertible Preferred Stock"
and the number of shares of Convertible Preferred Stock authorized hereby shall
be 4,000,000 shares.
3. Dividends.
---------
(a) So long as any shares of Convertible Preferred Stock shall be
outstanding, the holders of such Convertible Preferred Stock shall
be entitled to receive out of any funds legally available therefor,
when, as and if declared by the Board of Directors of the Company,
preferential dividends in cash at the Dividend Rate on the
Liquidation Preference hereunder. Such dividends shall be cumulative
and begin to accrue from the Original Issue Date, whether or not
declared and whether or not there shall be net profits or net assets
of the Company legally available for the payment of those dividends.
Each holder of the Convertible Preferred Stock shall be entitled to
convert its accrued and unpaid dividends into additional shares of
Convertible Preferred Stock at a price per share of $5.00 (adjusted
for stock splits and the like).
32
(b) So long as any shares of Convertible Preferred Stock shall be
outstanding, (i) no dividend whatsoever shall be paid or declared,
and no distribution shall be made, on account of any Common Stock,
and (ii) no shares of Common Stock shall be purchased, redeemed or
acquired by the Company and no funds shall be paid into or set aside
or made available for a sinking fund for the purchase, redemption or
acquisition thereof, other than redemptions of shares of Common
Stock pursuant to contractual obligations in existence on the
Original Issue Date and shares of Series A Preferred Stock and
Convertible Preferred Stock. Notwithstanding the foregoing, if the
Company has made all dividend payments required by Section 3(a), the
Company shall not be prohibited from paying dividends on the Series
A Preferred Stock.
4. Liquidation Rights of Convertible Preferred Stock.
-------------------------------------------------
(a) In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, the holders of
Convertible Preferred Stock then outstanding shall be entitled to be
paid out of the assets of the Company available for distribution to
its stockholders, whether such assets are capital, surplus or
earnings, before any payment or declaration and setting apart for
payment of any amount shall be made in respect of any shares of
Common Stock or any share of Series A Preferred Stock or any other
class or series of the Company's preferred stock ranking junior to
the Convertible Preferred Stock with respect to the payment of
dividends or distribution of assets on liquidation, dissolution or
winding up of the Company, for each share of Convertible Preferred
Stock, an amount equal to the Liquidation Preference plus all
declared or accrued and unpaid dividends in respect of any
liquidation, dissolution or winding up consummated.
(b) If upon any liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the assets to be distributed among
the holders of Convertible Preferred Stock shall be insufficient to
permit the payment to such stockholders of the full preferential
amounts aforesaid, then the entire assets of the Company to be
distributed shall be distributed ratably among the holders of
Convertible Preferred Stock, based on the full preferential amounts
for the number of shares of Convertible Preferred Stock held by each
holder.
(c) After payment to the holders of Convertible Preferred Stock of the
amounts set forth in Section 4(a) hereof, the entire remaining
assets and funds of the Company legally available for distribution,
if any, shall be distributed among the holders of any Company stock
entitled to a preference over the Common Stock in accordance with
the terms thereof and, thereafter, to the holders of Common Stock,
in which distribution the holders of Convertible Preferred Stock and
Series A Preferred Stock shall participate on an as if converted
basis.
(d) If there is an Organic Change of the type referred to in clauses (a)
or (c) of the definition of Organic Change, then such transaction
shall be deemed a liquidation for purposes of distributions to
stockholders of the consideration received in such transaction;
provided, however, that solely for the purposes of this Section
4(d), an Organic Change of the type referred to in such clause (c)
shall not be deemed a
33
liquidation for purposes of this Section 4(d) if, immediately after
consummation of the Organic Change, the stockholders of Company (as
determined immediately prior to such Organic Change) own at least
35% of the voting capital stock of the surviving entity.
5. Voting Rights. In addition to any voting rights provided by law, the
-------------
holders of shares of Convertible Preferred Stock shall have the following voting
rights:
(a) So long as any of the Convertible Preferred Stock is outstanding,
each share of Convertible Preferred Stock shall entitle the holder
thereof to vote on all matters voted on by the holders of Common
Stock, voting together as a single and not separate class with other
shares entitled to vote at all meetings of the stockholders of the
Company. With respect to any such vote, each share of Convertible
Preferred Stock shall entitle the holder thereof to cast the number
of votes equal to the number of votes which could be cast in such
vote by a holder of the number of shares of Common Stock of the
Company into which such share of Convertible Preferred Stock is
convertible on the record date for such vote.
(b) The affirmative vote of the Required Holders, voting together as a
class, in person or by proxy, at a special or annual meeting of
stockholders called for the purpose, or pursuant to a written
consent of stockholders shall be necessary to
(i) authorize, adopt or approve an amendment to the articles of
incorporation of the Company which would alter or change in any
manner the terms, powers, preferences or special rights of the
shares of Convertible Preferred Stock or grant waivers thereof,
or which would otherwise adversely affect the rights of the
Convertible Preferred Stock, provided that no such modification
or amendment may, without the consent of each holder of
Convertible Preferred Stock affected thereby, (A) change the
redemption date of the Convertible Preferred Stock; (B) raise
the Conversion Price or reduce the Liquidation Preference,
Dividend Rate or Redemption Price of the Convertible Preferred
Stock; (C) adversely affect any of the conversion features of
the Convertible Preferred Stock set forth in Section 7 hereof;
or (D) reduce the percentage of outstanding Convertible
Preferred Stock necessary to modify or amend the terms thereof
or to grant waivers thereof; or
(ii) issue any shares of the capital stock of the Company ranking
senior to, or pari passu with (either as to dividends or upon
voluntary or involuntary liquidation, dissolution or winding
up) the Convertible Preferred Stock, or issue any securities
convertible into or exchangeable for such shares, except shares
of Common Stock. This provision is not intended to limit the
right of the Company to increase the number of authorized
shares of Convertible Preferred Stock as may be necessary for
the Company to fulfill its obligations in the event that
dividends accrued on the Convertible Preferred Stock are
converted into additional shares of Convertible Preferred Stock
pursuant to Section 3(a) hereof.
(c) The foregoing rights of holders of shares of Convertible Preferred
Stock to take any actions as provided in this Section 5 may be
exercised at any annual meeting
34
of stockholders or at a special meeting of stockholders held for
such purpose as hereinafter provided or at any adjournment thereof
or pursuant to any written consent of stockholders.
6. Redemption of Convertible Preferred Stock.
-----------------------------------------
(a) Upon at least thirty (30) Business Days prior written notice to the
Company by any of the holders of the Convertible Preferred Stock
(the "Redemption Notice"), which written notice may not be sent for
a redemption prior to fifty-four months from the Original Issue
Date, the Company shall redeem, at the redemption price equal to the
sum of the Liquidation Preference per share plus an amount equal to
the accrued and unpaid dividends per share of Convertible Preferred
Stock to be redeemed (the "Redemption Price"), the number of shares
of Convertible Preferred Stock specified in such notice, up to one-
third of the shares issued on the Original Issue Date if the
Redemption Notice is given for a redemption on or after fifty-four
months from the Original Issue Date, up to two-thirds of such amount
if given for a redemption on or after sixty-six months from the
Original Issue Date and up to all such shares if given for a
redemption on or after seventy-eight months from the Original Issue
Date and for a period of one year thereafter. If the Required
Holders so elect, on or after seventy-eight months from the Original
Issue Date but before ninety months from the Original Issue Date or
at any time upon the occurrence of an Organic Change, the Company
shall redeem all of the outstanding shares of Convertible Preferred
Stock; provided, however, that solely for the purposes of this
Section 6(a), an Organic Change of the type referred to in clause
(c) of the definition of Organic Change shall not be deemed an
Organic Change for purposes of this Section 6(a) if, immediately
after consummation of the Organic Change, the stockholders of
Company (as determined immediately prior to such Organic Change) own
at least 35% of the voting capital stock of the surviving entity.
Such redemption rights shall expire ninety months from the Original
Issue Date, except upon the occurrence of an Organic Change.
(b) Upon receipt of a Redemption Notice, the Company shall fix a date
for redemption (the "Redemption Date"), which shall be no later than
thirty (30) Business Days after the date of the Redemption Notice.
Within five (5) business days following receipt of any Redemption
Notice, the Company shall notify each other holder of record of
shares of Convertible Preferred Stock and Series A Preferred Stock
which has not made a redemption request at such time, specifying the
name of the holder or holders who have given the Redemption Notice
and the number of shares covered by such request. Each other holder
shall then have a period of fifteen (15) Business Days following the
date of such notice from the Company in which to provide to the
Company a Redemption Notice in order for the Company to
simultaneously redeem their shares of Convertible Preferred Stock
and Series A Preferred Stock which are then subject to redemption.
The redemption of any shares of Series A Preferred Stock will be
made pursuant to the terms set forth in the Certificate of
Designations with respect thereto. Each holder of Convertible
Preferred Stock who has given the Company a Redemption Notice shall
surrender the certificate or certificates representing such shares
of Convertible Preferred Stock to the Company, duly endorsed for
transfer in the
35
manner and at the place designated by the Company in a notice to the
redeeming holders, and thereupon the Redemption Price for such
shares shall be payable in cash on the Redemption Date to the person
whose name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be cancelled and
retired. In the event that less than all of the shares represented
by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(c) Unless the Company defaults in the payment in full of the Redemption
Price, dividends on the Convertible Preferred Stock called for
redemption shall cease to accumulate on the Redemption Date, and the
holders of such shares redeemed shall cease to have any further
rights with respect thereto on the Redemption Date, other than to
receive the Redemption Price without interest.
(d) If, at the time of any redemption pursuant to this Section 6, the
funds of the Company legally available for redemption of Convertible
Preferred Stock are insufficient to redeem the number of shares
required to be redeemed, those funds which are legally available
shall be used to redeem the maximum possible number of such shares,
pro rata based upon the number of shares to be redeemed. At any time
thereafter when additional funds of the Company become legally
available for the redemption of Convertible Preferred Stock, such
funds shall immediately be used to redeem the balance of the shares
of Convertible Preferred Stock which the Company has become
obligated to redeem pursuant to this subparagraph, but which it has
not redeemed.
(e) The Company may not otherwise redeem or repurchase the Convertible
Preferred Stock.
(f) Notwithstanding anything to the contrary herein, the rights granted
under this Section 6 shall be superior to the redemption rights of
the holders of any other class of stock, including the Series A
Preferred Stock. The available funds of the Company shall first be
used to satisfy any redemption request made by the holders of
Convertible Preferred Stock pursuant to this Section 6. Any funds
available after satisfaction in full of the redemption rights of the
holders of the Convertible Preferred Stock shall be available for
the redemption of such other classes of the Company's stock.
7. Conversion.
----------
(a) Subject to the provisions for adjustment hereinafter set forth, each
share of Convertible Preferred Stock shall be convertible at any
time after the earlier of (i) the ninetieth (90/th/) day following
the Original Issue Date or (ii) the effective date of an amendment
to the Articles of Incorporation of the Company increasing the
number of authorized shares of Common Stock to 500,000,000 and from
time to time thereafter, at the option of the holder thereof (such
conversion, an "Optional Conversion") into fully paid and
nonassessable shares of Common Stock. The number of shares of Common
Stock deliverable upon conversion of a share of Convertible
Preferred Stock, adjusted as hereinafter provided, is referred to
herein as the "Conversion Ratio." The Conversion Ratio shall
initially be one hundred
36
(100), subject to adjustment from time to time pursuant to paragraph (f)
of this Section 7. No fractional shares shall be issued upon the
conversion of any shares of Convertible Preferred Stock. All shares of
Common Stock (including fractions thereof) issuable upon conversion of
more than one share of Convertible Preferred Stock by a holder thereof
shall be aggregated for purposes of determining whether conversion would
result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of
a fraction of a share of Common Stock, the Company shall, in lieu of
issuing any fractional share, pay the holder otherwise entitled to such
fraction a sum in cash equal to the Current Market Price of such fraction
on the date of conversion.
(b) (i) An Optional Conversion of the Convertible Preferred Stock may be
effected by any such holder upon the surrender to the Company at the
principal office of the Company of the certificate for such
Convertible Preferred Stock to be converted accompanied by a written
notice stating that such holder elects to convert all or a specified
number of such shares (which may be fractional shares) in accordance
with the provisions of this Section 7 and specifying the name or
names in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. Upon an Optional Conversion
of any shares of Convertible Preferred Stock, dividends on the
Convertible Preferred Stock so converted shall cease to accumulate,
and the Company shall pay the holder thereof all accrued and unpaid
dividends owing in respect of such shares so converted, which
dividends shall be paid when declared by the Board, or may be
converted into additional shares of Convertible Preferred Stock at
the holder's election as provided in Section 3(a) above.
(ii) In case the written notice specifying the name or names in which
such holder wishes the certificate or certificates for shares of
Common Stock to be issued shall specify a name or names other than
that of such holder, such notice shall be accompanied by payment of
all transfer taxes payable upon the issuance of shares of Common
Stock in such name or names. Other than such taxes, the Company will
pay any and all issue and other taxes (other than taxes based on
income) that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of Convertible Preferred Stock
pursuant hereto. As promptly as practicable, and in any event within
five Business Days after the surrender of such certificate or
certificates and the receipt of such notice relating thereto and, if
applicable, payment of all transfer taxes (or the demonstration to
the satisfaction of the Company that such taxes have been paid), the
Company shall deliver or cause to be delivered (i) certificates
representing the number of validly issued, fully paid and
nonassessable full shares of Common Stock to which the holder of
shares of Convertible Preferred Stock being converted shall be
entitled and (ii) if less than the full number of shares of
Convertible Preferred Stock evidenced by the surrendered certificate
or certificates is 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 being converted.
(iii) In the case of an Optional Conversion, such conversion shall be
deemed to have been made at the close of business on the date of
giving the written
37
notice referred to in the first sentence of (b)(i) above and of
such surrender of the certificate or certificates representing the
shares of Convertible Preferred Stock to be converted so that the
rights of the holder thereof as to the shares being converted shall
cease except for the right to accrued dividends as set forth in
Section (b) (ii) above and the right to receive shares of Common
Stock in accordance herewith, and the person entitled to receive
the shares of Common Stock shall be treated for all purposes as
having become the record holder of such shares of Common Stock at
such time.
(c) In case any shares of Convertible Preferred Stock are to be redeemed
pursuant to Section 6, all rights of conversion shall cease and
terminate as to the shares of Convertible Preferred Stock to be
redeemed at the close of business on the Business Day next preceding
the date fixed for redemption unless the Company shall default in the
payment of the Redemption Price.
(d) The Conversion Ratio shall be subject to adjustment from time to time
in certain instances as hereinafter provided.
(e) The Company shall at all times reserve, and keep available for issuance
upon the conversion of the Convertible Preferred Stock, such number of
its authorized but unissued shares of Common Stock as will from time to
time be sufficient to permit the conversion of all outstanding shares
of Convertible Preferred Stock, and shall take all action required to
increase the authorized number of shares of Common Stock if necessary
to permit the conversion of all outstanding shares of Convertible
Preferred Stock.
(f) The Conversion Ratio will be subject to adjustment from time to time
as follows:
(i) In case the Company shall at any time or from time to time after
the Original Issue Date (A) pay a dividend, or make a distribution,
on the outstanding shares of Common Stock in shares of Common
Stock, (B) subdivide the outstanding shares of Common Stock, (C)
combine the outstanding shares of Common Stock into a smaller
number of shares or (D) issue by reclassification of the shares of
Common Stock any shares of capital stock of the Company, then, and
in each such case, the Conversion Ratio in effect immediately prior
to such event or the record date therefor, whichever is earlier,
shall be adjusted so that the holder of any shares of Convertible
Preferred Stock thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock or other
securities of the Company which such holder would have owned or
have been entitled to receive after the happening of any of the
events described above, had such shares of Convertible Preferred
Stock been surrendered for conversion immediately prior to the
happening of such event or the record date therefor, whichever is
earlier. An adjustment made pursuant to this clause (i) shall
become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the record
date for the determination of holders of shares of Common Stock
entitled to receive such dividend or distribution, or (y) in the
case of such subdivision, reclassification or combination, at the
close of business on the day upon which such corporate
38
action becomes effective. No adjustment shall be made pursuant
to this clause (i) in connection with any transaction to which
paragraph (g) applies.
(ii) In case the Company shall issue shares of Common Stock (or
rights, warrants or other securities convertible into or
exchangeable for shares of Common Stock) after the Original
Issue Date, other than issuances covered by clause (i) above and
Permitted Issuances, at a price per share (or having an
exercise, conversion or exchange price per share) less than the
Conversion Price as of the date of issuance of such shares or of
such rights, warrants or other convertible or exchangeable
securities, then, and in each such case, the Conversion Price
shall be reduced (but not increased) to a price determined by
dividing (A) an amount equal to the sum of (x) the number of
shares of Fully Diluted Outstanding Common Stock outstanding
immediately prior to such issue multiplied by the then existing
Conversion Price, plus (y) the consideration, if any, received
by Company upon such issue, by (B) the total number of shares of
Fully Diluted Outstanding Common Stock outstanding immediately
after such issue or sale. The Conversion Ratio shall be adjusted
to equal the Liquidation Preference divided by the Conversion
Price. For the purpose of determining the consideration received
by the Company upon any such issue pursuant to clause (y) above,
if the consideration received by the Company is other than cash,
its value will be deemed its Fair Market Value, as determined in
good faith by the Board of Directors of the Company.
(iii) An adjustment made pursuant to clause (ii) above shall be made
on the next Business Day following the date on which any such
issuance is made and shall be effective retroactively
immediately after the close of business on such date. For
purposes of clause (ii), the aggregate consideration received by
the Company in connection with the issuance of shares of Common
Stock or of rights, warrants or other securities exchangeable or
convertible into shares of Common Stock shall be deemed to be
equal to the sum of the aggregate offering price of all such
Common Stock and such rights, warrants, or other exchangeable or
convertible securities plus the minimum aggregate amount, if
any, receivable upon exchange or conversion of any such
exchangeable or convertible securities into shares of Common
Stock.
(iv) In case the Company shall at any time or from time to time after
the Original Issue Date declare, order, pay or make a dividend
or other distribution (including, without limitation, any
distribution of stock or other securities or property or rights
or warrants to subscribe for securities of the Company or any of
its Subsidiaries by way of dividend or spinoff), on its Common
Stock, other than dividends or distributions of shares of Common
Stock which are referred to in clause (i) of this paragraph (f),
then, and in each such case, the Conversion Ratio shall be
adjusted so that the holder of each share of Convertible
Preferred Stock shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock
determined by multiplying (1) the applicable Conversion Ratio on
the day immediately prior to the record date fixed for the
determination of stockholders entitled to receive such dividend
or distribution by (2) a fraction, the numerator of which shall
be the Current Market Price per share of Common Stock at such
record date, and the
39
denominator of which shall be such Current Market Price per
share of Common Stock less the Fair Market Value of such
dividend or distribution per share of Common Stock. No
adjustment shall be made pursuant to this clause (v) in
connection with any transaction to which paragraph (g)
applies.
(v) For purposes of this paragraph (f), the number of shares of
Common Stock at any time outstanding shall not include any
shares of Common Stock then owned or held by or for the
account of the Company or any of its subsidiaries.
(vi) If the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and
before the distribution to stockholders thereof legally
abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of
shares of Common Stock issuable upon exercise of the right of
conversion granted by this paragraph (f) or in the Conversion
Ratio then in effect shall be required by reason of the taking
of such record.
(vii) Anything in this paragraph (f) to the contrary
notwithstanding, the Company shall not be required to give
effect to any adjustment in the Conversion Ratio unless and
until the net effect of one or more adjustments (each of which
shall be carried forward), determined as above provided, shall
have resulted in a change of the Conversion Ratio by at least
one-tenth of one share of Common Stock, and when the
cumulative net effect of more than one adjustment so
determined shall be to change the Conversion Ratio by at least
one-tenth of one share of Common Stock, such change in
Conversion Ratio shall thereupon be given effect.
(viii) If any option or warrant expires or is cancelled without
having been exercised, then, for the purposes of the
adjustments set forth above, such option or warrant shall have
been deemed not to have been issued and the Conversion Ratio
shall be adjusted accordingly. No holder of Common Stock which
was previously issued upon conversion of Convertible Preferred
Stock shall have any obligation to redeem or cancel any such
shares of Common Stock as a result of the operation of this
paragraph (viii).
(g) In case of any Organic Change (or any other merger or consolidation to
which the Company is a party, which for purposes of this paragraph (g)
shall be deemed an Organic Change), each share of Convertible
Preferred Stock then outstanding, other than those shares to be
redeemed pursuant to Section 6 hereof, shall thereafter be convertible
into, in lieu of the Common Stock issuable upon such conversion prior
to consummation of such Organic Change, the kind and amount of shares
of stock and other securities and property receivable (including cash)
upon the consummation of such Organic Change by a holder of that
number of shares of Common Stock into which one share of Convertible
Preferred Stock was convertible immediately prior to such Organic
Change (including, on a pro rata basis, the cash, securities or
property received by holders of Common Stock in any tender or exchange
offer that is a step in such Organic Change). In case securities or
property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this Section 7 shall
be deemed
40
to apply, so far as appropriate and nearly as may be, to such
other securities or property.
(h) In case at any time or from time to time the Company shall pay
any stock dividend or make any other non-cash distribution to the
holders of its Common Stock, or shall offer for subscription pro
rata to the holders of its Common Stock any additional shares of
stock of any class or any other right, or there shall be any
capital reorganization or reclassification of the Common Stock of
the Company or consolidation or merger of the Company with or
into another corporation, or any sale or conveyance to another
corporation of the property of the Company as an entirety or
substantially as an entirety, or there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the
Company, then, in any one or more of said cases, the Company
shall give at least 20 days' prior written notice to the
registered holders of the Convertible Preferred Stock at the
addresses of each as shown on the books of the Company as of the
date on which (i) the books of the Company shall close or a
record shall be taken for such stock dividend, distribution or
subscription rights or (ii) such reorganization,
reclassification, consolidation, merger, sale or conveyance,
dissolution, liquidation or winding up shall take place, as the
case may be, provided that in the case of any Organic Change to
which paragraph (g) applies the Company shall give at least 30
days' prior written notice as aforesaid. Such notice shall also
specify the date as of which the holders of the Common Stock of
record shall participate in said dividend, distribution or
subscription rights or shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale or
conveyance or participate in such dissolution, liquidation or
winding up, as the case may be. Failure to give such notice shall
not invalidate any action so taken.
8. Reports as to Adjustments. Upon any adjustment of the Conversion Ratio
-------------------------
then in effect and any increase or decrease in the number of shares of Common
Stock issuable upon the operation of the conversion set forth in Section 7,
then, and in each such case, the Company shall promptly deliver to each holder
of the Convertible Preferred Stock, a certificate signed by the President or a
Vice President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Company setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the Conversion Ratio then in effect following such
adjustment and the increased or decreased number of shares issuable upon the
conversion granted by Section 7, and shall set forth in reasonable detail the
method of calculation of each and a brief statement of the facts requiring such
adjustment. Where appropriate, such notice to holders of the Convertible
Preferred Stock may be given in advance.
9. Certain Covenants. Any registered holder of Convertible Preferred
-----------------
Stock may proceed to protect and enforce its rights and the rights of such
holders by any available remedy by proceeding at law or in equity to protect and
enforce any such rights, whether for the specific enforcement of any provision
in this Certificate of Designation or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
10. No Reissuance of Preferred Stock. No Convertible Preferred Stock
--------------------------------
acquired by the Company by reason of redemption, purchase, or otherwise shall be
reissued, and all such shares
41
shall be cancelled, retired and eliminated from the shares which the Company
shall be authorized to issue.
11. Notices. All notices to the Company permitted hereunder shall be
-------
personally delivered or sent by first class mail, postage prepaid, addressed to
its principal office located at 2859 Paces Ferry Road, Suite 1740, Atlanta,
Georgia 30339, or to such other address at which its principal office is located
and as to which notice thereof is similarly given to the holders of the
Convertible Preferred Stock at their addresses appearing on the books of the
Company.
IN WITNESS WHEREOF, TRANSIT GROUP, INC. has caused this Certificate to be
signed by its President and Secretary, respectively, on this 10/th/ day of
April, 2001.
/s/ Philip A. Belyew
-----------------------------
PHILIP A. BELYEW, President
/s/ James G. Overley
-----------------------------
JAMES G. OVERLEY, Secretary
42
EXHIBIT "B"
AMENDMENT TO
TRANSIT GROUP, INC.
1998 STOCK INCENTIVE PLAN
THIS AMENDMENT, is made this 16/th/ day of May, 2001, by TRANSIT GROUP,
INC. (the "Corporation"), to the Corporation's 1998 Stock Incentive Plan (the
"1998 Plan").
R E C I T A L S:
- - - - - - - -
WHEREAS, the Board of Directors of the Corporation has deemed it advisable
to amend the 1998 Plan as set forth below.
NOW, THEREFORE, IT IS DECLARED that, effective May 16, 2001, the 1998 Plan
shall be and is hereby amended as follows:
1. Section 4(a) of the 1998 Plan shall be amended by deleting Section 4(a)
and inserting the following Section 4(a) in lieu thereof:
"4. Shares of Stock Subject to the Plan; Award Limitations.
------------------------------------------------------
(a) Subject to adjustments as provided in this Section 4, the
number of shares of Common Stock that may be issued pursuant to Awards
shall be the sum of (i) 32,000,000 plus (ii) one percent (1%) of the
total issued and outstanding shares of Common Stock determined as of
December 31 for each year that the Plan is in effect. Such shares shall
be authorized but unissued shares or treasury shares of the Corporation
or shares purchased on the open market. Notwithstanding the foregoing,
the maximum number of shares of Common Stock that may be issued
pursuant to Incentive Options shall be 32,000,000 shares."
2. Except as specifically amended herein, all other provisions of the 1998
Plan shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment is executed on behalf of Transit Group,
Inc. as of the day and year first above written.
TRANSIT GROUP, INC.
By: /s/ Philip A. Belyew
---------------------
Philip A. Belyew
ATTEST:
/s/ James G. Overley
------------------------
James G. Overley
[CORPORATE SEAL]
43