PROPOSAL 7
APPROVAL OF AMENDMENT TO THE COMPANYS CERTIFICATE OF INCORPORATION TO AUTHORIZE THE ISSUANCE OF UP TO 5,000,000 SHARES OF PREFERRED
STOCK
General
Our Board has approved, subject to stockholder approval, an amendment to our Certificate of Incorporation to authorize the issuance of
5,000,000 shares of preferred stock, par value $0.0001, and to make a corresponding change to the number of authorized shares of capital stock. The form of the proposed amendment is included in Appendix C attached to this Proxy Statement (the
Preferred Stock Amendment).
We currently have a total of 10,000,000 shares of capital stock authorized under our
Certificate of Incorporation, consisting of 10,000,000 shares of common stock and no shares of preferred stock. Our Board is asking our stockholders to approve an amendment that will increase the number of authorized shares of common stock from
10,000,000 to 40,000,000 pursuant to Proposal 6 above. If this Proposal 7 is approved, we will amend the Certificate of Incorporation to authorize the issuance of up to 5,000,000 shares of preferred stock. If both Proposal 6 and Proposal 7 are
approved, the authorized shares of all classes of our capital stock would be increased from 10,000,000 to 45,000,000 shares.
Background and Purpose of the Proposal
Our Certificate of Incorporation currently does not authorize us to issue preferred stock. Upon filing with the Delaware Secretary of State,
the Preferred Stock Amendment will authorize the Company to issue up to 5,000,000 shares of preferred stock. The Board will be authorized to fix the designations, rights, preferences, powers and limitations of each series of the preferred stock.
If this Proposal 7 is approved, the preferred stock we will be authorized to issue will be blank check preferred stock. The term
blank check preferred stock refers to stock which gives the board of directors of a corporation the flexibility to create one or more series of preferred stock, from time to time, and to determine the relative rights, preferences, powers
and limitations of each series, including, without limitation: (i) the number of shares in each series, (ii) whether a series will bear dividends and whether dividends will be cumulative, (iii) the dividend rate and the dates of
dividend payments, (iv) liquidation preferences and prices, (v) terms of redemption, including timing, rates and prices, (vi) conversion rights, (vii) any sinking fund requirements, (viii) any restrictions on the issuance of
additional shares of any class or series, (ix) any voting rights and (x) any other relative, participating, optional or other special rights, preferences, powers, qualifications, limitations or restrictions. Any issuances of Preferred
Stock by the Company will need to be approved by the Board.
Effects of Preferred Stock Amendment on Current Stockholders
The shares of preferred stock to be authorized pursuant to the Preferred Stock Amendment could be issued, at the discretion of the
Board, for any proper corporate purpose, without further action by the stockholders other than as may be required by applicable law. The Company does not currently have any plan or proposal to issue any shares of preferred stock. Existing
stockholders do not have preemptive rights with respect to future issuance of preferred stock by the Company and their interest in the Company could be diluted by such issuance with respect to earnings per share, voting, liquidation rights and book
and market value.
The Board will have the power to issue the shares of preferred stock in one or more series with such preferences and
voting rights as the Board may fix in the resolution providing for the issuance of such shares. The issuance of shares of preferred stock could affect the relative rights of the Companys shares of common stock. Depending upon the exact terms,
limitations and relative rights and preferences, if any, of the shares of preferred stock as determined by the Board at the time of issuance, the holders of shares of preferred stock may
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