ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL
YEAR.
On October 9, 2009, DRI Corporation (the "Company") amended its Articles of
Incorporation by filing a Certificate of Designation (the "Certificate of
Designation") with the Secretary of State of North Carolina designating Seven
Hundred (700) shares of the Company's authorized preferred stock as "Series K
Senior Convertible Preferred Stock" (the "Series K Preferred Stock"). No shares
of Series K Preferred Stock have been issued as of the date hereof. The general
terms of the Series K Preferred Stock are summarized below.
Dividends. The Series K Preferred Stock will accrue dividends quarterly at
the rate of nine and one-half percent (9-1/2%) per annum on the Liquidation
Preference (as defined below), compounded quarterly, and will be payable on
December 15, March 15, June 15 and September 15 of each year. Dividends on the
Series K Preferred Stock will be payable in cash or additional shares of
Series K Preferred Stock, at the option of each Series K Preferred Stock holder,
which option shall be designated in writing on an annual basis before December 1
of each year and, if not otherwise designated, shall be payable in cash. With
respect to the payment of dividends, the Series K Preferred Stock shall rank
prior and superior to the Company's Series AAA Preferred Stock, Series E
Redeemable Nonvoting Convertible Preferred Stock, Series G Preferred Stock,
Series H Preferred Stock, Series J Convertible Preferred Stock, and Common Stock
(collectively, the "Junior Stock").
Voting. The holders of the Series K Preferred Stock will be entitled to
vote with the holders of the Common Stock as a single class on any matters on
which the holders of the Common Stock are entitled to vote. The holders of the
Series K Preferred Stock will be entitled to a number of votes equal to the
quotient obtained by dividing the Liquidation Preference by $3.00. If all 700
authorized shares of the Series K Preferred Stock were issued and outstanding as
of the date hereof, the holders of these shares would be entitled to cast
approximately 1,166,200 votes on an as-converted basis, representing
approximately 8.3% of the total voting power of the Company.
Liquidation. The liquidation preference for the Series K Preferred Stock is
currently $5,000 per share (the "Liquidation Preference"). The Series K
Preferred Stock ranks prior and superior to the Junior Stock.
Redemption. The holders of the Series K Preferred Stock will not have a
right to cause the Company to redeem their shares. However, the Company will
have the right, but not the obligation, to redeem all or any portion of the
outstanding shares of Series K Preferred Stock. The redemption price to be paid
by the Company for any shares of Series K Preferred Stock will be equal to the
Liquidation Preference for those shares, plus the cash value of all accrued but
unpaid dividends thereon.
Optional Conversion. At the option of the holder, any or all outstanding
shares of Series K Preferred Stock may be converted into a number of fully paid
and nonassessable shares of Common Stock. The number of shares of Common Stock
received upon conversion will be determined by multiplying the number of
Series K Preferred Stock to be converted by a fraction, the numerator of which
is the Liquidation Preference plus all accrued but unpaid dividends on such
shares, and the denominator of which is the conversion price then in effect for
the Series K Preferred Stock. Currently, the conversion price for the Series K
Preferred Stock is $3.00 per share. The conversion price will be subject to
adjustments upon the occurrence of stock splits, stock dividends,
consolidations, reclassifications, exchanges and substitutions. If all 700
authorized shares of Series K Preferred Stock were issued and outstanding on the
date hereof, they would be convertible into approximately 1,166,200 shares of
Common Stock.
Automatic Conversion. The outstanding shares of Series K Preferred Stock
will automatically convert to shares of Common Stock if the closing bid price
for the Common Stock on The Nasdaq Stock Market (or other exchange or market on
which the Common Stock may be traded) for any consecutive twenty (20) day period
exceeds $6.00.
The foregoing description of the Certificate of Designation does not
purport to be complete and is qualified in its entirety by reference to the full
text of the Certificate of Designation, which is filed as Exhibit 10.1 hereto.
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