EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS
RIGHTS AND PRFERENCES
OF SERIES D REDEEMABLE CONVERTIBLE PREFERRED STOCK
CERTIFICATE OF DESIGNATIONS,
RIGHTS AND PREFERENCES
OF
SERIES D REDEEMABLE CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware)
We, the undersigned duly authorized officers of AVITAR, INC., a corporation
organized and existing under the laws of the State of Delaware, do hereby
certify that:
A) AVITAR, INC. ( the "Corporation") was incorporated in the State of
Delaware on November 20, 1986.
B) Pursuant to the authority conferred upon the Board of Directors of the
Corporation (the "Board of Directors") by the provisions of the Corporation's
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
and the provisions of Sections 141 and 151 of the General Corporation Law of the
State of Delaware, the Board of Directors has duly adopted the following
recitals and resolutions, which are not in conflict with any provisions of the
Certificate of Incorporation or the Corporation's By-Laws, setting forth the
number, terms, designations, relative rights, preferences, privileges and
restrictions of a series of Preferred Stock, par value $0.01 per share, of the
Corporation.
WHEREAS, the Certificate of Incorporation provides for a class of shares
known as Preferred Stock, consisting of 5,000,000 shares;
WHEREAS, the Certificate of Incorporation authorizes the issuance of
Preferred Stock from time to time in one or more series and authorizes the Board
of Directors to (a) determine or alter the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock, (b) fix the number of shares constituting any such series and
(c)determine the designation thereof; and
WHEREAS, the Corporation plans to issue a fourth series of Preferred Stock
and the Board of Directors desires to determine and fix the rights, privileges,
and restrictions relating to this series of Preferred Stock and the number of
shares constituting, and the designation of, such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
determines and fixes the designations of, the number of shares constituting, and
the rights, preferences, privileges and restrictions relating to, a fourth
series of Preferred Stock, as follows:
1. Designation. 142,000 shares of Preferred Stock shall be designated
hereby as "Series D Redeemable Convertible Preferred Stock" (hereinafter
referred to as the "Series D Preferred Stock") with the rights, preferences,
privileges and restrictions specified herein.
2. Voting Rights. On all matters submitted to a vote of the holders of the
Corporation's common stock, par value $0.01 per share (the "Common Stock), the
holders of Series D Preferred Stock shall be entitled to exercise one vote per
share of the Common Stock underlying the Series D Preferred Stock.
3. Liquidation Preference.
A. The Series D Preferred Stock and all other preferred stock are
senior to the Common Stock. Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the holders of Series D Preferred
Stock shall be entitled to receive out of the assets of the Corporation
which remain after satisfaction in full of all valid claims of creditors of
the Corporation, liquidating distributions of an amount per share of Series
D Preferred Stock equal to the amount per share for Series D Preferred
Stock paid by the holder when making the investment. If these liquidation
distributions are not paid in full, the holders of the Series D Preferred
Stock shall share ratably in any distribution of assets in proportion to
the full respective preferential amount to which they are entitled.
B. The merger or consolidation of the Corporation with or into any
other corporation and the sale or transfer of all or substantially all of
the assets of the Corporation shall be deemed to be a dissolution,
liquidation or winding-up of the Corporation for the purposes of this
Section 3.
C. Written notices of any voluntary liquidation, dissolution or
winding-up of the Corporation, stating the payment date or dates when, and
the place or places where, the amounts distributable to holders of Series D
Preferred Stock in such circumstances shall be payable, shall be given by
certified mail, postage pre-paid, mailed not less than ten (10) days prior
to any payment stated therein, to the holders of Series D Preferred Stock,
at the address shown on the books of the Corporation or any transfer agent
for the Series D Preferred Stock.
D. The Corporation may issue shares of its Preferred Stock which have
liquidation, dividend, voting, and/or redemption rights which are senior or
junior to, or pari passu with, the Series D Preferred Stock. For a period
of one year from the date of original issuance of the Series D Preferred
Stock, no shares or debt convertible into shares of Common Stock or debt
with rights or options to acquire shares of Common Stock ranking in
priority to the Series D Preferred Stock may be issued without consent of
the holders of the Series D Preferred Stock.
4. Conversion.
A. A holder of Series D Preferred Stock shall be entitled, at any time
prior to the close of business on any date fixed for the redemption of such
shares pursuant to Section 6 hereof, to cause any or all such shares to be
converted (the "Conversion") into ten shares of Common Stock for each share of
Series D Preferred Stock (the "Conversion Price"), subject to adjustment as
provided herein.
B) The issuance by the Corporation of shares of Common Stock upon any
Conversion of shares of the Series D Preferred Stock made at the option of the
holder thereof, shall be effective the earlier of (i) the delivery to such
holder or such holders' designee of certificates representing the shares of
Common Stock issued upon Conversion thereof or (ii) the commencement of business
on the second business day after the surrender of the certificate or
certificates for the shares of Series D Preferred Stock to be converted, duly
assigned or endorsed for transfer to the Corporation ( or accompanied by duly
executed stock powers relating thereto) as provided hereby. On and after the
effective date of any Conversion, the converted shares of Series D Preferred
Stock shall no longer be deemed to be outstanding and all rights whatsoever with
respect thereto shall terminate, and the person or persons entitled to receive
the Common Stock issuable upon such Conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock. All shares of
Series D Preferred Stock upon Conversion shall be restored to the status of
authorized but unissued shares of preferred stock without designation as to
Class, and may be issued thereafter.
C. The Conversion Price shall be subject to adjustment from time to time as
follows:
(i) If the Corporation shall, at any time or from time to time while
shares of the Series D Preferred Stock shall be outstanding, (1) subdivide
its outstanding shares of Common Stock into a greater number of shares, (2)
combine its outstanding shares of Common Stock into a smaller number of
shares or (3) pay a dividend (exclusive of the stock dividend provided
herein), or make a distribution in Common Stock (or securities convertible
into or exchangeable for shares of Common Stock) to holders of the Common
Stock or other class or series of capital stock of the Corporation
convertible into or exchangeable for shares of Common Stock, then the
Conversion Price in effect immediately prior to such subdivision or
combination, as the case may be, or immediately prior to the record date
fixed for the determination of shareholders entitled to such dividend or
distribution, shall be increased or decreased, as the case may be, to
produce such results as would have been obtained prior to the occurrence of
such event. An adjustment made pursuant hereto shall become effective
immediately after the record date, in the case of a dividend or
distribution payable in Common Stock (or other securities) and immediately
after the effective date, in the case of a subdivision or combination.
(ii) If the Corporation shall, at any time or from time to time while
shares of Series D Preferred Stock shall be outstanding, sell or issue
rights, options, warrants or convertible securities containing the right to
subscribe for or purchase shares of Common Stock at a purchase price less
than the 90% of the Conversion Price (i.e. 9% of the amount invested per
share for Series D Preferred Stock), then the Conversion Price in effect
immediately prior to such event shall be reduced by an amount equal to the
quotient determined by dividing:
(a) an amount equal to the sum of (x) the product of the total
number of shares of Common Stock outstanding immediately prior to the
date of such sale or issuance of such rights, options, warrants or
convertible securities and the Conversion Price in effect immediately
prior to such sale or issuance, plus (y) the aggregate consideration
(if non-cash consideration, the fair market value of which shall be
determined by the Board of Directors in its good faith judgment), if
any, received by the Corporation upon such sale or issuance; by
(b) the total number of shares of Common Stock outstanding
immediately after such sale or issuance.
(iii) Whenever any adjustment is made in the Conversion Price pursuant
to the foregoing provisions (i) or (ii), the Corporation shall, as soon as
reasonably practicable thereafter, prepare a written statement signed by an
executive officer of the Corporation setting forth the adjusted Conversion
Price, determined as provided herein, and , in reasonable detail, the facts
requiring such adjustment. The Corporation shall mail such statement to all
holders of record of shares of Series D Preferred Stock at their respective
addresses appearing on the stock records of the Corporation.
D. The Corporation shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for issuance upon the Conversion of
shares of Series D Preferred Stock as provided herein, free from any preemptive
rights, such number of shares of Common Stock as shall from time to time be
issuable upon the Conversion of all the shares of Series D Preferred Stock then
outstanding.
5. Redemption.
A. In the event that after one year from the date of issuance, the average
of the last sales price ten shares of Common Stock equal or exceeds 300% of the
amount invested per share for Series D Preferred Stock for any (20) consecutive
trading days immediately prior to the date of the notice discussed in Section
5.B below, the Corporation shall have the right, at any time, to redeem all, or
any portion of, the outstanding shares of Series D Preferred Stock, at the price
per share paid by the holder upon making the investment in Series D Preferred
Stock. If less than all of the outstanding shares of Series D Preferred Stock
shall be redeemed, the Corporation shall redeem a pro rata portion of the shares
of each holder. From and after the date of redemption of any shares of Series D
Preferred Stock, such shares shall no longer be deemed to be outstanding and all
rights in respect of such shares of Series D Preferred Stock shall cease, except
the right to receive the redemption price.
B. Notice of any redemption made pursuant to this Section 6 shall be sent
to the holders of Series D Preferred Stock at the address shown on the books of
the Corporation or any transfer agent for the Series D Preferred Stock by first
class mail, postage prepaid, mailed not less than thirty (30) days' prior to the
redemption date. Each notice shall state (i) the redemption date, (ii) the total
number of shares of Series D Preferred Stock to be redeemed and, if fewer than
all the shares held by such holder are to be redeemed, the number of shares to
be redeemed from such holder, (iii) the redemption price, (iv) the place or
places where certificates for such shares are to be surrendered for payment of
the redemption price and (v) Conversion rights of the shares to be redeemed, the
period within which Conversion rights may be exercised, and the Conversion Price
and number of shares of Common Stock issuable upon Conversion of a share of
Series D Preferred Stock at the time. Promptly following receipt of such notice,
the holders of Series D Preferred Stock shall surrender their certificates
representing such shares to the Corporation unless they shall Convert in
accordance with Sections 4 and 5 hereof.
6. Pre-emptive Rights. The holders of Series D Preferred Stock shall have
no pre-emptive rights.
7. Stated Capital. The amount to be capital at all times for each share of
Series D Preferred Stock shall be its par value (i.e., $0.01 per share).
RESOLVED, FURTHER, that the Chairman of the Board/Chief Executive Officer
and the Secretary of the Corporation be, and they are hereby are, authorized and
directed to prepare and file a Certificate of Designation in accordance with
this resolution and as required by law.
IN WITNESS WHEREOF, we have executed this Certificate of Designation and
affirm the foregoing as true under the penalties of perjury this 26th day of
February, 2001.
/s/J.C. LEATHERMAN /s/PETER P. PHILDIUS
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Secretary Chairman of the Board/Chief Executive
Officer