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Exhibit 4.2
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF
SERIES A CONVERTIBLE PREFERRED STOCK OF
INTEGRATED SURGICAL SYSTEMS, INC.
PURSUANT TO SECTION 151 OF THE DELAWARE
GENERAL CORPORATION LAW
Integrated Surgical Systems, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
(hereinafter the "Corporation"), in accordance with the provisions of Section
151(g) thereof, DOES HEREBY CERTIFY that, at a meeting of the Board of Directors
of the Corporation held on August 15, 1998:
FIRST: The following resolution was duly adopted by the Board of
Directors of the Corporation:
"RESOLVED: That pursuant to the authority vested in the Board of
Directors of the Corporation by Article 4 of the Corporation's restated
certificate of incorporation, as amended (the "Certificate of Incorporation"), a
series of Preferred Stock of the Corporation be, and it hereby is, created out
of the authorized but unissued shares of the capital stock of the Corporation,
such series to be designated Series A Convertible Preferred Stock (the "Series A
Convertible Preferred Stock"), to consist of 3,520 shares, par value $0.01 per
share, of which the preferences and relative and other rights, and the
qualifications, limitations or restrictions thereof, shall be as set forth in
the Certificate of Designations annexed hereto:
1. NUMBER OF SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK. Of the
1,000,000 shares of authorized but unissued Preferred Stock, $0.01 par value
("Preferred Stock") of the Corporation, three thousand five hundred and twenty
(3,520) shares shall be designated and known as Series A Convertible Preferred
Stock, par value $0.01 per share ("Series A Convertible Preferred Stock").
2. VOTING.
(a) Unless required by law, no holder of any shares of Series
A Convertible Preferred Stock shall be entitled to vote at any meeting of
stockholders of the Corporation (or any written actions of stockholders in lieu
of meetings) with respect to any matters presented to the stockholders of the
Corporation for their action or consideration. Notwithstanding the foregoing,
the Corporation shall provide each holder of record of Series A Convertible
Preferred Stock with timely
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notice of every meeting of stockholders of the Corporation and shall provide
each holder with copies of all proxy materials distributed in connection
therewith.
(b) So long as shares of Series A Convertible Preferred Stock
are outstanding, the Corporation shall not, without first obtaining the approval
(by vote or written consent, as provided by the Delaware General Corporation
Law) of the holders of at least 85% in interest of the then outstanding shares
of Series A Convertible Preferred Stock:
(i) alter or change the rights, preferences or
privileges of the Series A Convertible Preferred Stock;
(ii) create any new class or series of capital stock
having parity with or a preference over the Series A Convertible Preferred Stock
as to distribution of assets upon liquidation, dissolution or winding up of the
Corporation ("Senior Securities") or alter or change the rights, preferences or
privileges of any Senior Securities so as to affect adversely the Series A
Convertible Preferred Stock;
(iii) increase the authorized number of shares of
Series A Convertible Preferred Stock; or
(iv) do any act or thing not authorized or
contemplated by this Certificate of Designations which would result in taxation
of the holders of shares of the Series A Convertible Preferred Stock under
Section 305 of the Internal Revenue Code of 1986, as amended (or any comparable
provision of the Internal Revenue Code as hereafter from time to time amended).
In the event holders of at least 85% in interest of the then
outstanding shares of Series A Convertible Preferred Stock agree to allow the
Corporation to alter or change the rights, preferences or privileges of the
shares of Series A Convertible Preferred Stock, pursuant to subsection (b)
above, so as to affect the Series A Convertible Preferred Stock, then the
Corporation will deliver notice of such approved change to the holders of the
Series A Convertible Preferred Stock that did not agree to such alteration or
change (the "Dissenting Holders") and Dissenting Holders shall have the right
for a period of thirty (30) days to convert any and all shares of then held
Series A Convertible Preferred Stock pursuant to the terms of this Certificate
of Designation as in effect prior to such alteration or change, or else to
continue to hold their shares of Series A Convertible Preferred Stock.
3. DIVIDENDS.
No holder of any shares of Series A Convertible Preferred
Stock shall be entitled to receive any dividends.
4. LIQUIDATION. (a) If the Corporation shall commence a voluntary case
under the Federal bankruptcy laws or any other applicable Federal or State
bankruptcy, insolvency or similar
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law, or consent to the entry of an order for relief in an involuntary case under
any law or to the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as they
become due, or if a decree or order for relief in respect of the Corporation
shall be entered by a court having jurisdiction in the premises in an
involuntary case under the Federal bankruptcy laws or any other applicable
Federal or State bankruptcy, insolvency or similar law resulting in the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of thirty (30) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"Liquidating Event"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation upon liquidation, dissolution or winding up
unless prior thereto, the holders of shares of Series A Convertible Preferred
Stock shall have received the Liquidation Preference (as defined in Article
4(c)) with respect to each share. If upon the occurrence of a Liquidation Event,
the assets and funds available for distribution among the holders of the Series
A Convertible Preferred Stock and holders of Pari Passu Securities shall be
insufficient to permit the payment to such holders of the preferential amounts
payable thereon, then the entire assets and funds of the Corporation legally
available for distribution to the Series A Convertible Preferred Stock and the
Pari Passu Securities shall be distributed ratably among such shares in
proportion to the ratio that that Liquidation Preference payable on each such
share bears to the aggregate Liquidation Preference payable on all such shares.
(b) At the option of each Holder, the sale,
conveyance of disposition of all or substantially all of the assets of the
Corporation, the effectuation by the Corporation of a transaction or series or
related transactions in which more than 50% of the voting power of the
Corporation is disposed of, or the consolidation, merger or other business
combination of the Corporation with or into any other Person or Persons when the
Corporation is not the survivor shall be deemed to be a liquidation, dissolution
or winding up of the Corporation pursuant to which the Corporation shall be
required to distribute, upon consummation of and as a condition to such
transaction an amount equal to the Liquidation Preference with respect to each
outstanding share of Series A Convertible Preferred Stock held by such Holder in
accordance with and subject to the terms of this Article 4.
(c) The Liquidation Preference shall be the Stated
Value of $1,000 per share of Series A Convertible Preferred Stock.
5. OPTIONAL CONVERSION. The holders of shares of Series A Convertible
Preferred Stock shall have the following conversion rights:
(a) RIGHT TO CONVERT; CONVERSION PRICE. Subject to the terms,
conditions, and restrictions of this Paragraph 5, the holder of any shares of
Series A Convertible Preferred Stock
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shall have the right to convert each such share of Series A Convertible
Preferred Stock (except that upon any liquidation of the Corporation, the right
of conversion shall terminate at the close of business on the business day fixed
for payment of the amount distributable on the Series A Convertible Preferred
Stock) into an amount of shares of Common Stock equal to the Stated Value of
such share or shares of Series A Convertible Preferred Stock divided by (i) the
lowest price at which a trade of the Common Stock is executed, as reported by
Bloomberg L.P., on the principal market for the Corporation's Common Stock (the
"Principal Market") during the period of five Trading Days ending with the last
Trading Day prior to the date of conversion (the "Conversion Date") (the "Market
Price"), after (ii) discounting the Market Price by 15% to determine the
conversion price (the "Conversion Price"). To illustrate, if the Market Price as
of the Conversion Date is $6.00 and 100 shares of Series A Convertible Preferred
Stock are being converted, the Stated Value for which would be $100,000, then
the Conversion Price shall be $5.10 per share of Common Stock ($6.00 x .85),
whereupon the Stated Value of $100,000 of Series A Convertible Preferred Stock
would entitle the holder thereof to convert the 100 shares of Series A
Convertible Preferred Stock into 19,607 shares of Common Stock ($100,000 divided
by $5.10 equals 19,607). However, in no event shall the Conversion Price be
greater than 150% of Market Price on the Original Issuance Date, as defined in
the next paragraph (the "Maximum Conversion Price"). In addition, if the
Conversion Price on any Conversion Date is less than $6.00, then the Corporation
shall have the option, prior to receipt of a Conversion Notice from the holder
and upon prior written notice to the holder, to pay the holder in shares of
Common Stock as set forth above, or else in cash in an amount equal to (i) the
closing price on the Principal Market on the day prior to the Conversion Date
multiplied by (ii) the number of shares of Common Stock which would otherwise be
issuable to the holder upon such conversion, or any combination of cash and
Common Stock. If notice of the Corporation's election to pay the holder in cash
is not received by the holder prior to the receipt by the Corporation of a
Conversion Notice, the Corporation shall pay the holder in shares of Common
Stock. Unless the Corporation shall have obtained the approval of its voting
stockholders to such issuance in accordance with the rules of the Principal
Market, the Corporation shall not issue shares of Common Stock upon conversion
of any shares of Series A Convertible Preferred Stock if such issuance of Common
Stock, when added to the number of shares of Common Stock previously issued by
the Corporation upon conversion of shares of the Series A Convertible Preferred
Stock, would equal or exceed twenty percent (20%) of the number of shares of the
Corporation's Common Stock which were issued and outstanding on the Original
Issuance Date; and, in such event, the Corporation shall honor such conversion
request in cash in accordance with the previous sentence, irrespective of the
Conversion Price.
(b) CONVERSION DATE. (i) The holder of any shares of Series A
Convertible Preferred Stock may convert: 90 days after the date upon which the
Series A Preferred Stock was originally issued (the "Original Issuance Date"),
25% of the cumulative amount of shares of Series A Convertible Preferred Stock
held by such holder; 120 days after the Original Issuance Date, 50% of the
cumulative amount of shares of Series A Convertible Preferred Stock held by such
holder; 150 days after the Original Issuance Date, 75% of the cumulative amount
of shares of Series A Convertible Preferred Stock held by such holder; and 180
days after the Original Issuance Date,
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100% of the cumulative amount of shares of Series A Convertible Preferred Stock
held by such holder. In the event that the Market Price exceeds the Maximum
Conversion Price at any time prior to 180 days after the Original Issuance Date,
then all of the shares of Series A Convertible Preferred Stock shall become
immediately convertible.
(ii) The Holder shall not have the right, and the
Company shall not have the obligation, to convert all or any portion of the
Series A Convertible Preferred Stock if and to the extent that the issuance to
the Holder of Common Shares upon such conversion would result in the Holder
being deemed the "beneficial owner" of more than 5% of the then outstanding
shares of Common Stock within the meaning of Section 13(d) of the Securities
Exchange Act of 1934, as amended, and the rules promulgated thereunder. If any
court of competent jurisdiction shall determine that the foregoing limitation is
ineffective to prevent a holder from being deemed the beneficial owner of more
than 5% of the then outstanding shares of Common Stock, then the Corporation
shall redeem so many of such holder's shares of Series A Convertible Preferred
Stock pursuant to Section 7(a) hereof as are necessary to cause such holder to
be deemed the beneficial owner of not more than 5% of the then outstanding
shares of Common Stock.
(c) NOTICE OF CONVERSION. The right of conversion shall be
exercised by the holder thereof by giving written notice (the "Conversion
Notice") to the Corporation, by facsimile or by registered mail or overnight
delivery service, with a copy by facsimile to the Corporation's then transfer
agent for its Common Stock, as designated by the Corporation from time to time,
that the holder elects to convert a specified number of shares of Series A
Convertible Preferred Stock representing a specified Stated Value thereof into
Common Stock and, if such conversion will result in the conversion of all of
such holder's shares of Series A Convertible Preferred Stock, by surrender of a
certificate or certificates for the shares so to be converted to the Corporation
at its principal office (or such other office or agency of the Corporation as
the Corporation may designate by notice in writing to the holders of the Series
A Convertible Preferred Stock) at any time during its usual business hours on
the date set forth in the Conversion Notice, together with a statement of the
name or names (with address) in which the certificate or certificates for shares
of Common Stock shall be issued. The Conversion Notice shall include therein the
Stated Value of shares of Series A Convertible Preferred Stock to be converted,
and a calculation (i) of the Market Price, (ii) the Conversion Price, and (iii)
the number of shares of Common Stock to be issued in connection with such
conversion.
(d) ISSUANCE OF CERTIFICATES; TIME CONVERSION EFFECTED. (i)
Promptly, but in no event more than three business days, after the receipt of
the Conversion Notice referred to in Subparagraph 5(c) and surrender of the
certificate or certificates for the share or shares of Series A Convertible
Preferred Stock to be converted, the Corporation shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such name or
names as such holder may direct, a certificate or certificates for the number of
whole shares of Common Stock into which such shares of Series A Convertible
Preferred Stock are converted. To the extent permitted by law, such conversion
shall be deemed to have been effected on the date on which such Conversion
Notice shall
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have been received by the Corporation and at the time specified stated in such
Conversion Notice, which must be during the calendar day of such notice, and at
such time the rights of the holder of such share or shares of Series A
Convertible Preferred Stock shall cease, and the person or persons in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby. Issuance of shares of
Common Stock issuable upon conversion which are requested to be registered in a
name other than that of the registered holder shall be subject to compliance
with all applicable federal and state securities laws.
(ii) The Corporation understands that a delay in the issuance
of the shares of Common Stock beyond three business days could result in
economic loss to the holder. As compensation to the holder for such loss, the
Corporation agrees to pay late payments to the holder for late issuance of
shares of Common Stock upon conversion in accordance with the following schedule
(where "No. Business Days Late" is defined as the number of business days beyond
three (3) business days from the date of receipt of the Conversion Notice):
No. Business Days Late Late Payment For Each
$5,000 of Liquidation Preference
Amount Being Converted
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1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each Business Day
Late beyond 10 days
The Corporation shall pay any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall limit holder's
right to pursue injunctive relief and/or actual damages for the Corporation's
failure to issue and deliver Common Stock to the holder. Furthermore, in
addition to any other remedies which may be available to the holder, in the
event that the Corporation fails for any reason to effect delivery of such
shares of Common Stock within five business days the date of receipt of the
Conversion Notice, the holder will be entitled to revoke the relevant Conversion
Notice by delivering a notice to such effect to the Corporation whereupon the
Corporation and the holder shall each be restored to their respective positions
immediately prior to delivery of such Conversion Notice.
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(iii) If, at any time (a) the Corporation challenges,
disputes or denies the right of the holder to effect the conversion of the
Series A Convertible Preferred Stock into Common Shares or otherwise dishonors
or rejects any Conversion Notice delivered in accordance with this Section 5 or
(b) any third party who is not and has never been an Affiliate (as defined in
Rule 405 under the Securities Act of 1933, as amended) of the holder commences
any lawsuit or proceeding or otherwise asserts any claim before any court or
public or governmental authority which seeks to challenge, deny, enjoin, limit,
modify, delay or dispute the right of the holder hereof to effect the conversion
of the Series A Convertible Preferred Stock into Common Shares, then the holder
shall have the right, by written notice to the Corporation, to require the
Corporation to promptly redeem the Series A Convertible Preferred Stock for cash
at a redemption price equal to one hundred thirty-five percent (135%) of the
Stated Value thereof (the "Mandatory Purchase Amount"). Under any of the
circumstances set forth above, the Corporation shall be responsible for the
payment of all costs and expenses of the holder, including reasonable legal fees
and expenses, as and when incurred in disputing any such action or pursuing its
rights hereunder (in addition to any other rights of the holder).
(iv) The holder shall be entitled to exercise its
conversion privilege notwithstanding the commencement of any case under 11
U.S.C. Section 101 et seq. (the "Bankruptcy Code"). In the event the Corporation
is a debtor under the Bankruptcy Code, the Corporation hereby waives to the
fullest extent permitted any rights to relief it may have under 11 U.S.C.
Section 362 in respect of the holder's conversion privilege. The Corporation
hereby waives to the fullest extent permitted any rights to relief it may have
under 11 U.S.C. Section 362 in respect of the conversion of the Series A
Convertible Preferred Stock. The Corporation agrees, without cost or expense the
holder, to take or consent to any and all action necessary to effectuate relief
under 11 U.S.C. Section 362.
(e) FRACTIONAL SHARES. No fractional shares shall be issued
upon conversion of Series A Convertible Preferred Stock into Common Stock. All
fractional shares shall be rounded up to the nearest whole share.
(f) REORGANIZATION OR RECLASSIFICATION. If any capital
reorganization or reclassification of the capital stock of the Corporation shall
be effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for Common
Stock, or, in the case of any consolidation, merger or mandatory share exchange
of the Corporation into any other company, then, as a condition of such
reorganization, reclassification or exchange, lawful and adequate provisions
shall be made whereby each holder of a share or shares of Series A Convertible
Preferred Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the conversion of such
share or shares of Series A Convertible Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares of such Common Stock immediately theretofore receivable upon such
conversion had such reorganization, reclassification or exchange not taken
place, and in any such
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case appropriate provisions shall be made with respect to the rights and
interests of such holder to the end that the provisions hereof (including
without limitation provisions for adjustments of the conversion rights) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
conversion rights.
(g) ADJUSTMENTS FOR SPLITS, COMBINATIONS, ETC. The Conversion
Price and the number of shares of Common Stock into which the Series A
Convertible Preferred Stock shall be convertible shall be adjusted for stock
splits, combinations, or other similar events. Additionally, an adjustment will
be made in the case of an exchange of Common Stock, consolidation or merger of
the Company with or into another corporation or sale of all or substantially all
of the assets of the Company in order to enable the holder of Series A
Convertible Preferred Stock to acquire the kind and the number of shares of
stock or other securities or property receivable in such event by a holder of
the number of shares of Common Stock that might otherwise have been issued upon
the conversion of the Series A Convertible Preferred Stock. No adjustment to the
Conversion Price will be made for dividends (other than stock dividends), if
any, paid on the Common Stock or for securities issued pursuant to exercise for
fair value of options, warrants, or restricted stock.
(h) ADJUSTMENTS TO CONVERSION RATIO. For so long as any shares
of Series A Convertible Preferred Stock are outstanding, but no later than one
year from the effective date of a registration statement registering for resale
by the holders the shares of Common Stock issuable upon conversion of the Series
A Convertible Preferred Stock, if the Corporation (i) issues and sells pursuant
to an exemption from registration under the Securities Act (A) Common Stock at a
purchase price on the date of issuance thereof that is lower than the Conversion
Price at such date (other than shares of Common Stock issued in connection with
the exercise of any warrants or options outstanding on the Original Issuance
Date or pursuant to the Corporation's 1998 Employee Stock Purchase Plan), (B)
warrants or options with an exercise price on the date of issuance of the
warrants or options that is lower than the Conversion Price on such date (other
than options and stock awards granted pursuant to the Corporation's 1995 and
1998 Stock Option Plans), or (C) convertible, exchangeable or exercisable
securities with a right to convert, exchange or exercise at lower than the
Conversion Price on the date of issuance or conversion, as applicable, of such
convertible, exchangeable or exercisable securities (other than options and
stock awards granted pursuant to the Corporation's 1995 and 1998 Stock Option
Plans); and (ii) grants the right to the purchaser(s) thereof to demand that the
Corporation register under the Securities Act such Common Stock issued or the
Common Stock for which such warrants or options may be exercised or such
convertible, exchangeable or exercisable securities may be converted, exercised
or exchanged, then the Conversion Price shall be reduced to a rate equal to the
lowest of any lower rates since the most recently received Conversion Notice,
and such Adjusted Conversion Price shall apply to any future Conversion Notices
received by the Corporation. The Adjusted Conversion Price as it may exist from
time to time shall not apply retroactively to any shares of Series A Convertible
Preferred Stock converted prior to the implementation of such Adjusted
Conversion Price. Notwithstanding the foregoing, the Corporation may issue up to
an aggregate total of Three Hundred Thousand (300,000) shares of Common Stock
(subject to adjustment only for stock splits, stock dividends and reverse
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stock splits) at any price determined by the Board of Directors, after the
Original Issuance Date, without causing an Adjusted Conversion Price.
6. MANDATORY CONVERSION.
(a) MANDATORY CONVERSION DATE. If on or after August 24, 2001
(such date as selected by the Corporation being the "Mandatory Conversion
Date"), there remain issued and outstanding any shares of Series A Convertible
Preferred Stock, then the Corporation shall be entitled to require all (but not
less than all) holders of shares of Series A Convertible Preferred Stock then
outstanding to convert their shares of Series A Convertible Preferred Stock into
shares of Common Stock or, at the option of the Corporation, to buy out all such
holders in cash, at the then effective Conversion Price pursuant to Subparagraph
5(a). The Corporation shall provide written notice (the "Mandatory Conversion
Notice") to the holders of shares of Series A Convertible Preferred Stock of
such mandatory conversion or such mandatory buy-out. The Mandatory Conversion
Notice shall include (i) the Stated Value of the shares of Series A Convertible
Preferred Stock to be converted or bought out, (ii) the Conversion Price at the
Mandatory Conversion Date, and (iii) the number of shares of the Corporation's
Common Stock to be issued (or the amount of cash to be paid in the event of a
buy-out) upon such mandatory conversion or such mandatory buy-out at the then
applicable Conversion Price. Notwithstanding the foregoing, in no event shall
the Corporation convert that portion of the Series A Convertible Preferred Stock
to the extent that the issuance of Common Stock upon the conversion of such
Series A Convertible Preferred Stock, when combined with shares of Common Stock
received upon other conversions of Series A Convertible Preferred Stock by such
holder and any other holders of Series A Convertible Preferred Stock, would
exceed 19.99% of the Common Stock outstanding on the Original Issuance Date, or
as to any individual holder, make such holder the beneficial owner of 5% or more
of the Company's then-outstanding Common Stock.
(b) SURRENDER OF CERTIFICATES. On or before the Mandatory
Conversion Date, each holder of shares of Series A Convertible Preferred Stock
shall surrender his or its certificate or certificates for all such shares to
the Corporation at the place designated in such Mandatory Conversion Notice (or
an affidavit of lost certificate in form and content reasonably satisfactory to
the Corporation), and shall thereafter receive certificates for the number of
shares of Common Stock to which such holder is entitled or, in the event of a
buy-out by the Corporation, the amount of cash such holder is entitled within
three business days. On the Mandatory Conversion Date, all rights with respect
to the Series A Convertible Preferred Stock so converted, including the rights,
if any, to receive notices and vote, will terminate. All certificates evidencing
shares of Series A Convertible Preferred Stock that are required to be
surrendered for conversion in accordance with the provisions hereof, from and
after the Mandatory Conversion Date, shall be deemed to have been retired and
cancelled, notwithstanding the failure of the holder or holders thereof to
surrender such certificates on or prior to such date. The Corporation may
thereafter take such appropriate action as may be necessary to reduce the
authorized Series A Convertible Preferred Stock accordingly.
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7. REDEMPTION OF SERIES A CONVERTIBLE PREFERRED STOCK.
(a) RIGHT TO REDEEM SERIES A CONVERTIBLE PREFERRED STOCK. At
any time, and from time to time, on and after the expiration of the earlier of
(i) six months from the Original Issuance Date or (ii) the closing of a
registered firm-commitment underwritten secondary offering of equity securities
by the Corporation for cash, the Corporation may, in its sole discretion, but
shall not be obligated to, redeem, in whole or in part, the then issued and
outstanding shares of Series A Convertible Preferred Stock, at a price equal to
the greater of (i) $1,500 per share of such Series A Convertible Preferred Stock
or (ii) the Market Price of the Common Stock into which such share of Series A
Convertible Preferred Stock could be converted on the date of such notice (the
"Redemption Price").
(b) NOTICE OF REDEMPTION. The Corporation shall provide each
holder of record of the Series A Convertible Preferred Stock being redeemed with
written notice of redemption (the "Redemption Notice") not less than 30 days
prior to any date stipulated by the Corporation for the redemption of the Series
A Convertible Preferred Stock (the "Redemption Date"). The Redemption Notice
shall contain (i) the Redemption Date, (ii) the number of shares of Series A
Convertible Preferred Stock to be redeemed from the holder to whom the
Redemption Notice is delivered, (iii) instructions for surrender to the
Corporation of the certificate or certificates representing the shares of Series
A Convertible Preferred Stock to be redeemed, and (iv) a procedure for the
holder to specify the number of shares of Series A Convertible Preferred Stock
to be converted into Common Stock pursuant to Paragraph 5.
(c) RIGHT TO CONVERT SERIES A CONVERTIBLE PREFERRED STOCK UPON
RECEIPT OF REDEMPTION Notice. Upon receipt of the Redemption Notice, the
recipient thereof shall have the option, at its sole election, to specify what
portion of the Series A Convertible Preferred Stock called for redemption in the
Redemption Notice shall be redeemed as provided in this Paragraph 7 or converted
into Common Stock in the manner provided in Paragraph 5. If the holder of the
Series A Convertible Preferred Stock called for redemption elects to convert any
of such shares, then such conversion shall take place on the Conversion Date
specified by the holder, but in no event after the Redemption Date, in
accordance with the terms of Paragraph 5.
(d) SURRENDER OF CERTIFICATES; PAYMENT OF REDEMPTION PRICE. On
or before the Redemption Date, each holder of the shares of Series A Convertible
Preferred Stock to be redeemed shall surrender the required certificate or
certificates representing such shares to the Corporation, in the manner and at
the place designated in the Redemption Notice, and upon payment to the holder of
the Redemption Price, each such surrendered certificate shall be cancelled and
retired. If payment of such redemption price is not made in full by the
Redemption Date the Holder shall again have the right to convert the Series A
Convertible Preferred Stock as provided in Article 5 hereof. If a certificate is
surrendered and all the shares evidenced thereby are not being redeemed, the
Corporation shall issue new certificates to be registered in the names of the
person(s) whose
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name(s) appear(s) as the owners on the respective surrendered certificates and
deliver such certificate to such person(s).
8. NOTICES. In case at any time:
(a) the Corporation shall declare any dividend upon its Common
Stock payable in cash or stock or make any other pro rata distribution to the
holders of its Common Stock; or
(b) the Corporation shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
other rights; or
(c) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation or
merger of the Corporation with or into, or a sale of all or substantially all
its assets to, another entity or entities; or
(d) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, or by telex or facsimile or by recognized overnight
delivery service to non-U.S. residents, addressed to each holder of any shares
of Series A Convertible Preferred Stock at the address of such holder as shown
on the books of the Corporation, (i) at least 10 days' prior written notice of
the date on which the books of the Corporation shall close or a record shall be
taken for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up and (ii) in
the case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, at least 10 days' prior written
notice of the date when the same shall take place. Such notice in accordance
with the foregoing clause (i) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the holders of
Common Stock shall be entitled thereto and (ii) shall also specify the date on
which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
9. STOCK TO BE RESERVED. The Corporation, upon the effective
date of this Certificate of Designations, has a sufficient number of shares of
Common Stock available to reserve for issuance upon the conversion of all
outstanding shares of Series A Convertible Preferred Stock. The Corporation will
at all times reserve and keep available out of its authorized Common Stock,
solely for the purpose of issuance upon the conversion of Series A Convertible
Preferred Stock as herein provided, such number of shares of Common Stock as
shall then be issuable upon the conversion of all outstanding shares of Series A
Convertible Preferred. The Corporation covenants that all shares of Common Stock
which shall be so issued shall be duly and validly issued, fully
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paid and non-assessable. The Corporation will take all such action as may be so
taken without violation of any applicable law or regulation, or of any
requirement of any national securities exchange upon which the Common Stock may
be listed to have a sufficient number of authorized but unissued shares of
Common Stock to issue upon conversion of the Series A Convertible Preferred
Stock. The Corporation will not take any action which results in any adjustment
of the conversion rights if the total number of shares of Common Stock issued
and issuable after such action upon conversion of the Series A Convertible
Preferred Stock would exceed the total number of shares of Common Stock then
authorized by the Corporation's Certificate of Incorporation, as amended.
10. NO REISSUANCE OF SERIES A CONVERTIBLE PREFERRED STOCK.
Shares of Series A Convertible Preferred Stock which are converted into shares
of Common Stock as provided herein shall not be reissued.
11. ISSUE TAX. The issuance of certificates for shares of
Common Stock upon conversion of Series A Convertible Preferred Stock shall be
made without charge to the holder for any United States issuance tax in respect
thereof, provided that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the holder of the
Series A Convertible Preferred Stock which is being converted.
12. CLOSING OF BOOKS. The Corporation will at no time close
its transfer books against the transfer of any Series A Convertible Preferred
Stock or of any shares of Common Stock issued or issuable upon the conversion of
any shares of Series A Convertible Preferred Stock in any manner which
interferes with the timely conversion of such Series A Convertible Preferred
Stock, except as may otherwise be required to comply with applicable securities
laws.
13. DEFINITIONS. As used in this Certificate of Designations,
the term "Common Stock" shall mean and include the Corporation's authorized
Common Stock, $0.01 par value, as constituted on the date of filing of these
terms of the Series A Convertible Preferred Stock, and shall also include any
capital stock of any class of the Corporation thereafter authorized which shall
neither be limited to a fixed sum or percentage of par value in respect of the
rights of the holders thereof to participate in dividends nor entitled to a
preference in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Series A
Convertible Preferred Stock shall include only shares designated as Common Stock
of the Corporation on the date of filing of this instrument, or in case of any
reorganization, reclassification, or stock split of the outstanding shares
thereof, the stock, securities or assets provided for in Subparagraph 5(f) and
(g). Any capitalized terms used in this Certificate of Designations but not
defined herein shall have the meanings set forth in that certain Preferred Stock
Purchase Agreement dated as of August 25, 1998 among the Corporation and the
other
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persons signatory thereto, a copy of which will be provided to any stockholder
of the Corporation upon request to the Secretary of the Corporation, without
charge.
14. LOSS, THEFT, DESTRUCTION OF PREFERRED STOCK. Upon receipt
of evidence satisfactory to the Corporation of the loss, theft, destruction or
mutilation of certificates representing shares of Series A Convertible Preferred
Stock and, in the case of any such loss, theft or destruction, upon receipt of
indemnity or security reasonably satisfactory to the Corporation, or, in the
case of any such mutilation, upon surrender and cancellation of the Series A
Convertible Preferred Stock certificate, the Corporation shall make, issue and
deliver, in lieu of such lost, stolen, destroyed or mutilated certificates for
Series A Convertible Preferred Stock, new certificates for Series A Convertible
Preferred Stock of like tenor. The Series A Convertible Preferred Stock shall be
held and owned upon the express condition that the provisions of this Section 14
are exclusive with respect to the replacement of mutilated, destroyed, lost or
stolen shares of Series A Preferred Stock and shall preclude any and all other
rights and remedies notwithstanding any law or statue existing or hereafter
enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without the surrender thereof.
15. WHO DEEMED ABSOLUTE OWNER. The Corporation may deem the
person in whose name the Series A Convertible Preferred Stock shall be
registered upon the registry books of the Corporation to be, and may treat it
as, the absolute owner of the Series A Convertible Preferred Stock for the
purpose of conversion of the Series A Convertible Preferred Stock and for all
other purposes, and the Corporation shall not be affected by any notice to the
contrary. All such payments and such conversion shall be valid and effectual to
satisfy and discharge the liability upon the Series A Convertible Preferred
Stock to the extent of the sum or sums so paid or the conversion so made.
16. REGISTER. The Corporation shall keep at its principal
office a register in which the Corporation shall provide for the registration of
the Series A Convertible Preferred Stock. Upon any transfer of the Series A
Convertible Preferred Stock in accordance with the provisions hereof, the
Corporation shall register such transfer on the Series A Convertible Preferred
Stock register.
17. WITHHOLDING. To the extent required by applicable law, the
Corporation may withhold amounts for or on account of any taxes imposed or
levied by or on behalf of any taxing authority in the United States having
jurisdiction over the Corporation from any payments made pursuant to the Series
A Convertible Preferred Stock.
18. HEADINGS. The headings of the Sections of this Certificate
of Designations are inserted for convenience only and do not constitute a part
of this Certificate of Designations.
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IN WITNESS WHEREOF, Mark Winn, Chief Financial Officer of the
Corporation, under penalties of perjury, does hereby declare and certify that
this is the act and deed of the Corporation and the facts stated herein are true
and accordingly has signed this Certificate of Designations as of this 25th day
of August, 1998.
INTEGRATED SURGICAL SYSTEMS, INC.
By: /s/Mark Winn
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Mark Winn
Chief Financial Officer
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