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EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
LASER VISION CENTERS, INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
Laser Vision Centers, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"),
hereby certifies that the following resolutions were adopted by the Board of
Directors of the Corporation on June 19, 1997 pursuant to authority of the
Board of Directors as required by Section 151(g) of the General Corporation Law
of the State of Delaware:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Corporation (the "Board of Directors" or the
"Board") in accordance with the provisions of its Certificate of Incorporation,
the Board of Directors hereby authorizes a series of the Corporation's
previously authorized Preferred Stock, par value $.01 per share (the "Preferred
Stock"), and hereby states the designation and number of shares, and fixes the
relative rights, preferences, privileges, powers and restrictions thereof as
follows:
Series B Convertible Preferred Stock:
I. Designation and Amount
The designation of this series, which consists of 6,000 shares of
Preferred Stock, is Series B Convertible Preferred Stock (the "Series B
Preferred Stock") and the stated value shall be One Thousand Dollars ($1,000)
per share (the "Stated Value").
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II. Rank
The Series B Preferred Stock shall rank (i) prior to the
Corporation's common stock, par value $.01 per share (the "Common Stock"); (ii)
prior to any class or series of capital stock of the Corporation hereafter
created (unless, with the consent of the holders of Series B Preferred Stock
obtained in accordance with Article IX hereof, such class or series of capital
stock specifically, by its terms, ranks senior to or pari passu with the Series
B Preferred Stock) (collectively, with the Common Stock, "Junior Securities");
(iii) pari passu with any class or series of capital stock of the Corporation
hereafter created (with the consent of the holders of Series B Preferred Stock
obtained in accordance with Article IX hereof) specifically ranking, by its
terms, on parity with the Series B Preferred Stock ("Pari Passu Securities");
and (iv) junior to any class or series of capital stock of the Corporation
hereafter created (with the consent of the holders of Series B Preferred Stock
obtained in accordance with Article IX hereof) specifically ranking, by its
terms, senior to the Series B Preferred Stock ("Senior Securities"), in each
case as to distribution of assets upon liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary.
III. Dividends
The Series B Preferred Stock shall not bear any dividends. In
no event, so long as any Series B Preferred Stock shall remain outstanding,
shall any dividend whatsoever be declared or paid upon, nor shall any
distribution be made upon, any Junior Securities, nor shall any shares of
Junior Securities be purchased or redeemed by the Corporation nor shall any
moneys be paid to or made available for a sinking fund for the purchase or
redemption of any Junior Securities (other than a distribution of Junior
Securities), without, in each such case, the written consent of the holders of
a majority of the outstanding shares of Series B Preferred Stock, voting
together as a class.
IV. Liquidation Preference
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 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 "Liquidation Event"), no
distribution
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shall be made to the holders of any shares of capital stock of the Corporation
(other than Senior Securities) upon liquidation, dissolution or winding up
unless prior thereto, the holders of shares of Series B Preferred Stock,
subject to Article VI, shall have received the Liquidation Preference (as
defined in Article IV.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 B 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 B Preferred Stock and the Pari
Passu Securities shall be distributed ratably among such shares in proportion
to the ratio that the Liquidation Preference payable on each such share bears
to the aggregate liquidation preference payable on all such shares.
B. At the option of any holder of Series B Preferred
Stock, the sale, conveyance or disposition of all or substantially all of the
assets of the Corporation, the effectuation by the Corporation of a transaction
or series of 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 (as defined below)
or Persons when the Corporation is not the survivor shall either: (i) be deemed
to be a liquidation, dissolution or winding up of the Corporation pursuant to
which the Corporation shall be required to distribute an amount equal to 118%
of the Liquidation Preference with respect to each outstanding share of Series
B Preferred Stock in accordance with and subject to the terms of this Article
IV or (ii) be treated pursuant to Article VI.C(d) hereof. "Person" shall mean
any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.
C. For purposes hereof, the "Liquidation Preference"
with respect to a share of the Series B Preferred Stock shall mean an amount
equal to the sum of (i) the Stated Value thereof, plus (ii) an amount equal to
five percent (5%) per annum of such Stated Value for the period beginning on
the date of issuance of such share and ending on the date of final distribution
to the holder thereof (pro rated for any portion of such period). The
liquidation preference with respect to any Pari Passu Securities shall be as
set forth in the Certificate of designation filed in respect thereof.
V. Redemption
A. If any of the following events (each, a "Mandatory
Redemption Event") shall occur:
(i) The Corporation fails to issue shares of
Common Stock to the holders of Series B Preferred Stock upon exercise by the
holders of their conversion rights in accordance with the terms of this
Certificate of Designation (for a period of at least sixty (60) days if such
failure is solely as a result of the circumstances governed by the second
paragraph of Article VI.F below and the Corporation is using all commercially
reasonable efforts to authorize a sufficient number of shares of Common Stock
as soon as practicable), fails to transfer or to cause its transfer agent to
transfer any certificate for shares of Common Stock
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issued to the holders upon conversion of the Series B Preferred Stock as and
when required by this Certificate of Designation or the Registration Rights
Agreement, dated as of June 20, 1997, by and among the Corporation and the
other signatories thereto (the "Registration Rights Agreement"), fails to
remove any restrictive legend on any certificate or any shares of Common Stock
issued to the holders of Series B Preferred Stock upon conversion of the Series
B Preferred Stock as and when required by this Certificate of Designation, the
Securities Purchase Agreement dated as of June 20, 1997, by and between the
Corporation and the other signatories thereto (the "Purchase Agreement") or the
Registration Rights Agreement, or fails to fulfill its obligations pursuant to
Sections 4(c), 4(e), 4(h), 4(i), 4(j) or 5 of the Purchase Agreement (or makes
any announcement that it does not intend to honor the obligations described in
this paragraph) and any such failure shall continue uncured (or any
announcement not to honor its obligations shall not be rescinded) for ten (10)
business days;
(ii) The Corporation fails to obtain effectiveness
with the Securities and Exchange Commission (the "SEC") of the Registration
Statement (as defined in the Registration Rights Agreement) prior to November
30, 1997 or such Registration Statement lapses in effect (or sales otherwise
cannot be made thereunder, whether by reason of the Company's failure to amend
or supplement the prospectus included therein in accordance with the
Registration Rights Agreement or otherwise) (a "Sale Restriction Day") for more
than thirty (30) consecutive days or sixty (60) days in any twelve (12) month
period after such Registration Statement becomes effective; provided, however,
that the Automatic Conversion Date set forth in Article VII hereof shall be
extended by the number of Sale Restriction Days which exceed a total of thirty
(30) days;
(iii) The Corporation shall make an assignment for
the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for all or substantially all of its property or
business; or such a receiver or trustee shall otherwise be appointed;
(iv) Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy
law or any law for the relief of debtors shall be instituted by or against the
Corporation or any subsidiary of the Corporation;
(v) The Corporation shall fail to maintain the
listing of the Common Stock on the Nasdaq National Market ("Nasdaq"), the
Nasdaq SmallCap Market, the New York Stock Exchange or the American Stock
Exchange and such failure shall remain uncured for at least thirty (30) days,
then, upon the occurrence and during the continuation of any Mandatory
Redemption Event specified in subparagraphs (i), (ii) or (v) at the option of
the holders of at least 50% of the then outstanding shares of Series B
Preferred Stock by written notice (the "Mandatory Redemption Notice") to the
Corporation of such Mandatory Redemption Event, or upon the occurrence of any
Mandatory Redemption Event specified in subparagraphs (iii) or (iv), the
Corporation shall purchase each holder's shares of Series B Preferred Stock for
an amount per share equal to the greater of (1) 118% multiplied by the sum of
(a) the Stated Value of the shares to be redeemed,
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plus (b) an amount equal to five percent (5%) per annum of such Stated Value
for the period beginning on the issuance of such shares and ending on the date
of payment of the Mandatory Redemption Amount (the "Mandatory Redemption Date")
and (2) the "parity value" of the shares to be redeemed, where parity value
means the product of (a) the number of shares of Common Stock issuable upon
conversion of such shares in accordance with Article VI below (treating the
Trading Day immediately preceding the Mandatory Redemption Date as the
"Conversion Date" (as hereinafter defined) and assuming that the Applicable
Percentage (as defined in Article VI.B.) is 85%), multiplied by (b) the closing
sale price for the Common Stock on the principal trading market for such shares
on such "Conversion Date" (the greater of such amounts being referred to as the
"Mandatory Redemption Amount").
In the case of a Mandatory Redemption Event, if the
Corporation fails to pay the Mandatory Redemption Amount for each share within
five (5) business days of written notice that such amount is due and payable,
then (assuming there are sufficient authorized shares) in addition to all other
available remedies, each holder of Series B Preferred Stock shall have the
right at any time, so long as the Mandatory Redemption Event continues, to
require the Corporation, upon written notice, to immediately issue (in
accordance with and subject to the terms of Article VI below), in lieu of the
Mandatory Redemption Amount, with respect to each outstanding share of Series B
Preferred Stock held by such holder, the number of shares of Common Stock of
the Corporation equal to the Mandatory Redemption Amount divided by the
Conversion Price then in effect.
B. If the Series B Preferred Stock ceases to be
convertible as a result of the limitations described in the second paragraph of
Article VI.A below (a "19.99% Redemption Event"), and the Corporation has not
prior to, or within thirty (30) days of, the date that such 19.99% Redemption
Event arises, (i) obtained approval of the issuance of the Conversion Shares by
the requisite vote of the holders of the then-outstanding Common Stock (not
including any shares of Common Stock held by present or former holders of
Series B Preferred Stock that were issued upon conversion of Series B Preferred
Stock) or (ii) received other permission pursuant to Nasdaq Requirement 4460(i)
allowing the Corporation to resume issuances of shares of Common Stock upon
conversion of Series B Preferred Stock, then the Corporation shall be obligated
to redeem immediately all of the then outstanding Series B Preferred Stock, in
accordance with this Article V.B. An irrevocable Redemption Notice shall be
delivered promptly to the holders of Series B Preferred Stock at their
registered address appearing on the records of the Corporation and shall state
(1) that 19.99% of the Outstanding Common Amount (as defined in Article VI.A
below) has been issued upon exercise of the Series B Preferred Stock, (2) that
the Corporation is obligated to redeem all of the outstanding Series B
Preferred Stock and (3) the Mandatory Redemption Date, which shall be a date
within five (5) business days of the date of the Redemption Notice. On the
Mandatory Redemption Date, the Corporation shall make payment of the Mandatory
Redemption Amount (as defined in Article V.A. above) in cash.
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VI. Conversion at the Option of the Holder
A. Each holder of shares of Series B Preferred Stock
may, at its option at any time and from time to time after the date of issuance
thereof, upon surrender of the certificates therefor, convert any or all of its
shares of Series B Preferred Stock into Common Stock as follows (an "Optional
Conversion"). Each share of Series B Preferred Stock shall be convertible into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing (1) the sum of (a) the Stated Value thereof, plus, (b)
the Premium Amount (as defined below), by (2) the then effective Conversion
Price (as defined below); provided, however, that, unless the Holder delivers a
waiver in accordance with the immediately following sentence, in no event shall
a holder of shares of Series B Preferred Stock be entitled to convert any such
shares in excess of that number of shares upon conversion of which the sum of
(x) the number of shares of Common Stock beneficially owned by the holder and
its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of the
shares of Series B Preferred Stock) and (y) the number of shares of Common
Stock issuable upon the conversion of the shares of Series B Preferred Stock
with respect to which the determination of this proviso is being made, would
result in beneficial ownership by a holder and such holder's affiliates of more
than 4.9% of the outstanding shares of Common Stock. For purposes of the
proviso to the immediately preceding sentence, (i) beneficial ownership shall
be determined in accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended, and Regulation 13D-G thereunder, except as otherwise
provided in clause (x) of such proviso and (ii) a holder may waive the
limitations set forth therein by written notice to the Corporation upon not
less than sixty-one (61) days prior written notice (with such waiver taking
effect only upon the expiration of such sixty-one (61) day notice period). The
"Premium Amount" means the product of the Stated Value, multiplied by .05,
multiplied by (N/365), where "N" equals the number of days elapsed from the
date of issuance of the Series B Preferred Stock to and including the
Conversion Date (as defined in Article VI.B. below).
Notwithstanding anything to the contrary contained herein, if,
at any time, the aggregate number of shares of Common Stock then issued upon
conversion of the Series B Preferred Stock equals 19.99% of the "Outstanding
Common Amount" (as hereinafter defined), the Series B Preferred Stock shall,
from that time forward, cease to be convertible into Common Stock in accordance
with the terms of this Article VI and Article VII below, unless the Corporation
(i) has obtained approval of the issuance of the Series B Preferred Stock by a
majority of the total votes cast on such proposal, in person or by proxy, by
the holders of the then-outstanding Common Stock (not including any shares of
Common Stock held by present or former holders of Series B Preferred Stock that
were issued upon conversion of Series B Preferred Stock), or (ii) shall have
otherwise obtained permission to allow such issuances from Nasdaq in accordance
with Nasdaq Requirement 4460(i). For purposes of this paragraph, "Outstanding
Common Amount" means (i) the number of shares of the Common Stock outstanding
on the date of issuance of the Series B Preferred Stock pursuant to the
Purchase Agreement plus (ii) any additional shares of Common Stock issued
thereafter in respect of such shares pursuant to a stock dividend, stock split
or similar event. The maximum number of shares of Common Stock issuable as a
result of the 19.99% limitation set forth herein is
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hereinafter referred to as the "Maximum Share Amount." With respect to each
holder of Series B Preferred Stock, the Maximum Share Amount shall refer to
such holder's pro rata share thereof determined in accordance with Article X
below. In the event that Corporation obtains Stockholder Approval, the
approval of The Nasdaq Stock Market or otherwise concludes that it is able to
increase the number of shares to be issued above the Maximum Share Amount (such
increased number being the "New Maximum Share Amount"), the references to
Maximum Share Amount, above, shall be deemed to be, instead, references to the
greater New Maximum Share Amount. In the event that Stockholder Approval is
not obtained or a registration statement covering the additional shares of
Common Stock which constitute the New Maximum Share Amount is not effective
prior to the Maximum Share Amount being issued (if such registration statement
is necessary to allow for the public resale of such securities), the Maximum
Share Amount shall remain unchanged; provided, however, that the Holder may
grant an extension of the effective date of such registration statement. In
the event that (a) the aggregate number of shares of Common Stock issued
pursuant to the outstanding Series B Preferred Stock represents at least thirty
percent (30%) of the Maximum Share Amount and (b) the sum of (x) the aggregate
number of shares of Common Stock issued upon conversion of Series B Preferred
Stock plus (y) the aggregate number of shares of Common Stock that remain
issuable upon conversion of Series B Preferred Stock, represents at least one
hundred percent (100%) of the Maximum Share Amount (the "Triggering Event"),
the Corporation will use its best efforts to seek and obtain Stockholder
Approval (or obtain such other relief as will allow conversions hereunder in
excess of the Maximum Share Amount) as soon as practicable following the
Triggering Event and before the Maximum Conversion Date.
B. (a) Subject to subparagraph (b) below, the
"Conversion Price" shall be the lesser of (i) The Variable Conversion Price (as
defined herein) and (ii) the Fixed Conversion Price (in each case, subject to
adjustments pursuant to the provisions of Article VI.C below). The "Variable
Conversion Price" shall mean the Applicable Percentage (as defined herein)
multiplied by the Market Price (as defined herein). "Market Price" shall mean
the average of the daily low sale prices of the Common Stock on Nasdaq, or on
the principal securities exchange or other securities market on which the
Common Stock is then being traded (in each case, as reported by Bloomberg, L.P.
("Bloomberg")), for the five (5) consecutive Trading Days (as defined herein)
ending two (2) Trading Days prior to the date (the "Conversion Date") the
Conversion Notice is sent by a holder to the Corporation via facsimile.
"Trading Day" shall mean any day on which the Common Stock is traded for any
period on Nasdaq, or on the principal securities exchange or other securities
market on which the Common Stock is then being traded. "Applicable Percentage"
shall mean (i) 85%, with respect to any Conversion Date on which the closing
sale price of the Common Stock on Nasdaq, or on the principal securities
exchange or other securities market on which the Common Stock is then traded,
as reported by Bloomberg (the "Closing Price") equals or exceeds the Floor
Price (as defined herein) and (ii) 100%, with respect to any Conversion Date on
which the Closing Price is less than the Floor Price; provided, however, that
if the Closing Price of the Common Stock is less than the Floor Price for any
thirty (30) consecutive Trading Days and the Corporation elects to reset the
Applicable Percentage in accordance with Article VI.C(a) below, with respect to
any Conversion Date thereafter on which the Closing Price is less than the
Floor Price, the Applicable Percentage shall be 92% in lieu of 100%. The
"Fixed Conversion Price" shall mean $8.050,
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or the price described in clause (i) of Article VI.C(a) if the Corporation
makes the election described therein. The "Floor Price" shall mean the lesser
of (i) $4.00 and (ii) the average closing sale price of the Common Stock for
the five (5) Trading Days preceding the effective date of the Registration
Statement to be filed pursuant to the Registration Rights Agreement.
(b) Notwithstanding anything contained in
subparagraph (a) of this Paragraph B to the contrary, in the event the
Corporation (i) makes a public announcement that it intends to consolidate or
merge with any other corporation (other than a merger in which the Corporation
is the surviving or continuing corporation and its capital stock is unchanged)
or sell or transfer all or substantially all of the assets of the Corporation
or (ii) any person, group or entity (including the Corporation) publicly
announces a tender offer to purchase 50% or more of the Corporation's Common
Stock (the date of the announcement referred to in clause (i) or (ii) is
hereinafter referred to as the "Announcement Date"), then the Conversion Price
shall, effective upon the Announcement Date and continuing through the Adjusted
Conversion Price Termination Date (as defined below), be equal to the lower of
(x) the Conversion Price which would have been applicable for an Optional
Conversion occurring on the Announcement Date and (y) the Conversion Price that
would otherwise be in effect. From and after the Adjusted Conversion Price
Termination Date, the Conversion Price shall be determined as set forth in
subparagraph (a) of this Article VI.B. For purposes hereof, "Adjusted
Conversion Price Termination Date" shall mean, with respect to any proposed
transaction or tender offer for which a public announcement as contemplated by
this subparagraph (b) has been made, the date upon which the Corporation (in
the case of clause (i) above) or the person, group or entity (in the case of
clause (ii) above) publicly announces the termination or abandonment of the
proposed transaction or tender offer which caused this subparagraph (b) to
become operative.
C. The Conversion Price shall be subject to adjustment
from time to time as follows:
(a) Reset of Original Fixed Conversion Price or
Applicable Percentage. In the event that the closing bid price of the Common
Stock on Nasdaq or on the principal securities exchange on which the Common
Stock is traded is below $4.00 for any thirty (30) consecutive Trading Days,
the Corporation shall either (i) reset the Fixed Conversion Price to 100% of
the average closing bid price of such thirty (30) day period or (ii) reset the
percentage referred to in the forepart of clause (ii) of the definition of
Applicable Percentage from 100% to 92%. The Corporation shall notify the
holders of Series C Preferred Stock (in writing on the Trading Day next
following the thirty (30) consecutive Trading Day period giving rise to the
Corporation's obligations hereunder) of its election to reset the Fixed
Conversion Price or the Applicable Percentage as provided above, and the choice
of which to reset shall be the Corporation's. The reset shall be effective
upon the first Trading Day following the thirty (30) consecutive Trading Day
period giving rise thereto.
(b) Adjustment to Fixed Conversion Price Due to
Stock Split, Stock Dividend, Etc. If at any time when the Series B Preferred
Stock is issued and outstanding, the number of outstanding shares of Common
Stock is increased by a stock split, stock dividend, combination,
reclassification, below-Market Price rights offering to all holders of Common
Stock
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or other similar event, the Fixed Conversion Price shall be proportionately
reduced, or if the number of outstanding shares of Common Stock is decreased by
a reverse stock split, combination or reclassification of shares, or other
similar event, the Fixed Conversion Price shall be proportionately increased.
In such event, the Corporation shall notify its transfer agent ("Transfer
Agent") of such change on or before the effective date thereof.
(c) Adjustment to Variable Conversion Price. If
at any time when Series B Preferred Stock is issued and outstanding, the number
of outstanding shares of Common Stock is increased or decreased by a stock
split, stock dividend, combination, reclassification, below-Market Price rights
offering to all holders of Common Stock or other similar event, which event
shall have taken place during the reference period for determination of the
Conversion Price for any Optional Conversion or Automatic Conversion of the
Series B Preferred Stock, then the Variable Conversion Price shall be
calculated giving appropriate effect to the stock split, stock dividend,
combination, reclassification or other similar event for all five (5) Trading
Days immediately preceding the Conversion Date. In such event, the Corporation
shall notify the Transfer Agent of such change on or before the effective date
thereof.
(d) Adjustment Due to Merger, Consolidation, Etc.
If, at any time when Series B Preferred Stock is issued and outstanding and
prior to the conversion of all Series B Preferred Stock, there shall be any
merger, consolidation, exchange of shares, recapitalization, reorganization, or
other similar event, as a result of which shares of Common Stock of the
Corporation shall be changed into the same or a different number of shares of
another class or classes of stock or securities of the Corporation or another
entity, or in case of any sale or conveyance of all or substantially all of the
assets of the Corporation other than in connection with a plan of complete
liquidation of the Corporation, then the holders of Series B Preferred Stock
shall thereafter have the right to receive upon conversion of the Series B
Preferred Stock, upon the bases and upon the terms and conditions specified
herein and in lieu of the shares of Common Stock immediately theretofore
issuable upon conversion, such stock, securities or assets which the holders of
Series B Preferred Stock would have been entitled to receive in such
transaction had the Series B Preferred Stock been converted in full (without
regard to any limitations on conversion contained herein) immediately prior to
such transaction, and in any such case appropriate provisions shall be made
with respect to the rights and interests of the holders of Series B Preferred
Stock to the end that the provisions hereof (including, without limitation,
provisions for adjustment of the Conversion Price and of the number of shares
of Common Stock issuable upon conversion of the Series B Preferred Stock) shall
thereafter be applicable, as nearly as may be practicable in relation to any
securities or assets thereafter deliverable upon the conversion of Series B
Preferred Stock. The Corporation shall not effect any transaction described in
this subsection (d) unless (a) it first gives, to the extent practical, thirty
(30) days' prior written notice (but in any event at least fifteen (15)
business days prior written notice) of such merger, consolidation, exchange of
shares, recapitalization, reorganization or other similar event or sale of
assets (during which time the holders of Series B Preferred Stock shall be
entitled to convert the Series B Preferred Stock) and (b) the resulting
successor or acquiring entity (if not the Corporation) assumes by written
instrument the obligations of this subsection (d). The above provisions shall
similarly apply to successive consolidations, mergers, sales, transfers or
share exchanges.
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(e) Other Securities Offerings. If, at any time
during the period ending six (6) months after the original date of issuance of
the Series B Preferred Stock, the Corporation sells Common Stock or securities
or options convertible into, exercisable for, or exchangeable for, Common
Stock, other than a sale pursuant to a bona fide registered public offering of
Common Stock by the Corporation (not including a continuous offering pursuant
to Rule 415 under the Securities Act of 1933, as amended), other than shares or
options issued pursuant to the Corporation's employee, director or consultant
stock option plans and other than sales of shares to underwriters, then, if the
effective or maximum sales price of the Common Stock with respect to such
transaction (including the effective or maximum conversion, exercise or
exchange price) ("Other Price") is less than the effective conversion price of
the Series B Preferred Stock at such time (including, in each case, any
discount attributable to the value of warrants issued to the holders of Series
B Preferred Stock and to the holders of such other shares or options giving
rise to the Other Price), the Corporation shall adjust the conversion price
applicable to the Series B Preferred Stock not yet converted in form and
substance reasonably satisfactory to the holders of Series B Preferred Stock so
that the conversion price applicable to the Series B Preferred Stock shall not,
in any event, be greater, after giving effect to all other adjustments
contained herein, than the Other Price. For purposes of determining the
discount of any warrants issued by the Corporation during the period specified
above, such warrants shall be valued based upon the Black Scholes valuation
model where the interest rate used will be the one-year government bond yield
and volatility figure used will be 40%. This paragraph shall not apply to a
financing transaction consisting of (i) the sale of Common Stock at a price at
or above the closing price of the Common Stock as of the Trading Day
immediately preceding the date of issuance (taking into account the value of
any warrants issued in connection therewith) or (ii) a private placement of the
Corporation's securities in connection with a strategic alliance, or as
consideration for a merger or acquisition. For this purpose, a strategic
alliance shall mean a transaction in which the acquiror of the Corporation's
securities has a prospective or existing business relationship material to the
Corporation with the Corporation independent of such acquiror's acquisition of
the Corporation's securities.
(f) Adjustment Due to Distribution. Subject to
Article III, if the Corporation shall declare or make any distribution of its
assets (or rights to acquire its assets) to holders of Common Stock as a
dividend, stock repurchase, by way of return of capital or otherwise (including
any dividend or distribution to the Corporation's shareholders in cash or
shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a "Distribution"), then the holders of Series B Preferred Stock
shall be entitled, upon any conversion of shares of Series B Preferred Stock
after the date of record for determining shareholders entitled to such
Distribution, to receive the amount of such assets which would have been
payable to the holder with respect to the shares of Common Stock issuable upon
such conversion had such holder been the holder of such shares of Common Stock
on the record date for the determination of shareholders entitled to such
Distribution.
(g) Purchase Rights. Subject to Article III, if
at any time when any Series B Preferred Stock is issued and outstanding, the
Corporation issues any convertible securities or rights to purchase stock,
warrants, securities or other property (the "Purchase Rights") pro rata to the
record holders of any class of Common Stock, then the holders of Series B
Preferred Stock will be entitled to acquire, upon the terms applicable to such
Purchase Rights,
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the aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Common Stock acquirable upon complete
conversion of the Series B Preferred Stock (without regard to any limitations
on conversion contained herein) immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no
such record is taken, the date as of which the record holders of Common Stock
are to be determined for the grant, issue or sale of such Purchase Rights.
(h) Notice of Adjustments. Upon the occurrence
of each adjustment or readjustment of the Conversion Price pursuant to this
Article VI.C, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment and prepare and furnish to each holder of Series B
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is
based. The Corporation shall, upon the written request at any time of any
holder of Series B Preferred Stock, furnish to such holder a like certificate
setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at
the time in effect and (iii) the number of shares of Common Stock and the
amount, if any, of other securities or property which at the time would be
received upon conversion of a share of Series B Preferred Stock.
D. For purposes of Article VI.C(b) and (c) above,
"Market Price," which shall be measured as of the record date in respect of the
rights offering means (i) the average of the last reported sale prices for the
shares of Common Stock on Nasdaq as reported by Bloomberg, as applicable, for
the twenty (20) Trading Days immediately preceding such date, or (ii) if Nasdaq
is not the principal trading market for the shares of Common Stock, the average
of the last reported sale prices on the principal trading market for the Common
Stock during the same period as reported by Bloomberg, or (iii) if market value
cannot be calculated as of such date on any of the foregoing bases, the Market
Price shall be the fair market value as reasonably determined in good faith by
(a) the Board of Directors of the Corporation or, (b) at the option of a
majority-in-interest of the holders of the outstanding Series B Preferred Stock
by an independent investment bank of nationally recognized standing in the
valuation of businesses similar to the business of the Corporation.
E. In order to convert Series B Preferred Stock into
full shares of Common Stock, a holder of Series B Preferred Stock shall: (i)
submit a copy of the fully executed notice of conversion in the form attached
hereto as Exhibit A ("Notice of Conversion") to the Corporation by facsimile
dispatched on the Conversion Date (or by other means resulting in notice to the
Corporation on the Conversion Date) at the office of the Corporation or its
designated Transfer Agent for the Series B Preferred Stock that the holder
elects to convert the same, which notice shall specify the number of shares of
Series B Preferred Stock to be converted, the applicable Conversion Price and a
calculation of the number of shares of Common Stock issuable upon such
conversion (together with a copy of the first page of each certificate to be
converted) prior to Midnight, New York City time (the "Conversion Notice
Deadline") on the date of conversion specified on the Notice of Conversion; and
(ii) surrender the original certificates representing the Series B Preferred
Stock being converted (the "Preferred Stock Certificates"), duly endorsed,
along with a copy of the Notice of Conversion to the office of the Corporation
or the Transfer Agent for the Series B Preferred Stock as soon as practicable
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thereafter. The Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion, unless
either the Preferred Stock Certificates are delivered to the Company or its
Transfer Agent as provided above, or the holder notifies the Corporation or its
Transfer Agent that such certificates have been lost, stolen or destroyed
(subject to the requirements of subparagraph (a) below). In the case of a
dispute as to the calculation of the Conversion Price, the Corporation shall
promptly issue such number of shares of Common Stock that are not disputed in
accordance with subparagraph (b) below. The Corporation shall submit the
disputed calculations to its outside accountant via facsimile within two (2)
business days of receipt of the Notice of Conversion. The accountant shall
audit the calculations and notify the Corporation and the holder of the results
no later than 48 hours from the time it receives the disputed calculations.
The accountant's calculation shall be deemed conclusive absent manifest error.
(a) Lost or Stolen Certificates. Upon receipt by
the Corporation of evidence of the loss, theft, destruction or mutilation of
any Preferred Stock Certificates representing shares of Series B Preferred
Stock, and (in the case of loss, theft or destruction) of indemnity reasonably
satisfactory to the Corporation, and upon surrender and cancellation of the
Preferred Stock Certificate(s), if mutilated, the Corporation shall execute and
deliver new Preferred Stock Certificate(s) of like tenor and date.
(b) Delivery of Common Stock Upon Conversion.
Upon the surrender of certificates as described above together with a Notice of
Conversion, the Corporation shall issue and, within two (2) business days after
such surrender (or, in the case of lost, stolen or destroyed certificates,
after provision of agreement and indemnification pursuant to subparagraph (a)
above) (the "Delivery Period"), deliver (or cause its Transfer Agent to so
issue and deliver) to or upon the order of the holder (i) that number of shares
of Common Stock for the portion of the shares of Series B Preferred Stock
converted as shall be determined in accordance herewith and (ii) a certificate
representing the balance of the shares of Series B Preferred Stock not
converted, if any. In addition to any other remedies available to the holder,
including actual damages and/or equitable relief, the Corporation shall pay to
a holder $500 per day in cash for each day beyond the two (2) day grace period
following the Delivery Period that the Corporation fails to deliver Common
Stock issuable upon surrender of shares of Series B Preferred Stock with a
Notice of Conversion until such time as the Corporation has delivered all such
Common Stock. Such cash amount shall be paid to such holder by the fifth day
of the month following the month in which it has accrued or, at the option of
the holder (by written notice to the Corporation by the first day of the month
following the month in which it has accrued), shall be convertible into Common
Stock in accordance with the terms of this Article VI.
In lieu of delivering physical certificates representing the
Common Stock issuable upon conversion, provided the Corporation's Transfer
Agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon request of the holder and its
compliance with the provisions contained in Article VI.A. and in this Article
VI.E., the Corporation shall use its best efforts to cause its Transfer Agent
to electronically transmit the Common Stock issuable upon conversion to the
holder by crediting the account of holder's Prime Broker with DTC through its
Deposit Withdrawal Agent
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Commission ("DWAC") system. The time periods for delivery and penalties
described in the immediately preceding paragraph shall apply to the electronic
transmittals described herein.
(c) Cash in Lieu of Fractional Shares. If any
conversion of Series B Preferred Stock would result in a fractional share of
Common Stock or the right to acquire a fractional share of Common Stock, the
Corporation shall pay to the holder of such fractional share, cash in lieu of
such fractional share in an amount equal to such fraction multiplied by the
closing price of the Common Stock on the Conversion Date.
(d) Conversion Date. The "Conversion Date" shall
be the date specified in the Notice of Conversion, provided that the Notice of
Conversion is submitted by facsimile (or by other means resulting in notice) to
the Corporation or its Transfer Agent before Midnight, New York City time, on
the Conversion Date. The person or persons entitled to receive the shares of
Common Stock issuable upon conversion shall be treated for all purposes as the
record holder or holders of such securities as of the Conversion Date and all
rights with respect to the shares of Series B Preferred Stock surrendered shall
forthwith terminate except the right to receive the shares of Common Stock or
other securities or property issuable on such conversion and except that the
holders preferential rights as a holder of Series B Preferred Stock shall
survive to the extent the corporation fails to deliver such securities.
F. A number of shares of the authorized but unissued
Common Stock sufficient to provide for the conversion of the Series B Preferred
Stock outstanding at the then current Conversion Price shall at all times be
reserved by the Corporation, free from preemptive rights, for such conversion
or exercise. As of the date of issuance of the Series B Preferred Stock,
2,354,000 authorized and unissued shares of Common Stock have been duly
reserved for issuance upon conversion of the Series B Preferred Stock (the
"Reserved Amount"). The Reserved Amount shall be increased from time to time
in accordance with the Company's obligations pursuant to Section 4(h) of the
Purchase Agreement. In addition, if the Corporation shall issue any securities
or make any change in its capital structure which would change the number of
shares of Common Stock into which each share of the Series B Preferred Stock
shall be convertible at the then current Conversion Price, the Corporation
shall at the same time also make proper provision so that thereafter there
shall be a sufficient number of shares of Common Stock authorized and reserved,
free from preemptive rights, for conversion of the outstanding Series B
Preferred Stock.
If at any time a holder of shares of Series B Preferred Stock
submits a Notice of Conversion, and the Corporation does not have sufficient
authorized but unissued shares of Common Stock available to effect such
conversion in accordance with the provisions of this Article VI (a "Conversion
Default"), the Corporation shall issue to the holder (or holders, if more than
one holder submits a Notice of Conversion in respect of the same Conversion
Date, pro rata based on the ratio that the number of shares of Series B
Preferred Stock then held by each such holder bears to the aggregate number of
such shares held by such holders) all of the shares of Common Stock which are
available to effect such conversion. The number of shares of Series B
Preferred Stock included in the Notice of Conversion which exceeds the amount
which is then convertible into available shares of Common Stock (the "Excess
Amount") shall,
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notwithstanding anything to the contrary contained herein, not be convertible
into Common Stock in accordance with the terms hereof until (and at the
holder's option at any time after) the date additional shares of Common Stock
are authorized by the Corporation to permit such conversion, at which time the
Conversion Price in respect thereof shall be the lesser of (i) the Conversion
Price on the Conversion Default Date (as defined below) and (ii) the Conversion
Price on the Conversion Date elected by the holder in respect thereof. The
Corporation shall use its best efforts to effect an increase in the authorized
number of shares of Common Stock as soon as possible following a Conversion
Default. In addition, the Corporation shall pay to the holder payments
("Conversion Default Payments") for a Conversion Default in the amount of (a)
(N/365), multiplied by (b) the sum of the Stated Value plus the Premium Amount
per share of Series B Preferred Stock through the Authorization Date (as
defined below), multiplied by (c) the Excess Amount on the day the holder
submits a Notice of Conversion giving rise to a Conversion Default (the
"Conversion Default Date"), multiplied by (d) .24, where (i) N = the number of
days from the Conversion Default Date to the date (the "Authorization Date")
that the Corporation authorizes a sufficient number of shares of Common Stock
to effect conversion of the full number of shares of Series B Preferred Stock.
The Corporation shall send notice to the holder of the authorization of
additional shares of Common Stock, the Authorization Date and the amount of
holder's accrued Conversion Default Payments. The accrued Conversion Default
Payment for each calendar month shall be paid in cash or shall be convertible
into Common Stock at the Conversion Price, at the holder's option, as follows:
(a) In the event the holder elects to take such
payment in cash, cash payment shall be made to holder by the fifth day of the
month following the month in which it has accrued; and
(b) In the event the holder elects to take such
payment in Common Stock, the holder may convert such payment amount into Common
Stock at the Conversion Price (as in effect at the time of Conversion) at any
time after the fifth day of the month following the month in which it has
accrued in accordance with the terms of this Article VI (so long as there is
then a sufficient number of authorized shares).
Nothing herein shall limit the holder's right to pursue actual
damages for the Corporation's failure to maintain a sufficient number of
authorized shares of Common Stock, and each holder shall have the right to
pursue all remedies available at law or in equity (including a decree of
specific performance and/or injunctive relief).
G. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article VI, the
Corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Series B Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series B Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustment or readjustment, (ii) the Conversion Price at the time in effect and
(iii) the number
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of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon conversion of a share of
Series B Preferred Stock.
VII. Automatic Conversion
So long as the Registration Statement is effective and there
is not then a continuing Mandatory Redemption Event, each share of Series B
Preferred Stock issued and outstanding on June 20, 2002, subject to any
adjustment pursuant to Article V.A.(ii) (the "Automatic Conversion Date"),
automatically shall be converted into shares of Common Stock on such date at
the then effective Conversion Price in accordance with, and subject to, the
provisions of Article VI hereof (the "Automatic Conversion"). The Automatic
Conversion Date shall be the Conversion Date for purposes of determining the
Conversion Price and the time within which certificates representing the Common
Stock must be delivered to the holder.
VIII. Voting Rights
The holders of the Series B Preferred Stock have no voting
power whatsoever, except as otherwise provided by the General Corporation Law
of the State of Delaware ("DGCL"), in this Article VIII, and in Article IX
below.
Notwithstanding the above, the Corporation shall provide each
holder of Series B Preferred Stock with prior notification of any meeting of
the shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of
its shareholders for the purpose of determining shareholders who are entitled
to receive payment of any dividend or other distribution, any right to
subscribe for, purchase or otherwise acquire (including by way of merger,
consolidation or recapitalization) any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining shareholders who are entitled to vote in connection with any
proposed sale, lease or conveyance of all or substantially all of the assets of
the Corporation, or any proposed liquidation, dissolution or winding up of the
Corporation, the Corporation shall mail a notice to each holder, at least ten
(10) days prior to the record date specified therein (or thirty (30) days prior
to the consummation of the transaction or event, whichever is earlier), of the
date on which any such record is to be taken for the purpose of such dividend,
distribution, right or other event, and a brief statement regarding the amount
and character of such dividend, distribution, right or other event to the
extent known at such time.
To the extent that under the DGCL the vote of the holders of
the Series B Preferred Stock, voting separately as a class or series as
applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the holders of at least a majority of the shares
of the Series B Preferred Stock represented at a duly held meeting at which a
quorum is present or by written consent of a majority of the shares of Series B
Preferred Stock (except as otherwise may be required under the DGCL) shall
constitute the approval of such action by the class. To the extent that under
the DGCL holders of the Series B Preferred Stock are entitled to vote on a
matter with holders of Common Stock, voting
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together as one class, each share of Series B Preferred Stock shall be entitled
to a number of votes equal to the number of shares of Common Stock into which
it is then convertible using the record date for the taking of such vote of
shareholders as the date as of which the Conversion Price is calculated.
Holders of the Series B Preferred Stock shall be entitled to notice of all
shareholder meetings or written consents (and copies of proxy materials and
other information sent to shareholders) with respect to which they would be
entitled to vote, which notice would be provided pursuant to the Corporation's
bylaws and the DGCL.
IX. Protective Provisions
So long as shares of Series B Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval (by vote or
written consent, as provided by the DGCL) of the holders of at least a majority
of the then outstanding shares of Series B Preferred Stock:
(a) alter or change the rights, preferences or
privileges of the Series B Preferred Stock or any Senior Securities so as to
affect adversely the Series B Preferred Stock;
(b) create any new class or series of capital
stock having a preference over the Series B Preferred Stock as to distribution
of assets upon liquidation, dissolution or winding up of the Corporation (as
previously defined in Article II hereof, "Senior Securities");
(c) create any new class or series of capital
stock ranking pari passu with the Series B Preferred Stock as to distribution
of assets upon liquidation, dissolution or winding up of the Corporation (as
previously defined in Article II hereof, "Pari Passu Securities");
(d) increase the authorized number of shares of
Series B Preferred Stock; or
(e) do any act or thing not authorized or
contemplated by this Certificate of Designation which would result in taxation
of the holders of shares of the Series B 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 a majority of the then
outstanding shares of Series B Preferred Stock agree to allow the Corporation
to alter or change the rights, preferences or privileges of the shares of
Series B Preferred Stock, pursuant to subsection (a) above, so as to affect the
Series B Preferred Stock, then the Corporation will deliver notice of such
approved change to the holders of the Series B 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
pursuant to the terms of this Certificate of Designation as they exist prior to
such alteration or change or continue to hold their shares of Series B
Preferred Stock.
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X. Pro Rata Allocations
The Maximum Share Amount and the Reserved Amount (including
any increases thereto) shall be allocated by the Corporation pro rata among the
holders of Series B Preferred Stock based on the number of shares of Series B
Preferred Stock then held by each holder relative to the total aggregate number
of shares of Series B Preferred Stock then outstanding.
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IN WITNESS WHEREOF, this Certificate of Designation is
executed on behalf of the Corporation this 20th day of June, 1997.
LASER VISION CENTERS, INC.
By: /s/ John J. Klobnak
-------------------------
John J. Klobnak
Chief Executive Officer
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series B Preferred Stock)
The undersigned hereby irrevocably elects to convert ______
shares of Series B Preferred Stock, represented by stock certificate No(s).
__________ (the "Preferred Stock Certificates") into shares of common stock
("Common Stock") of Laser Vision Centers, Inc. (the "Corporation") according
to the conditions of the Certificate of Designation of Series B Preferred
Stock, as of the date written below. If securities are to be issued in the
name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith such
certificates. No fee will be charged to the Holder for any conversion, except
for transfer taxes, if any. A copy of each Preferred Stock Certificate is
attached hereto (or evidence of loss, theft or destruction thereof).
The undersigned represents and warrants that all offers and
sales by the undersigned of the securities issuable to the undersigned upon
conversion of the Series B Preferred Stock shall be made pursuant to
registration of the securities under the Securities Act of 1933, as amended
(the "Act"), or pursuant to an exemption from registration under the Act.
Date of Conversion:___________________________
Applicable Conversion Price:__________________
Number of Shares of
Common Stock to be Issued:____________________
Signature:____________________________________
Name:_________________________________________
Address:______________________________________
*The Corporation is not required to issue shares of Common Stock until the
original Series B Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Corporation or its
Transfer Agent. The Corporation shall issue and deliver shares of Common Stock
to an overnight courier not later than two (2) business days following receipt
of the original Preferred Stock Certificate(s) to be converted, and shall make
payments pursuant to the Certificate of Designation for the number of business
days such issuance and delivery is late.