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EXHIBIT 3.1
CERTIFICATE OF MERGER
OF
DEXTERITY INCORPORATED
INTO LIFEQUEST MEDICAL, INC.
Under Section 251 of the General Corporation Law of the State of
Delaware, LifeQuest Medical, Inc. hereby certifies that:
1. The name and state of incorporation of each of the constituent
corporations are:
a. Dexterity Incorporated, a Delaware corporation.
b. LifeQuest Medical, Inc., a Delaware corporation.
2. An Agreement of Merger has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations in accordance
with the provisions of Section 251 of the General Corporation Law of the State
of Delaware.
3. The name of the surviving corporation is LifeQuest Medical, Inc.
4. The Certificate of Incorporation of LifeQuest Medical, Inc. shall be
amended so that Article 1 of LifeQuest Medical, Inc.'s Certificate of
Incorporation reads in its entirety as follows:
"1. The name of the corporation is Dexterity Surgical, Inc. (the
"Company")."
and, as so amended, such Certificate of Incorporation shall be the Certificate
of Incorporation of the surviving corporation until thereafter changed or
amended as provided therein or by applicable law.
5. The executed Agreement of Merger between the aforesaid constituent
corporations is on file at the principal place of business of the surviving
corporation at 12961 Park Central, Suite 1300, San Antonio, Texas 78216.
6. A copy of the Agreement of Merger will be furnished by the surviving
corporation on request and without cost, to any stockholder of Dexterity
Incorporated.
[signatures on following page]
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IN WITNESS WHEREOF, LifeQuest Medical, Inc. has caused this certificate
to be signed by its Executive Vice President on the ____day of
_________________, 1999.
LIFEQUEST MEDICAL, INC.
By:
-----------------------------------------
Randall K. Boatright
Executive Vice President and
Chief Financial Officer
-2-
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RESTATED
CERTIFICATE OF INCORPORATION
OF
LIFEQUEST MEDICAL, INC.
LifeQuest Medical, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
I. The name of the corporation is LifeQuest Medical, Inc. and the name
under which the corporation was originally incorporated was Lifeline, Inc. The
date of filing of its original Certificate of Incorporation with the Secretary
of State of Delaware is December 23, 1988.
II. Pursuant to Section 245 of the General Corporation Law of the State
of Delaware, this Restated Certificate of Incorporation restates and integrates
and does not further amend the provisions of the Certificate of Incorporation of
this corporation.
III. The text of the Restated Certificate of Incorporation as
heretofore amended and supplemented is hereby restated to read in its entirety
as follows:
1. The name of the corporation is LifeQuest Medical, Inc. (the
"Company").
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted
is: to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4. The total number of shares of all classes of stock which the Company
shall be authorized to issue is 52,000,000 shares, divided into the following:
(i) 2,000,000 shares of preferred stock, of the par value of $.001 (one tenth of
one cent) per share (hereafter called "Preferred Stock"); and (ii) 50,000,000
shares of common stock, of the par value of $.001 (one tenth of one cent) per
share (hereafter called "Common Stock").
The board of directors of the Company shall have the authority to fix
by resolution the designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions of any class or series of capital stock of the Company.
4.1 NUMBER OF SHARES AND DESIGNATION. This series of Preferred Stock,
$.001 par value, shall be designated as Series A Cumulative Convertible
Preferred Stock (the "Series A Preferred Stock"), and the number of shares which
shall constitute such series shall be 1,170 shares.
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4.2 DEFINITIONS. For purposes of the Series A Preferred Stock, the
following terms shall have the meanings indicated below:
"Act" shall mean the Securities Act of 1933, as amended.
"Affiliate" of a person means a person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is
under common control with, the person specified.
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Series A
Preferred Stock.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New
York, New York are not required to be open.
"Common Stock" shall mean the common stock, $.001 par value, of the
Corporation or such shares of the Corporation's capital stock into
which such Common Stock shall be reclassified.
"Current Market Price" of publicly traded shares of Common Stock or any
other class or series of capital stock or other security of the
Corporation or of any similar security of any other issuer for any day
shall mean the last reported sale price, regular way on such day, or,
if no sale takes place on such day, the reported closing bid price,
regular way on such day, in either case as reported on the NASDAQ
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ") or, if not quoted on NASDAQ, on
the principal national securities exchange on which such security is
listed or admitted for trading or, if such security is not listed or
admitted for trading on a national securities exchange or quoted on the
NASDAQ National Market, the closing bid price on such day in the
over-the-counter market as reported by NASDAQ, or, if the bid price for
such security on such day shall not have been reported through NASDAQ,
the bid price on such day as furnished by any NYSE member firm
regularly making a market in such security selected for such purpose by
the Chief Executive Officer or the Board of Directors or if any class
or series of securities are not publicly traded, the fair value of the
shares of such class as determined reasonably and in good faith by the
Board of Directors of the Corporation or other issuer.
"Dividend Payment Date" shall mean, with respect to each Dividend
Period, the last day of March, June, September and December, in each
year, commencing on September 30, 1998; provided, however, that if any
Dividend Payment Date falls on any day other than a Business Day, the
dividend payment due on such Dividend Payment Date shall be paid on the
Business Day immediately following such Dividend Payment Date.
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"Dividend Periods" shall mean quarterly dividend periods commencing on
January 1, April 1, July 1 and October 1 of each year and ending on and
including the day preceding the first day of the next succeeding
Dividend Period (other than the initial Dividend Period, which shall
commence on the Issue Date and end on and include September 30, 1998).
"Fair Market Value" on any date shall mean the average of the daily
Current Market Price of a share of Common Stock during five (5)
consecutive Trading Days ending on the day before such date.
"Funds Available for Distribution" shall mean funds from operations
(net income, computed in accordance with generally accepted accounting
principles, excluding gains or losses from debt restructuring and sales
of property, plus depreciation and amortization) minus non-revenue
generated capital expenditures and debt principal amortization, as
determined by the Board of Directors on a basis consistent with the
policies and practices adopted by the Corporation for reporting
publicly its results of operations and financial condition.
"Issue Date" shall mean August 11, 1998.
"Junior Stock" shall have the meaning set forth in paragraph (c) of
Section 8 hereof.
"NYSE" shall mean the New York Stock Exchange.
"Parity Stock" shall have the meaning set forth in paragraph (b) of
Section 8 hereof.
"Permitted Common Stock Cash Distributions" means cash dividends and
cash distributions paid on Common Stock after December 31, 1997 not in
excess of the sum of the Corporation's cumulative undistributed net
earnings at December 31, 1997, plus the cumulative amount of Funds
Available for Distribution after December 31, 1997, minus the
cumulative amount of dividends accumulated, accrued or paid on the
Series A Preferred Stock or any other class of Preferred Stock after
January 1, 1998.
"Person" shall mean any individual, partnership, corporation or other
entity and shall include the successor (by merger or otherwise) of such
entity.
"Redemption Date" shall have the meaning set forth in paragraph (b) of
Section 6 hereof.
"Series A Preferred Stock" shall have the meaning set forth in Section
1 hereof.
"Set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which
indicates, pursuant to a declaration of dividends or other distribution
by the Board of Directors, the allocation of funds to be so paid on any
series or class of capital stock of the Corporation; provided, however,
that if any funds for any class
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or series of Junior Stock or any class or series of Parity Stock are
placed in a separate account of the Corporation or delivered to a
disbursing, paying or other similar agent, then "set apart for payment"
with respect to the Series A Preferred Stock shall mean placing such
funds in a separate account or delivering such funds to a disbursing,
paying or other similar agent.
"Trading Day," as to any securities, shall mean any day on which such
securities are traded on the NYSE or, if such securities are not listed
or admitted for trading on the NYSE, on the principal national
securities exchange on which such securities are listed or admitted or,
if such securities are not listed or admitted for trading on any
national securities exchange, on the NASDAQ National Market or, if such
securities are not quoted on the NASDAQ National Market, in the
securities market in which such securities are traded.
4.3 DIVIDENDS.
(a) The holders of Series A Preferred Stock shall be entitled
to receive, when and as declared by the Board of Directors out of funds legally
available for that purpose, cumulative dividends payable in cash in an amount
per share of Series A Preferred Stock equal to $80 per annum. Such dividends
shall be cumulative from the Issue Date, whether or not in any Dividend Period
or Periods such dividends shall be declared or there shall be funds of the
Corporation legally available for the payment of such dividends, and shall be
payable quarterly on the Dividend Payment Dates, commencing on the first
Dividend Payment Date after the Issue Date. Each such dividend shall be payable
to the holders of record of the Series A Preferred Stock, as they appear on the
stock records of the Corporation at the close of business on a record date which
shall be not more than sixty (60) days prior to the applicable Dividend Payment
Date. Accumulated, accrued and unpaid dividends for any past Dividend Periods
may be declared and paid at any time, without reference to any regular Dividend
Payment Date, to holders of record on such date, which date shall not precede by
more than forty-five (45) days the payment date thereof, as may be fixed by the
Board of Directors. The amount of accumulated, accrued and unpaid dividends on
any share of Series A Preferred Stock, or fraction thereof, at any date shall be
the amount of any dividends thereon calculated at the applicable rate to and
including such date, whether or not earned or declared, which have not been paid
in cash.
(b) The amount of dividends payable per share of Series A
Preferred Stock for each Dividend Period shall be computed by dividing the
annual dividend by four (4). The amount of dividends payable per share of Series
A Preferred Stock for the initial Dividend Period, or any other period shorter
or longer than a full Dividend Period, shall be computed ratably on the basis of
twelve (12) 30-day months and a 360-day year. Holders of Series A Preferred
Stock shall not be entitled to any dividends, whether payable in cash, property
or stock, in excess of cumulative dividends, as herein provided on the Series A
Preferred Stock. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series A Preferred
Stock that may be in arrears.
(c) So long as any of the shares of Series A Preferred Stock
are outstanding, no dividends, except as described in the immediately following
sentence, shall be declared or paid or set
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apart for payment by the Corporation, or other distribution of cash or other
property declared or made directly or indirectly by the Corporation or any
affiliate or any person acting on behalf of the Corporation or any of its
affiliates with respect to any class or series of Parity Stock for any period,
unless dividends equal to the full amount of accumulated, accrued and unpaid
dividends have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof have been or contemporaneously are set
apart for such payment on the Series A Preferred Stock for all Dividend Periods
terminating on or prior to the Dividend Payment Date with respect to such class
or series of Parity Stock. When dividends are not paid in full or a sum
sufficient for such payment is not set apart, as aforesaid, all dividends
declared upon the Series A Preferred Stock and all dividends declared upon any
other class or series of Parity Stock shall be declared ratably in proportion to
the respective amounts of dividends accumulated, accrued and unpaid on the
Series A Preferred Stock and accumulated, accrued and unpaid on such Parity
Stock.
(d) So long as any of the shares of Series A Preferred Stock
are outstanding, no dividends (other than dividends or distributions paid in
shares of, or options, warrants or rights to subscribe for or purchase shares
of, Junior Stock) shall be declared or paid or set apart for payment by the
Corporation, or other distribution of cash or other property declared or made
directly or indirectly by the Corporation or any affiliate or any person acting
on behalf of the Corporation or any of its affiliates with respect to any shares
of Junior Stock, nor shall any shares of Junior Stock be redeemed, purchased or
otherwise acquired (other than a redemption, purchase or other acquisition of
Common Stock made for purposes of an employee incentive or benefit plan of the
Corporation or any subsidiary) for any consideration (or any moneys be paid to
or made available for a sinking-fund for the redemption of any shares of any
such stock) directly or indirectly by the Corporation or any affiliate or any
person acting on behalf of the Corporation or any of its affiliates (except by
conversion into or exchange for Junior Stock), nor shall any other cash or other
property otherwise be paid or distributed to or for the benefit of any holder of
shares of Junior Stock in respect thereof, directly or indirectly, by the
Corporation or any affiliate or any person acting on behalf of the Corporation
or any of its affiliates, unless in each case (i) the full cumulative dividends
(including all accumulated, accrued and unpaid dividends) on all outstanding
shares of Series A Preferred Stock and any other Parity Stock of the Corporation
shall have been paid or such dividends have been declared and set apart for
payment for all past Dividend Periods with respect to the Series A Preferred
Stock and all past Dividend Periods with respect to such Parity Stock, and (ii)
sufficient funds shall have been paid or set apart for the payment of the full
dividend for the current Dividend Period with respect to the Series A Preferred
Stock and the current Dividend Period with respect to such Parity Stock.
4.4 LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, before any payment or
distribution of the assets of the Corporation (whether capital or surplus) shall
be made to or set apart for the holders of Junior Stock, the holders of shares
of Series A Preferred Stock shall be entitled to receive One Thousand Dollars
($1,000.00) per share of Series A Preferred Stock, plus an amount equal to all
dividends (whether or not earned
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or declared) accumulated, accrued and unpaid thereon to the date of final
distribution to such holders. Until the holders of the Series A Preferred Stock
have been paid the liquidation preference in full, no payment will be made to
any holder of Junior Stock upon the liquidation, dissolution or winding up of
the Corporation. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof, distributable
among the holders of Series A Preferred Stock shall be insufficient to pay in
full the preferential amount aforesaid and liquidating payments on any other
shares of any class or series of Parity Stock, then such assets, or the proceeds
thereof, shall be distributed among the holders of Series A Preferred Stock and
any such other Parity Stock ratably in the same proportion as the respective
amounts that would be payable on such Series A Preferred Stock and any such
other Parity Stock if all amounts payable thereon were paid in full. For the
purposes of this Section 4, (i) a consolidation or merger of the Corporation
with one or more corporations, (ii) a sale or transfer of all or substantially
all of the Corporation's assets, or (iii) a statutory share exchange shall not
be deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, of the Corporation.
(b) Subject to the rights of the holders of any shares of
Parity Stock, upon any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made in full to the holders of Series
A Preferred Stock and any Parity Stock, as provided in this Section 4, any other
series or class or classes of Junior Stock shall, subject to the respective
terms thereof, be entitled to receive any and all assets remaining to be paid or
distributed, and the holders of the Series A Preferred Stock and any Parity
Stock shall not be entitled to share therein.
4.5 CONVERSION RIGHTS. The holders of shares of Series A Preferred
Stock shall have the right, at their option, to convert such shares into shares
of Common Stock of the Corporation at any time on and subject to the following
terms and conditions:
(a) The shares of Series A Preferred Stock shall be
convertible at the office of the transfer agent for the Common Stock or the
principal executive office of the Corporation, into fully paid and
non-assessable shares (calculated as to each conversion to the nearest 1/100th
of a share) of Common Stock of the Corporation, at the conversion price,
determined as hereinafter provided, in effect at the time of conversion, each
share of Series A Preferred Stock being taken at $1,000.00 for the purpose of
such conversion. The price at which shares of Common Stock shall be delivered
upon conversion (the "Conversion Price") shall initially be $2.00 per share of
Common Stock. The conversion price shall be adjusted in certain instances as
provided below.
(b) In order to convert shares of Series A Preferred Stock
into Common Stock, the holder thereof shall surrender at the office or offices
hereinabove mentioned the certificate or certificates therefor, duly endorsed or
assigned to the Corporation or in blank, and give written notice to the
Corporation at said office or offices that such holder elects to convert such
shares. Shares of Series A Preferred Stock surrendered for conversion during the
period from the close of business on any record date for the payment of a
dividend on the shares of Series A Preferred Stock to the opening of business on
the date for payment of such dividend shall (except in the case of shares of
Series A Preferred Stock which have been called for redemption on a redemption
date within such
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period) be accompanied by a payment of an amount equal to the dividend declared
and payable on such dividend payment date on the shares of Series A Preferred
Stock being surrendered for conversion. Except as provided in the preceding
sentence, no payment or adjustment shall be made upon any conversion on account
of any unpaid or accrued dividends on the shares of Series A Preferred Stock
surrendered for conversion or on account of any dividends on the Common Stock
issued upon conversion.
Shares of Series A Preferred Stock shall be deemed to have
been converted immediately prior to the close of business on the day of the
surrender of the certificates for such shares for conversion in accordance with
the foregoing provisions, and the person or persons entitled to receive the
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such Common Stock at such time. As promptly as
practicable on or after the conversion date, the Corporation shall issue and
shall deliver at such office a certificate or certificates for the number of
full shares of Common Stock issuable upon such conversion, together with payment
in lieu of any fraction of a share, as hereinafter provided, to the person or
persons entitled to receive the same. In case shares of Series A Preferred Stock
are called for redemption, the right to convert such shares shall cease and
terminate at the close of business on the date fixed for redemption, unless
default shall be made in payment of the redemption price.
(c) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series A Preferred Stock, but, instead of any fraction
of a share which would otherwise be issuable, the Corporation shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
of the Closing Price (as hereinafter defined) on the date on which the
certificate or certificates for such shares were duly surrendered for
conversion, or, if such date is not a Trading Day (as hereinafter defined), on
the next Trading Day.
(d) The Conversion Price shall be adjusted from time to time
as follows:
(i) Adjustment for Issuance of Shares at Less Than
the Conversion Price. If at any time after the date of the first
issuance of Series A Preferred Stock, the Corporation shall issue any
shares of Common Stock, Convertible Securities (as hereinafter
defined), Rights (as hereinafter defined) or Related Rights (as
hereinafter defined; any such shares, Convertible Securities, Rights or
Related Rights, "Securities") without consideration or for a
consideration per share or unit less than the Conversion Price in
effect immediately prior to the issuance of such Securities, then the
Conversion Price in effect immediately prior to each such issuance
shall forthwith be reduced to the quotient obtained by dividing:
(A) an amount equal to the sum of (1) the
total number of shares of Common Stock outstanding immediately
prior to such issuance (including for this purpose the number
of shares of Common Stock into which the shares of Series A
Preferred Stock outstanding immediately prior to such issuance
are convertible on the date of such issuance in accordance
with Subsection 5(a) (without regard to Subsection 5(c)),
without giving effect to such issuance) multiplied by the
Conversion
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Price in effect immediately prior to such issuance, and (2)
the amount of consideration, if any, received by the
Corporation upon such issuance, by
(B) the total number of shares of Common
Stock (1) outstanding immediately after such issuance
(including the number of shares of Common Stock into which the
shares of Series A Preferred Stock outstanding immediately
prior to such issuance are convertible on the date of such
issuance in accordance with Subsection 5(a) (without regard to
Subsection 5(c)), without giving effect to such issuance) or
(2) into or for which any such newly issued Convertible
Securities are then convertible or exchangeable or (3)
issuable upon the exercise of any such Rights or Related
Rights).
(C) For the purpose of this Subsection 5(d),
the following definitions and procedures shall be applicable:
(1) In the case of the issuance of
options, warrants or other rights to purchase or
otherwise acquire Common Stock, whether or not at the
time exercisable ("Rights"), the total number of
shares of Common Stock issuable upon exercise of such
Rights shall be deemed to have been issued at the
time such Rights are issued, for a consideration
equal to the sum of the consideration, if any,
received by the Corporation upon the issuance of such
rights and the minimum purchase or exercise price
payable upon the exercise of such Rights for the
Common Stock to be issued upon the exercise thereof.
(2) In the case of the issuance of
any class or series of stock or any bonds,
debentures, notes or other securities or obligations
convertible into or exchangeable for Common Stock,
whether or not then convertible or exchangeable
("Convertible Securities"), or options, warrants or
other rights to purchase or otherwise acquire
Convertible Securities ("Related Rights"), the total
number of shares of Common Stock issuable upon the
conversion or exchange of such Convertible Securities
or exercise of such Related Rights shall be deemed to
have been issued at the time such Convertible
Securities or Related Rights are issued, for a
consideration equal to the sum of (I) the
consideration, if any, received by the Corporation
upon issuance of such Convertible Securities or
Related Rights (excluding any cash received on
account of accrued interest or dividends) and (II)
(A) in the case of Convertible Securities, the
minimum additional consideration, if any, to be
received by the Corporation upon the conversion or
exchange of such Convertible Securities or (B) in the
case of Related Rights, the sum of (x) the minimum
purchase or exercise price payable upon the exercise
of such Related Rights for Convertible Securities and
(y) the minimum additional consideration, if any, to
be received by the Corporation upon the conversion
or exchange of the Convertible Securities issued upon
the exercise of such Related Rights.
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(3) On any change in the number of
shares of Common Stock issuable upon the exercise of
Rights or Related Rights or upon the conversion or
exchange of Convertible Securities or on any change
in the minimum purchase or exercise price of Rights,
Related Rights or Convertible Securities, including,
but not limited to, a change resulting from the
anti-dilution provisions of such Rights, Related
Rights or Convertible Securities, the Conversion
Price to the extent in any way affected by such
Rights, Related Rights or Convertible Securities
shall forthwith be readjusted to be thereafter the
Conversion Price that would have been obtained had
the adjustment which was made upon the issuance of
such Rights, Related Rights or Convertible Securities
been made after giving effect to such change. No
further adjustment shall be made in respect of such
change upon the actual issuance of Common Stock or
any payment of consideration upon the exercise of any
such Rights or Related Rights or the conversion or
exchange of such Convertible Securities.
(4) On the expiration or
cancellation of any such Rights, Related Rights or
Convertible Securities, if the Conversion Price shall
have been adjusted upon the issuance thereof, the
Conversion Price shall forthwith be readjusted to
such Conversion Price as would have been obtained had
the adjustment made upon the issuance of such Rights,
Related Rights or Convertible Securities been made
upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the
exercise of such Rights or Related Rights or the
conversion or exchange of such Convertible
Securities.
(ii) Sale of Shares. In case of the issuance of
Securities for a consideration part or all of which shall be cash, the
amount of the cash consideration therefor shall be deemed to be the
gross amount of the cash paid to Corporation for such shares, before
deducting any underwriting compensation or discount in the sale,
underwriting or purchase thereof by underwriters or dealers or others
performing similar services or for any expenses incurred in connection
therewith. In case of the issuance of any Securities for a
consideration part or all of which shall be other than cash, the amount
of the consideration therefor, other than cash, shall be deemed to be
the then fair market value of the property received.
(iii) Reclassification of Shares. In case of the
reclassification of securities into shares of Common Stock, the shares
of Common Stock issued in such reclassification shall be deemed to have
been issued for a consideration other than cash. Securities issued by
way of dividend or other distribution on any class of stock of
Corporation shall be deemed to have been issued without consideration.
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(iv) Stock Dividends, Stock Splits, Subdivisions or
Combinations. In the event of a stock dividend, stock split or
subdivision of shares of Common Stock into a greater number of shares,
the Conversion Price shall be proportionately decreased, and in the
event of a combination of shares of Common Stock into a smaller number
of shares, the Conversion Price shall be proportionately increased,
such increase or decrease, as the case may be, becoming effective at
the record date.
(v) Exceptions. The adjustments provided in
Subsection 5(d)(i) shall not apply to any (A) Common Stock issued upon
the conversion of any of the Series A Preferred Stock; (B) Common Stock
issued upon exercise of any outstanding warrants, options or
debentures; (C) Common Stock issued upon exercise of outstanding
employee stock options; and (D) up to 200,000 shares of Common Stock
issuable upon exercise of employee stock options to be granted
subsequent to the date hereof.
(vi) Adjustment for Mergers and Consolidations.
(A) In the event of distribution to all
Common Stock holders of any stock, indebtedness of the
Corporation or assets (excluding cash dividends or
distributions from retained earnings) or other rights to
purchase securities or assets, then, after such event, the
shares of Series A Preferred Stock will be convertible into
the kind and amount of securities, cash and other property
which the holder of the shares of Series A Preferred Stock
would have been entitled to receive if the holder owned the
Common Stock issuable upon conversion of the shares of Series
A Preferred Stock immediately prior to the occurrence of such
event.
(B) In case of any capital reorganization,
reclassification of the stock of the Corporation (other than a
change in par value or as a result of a stock dividend,
subdivision, split up or combination of shares), the shares of
Series A Preferred Stock shall be convertible into the kind
and number of shares of stock or other securities or property
of the Corporation to which the holder of the shares of Series
A Preferred Stock would have been entitled to receive if the
holder owned the Common Stock issuable upon conversion of the
shares of Series A Preferred Stock immediately prior to the
occurrence of such event. The provisions of the immediately
foregoing sentence shall similarly apply to successive
reorganizations, reclassifications, consolidations, exchanges,
leases, transfers or other dispositions or other share
exchanges.
(C) The term "Fair Market Value," as used
herein, is the value ascribed to consideration other than cash
as determined by the Board of Directors of the Corporation in
good faith, which determination shall be final, conclusive and
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binding. If the Board of Directors shall be unable to agree as
to such fair market value, then the issue of fair market value
shall be submitted to arbitration under and pursuant to the
rules and regulations of the American Arbitration Association,
and the decision of the arbitrators shall be final, conclusive
and binding, and a final judgment may be entered thereon;
provided, however, that such arbitration shall be limited to
determination of the fair market value of assets tendered in
consideration for the issue of Common Stock.
(e) Whenever the conversion price is adjusted as herein
provided:
(i) The Corporation shall compute the adjusted
conversion price in accordance with this Section 5 and shall cause to
be prepared a certificate signed by the Corporation's treasurer setting
forth the adjusted conversion price and showing in reasonable detail
the fact upon which such adjustment is based; and
(ii) A notice stating that the conversion price has
been adjusted and setting forth the adjusted conversion price shall, as
soon as practicable, be mailed to the holders of record of outstanding
shares of Series A Preferred Stock.
(f) In case:
(i) The Corporation shall declare a dividend or
other distribution on its Common Stock payable otherwise than in cash
out of retained earnings;
(ii) The Corporation shall authorize the issuance to
the holders of its Common Stock of rights or warrants entitling them to
subscribe for or purchase any shares of capital stock of any class or
any other subscription rights or warrants; or
(iii) Of any reclassification of the capital stock of
the Corporation (other than a subdivision or combination of its
outstanding shares of Common Stock), or of any consolidation or merger
to which the Corporation is a party and for which approval of any
stockholders of the Corporation is required, or of the sale, transfer
or other disposition of all or substantially all of the assets of the
Corporation; or
(iv) Of the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
then the Corporation shall cause to be mailed to the holders
of record of the outstanding shares of Series A Preferred Stock, at least 20
days (or 10 days in any case specified in clause (i) or (ii) above) prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date as of which the holders of record of Common Stock to be entitled to
such dividend, distribution, rights or warrants are to be determined, or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
disposition, liquidation, dissolution or winding
14
up is expected to become effective, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their shares for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, disposition, liquidation, dissolution or
winding up, or the vote on any action authorizing such.
(g) The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
Common Stock, for the purpose of issuance upon conversion of shares of Series A
Preferred Stock, the full number of shares of Common Stock then deliverable upon
the conversion of all shares of Series A Preferred Stock then outstanding.
(h) The Corporation will pay any and all taxes that may be
payable in respect of the issuance of delivery of shares of Common Stock on
conversion of shares of Series A Preferred Stock pursuant thereto. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of shares of
Common Stock in a name other than that in which the shares of Series A Preferred
Stock so converted were registered, and no such issuance or delivery shall be
made unless and until the person requesting such issuance has paid to the
Corporation the amount of any such tax or has established to the satisfaction of
the Corporation that such tax has been paid.
(i) The certificate of any independent firm of public
accountants of nationally recognized standing selected by the Board of Directors
shall be presumptive evidence of the correctness of any computation made under
this Section 5.
(j) Notwithstanding the foregoing, if the volume-weighted
average closing bid price of the Common Stock, as determined by Bloomberg
Financial Markets and Commodities News, for the 21 consecutive trading days
following the Corporation's public press release of its December 31, 1998 fiscal
year-end financial results (such volume-weighted average closing bid price
herein referred to as the "1998 Conversion Price Adjustment") is a price less
than the existing Conversion Price, and the Corporation reports pre-tax income
of less than or equal to $4,400,000 excluding extraordinary gains for the
December 31, 1998 fiscal year, then the Conversion Price shall be adjusted
downward to an amount equal to 100% of the 1998 Conversion Price Adjustment. If
an adjustment is required pursuant to this section, then the Corporation shall
furnish to each of the holders of shares of Series A Preferred Stock a
statement, within ten (10) days of the occurrence thereof, signed by the Chief
Financial Officer and the Secretary of the Corporation, of the facts creating
such adjustment and specifying the resultant adjusted Conversion Price then in
effect. No holder of any shares of Series A Preferred Stock shall convert or
sell any shares of the Corporation's Common Stock during the 21 consecutive
trading days used to determine the 1998 Conversion Price Adjustment or during
the 9 trading days preceding such period.
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4.6 REDEMPTION AT THE OPTION OF THE HOLDER.
(a) At any time after the date hereof, upon notice by the
Corporation of any proposed change of any provision of the Certificate of
Incorporation or Bylaws that relates to the Board of Directors or the election
of directors or any merger or consolidation involving the Corporation or a sale
of all or substantially all of the assets of the Corporation (collectively,
"Events of Redemption"), the Series A Preferred Stock is redeemable at the
option of each holder of Series A Preferred Stock at one hundred percent (100%)
of par, together with accrued and unpaid dividends through the Redemption Date.
Notice of an Event of Redemption shall be given by the Corporation to each
holder of record of Series A Preferred Stock by first class mail, postage
prepaid, at such holder's address as the same appears on the stock records of
the Corporation. Each holder may exercise his right to require the Corporation
to redeem all, but not less than all, of the shares of Series A Preferred Stock
owned by him of record by written notice to the Corporation at the address
specified in the notice of an Event of Redemption. Such notice shall be sent by
first class mail, postage prepaid, within thirty (30) days of receipt by such
holder of the notice of an Event of Redemption.
(b) Shares of Series A Preferred Stock may be redeemed at the
option of the holder by the Corporation on the date specified in the notice of
an Event of Redemption (the "Redemption Date"). The Redemption Date selected by
the Corporation shall be sixty (60) days after the date notice of an Event of
Redemption is sent by the Corporation. As a condition precedent for such
redemption, the Corporation, by resolution of its Board of Directors, shall
declare a mandatory dividend on the Series A Preferred Stock payable in cash on
the Redemption Date in an amount equal to all accumulated, accrued and unpaid
dividends as of the Redemption Date on the Series A Preferred Stock to be
redeemed, which amount shall be added to the redemption price. If the Redemption
Date falls after a dividend payment record date and prior to the corresponding
Dividend Payment Date, then each holder of Series A Preferred Stock at the close
of business on such dividend payment record date shall be entitled to the
dividend payable on such shares on the corresponding Dividend Payment Date,
notwithstanding the redemption of such shares prior to such Dividend Payment
Date. Except as provided above, the Corporation shall make no payment or
allowance for accumulated or accrued dividends on shares of Series A Preferred
Stock to be redeemed.
(c) Neither the failure to mail any notice required by
Subsection 6(a), nor any defect therein or in the mailing thereof, to any
particular holder, shall affect the sufficiency of the notice or the validity of
the proceedings for redemption with respect to the other holders. Any notice
which was mailed in the manner herein provided shall be conclusively presumed to
have been duly given on the date mailed whether or not the holder receives the
notice. Each such mailed notice shall state, as appropriate: (1) the Redemption
Date; (2) the place or places at which certificates for such shares are to be
surrendered; and (3) that dividends on the shares of Series A Preferred Stock to
be redeemed shall cease to accrue on such Redemption Date, except as otherwise
provided herein. Notice having been mailed as aforesaid, from and after the
Redemption Date (unless the Corporation shall fail to issue and make available
at the office of the transfer agent the amount of cash necessary to effect such
redemption, including all accumulated, accrued and unpaid dividends to the
16
Redemption Date, whether or not earned or declared), (i) except as otherwise
provided herein, dividends on the shares of Series A Preferred Stock to be
redeemed shall cease to accumulate or accrue on the shares of Series A Preferred
Stock to be redeemed, (ii) said shares shall no longer be deemed to be
outstanding, and (iii) all rights of the holders thereof as holders of Series A
Preferred Stock of the Corporation shall cease (except the rights to receive the
cash payable upon such redemption, without interest thereon, upon surrender and
endorsement of their certificates if so required and to receive any dividends
payable thereon).
As promptly as practicable after the surrender in accordance
with said notice of the certificates for any such shares so redeemed (properly
endorsed or assigned for transfer, if the Corporation shall so require and if
the notice shall so state), such certificates shall be exchanged for cash
(without interest thereon) for which such shares have been redeemed in
accordance with such notice.
4.7 SERIES A PREFERRED STOCK TO BE RETIRED. All shares of Series A
Preferred Stock which shall have been issued and reacquired in any manner by the
Corporation shall be restored to the status of authorized, but unissued shares
of Preferred Stock, without designation as to series. The Corporation may also
retire any unissued shares of Series A Preferred Stock, and such shares shall
then be restored to the status of authorized but unissued shares of Preferred
Stock, without designation as to series.
4.8 RANKING. Any class or series of capital stock of the
Corporation shall be deemed to rank:
(a) prior or senior to the Series A Preferred Stock, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, if the holders of such class or series shall be
entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Series A Preferred Stock;
(b) on a parity with the Series A Preferred Stock, as to the
payment of dividends and as to distribution of assets upon liquidation,
dissolution or winding up, whether or not the dividend rates, dividend payment
dates or redemption or liquidation prices per share thereof be different from
those of the Series A Preferred Stock, if the holders of such class of stock or
series and the Series A Preferred Stock shall be entitled to the receipt of
dividends and of amounts distributable upon liquidation, dissolution or winding
up in proportion to their respective amounts of accrued and unpaid dividends per
share or liquidation preferences, without preference or priority of one over the
other ("Parity Stock"); and
(c) junior to the Series A Preferred Stock, as to the payment
of dividends or as to the distribution of assets upon liquidation, dissolution
or winding up, if such stock or series shall be Common Stock or if the holder of
Series A Preferred Stock shall be entitled to receipt of dividends
17
or of amounts distributable upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders of shares of such class or
series ("Junior Stock").
4.9 VOTING.
(a) The holders of Series A Preferred Stock shall be entitled
to one (1) vote per share on all matters submitted to a vote of shareholders of
the Corporation.
(b) The affirmative vote of the holders of sixty-six and
two-thirds percent (66 2/3%) of the votes entitled to be cast by holders of the
Series A Preferred Stock then outstanding, voting as a single class, in person
or by proxy, either in writing without a meeting or by vote at any meeting
called for the purpose, will be required in order to amend the Certificate of
Incorporation or Bylaws to affect materially and adversely the rights,
preferences or voting power of the holders of the Series A Preferred Stock or to
authorize, create or increase the authorized amount of, any class of stock
having rights prior or senior to the Series A Preferred Stock with respect to
the payment of dividends or amounts upon liquidation, dissolution or winding up.
However, the Corporation may create additional classes, shares or series of
Parity Stock with the consent of the holders of a majority of the outstanding
shares of Series A Preferred Stock, and may create classes of Junior Stock,
increase the authorized number of shares of Junior Stock and issue additional
series of Junior Stock, without the consent of any holder of Series A Preferred
Stock.
(c) If and whenever two (2) quarterly dividends (whether or
not consecutive) payable on the Series A Preferred Stock shall be in arrears
(which shall, with respect to any such quarterly dividend, mean that any such
dividend has not been paid in full), whether or not earned or declared, the
number of directors then constituting the Board of Directors shall be increased
by two (2), and the directors then serving shall appoint to the Board of
Directors two (2) persons designated by the holders of a majority of the then
outstanding shares of Series A Preferred Stock. The holders of shares of Series
A Preferred Stock shall thereafter be entitled to designate or elect the two (2)
additional directors to serve on the Board of Directors, by the vote of a
plurality of the votes cast by the holders of the Series A Preferred Stock at an
annual meeting of stockholders or special meeting held in place thereof, or at a
special meeting of the holders of the Series A Preferred Stock called from time
to time for the election of directors. Whenever all arrears in dividends on the
Series A Preferred Stock then outstanding shall have been paid and dividends
thereon for the current quarterly dividend period shall have been paid or
declared and set apart for payment, then the right of the holders of the Series
A Preferred Stock to elect such additional two (2) directors shall cease (but
subject always to the same provision of the vesting of such voting rights in the
case of any similar future arrearage in two (2) quarterly dividends), and the
terms of office of all persons elected as directors by the holders of the Series
A Preferred Stock shall forthwith terminate and the number of the Board of
Directors shall be reduced accordingly. At any time after such voting power
shall have been so vested in the holders of Series A Preferred Stock, if the
Board of Directors fails to appoint the two designees of the holders of the
Series A Preferred Stock, as hereinabove provided, the Secretary of the
Corporation shall, upon the written request of any holder of Series A Preferred
Stock (addressed to the Secretary at the principal office of the Corporation),
call a special meeting of the
18
holders of the Series A Preferred Stock for the election of the two (2)
directors to be elected by them as herein provided, such call to be made by
notice similar to that provided in the Bylaws of the Corporation for a special
meeting of the stockholders or as required by law. If any such special meeting
required to be called, as above provided, shall not be called by the Secretary
within twenty (20) days after receipt of any such request, then any holder of
Series A Preferred Stock may call such meeting, upon the notice above provided,
and for that purpose shall have access to the stock books of the Corporation.
The directors elected at any such special meeting shall hold office until the
next annual meeting of the stockholders or special meeting held in lieu thereof
if such office shall not have previously terminated as above provided. If any
vacancy shall occur among the directors elected by the holders of the Series A
Preferred Stock, a successor shall be elected by the Board of Directors, upon
the nomination of the then remaining directors elected by the holders of the
Series A Preferred Stock or the successors of such remaining directors, to serve
until the next annual meeting of the stockholders or special meeting held in
place thereof if such office shall not have previously terminated as above
provided. Notwithstanding the foregoing, the total number of directors
designated or elected by the holders of shares of Series A Preferred Stock, as
such, pursuant to this Section 9(c) or by such holders, as such, or any
affiliate of any of them pursuant to any other agreement or instrument will not
exceed two (2), unless such other agreement or instrument expressly provides for
a greater number.
So long as any shares of Series A Preferred Stock are
outstanding, the number of directors of the Corporation shall at all times be
such that the exercise by the holders of shares of Series A Preferred Stock of
the right to designate or elect directors under the circumstance provided in
this Section 9(c) will not contravene any provisions of the Corporation's
Certificate of Incorporation or Bylaws.
4.10 RECORD HOLDERS. The Corporation may deem and treat the record
holder of any share of Series A Preferred Stock as the true and lawful owner
thereof for all purposes, and neither the Corporation nor the Transfer Agent
shall be affected by any notice to the contrary.
5. The right to cumulate votes for the purpose of electing directors of
the Company or for any other purpose is expressly denied. The pre-emptive right
of shareholders to subscribe to and purchase shares or securities in proportion
to their respective holdings of shares is expressly denied.
6. The Company is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to make, alter or repeal
the bylaws of the Company.
8. To the extent permitted by the General Corporation Law of Delaware,
a director of the Company shall not be liable to the Company or its shareholders
for monetary damages for an act or omission in the director's capacity as a
director.
19
9. Elections of directors need not be by written ballot unless the
bylaws of the Company shall so provide.
Meetings of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the Company may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the bylaws of the Company.
10. The Company reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
executed this 12th day of August, 1998.
LIFEQUEST MEDICAL, INC.
By:
----------------------------
Randall K. Boatright
Executive Vice President
and Chief Financial Officer
20
LIFEQUEST MEDICAL, INC.
---------------------------
AMENDED
CERTIFICATE OF DESIGNATION AND PREFERENCES OF
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
---------------------------
DATED AS OF JANUARY 21, 1999
21
LIFEQUEST MEDICAL, INC.
---------------------
AMENDED
CERTIFICATE OF DESIGNATION AND PREFERENCES OF
SERIES B CUMULATIVE CONVERTIBLE PREFERRED STOCK
----------------------
LIFEQUEST MEDICAL, INC., a Delaware corporation, having its principal
office in San Antonio, Texas (the "Corporation"), hereby certifies to the
Secretary of State of the State of Delaware that:
Pursuant to authority expressly vested in the Board of Directors of the
Corporation by the Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), the Board of Directors has duly adopted
resolutions authorizing the creation and issuance of up to One Thousand
Twenty-Five (1,025) shares of Series B Cumulative Convertible Preferred Stock,
$.001 par value, with a liquidation preference of One Thousand Dollars
($1,000.00) per share, and determining the preferences, rights, powers,
limitations, qualifications and restrictions, as follows:
SECTION 1. NUMBER OF SHARES AND DESIGNATION. This series of Preferred
Stock, $.001 par value, shall be designated as Series B Cumulative Convertible
Preferred Stock (the "Series B Preferred Stock"), and the number of shares which
shall constitute such series shall be 1,025 shares.
SECTION 2. DEFINITIONS. For purposes of the Series B Preferred Stock,
the following terms shall have the meanings indicated below:
"Act" shall mean the Securities Act of 1933, as amended.
"Affiliate" of a person means a person that directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is
under common control with, the person specified.
"Board of Directors" shall mean the Board of Directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Series B
Preferred Stock.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which state or federally chartered banking institutions in New
York, New York are not required to be open.
"Common Stock" shall mean the common stock, $.001 par value, of the
Corporation or such shares of the Corporation's capital stock into
which such Common Stock shall be reclassified.
"Current Market Price" of publicly traded shares of Common Stock or any
other class or series of capital stock or other security of the
Corporation or of any similar security of any other issuer for any day
shall mean the last reported sale price, regular way on such day, or,
if no sale takes place on such day, the reported closing bid price,
regular way on such day,
22
in either case as reported on the NASDAQ National Market of the
National Association of Securities Dealers, Inc. Automated Quotation
System ("NASDAQ") or, if not quoted on NASDAQ, on the principal
national securities exchange on which such security is listed or
admitted for trading or, if such security is not listed or admitted for
trading on a national securities exchange or quoted on the NASDAQ
National Market, the closing bid price on such day in the
over-the-counter market as reported by NASDAQ, or, if the bid price for
such security on such day shall not have been reported through NASDAQ,
the bid price on such day as furnished by any NYSE member firm
regularly making a market in such security selected for such purpose by
the Chief Executive Officer or the Board of Directors or if any class
or series of securities are not publicly traded, the fair value of the
shares of such class as determined reasonably and in good faith by the
Board of Directors of the Corporation or other issuer.
"Dividend Payment Date" shall mean, with respect to each Dividend
Period, the last day of March, June, September and December, in each
year, commencing on December 31, 1998; provided, however, that if any
Dividend Payment Date falls on any day other than a Business Day, the
dividend payment due on such Dividend Payment Date shall be paid on the
Business Day immediately following such Dividend Payment Date.
"Dividend Periods" shall mean quarterly dividend periods commencing on
January 1, April 1, July 1 and October 1 of each year and ending on and
including the day preceding the first day of the next succeeding
Dividend Period (other than the initial Dividend Period, which shall
commence on the Issue Date and end on and include the day immediately
preceding the Dividend Payment Date which immediately follows the Issue
Date).
"Fair Market Value" on any date shall mean the average of the daily
Current Market Price of a share of Common Stock during five (5)
consecutive Trading Days ending on the day before such date.
"Funds Available for Distribution" shall mean funds from operations
(net income, computed in accordance with generally accepted accounting
principles, excluding gains or losses from debt restructuring and sales
of property, plus depreciation and amortization) minus non-revenue
generated capital expenditures and debt principal amortization, as
determined by the Board of Directors on a basis consistent with the
policies and practices adopted by the Corporation for reporting
publicly its results of operations and financial condition.
"Issue Date" shall mean the date upon which shares of Series B
Preferred Stock are issued.
"Junior Stock" shall have the meaning set forth in paragraph (c) of
Section 8 hereof.
"NYSE" shall mean the New York Stock Exchange.
"Parity Stock" shall have the meaning set forth in paragraph (b) of
Section 8 hereof.
2
23
"Permitted Common Stock Cash Distributions" means cash dividends and
cash distributions paid on Common Stock after December 31, 1997 not in
excess of the sum of the Corporation's cumulative undistributed net
earnings at December 31, 1997, plus the cumulative amount of Funds
Available for Distribution after December 31, 1997, minus the
cumulative amount of dividends accumulated, accrued or paid on the
Series B Preferred Stock or any other class of Preferred Stock after
January 1, 1998.
"Person" shall mean any individual, partnership, corporation or other
entity and shall include the successor (by merger or otherwise) of such
entity.
"Redemption Date" shall have the meaning set forth in paragraph (b) of
Section 6 hereof.
"Series B Preferred Stock" shall have the meaning set forth in Section
1 hereof.
"Set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its
accounting ledgers of any accounting or bookkeeping entry which
indicates, pursuant to a declaration of dividends or other distribution
by the Board of Directors, the allocation of funds to be so paid on any
series or class of capital stock of the Corporation; provided, however,
that if any funds for any class or series of Junior Stock or any class
or series of Parity Stock are placed in a separate account of the
Corporation or delivered to a disbursing, paying or other similar
agent, then "set apart for payment" with respect to the Series B
Preferred Stock shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.
"Trading Day," as to any securities, shall mean any day on which such
securities are traded on the NYSE or, if such securities are not listed
or admitted for trading on the NYSE, on the principal national
securities exchange on which such securities are listed or admitted or,
if such securities are not listed or admitted for trading on any
national securities exchange, on the NASDAQ National Market or, if such
securities are not quoted on the NASDAQ National Market, in the
securities market in which such securities are traded.
SECTION 3. DIVIDENDS.
(a) The holders of Series B Preferred Stock shall
be entitled to receive, when and as declared by the Board of Directors out of
funds legally available for that purpose, cumulative dividends payable in cash
in an amount per share of Series B Preferred Stock equal to $80 per annum. Such
dividends shall be cumulative from the Issue Date, whether or not in any
Dividend Period or Periods such dividends shall be declared or there shall be
funds of the Corporation legally available for the payment of such dividends,
and shall be payable quarterly on the Dividend Payment Dates, commencing on the
first Dividend Payment Date after the Issue Date. Each such dividend shall be
payable to the holders of record of the Series B Preferred Stock, as they appear
on the stock records of the Corporation at the close of business on a record
date which shall be not more than sixty (60) days prior to the applicable
Dividend Payment Date. Accumulated, accrued and unpaid dividends for any past
Dividend Periods may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to holders of record on such date, which date
shall not precede by more than
3
24
forty-five (45) days the payment date thereof, as may be fixed by the Board of
Directors. The amount of accumulated, accrued and unpaid dividends on any share
of Series B Preferred Stock, or fraction thereof, at any date shall be the
amount of any dividends thereon calculated at the applicable rate to and
including such date, whether or not earned or declared, which have not been paid
in cash.
(b) The amount of dividends payable per share of
Series B Preferred Stock for each Dividend Period shall be computed by dividing
the annual dividend by four (4). The amount of dividends payable per share of
Series B Preferred Stock for the initial Dividend Period, or any other period
shorter or longer than a full Dividend Period, shall be computed ratably on the
basis of twelve (12) 30-day months and a 360-day year. Holders of Series B
Preferred Stock shall not be entitled to any dividends, whether payable in cash,
property or stock, in excess of cumulative dividends, as herein provided on the
Series B Preferred Stock. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments on the Series B
Preferred Stock that may be in arrears.
(c) So long as any of the shares of Series B
Preferred Stock are outstanding, no dividends, except as described in the
immediately following sentence, shall be declared or paid or set apart for
payment by the Corporation, or other distribution of cash or other property
declared or made directly or indirectly by the Corporation or any affiliate or
any person acting on behalf of the Corporation or any of its affiliates with
respect to any class or series of Parity Stock for any period, unless dividends
equal to the full amount of accumulated, accrued and unpaid dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof have been or contemporaneously are set apart for such
payment on the Series B Preferred Stock for all Dividend Periods terminating on
or prior to the Dividend Payment Date with respect to such class or series of
Parity Stock. When dividends are not paid in full or a sum sufficient for such
payment is not set apart, as aforesaid, all dividends declared upon the Series B
Preferred Stock and all dividends declared upon any other class or series of
Parity Stock shall be declared ratably in proportion to the respective amounts
of dividends accumulated, accrued and unpaid on the Series B Preferred Stock and
accumulated, accrued and unpaid on such Parity Stock.
(d) So long as any of the shares of Series B
Preferred Stock are outstanding, no dividends (other than dividends or
distributions paid in shares of, or options, warrants or rights to subscribe for
or purchase shares of, Junior Stock) shall be declared or paid or set apart for
payment by the Corporation, or other distribution of cash or other property
declared or made directly or indirectly by the Corporation or any affiliate or
any person acting on behalf of the Corporation or any of its affiliates with
respect to any shares of Junior Stock, nor shall any shares of Junior Stock be
redeemed, purchased or otherwise acquired (other than a redemption, purchase or
other acquisition of Common Stock made for purposes of an employee incentive or
benefit plan of the Corporation or any subsidiary) for any consideration (or any
moneys be paid to or made available for a sinking-fund for the redemption of any
shares of any such stock) directly or indirectly by the Corporation or any
affiliate or any person acting on behalf of the Corporation or any of its
affiliates (except by conversion into or exchange for Junior Stock), nor shall
any other cash or other property otherwise be paid or distributed to or for the
benefit of any holder of shares of Junior Stock in respect thereof, directly or
indirectly, by the Corporation or any affiliate or any person acting on behalf
of the Corporation or any of its affiliates, unless in each case (i) the full
cumulative dividends (including all
4
25
accumulated, accrued and unpaid dividends) on all outstanding shares of Series B
Preferred Stock and any other Parity Stock of the Corporation shall have been
paid or such dividends have been declared and set apart for payment for all past
Dividend Periods with respect to the Series B Preferred Stock and all past
Dividend Periods with respect to such Parity Stock, and (ii) sufficient funds
shall have been paid or set apart for the payment of the full dividend for the
current Dividend Period with respect to the Series B Preferred Stock and the
current Dividend Period with respect to such Parity Stock.
SECTION 4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, before any
payment or distribution of the assets of the Corporation (whether capital or
surplus) shall be made to or set apart for the holders of Junior Stock, the
holders of shares of Series B Preferred Stock shall be entitled to receive One
Thousand Dollars ($1,000.00) per share of Series B Preferred Stock, plus an
amount equal to all dividends (whether or not earned or declared) accumulated,
accrued and unpaid thereon to the date of final distribution to such holders.
Until the holders of the Series B Preferred Stock have been paid the liquidation
preference in full, no payment will be made to any holder of Junior Stock upon
the liquidation, dissolution or winding up of the Corporation. If, upon any
liquidation, dissolution or winding up of the Corporation, the assets of the
Corporation, or proceeds thereof, distributable among the holders of Series B
Preferred Stock shall be insufficient to pay in full the preferential amount
aforesaid and liquidating payments on any other shares of any class or series of
Parity Stock, then such assets, or the proceeds thereof, shall be distributed
among the holders of Series B Preferred Stock and any such other Parity Stock
ratably in the same proportion as the respective amounts that would be payable
on such Series B Preferred Stock and any such other Parity Stock if all amounts
payable thereon were paid in full. For the purposes of this Section 4, (i) a
consolidation or merger of the Corporation with one or more corporations, (ii) a
sale or transfer of all or substantially all of the Corporation's assets, or
(iii) a statutory share exchange shall not be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary, of the Corporation.
(b) Subject to the rights of the holders of any
shares of Parity Stock, upon any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made in full to the holders of Series
B Preferred Stock and any Parity Stock, as provided in this Section 4, any other
series or class or classes of Junior Stock shall, subject to the respective
terms thereof, be entitled to receive any and all assets remaining to be paid or
distributed, and the holders of the Series B Preferred Stock and any Parity
Stock shall not be entitled to share therein.
SECTION 5. CONVERSION RIGHTS. The holders of shares of Series B
Preferred Stock shall have the right, at their option, to convert such shares
into shares of Common Stock of the Corporation at any time on and subject to the
following terms and conditions:
(a) The shares of Series B Preferred Stock shall be
convertible at the office of the transfer agent for the Common Stock or the
principal executive office of the Corporation, into fully paid and
non-assessable shares (calculated as to each conversion to the nearest 1/100th
of a share) of Common Stock of the Corporation, at the conversion price,
determined as hereinafter
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provided, in effect at the time of conversion, each share of Series B Preferred
Stock being taken at $1,000.00 for the purpose of such conversion. The price at
which shares of Common Stock shall be delivered upon conversion (the "Conversion
Price") shall initially be $2.00 per share of Common Stock. The conversion price
shall be adjusted in certain instances as provided below.
(b) In order to convert shares of Series B Preferred
Stock into Common Stock, the holder thereof shall surrender at the office or
offices hereinabove mentioned the certificate or certificates therefor, duly
endorsed or assigned to the Corporation or in blank, and give written notice to
the Corporation at said office or offices that such holder elects to convert
such shares. Shares of Series B Preferred Stock surrendered for conversion
during the period from the close of business on any record date for the payment
of a dividend on the shares of Series B Preferred Stock to the opening of
business on the date for payment of such dividend shall (except in the case of
shares of Series B Preferred Stock which have been called for redemption on a
redemption date within such period) be accompanied by a payment of an amount
equal to the dividend declared and payable on such dividend payment date on the
shares of Series B Preferred Stock being surrendered for conversion. Except as
provided in the preceding sentence, no payment or adjustment shall be made upon
any conversion on account of any unpaid or accrued dividends on the shares of
Series B Preferred Stock surrendered for conversion or on account of any
dividends on the Common Stock issued upon conversion.
Shares of Series B Preferred Stock shall be deemed to
have been converted immediately prior to the close of business on the day of the
surrender of the certificates for such shares for conversion in accordance with
the foregoing provisions, and the person or persons entitled to receive the
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such Common Stock at such time. As promptly as
practicable on or after the conversion date, the Corporation shall issue and
shall deliver at such office a certificate or certificates for the number of
full shares of Common Stock issuable upon such conversion, together with payment
in lieu of any fraction of a share, as hereinafter provided, to the person or
persons entitled to receive the same. In case shares of Series B Preferred Stock
are called for redemption, the right to convert such shares shall cease and
terminate at the close of business on the date fixed for redemption, unless
default shall be made in payment of the redemption price.
(c) No fractional shares of Common Stock shall be
issued upon conversion of shares of Series B Preferred Stock, but, instead of
any fraction of a share which would otherwise be issuable, the Corporation shall
pay a cash adjustment in respect of such fraction in an amount equal to the same
fraction of the Closing Price (as hereinafter defined) on the date on which the
certificate or certificates for such shares were duly surrendered for
conversion, or, if such date is not a Trading Day (as hereinafter defined), on
the next Trading Day.
(d) The Conversion Price shall be adjusted from time
to time as follows:
(i) Adjustment for Issuance of Shares at
Less Than the Conversion Price. If at any time after the date of the
first issuance of Series B Preferred Stock, the Corporation shall issue
any shares of Common Stock, Convertible Securities (as hereinafter
defined), Rights (as hereinafter defined) or Related Rights (as
hereinafter defined; any such
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shares, Convertible Securities, Rights or Related Rights, "Securities")
without consideration or for a consideration per share or unit less
than the Conversion Price in effect immediately prior to the issuance
of such Securities, then the Conversion Price in effect immediately
prior to each such issuance shall forthwith be reduced to the quotient
obtained by dividing:
(A) an amount equal to the sum of (1) the
total number of shares of Common Stock outstanding
immediately prior to such issuance (including for this
purpose the number of shares of Common Stock into which
the shares of Series B Preferred Stock outstanding
immediately prior to such issuance are convertible on
the date of such issuance in accordance with Subsection
5(a) (without regard to Subsection 5(c)), without
giving effect to such issuance) multiplied by the
Conversion Price in effect immediately prior to such
issuance, and (2) the amount of consideration, if any,
received by the Corporation upon such issuance, by
(B) the total number of shares of Common
Stock (1) outstanding immediately after such issuance
(including the number of shares of Common Stock into
which the shares of Series B Preferred Stock
outstanding immediately prior to such issuance are
convertible on the date of such issuance in accordance
with Subsection 5(a) (without regard to Subsection
5(c)), without giving effect to such issuance) or (2)
into or for which any such newly issued Convertible
Securities are then convertible or exchangeable or (3)
issuable upon the exercise of any such Rights or
Related Rights).
(C) For the purpose of this Subsection 5(d),
the following definitions and procedures shall be
applicable:
(1) In the case of the issuance of
options, warrants or other rights to purchase
or otherwise acquire Common Stock, whether or
not at the time exercisable ("Rights"), the
total number of shares of Common Stock issuable
upon exercise of such Rights shall be deemed to
have been issued at the time such Rights are
issued, for a consideration equal to the sum of
the consideration, if any, received by the
Corporation upon the issuance of such rights
and the minimum purchase or exercise price
payable upon the exercise of such Rights for
the Common Stock to be issued upon the exercise
thereof.
(2) In the case of the issuance of
any class or series of stock or any bonds,
debentures, notes or other securities or
obligations convertible into or exchangeable
for Common Stock, whether or not then
convertible or exchangeable ("Convertible
Securities"), or options, warrants or other
rights to purchase or otherwise acquire
Convertible Securities ("Related Rights"), the
total number of shares of Common Stock issuable
upon the conversion or exchange of such
Convertible Securities or exercise of such
Related Rights shall be deemed to have
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been issued at the time such Convertible
Securities or Related Rights are issued, for a
consideration equal to the sum of (I) the
consideration, if any, received by the
Corporation upon issuance of such Convertible
Securities or Related Rights (excluding any
cash received on account of accrued interest or
dividends) and (II) (A) in the case of
Convertible Securities, the minimum additional
consideration, if any, to be received by the
Corporation upon the conversion or exchange of
such Convertible Securities or (B) in the case
of Related Rights, the sum of (x) the minimum
purchase or exercise price payable upon the
exercise of such Related Rights for Convertible
Securities and (y) the minimum additional
consideration, if any, to be received by the
Corporation upon the conversion or exchange of
the Convertible Securities issued upon the
exercise of such Related Rights.
(3) On any change in the number of
shares of Common Stock issuable upon the
exercise of Rights or Related Rights or upon
the conversion or exchange of Convertible
Securities or on any change in the minimum
purchase or exercise price of Rights, Related
Rights or Convertible Securities, including,
but not limited to, a change resulting from the
anti-dilution provisions of such Rights,
Related Rights or Convertible Securities, the
Conversion Price to the extent in any way
affected by such Rights, Related Rights or
Convertible Securities shall forthwith be
readjusted to be thereafter the Conversion
Price that would have been obtained had the
adjustment which was made upon the issuance of
such Rights, Related Rights or Convertible
Securities been made after giving effect to
such change. No further adjustment shall be
made in respect of such change upon the actual
issuance of Common Stock or any payment of
consideration upon the exercise of any such
Rights or Related Rights or the conversion or
exchange of such Convertible Securities.
(4) On the expiration or
cancellation of any such Rights, Related Rights
or Convertible Securities, if the Conversion
Price shall have been adjusted upon the
issuance thereof, the Conversion Price shall
forthwith be readjusted to such Conversion
Price as would have been obtained had the
adjustment made upon the issuance of such
Rights, Related Rights or Convertible
Securities been made upon the basis of the
issuance of only the number of shares of Common
Stock actually issued upon the exercise of such
Rights or Related Rights or the conversion or
exchange of such Convertible Securities.
(ii) Sale of Shares. In case of the
issuance of Securities for a consideration part or all of which shall
be cash, the amount of the cash consideration therefor shall be deemed
to be the gross amount of the cash paid to Corporation for such shares,
before deducting any underwriting compensation or discount in the sale,
underwriting or
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purchase thereof by underwriters or dealers or others performing
similar services or for any expenses incurred in connection therewith.
In case of the issuance of any Securities for a consideration part or
all of which shall be other than cash, the amount of the consideration
therefor, other than cash, shall be deemed to be the then fair market
value of the property received.
(iii) Reclassification of Shares. In case
of the reclassification of securities into shares of Common Stock, the
shares of Common Stock issued in such reclassification shall be deemed
to have been issued for a consideration other than cash. Securities
issued by way of dividend or other distribution on any class of stock
of Corporation shall be deemed to have been issued without
consideration.
(iv) Stock Dividends, Stock Splits,
Subdivisions or Combinations. In the event of a stock dividend, stock
split or subdivision of shares of Common Stock into a greater number of
shares, the Conversion Price shall be proportionately decreased, and in
the event of a combination of shares of Common Stock into a smaller
number of shares, the Conversion Price shall be proportionately
increased, such increase or decrease, as the case may be, becoming
effective at the record date.
(v) Exceptions. The adjustments
provided in Subsection 5(d)(i) shall not apply to any (A) Common Stock
issued upon the conversion of any of the Series B Preferred Stock; (B)
Common Stock issued upon exercise of any outstanding warrants, options
or debentures; (C) Common Stock issued upon exercise of outstanding
employee stock options; and (D) up to 200,000 shares of Common Stock
issuable upon exercise of employee stock options to be granted
subsequent to the date hereof.
(vi) Adjustment for Mergers and
Consolidations.
(A) In the event of distribution to all
Common Stock holders of any stock, indebtedness of the
Corporation or assets (excluding cash dividends or
distributions from retained earnings) or other rights
to purchase securities or assets, then, after such
event, the shares of Series B Preferred Stock will be
convertible into the kind and amount of securities,
cash and other property which the holder of the shares
of Series B Preferred Stock would have been entitled to
receive if the holder owned the Common Stock issuable
upon conversion of the shares of Series B Preferred
Stock immediately prior to the occurrence of such
event.
(B) In case of any capital reorganization,
reclassification of the stock of the Corporation (other
than a change in par value or as a result of a stock
dividend, subdivision, split up or combination of
shares), the shares of Series B Preferred Stock shall
be convertible into the kind and number of shares of
stock or other securities or property of the
Corporation to which the holder of the shares of Series
B Preferred Stock would have been entitled to receive
if the holder owned the Common Stock issuable upon
conversion of the shares
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of Series B Preferred Stock immediately prior to the
occurrence of such event. The provisions of the
immediately foregoing sentence shall similarly apply to
successive reorganizations, reclassifications,
consolidations, exchanges, leases, transfers or other
dispositions or other share exchanges.
(C) The term "Fair Market Value," as used
herein, is the value ascribed to consideration other
than cash as determined by the Board of Directors of
the Corporation in good faith, which determination
shall be final, conclusive and binding. If the Board of
Directors shall be unable to agree as to such fair
market value, then the issue of fair market value shall
be submitted to arbitration under and pursuant to the
rules and regulations of the American Arbitration
Association, and the decision of the arbitrators shall
be final, conclusive and binding, and a final judgment
may be entered thereon; provided, however, that such
arbitration shall be limited to determination of the
fair market value of assets tendered in consideration
for the issue of Common Stock.
(e) Whenever the conversion price is adjusted as herein
provided:
(i) The Corporation shall compute the
adjusted conversion price in accordance with this Section 5 and shall
cause to be prepared a certificate signed by the Corporation's
treasurer setting forth the adjusted conversion price and showing in
reasonable detail the fact upon which such adjustment is based; and
(ii) A notice stating that the conversion
price has been adjusted and setting forth the adjusted conversion price
shall, as soon as practicable, be mailed to the holders of record of
outstanding shares of Series B Preferred Stock.
(f) In case:
(i) The Corporation shall declare a
dividend or other distribution on its Common Stock payable otherwise
than in cash out of retained earnings;
(ii) The Corporation shall authorize the
issuance to the holders of its Common Stock of rights or warrants
entitling them to subscribe for or purchase any shares of capital stock
of any class or any other subscription rights or warrants; or
(iii) Of any reclassification of the
capital stock of the Corporation (other than a subdivision or
combination of its outstanding shares of Common Stock), or of any
consolidation or merger to which the Corporation is a party and for
which approval of any stockholders of the Corporation is required, or
of the sale, transfer or other disposition of all or substantially all
of the assets of the Corporation; or
(iv) Of the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation;
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then the Corporation shall cause to be mailed to the
holders of record of the outstanding shares of Series B Preferred Stock, at
least 20 days (or 10 days in any case specified in clause (i) or (ii) above)
prior to the applicable record or effective date hereinafter specified, a notice
stating (x) the date as of which the holders of record of Common Stock to be
entitled to such dividend, distribution, rights or warrants are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, disposition, liquidation, dissolution or winding up is
expected to become effective, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to exchange their shares for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, disposition, liquidation, dissolution or
winding up, or the vote on any action authorizing such.
(g) The Corporation shall at all times reserve and
keep available, free from preemptive rights, out of its authorized but unissued
Common Stock, for the purpose of issuance upon conversion of shares of Series B
Preferred Stock, the full number of shares of Common Stock then deliverable upon
the conversion of all shares of Series B Preferred Stock then outstanding.
(h) The Corporation will pay any and all taxes that
may be payable in respect of the issuance of delivery of shares of Common Stock
on conversion of shares of Series B Preferred Stock pursuant thereto. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of shares of
Common Stock in a name other than that in which the shares of Series B Preferred
Stock so converted were registered, and no such issuance or delivery shall be
made unless and until the person requesting such issuance has paid to the
Corporation the amount of any such tax or has established to the satisfaction of
the Corporation that such tax has been paid.
(i) The certificate of any independent firm of
public accountants of nationally recognized standing selected by the Board of
Directors shall be presumptive evidence of the correctness of any computation
made under this Section 5.
(j) Notwithstanding the foregoing, if the
volume-weighted average closing bid price of the Common Stock, as determined by
Bloomberg Financial Markets and Commodities News, for the 21 consecutive trading
days following the Corporation's public press release of its December 31, 1998
fiscal year-end financial results (such volume-weighted average closing bid
price herein referred to as the "1998 Conversion Price Adjustment") is a price
less than the existing Conversion Price, and the Corporation reports pre-tax
income of less than or equal to $4,400,000 excluding extraordinary gains for the
December 31, 1998 fiscal year, then the Conversion Price shall be adjusted
downward to an amount equal to 100% of the 1998 Conversion Price Adjustment. If
an adjustment is required pursuant to this section, then the Corporation shall
furnish to each of the holders of shares of Series B Preferred Stock a
statement, within ten (10) days of the occurrence thereof, signed by the Chief
Financial Officer and the Secretary of the Corporation, of the facts creating
such adjustment and specifying the resultant adjusted Conversion Price then in
effect. No holder of any shares of Series B Preferred Stock shall convert or
sell any shares of the Corporation's Common Stock during the 21 consecutive
trading days used to determine the 1998 Conversion Price Adjustment or during
the 9 trading days preceding such period.
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SECTION 6. REDEMPTION AT THE OPTION OF THE HOLDER.
(a) At any time after the date hereof, upon notice
by the Corporation of any proposed change of any provision of the Certificate of
Incorporation or Bylaws that relates to the Board of Directors or the election
of directors or any merger or consolidation involving the Corporation or a sale
of all or substantially all of the assets of the Corporation (collectively,
"Events of Redemption"), the Series B Preferred Stock is redeemable at the
option of each holder of Series B Preferred Stock at one hundred percent (100%)
of par, together with accrued and unpaid dividends through the Redemption Date.
Notice of an Event of Redemption shall be given by the Corporation to each
holder of record of Series B Preferred Stock by first class mail, postage
prepaid, at such holder's address as the same appears on the stock records of
the Corporation. Each holder may exercise his right to require the Corporation
to redeem all, but not less than all, of the shares of Series B Preferred Stock
owned by him of record by written notice to the Corporation at the address
specified in the notice of an Event of Redemption. Such notice shall be sent by
first class mail, postage prepaid, within thirty (30) days of receipt by such
holder of the notice of an Event of Redemption.
(b) Shares of Series B Preferred Stock may be
redeemed at the option of the holder by the Corporation on the date specified in
the notice of an Event of Redemption (the "Redemption Date"). The Redemption
Date selected by the Corporation shall be sixty (60) days after the date notice
of an Event of Redemption is sent by the Corporation. As a condition precedent
for such redemption, the Corporation, by resolution of its Board of Directors,
shall declare a mandatory dividend on the Series B Preferred Stock payable in
cash on the Redemption Date in an amount equal to all accumulated, accrued and
unpaid dividends as of the Redemption Date on the Series B Preferred Stock to be
redeemed, which amount shall be added to the redemption price. If the Redemption
Date falls after a dividend payment record date and prior to the corresponding
Dividend Payment Date, then each holder of Series B Preferred Stock at the close
of business on such dividend payment record date shall be entitled to the
dividend payable on such shares on the corresponding Dividend Payment Date,
notwithstanding the redemption of such shares prior to such Dividend Payment
Date. Except as provided above, the Corporation shall make no payment or
allowance for accumulated or accrued dividends on shares of Series B Preferred
Stock to be redeemed.
(c) Neither the failure to mail any notice required
by Subsection 6(a), nor any defect therein or in the mailing thereof, to any
particular holder, shall affect the sufficiency of the notice or the validity of
the proceedings for redemption with respect to the other holders. Any notice
which was mailed in the manner herein provided shall be conclusively presumed to
have been duly given on the date mailed whether or not the holder receives the
notice. Each such mailed notice shall state, as appropriate: (1) the Redemption
Date; (2) the place or places at which certificates for such shares are to be
surrendered; and (3) that dividends on the shares of Series B Preferred Stock to
be redeemed shall cease to accrue on such Redemption Date, except as otherwise
provided herein. Notice having been mailed as aforesaid, from and after the
Redemption Date (unless the Corporation shall fail to issue and make available
at the office of the transfer agent the amount of cash necessary to effect such
redemption, including all accumulated, accrued and unpaid dividends to the
Redemption Date, whether or not earned or declared), (i) except as otherwise
provided herein, dividends on the shares of Series B Preferred Stock to be
redeemed shall cease to accumulate or
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accrue on the shares of Series B Preferred Stock to be redeemed, (ii) said
shares shall no longer be deemed to be outstanding, and (iii) all rights of the
holders thereof as holders of Series B Preferred Stock of the Corporation shall
cease (except the rights to receive the cash payable upon such redemption,
without interest thereon, upon surrender and endorsement of their certificates
if so required and to receive any dividends payable thereon).
As promptly as practicable after the surrender in
accordance with said notice of the certificates for any such shares so redeemed
(properly endorsed or assigned for transfer, if the Corporation shall so require
and if the notice shall so state), such certificates shall be exchanged for cash
(without interest thereon) for which such shares have been redeemed in
accordance with such notice.
SECTION 7. SERIES B PREFERRED STOCK TO BE RETIRED. All shares of
Series B Preferred Stock which shall have been issued and reacquired in any
manner by the Corporation shall be restored to the status of authorized, but
unissued shares of Preferred Stock, without designation as to series. The
Corporation may also retire any unissued shares of Series B Preferred Stock, and
such shares shall then be restored to the status of authorized but unissued
shares of Preferred Stock, without designation as to series.
SECTION 8. RANKING. Any class or series of capital stock of the
Corporation shall be deemed to rank:
(a) prior or senior to the Series B Preferred
Stock, as to the payment of dividends and as to distribution of assets upon
liquidation, dissolution or winding up, if the holders of such class or series
shall be entitled to the receipt of dividends or of amounts distributable upon
liquidation, dissolution or winding up, as the case may be, in preference or
priority to the holders of Series B Preferred Stock;
(b) on a parity with the Series A Cumulative
Convertible Preferred Stock (the "Series A Preferred Stock") and any other stock
designated to be Parity Stock (as defined below), as to the payment of dividends
and as to distribution of assets upon liquidation, dissolution or winding up,
whether or not the dividend rates, dividend payment dates or redemption or
liquidation prices per share thereof be different from those of the Series B
Preferred Stock, if the holders of such class of stock or series and the Series
B Preferred Stock shall be entitled to the receipt of dividends and of amounts
distributable upon liquidation, dissolution or winding up in proportion to their
respective amounts of accrued and unpaid dividends per share or liquidation
preferences, without preference or priority of one over the other ("Parity
Stock"); and
(c) junior to the Series B Preferred Stock, as to
the payment of dividends or as to the distribution of assets upon liquidation,
dissolution or winding up, if such stock or series shall be Common Stock or if
the holder of Series B Preferred Stock shall be entitled to receipt of dividends
or of amounts distributable upon liquidation, dissolution or winding up, as the
case may be, in preference or priority to the holders of shares of such class or
series ("Junior Stock").
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SECTION 9. VOTING.
(a) The holders of Series B Preferred Stock shall
be entitled to one (1) vote per share on all matters submitted to a vote of
shareholders of the Corporation.
(b) The affirmative vote of the holders of
sixty-six and two-thirds percent (66 2/3%) of the votes entitled to be cast by
holders of the Series B Preferred Stock then outstanding, voting as a single
class, in person or by proxy, either in writing without a meeting or by vote at
any meeting called for the purpose, will be required in order to amend the
Certificate of Incorporation or Bylaws to affect materially and adversely the
rights, preferences or voting power of the holders of the Series B Preferred
Stock or to authorize, create or increase the authorized amount of, any class of
stock having rights prior or senior to the Series B Preferred Stock with respect
to the payment of dividends or amounts upon liquidation, dissolution or winding
up. However, the Corporation may create additional classes, shares or series of
Parity Stock with the consent of the holders of a majority of the outstanding
shares of Series B Preferred Stock, and may create classes of Junior Stock,
increase the authorized number of shares of Junior Stock and issue additional
series of Junior Stock, without the consent of any holder of Series B Preferred
Stock.
(c) If and whenever two (2) quarterly dividends
(whether or not consecutive) payable on the Series B Preferred Stock shall be in
arrears (which shall, with respect to any such quarterly dividend, mean that any
such dividend has not been paid in full), whether or not earned or declared, the
number of directors then constituting the Board of Directors shall be increased
by two (2), and the directors then serving shall appoint to the Board of
Directors two (2) persons designated by the holders of a majority of the then
outstanding shares of Series B Preferred Stock. The holders of shares of Series
B Preferred Stock shall thereafter be entitled to designate or elect the two (2)
additional directors to serve on the Board of Directors, by the vote of a
plurality of the votes cast by the holders of the Series B Preferred Stock at an
annual meeting of stockholders or special meeting held in place thereof, or at a
special meeting of the holders of the Series B Preferred Stock called from time
to time for the election of directors. Whenever all arrears in dividends on the
Series B Preferred Stock then outstanding shall have been paid and dividends
thereon for the current quarterly dividend period shall have been paid or
declared and set apart for payment, then the right of the holders of the Series
B Preferred Stock to elect such additional two (2) directors shall cease (but
subject always to the same provision of the vesting of such voting rights in the
case of any similar future arrearage in two (2) quarterly dividends), and the
terms of office of all persons elected as directors by the holders of the Series
B Preferred Stock shall forthwith terminate and the number of the Board of
Directors shall be reduced accordingly. At any time after such voting power
shall have been so vested in the holders of Series B Preferred Stock, if the
Board of Directors fails to appoint the two designees of the holders of the
Series B Preferred Stock, as hereinabove provided, the Secretary of the
Corporation shall, upon the written request of any holder of Series B Preferred
Stock (addressed to the Secretary at the principal office of the Corporation),
call a special meeting of the holders of the Series B Preferred Stock for the
election of the two (2) directors to be elected by them as herein provided, such
call to be made by notice similar to that provided in the Bylaws of the
Corporation for a special meeting of the stockholders or as required by law. If
any such special meeting required to be called, as above provided, shall not be
called by the Secretary within twenty (20) days after receipt of any such
request, then any holder of Series B Preferred Stock may call such
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meeting, upon the notice above provided, and for that purpose shall have access
to the stock books of the Corporation. The directors elected at any such special
meeting shall hold office until the next annual meeting of the stockholders or
special meeting held in lieu thereof if such office shall not have previously
terminated as above provided. If any vacancy shall occur among the directors
elected by the holders of the Series B Preferred Stock, a successor shall be
elected by the Board of Directors, upon the nomination of the then remaining
directors elected by the holders of the Series B Preferred Stock or the
successors of such remaining directors, to serve until the next annual meeting
of the stockholders or special meeting held in place thereof if such office
shall not have previously terminated as above provided. Notwithstanding the
foregoing, the total number of directors designated or elected by the holders of
shares of Series B Preferred Stock, as such, pursuant to this Section 9(c) or by
such holders, as such, or any affiliate of any of them pursuant to any other
agreement or instrument will not exceed two (2), unless such other agreement or
instrument expressly provides for a greater number.
So long as any shares of Series B Preferred Stock are
outstanding, the number of directors of the Corporation shall at all times be
such that the exercise by the holders of shares of Series B Preferred Stock of
the right to designate or elect directors under the circumstance provided in
this Section 9(c) will not contravene any provisions of the Corporation's
Certificate of Incorporation or Bylaws.
SECTION 10. RECORD HOLDERS. The Corporation may deem and treat the
record holder of any share of Series B Preferred Stock as the true and lawful
owner thereof for all purposes, and neither the Corporation nor the Transfer
Agent shall be affected by any notice to the contrary.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
duly executed as of January 21, 1999.
LIFEQUEST MEDICAL, INC.
By:
--------------------------------------------
Randall K. Boatright
Executive Vice President and Chief Financial
Officer