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EXHIBIT 4.1
CERTIFICATE OF DESIGNATION, PREFERENCES
AND RIGHTS OF SERIES A CONVERTIBLE
PREFERRED STOCK
OF
ACCUMED INTERNATIONAL, INC.
ACCUMED INTERNATIONAL, INC., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Company"), by
its President and Secretary, does hereby certify that, pursuant to authority
conferred upon the Board of Directors by Division I of Article Fourth of the
Certificate of Incorporation, as amended, of the Company, authorizing a class of
5,000,000 shares of preferred stock of the Company and pursuant to the
provisions of Section 151 of the Delaware General Corporation Law, as amended,
the Board of Directors of the Company, by Unanimous Written Consent effective as
of February 12, 1998, has duly adopted resolutions providing for the issuance
out of such class of a series of up to 1,221,715 shares of Series A Convertible
Preferred Stock at an issuance price of $4.50 per share (the "Stated Value") and
setting forth the voting powers, designation, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof, which resolution is as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Company in accordance with the provisions of its Certificate of
Incorporation, as amended, there be, and hereby is, created out of the class of
5,000,000 shares of preferred stock of the Company authorized in Division I of
Article Fourth of its Certificate of Incorporation, as amended, a series of
preferred stock of the Company with the following voting powers, designation,
preferences and relative, participating, optional and other special rights, and
qualifications, limitations and restrictions:
1. Designation and Number of Shares.
1,221,715 shares of preferred stock are hereby designated
as Series A Convertible Preferred Stock, par value $0.01 per share (the "Series
A Preferred Stock"). The Stated Value per share of the Series A Preferred Stock
is $4.50.
2. Dividends and Distributions.
(A) If on or prior to June 23, 1998 (the "Registration
Deadline"), the Company shall fail to have an effective registration statement
("Registration Statement") under the Securities Act of 1933, as amended
("Securities Act"), covering the registration of at least one-third of the
shares of Common Stock, $.01 par value per share, of the Company (the "Common
Stock") issuable upon conversion of the Series A Preferred Stock, commencing on
the Registration Deadline, the holders of the Series A Preferred Stock shall be
entitled to receive cumulative dividends on each share of Series A Preferred
Stock, payable in cash, at the rate of 16% per annum (computed on the basis of a
360-day year of twelve 30 day months) per share on the Stated Value of the
Series A Preferred Stock, payable
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quarterly in arrears, until and including such date as such shares of Common
Stock are covered by an effective registration statement under the Securities
Act. Thereafter, the Series A Preferred Stock shall not bear any dividend. Such
dividends shall accrue and accumulate whether or not they have been declared and
whether or not there are profits, surplus or other funds of the Company legally
available for the payment of dividends.
(B) In addition to the foregoing, subject to the prior and
superior rights of the holders of any shares of any series or class of capital
stock ranking prior and superior to the shares of Series A Preferred Stock with
respect to dividends, the holders of shares of Series A Preferred Stock shall be
entitled to receive, as, when and if declared by the Board of Directors of the
Corporation, out of assets legally available for that purpose, dividends or
distributions in cash, stock or otherwise.
(C) The Corporation shall not declare any dividend or
distribution on any Junior Stock (as defined below), unless the Corporation
shall have paid all accrued cumulative dividends on the Series A Preferred Stock
pursuant to Subsection 2(A), if any, and shall, concurrently with the
declaration of such dividend or distribution on the Junior Stock, declare a like
dividend or distribution, as the case may be, on the Series A Preferred Stock in
an amount per share equal to (x) the amount of the dividend or distribution per
share of Junior Stock multiplied by (y) the effective Conversion Rate at the
time of such dividend or distribution.
(D) Any dividend or distribution (other than that
referenced in Subsection 2(A)) payable to the holders of the Series A Preferred
Stock pursuant to this Section 2 shall be paid to such holders at the same time
as the dividend or distribution on the Junior Stock or any other capital stock
of the Corporation by which it is measured is paid.
(E) All dividends or distributions declared upon the
Series A Preferred Stock shall be declared pro rata per share.
(F) Any reference to "distribution" contained in this
Section 2 shall not be deemed to include any distribution made in connection
with or in lieu of any Liquidation (as defined below).
(G) "Junior Stock" shall mean the Common Stock and any
shares of preferred stock or any series or class of the Corporation, whether
presently outstanding or hereafter issued, which are junior to the shares of
Series A Preferred Stock with respect to (i) the distribution of assets on any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, (ii) dividends or (iii) voting.
(H) In the event of a split or subdivision of the
outstanding shares of Series A Preferred Stock, or the combination or the
outstanding shares of Series A Preferred Stock, as the case may be, the
dividends provided for in this Section 2 shall automatically and without any
further action be decreased, in the case of a split or subdivision, or
increased, in the case of a combination, in proportion to the increase or
decrease in the number of shares of Series A Preferred Stock outstanding
immediately before such split, subdivision or combination.
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3. Redemption. The Series A Preferred Stock is not redeemable.
4. Liquidation
Upon any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary ("Liquidation"), the holders of record
of the shares of the Series A Preferred Stock shall be entitled to receive,
before and in preference to any distribution or payment of assets of the Company
or the proceeds thereof may be made or set apart for the holders of Common Stock
or any other security junior to the Series A Preferred Stock in respect of
distributions upon Liquidation out of the assets of the Company legally
available for distribution to its stockholders, an amount in cash equal to the
Stated Value per share (subject to adjustment if the Series A Preferred Stock
has been adjusted pursuant to Paragraph 2 hereof) plus an amount equal to
accrued and unpaid dividends, if any, on each share of Series A Preferred Stock
on the date fixed for the distribution of assets of the Company (the
"Liquidation Preference"). If, upon such Liquidation, the assets of the Company
available for distribution to the holders of Series A Preferred Stock and any
other series of preferred stock then outstanding ranking on parity with the
Series A Preferred Stock upon liquidation ("Parity Stock") shall be insufficient
to permit payment in full to the holders of the Series A Preferred Stock and
Parity Stock, then the entire assets and funds of the Company legally available
for distribution to such holders and the holders of the Parity Stock then
outstanding shall be distributed ratably among the holders of the Series A
Preferred Stock and Parity Stock based upon the proportion the total amount
distributable on each share upon liquidation bears to the aggregate amount
available for distribution on all shares of the Series A Preferred Stock and of
such Parity Stock, if any. A merger or consolidation shall be considered a
Liquidation except in the event that in such a transaction, the holders of the
Series A Preferred Stock receive securities of the surviving corporation having
substantially similar rights as the Series A Preferred Stock and the
stockholders of the Company immediately prior to such transaction are holders of
at least a majority of the voting securities of the surviving corporation
immediately thereafter. Notwithstanding Section 7 hereof, such provision may be
waived in writing by a majority of the holders of the then outstanding Series A
Preferred Stock.
5. Priority.
(A) So long as any shares of Series A Preferred Stock
shall be outstanding, no dividends, whether in cash or property, shall be paid
or declared, nor shall any other distribution be made, on the Common Stock of
the Company or any other security junior to the Series A Preferred Stock as to
dividend rights, unless all dividends on the Series A Preferred Stock for all
past quarterly dividend periods and the full dividends for the then current
quarterly period shall have been paid or declared and duly provided for. The
provisions of this Section 5 shall not, however, apply to a dividend payable in
Common Stock or any other security of the Company junior to the Series A
Preferred Stock. If any dividend previously due on the Series A Preferred Stock
has not been paid in full, then no dividends shall be paid or declared upon any
shares of any class or series of stock of the Company ranking on a parity with
the Series A Preferred Stock in the payment of dividends for any period unless a
like proportionate dividend for the current period, ratably in proportion to the
respective annual dividend rates fixed thereupon, if any, have been paid upon or
declared for the Series A Preferred Stock then issued and outstanding.
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(B) The Company may issue, in the future, without the
consent of holders of the Series A Preferred Stock, other series of preferred
stock which rank on parity with or junior to the Series A Preferred Stock as to
dividend and/or liquidation rights. In accordance with Paragraph 7(C) hereof,
the consent of the holders of two-thirds of the outstanding shares of the Series
A Preferred Stock is required for the issuance of any series of preferred stock
which is senior as to dividend and/or liquidation rights to the Series A
Preferred Stock.
6. Conversion Rights.
Each holder of record of shares of the Series A Preferred
Stock shall have the right to convert all or any part of such holder's shares of
Series A Preferred Stock into Common Stock as follows:
(A) Voluntary Conversion. Each share of the Series A
Preferred Stock shall be convertible, at the option of the respective holders
thereof, at any time after the date of issuance, at the office of any transfer
agent for the Series A Preferred Stock, or if there is none, then at the office
of the transfer agent for the Common Stock, or if there is no such transfer
agent, at the principal executive office of the Company, into that number of
fully paid and non-assessable shares of Common Stock of the Company equal to the
Stated Value divided by the conversion price in effect at the time of conversion
(the "Conversion Price"), determined as hereinafter provided. The Conversion
Price shall initially be $1.125. The number of shares of Common Stock into which
each share of Series A Preferred Stock is convertible is hereinafter
collectively referred to as the "Conversion Rate." Dividends accrued and payable
at the time of conversion, if any, shall be paid in cash. For purposes of this
Paragraph 6(A), such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Series A Preferred Stock to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date.
(B) Automatic Conversion. During the six year period
commencing on February 23, 1998 if (i) the current market price (as determined
in accordance with Paragraph 6(G)(ii)) of the Company's Common Stock equals or
exceeds $4.50 per share and (ii) a registration statement covering the shares of
Common Stock issuable upon conversion of the Series A Preferred Stock has been
declared effective under the Securities Act, each share of Series A Preferred
Stock then outstanding shall, at the option of the Company upon 20 days' prior
written notice to each holder of record, by virtue of such conditions and
without any action on the part of the holder thereof, be deemed automatically
converted into that number of shares of Common Stock into which the Series A
Preferred Stock would then be converted at the then effective Conversion Rate.
(C) Mechanics of Conversion. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Company or of any transfer agent for the
Series A Preferred Stock, and shall give written notice to the Company at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Company shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A
Preferred Stock, or to
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the nominee or nominees of such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of Series A
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date.
(D) All Common Stock which may be issued upon conversion
of the Series A Preferred Stock will, upon issuance, be duly issued, fully paid
and non-assessable and free from all taxes, liens, and charges with respect to
the issuance thereof. At all times that any shares of Series A Preferred Stock
are outstanding, the Company shall have authorized and shall have reserved for
the purpose of issuance upon such conversion into Common Stock of all Series A
Preferred Stock, a sufficient number of shares of Common Stock to provide for
the conversion of all outstanding shares of Series A Preferred Stock at the then
effective Conversion Rate. Without limiting the generality of the foregoing, if,
at any time, the Conversion Price is decreased, the number of shares of Common
Stock authorized and reserved for issuance upon the conversion of the Series A
Preferred Stock shall be proportionately increased.
(E) The Conversion Price shall be subject to adjustment
from time to time as follows:
(i) In case the Company shall (a) issue Common
Stock as a dividend or distribution on any class of the capital stock of the
Company, (b) split or otherwise subdivide its outstanding Common Stock, (c)
combine the outstanding Common Stock into a smaller number of shares, or (d)
issue by reclassification of its Common Stock (except in the case of a merger,
consolidation or sale of all or substantially all of the assets of the Company
as set forth in subparagraph 6(E)(ii) below) any shares of the capital stock of
the Company, the Conversion Price in effect on the record date for any stock
dividend or the effective date of any such other event shall be increased (or
decreased in the case of a reverse stock split) so that the holder of each share
of the Series A Preferred Stock shall thereafter be entitled to receive, upon
the conversion of such share, the number of shares of Common Stock or other
capital stock which it would own or be entitled to receive immediately after the
happening of any of the events mentioned above had such share of the Series A
Preferred Stock been converted immediately prior to the close of business on
such record date or effective date. The adjustments herein provided shall become
effective immediately following the record date for any such stock dividend or
the effective date of any such other events. There shall be no reduction in the
Conversion Price in the event that the Company pays a cash dividend.
(ii) In case of any reclassification or similar
change of outstanding shares of Common Stock of the Company, or in case of the
consolidation or merger of the Company with another corporation, or the
conveyance of all or substantially all of the assets of the Company in a
transaction in which holders of the Common Stock receive shares of stock or
other property including cash, each share of the Series A Preferred Stock shall,
after such event and subject to the other rights of the Series A Preferred Stock
as set forth elsewhere herein, be convertible only into the number of shares of
stock or other securities or property, including cash, to which a holder of the
number of shares of Common Stock of the Company deliverable upon conversion of
such shares of the Series A Preferred
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Stock would have been entitled upon such reclassification, change consolidation,
merger or conveyance had such share been converted immediately prior to the
effective date of such event.
(iii) No adjustment in the Conversion Price or the
number of shares of Common Stock into which a share of Series A Preferred Stock
may be converted shall be required unless such adjustment (plus any adjustments
not previously made by reason of this subparagraph (iii)) would require an
increase or decrease of at least 1 1/2% in the number of shares of Common Stock
into which each share of the Series A Preferred Stock is then convertible;
provided, however, that any adjustments which are not required to be made by
reason of this subparagraph (iii) shall be carried forward and taken into
account in any subsequent adjustment. All calculations and adjustments shall be
made to the nearest cent or to the nearest 1/100th of a share, as the case may
be.
(iv) After each adjustment of the Conversion Price
the Company shall promptly prepare a certificate signed by its Chairman or Chief
Financial Officer and a Secretary or Assistant Secretary setting forth the
Conversion Price, as so adjusted; the number of shares of Common Stock into
which the Series A Preferred Stock may be converted, and a statement of the
facts upon which such adjustment is based, and such certificate shall forthwith
be filed with the transfer agent, if any, for the Series A Preferred Stock, and
the Company shall cause such a copy of statement to be sent by ordinary first
class mail to each holder of record of Series A Preferred Stock.
(F) The Company shall at all times reserve and keep
available, out of its authorized but unissued shares of Common Stock or out of
shares of Common Stock held in its treasury, solely for the purpose of effecting
the conversion of the shares of the Series A Preferred Stock, the full number of
shares of Common Stock deliverable upon the conversion of all shares of the
Series A Preferred Stock from time to time outstanding. The Company shall from
time to time in accordance with Delaware law take all steps necessary to
increase the authorized amount of its Common Stock if at any time the authorized
number of shares of Common Stock remaining unissued shall not be sufficient to
permit the conversion of all of the shares of the Series A Preferred Stock.
(G)(i) No fractional shares or scrip representing
fractional shares of Common Stock shall be issued upon the conversion of the
Series A Preferred Stock. In lieu of any fractional shares to which a holder
would otherwise be entitled, the Company shall pay cash, equal to such fraction
multiplied by the current market price per share (determined as provided in
subparagraph (ii) of this Paragraph 6(G)) of the Common Stock on the day of
conversion.
(ii) For the purposes of any computation under this
Section 6, the current market price per share of Common Stock on any date shall
be deemed to be the average of the closing prices for the 20 consecutive trading
days commencing 45 business days before the day in question. The closing price
for each day shall be the last reported sales price regular way or in case no
sale takes place on such day, the average of the closing high bid and low asked
prices regular way, in either case (a) as officially quoted by the Nasdaq Small
Capitalization Market or the Nasdaq National Market, as the case may be, or (b)
if, in the reasonable judgment of the Board of Directors of the Company, the
Nasdaq Small Capitalization Market or the Nasdaq National Market is no longer
the principal United States market for the Common Stock, then as quoted on the
principal United States market for the Common Stock, as determined by the Board
of Directors of the Company, or (c) if, in the reasonable judgment
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of the Board of Directors of the Company, there exists no principal United
States market for the Common Stock, then as reasonably determined by the Board
of Directors of the Company.
(H) The Company will pay any taxes that may be payable in
respect of any issue or delivery of shares of Common Stock on conversion of
shares of the Series A Preferred Stock. However, the Company shall not be
required to pay any tax which may be payable in respect to any transfer involved
in the issue and delivery of shares of Common Stock upon conversion in a name
other than that in which the shares of the Series A Preferred Stock so converted
were registered, and no such issue or delivery shall be made unless and until
the person requesting such issue or delivery has paid to the Company the amount
of any such tax, or has established, to the satisfaction of the Company, that
such tax has been paid.
(I) The Company will not, by amendment of its Certificate
of Incorporation, as amended, or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Section 6 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
holders of the Series A Preferred Stock against impairment.
7. Voting Rights. The holders of the Series A Preferred Stock
shall have no right to vote for any purpose, except as specifically required by
the General Corporation Law of the State of Delaware and except as follows:
(A) So long as any shares of the Series A Preferred Stock
remain outstanding, the affirmative vote of the holders of a majority of the
then outstanding shares of Series A Preferred Stock, voting as a single class,
together with any other series of preferred stock then entitled to vote on such
matter, regardless of series, either expressed in writing or at a meeting called
for that purpose, shall be necessary to permit, effect or validate the creation
and issuance of any series of preferred stock of the Company which is senior as
to liquidation and/or dividend rights to the Series A Preferred Stock.
(B) So long as any shares of the Series A Preferred Stock
remain outstanding, the affirmative vote of the holders of a majority of the
then outstanding shares of Series A Preferred Stock, voting as one class
together with any other series of the Company's preferred stock then entitled to
vote on such matter, regardless of series, either expressed in writing or at a
meeting called for that purpose, shall be necessary to repeal, amend or
otherwise change this Certificate of Designation, Preferences and Rights or the
Certificate of Incorporation of the Company in a manner which would alter or
change the powers, preferences or rights of the Series A Preferred Stock so as
to adversely affect the Series A Preferred Stock. However, in case the Series A
Preferred Stock would be affected by any action referred to in this Paragraph
7(B) in a different manner than any other series of preferred stock then
outstanding, the holders of the shares of the Series A Preferred Stock shall be
entitled to vote as a single and separate class, and the Company shall not take
such action without the affirmative vote, as above provided, of at least a
majority of the total number of shares of the Series A Preferred Stock then
outstanding, in addition to or as a specific part of the consent or affirmative
vote hereinabove otherwise required.
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(C) So long as any shares of the Series A Preferred Stock
remain outstanding, the affirmative vote of the holders of a majority of the
then outstanding shares of Series A Preferred Stock, voting as one class
together with any other series of the Company's preferred stock then entitled to
vote on such matter, regardless of series, either expressed in writing or at a
meeting called for that purpose, shall be necessary to permit the Company to
incur any indebtedness whatsoever which indebtedness does not expressly provide
that no payments will be made on such indebtedness (except for regularly
scheduled interest payments) while the Series A Preferred Stock is outstanding,
except for the incurrence of $5,000,000 principal amount of bank debt and
$500,000 principal amount of intercompany indebtedness and except for the
incurrence of any indebtedness (including without limitation, the incurrence of
any guarantee or contingent payment obligation with respect thereto) secured by
a lien, mortgage or guarantee on the property (whether real or personal) or
equipment of the Company and any refinancings or replacements thereto or trade
debt incurred in the ordinary course of business.
(D) Each share of the Series A Preferred Stock shall
entitle the holder thereof to one vote on all matters to be voted on by the
holders of the Series A Preferred Stock, as set forth above. However, if the
Series A Preferred Stock is entitled to vote, together with the holders of
Common Stock as one class, then each share of Series A Preferred Stock shall
entitle the holder thereof to the number of votes per share that equals the
number of whole shares of Common Stock into which each such share of Series A
Preferred Stock is then convertible, calculated to the nearest one share.
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8. Miscellaneous.
(A) All shares of the Series A Preferred Stock purchased
or otherwise acquired by the Company or surrendered to it for conversion into
Common Stock as provided above shall be cancelled and shall be restored to the
status of authorized but unissued preferred stock of the Company.
(B) There is no sinking fund with respect to the Series A
Preferred Stock.
(C) The shares of the Series A Preferred Stock shall not
have any preferences, voting powers or relative, participating, optional,
preemptive or other special rights except as set forth above in this Certificate
of Designation, Preferences and Rights and in the Certificate of Incorporation
of the Company, as amended.
(D) The holders of record of the Series A Preferred Stock
shall be entitled to receive all communications sent by the Company to the
holders of the Common Stock, sent by regular U.S. mail to such holder's address
as set forth in the records of the registrar for the Series A Preferred Stock.
IN WITNESS WHEREOF, AccuMed International, Inc. has caused this
Certificate to be signed by Paul F. Lavallee, its Chairman, Chief Executive
Officer and President, on this 23rd day of February, 1998, and such person
hereby affirms under penalty of perjury that this Certificate is the act and
deed of AccuMed International, Inc. and that the facts stated herein are true
and correct.
ACCUMED INTERNATIONAL, INC.
By: /s/ PAUL F. LAVALLEE
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Paul F. Lavallee, Chairman, Chief
Executive Officer and President
Attest:
/s/ JOYCE WALLACH
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Joyce L. Wallach, Secretary
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