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Exhibit 4.2
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Prescribed by Charter No.___________
Bob Taft, Secretary of State ----------------------
30 East Broad Street, 14th Floor Approved _____________
[LOGO] Columbus, Ohio 43266-0418 Date__________________
Form C-107 (January 1991) Fee
CERTIFICATE OF AMENDMENT
BY DIRECTORS OF
NETMED, INC.
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(Name of Corporation)
David J. Richards , who is:
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X Chairman of the Board President Vice President (check one)
- --- --- ---
and
William J. Kelly, Jr. ,who is: X Secretary Assistant Secretary (check one)
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of the above named Ohio corporation for profit do hereby certify that:
___ a meeting of the Board of Directors called and held on the ______ day of
_____ 19_____,
_X_ in a writing signed by all the Directors pursuant to Section 1701.54 of the
Ohio Revised Code.
the following resolution was adopted pursuant to Section 1701.70(B)(1) of the
Ohio Revised Code:
RESOLVED, that pursuant to the authority granted to the Directors in
Division C of Article FOURTH of the Articles of Incorporation with
respect to the adoption of amendments to the Articles of Incorporation
to provide for the issuance of one or more series of Voting Preferred
Stock, Division C of Article FOURTH of the Articles of Incorporation be
amended to add the designation of the relative rights, preferences and
other terms of a new series of 100,000 shares of Voting Preferred Stock
to be known as the "Series A, 6% Convertible Preferred Stock," as
provided in Exhibit A hereto.
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IN WITNESS WHEREOF, the above named officers, acting for and on behalf
of the corporation, have hereunto subscribed their names this 29th day of
October, 1998.
BY:
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David J. Richards, President
BY:
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William J. Kelly, Jr., Secretary
NOTE: Ohio law does not permit one officer to sign in two capacities. Two
separate signatures are required even if this necessitates the election of a
second officer before the filing can be made.
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Exhibit A
1. Series A 6% Convertible Preferred Stock. The Voting Preferred Stock
shall include a series of 100,000 shares, without par value, and with a stated
value of [$15.02] per share (the "STATED VALUE"), designated as the "Series A,
6% Convertible Preferred Stock," issued pursuant to the terms of an Exchange
Agreement dated October 27, 1998 ("EXCHANGE AGREEMENT") with the following
relative rights, preferences, powers, restrictions and limitations.
a. DIVIDENDS.
The holders of the then outstanding shares of Series A, 6%
Convertible Preferred Stock (hereinafter, "PREFERRED STOCK") shall be entitled
to receive, out of funds legally available therefor, annual dividends at annual
rate per share equal to six percent (6%) of the Stated Value. Such dividends
shall be deemed to accrue on the Preferred Stock beginning November 1, 1998, and
be cumulative, whether or not there are profits, surplus or other funds of the
Corporation legally available for the payment of dividends. If there shall not
have been a sum sufficient for the payment therefor set apart, the deficiency
shall first be paid before any dividend or other distribution shall be paid or
declared and set apart with respect to any class of the Corporation's capital
stock, now or hereafter outstanding. The accrued dividends shall be due and
payable, upon conversion of the Preferred Stock as set forth herein, in cash or,
at the option of the Corporation, in unrestricted, registered shares of common
stock of the Corporation, without par value (the "COMMON STOCK") at the
applicable Conversion Price (as defined below). The date the Corporation pays
dividends to the holders of the Preferred Stock shall be deemed a "Dividend
Date". Notwithstanding the foregoing, the Corporation shall not declare or pay a
dividend on the Common Stock prior to the Dividend Date.
b. LIQUIDATION, DISSOLUTION OR WINDING UP
(i) In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, before any distribution
may be made with respect to the Common Stock or any other series of capital
stock, holders of each share of Preferred Stock shall be entitled to be paid out
of the assets of the Corporation available for distribution to holders of the
Corporation's capital stock of all classes, whether such assets are capital,
surplus, or capital earnings, an amount per share of Preferred Stock equal to
the Stated Value plus the amount of any accrued and unpaid dividends (the
"LIQUIDATION AMOUNT").
(ii) If the assets of the Corporation available for
distribution to its shareholders shall be insufficient to pay the holders of
shares of Preferred Stock the full amount of the Liquidation Amount to which
they shall be entitled, the holders of shares of Preferred Stock shall share
ratably in any distribution of assets according to the amounts which would be
payable with respect to the shares of Preferred Stock held by them upon such
distribution if all amounts payable on or with respect to said shares were paid
in full.
(iii) After the payment of the Liquidation Amount shall have
been made in full to the holders of the Preferred Stock or funds necessary for
such payment shall have been set aside by the Corporation in trust for the
account of holders of the Preferred Stock so as to be available for such
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payments, the holders of the Preferred Stock shall be entitled to no further
participation in the distribution of the assets of the Corporation, and the
remaining assets of the Corporation legally available for distribution to its
shareholders shall be distributed among the holders of other classes of
securities of the Corporation in accordance with their respective terms.
(iv) The Liquidation Amount shall in all events be paid in cash.
c. CONVERSION RIGHTS FOR THE PREFERRED STOCK. The holders of the
Preferred Stock shall have following rights with respect to the conversion of
the Preferred Stock into shares of Common Stock:
(i) Conversion Price. Subject to and in compliance with the provisions
of this Section 1. c., shares of the Preferred Stock may, at the option of the
holder, be converted into the number of fully paid and non-assessable shares of
Common Stock obtained by dividing the Stated Value plus all accrued but unpaid
dividends per share of Preferred Stock, by the Conversion Price. "CONVERSION
PRICE" means an amount equal to the lesser of (a) seventy-five percent (75%) of
the average closing bid price per share of the Common Stock as reported by the
principal exchange or interdealer quotation system on which the securities are
listed or quoted ("CLOSING BID PRICE") for the three (3) trading days
immediately preceding the Conversion Date, or (b) $6.23. "Conversion Date" means
the date on which the holder has telecopied a notice of conversion to the
Corporation in the form attached to the Exchange Agreement as Exhibit B ("NOTICE
OF CONVERSION") as provided in paragraph (v) of this Section 1. c.
(ii) Capital Reorganization or Reclassification. If the Common Stock
issuable upon the conversion of the Preferred Stock shall be changed into the
same or different number of shares of any class or classes of stock, whether by
capital reorganization, reclassification or otherwise, then and in each such
event, the holder of each share of Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of shares of stock and
other securities and property receivable upon such capital reorganization,
reclassification or other change which such holder would have received had its
shares of Preferred Stock been converted immediately prior to such capital
reorganization, reclassification or other change.
(iii) Capital Reorganization, Merger or Sale of Assets. If at any time
or from time to time there shall be a capital reorganization of the Common Stock
(other than a subdivision, combination, reclassification or exchange of shares
provided for elsewhere in this Section 1. c.) or a merger or consolidation of
the Corporation with or into another corporation, or the sale of all or
substantially all of the Corporation's properties and assets to any other
person, or any transaction or series of related transactions in which more than
fifty percent (50%) of the outstanding voting securities of the Corporation (on
an as converted basis) is sold or assigned (any of which events is herein
referred to as a "Reorganization"), then as a part of such Reorganization,
provision shall be made so that the holders of the Preferred Stock shall
thereafter be entitled to receive upon conversion of the Preferred Stock, the
number of shares of stock or other securities or property of the Corporation, or
of the successor corporation resulting from such Reorganization, to which such
holder would have been entitled if such holder had converted its shares of
Preferred Stock immediately prior to such Reorganization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 1. c. with respect to the rights of the holders of the Preferred
Stock after the Reorganization, to the end that the
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provisions of this Section 1 (including adjustment of the number of shares
issuable upon conversion of the Preferred Stock) shall be applicable after that
event in as nearly equivalent a manner as may be practicable.
(iv) Certificate as to Adjustments; Notice by Corporation. Upon the
occurrence of each adjustment or readjustment of the Conversion Price of the
Preferred Stock, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of such Preferred Stock a certificate executed by the
president and chief financial officer (or in the absence of a person designated
as the chief financial officer, by the treasurer) setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment are based. The Corporation shall, within five business days after
receipt of a written request (via facsimile) at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a certificate
setting forth (A) the Conversion Price at the time in effect, and (B) the number
or shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Preferred Stock.
(v) Exercise of Conversion Privilege. Conversion of shares of Preferred
Stock to Common Stock may be effected in whole or in part by the holder
telecopying an executed and completed Notice of Conversion to the Corporation
not later than 5:00 p.m. Eastern Time on any business day, and delivering to the
Corporation at its principal office the original Notice of Conversion and the
certificate(s) representing the shares of Preferred Stock being converted by
express courier within three (3) business days thereafter. Such notice shall
also state the name or names (with address or addresses) in which the
certificate or certificates for shares of Common Stock issuable upon such
conversion shall be issued. The certificate or certificates for shares of
Preferred Stock surrendered for conversion shall be accompanied by proper
assignment thereof to the Corporation or in blank. The date on which a Notice of
Conversion is telecopied to the Corporation in accordance with the provisions
hereof shall be deemed a "CONVERSION DATE". Within five business days after the
delivery to the Corporation of the original Notice of Conversion and the
certificates representing the shares of Preferred Stock being converted, the
Corporation shall issue and shall deliver to the holder of the shares of
Preferred Stock being converted, or on its written order, such certificate or
certificates as it may request for the number of whole shares of Common Stock
issuable upon the conversion of such shares of Preferred Stock in accordance
with the provisions of this Section 5, and cash, as provided in Section 1. c.
(vi), in respect of any fraction of a share of Common Stock issuable upon such
conversion. Such conversion shall be deemed to have been effected immediately
prior to the close of business on the Conversion Date. The rights of the holder
as holder of the converted shares of Preferred Stock shall cease upon the
issuance and delivery of the Common Shares upon conversion and the person or
persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares of Common Stock represented
thereby. The Corporation shall pay any taxes payable with respect to the
issuance of Common Stock upon conversion of the Preferred Stock, other than any
taxes payable with respect to income by the holders thereof. In the event the
shares of Common Stock are not delivered by the Corporation to the holder within
the five business day period specified in this paragraph, the Corporation shall
pay by wire transfer to such holder, as liquidated damages and not as a penalty,
the sum of $1,000 for each day thereafter that the shares are not delivered.
(vi) Cash in Lieu of Fractional Shares. In lieu of issuing fractional
shares of Common Stock which may become due upon conversion of the Preferred
Stock, the Corporation shall pay to the
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holder of the shares of Preferred Stock which were converted in cash in respect
of such fractional shares an amount equal to the same fraction of the market
price per share of the Common Stock (as determined in a reasonable manner
prescribed by the Board of Directors) on the close of business on the Conversion
Date. The determination as to whether any fractional shares are issuable shall
be based upon the total number of shares of Preferred Stock being converted at
any one time by any holder thereof, not upon each share of Preferred Stock being
converted.
(vii) Partial Conversion. In the event some but not all of the shares
of Preferred Stock represented by a certificate or certificates surrendered by a
holder are converted, the Corporation shall execute and deliver to or on the
order of the holder, at the expense of the Corporation, a new certificate
representing the number of shares of Preferred Stock which were not converted.
(viii) Reservation of Common Stock. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Preferred Stock, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of the
Preferred Stock, and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Preferred Stock, the Corporation shall take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
d. MANDATORY CONVERSION/REDEMPTION RIGHTS.
(i) Mandatory Conversion. The Corporation has the right to
require the holders to convert the Preferred Stock, pursuant to this Section 1
d. (i), in the event both of the following conditions are satisfied: (a) the
average of the Closing Price of the Common Stock is equal to or greater than
$9.35 for ten consecutive trading days (as adjusted for any split or combination
of shares), and (b) the average daily trading volume of the Common Stock for the
thirty (30) trading days immediately preceding the business date the holder
receives, via facsimile, the mandatory conversion notice from the Corporation is
equal to or greater than thirty-five thousand (35,000) shares per trading day,
non-inclusive of trading volume created by sales of Common Stock by the holders,
if any, of Preferred Stock. The Corporation shall provide the holders of the
Preferred Stock written notice of any election under this Section 1 d. (i) via
facsimile, and the date on which such notice is received by the holders shall
constitute a "Conversion Date," and the applicable "Conversion Price" will be
calculated under Section 1 c. (i) as of such date. As promptly as practicable
after the Conversion Date, the holders shall surrender the remaining
certificates for shares of Preferred Stock, be accompanied by proper assignment
thereof to the Corporation or in blank, and the Corporation shall issue to the
holders certificates for the shares of Common Stock issuable on such conversion
in accordance with the delivery requirements set forth in the Purchase
Agreement, and any cash in lieu of fractional shares. Such conversion shall be
deemed to have been effected immediately prior to the close of business on the
Conversion Date, and the rights of a holder as holder of the converted shares of
Preferred Stock shall cease upon the issuance and delivery of the Common Shares
upon such mandatory conversion and the person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the shares of Common Stock represented thereby. The Corporation shall
only be able to require conversion of the Preferred Stock pursuant to the terms
of this Section if the shares of Common Stock issuable
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pursuant to such mandatory conversion are included in an effective registration
statement and no transfer restrictions apply thereto. The Corporation must
require conversion of the Preferred Stock pro rata among all of the holders of
the Preferred Stock at such time. Notwithstanding the foregoing, in no event
shall the Company be permitted to force conversion of any share or shares of
Preferred Stock which would result in such holder of the Preferred Stock being
deemed a beneficial owner, in accordance with the provisions of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended, of 4.99% or more of the then
issued and outstanding shares of Common Stock of the Company.
(ii) Redemption Right. The Corporation has the right to redeem the
Preferred Stock, in total or in part, in cash upon the simultaneous wire
transfer to the holders (per share of Preferred Stock) of one hundred twenty
five percent (125%) of the Stated Value of each share of Preferred Stock to be
redeemed, plus all accrued and unpaid dividends due on each share(s) of
Preferred Stock to be redeemed (the "REDEMPTION PRICE") and service on any
business day of a written notice upon the holders of the Preferred Stock of its
election to redeem the Preferred Stock. Upon receipt of the aforementioned
notice and the appropriate Redemption Price, the holders of the Preferred Stock
shall immediately forward to the Corporation, via reputable overnight courier,
the shares of Preferred Stock which are the subject of the redemption. The
Corporation may only send a notice of redemption if at such time it also sends
to the holders of the Preferred Stock immediately available funds specifically
for such purpose. The Corporation must redeem the Preferred Stock pro rata among
all of the holders of the Preferred Stock at such time.
(iii) Surrender of Certificates. Each holder of shares of Preferred
Stock to be redeemed under Section 1. d. (ii) shall surrender the certificate or
certificates representing such shares to the Corporation at the place designated
in the applicable redemption notice upon receipt of the aforementioned notice of
redemption and Redemption Price. The Corporation shall fund all redemptions made
pursuant to this Section 1. d. (ii) by wire transfer of same day funds to the
accounts provided by the holders of the Preferred Stock. Irrespective of whether
the certificates therefor shall have been surrendered, all shares of Preferred
Stock which are subject to redemption under this Section 1. d. (ii) shall be
deemed to have been redeemed and shall be canceled effective as of the business
day in which the holders of the Preferred Stock receive the notice of redemption
and the Redemption Price, unless the Corporation shall default in the payment of
the applicable redemption price.
e. RESTRICTIONS AND LIMITATIONS.
(i) Corporate Securities Action. Except as expressly provided herein or
as required by law, so long as any shares of Preferred Stock remain outstanding,
the Corporation shall not, and shall not permit any subsidiary (which shall mean
any corporation, association or other business entity which the Corporation
and/or any of its other subsidiaries directly or indirectly owns at the time
more than fifty percent (50%) of the outstanding voting shares, or more than 50%
of the combined voting power of the outstanding voting shares, of such
corporation or trust) to, without the approval by vote or written consent by the
holders of at least a majority of the then outstanding shares of Preferred
Stock, voting as a separate class: (i) to amend the Corporation's articles of
incorporation and bylaws and (ii) take any action, or fail to take any action,
which would result in a breach of this Certificate of Amendment, the Purchase
Agreement (including any agreement annexed thereto), or the Exchange Agreement
(including any agreement annexed thereto)or adversely affect the rights of the
holders of Preferred Stock.
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(ii) Amendments to Articles of Incorporation. Without limiting the
generality of the preceding paragraph, the Corporation shall not amend its
articles of incorporation without the approval by the holders of at least a
majority of the then outstanding shares of Preferred Stock if such amendment
would:
(A) change the relative seniority rights of the holders of
Preferred Stock as to the payment of dividends in relation to the holders of any
other capital stock of the Corporation, or create any other class or series of
capital stock entitled to seniority as to the payment of dividends in relation
to the holders of Preferred Stock;
(B) reduce the amount payable to the holders of Preferred Stock
upon the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, or change the relative seniority of the liquidation preferences of
the holders of Preferred Stock to the rights upon liquidation of the holders of
other capital stock of the Corporation, or change the dividend rights of the
holders of Preferred Stock;
(C) cancel or modify the conversion rights of the holders of
Preferred Stock provided for in Section 1. c. herein; or
(D) cancel or modify the rights of the holders of the Preferred
Stock provided for in this Section 1. e.
(iii) No Reissuance. The Corporation shall not reissue any shares of
Preferred Stock which have been canceled by the Corporation through either
conversion, redemption or otherwise.
f. NO DILUTION OR IMPAIRMENT. The Corporation shall not, by amendment of
its Articles of Incorporation or through any reorganization, 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 of the Preferred Stock set forth herein, but shall at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate in order to protect the rights
of the holders of the Preferred Stock against dilution or other impairment.
Without limiting the generality of the foregoing, the Corporation (i) shall not
increase the par value of any shares of stock receivable on the conversion of
the Preferred Stock above the amount payable therefor on such conversion, (ii)
shall take all such action as may be necessary or appropriate in order that the
Corporation may validly and legally issue fully paid and nonassessable shares of
stock on the conversion of all Preferred Stock from time to time outstanding,
and (iii) shall not consolidate with or merge into any other person or permit
any such person to consolidate with or merge into the Corporation (if the
Corporation is not the surviving person), unless such other person shall
expressly assume in writing and will be bound by all of the terms of the
Preferred Stock set forth herein.
g. NOTICES OF RECORD DATE. In the event of:
(i) any taking by the Corporation of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
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(ii) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger of the Corporation, or any transfer of all or substantially all of
the assets of the Corporation to any other corporation, or any other entity or
person, or
(iii) any voluntary or involuntary dissolution, liquidation or winding
up of the Corporation,
then and in each such event the Corporation shall mail or cause to be mailed to
each holder of Preferred Stock a notice specifying (A) the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right and a description of such dividend, distribution or right, (B) the date on
which any such reorganization, reclassification, recapitalization, transfer,
merger, dissolution, liquidation or winding up is expected to become effective
and (C) the time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) shall be entitled to exchange their shares
of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
transfer, merger, dissolution, liquidation or winding up. Such notice shall be
mailed at least twenty (20) business days prior to the date specified in such
notice on which such action is to be taken.