Exhibit 10.08
RESTATED CERTIFICATE OF DESIGNATIONS
AND THE TERMS AND CONDITIONS
AND RELATIVE RIGHTS AND PREFERENCES
OF SERIES AA PREFERRED STOCK
of
SPARTA SURGICAL CORPORATION
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
I, Thomas F. Reiner, President and Chairman of the Board of Sparta Surgical
Corporation, a Delaware corporation (the "Corporation"), in accordance with
Section 103 of the General Corporation Law of the State of Delaware, do hereby
certify that pursuant to authority conferred upon the Corporation's Board of
Directors by the Restated Certificate of Incorporation, as filed in the office
of the Secretary of State of Delaware and recorded in the office of the Recorder
for the County of New Castle, Delaware, the Corporation's Board of Directors, by
unanimous written consent dated February 11th, 1999, adopted the following
resolution to restate the Certificate of Designations and the Terms and
Conditions and Relative Rights and Preferences of the series of preferred stock
designated as Series AA Preferred Stock:
RESOLVED, that under the authority vested in the Corporation's Board of
Directors pursuant to the Restated Certificate of Incorporation of the
Corporation, that the Certificate of Designations and the Terms and Conditions
and Relative Rights and Preferences respecting the series of preferred stock
designated as Series AA Preferred Stock, $4.00 par value per share, shall be
restated such that the powers, preferences and relative, participating,
optional, redemption and other special rights, and the qualifications,
limitations and restrictions of the shares of such series of preferred stock are
as follows:
(1) Designation and Stated Value. 875,000 shares of Preferred Stock, par
value $4.00 per share, of the Corporation are hereby constituted as a series
designated as "Series AA Preferred Stock" (hereinafter called "Series AA
Preferred Stock").
(2) Definitions. Terms used herein which are capitalized or otherwise
defined shall have the meanings given to them herein, unless the context clearly
requires otherwise.
(3)Dividends.
(a) The holders of Series AA Preferred Stock, in preference to any of the
holders of any stock that is Junior and subordinate to any of the holders of any
stock that is Senior (as such terms are hereinafter defined) to such series of
Preferred Stock as to dividends, shall be entitled to receive out of the assets
of the Corporation which are by law available for the payment of dividends, when
and as declared by the Board of Directors, cumulative dividends at the per
annum rate of $0.28 per share, and no more, payable either in the form of cash,
common stock or some combination thereof, in the sole discretion of the Company,
semi-annually in arrears on November 30th and May 31st of each year, which
dividends shall be payable on the last day of the month following such period,
except that if any such date is a Saturday, Sunday or legal holiday, then such
dividend shall be payable on the next day that is not a Saturday, Sunday or
legal holiday (each of such periods being hereinafter called a "Dividend
Period") and which dividends shall pro rated for any partial Dividend Period.
(b) Dividends on shares of Series AA Preferred Stock shall be non-cumulative.
References to a stock that is "Senior" to, on a "Parity" with or "Junior" to
other stock as to (1) "dividends" or (2) "liquidation" shall refer,
respectively, to rights of priority of one series or class of stock over another
(i) in the payment of dividends or (ii) in the distribution of assets on any
liquidation, dissolution or winding up of the Corporation. The Series AA
Preferred Stock shall be Senior to the Common Stock of the Corporation (as
defined in the Restated Certificate of Incorporation of the Corporation) as to
dividends and liquidation. The Series AA Preferred Stock shall be Junior to the
Corporation's Non-Cumulative Convertible Redeemable Preferred Stock, as defined
in a Certificate of Designations filed in February 1992 as "Redeemable
Convertible Preferred Stock" and the Corporation's Series A Convertible
Redeemable Preferred Stock, as defined in a Certificate of Designations filed in
July of 1994 as "Series A Preferred Stock" (the "Existing Preferred Stock) as
to dividends and liquidation.
(c) No dividends shall be declared upon or paid to the holders of Series AA
Preferred Stock in respect of any Dividend Period, unless there shall likewise
be declared on or paid to shares of stock at the time outstanding, which is on a
Parity therewith as to dividends, like dividends for such Dividend Period,
ratably in proportion to the respective dividend rates per annum fixed
therefore.
(d) The foregoing provisions of this Section 3 shall not apply to a dividend or
distribution payable in shares of stock which is Junior to the Series AA
Preferred Stock as to dividends and liquidation solely in shares of stock which
are Junior to the Series AA Preferred Stock, or to the acquisition of shares of
stock upon the conversion thereof into or in exchange solely for shares of such
Junior stock.
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(4)Conversion.
(a) Subject to the limitations set forth in the preceding Section 3 and this
Section 4, each two shares of Series AA Preferred Stock (a "Unit") then
outstanding:
(i) shall be convertible, in whole or in part, into nine (9) fully paid and
non-assessable shares of the Corporation's common stock, $0.002 par value (the
"Common Stock") at the option of the holder of such Unit, at any time or from
time to time on or before February 10, 2001 (with such period being referred to
hereinafter as the "Conversion Period"), upon notice duly given as provided in
this Section 4.
(ii) shall automatically convert into nine (9) shares of Common Stock in the
event that during the "Conversion Period" the daily average bid and ask price of
the Common Stock averages $3.00 per share or more over a thirty consecutive day
period.
(b) If the Common Stock issuable upon the conversion of the Series AA 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,
exchange of shares, or otherwise (other than an Extraordinary Common Stock
Event, or a reorganization, merger, consolidation or sale of assets provided for
elsewhere in this Section 4), then and in each such event each holder of shares
of Series AA Preferred Stock shall have the right thereafter to convert such
shares into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change,
by holders of the number of shares of Common Stock into which such shares of
Series AA Preferred Stock might have been converted immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided herein.
(c) In each case of an adjustment or readjustment of the conversion rate as
provided for in Section 4 (b), the Company will furnish each holder of Series AA
Preferred Stock with a certificate, prepared by independent public accountants
of recognized standing, showing such adjustment or adjustment, and stating in
detail the facts upon which such adjustment or readjustment is based.
(d) To exercise the conversion privilege provided for in Section 4 (a)(i), a
holder of Series AA Preferred Stock shall surrender the certificate or
certificates representing the shares being converted to the Corporation at its
principal office, and shall give written notice to the Corporation at that
office that such holder elects to convert such shares. Such notice shall also
state the name or names (with address or addresses) in which the certificate or
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certificates for shares of Common Stock issuable upon such conversion shall be
issued. The certificate or certificates for shares of Series AA Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Corporation or in blank. The date when such written notice is received by
the Corporation together with the certificate or certificates representing the
shares of Series AA Preferred Stock being converted, shall be the "Conversion
Date". As promptly as practicable after the Conversion Date, the Corporation
shall issue and shall deliver to the holder of the shares of Series AA Preferred
Stock being converted a certificate or certificates as such holder may request
for the number of full shares of Common Stock issuable upon the conversion of
such shares of Series AA Preferred Stock in accordance with the provisions of
this Section 4 and cash, as provided in Section 4 (e), 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, and at such time the rights of the holder as
holder of the converted shares of Series AA Preferred Stock shall cease and the
person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares of Common Stock
represented thereby.
(e) No fractional shares of Common Stock or scrip representing fractional shares
shall be issued upon conversion of Series AA Preferred Stock. Instead of any
fractional shares of Common Stock which would otherwise be issuable upon
conversion of Series AA Preferred Stock, the Corporation shall pay to the holder
of the shares of Series AA Preferred Stock which were converted a cash
adjustment in respect of such fraction in an amount equal to the reported last
sale price for the shares of Common Stock on any national securities exchange or
automated interdealer quotation system on the trading day prior to the date of
the conversion or, if the Common Stock is not listed on any national securities
exchange or automated interdealer quotation system, at the fair market value
(as determined in a manner prescribed by the Board of Directors) at the close of
business on the Conversion Date.
(f) In the event that some but not all of the shares of Series AA 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 Series AA Preferred Stock which were not converted.
(g) 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 Series AA Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient to
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effect the conversion of all outstanding shares of the Series AA 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 Series AA Preferred Stock, the Corporation shall take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
(h) "Extraordinary Common Stock Event" shall mean (i) the issue of additional
shares of the Common Stock as a dividend or other distribution on outstanding
Common Stock, (ii) subdivision of outstanding shares of Common Stock into a
greater number of shares of the Common Stock, or (iii) combination of
outstanding shares of the Common Stock into a smaller number of shares of the
Common Stock.
(i) The Corporation shall pay all documentary, stamp, transfer or other
transactional taxes attributable to the issuance or delivery of shares of Common
Stock upon the conversion of any shares of Series AA Preferred Stock; provided
that the Corporation shall not be required to pay any taxes which may be payable
in respect of any transfer involved in the issuance or delivery of any
certificate for such shares in a name other than that of the holder of such
shares of Series AA Preferred Stock in respect of which such shares are being
issued.
(5) Redemption.
(a) Subject to the limitations set forth in the preceding Section 3, the shares
of Series AA Preferred Stock then outstanding shall be redeemable, in whole or
in part at the option of the Corporation expressed by resolution of the
Corporation's Board of Directors:
(i) at any time or from time to time following the expiration of the Conversion
Period, upon notice duly given as provided in this Section 4, at a price of
$10.00 per Unit, in the event the daily average bid and ask price of the Common
Stock averages $2.00 per share or more over a thirty consecutive day period.
(ii) at any time or from time to time following the expiration of the Conversion
Period, upon notice duly given as provided in this Section 4, at a price of
$8.00 per Unit, in the event the daily average bid and ask price of the Common
Stock averages $3.00 per share or more over a thirty consecutive day period.
(b) In case of a redemption of a part only of the shares of the Series AA
Preferred Stock at the time outstanding, the redemption may be either pro rata
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or by lot or in such other fair and equitable manner as may be prescribed by the
Corporation's Board of Directors.
(c) Notice of every redemption of shares of Series AA Preferred Stock, in the
form approved by the Corporation's Board of Directors, shall be given by mailing
such notice, by first class mail, postage prepaid, not less than 30 days nor
more than 60 days prior to the applicable redemption date, to each holder of
shares so to be redeemed at tie address of such holder as the same shall appear
on the books of the Corporation. Each such notice shall specify the applicable
redemption date and the place where payment of the applicable redemption price
is to be made upon surrender for cancellation of the certificates representing
shares called for redemption, if applicable, the deposit made or to be made
pursuant to paragraph (d) below, and the effect thereof, the current conversion
price and the number of shares of Common Stock of the Corporation issuable upon
conversion of each share of Series AA Preferred Stock and the date upon which
such conversion rights will terminate, and such other matters as the Corporation
deems appropriate. No failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the proceedings for such
redemption except as to the holder to whom the Corporation has failed to mail
such notice or except as to the holder whose mailed notice was defective. Any
notice mailed in the manner herein provided shall be conclusively presumed to
have been duly given whether or not the holder receives the notice.
(d) At any time before the applicable redemption date, but not prior to the date
on which the notice of redemption shall be mailed, the Corporation may (but need
not) deposit in trust, for the account of the holders of the shares to be
redeemed, the moneys necessary for such redemption with a bank or other agent to
be designated in the notice of such redemption. The making of such deposit with
any such bank or other agent will not relieve the Corporation of liability for
payment of the moneys necessary for such redemption. Except as otherwise
required by law, any funds so deposited by the Corporation which are not
required for such redemption because of the exercise of the right of conversion
shall be returned to the Corporation. Any funds so deposited by the Corporation
which are unclaimed by the holders of the redeemed shares at the end of two
years after the applicable redemption date shall be repaid to the Corporation,
after which the holders of the shares entitled thereto shall look only to the
Corporation for payment thereof. Any interest accrued on moneys so deposited
shall belong to the Corporation and shall be paid to it from time to time.
(e) If notice of redemption shall have been duly given as hereinabove provided,
then on and after the applicable redemption date or, if the Corporation shall
have made the deposit referred to in paragraph (d) above on or before the date
specified therefor in the notice, then on and after the date of deposit or on
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the date of any conversion, all shares so called for redemption (unless the
Corporation shall default in providing moneys for the payment of the applicable
redemption price) or converted in any conversion, shall be deemed to be no
longer outstanding for any purpose, and all rights with respect to such shares,
including but not limited to the right to receive dividends thereon, shall cease
and terminate. The holder of any certificate for such shares so called for
redemption shall have no interest in or claim against the Corporation, except
the right to receive the applicable redemption price as hereinafter provided and
any conversion rights not theretofore expired.
(f) At any time on or after the applicable redemption date or, if the
Corporation shall elect to deposit the moneys for such redemption as provided in
paragraph (d) above, then at any time on or after the date of deposit and
without awaiting the applicable redemption date, the respective holders of
record of the shares of Series AA Preferred Stock to be redeemed shall be
entitled to receive the applicable redemption price upon actual delivery to the
Corporation, or, in the event of such deposit, to the bank or agent with which
such deposit shall be made, of certificates for the shares to be redeemed, such
certificates, if required, to be properly stamped for transfer and duly endorsed
in blank or accompanied by proper instruments of assignment and transfer thereof
duly executed in blank.
(6) Liquidation or Dissolution.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, holders of each outstanding share
of Series AA Preferred Stock shall be entitled to be paid first out of the
assets of the Corporation available for distribution to stockholders, whether
such assets are capital, surplus, or earnings, an amount equal to $4.00 per
share of Series AA Preferred Stock held, plus an amount equal to all Accrued and
Unpaid Dividends, before any payment shall be made to the holders of the Common
Stock, or any other stock of the Corporation ranking as to dividends or assets
Junior to the Series AA Preferred Stock, but the holders of the shares of the
Series AA Preferred Stock shall not be entitled to receive the liquidation
preference of such shares until the liquidation preference of any other series
of or class of the Corporation's stock hereafter issued that ranks Senior as to
liquidation rights to the Series AA Preferred Stock (including the Existing
Preferred Stock, which has a liquidation preference of $4.00 per share) has been
paid in full. The holders of the Series AA Preferred Stock and all series or
classes of the Corporation's stock now or hereafter issued that ranks on a
Parity as to liquidation rights with the Series AA Preferred Stock shall be
entitled to share ratably, in accordance with the respective preferential
amounts payable on such stock, in any distribution (after payment of the
liquidation preference of the Senior liquidation stock) which is not sufficient
to pay in full the aggregate of the amounts payable thereon. If, upon any
liquidation, dissolution, or winding up of the Corporation, the assets to be
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distributed to the holders of the Series AA Preferred Stock (and any stock on a
Parity therewith) shall be insufficient to permit payment to such shareholders
of the full preferential amounts aforesaid, then all of the assets of the
Corporation available for distribution to shareholders shall be distributed to
the holders of Series AA Preferred Stock and any stock on a Parity as to
liquidation. Each holder of the Series AA Preferred Stock shall be entitled to
receive that portion of the assets available for distribution as the number of
shares of Series AA Preferred Stock held by such holder bears to the total
number of shares of Series AA Preferred Stock and any stock on a Parity as to
liquidation then outstanding. Such payment shall constitute payment in full to
the holders of the Series AA Preferred Stock upon the liquidation, dissolution,
or winding up of the Corporation. After such payment shall have been made in
full, or funds necessary for such payment shall have been set aside by the
Corporation in trust for the account of the Series AA Preferred Stockholders, so
as to be available for such payment, such Series AA Preferred Stockholders shall
be entitled to no further participation in the distribution of the assets of the
Corporation.
(b) A consolidation or merger of the Corporation (except into or with a
subsidiary corporation) or a sale, lease, mortgage, pledge, exchange, transfer
or other disposition of all or substantially all of the assets of the
Corporation or any reclassification of the stock of the Corporation (other than
a change in par value or from no par to par, or from par to no par or as result
of an Extraordinary Common Stock Event, as hereinabove defined), shall be
regarded as a liquidation, dissolution or winding up of the affairs of the
Corporation within the meaning of this Section 6. In no event shall the issuance
of new classes of stock, whether Senior, Junior or on a Parity with the Series
AA Preferred Stock, be deemed a "reclassification" under, or otherwise limited
by the terms hereof.
(c) Each holder of the Series AA Preferred Stock shall have the right to elect
the benefits of Section 4 hereof in lieu of receiving payment in liquidation,
dissolution or winding up of the Corporation pursuant to this Section 6. In the
event of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, holders of each outstanding share of Series AA
Preferred Stock shall be given at least 45 days' prior written notice of the
date fixed and place designated for their making an election for conversion
pursuant to this subsection. Such notice shall be sent by first class mail,
postage prepaid, or shall be hand delivered, to each holder of record of the
Series AA Preferred Stock at such holder's address as shown in the records of
the Corporation. On or before the date so fixed, the holders of the Series AA
Preferred Stock may elect the benefits of Section 4 hereof by notifying the
Corporation of such holder's election in writing and surrendering the
certificates representing such shares at the place designated in such notice.
Thereupon, there shall be issued and delivered to such holder, in his name as
shown on such surrendered certificate or certificates, a certificate or
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certificates for the number of shares of Common Stock to which such holder is
entitled; provided, however, that the Corporation shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon such
conversion unless certificates evidencing such shares of the Series AA Preferred
Stock being converted are either delivered as hereinabove provided, or the
holder notifies the Corporation or any transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith.
(d) In the event of a liquidation, dissolution or winding up of the Corporation
resulting in the availability of assets other than cash for distribution to the
holders of the Series AA Preferred Stock, the holders of the Series AA Preferred
Stock shall be entitled to a distribution of cash and/or assets equal in value
to the liquidation preference stated in Section 6 (a), which valuation shall be
made by the Board of Directors, and provided that such board was acting in good
faith, shall be conclusive.
(e) After the payment or distribution to the holders of the Series AA Preferred
Stock of the full preferential amounts aforesaid, the holders of the Common
Stock then outstanding (excluding Common Stock held by the Corporation as
treasury stock) shall be entitled to receive ratably all of the remaining assets
of the Corporation.
(7) Voting Rights.
(a) Except as otherwise expressly provided herein or as required by law, the
holder of each share of Series AA Preferred Stock shall have no voting rights.
In connection with any vote permitted in Section 7 (b) the holder of each share
of Series AA Preferred Stock shall be entitled to one vote per share.
(b) The vote of the holders of at least 50% of all outstanding shares of Series
AA Preferred Stock, voting as a separate class after proper notice, shall be
required before the Corporation may (i) amend, alter or repeal any provision of
the Certificate of Incorporation or the Bylaws of the Corporation so as to
directly and adversely affect the relative rights, preferences, qualifications,
limitations or restrictions of :he Series AA Preferred Stock as set forth
herein; (ii) authorize or issue, or increase the authorized amount of, any
additional class or series of stock, or any security convertible into stock of
such class or series, ranking senior to the Series AA Preferred Stock as to
dividends or upon liquidation dissolution or winding up of the Corporation;
(iii) effect any reclassification of the Series AA Preferred Stock; or (iv)
effect a capital reorganization of the Company or a merger or consolidation of
the Company, or the sale, mortgage, pledge, exchange, transfer or other
disposition of all or substantially all of the Company's properties and
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assets to any other person or persons (an "Event of Merger or Sale"), if the
stockholders of the Corporation immediately prior to such Event of Merger or
Sale will own less than 50% of the shares of the surviving (in the case of a
merger) or acquiring (in the case of a sale of assets) corporation immediately
following such merger or sale.
(8) Required Notices. As long as any shares of the Series AA Preferred
Stock remain outstanding, the Corporation shall not, without notifying the
holders of the Series AA Preferred Stock (i) grant to the holders of the
Corporation's Common Stock rights to purchase any shares of capital stock or any
other rights; or (ii) reclassify the Common Stock, or enter into an Event of
Merger or Sale (other than an Event of Merger or Sale that does not result in
any reclassification, conversion, exchange or cancellation of outstanding shares
of Common Stock).
(9) Severability. If any right, preference or limitation of the Series AA
Preferred Stock set forth herein is invalid, unlawful or incapable of being
enforced by reason of any rule, law or public policy, all other rights,
preferences and limitations set forth herein which can be given effect without
the invalid, unlawful or unenforceable right, preference or limitation shall,
nevertheless, remain in full force and effect, and no right preference or
limitation herein shall be deemed dependent upon any other such right,
preference or limitation unless so expressed herein.
IN WITNESS WHEREOF, Sparta Surgical Corporation has caused this certificate
to be executed by Thomas F. Reiner, its President and Chairman of the Board, and
Allan J. Korn, its Secretary, this 11tg day of February, 1999.
Attest:
/s/ Allan J. Korn /s/ Thomas F. Reiner
- ------------------------ --------------------------------
Allan J. Korn, Secretary Thomas F. Reiner, President
and Chairman of the Board
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