EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
LIFEPOINT, INC.
LifePoint, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware, hereby certifies that:
FIRST: The present name of the corporation (hereinafter called
the "Corporation") is LifePoint, Inc. The name under which the Corporation was
originally incorporated is U.S. Drug Testing, Inc. The original Certificate of
Incorporation of the Corporation was filed with the Secretary of State of the
State of Delaware on October 8, 1992. A Restated Certificate of Incorporation of
the Corporation was filed with the Secretary of State of the State of Delaware
on January 28, 2002.
SECOND: This Amended and Restated Certificate of Incorporation
of the Corporation has been duly adopted and approved in accordance with the
provisions of Sections 228, 242 and 245 of the General Corporation Law of the
State of Delaware by the directors and stockholders of the Corporation, and
prompt written notice was duly given pursuant to Section 228 of the General
Corporation Law of the State of Delaware to those stockholders who did not
approve the Amended and Restated Certificate of Incorporation by written
consent.
THIRD: The Amended and Restated Certificate of Incorporation
as heretofore amended or supplemented and so adopted is hereby amended and
restated now to read in full as follows:
"Amended and Restated Certificate of Incorporation
of
LifePoint, Inc.
FIRST: The name of the Corporation (hereinafter called the
"Corporation") is LifePoint, Inc.
SECOND: The address, including street number, city, and county, of the
registered office of the Corporation in the State of Delaware is 2711
Centerville Road, Suite 400, City of Wilmington, County of New Castle; and the
name of the registered agent of the Corporation in the State of Delaware at such
address is The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: A. The total number of shares of stock (hereinafter referred to
as the "Capital Stock") which the Corporation shall have authority to issue is
253,000,000, all of which shares shall have the par value of $.001 per share,
and the Capital Stock shall be divided into two classes:
1. 3,000,000 of the shares shall be Preferred Stock.
2. 250,000,000 of the shares shall be Common Stock.
B. The relative rights, powers, privileges, preferences,
participations, qualifications, limitations and restrictions of the classes of
the Capital Stock are as follows:
1. SERIES C CONVERTIBLE PREFERRED STOCK
I. DESIGNATION AND AMOUNT
The designation of this series, which consists of 430,000 shares of
Preferred Stock, is the Series C Convertible Preferred Stock (the "Series C
Preferred Stock") and the stated value shall be $35.00 per share (the "Stated
Value").
II. NO DIVIDENDS
The Series C Preferred Stock will bear no dividends, and the holders of
the Series C Preferred Stock shall not be entitled to receive dividends on the
Series C Preferred Stock.
III. CERTAIN DEFINITIONS
For purposes of this Section 1, the following terms shall have the
following meanings:
A. "Closing Sales Price" as of any date, (i) means the closing
sales price for the shares of the Common Stock as reported on The American Stock
Exchange ("AMEX") by Bloomberg Financial Markets or if Bloomberg Financial
Markets is not then reporting Closing Sales Prices of such security, a
comparable reporting service of national reputation selected by the Company and
reasonably acceptable to holders of a majority of the then outstanding shares of
Series C Preferred Stock (collectively "Bloomberg"), or (ii) if the AMEX is not
the principal trading market for the shares of the Common Stock, the closing
sales price, or, if not so reported, the average of the closing bid and asked
prices as reported by Bloomberg on the principal trading market for the Common
Stock during the same period, or, if there is no sale price for such period, the
last reported bid price as reported by Bloomberg for such period, or (iii) if
the Closing Sales Price cannot be calculated as of such date on any of the
foregoing bases, the Closing Sales Price on any such date shall be the fair
market value as reasonably determined by an investment banking firm selected by
the Company and reasonably acceptable to holders of a majority of the then
outstanding shares of Series C Preferred Stock, with the costs of the
determination to be borne by the Company. The manner of determining the Closing
Sales Price of the Common Stock set forth in the foregoing definition shall
apply with respect to any other security in respect of which a determination as
to market value must be made hereunder.
B. [Reserved]
C. "Conversion Date" means, for any Conversion (as defined
below), the date on which the notice of conversion in the form attached hereto
(the "Notice of Conversion") is delivered by fax, as evidenced by a mechanically
or electronically generated confirmation thereof (or delivered by other means
resulting in notice) to the Company before 4:30 p.m., Pacific time, on the
Conversion Date indicated in the Notice of Conversion. The holder shall confirm,
by overnight courier, in person (by courier or otherwise) or by telephone (to an
authorized officer of the Company or his or her administrative assistant), the
delivery of the Notice of Conversion to the Company on the date on which the
Notice of Conversion is delivered or before 9:00 a.m., Pacific time, on the
trading day immediately succeeding such date; provided that an overnight courier
delivery which is signed for or refused by the Company prior to 12:00 noon,
Pacific time, on a given day shall be deemed to have been delivered before 9:00
a.m., Pacific time, on such day. If the Notice of Conversion is not so faxed or
otherwise delivered or the overnight courier, in-person or telephone
confirmation is not so made or deemed to be made before such applicable times,
then the Conversion Date shall be the date as of which both such conditions are
satisfied (i.e., the Notice of Conversion is delivered on or before 4:30 p.m.,
Pacific time, on a given day and the overnight courier, in-person or telephone
confirmation is made or deemed to be made either on such day of delivery or
before 9:00 a.m., Pacific time, on the immediately succeeding trading day).
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D. "Conversion Default" means (i) following the submission by
a holder of shares of Series C Preferred Stock of a Notice of Conversion, the
Company fails for any reason (other than because of an event described in clause
(iii) below) to deliver, on or prior to the tenth (10th) business day following
the expiration of the Delivery Period (as defined below) for such conversion,
such number of shares of the Common Stock without a restrictive legend (other
than a prospectus delivery requirement legend) covered by an effective
registration statement to which such holder is entitled upon such conversion
including shares issuable in payment of the redemption of Premium on the Series
C Preferred Stock, (ii) the Company provides notice to any holder of Series C
Preferred Stock at any time of its intention not to issue freely tradeable
shares of the Common Stock upon exercise by any holder of its conversion rights
in accordance with the terms of this Certificate of Designation (other than
because of an event described in clause (iii) below), or (iii) the Company is
prohibited, at any time, from listing shares of the Common Stock or from issuing
shares of the Common Stock upon conversion of Series C Preferred Stock
(including shares issuable upon redemption of Premium) to any holder because the
Company (A) does not at the date of such conversion have available a sufficient
number of authorized and reserved shares of the Common Stock or (B) such listing
or issuance would exceed the then unissued portion of such holder's Cap Amount
(as defined below); provided that so long as a conversion dispute is being
resolved as provided in Article IV.B(v), no Conversion Default shall occur.
E. "Conversion Price" means $3.00, subject to adjustment as
provided only in Article XII, Sections A, B, C and E; provided, however, that
with respect to any holder of Series C Preferred Stock that invests in Senior
Securities, a portion of the shares of Series C Preferred Stock held by such
holder (determined on the basis of $2 in stated value of Series C Preferred
Stock for each $1 invested in Senior Securities) shall receive a one-time reset
of the Conversion Price to the initial conversion price applicable to such
Senior Securities ($0.30), subject to further adjustment only pursuant to
Article XII, Sections A, B, C and E. Unless earlier converted, the Series C
Preferred Stock will convert to Common Stock at the Maturity Date.
F. "Issuance Date" means, with respect to each share of Series
C Preferred Stock, the date of the Closing under that certain Securities
Purchase Agreement dated as of June 20, 2001 by and among the Company and the
other signatories thereto (the "Securities Purchase Agreement"), in which such
share of Series C Preferred Stock was issued.
G. "Market Price," as of any date, means the average of the
Closing Sales Prices for the shares of the Common Stock for the twenty (20)
consecutive trading days immediately preceding such date. The manner of
determining the Market Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.
H. "N" means, with respect to each share of Series C Preferred
Stock, the number of days from, but excluding, the Issuance Date until the date
Premium is first redeemed in accordance with Article IV.D hereof on such share
and thereafter the number of days from and including the date on which Premium
was last redeemed in accordance with Article IV.D hereof until the date Premium
is next redeemed on such share.
I. "Premium" means an amount equal to (.1)x(N/365) x (Stated
Value), provided, however, if after the third anniversary of the Issuance Date
(the "Maturity Date"), the Premium shall mean an amount equal to (.05)x(n/365) x
(Stated Value).
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IV. CONVERSION: REDEMPTION OF PREMIUM
A. Conversion at the Option of the Holder. Subject to the limitations
on conversions contained in Paragraph C of this Article IV, each holder of
shares of Series C Preferred Stock may, at any time and from time to time on or
after the Issuance Date, convert (a "Conversion") each of its outstanding shares
of Series C Preferred Stock and any unpaid Premium thereon into a number of
fully paid and nonassessable shares of the Common Stock determined in accordance
with the following formula:
Stated Value
----------------------
Conversion Price
B. Mechanics of Conversion.
(i) In order to effect a Conversion, a holder shall: (x) fax
(or otherwise deliver) a copy of the fully executed Notice of Conversion to the
Company or the transfer agent for the Common Stock and (y) surrender or cause to
be surrendered the original certificates representing the Series C Preferred
Stock being converted (the "Preferred Stock Certificates"), duly endorsed, along
with a copy of the Notice of Conversion as soon as practicable thereafter to the
Company or the transfer agent. The holder shall confirm by overnight courier, in
person (by courier or otherwise) or by telephone (to an authorized officer of
the Company or his or her administrative assistant), the delivery of the Notice
of Conversion to the Company on the date on which the Notice of Conversion is
delivered or before 9:00 a.m., Pacific time, on the trading day immediately
succeeding such date; provided that an overnight courier delivery which is
signed for or refused by the Company prior to 12:00 noon, Pacific time, on a
given day shall be deemed to have been delivered before 9:00 a.m., Pacific time,
on such day. Upon receipt by the Company of the Notice of Conversion by fax from
a holder, the Company shall, within one business day following the later of the
Company's receipt of such Notice of Conversion and the holder's overnight
courier, in-person or telephone confirmation of the delivery of such Notice of
Conversion, send, via fax, a confirmation (the "Notice of Conversion
Confirmation") to such holder stating that the Notice of Conversion has been
received, the date upon which the Company expects to deliver the shares of the
Common Stock issuable upon such conversion, and the name and telephone number of
a contact person at the Company regarding the conversion. The Company shall not
be obligated to issue shares of the Common Stock upon a conversion unless either
the Preferred Stock Certificates are delivered to the Company or the transfer
agent as provided above, or the holder notifies the Company or the transfer
agent that such certificates have been lost, stolen or destroyed and delivers
the documentation to the Company required by Article XVI.B hereof.
(ii) Delivery of Common Stock Upon Conversion. Upon the
surrender of Preferred Stock Certificates from a holder of Series C Preferred
Stock accompanied or preceded by a Notice of Conversion, the Company shall,
subject to the Company's redemption rights set forth in Article VIII.D, no later
than the later of (a) the third (3rd) business day following the Conversion Date
and (b) the business day following the date of such surrender (or, in the case
of lost, stolen or destroyed certificates, after provision of documentation
pursuant to Article XV.B) (the "Delivery Period"), issue and deliver to the
holder or its nominee, after registration of the resale of such shares under the
Securities Act of 1933, as amended, or any similar successor statute (the
"Securities Act"), or delivery of documentation reasonably satisfactory to the
Company that the registration of such shares is not required, to such holder's
nominee, (x) that number of shares of the Common Stock issuable upon conversion
of such shares of Series C Preferred Stock being converted and (y) a certificate
representing the number of shares of Series C Preferred Stock not being
converted, if any. If the Company's transfer agent is participating in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer program, and
so long as the certificates therefor do not bear a legend and the holder thereof
is not then required to return such certificate for the placement of a legend
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thereon, the Company may cause its transfer agent to electronically transmit the
shares of the Common Stock issuable upon conversion to the holder by crediting
the account of the holder or its nominee with DTC through its Deposit Withdrawal
Agent Commission system ("DTC Transfer"). If the aforementioned conditions to a
DTC Transfer are not satisfied or a DTC Transfer is otherwise not effected, the
Company shall deliver to the holder physical certificates representing the
shares of the Common Stock issuable upon conversion. Further, a holder may
instruct the Company to deliver to the holder physical certificates representing
the shares of the Common Stock issuable upon conversion in lieu of delivering
such shares by way of DTC Transfer.
(iii) Taxes. The Company shall pay any and all taxes which may
be imposed upon the Company with respect to the issuance and delivery of the
shares of the Common Stock upon the conversion of the Series C Preferred Stock
other than transfer taxes due upon conversion, if such holder has transferred to
another party the Series C Preferred Stock or the right to receive the shares of
the Common Stock upon the holder's conversion thereof.
(iv) No Fractional Shares. If any conversion of Series C
Preferred Stock would result in the issuance of a fractional share of the Common
Stock, such fractional share shall be disregarded and the number of shares of
the Common Stock issuable upon conversion of the Series C Preferred Stock shall
be rounded up or down to the nearest whole share, it being understood that .5 of
one (1) share shall be rounded up to the next highest share.
(v) Conversion Disputes. In the case of any dispute with
respect to a conversion, the Company shall promptly issue such number of shares
of the Common Stock as are not disputed in accordance with subparagraph (ii)
above. If such dispute involves the calculation of the Conversion Price, the
Company shall submit the disputed calculations to the Company's outside auditors
reasonably acceptable to the holder of Series C Preferred Stock being converted
via facsimile at any time prior to the expiration of the Delivery Period. Such
auditors, at the Company's expense, shall review the calculations and notify the
Company and the holder of the results as soon as practicable following the date
it receives the disputed calculations. The auditors' determination shall be
deemed conclusive, absent manifest error. The Company shall then issue the
appropriate number of shares of the Common Stock in accordance with subparagraph
(i) above.
C. Limitations on Conversions. The conversion of shares of Series C
Preferred Stock shall be subject to the following limitations (each of which
limitations shall be applied independently):
(i) Cap Amount. If, notwithstanding the representations and
warranties of the Company contained in the Securities Purchase Agreement, the
Company is prohibited by the rules or regulations of the AMEX or of any
securities exchange or quotation system on which the Common Stock is then listed
or traded, from listing or issuing a number of shares of the Common Stock in
excess of a prescribed amount (the "Cap Amount") without the approval of the
Company's stockholders, then the Company shall not be required to list or issue,
as applicable, shares in excess of the Cap Amount unless the Company has
obtained the required approvals. The Cap Amount shall be allocated pro rata to
the holders of Series C Preferred Stock as provided in Article XVI.C. In the
event a holder of Series C Preferred Stock submits a Notice of Conversion and
the Company is prohibited from listing or issuing shares of the Common Stock to
satisfy such Notice of Conversion as a result of the operation of this
subparagraph (i), such holder shall be entitled to the rights set forth in
Article VII hereof.
(ii) No Five Percent Holders. Unless a holder of shares of
Series C Preferred Stock delivers a waiver in accordance with the second to last
sentence of this subparagraph (ii), in no event shall a holder of shares of
Series C Preferred Stock be entitled to receive shares of the Common Stock upon
a conversion to the extent that the sum of (x) the number of shares of the
Common Stock beneficially owned by the holder and its affiliates (exclusive of
shares issuable upon conversion of the unconverted portion of the shares of
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Series C Preferred Stock or the unexercised or unconverted portion of any other
securities of the Company (including, without limitation, those certain stock
purchase warrants (the "Warrants") issued pursuant to the Securities Purchase
Agreement (as defined herein)) subject to a limitation on conversion or exercise
analogous to the limitations contained herein) and (y) the number of shares of
the Common Stock issuable upon the conversion of the shares of Series C
Preferred Stock with respect to which the determination of this subparagraph is
being made, would result in beneficial ownership by the holder and its
affiliates of more than 4.99% of the outstanding shares of the Common Stock. For
purposes of this subparagraph, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Regulation 13 D-G thereunder, except as otherwise
provided in clause (x) above. Except as provided in the immediately succeeding
sentence, the restriction contained in this subparagraph (ii) shall not be
altered, amended, deleted or changed in any manner whatsoever unless the holders
of a majority of the outstanding shares of the Common Stock and each holder of
outstanding shares of Series C Preferred Stock shall approve such alteration,
amendment, deletion or change. Notwithstanding the foregoing, a holder of shares
of Series C Preferred Stock may, by providing written notice to the Company, (x)
adjust the restriction set forth in this subparagraph (ii) so that the
limitations on beneficial ownership of 4.99% of the outstanding shares of the
Common Stock referred to above shall not be applicable to such holder, which
adjustment shall not take effect until the 61st day after the date of such
notice and (y) irrevocably waive the right to deliver a waiver in accordance
with clause (x) of this sentence. Notwithstanding the foregoing, this Article
IV.C(ii) shall not apply to any holder who owns more than 4.99% of the
outstanding shares of the Common Stock prior to the Issuance Date.
D. Redemption of Premium. No quarterly Premiums will be paid until the
Conversion Date. Upon conversion, any and all outstanding Premium with respect
to the shares of the Series C Preferred Stock being converted shall be redeemed
by the Company as of such Conversion Date by the issuance of a number of shares
of the Common Stock equal to the quotient obtained by dividing (i) the aggregate
amount of Premium as of such Conversion Date on the shares being converted by
(ii) the greater of (a) $0.30 or (b) the Market Price on such Conversion Date.
Any fractional shares resulting from the redemption of Premium shall be rounded
to the nearest whole share in accordance with Article IV.B(iv).
E. Mandatory Conversion. Subject to the limitations set forth in
Paragraph C(i) and (ii) of this Article IV, and provided all shares of the
Common Stock issuable upon conversion of all outstanding shares of Series C
Preferred Stock are then (i) authorized and reserved for issuance, (ii)
registered under the Securities Act for resale by the holders of such shares of
Series C Preferred Stock and (iii) eligible to be traded on either the AMEX, The
New York Stock Exchange (the "NYSE"), the NASD National Market (the "NNM"), the
Nasdaq Small Cap Market (the "NSCM") or the successors of any of them, and
provided no Redemption Event has occurred and is continuing, the Company may, by
delivery of a Notice of Conversion to each of the holders of Series C Preferred
Stock, require the holders of the Series C Preferred Stock to convert no more
than 20% of their outstanding shares of the Series C Preferred Stock, on a
pro-rata basis, pursuant to the applicable conversion procedures set forth in
Article IV.B (a "Mandatory Conversion") upon each of the following occurrences:
if the Closing Sales Prices of the Common Stock for ten (10) consecutive trading
days immediately preceding the date of the Notice of Conversion (which Notice
shall be delivered within three (3) business days of its date) is at or above
$7.50, $8.50, $9.50, $10.50 and $11.50, respectively, (as adjusted to reflect
any stock dividends, distributions, combinations, reclassifications and other
similar transactions effected by the Company with respect to its Common Stock);
provided, however that the holders of Series C Preferred Stock are not required
to deliver a Notice of Conversion to the Company or its transfer agent.
Notwithstanding the foregoing, in the event the Company elects to effect a
Mandatory Conversion with respect to any of the trigger prices provided for
above, thereafter, the Company will have no further right to elect a Mandatory
Conversion with respect to such trigger price. For example, if the Closing Sales
Price of the Common Stock for the ten (10) consecutive trading day period
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immediately preceding the date of the Notice of Conversion is at or above $7.50
and the Company elects a Mandatory Conversion, thereafter the Company will have
no further right to elect another Mandatory Conversion unless and until the
Closing Sales Price for another ten (10) consecutive trading day period is at or
above $8.50. In the event the Company elects to exercise its Mandatory
Conversion rights with respect to only some of the outstanding Series C
Preferred Stock, such Series C Preferred Stock shall be converted pro rata among
the holders thereof based upon the percentage of Series C Preferred Stock held
by such holders against the then total outstanding shares of Series C Preferred
Stock.
F. Additional Mandatory Conversion. Subject to the limitations set
forth in paragraph C(i) and (ii) of this Article IV, and provided all shares of
the Common Stock issuable upon conversion of all outstanding shares of Series C
Preferred Stock are then (i) authorized and reserved for issuance, (ii)
registered under the Securities Act for resale by the holders of such shares of
Series C Preferred Stock and (iii) eligible to be traded on either the AMEX, the
NYSE, NMN, the NSCM or the successors of any of them, and provided no Redemption
Event has occurred and is continuing, the Company may, by delivery of a Notice
of Conversion to each of the holders of Series C Preferred Stock, if, an
underwriter requires as a condition precedent to an underwritten public offering
by such underwriter of securities of the Company, provided that the offering
will provide to the Company net proceeds of at least $20,000,000 and the
offering price to the public, net of underwriting discount and commissions, is
not less than ten dollars ($10.00) per share of the Common Stock (as adjusted to
reflect any stock dividends, distributions, combinations, reclassifications and
other similar transactions effected by the Company with respect to its Common
Stock), require such holders to convert all of the outstanding shares of Series
C Preferred Stock pursuant to the applicable conversion procedures set forth in
Article IV.B (a "Mandatory Conversion"); provided, however, that the holders of
Series C Preferred Stock are not required to deliver a Notice of Conversion to
the Company or its transfer agent and provided, further, that such conversion
shall occur contemporaneously with the closing of such public offering.
G. Additional Optional Conversion. If at any time after the Issuance
Date the Common Stock (including, from and after the Conversion Date, any of the
shares of the Common Stock issuable upon conversion of the Series C Preferred
Stock) is suspended from trading on any of, or is not listed (and authorized)
for trading on at least one of, the NSCM, the NNM, the NYSE or the AMEX for an
aggregate of ten (10) full trading days in any nine (9)-month period (a
"Delisting Event"), each holder of shares of Series C Preferred Stock may
convert each of its outstanding shares of Series C Preferred Stock and any
unpaid Premium thereon into shares of the Common Stock in accordance with
Article IV.A and Article IV.B hereof.
H. Mandatory Conversion at Maturity. As set forth above in Section
III.E, unless earlier converted, the Series C Preferred Stock will automatically
convert to Common Stock at the applicable Conversion Price at the Maturity Date.
V. RESERVATION OF SHARES OF COMMON STOCK
On the Issuance Date, the Company shall reserve 110% of the number of
shares of the Common Stock which would be issuable if the outstanding shares of
Series C Preferred Stock were converted in their entirety on the such Issuance
Date based on the Conversion Price in effect on such Issuance Date of the
authorized, unreserved and unissued shares of the Common Stock for issuance upon
conversion of the Series C Preferred Stock and thereafter the number of
authorized, unreserved and unissued shares of the Common Stock so reserved (the
"Reserved Amount") shall not be decreased and shall at all times be sufficient
to provide for the conversion of the Series C Preferred Stock outstanding at the
then current Conversion Price thereof. The Reserved Amount shall be allocated to
the holders of Series C Preferred Stock as provided in Article XVI.C.
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VI. FAILURE TO SATISFY CONVERSION
A. Buy-In Cure. Unless the Company has notified the applicable holder
in writing prior to the delivery by such holder of a Notice of Conversion that
the Company is unable to honor conversions due to the limitations contained in
Article IV.C, if (i) (a) the Company fails for any reason to deliver during the
Delivery Period shares of the Common Stock to a holder upon a conversion of
shares of Series C Preferred Stock or (b) there shall occur a Legend Removal
Failure (as defined in Article VIII.A(ii) below) and (ii) thereafter, such
holder purchases (in an open market transaction or otherwise) shares of the
Common Stock to make delivery in satisfaction of a sale by such holder of the
unlegended shares of the Common Stock (the "Sold Shares") which such holder
anticipated receiving upon such conversion (a "Buy-In"), the Company shall pay
such holder (in addition to any other remedies available to the holder) the
amount by which (x) such holder's total purchase price (including brokerage
commissions, if any) for the unlegended shares of the Common Stock so purchased
exceeds (y) the net proceeds received by such holder from the sale of the Sold
Shares. For example, if a holder purchases unlegended shares of the Common Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to
shares of the Common Stock it sold for $10,000, the Company will be required to
pay the holder $1,000. A holder shall provide the Company written notification
indicating any amounts payable to such holder pursuant to this Paragraph A. The
Company shall make any payments required pursuant to this Paragraph A in
accordance with and subject to the provisions of Article XVI.E.
B. Redemption Right. If the Company fails, and such failure continues
uncured for seven (7) business days after the Company has been notified thereof
in writing by the holder, for any reason to issue shares of the Common Stock
within the applicable Delivery Period with respect to any conversion of Series C
Preferred Stock, then the holder may elect at any time and from time to time
prior to the Default Cure Date (as defined below) for such Conversion Default,
by delivery of a Redemption Notice to the Company, to have all of such holder's
shares of Series C Preferred Stock for which a Notice of Conversion was given to
the holder and for which such failure exists purchased by the Company for cash,
at an amount per share equal to the Redemption Amount (as defined in Article
VIII.B). If the Company fails to redeem any of such shares within seven (7)
business days after its receipt of such Redemption Notice, then such holder
shall be entitled to the remedies provided in Article VIII.C. "Default Cure
Date" means (i) with respect to a Conversion Default described in clause (i) of
its definition, the date the Company effects the conversion of the full number
of shares of Series C Preferred Stock, (ii) with respect to a Conversion Default
described in clause (ii) of its definition, the date the Company issues shares
of the Common Stock, without a restrictive legend (other than a prospectus
delivery requirement legend) when covered by an effective registration
statement, in satisfaction of all conversions of Series C Preferred Stock in
accordance with Article IV.A, and (iii) with respect to a Conversion Default
described in clause (i) or clause (ii) of its definition, the date on which the
Company redeems shares of Series C Preferred Stock held by such holder pursuant
to paragraph C of this Article VI.
C. Void Notice of Conversion. If for any reason a holder has not
received all of the shares of the Common Stock prior to the tenth (10th)
business day after the expiration of the Delivery Period with respect to a
conversion of Series C Preferred Stock (including shares of the Common Stock
issued in redemption of Premium on shares of Series C Preferred Stock being
converted) and such shares are not subject to a redemption notice from the
holder thereof, then the holder, upon written notice to the Company's transfer
agent, with a copy to the Company, may void its Notice of Conversion with
respect to, and retain or have returned, as the case may be, any shares of
Series C Preferred Stock that have not been converted pursuant to such holder's
Notice of Conversion; provided that the voiding of a holder's Notice of
Conversion shall not affect such holders rights and remedies which have accrued
prior to the date of such notice pursuant to Article VI hereof or otherwise.
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VII. INABILITY TO LIST OR CONVERT DUE TO CAP AMOUNT
If at any time after the Issuance Date the then unissued portion of any
holder's Cap Amount is less than 110% of the number of shares of the Common
Stock then issuable upon conversion of such holder's shares of Series C
Preferred Stock (a "Trading Market Trigger Event"), the Company shall
immediately notify the holders of Series C Preferred Stock of such occurrence
and shall take immediate action (including, if necessary, seeking the approval
of its stockholders to authorize the listing or issuance of the full number of
shares of the Common Stock which would be issuable upon the conversion of the
then outstanding shares of Series C Preferred Stock but for the Cap Amount) to
eliminate any prohibitions under applicable law or the rules or regulations of
any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Company or any of its securities on the
Company's ability to list or issue shares of the Common Stock in excess of the
Cap Amount ("Trading Market Prohibitions"). In the event the Company fails to
eliminate all such Trading Market Prohibitions within one hundred twenty (120)
days after the Trading Market Trigger Event, then each holder of Series C
Preferred Stock shall thereafter have the option, exercisable in whole or in
part at any time and from time to time until such date that all such Trading
Market Prohibitions are eliminated, by delivery of a Redemption Notice (as
defined in Article VIII.C) to the Company, to require the Company to purchase
for cash, at an amount per share equal to the Redemption Amount, a number of the
holder's shares of Series C Preferred Stock such that, after giving effect to
such redemption, the then unissued portion of such holder's Cap Amount exceeds
110% of the total number of shares of the Common Stock issuable upon conversion
of such holder's shares of Series C Preferred Stock.
VIII. REDEMPTION
A. Redemption by Holder. In the event (each of the events described in
clauses (i)-(iii) below after expiration of the applicable cure period (if any)
being a "Redemption Event"):
(i) the Company fails to remove any restrictive legend (other
than a prospectus delivery legend) on any certificate or any shares of the
Common Stock issued to the holders of Series C Preferred Stock (a "Legend
Removal Failure") upon conversion of the Series C Preferred Stock as and when
required by this Certificate of Designation, the Securities Purchase Agreement
or the Registration Rights Agreement and any such failure continues uncured for
ten (10) business days after the Company has been notified thereof in writing by
the holder;
(ii) the Company provides notice to any holder of Series C
Preferred Stock, including by way of public announcement, at any time, of its
intention not to issue, or otherwise refuses to issue, shares of the Common
Stock to any holder of Series C Preferred Stock upon conversion in accordance
with the terms of this Certificate of Designation (other than due to the
circumstances contemplated by Articles V or VII for which the holders shall have
the remedies set forth in such Articles);
(iii) the Company shall:
(a) sell, convey or dispose of all or substantially
all of its assets (the presentation of any such transaction for stockholder
approval being conclusive evidence that such transaction involves the sale of
all or substantially all of the assets of the Company); or
(b) merge, consolidate or engage in any other
business combination with any other entity (other than pursuant to a migratory
merger effected solely for the purpose of changing the jurisdiction of
incorporation of the Company and other than pursuant to a merger in which the
Company is the surviving or continuing entity and the voting capital stock of
the Company immediately prior to such merger represents at least 50% of the
voting power of the capital stock of the Company after the merger) and its
capital stock is unchanged.
9
Then, upon the occurrence of any such Redemption Event, each holder of
shares of Series C Preferred Stock shall thereafter have the option, exercisable
in whole at any time or in part from time to time by delivery of a Redemption
Notice (as defined in Paragraph C below) to the Company while such Redemption
Event continues, to require the Company to purchase for cash any or all of the
then outstanding shares of Series C Preferred Stock held by such holder for an
amount per share equal to the Redemption Amount (as defined in Paragraph B
below) in effect at the time of the redemption hereunder. The occurrence of any
event described in clauses (ii) or (iii) above shall immediately constitute a
Redemption Event and there shall be no cure period. Upon the Company's receipt
of any Redemption Notice hereunder (other than during the three-trading-day
period following the Company's delivery of a Redemption Announcement (as defined
below) to all of the holders in response to the Company's initial receipt of a
Redemption Notice from a holder of Series C Preferred Stock), the Company shall
immediately (and in any event within three (3) business days following such
receipt) deliver a written notice (a "Redemption Announcement") to all holders
of Series C Preferred Stock stating the date upon which the Company received
such Redemption Notice and the amount of Series C Preferred Stock covered
thereby. Subject to Article VIII.D, the Company shall not redeem any shares of
Series C Preferred Stock during the three trading day period following the
delivery of a required Redemption Announcement hereunder. At any time and from
time to time during such three trading day period, each holder of Series C
Preferred Stock may request (either orally or in writing) information from the
Company with respect to the instant redemption (including, but not limited to,
the aggregate number of shares of Series C Preferred Stock covered by Redemption
Notices received by the Company) and the Company shall furnish (either orally or
in writing) as soon as practicable such requested information to such requesting
holder.
B. Definition of Redemption Amount. The "Redemption Amount" with
respect to a share of Series C Preferred Stock means an amount equal to the
greater of:
(i) V
------- x M
C P
and (ii) V x 1.20
where:
"V" means the Stated Value thereof, plus the accrued and
unpaid Premium thereon through the date of payment of the Redemption
Amount;
"CP" means the Conversion Price in effect on the date on which
the Company receives the Redemption Notice; and
"M" means the higher of (i) the highest Closing Sales Price of
the Company's Common Stock during the period beginning on the date on
which the Company receives the Redemption Notice and ending on the date
immediately preceding the date of payment of the Redemption Amount and
(ii) the fair market value, as of the date on which the Company
receives the Redemption Notice, of the consideration payable to the
holder of a share of the Common Stock pursuant to the transaction which
triggers the redemption. For purposes of this definition, "fair market
value" shall be determined by the mutual agreement of the Company and
holders of a majority of the shares of Series C Preferred Stock then
outstanding, or if such agreement cannot be reached within five (5)
business days prior to the date of redemption, by an investment banking
firm selected by the Company and reasonably acceptable to holders of a
majority of the then outstanding shares of Series C Preferred Stock,
with the costs of such appraisal to be borne by the Company.
10
C. Redemption Defaults. If the Company fails to pay any holder the
Redemption Amount with respect to any share of Series C Preferred Stock within
ten (10) business days after its receipt of a notice requiring such redemption
(a "Redemption Notice"), then the holder of Series C Preferred Stock delivering
such Redemption Notice (i) shall be entitled to interest on the Redemption
Amount at a per annum rate equal to the lower of twenty-four percent (24%) and
the highest interest rate permitted by applicable law from the date on which the
Company receives the Redemption Notice until the date of payment of the
Redemption Amount hereunder, and (ii) shall have the right, at any time and from
time to time, to require the Company, upon written notice, to immediately
convert (in accordance with the terms of Paragraph A of Article IV) all or any
portion of the Redemption Amount, plus interest as aforesaid, into shares of the
Common Stock at the Conversion Price in effect during such period. In the event
the Company is not able to redeem all of the shares of Series C Preferred Stock
subject to Redemption Notices delivered prior to the date upon which such
redemption is to be effected, the Company shall redeem shares of Series C
Preferred Stock from each holder pro rata, based on the total number of shares
of Series C Preferred Stock outstanding at the time of redemption included by
such holder in all Redemption Notices delivered prior to the date upon which
such redemption is to be effected relative to the total number of shares of
Series C Preferred Stock outstanding at the time of redemption included in all
of the Redemption Notices delivered prior to the date upon which such redemption
is to be effected.
D. Optional Redemption by Company.
(i) Provided all shares of the Common Stock issuable upon
conversion of all outstanding shares of Series C Preferred Stock are then (i)
authorized and reserved for issuance, (ii) registered under the Securities Act
for resale by the holders of such shares of Series C Preferred Stock and (iii)
eligible to be traded on either the NSCM, the AMEX, the NYSE, the NNM or the
successors of any of them, and provided no Redemption Event has occurred and is
continuing, if, at any time after the Issuance Date, the Closing Sales Price of
the Common Stock is less than $3.00 for 11 or more consecutive trading days, the
Company shall have the right, during the next five (5) trading days, to call all
or part of the then outstanding shares of the Series C Preferred Stock for
redemption at a redemption price per share of the Stated Value, plus all accrued
but unpaid Premium with respect to such share to the date of redemption
(hereinafter referred to as the "Optional Redemption Date") designated in the
Notice of Redemption, payable in cash on the basis of the Market Price of the
Common Stock on such date.
(ii) Company may not deliver to a holder of Series C Preferred
Stock an Optional Redemption Notice unless on or prior to the date of delivery
of such Optional Redemption Notice (as defined below), the Company shall have
segregated on the books and records of the Company an amount of cash sufficient
to pay all amounts to which the holders of Series C Preferred Stock are entitled
upon such redemption pursuant to subparagraph (i) of this Paragraph D. Any
Optional Redemption Notice delivered shall be irrevocable and shall be
accompanied by a statement executed by a duly authorized officer of the Company.
(iii) The redemption amount payable under this Section D shall
be paid to the holders of the Series C Preferred Stock being redeemed within
three (3) business days of the Optional Redemption Date; provided, however, that
the Company shall not be obligated to deliver any portion of such redemption
amount until either the certificates evidencing the Series C Preferred Stock
11
being redeemed are delivered to the office of the Company or the escrow agent or
the holder notifies the Company or the escrow agent that such certificates have
been lost, stolen or destroyed and delivers the documentation in accordance with
Article XV.B hereof. Notwithstanding anything herein to the contrary, in the
event that the certificates evidencing the Series C Preferred Stock being
redeemed are not delivered to the Company or the escrow agent prior to the third
business day following the Optional Redemption Date, the redemption of the
Series C Preferred Stock pursuant to this Article VIII.D shall still be deemed
effective as of the Optional Redemption Date and such redemption amount shall be
paid to the holder of Series C Preferred Stock being redeemed within five (5)
business days of the date the certificates evidencing the Series C Preferred
Stock being redeemed are actually delivered to the Company or the escrow agent.
E. [Reserved]
F. Void Redemption. In the event that the Company does not pay the
applicable redemption amount within the time period set forth in Article VIII.A
or Article VIII.D, at any time thereafter and until the Company pays such unpaid
applicable redemption amount in full, a holder of Series C Preferred Stock shall
have the option (the "Void Optional Redemption Option") to, in lieu of
redemption, require the Company to promptly return to such holder any or all of
the shares of Series C Preferred Stock that were submitted for redemption by
such holder under this Article VIII and for which the applicable Redemption
Amount (together with any interest thereon) has not been paid, by sending
written notice thereof to the Company via facsimile and confirmed by overnight
courier, in person (by courier or otherwise) or by telephone (to an authorized
officer of the Company or his or her administrative assistant) (the "Void
Optional Redemption Notice). Upon the Company's receipt of such Void Optional
Redemption Notice and overnight courier, in-person or telephone confirmation,
(i) the Notice of Redemption shall be null and void with respect to those shares
of Series C Preferred Stock subject to the Void Optional Redemption Notice, and
(ii) the Company shall immediately return any shares of Series C Preferred Stock
subject to the Void Optional Redemption Notice.
G. Limitation on Redemption. Anything in this Article VIII to the
contrary notwithstanding, if the Redemption Event is any event described in
clause (iii) of Article VIII.A, then, upon delivery of a Redemption Notice to
the Company, the Company shall not be obligated to pay the Redemption Amount in
cash, but shall instead, at its option, have the unconditional right, in
redemption of the shares of the Series C Preferred Stock which would otherwise
be entitled to a cash payment, either (i) to issue to each such holder that
number of shares of the Common Stock as is equal to the quotient of (a) the
product of the Redemption Amount and the number of shares of the Series C
Preferred Stock to be redeemed held by such holder and (b) the average of the
three (3) lowest Closing Sales Prices for the twenty (20) consecutive trading
days immediately preceding delivery of the Redemption Notice or (ii) to limit
the amount of the cash redemption to all holders to be not more than the cash
proceeds to be received from a new equity offering of shares of the Common
Stock.
IX. RANK
The Series C Preferred Stock shall rank (i) prior to the Common Stock;
(ii) prior to any class or series of capital stock of the Company hereafter
created that, by its terms, ranks junior to the Series C Preferred Stock
("Junior Securities"); (iii) junior to any class or series of capital stock of
the Company hereafter created (with the consent of the holders of Series C
Preferred Stock, obtained in accordance with Article XIV hereof) specifically
ranking, by its terms, senior to the Series C Preferred Stock, including without
limitation the Series D Preferred Stock ("Senior Securities"); and (iv) pari
passu with any other class or series of capital stock of the Company hereafter
created (with the consent of the holders of the Series C Preferred Stock
obtained in accordance with Article XIV hereof) specifically ranking by its
terms on parity with the Series C Preferred Stock ("Pari Passu Securities"), in
each case as to distribution of assets upon liquidation, dissolution or winding
up of the Company, whether voluntary or involuntary.
12
X. LIQUIDATION PREFERENCE
A. If the Company shall commence a voluntary case under the U.S.
Federal bankruptcy laws or any other applicable bankruptcy, insolvency or
similar law, or consent to the entry of an order for relief in an involuntary
case under any law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Company or
of any substantial part of its property, or make an assignment for the benefit
of its creditors, or admit in writing its inability to pay its debts generally
as they become due, or if a decree or order for relief in respect of the Company
shall be entered by a court having jurisdiction in the premises in an
involuntary case under the U.S. Federal bankruptcy laws or any other applicable
bankruptcy, insolvency or similar law resulting in the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of 60 consecutive days and,
on account of any such event, the Company shall liquidate, dissolve or wind up,
or if the Company shall otherwise liquidate, dissolve or wind up, including, but
not limited to, the sale or transfer of all or substantially all of the
Company's assets in one transaction or in a series of related transactions (a
"Liquidation Event"), no distribution shall be made to the holders of any shares
of capital stock of the Company (other than Senior Securities and Pari Passu
Securities) upon liquidation, dissolution or winding up unless prior thereto the
holders of shares of Series C Preferred Stock shall have received the
Liquidation Preference (as defined below) with respect to each share. If, upon
the occurrence of a Liquidation Event, the assets and funds available for
distribution among the holders of the Series C Preferred Stock and holders of
Pari Passu Securities shall be insufficient to permit the payment to such
holders of the preferential amounts payable thereon, then the entire assets and
funds of the Company legally available for distribution to the Series C
Preferred Stock and the Pari Passu Securities shall be distributed ratably among
such shares in proportion to the ratio that the Liquidation Preference payable
on each such share bears to the aggregate Liquidation Preference payable on all
such shares.
B. The purchase or redemption by the Company of stock of any class, in
any manner permitted by law, shall not, for the purposes hereof, be regarded as
a liquidation, dissolution or winding up of the Company. Neither the
consolidation or merger of the Company with or into any other entity nor the
sale or transfer by the Company of less than substantially all of its assets
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Company.
C. The "Liquidation Preference" with respect to a share of Series C
Preferred Stock means an amount equal to the Stated Value thereof, plus the
accrued Premium thereon through the date of final distribution. The Liquidation
Preference with respect to any Pari Passu Securities shall be as set forth in
the Certificate of Designation filed in respect thereof.
XI. [RESERVED]
XII. ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time
as follows:
A. Stock Splits, Stock Dividends, Etc. If, at any time on or after the
Issuance Date, the number of outstanding shares of the Common Stock is increased
by a stock split, stock dividend, combination, reclassification or other similar
event, the Conversion Price shall be proportionately reduced, or if the number
of outstanding shares of the Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the
Conversion Price shall be proportionately increased. In such event, the Company
shall notify the Company's transfer agent of such change on or before the
effective date thereof.
13
B. Adjustment Due to Merger, Consolidation, Etc. If, at any time after
the Issuance Date, there shall be (i) any reclassification or change of the
outstanding shares of the Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation or merger of the
Company with any other entity (other than a merger in which the Company is the
surviving or continuing entity and its capital stock is unchanged), (iii) any
sale or transfer of all or substantially all of the assets of the Company or
(iv) any share exchange pursuant to which all of the outstanding shares of the
Common Stock are converted into other securities or property (each of (i)-(iv)
above being a "Corporate Change"), then the holders of Series C Preferred Stock
shall thereafter have the right to receive upon conversion, in lieu of the
shares of the Common Stock otherwise issuable, such shares of stock, securities
and/or other property as would have been issued or payable in such Corporate
Change with respect to or in exchange for the number of shares of the Common
Stock which would have been issuable upon conversion (without giving effect to
the limitations contained in Article IV.C) had such Corporate Change not taken
place, and in any such case, appropriate provisions (in form and substance
reasonably satisfactory to the holders of a majority of the Series C Preferred
Shares then outstanding) shall be made with respect to the rights and interests
of the holders of the Series C Preferred Stock to the end that the economic
value of the shares of Series C Preferred Stock are in no way diminished by such
Corporate Change and that the provisions hereof (including, without limitation,
in the case of any such consolidation, merger or sale in which the successor
entity or purchasing entity is not the Company, an immediate adjustment of the
Conversion Price so that the Conversion Price immediately after the Corporate
Change reflects the same relative value as compared to the value of the
surviving entity's common stock that existed between the Conversion Price at the
value of the Common Stock immediately prior to such Corporate Change shall
thereafter be applicable, as nearly as may be practicable in relation to any
shares of stock or securities thereafter deliverable upon the conversion
thereof. The Company shall not effect any Corporate Change unless (i) each
holder of Series C Preferred Stock has received written notice of such
transaction along with the notice sent to the holders of the Common Stock of the
Company, but in no event later than twenty (20) days prior to the record date
for the determination of stockholders entitled to vote with respect thereto,
(ii) the resulting, successor or acquiring entity (if not the Company) assumes
by written instrument (in form and substance reasonably satisfactory to the
holders of a majority of the Series C Preferred Shares then outstanding) the
obligations of this Certificate of Designation, and (iii) the securities
issuable upon conversion of the Series C Preferred Stock (or replacement
security) are (i) either registered with the Securities and Exchange Commission
or exempt from all applicable federal and state registration requirements and
such securities are listed for trading on the NYSE, the AMEX, the NNM or the
NSCM, and (ii) the average weekly reported volume of trading of such securities
on the principal exchange or market on which such securities are traded for the
twelve (12) calendar weeks immediately preceding the public announcement of such
transaction, is greater than the product of the aggregate number of shares
issuable upon conversion of all such shares of Series C Preferred Stock (or
replacement securities) following such event and ten (10). The above provisions
shall apply regardless of whether or not there would have been a sufficient
number of shares of the Common Stock authorized and available for issuance upon
conversion of the shares of Series C Preferred Stock outstanding as of the date
of such transaction, and shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
C. Adjustment Due to Distribution. If, at any time after the Issuance
Date, the Company shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of the Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including any
dividend or distribution to the Company's common stockholders in shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off))
(a "Distribution"), then the holders of Series C Preferred Stock shall be
entitled to receive in such Distribution the amount of such assets payable to
the holder on an as-converted basis (without giving effect to the limitations
contained in Article IV.C) as of the record date for the determination of
stockholders entitled to such Distribution.
14
D. Purchase Rights. If, at any time after the Issuance Date, the
Company issues any securities which are convertible into or exchangeable for
shares of the Common Stock, or rights to purchase stock, warrants, securities or
other property (the "Purchase Rights") pro rata to the record holders of any
class of the Common Stock, then the holders of Series C Preferred Stock will be
entitled to acquire, upon the terms applicable to such Purchase Rights, the
aggregate Purchase Rights which such holder could have acquired if such holder
had held the number of shares of the Common Stock acquirable upon complete
conversion of the Series C Preferred Stock (without giving effect to the
limitations contained in Article IV.C) immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights, or, if
no such record is taken, the date as of which the record holders of the Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights.
E. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article XII, the Company,
at its expense, shall promptly compute such adjustment or readjustment and
prepare and furnish to each holder of Series C Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request at any time of any holder of Series C Preferred Stock, furnish
to such holder a like certificate setting forth (i) such adjustment or
readjustment, (ii) the Conversion Price at the time in effect and (iii) the
number of shares of the Common Stock and the amount, if any, of other securities
or property which at the time would be received upon conversion of a share of
Series C Preferred Stock.
XIII. VOTING RIGHTS
The holders of the Series C Preferred Stock have no voting power
whatsoever, except as otherwise provided by the Delaware General Corporation Law
(the "General Corporation Law") and in Article XIV below.
Notwithstanding the above, the Company shall provide each holder of
Series C Preferred Stock with prior notification of any meeting of the
stockholders (and copies of proxy materials and other information sent to
stockholders) at the same time such notice and materials are provided to the
holders of Common Stock. If the Company takes a record of its stockholders for
the purpose of determining stockholders entitled to (a) receive payment of any
dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger consolidation or recapitalization)
any share of any class or any other securities or property, or to receive any
other right, or (b) to vote in connection with any proposed sale, lease or
conveyance of all or substantially all of the assets of the Company, or any
proposed merger, consolidation, liquidation, dissolution or winding up of the
Company, the Company shall mail a notice to each holder, at least twenty (20)
days prior to the record date specified therein (but in no event earlier than
public announcement of such proposed transaction), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
To the extent that under the General Corporation Law the vote of the
holders of the Series C Preferred Stock, voting separately as a class or series,
as applicable, is required to authorize a given action of the Company, the
affirmative vote or consent of the holders of at least a majority of the then
outstanding shares of the Series C Preferred Stock represented at a duly held
meeting at which a quorum is present or by written consent of the holders of at
15
least a majority of the then outstanding shares of Series C Preferred Stock
(except as otherwise may be required under the General Corporation Law) shall
constitute the approval of such action by the class. To the extent that under
the General Corporation Law holders of the Series C Preferred Stock are entitled
to vote on a matter with holders of Common Stock, voting together as one class,
each share of Series C Preferred Stock shall be entitled to a number of votes
equal to the number of shares of the Common Stock into which it is then
convertible (subject to the limitations contained in Article IV.C) using the
record date for the taking of such vote of stockholders as the date as of which
the Conversion Price is calculated.
XIV. PROTECTION PROVISIONS
So long as any shares of Series C Preferred Stock are outstanding, the
Company shall not without first obtaining the approval (by vote or written
consent, as provided by the General Corporation Law) of holders of a majority of
the then outstanding shares of Series C Preferred Stock:
(a) alter or change the rights, preferences or privileges of
the Series C Preferred Stock;
(b) alter or change the rights, preferences or privileges of
any previously issued shares of capital stock of the Company so as to affect
adversely the Series C Preferred Stock;
(c) create any new class or series of capital stock having a
preference over the Series C Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Company (as previously defined in
Article IX hereof, "Senior Securities");
(d) create any new class or series of capital stock ranking
pari passu with the Series C Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Company (as previously defined in
Article IX hereof, "Pari Passu Securities");
(e) increase the authorized number of shares of Series C
Preferred Stock;
(f) issue any shares of Senior Securities, with the exception
of the Series D Preferred Stock, which has been approved by the holders of the
Series C Preferred Stock;
(g) issue any shares of Series C Preferred Stock other than
pursuant to the Securities Purchase Agreement;
(h) redeem, or declare or pay any cash dividend or
distribution on, any Junior Securities;
(i) redeem, or declare or pay any cash dividend or
distribution on, any Pari Passu Securities while any redemption of Series C
Preferred Stock is pending or when any Redemption Event exists, or
(j) increase the par value of the Common Stock.
Notwithstanding the foregoing, no change pursuant to this Article XIV
shall be effective to the extent that, by its terms, it applies to less than all
of the holders of shares of Series C Preferred Stock then outstanding.
XV. LIMITATION ON COMPANY'S ACTIONS
Anything in this Certificate of Designation to the contrary
notwithstanding, the Company shall not be obligated to make any redemption or
payment hereunder or to issue shares of the Common Stock in lieu thereof, if
such action is not permitted by the General Corporation Law or any successor
statute; provided, however, the Company will permit any holder of the Series C
Preferred Stock to pay an amount equivalent to the par value of any shares of
the Common Stock to be issued to fulfill the Company's obligation if such action
by the holder will make the action permissible under the General Corporation Law
and, upon receipt of such payment, the Company will promptly issue the shares to
the holder.
16
XVI. MISCELLANEOUS
A. Cancellation of Series C Preferred Stock. If any shares of Series C
Preferred Stock are converted pursuant to Article IV or redeemed, the shares so
converted or redeemed shall be canceled, shall return to the status of
authorized, but unissued preferred stock of no designated series, and shall not
be issuable by the Company as Series C Preferred Stock.
B. Lost or Stolen Certificates. Upon receipt by the Company of (i)
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity (without any bond or other security) reasonably satisfactory to the
Company, or (z) in the case of mutilation, upon surrender and cancellation of
the Preferred Stock Certificate(s), the Company shall execute and deliver new
Preferred Stock Certificate(s) of like tenor and date. However, the Company
shall not be obligated to reissue such lost or stolen Preferred Stock
Certificate(s) if the holder contemporaneously requests the Company to convert
such Series C Preferred Stock.
C. Allocation of Cap Amount and Reserved Amount. The initial Cap Amount
and Reserved Amount shall be allocated pro rata among the holders of Series C
Preferred Stock based on the number of shares of Series C Preferred Stock issued
to each holder. Each increase to the Cap Amount and the Reserved Amount shall be
allocated pro rata among the holders of Series C Preferred Stock based on the
number of shares of Series C Preferred Stock held by each holder at the time of
the increase in the Cap Amount or Reserved Amount. In the event a holder shall
sell or otherwise transfer any of such holder's shares of Series C Preferred
Stock, each transferee shall be allocated a pro rata portion of such
transferor's Cap Amount and Reserved Amount. Any portion of the Cap Amount or
Reserved Amount which remains allocated to any person or entity which does not
hold any Series C Preferred Stock shall be allocated to the remaining holders of
shares of Series C Preferred Stock, pro rata based on the number of shares of
Series C Preferred Stock then held by such holders.
D. Quarterly Statements of Available Shares. For each calendar quarter
beginning in the quarter in which the initial registration statement required to
be filed pursuant to the Registration Rights Agreement is declared effective and
thereafter so long as any shares of Series C Preferred Stock are outstanding,
the Company shall deliver (or cause its transfer agent to deliver) to each
holder a written report notifying the holders of any occurrence which prohibits
the Company from issuing shares of the Common Stock upon any such conversion.
The report shall also specify (i) the total number of shares of Series C
Preferred Stock outstanding as of the end of such quarter, (ii) the total number
of shares of the Common Stock issued upon all conversions of Series C Preferred
Stock prior to the end of such quarter, (iii) the total number of shares of the
Common Stock which are reserved for issuance upon conversion of the Series C
Preferred Stock as of the end of such quarter and (iv) the total number of
shares of the Common Stock which may thereafter be listed or issued by the
Company upon conversion of the Series C Preferred Stock before the Company would
exceed the Cap Amount and the Reserved Amount. The Company (or its transfer
agent) shall deliver the report for each quarter to each holder prior to the
tenth (10th) day of the calendar month following the quarter to which such
report relates. In addition, the Company (or its transfer agent) shall provide,
within fifteen (15) days after delivery to the Company of a written request by
any holder, any of the information enumerated in clauses (i) - (iv) of this
Paragraph D as of the date of such request.
17
E. Payment of Cash; Defaults. Whenever the Company is required to make
any cash payment to a holder under this Certificate of Designation (upon
redemption or otherwise), such cash payment shall be made to the holder within
five (5) business days after delivery by such holder of a notice specifying that
the holder elects to receive such payment in cash and the method (e.g., by
check, wire transfer) in which such payment should be made. If such payment is
not delivered within such five (5) business day period, such holder shall
thereafter be entitled to interest on the unpaid amount at a per annum rate
equal to the lower of twenty-four percent (24%) and the highest interest rate
permitted by applicable law until such amount is paid in full to the holder.
F. Status as Stockholder. Upon submission of a Notice of Conversion by
a holder of Series C Preferred Stock, (i) the shares covered thereby (other than
the shares, if any, which cannot be issued because their listing or issuance
would exceed such holder's allocated portion of the Reserved Amount or Cap
Amount) shall be deemed converted into shares of the Common Stock and (ii) the
holder's rights as a holder of such converted shares of Series C Preferred Stock
shall cease and terminate, excepting only the right to receive certificates for
such shares of the Common Stock and to any remedies provided herein or otherwise
available at law or in equity to such holder because of a failure by the Company
to comply with the terms of this Certificate of Designation. Notwithstanding the
foregoing, if a holder has not received certificates for all shares of the
Common Stock prior to the tenth (10th) business day after the expiration of the
Delivery Period with respect to a conversion of Series C Preferred Stock for any
reason, then (unless the holder otherwise elects to retain its status as a
holder of the Common Stock by so notifying the Company within five (5) business
days after the expiration of such ten (10) business day period) the holder shall
regain the rights of a holder of Series C Preferred Stock with respect to such
unconverted shares of Series C Preferred Stock and the Company shall, as soon as
practicable, return such unconverted shares to the holder. In all cases, the
holder shall retain all of its rights and remedies (including, without
limitation, the right to have the Conversion Price with respect to subsequent
conversions determined in accordance with Article VI) for the Company's failure
to convert Series C Preferred Stock.
G. Remedies Cumulative. The remedies provided in this Certificate of
Designation shall be cumulative and in addition to all other remedies available
under this Certificate of Designation, at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein
shall limit a holder's right to pursue actual damages for any failure by the
Company to comply with the terms of this Certificate of Designation. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the holders of Series C Preferred Stock and that the remedy
at law for any such breach may be inadequate. The Company therefore agrees, in
the event of any such breach or threatened breach, that the holders of Series C
Preferred Stock shall be entitled, in addition to all other available remedies,
to an injunction restraining any breach, without the necessity of showing
economic loss and without any bond or other security being required.
2. SERIES D CONVERTIBLE PREFERRED STOCK
I. DESIGNATION AND AMOUNT
The designation of this series, which consists of 20,000 shares of
Preferred Stock, is the Series D Convertible Preferred Stock (the "SERIES D
PREFERRED STOCK") and the face amount shall be One Thousand U.S. Dollars
($1,000.00) per share (the "FACE AMOUNT").
II. DIVIDENDS
The Series D Preferred Stock will bear dividends and the holders of the
Series D Preferred Stock shall be entitled to receive dividends on the Series D
Preferred Stock as set forth in Article IV.
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III. CERTAIN DEFINITIONS
For purposes of this Section 2, the following terms shall have the
following meanings:
A. "AFFILIATE" has the meaning assigned to such term in Rule 12b-2,
promulgated under the Securities Exchange Act of 1934, as amended.
B. "CHANGE OF CONTROL EVENT" means (a) a consolidation or merger of the
Corporation with or into any person or entity, acting individually or in concert
with others, that results in the holders of the voting securities of the
Corporation immediately prior thereto (together with their respective
Affiliates) holding or having the right to direct the voting of less than fifty
percent (50%) of the total outstanding voting securities of the Corporation or
such other surviving entity immediately following such Change of Control Event,
(b) a sale or other disposition, in one transaction or a series of related
transactions, of all or substantially all of the assets of the Corporation, or
(c) the (i) sale or issuance, in one transaction or a series of related
transactions, by the Corporation or any of its stockholders of any securities to
any person or entity, or (ii) acquisition or right to acquire or control, in one
transaction or a series of related transactions, by any person or entity, in
either case acting individually or in concert with others, such that, following
the consummation of such transaction(s), such person(s) or entity(ies) (together
with their respective Affiliates) would own or have the right to acquire greater
than fifty percent (50%) of the outstanding shares of Common Stock (calculated
on a fully-diluted basis).
C. "COMMON STOCK" shall mean the Corporation's Common Stock, par value
$0.001 per share.
D. "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of shares of
Common Stock outstanding (not including shares of Common Stock held in the
treasury of the Corporation), if any.
E. "CONVERSION DATE" means, for (i) any Optional Conversion (as defined
below), the date specified in the notice of conversion in the form attached
hereto as Exhibit A (the "NOTICE OF CONVERSION"), so long as a copy of the
Notice of Conversion is faxed (or delivered by other means resulting in notice)
to the Corporation before 5:00 p.m., New York City time, on the Conversion Date
indicated in the Notice of Conversion; provided, however, that if the Notice of
Conversion is not so faxed or otherwise delivered before such time, then the
Conversion Date shall be the date the holder faxes or otherwise delivers the
Notice of Conversion to the Corporation and if the Notice of Conversion is faxed
or otherwise delivered after 5:00 p.m., New York City time, on the Conversion
Date indicated in the Notice of Conversion, the Conversion Date shall be the
next business day, and (ii) for any Mandatory Conversion, that date specified in
the notice delivered to the holders of the Series D Preferred Stock being
converted pursuant to Article IV.C in the event that such Mandatory Conversion
occurs.
F. "CONVERSION PRICE" means $0.30, and shall be subject to adjustment
as provided herein.
G. "ISSUANCE DATE" means, with respect to each share of Series D
Preferred Stock, the date of the closing under the Securities Purchase Agreement
by and among the Corporation and the purchasers named therein (the "SECURITIES
PURCHASE AGREEMENT") pursuant to which such share of Series D Preferred Stock
was issued.
H. "MEASUREMENT DATE" means for purposes of any issuance of securities,
the date of issuance thereof.
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I. "MARKET PRICE" means, for any security as of any date, the volume
weighted average price of such security on the American Stock Exchange (the
"AMEX") or other principal trading market where such security is listed or
traded as reported by Bloomberg Financial Markets (or a comparable reporting
service of national reputation selected by the Corporation and reasonably
acceptable to holders of at least sixty six and two-thirds percent (66 2/3%) of
the then outstanding shares of Series D Preferred Stock ("MAJORITY HOLDERS") if
Bloomberg Financial Markets is not then reporting closing sales prices of such
security) (collectively, "BLOOMBERG"), or if the foregoing does not apply, the
last reported sales price of such security on a national exchange or in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no such price is reported for such security by
Bloomberg, the average of the bid prices of all market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc., in each
case for such date or, if such date was not a trading day for such security, on
the next preceding date which was a trading day. If the Market Price cannot be
calculated for such security as of either of such dates on any of the foregoing
bases, the Market Price of such security on such date shall be the fair market
value as reasonably determined by an investment banking firm selected by the
Corporation and reasonably acceptable to the Majority Holders, with the costs of
such appraisal to be borne by the Corporation.
J. "NATIONAL SECURITIES MARKET" means AMEX, New York Stock Exchange
("NYSE"), the Nasdaq National Market ("NNM"), or the NASDAQ SmallCap Market
("SMALLCAP") (or the successor to any of them).
K. "WARRANTS" shall mean the warrants issued by the Corporation to the
initial holders pursuant to the Securities Purchase Agreement.
IV. PAYMENT OF DIVIDENDS; CONVERSION
A. DIVIDENDS; CONVERSION AT THE OPTION OF THE HOLDER.
(i) Dividends shall be payable cumulatively out of funds
legally available therefor, at the rate of six percent (6%) per annum from the
Issuance Date, as to each outstanding share of Series D Preferred Stock on every
successive September 30, December 31, March 31 and June 30 and upon conversion
or redemption of such share (each such date or occurrence, a "DIVIDEND DATE").
Payment of a Dividend shall be made, (x) in cash or (y) at the option of the
Corporation by the issuance of shares of Series D Preferred Stock by the
Corporation, determined by dividing the amount of the Dividends that are payable
by the Face Amount immediately proceeding the applicable Dividend Date. If the
payment of any Dividend would result in the issuance of a fractional share of
Series D Preferred Stock, such fractional share shall be payable in cash based
upon the Face Amount at such time. If the Corporation is unable to make such a
cash payment, the holder shall be entitled to receive, in lieu of the fraction
of a share of Series D Preferred Stock a whole share of Series D Preferred
Stock.
(ii) Subject to the limitations on conversions contained in
Paragraph D of this Article IV, each holder of shares of Series D Preferred
Stock may, at any time and from time to time, convert (an "OPTIONAL CONVERSION")
each of its shares of Series D Preferred Stock into a number of fully paid and
nonassessable shares of Common Stock determined in accordance with the following
formula:
Face Amount (plus accrued, but unpaid, Dividends, if any)
---------------------------------------------------------
Conversion Price
B. MECHANICS OF CONVERSION. In order to effect an Optional Conversion,
a holder shall: (x) fax (or otherwise deliver) a copy of the fully executed
Notice of Conversion to the Corporation (Attention: Secretary) and (y) surrender
or cause to be surrendered the original certificates representing the Series D
Preferred Stock being converted (the "PREFERRED STOCK CERTIFICATES"), duly
endorsed, along with a copy of the Notice of Conversion as soon as practicable
20
thereafter to the Corporation. Upon receipt by the Corporation of a facsimile
copy of a Notice of Conversion from a holder, the Corporation shall promptly
send, via facsimile, a confirmation to such holder stating that the Notice of
Conversion has been received, the date upon which the Corporation expects to
deliver the Common Stock issuable upon such conversion and the name and
telephone number of a contact person at the Corporation regarding the
conversion. The Corporation shall not be obligated to issue shares of Common
Stock upon a conversion unless either the Preferred Stock Certificates are
delivered to the Corporation as provided above, or the holder notifies the
Corporation that such Preferred Stock Certificates have been lost, stolen or
destroyed and delivers the documentation to the Corporation required by Article
XIV.B hereof.
(i) DELIVERY OF COMMON STOCK UPON CONVERSION. Upon the
surrender of Preferred Stock Certificates accompanied by a Notice of Conversion,
the Corporation (itself, or through its transfer agent) shall, no later than the
later of (a) the second business day following the Conversion Date and (b) the
business day following the date of such surrender (or, in the case of lost,
stolen or destroyed certificates, after provision of indemnity pursuant to
Article XIV.B) (the "DELIVERY PERIOD"), issue and deliver (i.e., deposit with a
nationally recognized overnight courier service postage prepaid) to the holder
or its nominee (x) that number of shares of Common Stock issuable upon
conversion of such shares of Series D Preferred Stock being converted and (y) a
certificate representing the number of shares of Series D Preferred Stock not
being converted, if any. Notwithstanding the foregoing, if the Corporation's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, and so long as the certificates therefore
do not bear a legend (pursuant to the terms of the Securities Purchase
Agreement) and the holder thereof is not then required to return such
certificate for the placement of a legend thereon (pursuant to the terms of the
Securities Purchase Agreement), the Corporation shall cause its transfer agent
to promptly electronically transmit the Common Stock issuable upon conversion to
the holder by crediting the account of the holder or its nominee with DTC
through its Deposit Withdrawal Agent Commission system ("DTC TRANSFER"). If the
aforementioned conditions to a DTC Transfer are not satisfied, the Corporation
shall deliver as provided above to the holder physical certificates representing
the Common Stock issuable upon conversion. Further, a holder may instruct the
Corporation to deliver to the holder physical certificates representing the
Common Stock issuable upon conversion in lieu of delivering such shares by way
of DTC Transfer. Notwithstanding the foregoing, in no event shall the Company be
required to effect a conversion of Series D Preferred Stock into less than 1,000
shares of Common Stock, unless such conversion would result in the conversion of
all shares of Series D Preferred Stock then held by such holder.
(ii) TAXES. The Corporation shall pay any and all taxes that
may be imposed upon it with respect to the issuance and delivery of the shares
of Common Stock upon the conversion of the Series D Preferred Stock, provided
however, that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
shares of Common Stock in a name other than the holder of the Series D Preferred
Stock.
(iii) NO FRACTIONAL SHARES. If any conversion of Series D
Preferred Stock would result in the issuance of a fractional share of Common
Stock, such fractional share shall be payable in cash based upon the ten (10)
day average Market Price at such time, and the number of shares of Common Stock
issuable upon conversion of the Series D Preferred Stock shall be the next lower
whole number of shares. If the Corporation is unable to make such a cash
payment, the holder shall be entitled to receive, in lieu of the fraction of a
share of Common Stock a whole share of Common Stock.
(iv) CONVERSION DISPUTES. In the case of any dispute with
respect to a conversion, the Corporation shall promptly issue such number of
shares of Common Stock as are not disputed in accordance with subparagraph (i)
above. If such dispute involves the calculation of the Conversion Price, and
such dispute is not promptly resolved by discussion between the relevant holder
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and the Corporation, the Corporation shall submit the disputed calculations to
an independent outside accountant via facsimile within three business days of
receipt of the Notice of Conversion. The accountant shall promptly audit the
calculations and notify the Corporation and the holder of the results no later
than three business days from the date it receives the disputed calculations.
The accountant's calculation shall be deemed conclusive, absent manifest error.
The Corporation shall then issue the appropriate number of shares of Common
Stock in accordance with subparagraph (i) above. The fees of the accountant
shall be borne (i) by the Corporation if the holder's calculation of the
Conversion Price is closer to the accountant's calculation of the Conversion
Price, and (ii) by the holder if the reverse is true.
C. MANDATORY CONVERSION BY CORPORATION.
(i) At any time after the second anniversary of the Issuance
Date and subject to Article IV.D hereof, if all of the Required Conditions are
satisfied, at the option of the Corporation exercised by the delivery of written
notice (a "MANDATORY CONVERSION NOTICE") to all holders of the shares of Series
D Preferred Stock, the Company may require the holders of Series D Preferred
Stock to convert all of the outstanding shares of Series D Preferred Stock into
Common Stock pursuant to the applicable conversion procedures in Article IV.B.
(ii) The "REQUIRED CONDITIONS" shall consist of the following:
(a) the Market Price of the Common Stock for the
twenty (20) trading days prior to the date of delivery of the Mandatory
Conversion Notice equals or exceeds two hundred percent (200%) of the then
applicable Conversion Price;
(b) the registration statement required to be filed
by the Corporation pursuant to Section 2(a) of the Registration Rights
Agreement, dated as of the Issuance Date, by and among the Corporation and the
initial holders (the "REGISTRATION RIGHTS AGREEMENT") shall have been declared
effective by the United States Securities and Exchange Commission (the date on
which such registration statement is declared effective is hereinafter referred
to as the "REGISTRATION STATEMENT EFFECTIVE DATE") and continues to be effective
up through and including the date of the Mandatory Conversion contemplated by
this Article IV.C (it being understood that the Corporation shall comply with
its obligations under Article 3 of the Registration Rights Agreement relating to
the effectiveness of such registration statement);
(c) all shares of Common Stock issuable upon
conversion of the Series D Preferred Stock and exercise of the Warrants are then
(a) authorized and reserved for issuance, (b) registered under the Securities
Act for resale by the holders and (c) listed or traded on any National
Securities Market;
(d) no Redemption Event (as defined in Article VIII
below) shall have occurred without having been cured; and
(e) all amounts, if any, then accrued or payable
under this Certificate of Designation or the Registration Rights Agreement shall
have been paid.
D. LIMITATIONS ON CONVERSIONS. The conversion of shares of Series D
Preferred Stock shall be subject to the following limitations (each of which
limitations shall be applied independently):
(i) CAP AMOUNT. If the Corporation is prohibited by Rule 713
of the AMEX Company Guide, or any successor or similar rule, or the rules or
regulations of any other securities exchange or automated quotation system on
which the Common Stock is then listed or traded, from issuing a number of shares
of Common Stock upon conversion of Series D Preferred Stock (together with any
22
shares of Common Stock issuable as Dividends payable on the Series D Preferred
Stock or issuable upon exercise of the Warrants, or securities convertible into
or exercisable for Common Stock issued pursuant to the Securities Purchase
Agreement or other agreements entered in connection therewith) in excess of a
prescribed amount (the "CAP AMOUNT") (without stockholder approval or
otherwise), then the Corporation shall not issue shares upon conversion of
Series D Preferred Stock in excess of the Cap Amount. The Cap Amount shall be
allocated pro rata to the holders of Series D Preferred Stock as provided in
Article XIV.C. In the event the Corporation is prohibited from issuing shares of
Common Stock as a result of the operation of this subparagraph (i), the
Corporation shall comply with Article VII.
(ii) NO FIVE PERCENT HOLDERS. In no event shall a holder of
shares of Series D Preferred Stock of the Corporation have the right to convert
shares of Series D Preferred Stock into shares of Common Stock or to dispose of
any shares of Series D Preferred Stock, nor shall the Company have the right to
redeem shares of Series D Preferred Stock for Common Stock, to the extent that
such right to effect such conversion, disposition, or redemption would result in
the holder or any of its affiliates beneficially owning more than 4.99% of the
outstanding shares of Common Stock. For purposes of this subparagraph,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder.
The restriction contained in this subparagraph may not be altered, amended,
deleted or changed in any manner whatsoever unless the holders of a majority of
the outstanding shares of Common Stock and the Majority Holders shall approve,
in writing, such alteration, amendment, deletion or change. Notwithstanding the
forgoing, this Article IV.D(ii) shall not apply to (a) the following
individuals: the General Conference Corporation of Seventh-day Adventists,
Jonathan J. Pallin, and Pierre Caland and affiliates, or (b) any individual not
a party to the Securities Purchase Agreement who becomes a holder of Preferred
Stock after July 10, 2003, and who notifies the Corporation in writing that this
Article IV.D(ii) shall not be applicable to such holder.
V. RESERVATION OF SHARES OF COMMON STOCK
A. RESERVED AMOUNT. As promptly as practicable following the issuance
date, but in no event later than 75 days following the First Closing (as defined
in the Securities Purchase Agreement), the Corporation shall use its best
efforts to obtain stockholder approval of an increase in its authorized but
unissued shares of Common Stock in accordance with Section 3(c) of the
Securities Purchase Agreement and upon such approval shall reserve 110% of the
number of shares of its authorized but unissued shares of Common Stock for
issuance upon conversion of the Series D Preferred Stock and exercise of the
Warrants. Thereafter, the number of authorized but unissued shares of Common
Stock so reserved (the "RESERVED AMOUNT") shall at all times be sufficient to
provide for the conversion of all of the Series D Preferred Stock outstanding at
the then current Conversion Price thereof and exercise the Warrants of the then
current Exercise Price (as defined in the Warrants). The Reserved Amount shall
be allocated to the holders of Series D Preferred Stock as provided in Article
XIV.C.
B. INCREASES TO RESERVED AMOUNT. If at any time following the Company's
receipt of the stockholder approval referred to in Article V.A above the
Reserved Amount for any three consecutive trading days (the last of such three
trading days being the "AUTHORIZATION TRIGGER DATE") shall be less than 100% of
the number of shares of Common Stock issuable upon conversion of the then
outstanding shares of Series D Preferred Stock and upon exercise of the then
outstanding Warrants, the Corporation shall immediately notify the holders of
Series D Preferred Stock of such occurrence and shall take immediate action
(including, if necessary, seeking stockholder approval to authorize the issuance
of additional shares of Common Stock) to increase the Reserved Amount to 110% of
the number of shares of Common Stock then issuable upon conversion of all of the
outstanding Series D Preferred Stock at the then current Conversion Price. In
the event the Corporation fails to so increase the Reserved Amount within 90
days after an Authorization Trigger Date, each holder of Series D Preferred
Stock shall thereafter have the option, exercisable in whole or in part at any
23
time and from time to time by delivery of a Redemption Notice (as defined in
Article VIII.C) to the Corporation, to require the Corporation to purchase for
cash, at an amount per share equal to the Redemption Amount (as defined in
Article VIII.B), a portion of the holder's Series D Preferred Stock such that,
after giving effect to such purchase, the holder's allocated portion of the
Reserved Amount exceeds 100% of the total number of shares of Common Stock
issuable to such holder upon conversion of its Series D Preferred Stock. If the
Corporation fails to redeem any of such shares within five (5) business days
after its receipt of such Redemption Notice, then such holder shall be entitled
to the remedies provided in Article VIII.C.
VI. FAILURE TO SATISFY CONVERSIONS
A. CONVERSION DEFAULTS. If, at any time, (x) a holder of shares of
Series D Preferred Stock submits a Notice of Conversion and the Corporation
fails for any reason (other than because such issuance would exceed such
holder's allocated portion of the Reserved Amount or Cap Amount, for which
failures the holders shall have the remedies set forth in Articles V and VII,
respectively) to deliver, on or prior to the fifth business day following the
expiration of the Delivery Period for such conversion (or if there is a dispute
with respect to such conversion, the fifth business day after such dispute is
resolved in accordance with Article IV.B), such number of shares of Common Stock
to which such holder is entitled upon such conversion, or (y) the Corporation
provides written notice to any holder of Series D Preferred Stock (or makes a
public announcement via press release) at any time of its intention not to issue
shares of Common Stock upon exercise by any holder of its conversion rights in
accordance with the terms of this Certificate of Designation (other than because
such issuance would exceed such holder's allocated portion of the Reserved
Amount or Cap Amount) (each of (x) and (y) being a "CONVERSION DEFAULT") then
the holder may elect at any time and from time to time prior to the Default Cure
Date (as defined below) for such Conversion Default, by delivery of a Redemption
Notice to the Corporation, to have all or any portion of such holder's
outstanding shares of Series D Preferred Stock purchased by the Corporation for
cash, at an amount per share equal to the Redemption Amount (as defined in
Article VIII.B). If the Corporation fails to redeem any of such shares within
five business days after its receipt of such Redemption Notice, then such holder
shall be entitled to the remedies provided in Article VIII.C.
"DEFAULT CURE DATE" means, as applicable, (i) with respect to a Conversion
Default described in clause (x) of its definition, the date the Corporation
effects the conversion of the full number of shares of Series D Preferred Stock,
and (ii) with respect to a Conversion Default described in clause (y) of its
definition, the date the Corporation issues shares of Common Stock in
satisfaction of all conversions of Series D Preferred Stock in accordance with
Article IV.A, or (iii) with respect to either type of a Conversion Default, the
date on which the Corporation redeems shares of Series D Preferred Stock held by
such holder pursuant to this Article VI.A.
B. BUY-IN CURE. Unless the Corporation has notified the applicable
holder in writing prior to the delivery by such holder of a Notice of Conversion
that the Corporation is unable to honor conversions, if (i) (a) the Corporation
fails to promptly deliver during the Delivery Period shares of Common Stock to a
holder upon a conversion of shares of Series D Preferred Stock or (b) there
shall occur a Legend Removal Failure (as defined in Article VIII.A(iii) below)
and (ii) thereafter, such holder purchases (in an open market transaction or
otherwise) shares of Common Stock to make delivery in satisfaction of a sale by
such holder of the unlegended shares of Common Stock (the "SOLD SHARES") which
such holder anticipated receiving upon such conversion (a "BUY-IN"), the
Corporation shall pay such holder (in addition to any other remedies available
to the holder) the amount by which (x) such holder's total purchase price
(including brokerage commissions, if any) for the unlegended shares of Common
Stock so purchased exceeds (y) the net proceeds received by such holder from the
sale of the Sold Shares. For example, if a holder purchases unlegended shares of
Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to shares of Common Stock it sold for $10,000, the Corporation will be
required to pay the holder $1,000. A holder shall provide the Corporation
written notification and supporting documentation indicating any amounts payable
to such holder pursuant to this Paragraph B. The Corporation shall make any
payments required pursuant to this Paragraph B in accordance with and subject to
the provisions of Article XIV.E.
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VII. INABILITY TO CONVERT DUE TO CAP AMOUNT
A. If the Stockholder Approvals have not been obtained within 75 days
following the First Closing (the "REPURCHASE EVENT"), the Corporation shall
immediately notify the holders of such failure and, within five days after the
occurrence of the Repurchase Event, purchase from each holder of Series D
Preferred Stock, at a per share price equal to the Face Amount plus accrued
Dividends (the "PER SHARE REPURCHASE PRICE"), all shares of Series D Preferred
Stock (together with Warrants to purchase that number of Warrant Shares issuable
with such number of shares) held by each Purchaser.
B. If at any time following receipt of the stockholder approval
referred to in Article VII.A. above, the Corporation is prohibited by Rule 713
of the AMEX Company Guide or any successor or similar rule, or the rules of any
other securities exchange or automated quotation system on which the Common
Stock is then listed or traded (a "TRIGGERING Event"), from issuing all of the
shares of Common Stock issuable upon complete conversion of the Series D
Preferred Stock and complete exercise of the Warrants (without giving effect to
the limitations on conversion and exercise contained in Article IV.D of this
Certificate of Designation and Section 7(g) of the Warrants), the Corporation
shall immediately notify the holders of such Triggering Event and, within a
period of five (5) days after the occurrence of such Triggering Event, purchase
from each holder of the Series D Preferred Stock, at a per share purchase price
equal to the greater of (i)(a) the quotient of the Face Amount plus accrued
Dividends (b) divided by the Conversion Price and (c) multiplied by the Market
Price of the Common Stock for the twenty (20) trading days prior to such
purchase and (ii)(a) the Face Amount together with accrued Dividends through the
repurchase date (b) multiplied by 1.25 (the "PER SHARE PRICE"), such whole
number of Series D Preferred Stock such that the Common Stock issuable upon
complete conversion of the Series D Preferred Stock and complete exercise of the
Warrants (without giving effect to the limitations on conversion and exercise
contained in Article IV.D in this Certificate of Designations and Section 7(g)
of the Warrants) is no longer prohibited by Rule 713 of the AMEX Company Guide
(or any successor or similar rule) or the rules of any other securities exchange
or automated quotation system on which the Common Stock is then listed or
traded.
VIII. REDEMPTION
A. REDEMPTION BY HOLDER. In the event (each of the events described in
clauses (i) - (x) below after expiration of the applicable cure period (if any)
being a "REDEMPTION EVENT"):
(i) the Common Stock (including any of the shares of Common
Stock issuable upon conversion of the Series D Preferred Stock) is suspended
from trading on any of, or is not listed (and authorized) for trading on at
least one of, the NYSE, the AMEX, the NNM, or the SmallCap, for an aggregate of
10 trading days in any nine month period;
(ii) the registration statement required to be filed by the
Corporation pursuant to Section 2(a) of the Registration Rights Agreement has
not been declared effective by the 270th day following the Issuance Date or such
registration statement, after being declared effective, cannot be utilized by
the holders of Series D Preferred Stock for resale of all of their Registrable
Securities (as defined in the Registration Rights Agreement) for an aggregate
amount of time more than the time period permitted under Section 3(g) of the
Registration Rights Agreement;
25
(iii) the Corporation fails to remove any restrictive legend
on any certificate or any shares of Common Stock issued to the holders of Series
D Preferred Stock upon conversion of the Series D Preferred Stock as and when
required by this Certificate of Designation, the Securities Purchase Agreement
or the Registration Rights Agreement (a "LEGEND REMOVAL FAILURE"), and any such
failure continues uncured for five business days after the Corporation has been
notified thereof in writing by the holder that the holder;
(iv) the Corporation provides written notice (or otherwise
indicates) to any holder of Series D Preferred Stock, or states by way of public
announcement distributed via a press release, at any time, of its intention not
to issue, or otherwise refuses to issue, shares of Common Stock to any holder of
Series D Preferred Stock upon conversion in accordance with the terms of this
Certificate of Designation (other than due to the circumstances contemplated by
Articles V or VII for which the holders shall have the remedies set forth in
such Articles);
(v) the Corporation or any subsidiary of the Corporation shall
make an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business, or such a receiver or trustee shall otherwise be
appointed;
(vi) bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for the relief of debtors shall be instituted
by or against the Corporation or any subsidiary of the Corporation and if
instituted against the Corporation by a third party, shall not be dismissed
within 90 days of their initiation;
(vii) the Corporation shall either
(a)(i) fail to pay, when due, or within any
applicable grace period, any payment with respect to any indebtedness of the
Corporation in excess of $250,000 (other than that set forth on Schedule 4(d) of
the Schedule of Exceptions to the Securities Purchase Agreement) due to any
third party, other than payments contested by the Corporation in good faith, or
otherwise is in breach or violation of any agreement for monies owed or owing in
an amount in excess of $250,000 (other than that set forth on Schedule 4(d) of
the Schedule of Exceptions to the Securities Purchase Agreement) which breach or
violation permits the other party thereto to declare a default or otherwise
accelerate amounts due thereunder, or (ii) suffer to exist any other default or
event of default under any agreement binding the Corporation which default or
event of default would or is likely to have a material adverse effect on the
business, operations, properties, prospects or financial condition of the
Corporation; or
(b) consummate a Change of Control Event;
(viii) the Corporation shall fail to pay in full Dividends on
any Dividend Date;
(ix) no Second Closing (as that term is defined in the
Securities Purchase Agreement) has occurred within 75 days following the First
Closing; or
(x) except with respect to matters covered by subparagraphs
(i) - (ix) above, as to which such applicable subparagraphs shall apply, the
Corporation otherwise shall materially breach any term or provision hereunder or
under the Securities Purchase Agreement, the Registration Rights Agreement or
the Warrants (as defined in the Securities Purchase Agreement), including,
without limitation, the representations and warranties contained therein (i.e.,
in the event of a material breach as of the date such representation and
warranty was made) and if such breach is curable, shall fail to cure such breach
within 10 business days after the Corporation has been notified thereof in
writing by the holder;
26
then, upon the occurrence of any such Redemption Event, each holder of shares of
Series D Preferred Stock shall thereafter have the option, exercisable in whole
or in part at any time and from time to time by delivery of a Redemption Notice
(as defined in Paragraph C below) to the Corporation while such Redemption Event
continues, to require the Corporation to purchase for cash any or all of the
then outstanding shares of Series D Preferred Stock held by such holder for an
amount per share equal to the Redemption Amount (as defined in Paragraph B
below) in effect at the time of the redemption hereunder. For the avoidance of
doubt, the occurrence of any event described in clauses (i), (ii), (iv), (v) or
(ix) above shall immediately constitute a Redemption Event and there shall be no
cure period. Upon the Corporation's receipt of any Redemption Notice hereunder
(other than during the three trading day period following the Corporation's
delivery of a Redemption Announcement (as defined below) to all of the holders
in response to the Corporation's initial receipt of a Redemption Notice from a
holder of Series D Preferred Stock), the Corporation shall immediately (and in
any event within one business day following such receipt) deliver a written
notice (a "REDEMPTION ANNOUNCEMENT") to all holders of Series D Preferred Stock
stating the date upon which the Corporation received such Redemption Notice and
the amount of Series D Preferred Stock covered thereby. The Corporation shall
not redeem any shares of Series D Preferred Stock during the three trading day
period following the delivery of a required Redemption Announcement hereunder.
At any time and from time to time during such three trading day period, each
holder of Series D Preferred Stock may request (either orally or in writing)
information from the Corporation with respect to the instant redemption
(including, but not limited to, the aggregate number of shares of Series D
Preferred Stock covered by Redemption Notices received by the Corporation) and
the Corporation shall furnish (either orally or in writing) as soon as
practicable such requested information to such requesting holder.
B. DEFINITION OF REDEMPTION AMOUNT. The "Redemption Amount" with
respect to a share of Series D Preferred Stock means an amount equal to:
(i) in the case of any Redemption Event described in Article
VIII.A (other than the Redemption Event described in either Article
VIII.A(vii)(b) or Article VIII.A(ix)), an amount equal to V multiplied by 1.25;
(ii) in the case of the Redemption Event described in Article
VIII.A(vii)(b), the greater of (x) V or (y) V/Conversion Price (without giving
effect to the limitations contained in Article IV.D hereof); or
(iii) in the case of the Redemption Event described in Article
VIII.A(ix), an amount equal to V;
where:
"V" means the Face Amount thereof plus the accrued Dividends thereon through the
date of payment of the Redemption Amount.
C. REDEMPTION DEFAULTS. If the Corporation fails to pay any holder the
Redemption Amount with respect to any share of Series D Preferred Stock within
five business days after its receipt of a notice requiring such redemption (a
"REDEMPTION NOTICE"), then the holder of Series D Preferred Stock entitled to
redemption (i) shall be entitled to interest on the Redemption Amount at a per
annum rate equal to the lower of eighteen percent (18%) and the highest interest
rate permitted by applicable law from the date on which the Corporation receives
the Redemption Notice, until the date of payment of the Redemption Amount
hereunder, and (ii) provided that the Corporation can then legally do so, shall
have the right, at any time and from time to time, to require the Corporation,
upon written notice, to immediately convert (in accordance with the terms of
Paragraph A of Article IV) all or any portion of the Redemption Amount into
27
shares of Common Stock, at the Conversion Price then in effect, during the
period beginning on the date on which the Corporation receives the Redemption
Notice and ending on the Conversion Date with respect to the conversion of such
Redemption Amount. In the event the Corporation is not able to redeem all of the
shares of Series D Preferred Stock subject to Redemption Notices delivered prior
to the date upon which such redemption is to be effected, the Corporation shall
redeem shares of Series D Preferred Stock from each holder pro rata, based on
the total number of shares of Series D Preferred Stock outstanding at the time
of redemption included by such holder in all Redemption Notices delivered prior
to the date upon which such redemption is to be effected relative to the total
number of shares of Series D Preferred Stock outstanding at the time of
redemption included in all of the Redemption Notices delivered prior to the date
upon which such redemption is to be effected.
D. MANDATORY REDEMPTION BY COMPANY AT MATURITY.
(i) On the third anniversary of the Issuance Date (the
"MATURITY DATE"), the Company shall redeem each share of Series D Preferred
Stock issued and outstanding on the Maturity Date, at a redemption price per
share equal to the Face Amount, plus all accrued Dividends to the date of such
redemption (the "MANDATORY REDEMPTION PRICE"). The Corporation may, at its
option, pay the Mandatory Redemption Price in (i) cash or (ii) if clauses
(b)-(e) of the Required Conditions in Article IV.C(ii) are met, and subject to
Article IV.D, in shares of the Company's Common Stock, valued at the lesser of
the then applicable Conversion Price or ninety percent (90%) of the Market Price
of the Common Stock for the ninety (90) trading days prior to the Maturity Date.
Within thirty (30) days of the Maturity Date, the Company shall send a notice to
the holders of the Series D Preferred Stock ("NOTICE OF REDEMPTION AT MATURITY")
stating the date set for redemption (which shall be no later than twenty (20)
days after the Maturity Date) and whether the Corporation has elected to pay the
Mandatory Redemption Price in cash or in shares of Common Stock. Notwithstanding
the delivery of a Notice of Redemption at Maturity, a holder may convert such
shares of Series D Preferred Stock subject to such notice by the delivery prior
to the date set forth in such notice on which the Company intends to redeem such
shares of a Notice of Conversion to the Company or its transfer agent pursuant
to the procedures set forth in Article IV.B.
(ii) The Company may not deliver to a holder of Series D
Preferred Stock a Notice of Redemption at Maturity unless on or prior to the
date of delivery of such Notice of Redemption at Maturity, the Company shall
have segregated on the books and records of the Company an amount of cash
sufficient to pay all amounts to which the holders of Series D Preferred Stock
are entitled upon such redemption pursuant to subparagraph (i) of this Section
D. Any Notice of Redemption at Maturity delivered shall be irrevocable and shall
be accompanied by a statement executed by a duly authorized officer of the
Company or the holder otherwise complies with Article XIV.B hereof.
(iii) The redemption amount payable under this Section D shall
be paid to the holders of the Series D Preferred Stock being redeemed within
five (5) business days of the redemption date specified in the Notice of
Redemption at Maturity Date; provided, however, that the Company shall not be
obligated to deliver any portion of such redemption amount until either the
certificates evidencing the Series D Preferred Stock being redeemed are
delivered to the office of the Company or the holder notifies the Company that
such certificates have been lost, stolen or destroyed and delivers the
documentation in accordance with Article XIV.B hereof. Notwithstanding anything
herein to the contrary, in the event that the certificates evidencing the Series
D Preferred Stock being redeemed are not delivered to the Company prior to the
third business day following the redemption date specified in the Notice of
28
Redemption at Maturity, the redemption of the Series D Preferred Stock pursuant
to this Article VIII.D shall still be deemed effective as of the redemption date
specified in the Notice of Redemption at Maturity and the applicable redemption
amount shall be paid to the holder of Series D Preferred Stock being redeemed
within five (5) business days of the date the certificates evidencing the Series
D Preferred Stock being redeemed are actually delivered to the Company or the
holder otherwise complies with Article XIV.B hereof.
IX. RANK
All shares of the Series D Preferred Stock shall rank (i) prior to (a)
the Corporation's Common Stock; (b) the Corporation's Series C Convertible
Preferred Stock; and (c) any class or series of capital stock of the Corporation
hereafter created (unless, with the consent of the Majority Holders obtained in
accordance with Article XIII hereof, such class or series of capital stock
specifically, by its terms, ranks senior to or pari passu with the Series D
Preferred Stock) (collectively with the Common Stock and Series C Convertible
Preferred Stock, "JUNIOR SECURITIES"); (ii) pari passu with any other class or
series of capital stock of the Corporation hereafter created (with the written
consent of the Majority Holders obtained in accordance with Article XIII hereof)
specifically ranking, by its terms, on parity with the Series D Preferred Stock
(the "PARI PASSU SECURITIES"); and (iii) junior to any class or series of
capital stock of the Corporation hereafter created (with the written consent of
the Majority Holders obtained in accordance with Article XIII hereof)
specifically ranking, by its terms, senior to the Series D Preferred Stock
(collectively, the "SENIOR SECURITIES"), in each case as to distribution of
assets upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary.
X. LIQUIDATION PREFERENCE
A. If the Corporation shall commence a voluntary case under the U.S.
Federal bankruptcy laws or any other applicable bankruptcy, insolvency or
similar law, or consent to the entry of an order for relief in an involuntary
case under any law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the U.S. Federal bankruptcy laws or any other
applicable bankruptcy, insolvency or similar law resulting in the appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of 90 consecutive days and,
on account of any such event, the Corporation shall liquidate, dissolve or wind
up, or if the Corporation shall otherwise liquidate, dissolve or wind up,
including, but not limited to, a Change of Control Event (only in the event a
holder does not elect its rights with respect to such a Change of Control Event
as set forth in Article VIII.A) (a "LIQUIDATION EVENT"), no distribution shall
be made to the holders of any shares of capital stock of the Corporation (other
than Senior Securities pursuant to the rights, preferences and privileges
thereof, if any ) upon liquidation, dissolution or winding up unless prior
thereto the holders of shares of Series D Preferred Stock shall have received
the Liquidation Preference with respect to each share. If, upon the occurrence
of a Liquidation Event, the assets and funds available for distribution among
the holders of the Series D Preferred Stock and holders of PariPassu Securities,
if any, shall be insufficient to permit the payment to such holders of the
preferential amounts payable thereon, then the entire assets and funds of the
Corporation legally available for distribution to the Series D Preferred Stock
and the Pari Passu Securities, if any, shall be distributed ratably among such
shares in proportion to the ratio that the Liquidation Preference payable on
each such share bears to the aggregate Liquidation Preference payable on all
such shares.
29
B. The purchase or redemption by the Corporation of stock of any class,
in any manner permitted by law, shall not, for the purposes hereof, be regarded
as a liquidation, dissolution or winding up of the Corporation.
C. The "Liquidation Preference" with respect to a share of Series D
Preferred Stock means an amount equal to the Face Amount thereof plus the
accrued but unpaid Dividends thereon (whether or not declared) through the date
of final distribution, or upon the occurrence of Change in Control Event (if a
holder does not elect its rights with respect to such Change in Control Event as
set forth in Article VIII.A) the Liquidation Preference shall be the greater of
(i) V or (ii) V/Conversion Price (without giving effect to the limitation
contained in Article IV.D hereof). The Liquidation Preference with respect to
any Pari Passu Securities, if any, shall be as set forth in the Certificate of
Designation filed in respect thereof.
XI. ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time
as follows:
A. STOCK SPLITS, STOCK DIVIDENDS, ETC. If, at any time on or after the
Issuance Date, the number of outstanding shares of Common Stock is increased by
a stock split, stock dividend, combination, reclassification or other similar
event, the Conversion Price shall be proportionately reduced, or if the number
of outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the
Conversion Price shall be proportionately increased. In such event, the
Corporation shall notify the Corporation's transfer agent of such change on or
before the effective date thereof.
B. ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, at any time after
the Issuance Date, there shall be (i) any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination), (ii) any consolidation or merger of the
Corporation with any other entity (other than a merger in which the Corporation
is the surviving or continuing entity and its capital stock is unchanged), (iii)
any sale or transfer of all or substantially all of the assets of the
Corporation or (iv) any share exchange pursuant to which all of the outstanding
shares of Common Stock are converted into other securities or property (each of
(i) - (iv) above being a "CORPORATE CHANGE"), then the holders of Series D
Preferred Stock shall thereafter have the right to receive upon conversion, in
lieu of the shares of Common Stock otherwise issuable, such shares of stock,
securities and/or other property as would have been issued or payable in such
Corporate Change with respect to or in exchange for the number of shares of
Common Stock which would have been issuable upon conversion had such Corporate
Change not taken place (without giving effect to the limitation contained in
Article IV.D hereof), and in any such case, appropriate provisions (in form and
substance reasonably satisfactory to the holders of a majority of the Series D
Preferred Stock then outstanding) shall be made with respect to the rights and
interests of the holders of the Series D Preferred Stock to the end that the
economic value of the shares of Series D Preferred Stock are in no way
diminished by such Corporate Change and that the provisions hereof (including,
without limitation, in the case of any such consolidation, merger or sale in
which the successor entity or purchasing entity is not the Corporation, an
immediate adjustment of the Conversion Price so that the Conversion Price
immediately after the Corporate Change reflects the same relative value as
compared to the value of the surviving entity's common stock that existed
between the Conversion Price and the value of the Corporation's Common Stock
immediately prior to such Corporate Change shall thereafter be applicable, as
nearly as may be practicable in relation to any shares of stock or securities
thereafter deliverable upon the conversion thereof. The Corporation shall not
effect any Corporate Change unless (i) each holder of Series D Preferred Stock
has received written notice of such transaction at least 30 days prior to the
consummation of the transaction or event (or 30 days prior to the date of the
meeting or other formal action of shareholders relating thereto, whichever is
30
earlier, but in no event earlier than public announcement of such proposed
transaction), and (ii) the resulting successor or acquiring entity (if not the
Corporation) assumes by written instrument (in form and substance reasonable
satisfactory to the holders of a majority of the Series D Preferred Stock) the
obligations of this Certificate of Designation. The above provisions shall apply
regardless of whether or not there would have been a sufficient number of shares
of Common Stock authorized and available for issuance upon conversion of the
shares of Series D Preferred Stock outstanding as of the date of such
transaction, and shall similarly apply to successive reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
C. ADJUSTMENT DUE TO DISTRIBUTION. If, at any time after the Issuance
Date, the Corporation shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including any
dividend or distribution to the Corporation's stockholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off))
(a "DISTRIBUTION"), then the holders of Series D Preferred Stock shall be
entitled, upon any conversion of shares of Series D Preferred Stock after the
date of record for determining stockholders entitled to such Distribution, to
receive the amount of such assets which would have been payable to the holder
with respect to the shares of Common Stock issuable upon such conversion had
such holder been the holder of such shares of Common Stock on the record date
for the determination of stockholders entitled to such Distribution. If the
Distribution involves rights, warrants, options or any other form of convertible
securities and the right to exercise or convert such securities would expire in
accordance with its terms prior to the conversion of the Series D Preferred
Stock, then the terms of such securities shall provide that such exercise or
convertibility right shall remain in effect until 30 days after the date the
holder of Series D Preferred Stock receives such securities pursuant to the
conversion hereof.
D. ISSUANCE OF OTHER SECURITIES.
(i) If at any time after the Issuance Date and on or before
the Maturity Date the Company issues or sells or in accordance with Article
XI.D(ii) is deemed to have issued and sold any shares of the Common Stock for no
consideration or for a consideration per share less than the Dilutive Price (as
defined in this subparagraph) on the date of issuance or deemed issuance of the
Common Stock (a "DILUTIVE ISSUANCE"), then effective immediately upon the
Dilutive Issuance, the Conversion Price will be reduced, as of the close of
business on the date of such Dilutive Issuance, to the price at which such
shares of the Common Stock are so issued or sold or deemed issued or sold. For
purposes of this subparagraph, "DILUTIVE PRICE" means, at any time, the
Conversion Price then in effect.
(ii) EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For
purposes of determining the adjusted Conversion Price under Article XI.D(i)
hereof, the following will be applicable:
(a) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in
any manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase shares of the Common
Stock or other securities exercisable, convertible into or exchangeable for
shares of the Common Stock ("CONVERTIBLE SECURITIES") (such warrants, rights and
options to purchase shares of the Common Stock or Convertible Securities are
hereinafter referred to as "OPTIONS") and the price per share for which a share
of the Common Stock is issuable upon the exercise of such Options is less than
the Dilutive Price in effect on the date of issuance of such Options ("BELOW
MARKET OPTIONS"), then the maximum total number of shares of the Common Stock
issuable upon the exercise of all such Below Market Options (assuming full
exercise, conversion or exchange of Convertible Securities, if applicable) will,
as of the date of the issuance or grant of such Below Market Options, be deemed
to be outstanding and to have been issued and sold by the Company for such price
per share. For purposes of the preceding sentence, the "price per share for
which a share of the Common Stock is issuable upon the exercise, conversion or
exchange of such Below Market Options is determined by dividing (i) the total
31
amount, if any, received or receivable by the Company as consideration for the
issuance or granting of all such Below Market Options, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the exercise of all such Below Market Options, plus, in the case of
Convertible Securities issuable upon the exercise of such Below Market Options,
the minimum aggregate amount of additional consideration payable upon the
exercise, conversion or exchange thereof at the time such Convertible Securities
first become exercisable, convertible or exchangeable, (determined in accordance
with the calculation method set forth in Article XI.D(ii)(c), if applicable) by
(ii) the maximum total number of shares of the Common Stock issuable upon the
exercise of all such Below Market Options (assuming full conversion of
Convertible Securities, if applicable). No further adjustment to the Conversion
Price will be made upon the actual issuance of such shares of the Common Stock
upon the exercise of such Below Market Options or upon the exercise, conversion
or exchange of Convertible Securities issuable upon exercise of such Below
Market Options.
(b) Issuance of Convertible Securities. If the
Company in any manner issues or sells any Convertible Securities, whether or not
immediately convertible and the price per share for which a share of the Common
Stock is issuable upon such exercise, conversion or exchange (as determined
pursuant to Article XI.D(ii)(c) if applicable) is less than the Dilutive Price
in effect on the date of issuance of such Convertible Securities, then the
maximum total number of shares of the Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which a share of
the Common Stock is issuable upon such exercise, conversion or exchange" is
determined by dividing (i) the total amount, if any, received or receivable by
the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise, conversion or exchange thereof at
the time such Convertible Securities first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of shares of the Common Stock
issuable upon the exercise, conversion or exchange of all such Convertible
Securities. No further adjustment to the Conversion Price will be made upon the
actual issuance of such shares of the Common Stock upon exercise, conversion or
exchange of such Convertible Securities.
(c) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the "price per
share for which Common Stock is issuable upon such exercise, a conversion or
exchange" for purposes of the calculation contemplated by Article XI.D(ii)(a)
shall be deemed to be the lowest price per share which would be applicable
(assuming all holding period and other conditions to any discounts contained in
such Variable Rate Convertible Security have been satisfied) if the Conversion
Price on such date of issuance or sale of such Variable Rate Convertible
Security was seventy-five percent (75%) of the Dilutive Price on such date (the
"ASSUMED VARIABLE MARKET PRICE"). Further, if the Conversion Price at any time
or times thereafter is less than or equal to the Assumed Variable Market Price
last used for making any adjustment under this Article XI.D with respect to any
Variable Rate Convertible Security, the Conversion Price in effect at such time
shall be readjusted to equal the Conversion Price which would have resulted if
the Assumed Variable Market Price at the time of issuance of the Variable Rate
Convertible Security had been 75% of the Market Price of the Common Stock for
the twenty (20) trading days prior the time of the adjustment required by this
sentence.
(d) CHANGE IN OPTION PRICE OR CONVERSION RATE. If
there is a reduction at any time in (i) the amount of additional consideration
payable to the Company upon the exercise of any Options; (ii) the amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange of any Convertible Securities; or (iii) the rate at which
32
any Convertible Securities are convertible into or exchangeable for shares of
the Common Stock (in each such case, other than under or by reason of provisions
designed to protect against dilution and except when an adjustment is made
pursuant to Article XI.D(ii)(c)), the Conversion Price in effect at the time of
such change will be readjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed additional consideration or changed conversion,
exercise or exchange rate, as the case may be, at the time initially granted,
issued or sold.
(e) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED
CONVERTIBLE SECURITIES. If, in any case, the total number of shares of the
Common Stock issuable upon exercise of any Option or upon exercise, conversion
or exchange of any Convertible Securities is not, in fact, issued and the rights
to exercise such Option or to exercise, convert or exchange such Convertible
Securities shall have expired or terminated, the Conversion Price then in effect
will be readjusted to the Conversion Price which should be in effect at the time
of such expiration or termination had such Option or Convertible Securities, to
the extent outstanding immediately prior to such expiration or termination
(other than in respect of the actual number of shares of the Common Stock issued
upon exercise or conversion thereof), never been issued. Any readjustment in the
Conversion Price pursuant to this Article XI.D(ii)(e) shall have no effect on
shares of the Series D Preferred Stock converted in accordance with the terms of
this Certificate of Designations, Preferences and Rights.
(f) CALCULATION OF CONSIDERATION RECEIVED. If any
shares of the Common Stock, Options or Convertible Securities are issued,
granted or sold for cash, the consideration received therefor for purposes
hereof will be the amount received by the Company therefor, after deduction of
reasonable commissions, underwriting discounts or allowances or other reasonable
expenses paid or incurred by the Company in connection with such issuance, grant
or sale. In case any shares of the Common Stock, Options or Convertible
Securities are issued or sold for a consideration part or all of which shall be
other than cash, the amount of the consideration other than cash (including the
net present value of the consideration expected by the Company for the provided
or purchased services) received by the Company will be the fair market value of
such consideration, except where such consideration consists of securities, in
which case the amount of consideration received by the Company will be the
Market Price of the Common Stock for the twenty (20) trading days prior to the
date of receipt. In case any shares of the Common Stock, Options or Convertible
Securities are issued in connection with any merger or consolidation in which
the Company is the surviving Company, the amount of consideration therefor will
be deemed to be the fair market value of such portion of the net assets and
business of the non-surviving Company as is attributable to such shares of the
Common Stock, Options or Convertible Securities, as the case may be. The fair
market value of any consideration other than cash or securities will be
determined in good faith by an investment banker or other appropriate expert of
national reputation selected by the Company and reasonably acceptable to the
holder hereof, with the costs of such determination to be borne by the Company.
In case any shares of the Common Stock, Options or Convertible Securities are
issued in connection with the issuance of debt securities the amount of
consideration therefor shall be the cash received by the Company and the value
of the securities issued by the Company shall be the fair market value of all
securities and instruments issued in such transaction, with fair market value
being determined by agreement between the holder hereof and the Company or if no
such agreement is reached, pursuant to the immediately preceding sentence. For
all Options the fair market value thereof shall be determined in accordance with
the Black-Scholes methodology.
(g) EXCEPTIONS TO ADJUSTMENT OF CONVERSION PRICE. No
adjustment to the Conversion Price will be made (i) upon the grant or exercise
of any stock, options or warrants which may hereafter be granted or exercised
under any equity incentive plan of the Company now existing or to be implemented
in the future which is approved in good faith by the Board of Directors of the
Company or a committee of non-employee directors established for such purpose;
(ii) the conversion of the Series D Preferred Stock or the exercise of the
Warrants; (iii) the issuance of securities in connection with a bona fide
business acquisition; (iv) the issuance of securities in connection with
33
strategic transactions involving the Corporation and other entities, including
joint ventures, manufacturing, marketing or distribution arrangements (but
excluding any sale of substantially all of the Corporation's assets or any
merger or consolidation of the Corporation into or with another entity in which
the holders of the capital stock of the Corporation immediately prior to such
merger or consolidation do not hold at least fifty percent (50%) in voting power
of the surviving corporation); or (v) the issuance of stock, warrants or other
securities or rights to persons or entities in connection with commercial lease
lines or bank financing provided that such issuances are primarily for purposes
other than equity financing.
E. PURCHASE RIGHTS. If, at any time after the Issuance Date, the
Corporation issues any Convertible Securities or rights to purchase stock,
warrants, securities or other property (the "PURCHASE RIGHTS") pro rata to the
record holders of any class of Common Stock, then the holders of Series D
Preferred Stock will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock acquirable
upon complete conversion of the Series D Preferred Stock (without giving effect
to the limitations contained in Article IV.D) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights.
F. NOTICE OF ADJUSTMENTS. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article XI amounting to
more than a 1% change in such Conversion Price, the Company, at its expense,
shall promptly compute such adjustment or readjustment and prepare and furnish
to each holder of the Series D Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written request
at any time of any holder of the Series D Preferred Stock, furnish to such
holder a like certificate setting forth (i) such adjustment or readjustment,
(ii) the Conversion Price at the time in effect and (iii) the number of shares
of Common Stock and the amount, if any, of other securities or property which at
the time would be received upon conversion of any shares of Series D Preferred
Stock.
G. OTHER ACTION AFFECTING CONVERSION PRICE. If the Corporation takes
any action affecting the Common Stock after the date hereof that would be
covered by Article XI.A through E, but for the manner in which such action is
taken or structured, which would in any way diminish the value of the Series D
Preferred Stock, then the Conversion Price shall be adjusted in such manner as
the Board of Directors of the Corporation shall in good faith determine to be
equitable under the circumstances.
XII. VOTING RIGHTS
A. GENERAL. Except as otherwise expressly provided elsewhere in this
Certificate of Designations, Preferences and Rights or as otherwise required by
the Delaware General Corporation Law (the "DGCL"), (a) each holder of Series D
Preferred Stock shall be entitled to vote on all matters submitted to a vote of
the stockholders of the Corporation and shall be entitled to that number of
votes equal to the largest number of whole shares of Common Stock into which
such holder's shares of Series D Preferred Stock could be converted, pursuant to
the provisions of Section IV hereof (subject to the limitations contained in
Article IV.D(ii)), at the record date for the determination of stockholders
entitled to vote on such matters or, if no such record date is established, at
the date such vote is taken or any written consent of stockholders is solicited,
and (b) except as otherwise provided herein, the holders of shares of Series D
Preferred Stock and Common Stock shall vote together (or tender written consents
in lieu of a vote) as a single class on all matters submitted to the
stockholders of the Corporation.
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B. NOTIFICATION. The Corporation shall provide each holder of Series D
Preferred Stock with prior notification of any meeting of the stockholders (and
copies of proxy materials and other information sent to stockholders) and a
brief statement regarding the business to be transacted at the meeting to the
extent known at such time, at least 30 days prior to the date of the meeting or
other formal action of shareholders (or 30 days prior to the consummation of the
transaction or event if a transaction or fundamental corporate event is to be
voted upon, whichever is earlier, but in no event earlier than public
announcement of such proposed transaction).
C. CLASS VOTING. To the extent that under the DGCL the vote of the
holders of the Series D Preferred Stock, voting separately as a class or series,
as applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the holders of at least a majority of the then
outstanding shares of the Series D Preferred Stock represented at a duly held
meeting at which a quorum is present or by written consent of the holders of at
least a majority of the then outstanding shares of Series D Preferred Stock
(except as otherwise may be required under the DGCL) shall constitute the
approval of such action by the class.
XIII. PROTECTION PROVISIONS
So long as any shares of Series D Preferred Stock are outstanding, the
Corporation shall not without first obtaining the approval (by vote or written
consent, as provided by the DGCL) of the Majority Holders:
(a) alter or change the rights, preferences or privileges of
the Series D Preferred Stock, whether through merger, sale, consolidation or
otherwise (unless such event is a Change of Control Event, in which case no
special approval shall be required upon consummation of such Change of Control
Event);
(b) alter or change the rights, preferences or privileges of
any capital stock of the Corporation so as to affect adversely the Series D
Preferred Stock, whether through merger, sale, consolidation or otherwise
(unless such event is a Change of Control Event, in which case no special
approval shall be required upon consummation of such Change of Control Event);
(c) create any Senior Securities;
(d) create any Pari Passu Securities;
(e) increase or decrease the authorized number of shares of
Series D Preferred Stock or Warrants;
(f) issue any shares of Senior Securities or Pari Passu
Securities;
(g) issue any Units other than pursuant to the Securities
Purchase Agreement;
(h) redeem or repurchase, or declare or pay any cash dividend,
distribution or interest on, any Junior Securities or other outstanding
securities of the Company, except pursuant to this Certificate of Designations,
Preferences and Rights or for repurchases pursuant to an equity incentive plan
approved by the Corporation's Board of Directors in good faith;
(i) permit any subsidiary now or hereinafter existing to issue
any securities, other than to the Corporation; or
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(j) sell or otherwise transfer any independently significant
asset or Intangible (as defined in the Securities Purchase Agreement) to any
other person(s) or entity(ies) (including, without limitation, to any
subsidiary(ies), now or hereinafter existing, of the Corporation), unless such
sale or transfer is a Change of Control Event, in which case no special approval
shall be required pursuant to this section upon consummation of such Change of
Control Event.
Furthermore, notwithstanding the foregoing, no change pursuant to this Article
XIII shall be effective to the extent that, by its terms, it applies to less
than all of the holders of shares of Series D Preferred Stock then outstanding.
XIV. MISCELLANEOUS
A. CANCELLATION OF SERIES D PREFERRED STOCK. If any shares of Series D
Preferred Stock are converted pursuant to Article IV, the shares so converted
shall be canceled, shall return to the status of authorized, but unissued
preferred stock of no designated series, and shall not be issuable by the
Corporation as Series D Preferred Stock.
B. LOST OR STOLEN CERTIFICATES. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity (without any bond or other security) reasonably satisfactory to the
Corporation, or (z) in the case of mutilation, upon surrender and cancellation
of the Preferred Stock Certificate(s), the Corporation shall execute and deliver
new Preferred Stock Certificate(s) of like tenor and date. However, the
Corporation shall not be obligated to reissue such lost or stolen Preferred
Stock Certificate(s) if the holder contemporaneously requests the Corporation to
convert such Series D Preferred Stock.
C. ALLOCATION OF CAP AMOUNT AND RESERVED AMOUNT. The initial Cap Amount
and Reserved Amount shall be allocated pro rata among the holders of Series D
Preferred Stock based on the number of shares of Series D Preferred Stock issued
to each holder. Each increase to the Cap Amount and the Reserved Amount shall be
allocated pro rata among the holders of Series D Preferred Stock based on the
number of shares of Series D Preferred Stock held by each holder at the time of
the increase in the Cap Amount or Reserved Amount. In the event a holder shall
sell or otherwise transfer any of such holder's shares of Series D Preferred
Stock, each transferee shall be allocated a pro rata portion of such
transferor's Cap Amount and Reserved Amount. Any portion of the Cap Amount or
Reserved Amount which remains allocated to any person or entity which does not
hold any Series D Preferred Stock shall be allocated to the remaining holders of
shares of Series D Preferred Stock, pro rata based on the number of shares of
Series D Preferred Stock then held by such holders.
D. QUARTERLY STATEMENTS OF AVAILABLE SHARES. For each calendar quarter
beginning in the quarter in which the initial registration statement required to
be filed pursuant to Section 2(a) of the Registration Rights Agreement is
declared effective and thereafter so long as any shares of Series D Preferred
Stock are outstanding, if requested by a holder, the Corporation shall deliver
(or cause its transfer agent to deliver) to such holder a written report
notifying such holder of any occurrence which prohibits the Corporation from
issuing Common Stock upon any such conversion. If issued, the report shall also
specify (i) the total number of shares of Series D Preferred Stock outstanding
as of the end of such quarter, (ii) the total number of shares of Common Stock
issued upon all conversions of Series D Preferred Stock prior to the end of such
quarter, (iii) the total number of shares of Common Stock which are reserved for
issuance upon conversion of the Series D Preferred Stock as of the end of such
quarter and (iv) the total number of shares of Common Stock which may thereafter
be issued by the Corporation upon conversion of the Series D Preferred Stock
before the Corporation would exceed the Cap Amount and the Reserved Amount. If
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requested, the Corporation (or its transfer agent) shall use its best efforts to
deliver the report for each quarter to each requesting holder prior to the tenth
day of the calendar month following the quarter to which such report relates. In
addition, the Corporation (or its transfer agent) shall provide, as promptly as
practicable delivery to the Corporation of a written request by any holder, any
of the information enumerated in clauses (i) - (iv) of this Paragraph D as of
the date of such request.
E. PAYMENT OF CASH; DEFAULTS. Whenever the Corporation is required to
make any cash payment to a holder under this Certificate of Designation (as
payment of any Dividend, upon redemption or otherwise), such cash payment shall
be made to the holder within five business days after delivery by such holder of
a notice specifying that the holder elects to receive such payment in cash and
the method (e.g., by check, wire transfer) in which such payment should be made.
If such payment is not delivered within such five business day period, such
holder shall thereafter be entitled to interest on the unpaid amount at a per
annum rate equal to the lower of eighteen percent (18%) and the highest interest
rate permitted by applicable law until such amount is paid in full to the
holder.
F. STATUS AS STOCKHOLDER. Upon submission of a Notice of Conversion by
a holder of Series D Preferred Stock, (i) the shares covered thereby (other than
the shares, if any, which cannot be issued because their issuance would exceed
such holder's allocated portion of the Reserved Amount or Cap Amount) shall be
deemed converted into shares of Common Stock and (ii) the holder's rights as a
holder of such converted shares of Series D Preferred Stock shall cease and
terminate, excepting only the right to receive certificates for such shares of
Common Stock and to any remedies provided herein or otherwise available at law
or in equity to such holder because of a failure by the Corporation to comply
with the terms of this Certificate of Designation. In situations where Article
VI.B is applicable, the number of shares of Common Stock referred to in clauses
(i) and (ii) of the immediately preceding sentence shall be determined on the
date on which such shares of Common Stock are delivered to the holder.
Notwithstanding the foregoing, if a holder has not received certificates for all
shares of Common Stock prior to the sixth business day after the expiration of
the Delivery Period with respect to a conversion of Series D Preferred Stock for
any reason, then (unless the holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Corporation within five business days
after the expiration of such 6 business day period after expiration of the
Delivery Period) the holder shall regain the rights of a holder of Series D
Preferred Stock with respect to such unconverted shares of Series D Preferred
Stock and the Corporation shall, as soon as practicable, return such unconverted
shares to the holder. In all cases, the holder shall retain all of its rights
and remedies for the Corporation's failure to convert Series D Preferred Stock.
G. TRANSFER. Subject to applicable law and the legend, if any, on the
certificate(s) to be transferred, the Series D Preferred Stock may be
transferred at any time and from time to time by the holder thereof.
Notwithstanding anything to the contrary, the Series D Preferred Stock may
transferred at any time and from time to time to the General Conference
Corporation of Seventh-Day Adventists and Jonathan J. Pallin.
H. REMEDIES CUMULATIVE. The remedies provided in this Certificate of
Designation shall be cumulative and in addition to all other remedies available
under this Certificate of Designation, at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein
shall limit a holder's right to pursue actual damages for any failure by the
Corporation to comply with the terms of this Certificate of Designation. The
Corporation acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the holders of Series D Preferred Stock and that the
remedy at law for any such breach may be inadequate. The Corporation therefore
agrees, in the event of any such breach or threatened breach, that the holders
of Series D Preferred Stock shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
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3. PREFERRED STOCK.
(a) Designation of Series. With respect to the 2,550,000 shares of the
Preferred Stock not designated as the Series C Preferred Stock or Series D
Preferred Stock, or any or all of the 450,000 shares of the Series C Preferred
Stock or Series D Preferred Stock that, after redemption, conversion or other
acquisition by the Corporation shall be restored to the status of shares of the
Preferred Stock without series, the Board of Directors of the Corporation is
authorized, subject to the limitations prescribed by the General Corporation Law
of the State of Delaware and the provisions of this subparagraph Fourth B.3, to
provide for the issuance of the shares of the Preferred Stock in series and, by
filing a certificate pursuant to the General Corporation Law of the State of
Delaware, to establish from time to time the number of shares to be included in
each such series, and to fix the designations, powers, preferences and shares to
be included in each such series, and to fix the designations, powers,
preferences and rights of the shares of each such series and the qualifications,
limitations or restrictions thereof;
(b) Priority. Each series into which the Preferred Stock shall be
subdivided by the Board of Directors subsequent to the date hereof, as herein
provided, shall, to the extent of its relative rights, powers and preferences,
be senior to the Common Stock and each subsequently created series of the
Preferred Stock unless a provision is otherwise made by the Board of Directors;
provided, however, the Preferred Stock and each series thereof shall in any
event be junior to the Series D Preferred Stock except as may otherwise be
consented to by the holders of at least the majority of the then outstanding
shares of the Series D Preferred Stock; provided, further, the Preferred Stock
and each series thereof shall in any event be junior to the Series C Preferred
Stock except as may otherwise be consented to by the holders of at least the
majority of the then outstanding shares of the Series C Preferred Stock.
(c) Board Designation. The authority of the Board of Directors with
respect to each series of the Preferred Stock shall include, but not be limited
to, determination of the following:
(i) The number of shares constituting that series and the
distinctive designation of that series;
(ii) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of that
series;
(iii) Whether that series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the terms of such
voting rights;
(iv) Whether that series shall have conversion privileges,
and, if so, the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors shall
determine;
(v) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the date upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different conditions
and at different redemption dates;
(vi) Whether the series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
(vii) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series; and
38
(viii) Any other relative rights, preferences and limitations
of that series.
(d) Dividends. Dividends on the outstanding shares of the Preferred
Stock shall be paid or declared and set apart for payment before any dividends
shall be paid or declared and set apart for payment on the shares of the Common
Stock with respect to the same dividend period.
(e) Preference on Liquidation. If upon any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation the assets available
for distribution to the holders of shares of the Preferred Stock of all series
shall be insufficient to pay such holders the full preferential amount to which
they are entitled, then such assets shall be distributed ratably among the
shares of all series of the Preferred Stock in accordance with the respective
preferential amounts (including unpaid cumulative dividends, if any) payable
with respect thereto.
4. COMMON STOCK.
(a) Designation and Dividends. The Common Stock shall be designated
"Common Stock." Subject to all of the rights of the Preferred Stock, dividends
may be paid upon the Common Stock as and when declared by the Board of Directors
out of any funds legally available for the payment of dividends.
(b) Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
and subject to the prior rights of creditors and after the holders of any then
outstanding series of the Preferred Stock shall have been paid in full amounts
to which they shall be entitled, or an amount sufficient to pay the aggregate
amount to which the holders of any then outstanding series of the Preferred
Stock shall be entitled shall have been deposited with a bank or trust company
having a capital surplus and undivided profits of at least $25,000,000 as a
trust fund for the benefit of the holders of any then outstanding series of the
Preferred Stock, the remaining net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock. For the purposes of
this subparagraph Fourth B.3(b), the consolidation or merger of the Corporation
with any other corporation or corporations shall not be deemed a liquidation or
dissolution of the Corporation.
(c) Voting Right. Each holder of the Common Stock shall be entitled to
one vote per share thereof held upon all matters.
5. DEFINITIONS.
(i) The term "Business Day" shall mean any day on which
national banks in the City of Los Angeles, State of California are open.
(ii) The term "Common Stock" shall mean the Corporation's
currently authorized Common Stock and any shares into which such Common Stock
may hereafter be changed.
FIFTH: The corporation is to have perpetual existence.
SIXTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Sec. 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for this
39
Corporation under the provisions of Sec. 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
this Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
SEVENTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation, and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the
affairs of the Corporation shall be vested in its Board of Directors. The number
of directors which shall constitute the whole Board of Directors shall be not
less than three (3) nor more than nine (9). The exact number of directors shall
be determined from time to time by a majority of the whole Board and such number
shall be six (6) until otherwise determined by a resolution adopted by the
majority of the whole Board. In the event that the number of directors is
increased by such a resolution of the whole Board, the vacancy or vacancies so
resulting shall be filled by a vote of a majority of the directors then in
office. No decrease in the number of directors shall shorten the term of any
incumbent director. The phrase "whole Board" and the phrase "total number of
directors" shall be deemed to have the same meaning, to wit, the total number of
directors which the Corporation would have if there were no vacancies. No
election of directors need be by written ballot.
2. After the original or other Bylaws of the Corporation have
been adopted, amended, or repealed, as the case may be, in accordance with the
provisions of sec.109 of the General Corporation Law of the State of Delaware,
and, after the Corporation has received any payment for any of its stock, the
power to adopt, amend, or repeal the Bylaws of the Corporation may be exercised
by the Board of Directors of the Corporation; provided, however, that any
provision for the classification of directors of the Corporation for staggered
terms pursuant to the provisions of subsection (d) of sec.141 of the General
Corporation Law of the State of Delaware shall be set forth in an initial Bylaw
or in a Bylaw adopted by the stockholders entitled to vote of the Corporation
unless provisions for such classification shall be set forth in this Certificate
of Incorporation.
3. Whenever the Corporation shall be authorized to issue only
one class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever the
Corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under the
provisions of the Certificate of Incorporation shall entitle the holder thereof
to the right to vote at any meeting of stockholders except as the provisions of
paragraph (2) of subsection (b) of sec.242 of the General Corporation Law of the
State of Delaware shall otherwise require; provided, that no share of any such
class which is otherwise denied voting power shall entitle the holder thereof to
vote upon the increase or decrease in the number of authorized shares of said
class.
4. The Board of Directors shall be divided into three (3)
classes as nearly equal in number as possible, with the term of office of Class
A expiring at the annual meeting of stockholders in 2001, of Class B expiring at
the annual meeting of stockholders in 2002, and of Class C expiring at the
annual meeting of stockholders in 2003. At each annual meeting of stockholders
beginning with the annual meeting of stockholders held in 2001, directors chosen
40
to succeed those whose terms then expire shall be elected for a term of office
expiring at the third succeeding annual meeting of stockholders after their
election. When the number of directors is changed, any newly created
directorships or any decreases in directorships shall be so apportioned among
the classes as to make all classes as nearly equal in numbers as possible. When
the number of directors is increased by the Board of Directors and the resultant
vacancies are filled by the Board of Directors, such additional directors shall
serve only until the next annual meeting of stockholders, at which time they
shall be subject to election and classification by the stockholders. In the
event that any director is elected by the Board to fill a vacancy, which occurs
as a result of the death, resignation or removal of another director, such
director will hold office until the annual meeting of stockholders at which the
director who died, resigned or was removed would have been required, in the
regular order of business, to stand for re-election, even though such term may
thereby extend beyond the next annual meeting of stockholders. Each director who
is elected as provided in this paragraph 4 of Article SEVENTH shall serve until
his or her successor is duly elected and qualifies.
EIGHT: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted by the provisions of paragraph
(7) of subsection (b) of sec.102 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented.
NINTH: The Corporation shall, to the fullest extent permitted by the
provisions of sec.145 of the General Corporation Law of the State of Delaware,
as the same may be amended and supplemented, indemnify any and all persons whom
it shall have power to indemnify under said section from and against any and all
of the expenses, liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
TENTH: From time to time any of the provisions of this Certificate of
Incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any time conferred upon the stockholders of the Corporation by this
Certificate of Incorporation are granted subject to the provisions of this
Article TENTH."
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IN WITNESS WHEREOF, LifePoint, Inc. has caused this Amended and
Restated Certificate of Incorporation to be signed by Linda H. Masterson, its
President and Chief Executive Officer, this 19th day of September, 2003.
LIFEPOINT, INC.,
a Delaware Corporation
By: /s/ Linda H. Masterson
-------------------------------------
Linda H. Masterson
President and Chief Executive Officer
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