EXHIBIT 4.2
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
of
SERIES E CONVERTIBLE PREFERRED STOCK
of
LIFEPOINT, INC.
(Pursuant to Section 151 of the Delaware
General Corporation Law)
LifePoint, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "CORPORATION"), hereby certifies that the Board of
Directors of the Corporation (the "Board of Directors" or the "BOARD") pursuant
to authority of the Board of Directors as required by Section 151 of the
Delaware General Corporation Law, and in accordance with the provisions of its
Certificate of Incorporation and Bylaws, each as amended and restated through
the date hereof, has and hereby authorizes a series of the Corporation's
previously authorized Preferred Stock, par value $.001 per share (the "PREFERRED
STOCK"), and hereby states the designation and number of shares, and fixes the
relative rights, preferences, privileges, powers and restrictions thereof as
follows:
I. DESIGNATION AND AMOUNT
The designation of this series, which consists of 15,000 shares of Preferred
Stock, is the Series E Convertible Preferred Stock (the "SERIES E 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 E Preferred Stock will bear dividends and the holders of the Series E
Preferred Stock shall be entitled to receive dividends on the Series E Preferred
Stock as set forth in Article IV.
III. CERTAIN DEFINITIONS
For purposes of this Certificate of Designation, 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.
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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); provided, however, a Change of Control shall not
include any of the forgoing in connection with either a strategic reorganization
or a merger or acquisition with a recapitalization of the Company's equity
structure to significantly reduce the number of shares outstanding 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 (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 E Preferred Stock being converted pursuant to
Article IV.C in the event that such Mandatory Conversion occurs.
F. "CONVERSION PRICE" means $0.20, and shall be subject to adjustment as
provided herein.
G. "ISSUANCE DATE" means, with respect to each share of Series E 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 E Preferred Stock was issued.
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H. "MEASUREMENT DATE" means for purposes of any issuance of securities, the date
of issuance thereof.
I. "MARKET PRICE" means, for any security as of any date, the twenty (20) day
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 fifty and one-tenth (50.1%) of the then
outstanding shares of Series E 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 five percent (5%) per annum from the Issuance
Date, as to each outstanding share of Series E Preferred Stock on every
successive December 31, March 31, June 30 and September 3and 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 E 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 E 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 E Preferred Stock a whole share of Series E Preferred
Stock.
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(ii) Subject to the limitations on conversions contained in Paragraph D
of this Article IV, each holder of shares of Series E Preferred Stock may, at
any time and from time to time, convert (an "OPTIONAL CONVERSION") each of its
shares of Series E 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 E 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
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 E Preferred Stock being converted and (y) a
certificate representing the number of shares of Series E 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 E Preferred Stock into less than 1,000
shares of Common Stock, unless such conversion would result in the conversion of
all shares of Series E Preferred Stock then held by such holder.
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(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 E 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 E Preferred
Stock.
(iii) NO FRACTIONAL SHARES. If any conversion of Series E 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 E 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 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 E
Preferred Stock, the Company may require the holders of Series E Preferred Stock
to convert all of the outstanding shares of Series E 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;
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(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 E 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 E 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 E Preferred Stock (together with any
shares of Common Stock issuable as Dividends payable on the Series E 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 E Preferred Stock in excess of the Cap Amount. The Cap Amount shall be
allocated pro rata to the holders of Series E 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 E Preferred Stock of the Corporation have the right to convert
shares of Series E Preferred Stock into shares of Common Stock or to dispose of
any shares of Series E Preferred Stock, nor shall the Company have the right to
redeem shares of Series E 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
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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 any party to the Securities
Purchase Agreement 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. The Corporation shall reserve 110% of the number of shares
of its authorized but unissued shares of Common Stock for issuance upon
conversion of the Series E Preferred Stock and exercise of the Warrants. 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 E 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 E Preferred Stock as provided in Article
XIV.C.
B. INCREASES TO RESERVED AMOUNT. If 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 E
Preferred Stock and upon exercise of the then outstanding Warrants, the
Corporation shall immediately notify the holders of Series E 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 E
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 E 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 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 E 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 E 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 E
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
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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 E 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 E 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 E 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 E 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 E 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 E 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 E Preferred Stock, at
a per share price equal to the Face Amount plus accrued Dividends (the "PER
SHARE REPURCHASE PRICE"), all shares of Series E 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 E 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 E 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 E
Preferred Stock such that the Common Stock issuable upon complete conversion of
the Series E 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 E 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 E 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;
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(iii) the Corporation fails to remove any restrictive legend
on any certificate or any shares of Common Stock issued to the holders of Series
E Preferred Stock upon conversion of the Series E 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 E 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 E 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;
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(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;
then, upon the occurrence of any such Redemption Event, each holder of shares of
Series E 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 E 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 E 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 E Preferred Stock
stating the date upon which the Corporation received such Redemption Notice and
the amount of Series E Preferred Stock covered thereby. The Corporation shall
not redeem any shares of Series E 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 E 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 E
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 E 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;
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(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 E Preferred Stock within
five business days after its receipt of a notice requiring such redemption (a
"REDEMPTION NOTICE"), then the holder of Series E 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
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 E 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 E Preferred Stock from each holder pro rata, based on
the total number of shares of Series E 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 E 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 E 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 E Preferred Stock ("NOTICE OF REDEMPTION AT MATURITY")
12
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 E 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 E
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 E 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 E 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 E 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
E 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
Redemption at Maturity, the redemption of the Series E 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 E Preferred Stock being redeemed
within five (5) business days of the date the certificates evidencing the Series
E 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 E Preferred Stock shall rank (i) prior to (a) the
Corporation's Common Stock; (b) the Corporation's Series D Convertible Preferred
Stock held by holders of the Corporation's Series D Convertible Preferred Stock
who do not also hold Series E Preferred Stock purchased directly from the
Corporation; 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 E
Preferred Stock) (collectively with the Common Stock and Series D Convertible
Preferred Stock, "JUNIOR SECURITIES"); (ii) pari passu with (a) the
Corporation's Series D Convertible Preferred Stock held by holders of the
Corporation's Series D Convertible Preferred Stock who also hold Series E
13
Preferred Stock purchased directly from the Corporation; and (b) 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 E
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 E 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 E 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 E 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 E 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.
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.
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C. The "LIQUIDATION PREFERENCE" with respect to a share of Series E 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 E
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 E
Preferred Stock then outstanding) shall be made with respect to the rights and
interests of the holders of the Series E Preferred Stock to the end that the
economic value of the shares of Series E 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
15
effect any Corporate Change unless (i) each holder of Series E 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
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 E 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 E 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 E Preferred Stock shall be entitled,
upon any conversion of shares of Series E 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 E 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 E
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
16
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
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.
17
(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 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 E 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
18
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 E 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
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 E 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 E 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.
19
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 E 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 E 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 E 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 E 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 E 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 E 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 E 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.
B. NOTIFICATION. The Corporation shall provide each holder of Series E 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).
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C. CLASS VOTING. To the extent that under the DGCL the vote of the holders of
the Series E 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 E 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 E 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 E 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 E 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 E
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 E 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
(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.
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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 E Preferred Stock then outstanding.
XIV. MISCELLANEOUS
A. CANCELLATION OF SERIES E PREFERRED STOCK. If any shares of Series E 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
E 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 E 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 E
Preferred Stock based on the number of shares of Series E 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 E Preferred Stock based on the
number of shares of Series E 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 E 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 E Preferred Stock shall be allocated to the remaining holders of
shares of Series E Preferred Stock, pro rata based on the number of shares of
Series E 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 E 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 E 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 E 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 E 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 E Preferred Stock before the
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Corporation would exceed the Cap Amount and the Reserved Amount. If 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 E 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 E 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 E 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 E
Preferred Stock with respect to such unconverted shares of Series E 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 E Preferred Stock.
G. TRANSFER. Subject to applicable law and the legend, if any, on the
certificate(s) to be transferred, the Series E Preferred Stock may be
transferred at any time and from time to time by the holder thereof.
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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 E 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
E 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.
IN WITNESS WHEREOF, this Certificate of Designation is
executed on behalf of the Corporation this 19th day of November, 2004.
LIFEPOINT, INC.
By: Linda H. Masterson
Name: Linda H. Masterson
Title: President & Chief Executive Officer
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NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series E Preferred Stock)
The undersigned hereby irrevocably elects to convert ____________
shares of Series E Preferred Stock (the "CONVERSION"), represented by stock
certificate No(s). ___________(the "PREFERRED STOCK CERTIFICATES"), into shares
of common stock ("COMMON STOCK") of LifePoint, Inc. (the "CORPORATION")
according to the conditions of the Certificate of Designations, Preferences and
Rights of Series E Convertible Preferred Stock (the "CERTIFICATE OF
DESIGNATION"), as of the date written below. If securities are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto. No fee will be charged to the
holder for any conversion, except for transfer taxes, if any. Each Preferred
Stock Certificate is attached hereto (or evidence of loss, theft or destruction
thereof).
Except as may be provided below, the Corporation shall electronically
transmit the Common Stock issuable pursuant to this Notice of Conversion to the
account of the undersigned or its nominee (which is _________________) with DTC
through its Deposit Withdrawal Agent Commission System ("DTC TRANSFER").
The undersigned acknowledges and agrees that all offers and sales by
the undersigned of the securities issuable to the undersigned upon conversion of
the Series E Preferred Stock have been or will be made only pursuant to an
effective registration of the transfer of the Common Stock under the Securities
Act of 1933, as amended (the "ACT"), or pursuant to an exemption from
registration under the Act.
|_| In lieu of receiving the shares of Common Stock issuable pursuant to
this Notice of Conversion by way of DTC Transfer, the undersigned
hereby requests that the Corporation issue and deliver to the
undersigned physical certificates representing such shares of Common
Stock.
Date of Series E Conversion:__________________________
Applicable Conversion Price:__________________________
Signature:____________________________________________
Name:_________________________________________________
Institution Name:_____________________________________
Address:______________________________________________
Phone:________________________________________________