SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 26, 1997
MEDCARE TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-28790 87-0429962B
- ---------------------------- ---------------- -------------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification Number)
Suite 101, 608 South Washington Street, Naperville, Illinois 60540
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code (800) 611-3388
2443 Warrenville Road, Suite 600, Lisle, Illinois 60532
(Former name or former address, if changed since last report.) (Zip Code)
<PAGE>
Item 1. Changes in Control of Registrant.
NONE.
Item 2. Acquisition or Disposition of Assets
On July 7, 1997, the Company filed a Certificate of Designation of Series
A Preferred Stock, a copy of which is attached hereto as Exhibit B. This
Certificate of Designation designates 1,000 shares of the Company's one million
shares of authorized preferred stock to be Series A stock. This stock has been
assigned an issue price of $10,000 per share with an eight percent (8%) per
annum accretion rate. The rank of this stock has been assigned as being senior
to all Common Stock of the Company, junior to any other class or series of
capital stock of the Company hereafter created specifically ranking by its
terms senior to the Series A Preferred Stock, senior to any class or series
of capital stock of the Company hereafter created not specifically ranking by
its terms senior to or on par with any Series A Preferred Stock of whatever
subdivision, and on parity with any class or series of capital stock of the
Company hereafter created specifically ranking by its terms on parity with the
Series A Preferred Stock. No dividend rights have been granted to this stock.
<PAGE>
The conversion terms outlined in the Certificate of Designation state that
holders of the Series A Preferred Stock can convert their stock on or after a
period of no less than four months from the closing date into Common Stock using
the formula per share of Series A Preferred Stock:
(.08)(N/365)(10,000) + 10,000
------------------------------
Conversion Price
The Conversion Price is determined as the lesser of 115% of the average Closing
Bid Price for the five trading days ending on June 6, 1997, which is $7.346 or
X% of the average Closing Bid Price of the Company's Common Stock for the five
trading days immediately preceding the Date of Conversion, where X is determined
as follows:
# of months between Last Closing
and Date of Conversion "X"
-------------------------------- -----
4-6 months 90%
6 months-1 year 87.5%
9 months, 1 day-12 months 85%
more than 12 months 80%
The Company also has the right to redeem the Series A Preferred Stock upon
receipt of Notice of Conversion at a rate of the Stated Value times 1.10 to 1.2
or may redeem the stock at its own election at 115% to 130%, depending on the
length of time, as detailed in the attached Exhibit. The shares have been sold
with the offering being completed on July 8, 1997. The Company received
$1,650,000 in gross proceeds from the offering.
Item 3. Bankruptcy or Receivership
NONE
Item 4. Changes in Registrant's Certifying Accountant
NONE
Item 5. Other events
On June 26, 1997, the Company entered into an employment agreement with
Jeff Aronin to become the President and Chief Operating Officer of the Company.
He was also elected to the Board of Directors at this time. Harmel Rayat, the
previous President, remains with the Company in the role of Chief Executive
Officer and Chairman of the Board. A copy of the employment agreement is
attached hereto as Exhibit A and a copy of the meeting minutes appointing Mr.
Aronin as President and a director are attached hereto as Exhibit D.
On September 17, 1997, Dr. Jake Jacobo was elected to the Board of
Directors. A copy of the meeting minutes appointing Dr. Jacobo as a director
are attached hereto as Exhibit C.
<PAGE>
Item 6. Resignations of Registrant's Directors
On September 17, 1997, Diane Nunziato resigned as a director of the
Company and Dr. Jake Jacobo joined the Company as a director. Ms. Nunziato
resigned for personal reasons and did not have any disagreements with the
Company. A copy of the meeting minutes approving Ms. Nunziato's resignation and
a copy of her resignation letter are both attached hereto as Exhibit C.
Item 7. Financial Statements and Exhibits.
NONE
Item 8. Change in Fiscal Year.
NONE
EXHIBITS
Exhibit A: Employment Agreement with Jeff Aronin
Exhibit B: Certificate of Designation
Exhibit C: Board Meeting Minutes regarding resignation of Diane Nunziato and
appointment of Jake Jacobo and Letter of Resignation of Diane
Nunziato
Exhibit D: Board Meeting Minutes regarding appointment of Jeff Aronin
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
(Registrant) MEDCARE TECHNOLOGIES, INC.
(Signature) /s/ Harmel S. Rayat
----------------------------------------
Harmel S. Rayat, Chief Executive Officer
Date October 10, 1997
*Print name and title of the signing officer under his/her signature.
<PAGE>
EXHIBIT A
EMPLOYMENT AGREEMENT
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of June 26, 1997, is
between MedCare Technologies, Inc., a Delaware corporation (the "Company"), and
Jeff Aronin ("Executive").
RECITALS
A. The Company desires to employ Executive as its President and Chief
Operating Officer, on the terms set forth in this Agreement.
B. Executive desires to be so employed by Company.
AGREEMENTS
In consideration of the foregoing recitals and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. Employment.
1.1 Term. Subject to the terms hereof, the Company agrees to employ
Executive as its President and Chief Operating Officer, and Executive agrees to
accept such employment, for the period beginning on the date hereof and ending
on June 30, 2000, subject to earlier termination pursuant to Section 3 hereof
(the "Term"); provided, however, that, after the expiration of the initial term,
the Term shall be automatically extended or re-extended on June 30th in each
year, commencing on June 30, 2000, for successive one-year periods, subject to
earlier termination pursuant to Section 3 hereof, unless the Company or
Executive delivers to the other party a notice specifying such party's intent
not to extend or re-extend the Term for an additional one-year period, at least
30 days prior to such June 30th.
1.2 Duties. During the Term, Executive shall perform such duties and
functions as are customarily performed by the chief operating officer of a
company the size and nature of the Company, including the duties and functions
consistent with the positions of President and Chief Operating Officer as are
from time to time assigned to him by the Chief Executive Officer of Company or
Board of Directors of Company (the "Board").
1.3 Place of Performance. Executive shall perform his services
hereunder at the headquarters of the Company, except for required travel on the
Company's business.
1.4 Vacations. Executive shall be entitled to such paid vacation
time as the Company customarily provides from time to time to its executives
(but in no event less than three weeks per year), to be taken in accordance with
its then-current employment policy regarding such vacation time. Executive
shall also be entitled to all paid holidays given by the Company to its
employees.
2. Compensation.
2.1 Base Salary. As compensation for services rendered hereunder,
Executive shall receive an annual salary of not less than $100,000, to be paid
in accordance with the Company's customary payroll practices but in no event
less frequently than monthly. Such salary shall be reviewed by the Board no
less frequently than semi-annually, beginning as of January 1, 1998, with a
view to making such increases as the Board, in its discretion, deems
appropriate. Any increase in salary granted by the Board shall in no way limit
or reduce any other obligation of the Company hereunder.
2.2 Annual Bonuses. In addition to the salary payable pursuant to
Section 2.1, Executive shall be eligible for an annual bonus for each fiscal
year of the Company ("Fiscal Year") during the Term. The annual bonus shall be
based on such performance standards as the Board or compensation committee may
establish.
2.3 Welfare and Pension Payments. The Company shall pay 100% of the
premiums for medical, life and dental insurance for Executive and Executive's
dependents. In addition, Executive shall be eligible to participate in the
various benefit plans maintained by the Company for its employees in accordance
with the terms of such plans as from time to time in effect and applicable to
employees of the Company.
2.4 Other Benefits. Executive will receive payment for all business
related organizational or association memberships, in accordance with the
Company's then current practices.
2.5 Auto Allowance. Executive shall be entitled to a $500 per month
auto allowance to cover automobile maintenance and insurance. Executive shall
be responsible for any taxes relating to such auto allowance.
2.6 Disability Insurance. The Company will maintain, and pay the
premiums of, a long-term disability insurance policy on Executive that provides
that if Executive becomes disabled for a period in excess of six months, the
insurer will pay Executive during the period that Executive is disabled an
annual amount equal to at least $75,000. The amount of such policy shall
be reviewed by the Board no less frequently than bi-annually, beginning July 1,
1999, with a view to making such increases in the amount of such policy as the
Board, in its discretion, deems appropriate. The Company agrees that the policy
will permit the Company to assign the policy to Executive upon the termination
for any reason of Executive's employment with the Company or permit Executive to
continue such policy on substantially the same terms after the termination
of Executive's employment. The Company will take all actions necessary to
assign such policy to Executive upon the termination of Executive's employment
with the Company.
2.7 Expenses. The Company shall reimburse Executive promptly for
all ordinary and necessary travel and other business expenses incurred by him in
connection with his duties hereunder (including reimbursement for business use
of home phone, home fax and cellular phone), provided that Executive properly
accounts therefor in accordance with the policies of the Company.
3. Termination.
3.1 End of Term or Earlier Death. Unless Executive's employment has
terminated sooner pursuant to Section 3, such employment shall terminate at the
end of the Term or, if Executive dies prior thereto, on the date of Executive's
death.
3.2 Termination by the Company for Cause. The Company may terminate
Executive's employment hereunder for Cause. For purposes of this Agreement,
"Cause" shall mean (i) Executive's conviction of, guilty plea concerning or
confession of fraud, theft, embezzlement or similar malfeasance or any felony,
(ii) Executive's commission of embezzlement of Company funds (provided that the
Company has substantial proof of such embezzlement) or (iii) a material breach
of Executive's obligations under this Agreement. In order to terminate
Executive's employment hereunder for Cause, the Company must notify Executive of
such decision in writing, specifying the Cause and the Date of Termination (as
hereinafter defined). With respect to item (iii), Executive shall have ten days
after the receipt of such notice to eliminate the basis for such Cause to the
reasonable satisfaction of the Board.
3.3 Termination by the Company without Cause. The Company may
terminate Executive's employment hereunder at any time without Cause upon
notice to Executive specifying the Date of Termination.
3.4 Termination by Executive for Good Reason. Executive shall be
entitled to terminate his employment hereunder for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean the occurrence of any of the following
circumstances without the prior written consent of Executive:
(a) the requirement that Executive report to any officer, consultant
or committee, other than the Chief Executive Officer or a formal committee
of the Board, it being the intent of the parties that Executive shall never
be required to report to anyone other than the Chief Executive Officer, the
Board or a formal committee thereof;
(b) the removal of any titles of Executive specified in Section 1.1;
(c) a redelegation of any material duties of Executive to other
officers, employees, consultants or committees;
(d) the failure of the Company to maintain and to continue
Executive's participation in its benefit plans as in effect from time to
time on a basis substantially equivalent to the participation of employees
similarly situated to Executive;
(e) a material breach of the Company's obligations under this
Agreement or the Option Agreement (as such terms are hereinafter defined);
(f) the removal of, or failure to elect or re-elect, Executive as a
director of the Company; or
(g) a Change of Control (as hereinafter defined);
For purposes of this Agreement, a "Change of Control" shall be deemed to have
occurred if at any time after the date hereof:
(A) the Company sells or otherwise disposes of all or substantially
all of its assets, other than to Executive;
(B) the Company participates in a merger or consolidation and,
immediately following the consummation of such merger or consolidation, the
Company's stockholders prior to such merger or consolidation do not own 50%
or more of the voting shares of stock of the surviving or successor
corporation, unless more than 50% of the voting shares of stock of the
surviving or successor corporation are owned by Executive; or
(C) any person or entity, including a "person" as such term is used
in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, but
excluding current officers or directors of the Company and Executive,
becomes the beneficial owner of 50% or more of the combined voting power of
the Company's voting securities.
In order to terminate his employment hereunder for Good Reason, Executive
shall give the Company written notice thereof, specifying such Good Reason and
the Date of Termination, which shall be not less than ten days from the date of
such notice, provided that Company may eliminate the basis of such Good Reason
during the period prior to the specified Date of Termination.
3.5 Termination for Disability. The Company may terminate
Executive's employment for Disability. For purposes of this Agreement,
"Disability" shall mean Executive's inability, due to physical or mental illness
or accident or injury, to perform his duties hereunder on a full-time basis for
90 or more business days within five consecutive months and Executive shall not
(a) within ten days after a written notice of intention to terminate is received
by Executive, have returned to the full-time performance of his duties and (b)
have continued during the following two months to perform his duties full-time
without absences due to physical or mental disability aggregating more than ten
business days. If the Company elects to terminate Executive's employment for
Disability, it shall give written notice thereof to Executive specifying the
Date of Termination.
3.6 Notice and Date of Termination. Any termination by the Company
or Executive shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 7.4. As used herein, the term "Date of
Termination" shall mean the date specified in the Notice of Termination (which
shall be not less than 30 days from the date such Notice of Termination is given
unless otherwise expressly provided herein).
4. Payments Upon or After Termination.
4.1 Accrued Compensation. Upon termination of Executive's employment
with the Company for any reason, Executive shall be entitled to receive the
compensation accrued and unpaid as of the Date of Termination, including salary
through the Date of Termination. The Company shall continue to provide
Executive with all profit sharing, pension, life, disability, accident, health
insurance, and other employee benefit and fringe benefit plans and programs
through the Date of Termination in accordance with the terms and provisions of
such plans and programs in effect at the time of that Notice of Termination is
given.
4.2 Payment in Case of Death. In addition to the Company's
obligations under Section 4.1, if at the time of Executive's death, Executive
maintained health insurance for members of his immediate family, the Company
shall pay the premiums to maintain such health insurance in full force and
effect for a period of at least one year from the date of Executive's death
(which shall not count toward or reduce the minimum length of time that the
Company is obligated to provide health insurance to Executive's immediate family
under Section 4980(B) of the Internal Revenue Code of 1986, as amended (the
"Code")).
4.3 Termination for Cause. Other than the Company's obligations
under Section 4.1, if Executive's employment with the Company is terminated by
the Company for Cause, the Company shall have no further obligations to
Executive under this Agreement.
4.4 Termination by Company Without Cause, Termination at Disability
or Termination by Executive for Good Reason. In addition to the Company's
obligations under Section 4.1, if (a) Executive's employment is terminated by
the Company and such termination does not comply with Section 3.2, (b)
Executive's employment is terminated pursuant to Section 3.5 or (c) Executive's
employment is terminated by Executive for Good Reason in accordance with the
provisions of Section 3.4, the Company shall pay Executive, within 30 days of
the Date of Termination, an amount equal to three months' salary at his then
current annual salary. In addition, the Company shall pay, or reimburse
Executive for, (i) the premiums to maintain health insurance for Executive and
members of his immediate family in full force and effect for a period of at
least three months after the Date of Termination (which shall not count toward
or reduce the minimum length of time that the Company is obligated to provide
health insurance to Executive and Executive's immediate family under Section
4980(B) of the Code), and (ii) the premiums to maintain the disability insurance
policy maintained in accordance with Section 2.6 in full force and effect for a
period of at least one year after the Date of Termination.
4.5 Other Termination by Executive. If Executive shall terminate his
employment hereunder for any reason other than Good Reason, other than the
Company's obligations under Section 4.1, the Company shall have no further
obligations to Executive under this Agreement.
4.6 Disclaimer of Mitigation Duty. Executive shall not be required
to mitigate the amount of any payment provided for or referred to in this
Section 4 by seeking other employment or otherwise, nor shall the amount of any
payment or benefit provided for or referred to in this Section 4 be reduced by
any compensation earned by Executive as a result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by Executive to Company or otherwise.
4.7 Other Benefits. In addition to all other amounts payable to
Executive under this Section 4, Executive shall be entitled to receive all
benefits payable to Executive under any plans or agreements relating to
retirement or other benefits in accordance with the terms and provisions
thereof.
5. Stock Options.
5.1 Stock Options. On the date hereof, the Company shall execute and
deliver to Executive an Option Agreement in the form attached hereto as Exhibit
A (the "Option Agreement").
5.2 Sale of Company Shares. The Executive agrees that, without the
written consent of the Company, which will not be unreasonably withheld, so long
as Executive is employed by the Company, Executive will not sell more than 1.5%
of the outstanding shares (on a fully diluted basis) of Common Stock of the
Company during any fiscal quarter of the Company; provided that if Executive
does not sell at least 1.5% during any such fiscal quarter, then, in addition to
any shares that Executive may otherwise sell pursuant to the foregoing,
Executive may sell additional shares in subsequent fiscal quarters to the extent
of such shortfall.
6. Board of Directors. (a) The Company agrees that at all times during
the Term the Company shall slate Executive for election as a member of the
Board.
(b) In the event that at any time, or from time to time, during the
Term the Board establishes an executive or similar committee of the Board, the
Company agrees that such committee will not have more than three members and
Executive will be a member of such committee.
(c) In the event that at any time, or from time to time, during the
Term the Board establishes a nominating or similar committee of the Board, the
Company agrees that Executive will be a member of such committee.
7. Miscellaneous.
7.1 Successors and Assigns: Binding Agreement. (a) The Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform this Agreement if no such succession had taken place.
(b) This Agreement and all rights of Executive hereunder shall inure
to the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive shall die while any amounts remain unpaid
hereunder, including any amounts which would be payable to him hereunder if he
had continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to Executive's spouse or
if Executive does not have a living spouse at such time, to Executive's estate.
(c) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns; provided, however, that the duties of
Executive hereunder are personal to Executive and may not be delegated by him.
7.2 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois.
7.3 Waivers. The waiver by either party hereto of any right
hereunder or of any failure to perform or breach by the other party hereto shall
not be deemed a waiver of any other right hereunder or of any other failure or
breach by the other party hereto, whether of the same or a similar nature or
otherwise. No waiver shall be deemed to have occurred unless set forth in a
writing executed by or on behalf of the waiving party. No such written waiver
shall be deemed a continuing waiver unless specifically stated therein, and each
such waiver shall operate only as to the specific term or condition waived and
shall not constitute a waiver of such term or condition for the future or as to
any act other than that specifically waived.
7.4 Notices. All notices and communications that are required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given when delivered personally, upon mailing by registered or
certified mail, postage prepaid, return receipt requested, or upon delivery to
a reputable overnight courier as follows:
If to the Company, to:
MedCare Technologies, Inc.
508 South Washington Street
Suite 101
Naperville, Illinois 60540
Attention: Chief Executive Officer
If to Executive, to:
Mr. Jeff Aronin
1658 N. Bissell
Chicago, Illinois 60614
or to such other address as may be specified in a notice given by one party to
the other party hereunder.
7.5 Severability. If for any reason any term or provision of this
Agreement is held to be invalid or unenforceable, all other valid terms and
provisions hereof shall remain in full force and effect, and all of the terms
and provisions of this Agreement shall be deemed to be severable in nature.
7.6 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute but one and the same instrument.
7.7 Legal Fees and Expenses. It is the intent of the Company that
Executive shall not be required to incur any expenses associated with the
enforcement of his rights under this Agreement by litigation, or other legal
action because the cost and expense thereof would substantially detract from the
benefits intended to be extended to Executive hereunder. Accordingly, if the
Company has failed to comply with any of its obligations under this Agreement,
or in the event that the Company or any other person takes any action to declare
this Agreement void or unenforceable, in whole or in part, or institutes any
litigation designed to deny, or to recover from, Executive any benefits intended
to be provided to Executive hereunder, the Company irrevocably authorizes
Executive from time to time to retain counsel of his choice, at the expense of
the Company as hereinafter provided, to represent Executive in connection with
the initiation or defense of any litigation, arbitration or other legal action,
whether by or against the Company or any director, officer, stockholder or other
person affiliated with the Company, in any jurisdiction. The Company shall
advance to Executive within 30 days after each written request therefor any and
all attorneys' and related fees and expenses actually incurred by Executive in
any such proceeding or otherwise as a result of the Company's failure to perform
this Agreement or any provision hereof or as a result of the Company or any
other person contesting the validity or reasonableness of this Agreement.
Without limiting the generality of the foregoing, if any amount is not paid by
the Company hereunder when due, including, but not limited to, any amount of
salary, bonus, fees or expenses, the amount thereof shall bear interest from the
due date thereof until paid in full at 10% per annum. Executive agrees that he
will reimburse the Company for all attorneys' and related fees and expenses
received by Executive from the Company under the provisions of this Section 7.7
in the event and only to the extent that it shall be ultimately determined that
the Company has not failed to comply with any of its obligations under this
Agreement, and each amount to be reimbursed hereunder shall bear interest
from the date of receipt by Executive thereof until paid to the Company in full
at 10% per annum.
7.8 Indemnification. The Company shall indemnify and hold harmless
Executive from any claim asserted against him as an employee, officer or
director of the Company or any of its subsidiaries, or as director, officer or
partner of any other enterprise if Executive serves or served in such capacity
at the request of the Company, to the fullest extent permitted by applicable
state laws. Expenses incurred by Executive in connection with any such claim
shall be paid by the Company in advance upon the written request of Executive.
Executive shall reimburse the Company for such expenses in the event and only
to the extent that it shall be ultimately determined that Executive is not
entitled under applicable state law to be indemnified for such expenses.
7.9 Amendment: Survival. This Agreement may be amended or canceled
by mutual agreement of the parties in writing without the consent of any other
person and, so long as Executive lives, no person, other than the parties
hereto, shall have any rights under or interest in this Agreement or the subject
matter hereof. The provisions of Sections 4 and 7 survive the termination or
expiration of this Agreement.
7.10 Entire Agreement. This Agreement, together with the Option
Agreement, constitutes the entire agreement between the parties, and supersedes
all prior oral or written understandings between the parties, relating to
Executive's employment.
7.11 Management Pool. The Company agrees that as soon as possible
(but in any event within sixty days of the date hereof) it shall take all
actions necessary to increase the number of shares available for the grant of
stock options under the incentive stock option plan approved by the Company in
June 1997 so that at least an additional 250,000 shares of Common Stock of the
Company are available under such plan for grant after June 1997.
7.12 No Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
The parties hereto have executed this Agreement on the date and year first
above written.
MEDCARE TECHNOLOGIES, INC.
By: /s/ Harmel S. Rayat
------------------------
Title: Chief Executive Officer
------------------------
By: /s/ Jeff Aronin
------------------------
Jeff Aronin
EXHIBIT B
CERTIFICATE OF DESIGNATION
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 03:35 PM 07/07/1997
971217070 -- 2632701
CERTIFICATE OF DESIGNATION OF
SERIES A PREFERRED STOCK
OF
MEDCARE TECHNOLOGIES, INC.
It is hereby certified that:
1. The name of the Company (hereinafter called the "Company") is Medcare
Technologies, Inc., a Delaware corporation.
2. The certificate of incorporation of the Company authorizes the
issuance of one million (1,000,000) shares of preferred stock, $.25 par value
per share, and expressly vests in the Board of Directors of the Company the
authority provided therein to issue any or all of said shares in one (l) or more
series and by resolution or resolutions to establish the designation and number
and to fix the relative rights and preferences of each series to be issued.
3. The Board of Directors of the Company, pursuant to the authority
expressly vested in it as aforesaid, has adopted the following resolutions
creating a Series A issue of Preferred Stock:
RESOLVED, that one thousand (1,000) of the one million (1,000,000)
authorized shares of Preferred Stock of the Company shall be designated Series
A Preferred Stock, $.25 par value per share, and shall possess the rights and
preferences set forth below:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall have a
par value of $.25 per share and shall be designated as Series A Preferred Stock
(the "Series A Preferred Stock") and the number of shares constituting the
Series A Preferred Stock shall be one thousand (1,000). The Series A Preferred
Stock shall be offered at a purchase price of Ten Thousand Dollars ($10,000) per
share (the "Original Series A Issue Price"), with an eight percent (8%) per
annum accretion rate as set forth herein.
Section 2. RANK. The Series A Preferred Stock shall rank: (i) junior to
any other class or series of capital stock of the Company hereafter created
specifically ranking by its terms senior to the Series A Preferred Stock
(collectively, the "Senior Securities"); (ii) prior to all of the Company's
Common Stock, $.001 par value per share ("Common Stock"); (iii) prior to any
class or series of capital stock of the Company hereafter created not
specifically ranking by its terms senior to or on parity with any Series A
Preferred Stock of whatever subdivision (collectively, with the Common Stock,
"Junior Securities"); and (iv) on parity with any class or series of capital
stock of the Company hereafter created specifically ranking by its terms on
parity with the Series A Preferred Stock ("Parity Securities") in each case as
to distributions of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary (all such distributions being referred
to collectively as "Distributions").
Section 3. DIVIDENDS. The Series A Preferred Stock will bear no dividends,
and the holders of the Series A Preferred Stock ("Holders") shall not be
entitled to receive dividends on the Series A Preferred Stock.
Section 4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Company ("Liquidation Event"), either voluntary or involuntary, the Holders of
shares of Series A Preferred Stock shall be entitled to receive, immediately
after any distributions to Senior Securities required by the Company's
Certificate of Incorporation or any certificate of designation, and prior in
preference to any distribution to Junior Securities but in parity with any
distribution to Parity Securities, an amount per share equal to the sum of
(i) the Original Series A Issue Price for each outstanding share of Series A
Preferred Stock and (ii) an amount equal to eight percent (8%) of the Original
Series A Issue Price per annum for the period that has passed since the date
that, in connection with the consummation of the purchase by Holder of shares
of Series A Preferred Stock from the Company,
<PAGE>
the escrow agent (or the Company, in the case of exercise of warrants to
acquire, the Series A Preferred Stock (the "Preferred Warrants")) first had in
its possession funds representing full payment for the shares of Series A
Preferred Stock (such amount being referred to herein as the "Premium"). If
upon the occurrence of such event, and after payment in full of the preferential
amounts with respect to the Senior Securities, the assets and funds available to
be distributed among the Holders of the Series A Preferred Stock and Parity
Securities shall be insufficient to permit the payment to such Holders of the
full preferential amounts due to the Holders of the Series A Preferred Stock and
the Parity Secunties, respectively, then the entire assets and funds of the
Company legally available for distribution shall be distributed among the
Holders of the Series A Preferred Stock and the Parity Securities, pro rata,
based on the respective liquidation amounts to which each such series of stock
is entitled by the Company's Certificate of Incorporation and any certificate(s)
of designation relating thereto.
(b) Upon the completion of the distribution required by subsection
4(a), if assets remain in this Company, they shall be distributed to holders of
Junior Securities in accordance with the Company's Certificate of Incorporation
including any duly adopted certificate(s) of designation.
(c) At each Holder's option, a sale, conveyance or disposition of
all or substantially all of the assets of the Company or the effectuation by the
Company of a transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of the Company is disposed of shall be
deemed to be a Liquidation Event as defined in Section 4(a); provided further
that (i) a consolidation, merger, acquisition, or other business combination of
the Company with or into any other publicly traded company or companies shall
not be treated as a Liquidation Event as defined in Section 4(a) but instead
stroll be treated pursuant to Section 5(d) hereof, and (ii) a consolidation,
merger, acquisition, or other business combination of the Company with or into
any other non-publicly traded company or companies shad be treated as a
Liquidation Event as defined in Section 4(a). The Company shall not effect any
transaction described in subsection 4(c)(ii) unless it first gives thirty (30)
business days prior notice of such transaction (during which time the Holder
shall be entitled to immediately convert any or all of its shares of Series A
Preferred Stock into Common Stock at the Conversion Price, as defined below,
then in effect, which conversion shall not be subject to the conversion
restrictions set forth in Section 5(a); provided however, that, if such
conversion takes place prior to the end of the four (4) month holding period set
forth in Section 5(a), for purposes of calculating the Variable Conversion Price
(as defined in Section 5(a)), "X" shall equal eighty-five percent (85%)).
(d) In the event that, immediately prior to the closing of a
transaction described in Section 4(c) which would constitute a liquidation
event, the cash distributions required by Section 4(a) or Section 6 have not
been made, the Company shall either (i) cause such closing to be postponed until
such cash distributions have been made, or (ii) cancel such transaction, in
which event the rights of the Holders of Series A Preferred Stock shall be the
same as existing immediately prior to such proposed transaction.
Section 5. CONVERSION. Subject to Section 4(c) herein, the record Holders
of this Series A Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) RIGHT TO CONVERT. The record Holder of the Series A Preferred
Stock shall be entitled to convert, subject to the Company's right of redemption
set forth in Section 6(a), any or all the shares of the Series A Preferred Stock
on or after the date that is four (4) months after the Last Closing Date, as
defined below, at the office of the Company or its designated transfer agent
(the "Transfer Agent"), into that number of fully-paid and non-assessable
shares of Common Stock calculated in accordance with the following formula (the
"Conversion Rate"):
Number of shares issued upon conversion of one (1) share of Series A
Preferred Stock =
(.08) (N/365) (10,000) + 10,000
-------------------------------
Conversion Price
<PAGE>
where,
N=the number of days between (i) the date that, in connection with the
consummation of the initial purchase by Holder of shares of Series A Preferred
Stock from the Company, the escrow agent (or the Company, in the case of
exercise of the Preferred Warrants) first had in its possession funds
representing full payment for the shares of Series A Preferred Stock for which
conversion is being elected, and (ii) the applicable Date of Conversion (as
defined in Section 5(b)(iv) below) for the shares of Series A Preferred Stock
for which conversion is being elected, and
Conversion Price = the lesser of (x) 115% of the average Closing Bid Price, as
defined below, for the five (5) trading days ending on June 6, 1997, which is
$7.346 (the "Fixed Conversion Price"), or (y) X9to of the average Closing Bid
Price, as that term is defined below, of the Company's Common Stock for the five
(5) trading days immediately preceding the Date of Conversion, as defined below
(the "Variable Conversion Price"), where X is determined as follows;
No. Months Between Last
Closing and Date of Conversion "X"
-------------------------------- -----
4 months-6 months 90%
6 months and 1 day-9 months 87.5%
9 months and 1 day-12 months 85%
more than 12 months 80%
provided, however, that, unless otherwise indicated herein, beginning on the
date that is four (4) months following the Last Closing Date, as defined below,
the right of the Holder to convert into Common Stock using the Variable
Conversion Price initially shall be limited to a maximum of fifteen percent
(15%) of the aggregate number of shares of the Series A Preferred Stock issued
to such Holder, including, if applicable, Series A Preferred Stock issued upon
exercise of the Preferred Warrants, and for each one (1) month period which
expires thereafter, the Holder shah accrue the right to convert into Common
Stock an additional fifteen percent (1S%) of the aggregate number of shares of
the Series A Preferred Stock issued to such Holder, including, if applicable,
Series A Preferred Stock issued upon exercise of the Preferred Warrants (the
number of shares that may be converted at any given time using the Variable
Conversion Price, in the aggregate, is referred to hereinafter as the
"Conversion Quota"); and provided, further, in the event that the Holder elects
not to convert its full Conversion Quota during any one (1) month period, the
unconverted amount shall be earned forward and added to the Conversion Quota,
and thereafter the Holder may, from time to time, convert any portion of the
Conversion Quota at the Variable Conversion Price; and provided further, that
subsequent to the date that is ten (10) months following the Last Closing Date,
there shall be no restrictions on the number of shares of Series A Preferred
Stock that may be converted into Common Stock using the Variable Conversion
Price; and provided, further, that a Holder can convert one hundred percent
(100%) of the Series A Preferred Stock or any portion thereof, into Common Stock
using the Fixed Conversion Price on or after the date that is four (4) months
after the Last Closing Date whether or not the Fixed Conversion Price is less
than the Variable Conversion Price.
As used herein, "Last Closing Date" shall mean the date of the last closing
of a purchase and sale of the Series A Preferred Stock that occurs pursuant to
the offering of the Series A Preferred Stock by the Company and accompanying
warrants (for purposes of this definition, the Series A Preferred Stock
obtained upon exercise of the Preferred Warrants shall be deemed to be acquired
at the closing when such Preferred Warrants were issued).
For purposes hereof, any Holder which acquires shares of Series A Preferred
Stock and/or Preferred Warrants from another Holder (the "Transferor") and not
upon original issuance from the Company shall be entitled to exercise its
conversion right as to the percentages of such shares specified under Section
5(a) in such amounts and at such times such that the number of shares eligible
for conversion by such Holder at any time shall be in the same proportion that
the number of shares of Series A Preferred Stock (assuming all Preferred
Warrants are exercised) acquired by such Holder from its Transferor bears to the
total number of shares of Series A Preferred Stock (assuming
<PAGE>
all Preferred Warrants are exercised) originally issued by the Company to such
Transferor (or its predecessor Transferor).
For purposes hereof, the term "Closing Bid Price" shall mean the closing bid
price of the Company's Common Stock on the OTC Bulletin Board, or if no longer
traded on the OTC Bulletin Board, the closing bid price on the principal
national securities exchange or the National Market System on which the Common
Stock is so traded and if not available, the mean of the high and low prices on
the principal national securities exchange or the National Market System on
which the Common Stock is so traded.
(b) MECHANICS OF CONVERSION. In order to convert Series A Preferred
Stock into full shares of Common Stock, the Holder shall (i) send via facsimile,
on or prior to 11:59 p.m., New York City time (the "Conversion Notice Deadline")
on the Date of Conversion, a copy of the fully executed notice of conversion
("Notice of Conversion") to the Company at the office of the Company and to its
designated transfer agent (the "Transfer Agent") for the Series A Preferred
Stock stating that the Holder elects to convert, which notice shall specify the
Date of Conversion, the number of shares of Series A Preferred Stock to be
converted, the applicable conversion price and a calculation of the number of
shares of Common Stock issuable upon such conversion (together with a copy of
the front page of each certificate to be converted) and (ii) surrender to a c
ommon courier for delivery to the office of the Company or the Transfer Agent,
the original certificates representing the Series A Preferred Stock being
converted (the "Preferred Stock Certificates"), duly endorsed for transfer
provided, however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless
either the Preferred Stock Certificates are delivered to the Company or its
Transfer Agent as provided above, or the Holder notifies the Company or its
Transfer Agent that such certificates have been lost, stolen or destroyed
(subject to the requirements of subparagraph (i) below). Upon receipt by Company
of a facsimile copy of a Notice of Conversion, Company shall immediately send,
via facsimile, a confirmation of receipt of the Notice of Conversion to Holder
which shall specify that the Notice of Conversion has been received and the name
and telephone number of a contact person at the Company whom the Holder should
contact regarding information related to the Conversion. In the case of a
dispute as to the calculation of the Conversion Rate, the Company shall promptly
issue to the Holder the number of Shares that are not disputed and shall submit
the disputed calculations to its outside accountant via facsimile within three
(3) days of receipt of Holder's Notice of Conversion. The Company shall cause
the accountant to perform the calculations and notify Company and Holder of the
results no later than forty-eight (48) hours from the time it receives the
disputed calculations. Accountant's calculation shall be deemed conclusive
absent manifest error.
(i) LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificates representing shares of Series A Preferred Stock, and (in the case
of loss, theft or destruction) of indemnity or security reasonably satisfactory
to the Company, and upon surrender and cancellation of the Preferred Stock
Certificate(s), if mutilated, the Company shall execute and deliver new
Preferred Stock Certificate(s) of like tenor and date. However, Company shall
not eve obligated to re-issue such lost or stolen Preferred Stock Certificates
if Holder contemporaneously requests Company to convert such Series A Preferred
Stock into Common Stock.
(ii) DELIVERY OF COMMON STOCK UPON CONVERSION. The Company shall
or shall cause the Transfer Agent to, no later than the close of business on
the second (2nd) business day (the "Deadline") after receipt by the Company or
the Transfer Agent of a facsimile copy of a Notice of Conversion and receipt by
Company or the Transfer Agent of all necessary documentation duly executed and
in proper form required for conversion, including the original Preferred Stock
Certificates to be converted (or after provision for security or indemnification
in the case of lost or destroyed certificates, if required), issue and surrender
to a common courier for either overnight or (if delivery is outside the United
States) two (2) day delivery to the Holder at the address of the Holder as shown
on the stock records of the Company a certificate for the number of shares of
Common Stock to which the Holder shall be entitled as aforesaid.
(iii) NO FRACTIONAL SHARES. If any conversion of the Series A
Preferred Stock would create a fractional share of Common Stock or a right to
acquire a fractional share of
<PAGE>
Common Stock, such fractional share shall be disregarded and the number of
shares of Common Stock issuable upon conversion, in the aggregate, shall be the
next higher number of shares.
(iv) DATE OF CONVERSION. The date on which conversion occurs (the
"Date of Conversion") shall be deemed to be the date set forth in such Notice of
Conversion, provided (i) that the advance copy of the Notice of Conversion is
sent via facsimile to the Company before 11:59 p.m., New York City time, on the
Date of Conversion, and (ii) that the original Preferred Stock Certificates
representing the shares of Series A Preferred Stock to be converted are
surrendered by depositing such certificates with a common courier, for delivery
to the Company or the Transfer Agent as provided above, as soon as practicable
after the Date of Conversion. The person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record Holder or Holders of such shares of Common Stock on the
Date of Conversion.
(c) AUTOMATIC CONVERSION OR REDEMPTION. Each share of Series A
Preferred Stock outstanding on the date which is three (3) years after the
Last Closing Date or, if not a business day, the first business day thereafter
("Termination Date") automatically shad, at the option of the Company, either
(i) be converted ("Automatic Conversion") into Common Stock on such date at the
Conversion Rate then in effect (calculated in accordance with the formula in
Section 5(a) above), and the Termination Date shall be deemed the Date of
Conversion with respect to such conversion for purposes of this Certificate of
Designation, or (ii) be redeemed ("Automatic Redemption") by the Company for
cash in an amount equal to the Stated Value (as defined in Section 6(b)(i)
below) of the shares of Series A Preferred Stock being redeemed. If the Company
elects to redeem, on the Termination late, the Company shall send to the Holders
of outstanding Series A Preferred Stock notice (the "Automatic Redemption
Notice") via facsimile of its intent to effect an Automatic Redemption of the
outstanding Series A Preferred Stocln If the Company does not send such notice
to Holder on such date, an Automatic Conversion shall be deemed to have
occurred. If an Automatic Conversion occurs, the Company and the Holders
shall follow the applicable conversion procedures set forth in this Certificate
of Designation; provided, however, that the Holders are not required to send the
Notice of Conversion contemplated by Section S(b). If the Company elects to
redeem, each Holder of outstanding Series A Preferred Stock shall send their
certificates representing the Series A Preferred Stock to the Company within
five (5) days of the date of receipt of the Automatic Redemption Notice from
the Company, and the Company shall pay the applicable redemption price to each
respective Holder within five (5) days of the receipt of such certificates. The
Company shall not be obligated to deliver the redemption price unless the
certificates representing the Series A Preferred Stock are delivered to the
Company, or, in the event one or more certificates have been lost, stolen,
mutilated or destroyed, unless the Holder has complied with Section 5(b)(i). If
the Company elects to redeem under this Section 5(c) and the Company fails to
pay the Holders the redemption price within five (5) days of the Termination
Date as required by this Section 5(c), then an Automatic Conversion shall be
deemed to have occurred and, upon receipt of the Preferred Stock Certificates,
the Company shall immediately deliver to the Holders the certificates
representing the number of shares of Common Stock to which the Holders would
have been entitled upon Automatic Conversion.
(d) ADJUSTMENT TO CONVERSION RATE.
(i) ADJUSTMENT TO FIXED CONVERSION PRICE DUE TO STOCK SPLIT, STOCK
DIVIDEND, ETC. If, prior to the conversion of all of the Series A Preferred
Stock, the number of outstanding shares of Common Stock is increased by a stock
split, stock dividend, or other similar event, the Fixed Conversion Price shall
be proportionately reduced, or if the number of outstanding shares of Common
Stock is decreased by a combination or reclassification of shares, or other
similar event, the Fixed Conversion Price shall be proportionately increased.
(ii) ADJUSTMENT TO VARIABLE CONVERSION PRICE. If, at any time when any
shares of the Series A Preferred Stock are issued and outstanding, the number of
outstanding shares of Common Stock is increased or decreased by a stock split,
stock dividend, or other similar event, which event shall have taken place
during the reference period for determination of the Conversion Price for any
conversion of the Series A Preferred Stock, then the Variable Conversion Price
shall be calculated giving appropriate effect to the stock split, stock
dividend, combination, reclassification or other similar event for all five (5)
trading days immediately preceding the Date of Conversion.
<PAGE>
(iii) ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If prior to the
conversion of all Series A Preferred Stock, there shall be any merger,
consolidation;, exchange of shares, recapitalization, reorganization, or other
similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another
class or classes of stock or securities of the Company or another entity or
there is a sale of all or substantially all the Company's assets or there is a
change of control transaction not deemed to be a liquidation pursuant to Section
4(c), then the Holders of Series A Preferred Stock shall thereafter have the
right to receive upon conversion of Series A Preferred Stock, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore issuable upon conversion, such stock,
securities and/or other assets which the Holder would have been entitled to
receive in such transaction had the Series A Preferred Stock been converted
immediately prior to such transaction, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the Holders
of the Series A Preferred Stock to the end that the provisions hereof
(including, without limitation, provisions for the adjustment of the Conversion
Price and of the number of shares issuable upon conversion of the Series A
Preferred Stock) shall thereafter be applicable, as nearly as may be practicable
in relation to any securities thereafter deliverable upon the exercise hereof.
The Company shall not effect any transaction described in this subsection
5(d)(iii) unless (a) it first gives thirty (30) business days prior notice of
such merger, consolidation, exchange of shares, recapitalization,
reorganization, or other similar event (during which time the Holder shall be
entitled to convert its shares of Series A Preferred Stock into Common Stock)
and (b) the resulting successor or acquiring entity (if not the Company) assumes
by written instrument the obligations of the Company under this Certificate of
Designation including this subsection 5(d)(iii).
(iv) NO FRACTIONAL SHARES. If any adjustment under this Section 5(d)
would create a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded
and the number of shares of Common Stock issuable upon conversion shall be the
next higher number of shares.
Section 6. REDEMPTION BY COMPANY.
(a) COMPANY'S RIGHT TO REDEEM UPON RECEIPT OF NOTICE OF CONVERSION. If
the Conversion Price of the Company's Common Stock is less than the Fixed
Conversion Price (as defined in Section 5(a)), at the time of receipt of a
Notice of Conversion pursuant to Section 5, the Company shall have the right,
in its sole discretion, to redeem in whole or in part any Series A Preferred
Stock submitted for conversion at the Redemption Rate (as defined below),
immediately prior to and in lieu of conversion ("Redemption Upon Receipt of
Notice of Conversion"). If the Company elects to redeem some, but not all, of
the Series A Preferred Stock submitted for conversion, the Company shall redeem
from among the Series A Preferred Stock submitted by the various shareholders
for conversion on the applicable date, a pro-rata amount from each such Holder
so submitting Series A Preferred Stock for conversion.
(i) REDEMPTION PRICE UPON RECEIPT OF A NOTICE OF CONVERSION. The
redemption price of Series A Preferred Stock under this Section 6(a) shall be
calculated as follows ("Redemption Rate"):
No. Months Between Last
Closing and Date of Conversion Redemption Rate
------------------------------ ---------------
4 months 6 months Stated Value x 1.10
6 months and 1 day -- 9 months Stated Value x 1.125
9 months and 1 day -- 12 months Stated Value x 1.15
more than 12 months Stated Value x 1.20
where,
"Stated Value" shall have the same meaning as defined in Section 6(b)
below.
<PAGE>
(ii) MECHANICS OF REDEMPTION UPON RECEIPT OF NOTICE OF CONVERSION.
The Company shall effect each such redemption by giving notice of its election
to redeem, by facsimile, by 5:00 p.m. New York City time the next business day
following receipt of a Notice of Conversion from a Holder, and the Company shall
provide a copy of such redemption notice by overnight or two (2) day courier, to
(A) the Holder of the Series A Preferred Stock submitted for conversion at the
address and facsimile number of such Holder appearing in the Company's register
for the Series A Preferred Stock and (B) the Company's Transfer Agent. Such
redemption notice shall indicate whether the Company will redeem all or part of
the Series A Preferred Stock submitted for conversion and the applicable
redemption price,
(b) COMPANY'S RIGHT TO REDEEM AT ITS ELECTION. At any time, commencing
twelve (12) months and one (1) day after the Last Closing Date, the Company
shall have the light, in its sole discretion, to redeem ("Redemption at
Company's Election"), from time to time, any or all of the Series A Preferred
Stock, provided (i) Company shall first provide thirty (30) business days
advance written notice as provided in subparagraph 6(b)(ii) below (which can be
given beginning thirty (30) business days prior to the date which is twelve (12)
months and one (1) day after the Last Closing Date), and (ii) that the Company
shall only be entitled to redeem Series A Preferred Stock having an aggregate
Stated Value (as defined below) of at least Two Hundred Fifty Thousand Dollars
($250,000). If the Company elects to redeem some, but not all, of the Series A
Preferred Stock, the Company shall redeem a pro-rata amount from each Holder of
the Series A Preferred Stock.
(i) REDEMPTION PRICE AT COMPANY'S ELECTION. The "Redemption Price At
Company's Election" shall be calculated as a percentage of Stated Value, as that
term is defined below, of the Series A Preferred Stock redeemed pursuant to this
Section 6(b), which percentage shall vary depending on the date of Redemption at
Company's Election (as defined below), and shall be determined as follows:
Date of Notice of Redemption at Company's Election % of Stated Value
- -------------------------------------------------- -----------------
12 months and 1 day to 18 months following Last Closing Date 130%
18 months and 1 day to 24 months following Last Closing Date 125%
24 months and 1 day to 30 months following Last Closing Date 120%
30 months and I day to 36 months following Last Closing Date 115%
For purposes hereof, "Stated Value" shall mean the Original Series A Issue
Price (as defined in Section 1)) of the shares of Series A Preferred Stock being
redeemed pursuant to this Section 6(b), together with the accreted but unpaid
Premium (as defined in Section 4(a)).
(ii) MECHANICS OF REDEMPTION AT COMPANY'S ELECTION. The Company shall
effect each such redemption by giving at least thirty (30) business days prior
written notice ("Notice of Redemption At Company's Election") to (A) the Holders
of the Series A Preferred Stock selected for redemption, at the address and
facsimile number of such Holder appearing in the Company's Series A Preferred
Stock register and (B) the Transfer Agent, which Notice of Redemption At
Company's Election shall be deemed to have been delivered three (3) business
days after the Company's mailing (try overnight or two (2) day courier, with
a copy by facsimile) of such Notice of Redemption At Company's Election. Such
Notice of Redemption At Company's Election shall indicate (i) the number of
shares of Series A Preferred Stock that have been selected for redemption, (ii)
the date which such redemption is to become effective (the "Date of Redemption
At Company's Election") and (iii) the applicable Redemption Price At Company's
Election, as defined in subsection (b)(i) above. Notwithstanding the above,
Holder may convert into Common Stock pursuant to section 5, prior to the close
of business on the Date of Redemption at Company's Election, any Series A
Preferred Stock which it is otherwise entitled to convert, including Series A
Preceded Stock that has been selected for redemption at Company's election
pursuant to this subsection 6(b), provided, however, that the Company shall
still be entitled to exercise its right to redeem upon receipt of a Notice of
Conversion pursuant to section 6(a).
***** (c) COMPANY MUST HAVE IMMEDIATELY AVAILABLE
FUNDS OR CREDIT FACILITIES. The Company shall not be entitled to send
any Redemption Notice and begin the redemption procedure under Sections 6(a)
and 6(b) unless it has:
<PAGE>
(i) the full amount of the redemption price in cash, available in a
demand or other immediately available account in a bank or similar financial
institution; or
(ii) immediately available credit facilities, in the full amount of
the redemption price with a bark or similar financial institution; or
(iii) an agreement with a standby underwriter willing to purchase
from the Company a sufficient number of shares of stock to provide proceeds
necessary to redeem any stock that is not converted prior to redemption; or
(iv) a combination of the items set forth in (i), (ii) and (iii)
above, aggregating the full amount of the redemption price.
If the foregoing conditions of this Section 6(c) are satisfied and Company
complies with Section 6(d) hereof, then any shares of Series A Preferred Stock
called for by a Redemption at Company's Election shall cease to he outstanding
for all purposes hereunder (including the right to convert or to accrete
additional Premium or to exercise any other right or privilege hereunder) on the
Date of Redemption at Company's Election and shall instead represent the right
to receive the Redemption Price at Company's Election without interest from and
after the Date of Redemption at Company's Election.
(d) PAYMENT OF REDEMPTION PRICE.
(i) Each Holder submitting Preferred Stock being redeemed under this
Section 6 shall send their Series A Preferred Stock Certificates so redeemed to
the Company or its Transfer Agent, and the Company shall pay the applicable
redemption price to that Holder within five (5) business days of the Date of
Redemption at Company's Election. The Company shall not be obligated to deliver
the redemption price unless the Preferred Stock Certificates so redeemed are
delivered to the Company or its Transfer Agent, or, in the event one (1) or more
certificates have been lost, stolen, mutilated or destroyed, unless the Holder
has complied with Section 5(b)(i).
(ii) If Company elects to redeem pursuant to Section 6(a) hereof, and
Company fails to pay Holder the redemption price within the time frame as
required by this Section 6(d) then Company shall issue shares of Common Stock
to any such Holder who has submitted a Notice of Conversion in compliance with
Section 5(b) hereof. The shares to be issued to Holder pursuant to this
provision shall be the number of shares determined using the lowest Conversion
Price (as defined in Section 5 hereof) in effect during the period beginning on
the date Holder sends its Notice of Conversion to Company or Transfer Agent via
facsimile and ending on the date the Transfer Agent issues Common Stock pursuant
to this Section 6(d)(ii). Nothing in this Section 6(d) shall be construed to
limit Holder's ability to pursue Holder's rights under Section 13 hereof.
(e) BLACKOUT PERIOD. Notwithstanding the foregoing, the Company may not
either send out a redemption notice or effect a redemption pursuant to Section
6(b) above during a Blackout Period (defined as a period during which the
Company's officers or directors would not be entitled to buy or sell stock
because of their holding of material non-public information), unless the Company
shall first disclose the non-public information that resulted in the Blackout
Period; provided, however, that no redemption shall be effected until at least
ten (10) days after the Company shall have given the Holder written notice that
the Blackout Period has been lifted.
Section 7. VOTING RIGHTS. The Holders of the Series A Preferred Stock
shall have no voting power whatsoever, except as otherwise provided by the
General Corporation Law of the State of Delaware ("Delaware Law"), and no Holder
of Series A Preferred Stock shall vote or otherwise participate in any
proceeding in which actions shall be taken by the Company or the shareholders
thereof or be enticed to notification as to any meeting of the shareholders.
Notwithstanding the above, Company shall provide Holder with notification
of any meeting of the shareholders regarding any major corporate events
affecting the Company. In the event of any taking by the Company of a record of
its shareholders for the purpose of determining shareholders
<PAGE>
who are entitled to receive payment of any dividend or other distribution, any
right to subscribe for, purchase or otherwise acquire any share of any class or
any other securities or property (including by way of merger, consolidation or
reorganization), or to receive any other right, or for the purpose of
determining shareholders who are entitled 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 liquidation, dissolution or winding up of the
Company, the Company shall mail a notice to Holder, at least ten (10) days prior
to the record date specified therein, 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 Delaware Law the vote of the Holders of the Series
A Preferred Stock, voting separately as a class, 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 shares of the Series A Preferred Stock represented at
a duly held meeting at which a quorum is present or by written consent of a
majority of the shares of Series A Preferred Stock (except as otherwise may be
required under Delaware Law) shall constitute the approval of such action by the
class. To the extent that under Delaware Law the Holders of the Series A
Preferred Stock are entitled to vote on a matter with holders of Common Stock,
voting together as one (1) class, each share of Series A Preferred Stock shall
be entitled to a number of votes equal to the number of shares of Common Stock
into which it is then convertible using the record date for the taking of such
vote of stockholders as the date as of which the Conversion Price is calculated.
Holders of the Series A Preferred Stock also shall be entitled to notice of all
shareholder meetings or written consents with respect to which they would be
entitled to vote, which notice would be provided pursuant to the Company's
by-laws and applicable statutes.
Section 8. PROTECTIVE PROVISION. So long as shares of Series A Preferred
Stock are outstanding, the Company shall not without first obtaining the
approval (by vote or written consent, as provided by Delaware Law) of the
Holders of at least seventy-five percent (75%) of the then outstanding shares of
Series A Preferred Stock, and at least seventy-five percent (75%) of the then
outstanding Holders:
(a) alter or change the rights, preferences or privileges of the Series
A Preferred Stock or any securities so as to affect adversely the Series A
Preferred Stock;
(b) create any new class or series of stock having a preference over the
Series A Preferred Stock with respect to Distributions (as defined in Section 2
above) or increase the size of the authorized number of Series A Preferred; or
(c) do any act or thing not authorized or contemplated by this
Designation which would result in taxation of the holders of shares of the
Series A Preferred Stock under Section 305 of the Internal Revenue Code of 1986,
as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
In the event Holders of at least seventy-five percent (75%) of the then
outstanding shares of Series A Preferred Stock and at least seventy-five percent
(75%) of the then outstanding Holders agree to allow the Company to alter or
change the rights, preferences or privileges of the shares of Series A Preferred
Stock, pursuant to subsection (a} above, so as to affect the Senes A Preferred
Stock, then the Company will deliver notice of such approved change to the
Holders of the Series A Preferred Stock that did not agree to such alteration
or change (the "Dissenting Holders"} and Dissenting Holders shall have the right
for a period of thirty (30) business days to convert pursuant to the terms of
this Certificate of Designation as they exist prior to such alteration or change
(notwithstanding the holding requirements set forth in Section 5(a) hereon, or
continue to hold shares of Series A Preferred Stock, as amended.
Section 9. STATUS OF CONVERTED OR REDEEMED STOCK. In the event any shares
of Series A Preferred Stock shall be converted or redeemed pursuant to Section
5 or Section 6 hereof, the shares so converted or redeemed shall be canceled,
shall return to the status of authorized but unissued Preferred Stock of no
designated senes, and shall not be issuable by the Company as Series A Preferred
Stock.
<PAGE>
Section 10. PREFERENCE RIGHTS. Nothing contained herein shall be
construed to prevent the Board of Directors of the Company from issuing one
(1) or more series of Preferred Stock with dividend and/or liquidation
preferences junior to the dividend and liquidation preferences of the Series A
Preferred Stock.
Section 11. RESERVATION OF SHARES OF COMMON STOCK.
(a) RESERVED AMOUNT. The Company shall have authorized and reserved and
keep available for issuance one million five hundred thousand (1,500,000) shares
of Common Stock (the "Reserved Amount") solely for the purpose of effecting the
conversion of the Series A Preferred Stock, including Series A Preferred Stock
to be issued upon exercise of the Preferred Warrants, and exercise of the
warrants to acquire Common Stock (the "Common Warrants") issued or to be issued
to the Holders. The Company shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock a sufficient number of
shares of Common Stock to provide for the full conversion of all outstanding
Series A Preferred Stock and the full conversion of Series A Preferred Stock
which may be issued upon exercise of the Preferred Warrants, and issuance of the
shares of Common Stock in connection therewith and the full exercise of the
Common Warrants and issuance of the shares of Common Stock in connection
therewith.
(b) INCREASES TO RESERVED AMOUNT. Without limiting any other provision
of this Section 11, if the Reserved Amount for any three (3) consecutive trading
days (the last of such three (3) trading days being the "Authorization Trigger
Date") shall be less than one hundred twenty-five percent (125%) of the number
of shares of Common Stock issuable upon conversion of this Series A Preferred
Stock, including Series A Preferred Stock which may be issued upon exercise of
the Preferred Warrants, and exercise of the Common Warrants on such trading days
(a "Share Authorization Failure"), the Company shall immediately notify all
Holders of such occurrence and shall take action as soon as possible, but in
any event within sixty (60) days after an Authorization Trigger Date (including,
if necessary, seeking shareholder approval to authorize the issuance of
additional shares of Common Stock) to increase the Reserved Amount to one
hundred fifty percent (150%) of the number of shares of Common Stock then
issuable upon conversion of the Series A Preferred Stock, including Series A
Preferred Stock which may be issued upon exercise of the Preferred Warrants, and
exercise of the Common Warrants.
(c) REDUCTION OF RESERVED AMOUNT UNDER CERTAIN CIRCUMSTANCES. Prior to
complete conversion of all Series A Preferred Stock, including Series A
Preferred Stock which may be issued upon exercise of the Preferred Warrants, the
Company shall not reduce the number of shares required to be reserved for
issuance under this Section 11 without the written consent of all Holders except
for a reduction proportionate to a reverse stock split effected for a business
purpose other than affecting the obligations of Company under this Section 11,
which reverse stock split affects all shares of Common Stock equally. Following
complete conversion of all the Series A Preferred Stock, including Series A
Preferred Stock which may be issued upon exercise of the Preferred Warrants,
the Company may, with fifteen (15) days prior written notice to Holder, reduce
the Reserved Amount to one hundred twenty-five percent (125%) of the number of
shares of Common Stock issuable upon the full exercise of the Common Warrants;
provided, however, that the Reserved Amount shall continue to be subject to
increase pursuant to Section 11 hereof.
(d) ALLOCATION OF RESERVED AMOUNT. Each increase to the Reserved Amount
shall be allocated pro rata among the Holders based on the number of Series A
Preferred Stock, including Series A Preferred Stock which may be issued upon
exercise of the Preferred Warrants, and Common Warrants held by each Holder at
the time of the establishment of or increase in the Reserved Amount. In the
event a Holder shall sell or otherwise transfer any of such Holder's Series A
Preferred Stock, Preferred Warrants or Common Warrants, each transferee shall
be allocated a pro rata portion of such transferor's Reserved Amount. Any
portion of the Reserved Amount which remains allocated to any person or entity
which does not hold any Series A Preferred Stock or Preferred Warrants shall be
allocated to the remaining Holders, pro rata based on the number of Series A
Preferred Stock, including Series A Preferred Stock which may be issued upon
exercise of the Preferred Warrants, and Common Warrants then held by such
Holders.
<PAGE>
Section 12. FAILURE TO SATISFY CONVERSIONS.
(a) CONVERSION FAILURE PAYMENTS. If, at any time, (x) a Holder submits a
Notice of Conversion (or is deemed to submit such notice pursuant to Section
5(c) hereof), and the Company fails for any reason to deliver, on or prior to
the expiration of the Deadline ("Delivery Period") for such conversion, such
number of shares of Common Stock to which such Converting Holder is entitled
upon such conversion, or (y) the Company provides notice to Holder at any time
of its intention not to issue shares of Common Stock upon exercise by Holder of
its conversion rights in accordance with the terms of this Certificate of
Designation (each of (x) and (y) being a "Conversion Failure"), then the Company
shall pay to such Holder damages in an amount equal to the lower of: (i) the
product of (A) the Damages Amount times (B) D times (C) .01 and (ii) the highest
interest rate permitted by applicable law, where:
"D" means the number of days beginning the date of the Conversion Failure
through and including the Cure Date with respect to such Conversion Failure;
"Damages Amount" means the Original Series A Issue Price for each share
of Series A Preferred Stock subject to conversion plus all accrued and unpaid
accretion thereon as of the first day of the Conversion Failure.
"Cure Date" means {i) with respect to a Conversion Failure described in
clause (x) of its definition, the date the Company effects the conversion of the
shares of Series A Preferred Stock submitted for conversion and (ii) with
respect to a Conversion Failure described in clause (y) of its definition, the
date the Company undertakes in writing to issue Common Stock in satisfaction of
all conversions of Series A Preferred Stock in accordance with the terms of this
Certificate of Designation.
The payments to which a Holder shall be entitled pursuant to this Section
are referred to herein as "Conversion Failure Payments." A Holder may elect to
receive accrued Conversion Failure Payments in cash or to convert all or any
portion of such accrued Conversion Failure Payments, at any time, into Common
Stock at the lowest Conversion Price in effect during the period beginning on
the date of the Conversion Failure through the Cure Date for such Conversion
Failure. In the event a Holder elects to receive any Conversion Failure
Payments in cash, it shall so notify the Company in writing. In the event a
Holder elects to convert all or any portion of the Conversion Failure Payments
such Holder shall indicate on a Notice of Conversion such portion of the
Conversion Failure Payments which such Holder elects to so convert and such
conversion shall otherwise be effected in accordance with provisions of Section
5.
(b) BUY-IN CURE. Unless a Conversion Failure described in clause (y)
of Section 12(a) hereof has occurred with respect to such a Holder, if (i) the
Company fails for any reason to deliver during the Delivery Period shams of
Common Stock to a Holder upon a conversion of the Series A Preferred Stock and
(ii) after the applicable Delivery Period with respect to such conversion, a
Holder purchases (in an open market transaction or otherwise) shares of Common
Stock to make delivery upon a sale by a Holder of the shares of 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 Holder) the amount by which (x) such Holder's total
purchase pace (including brokerage commission, if any) for the 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 shares of Common
Stock having a total purchase price of $11,000 to cover a Buy-In with respect to
shares of Common Stock sold for $10,000, the Company will be required to pay
such Holder $1,000. A Holder shall provide the Company written notification
indicating any amounts payable to Holder pursuant to this Section 12.
(c) ADJUSTMENT TO CONVERSION PRICE. If a Holder has not received
certificates for all shares of Common Stock within two (2) business days
following the expiration of the Delivery Period with respect to a conversion
of any portion of any of such Holder's Series A Preferred Stock for any reason,
then the Fixed Conversion Price applicable upon conversion of such portion of
the Series A Preferred Stock shall thereafter be the lesser of (i) the Fixed
Conversion Price on the Conversion Date specified in the Notice of Conversion
which resulted in the Conversion Failure and
<PAGE>
(ii) the lowest Conversion Price in effect during the period beginning on, and
including, such Conversion Date through and including the Cure Date. If there
shall occur a Conversion Failure of the type described in clause (y) of Section
12(a), then the Fixed Conversion Price with respect to a conversion thereafter
of any Series A Preferred Stock shall be the lowest Conversion Price in
effect at any time during the period beginning on, and including, the date of
the occurrence of such Conversion Failure through and including the Cure Date.
The Fixed Conversion Price shall thereafter be subject to further adjustment for
any events described in Section 5(d).
Section 13. EVENTS OF DEFAULT.
(a) HOLDER'S OPTION TO DEMAND PREPAYMENT. Upon the occurrence of an
Event of Default (as herein defined), each Holder shall have the right to elect
at any time and from time to time prior to the cure by Company of such Event of
Default to have all or any portion of such Holder's then outstanding Series A
Preferred Stock prepaid by the Company for an amount equal to the Holder Demand
Prepayment Amount (as herein defined).
(i) The right of a Holder to elect prepayment shall be exercisable
upon the occurrence of an Event of Default by such Holder in its sole discretion
by delivery of a Demand Prepayment Notice (as herein defined) in accordance with
the procedures set forth in this Section 13. Notwithstanding the exercise of
such right, the Holder shall be entitled to exercise all other rights and
remedies available under the provisions of this Certificate of Designation and
at law or in equity.
(ii) A Holder shall effect each demand for prepayment under this
Section 13 by giving at least two (2) business days prior to written notice (the
"Demand Prepayment Notice") of the date which such prepayment is to become
effective (the "Effective Date of Demand of Prepayment"), the Series A Preferred
Stock selected for prepayment and the Holder Demand Prepayment Amount to the
Company at the address and facsimile number provided in the stock records of the
Company, which Demand Prepayment Notice shall be deemed to have been delivered
on the business day after the date of transmission of Holder's facsimile (with a
copy sent by overnight courier to the Company) of such notice.
(iii) The Holder Demand Prepayment Amount shall be paid to a Holder
whose Series A Preferred Stock are being prepaid within one (1) business day
following the Effective Date of Demand of Prepayment, provided, however, that
the Company shall not be obligated to deliver any portion of the Holder Demand
Prepayment Amount until one (1) business day following either the date on which
the Series A Preferred Stock being prepaid are delivered to the office of the
Company or the Transfer Agent, or the date on which the Holder notifies the
Company or the Transfer Agent that such Series A Preferred Stock have been lost,
stolen or destroyed and delivers the documentation required in accordance with
Section 5(b)(i) hereof.
(b) HOLDER DEMAND PREPAYMENT AMOUNT. The "Holder Demand Prepayment
Amount" means the greater of: (a) 1.5 times the Stated Value of the Series A
Preferred Stock for which demand is being made, plus all accrued and unpaid
interest thereon and accrued and unpaid Conversion Failure Payments (if any)
through the date of prepayment and (b) the product of (1) the highest price at
which the Common Stock is traded on the date of the Event of Default (or on the
most recent trading date for the Common Stock if the Common Stock is not traded
on such date) divided by the Conversion Price in effect as of the date of the
Event of Default, and (2) the sum of the Stated Value and all accrued and unpaid
Conversion Failure Payments (if any) through the date of prepayment.
(c) EVENTS OF DEFAULT. An "Event of Default" means any one of the
following:
(i) a Conversion Failure described in Section 12(a) hereof;
(ii) a Share Authorization Failure described in Section ll(b)
hereof, if such Share Authorization Failure continues uncured for ninety (90)
days after the Authorization Trigger Date;
<PAGE>
(iii) the Company fails, and such failure continues uncured for
three (33 business days after the Company has been notified thereof in writing
by a Holder to satisfy the requirements of Section 11 hereof;
(iv) the Company fails to maintain an effective registration
statement as required by Section 2 and Section 3 of the Registration Rights
Agreement, between the Company and the Holder(s) (the "Registration Rights
Agreement") except where such failure lasts no longer than three (3) consecutive
trading days and is caused solely by failure of the Securities and Exchange
Commission to timely review the customary submission of or respond to the
customary requests of the Company;
(v) for three (3) consecutive trading days or for an aggregate
of ten (10) trading days in any nine (9) month period, the Common Stock
(including any of the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock, including Series A Preferred Stock which may be
issued upon exercise of the Preferred Warrants, and exercise of the Common
Warrants) is (i) suspended from trading on any of NASDAQ SmallCap, NMS, NYSE,
AMEX or the OTC Bulletin Board, or (ii) is not qualified for trading on at
least one of NASDAQ SmallCap, NMS, NYSE, AMEX or the OTC Bulletin Board;
(vi) the Company fails, and such failure continues uncured for
three (3) business days after the Company has been notified thereof in writing
by a Holder, to remove any restrictive legend on any certificate for any shares
of Common Stock issued to a Holder upon conversion of any Series A Preferred
Stock, including Series A Preferred Stock which may be issued upon exercise of
the Preferred Warrants, or exercise of any Common Warrant as and when required
by this Certificate of Designation, the Preferred Warrants, the Common Warrants,
the Subscription Agreement, between the Company and the Holder(s) (the
"Subscription Agreement") or the Registration Rights Agreement;
(vii) the Company breaches, and such breach continues uncured for
three (3) business days after the Company has been notified thereof in writing
by a Holder, any significant covenant or other material term or condition of
this Certificate of Designation, the Subscription Agreement, the Preferred
Warrants, the Common Warrants or the Registration Rights Agreement;
(viii) any representation or warranty of the Company made herein
or in any agreement, statement or certificate given in writing pursuant hereto
or in connection herewith (including, without limitation, the Subscription
Agreement and Registration Rights Agreement), shall be false or misleading in
any material respect when made;
(ix) the Company or any subsidiary of the Company shall make
an assignment for the benefit or 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 receiver or trustee shall otherwise be appointed;
or
(x) bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against the Company or any
subsidiary of the Company (and such proceedings shall continue unstayed for
thirty (30) days).
(d) FAILURE TO PAY DAMAGES AMOUNT. If the Company fails to pay the
Holder Demand Prepayment Amount within five (5) business days of its receipt of
a Demand Prepayment Notice, then such Holder shall have the right, at any time
and from time to time prior to the payment of the Holder Demand Prepayment
Amount, to require the Company, upon written notice, to immediately convert (in
accordance with the terms of Section 5) all or any portion of the Holder Demand
Prepayment Amount, into shares of Common Stock at the then current Conversion
Price, provided that if the Company has not delivered the full number of shares
of Common Stock issuable upon such conversion within two (2) business days after
the Holder delivers written notice of such conversion, the Conversion Price with
respect to such Holder Demand Prepayment Amount shall thereafter be deemed to be
the lowest Conversion Price in effect during the period beginning on the date of
the Event of Default and ending on the date on which the Company delivers to the
Holder the
<PAGE>
full number of freely tradable shales of Common Stock issuable upon such
conversion. In the event the Company is not able to pay all amounts due and
payable with respect to all Series A Preferred Stock subject to Holder Demand
Prepayment Notices, the Company shall pay the Holders such amounts pro rata,
based on the total amounts payable to such Holder relative to the total amounts
payable to all Holders.
Signed on June 26, 1997
/s/ Harmel Rayat
--------------------------------
Harmel S. Rayat, President
Attest:
/s/ Kundan S. Rayat
- ------------------------------
Kundan S. Rayat, Secretary
EXHIBIT C
LETTER OF RESIGNATION AND BOARD MEETING MINUTES
<PAGE>
MINUTES OF DIRECTORS MEETING
OF
MEDCARE TECHNOLOGIES, INC.
_________________________________
A meeting of the Board of Directors of MedCare Technologies, Inc. was held
on the 17th day of September, 1997 at 10:00 a.m. at the offices located at Suite
216, 1628 West 1st Avenue, Vancouver, B.C., V6J 1G1.
Present and participating at the meeting, either in person or
telephonically, were Mr. Harmel S. Rayat, Mr. Jeff Aronin, Ms. Valerie Boeldt-
Umbright, Dr. Michael Blue, Ms. Diane Nunziato and Mr. Kundan S. Rayat, being
all of the Directors of the Company. Mr. Harmel S. Rayat, the Chairman, chaired
the meeting and Mr. Kundan S. Rayat, the Secretary, read the minutes of the
last regular meeting and they were approved.
The first item of discussion brought before the board was the resignation
of Ms. Diane Nunziato as a Director and the appointment of Dr. Jake Jacobo to
the Board of Directors. After motion duly made, seconded and unanimously
carried with all in favor, it was;
RESOLVED, that the resignation of Diane Nunziato as a Director be accepted
and Jake Jacobo be appointed as a Director of the Company.
There being no further business and upon motion duly made and seconded, the
meeting was adjourned.
/s/ Kundan S. Rayat
- ------------------------------
Mr. Kundan S. Rayat, Secretary
<PAGE>
September 17, 1997
Dear Harmel:
It is with deep regret that I must ask you to accept my resignation from the
Board of Directors for MedCare Technologies, Inc. I have thoroughly enjoyed my
time as part of this innovative and exciting company. However, I need to now
spend more time with family and so I must resign for personal, family reasons.
Please accept this letter of resignation as of today, September 17, 1997.
Sincerely,
/s/ Diane Nunziato
Diane Nunziato, MCISc(CD)
EXHIBIT D
BOARD MEETING MINUTES APPOINTING
NEW PRESIDENT AND ADDITIONAL DIRECTOR
<PAGE>
MINUTES OF DIRECTORS MEETING
OF
MEDCARE TECHNOLOGIES, INC.
- ------------------------------------------------------------
A meeting of the Board of Directors of MedCare Technologies, Inc. was held
on the 8th day of July, 1997 at 3:00 p.m. at the offices located at 400 Burrard
Street, Suite 1400, Vancouver, B.C.
Present and participating at the meeting, either in person or
telephonically, were Mr. Harmel S. Rayat, Ms. Valerie Boeldt-Umbright, Dr.
Michael Blue, Ms. Diane Nunziato and Mr. Kundan S. Rayat, being all of the
Directors of the Company. Mr. Harmel S. Rayat, the President, chaired the
meeting and Mr. Kundan S. Rayat, the Secretary, read the minutes of the last
regular meeting and they were approved.
The first item of discussion brought before the board was the appointment of
Mr. Jeff Aronin as a Director of the Company. After motion duly made, seconded
and unanimously carried with all in favor, it was;
RESOLVED, that Mr. Jeff Aronin be appointed as a Director of the Company.
The next item of business to be brought before the Board of Directors was
the election of new officers of the Company. After a thorough discussion, it
was agreed that Mr. Jeff Aronin be President and Chief Operating Officer in the
place of Mr. Harmel S. Rayat and that Mr. Harmel S. Rayat be Chairman and Chief
Executive Officer. Upon motion duly made, seconded and unanimously carried with
all in favor, it was;
RESOLVED, that Mr. Jeff Aronin be President and Chief Operating Officer and
Mr. Harmel S. Rayat be Chairman and Chief Executive Officer.
There being no further business and upon motion duly made and seconded, the
meeting was adjourned.
/s/ Kundan S. Rayat
- -------------------------
Mr. Kundan S. Rayat, Secretary
