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Exhibit 3.4
CERTIFICATE OF DESIGNATION
OFF
SERIES B CONVERTIBLE PREFERRED STOCK
OFF
MOBILE PET SYSTEMS, INC.
(Adopted pursuant to Section 151 of the Delaware General Corporation Law)
The undersigned hereby certifies that the Board of Directors
of MOBILE PET SYSTEMS, INC., a Delaware corporation (the "COMPANY"), duly
adopted the following resolutions effective as of September 21, 2000:
RESOLVED, a series of preferred stock of the Company is
created and the relative rights, preferences, and limitations of the shares of
such Series are as follows:
I. DESIGNATION AND AMOUNT. The sharers of such series of Preferred Stock
shall be designated as "Series B Convertible Preferred Stock" (the "SERIES B
PREFERRED STOCK") and the number of shares constituting the Series B Preferred
Stock shall be Thirty (30). The Series B Preferred Stock shall have a
liquidation value (the "LIQUIDATION VALUE") of $50,000 per share.
II. DIVIDENDS.
A. The holders of shares of Series B Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
PARI PASSU with the holders of shares of the Company's Series A Preferred Stock,
and in preference to, any declaration or payment of any dividend on the Common
Stock of this Company, at a per share rate equal to eight percent (8%) per annum
of the amount of the Liquidation Value of the Series B Preferred Stock, which is
payable upon conversion (based upon a 365 calendar day year) as set forth below.
Dividends shall begin to accrue as of the Issuance Date (as defined below). Any
dividends payable pursuant to the provisions of this paragraph shall, at the
Company's option, be payable in cash, or unrestricted shares of Common Stock of
the Company within five Business Days (as defined below) of when due. The number
of shares of Common Stock to be issued by the Company in lieu of a cash payment
for dividends due as set forth herein shall be equal to the number of shares of
Common Stock resulting from dividing the dollar amount of dividends owed by the
Conversion Price (as defined below) on such date as the dividends are payable
(if such date is not a Trading Day, then the next Trading Day (as defined below)
immediately thereafter).
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B. Such dividends shall accrue on each share of Series B
Preferred Stock from the Issuance Date, and shall accrue from day to day whether
or not earned or declared. Such dividends shall be cumulative so that if such
dividends in respect of any previous or current annual dividend period, at the
annual rate specified above, shall not have been paid or declared and a sum
sufficient for the payment thereof set apart, for all Series B Preferred Stock
at the time outstanding, the deficiency shall first be fully paid before any
dividend or other distribution shall be paid on or declared or set apart for the
Series B Preferred Stock, Common Stock or other security of the Company
subordinate in liquidation to the Series B Preferred Stock. Dividends on the
Series B Preferred Stock shall be non-participating and the holders of the
Series B Preferred Stock shall not be entitled to participate in any other
dividends beyond the cumulative dividends specified herein.
III. LIQUIDATION, DISSOLUTION OR WINDING UP.
A. In the event of any liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary and in preference to any
distribution of any assets of the Company to the holders of Common Stock,
holders of each share of Series B Preferred Stock shall be entitled to receive
out of the assets available for distribution to shareholders, and PARI PASSU
with distributions made to the holders of the Company's Series A Preferred Stock
the Liquidation Value per share of Series B Preferred Stock plus eight percent
(8%) per annum thereon from the Issuance Date (as defined below) to the Trading
Day (as defined below) immediately prior to such liquidation, dissolution or
winding up of the Company (the "LIQUIDATION AMOUNT").
B. Upon the completion of any required distribution to the
holders of the Series B Stock and Series B Stock, if the assets of the Company
available for distribution to shareholders shall be insufficient to pay the
holders of shares of Series B Preferred Stock the full Liquidation Amount to
which they shall be entitled, then any such distribution of assets of the
Company shall be distributed ratably to the holders of shares of Series B
Preferred Stock.
C. After the payment of the Liquidation Amount shall have been
made in full to the holders of the Series B Preferred Stock or funds necessary
for such payment shall have been set aside by the Company in trust for the
account of holders of the Series B Preferred Stock so as to be available for
such payments, the holders of the Series B Preferred Stock shall be entitled to
no further participation in the distribution of the assets of the Company, and
the remaining assets of the Company legally available for distribution to
shareholders shall be distributed among the holders of Common Stock and any
other classes or series of Preferred Stock of the Company in accordance with
their respective terms.
IV. VOTING. Holders of Series B Preferred Stock shall have no voting rights
except as expressly required by law or as expressly provided herein.
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V. CONVERSION OF SERIES B PREFERRED STOCK. The holders of Series B
Preferred Stock shall have the right, at such holder's option, to convert the
Series B Preferred Stock into shares of Common Stock, on the following terms and
conditions:
A. Subject to the provisions of Section XI hereof, at any time or
times after the Issuance Date any holder of the Series B Preferred Stock shall
be entitled to convert any whole number of such holder's shares of Series B
Preferred Stock into that number of fully paid and nonassessable shares of
Common Stock, which is determined (per share of Series B Preferred Stock) by
dividing (x) $50,000, by (y) the Conversion Price (as defined below) (the
"CONVERSION RATE").
B. For purposes of this Certificate of Designation, the following
terms shall have the following meanings:
A "BUSINESS DAY" shall be any day other than a Saturday,
Sunday, national holiday or a day on which the New York Stock Exchange is
closed.
The "CLOSING BID PRICE" shall mean, for any security as of any
date, the last closing bid price for such security on the Nasdaq Stock Market as
reported by Bloomberg L.P. ("BLOOMBERG"), or, if the Nasdaq Stock Market is not
the principal trading market for such security, the last closing bid price of
such security on the principal securities exchange or trading market where such
security is listed or traded as reported by Bloomberg, or if the foregoing do
not apply, the last closing bid price of such security in the over-the-counter
market on the NASD OTC Electronic Bulletin Board for such security as reported
by Bloomberg, or, the last closing trade price of such security as reported by
Bloomberg, or, if no last closing bid or trade price is reported for such
security by Bloomberg, the closing bid price shall be determined by reference to
the closing bid price as reported on the Principal Market. If the Closing Bid
Price cannot be calculated for such security on such date on any of the
foregoing bases, the Closing Bid Price of such security on such date shall be
the fair market value as mutually agreed by the Company and the holders of two
thirds of the outstanding shares of Series B Preferred Stock.
The "CONVERSION PRICE" shall mean, as of any Conversion Date
(as defined below) the lesser of (i) $3.00 (the "Maximum Conversion Price") or
(ii) 75% of the average of the Closing Bid Prices of the Common Stock during the
Five (5) Trading Days (the "LOOKBACK PERIOD") immediately prior to the
Conversion Date.
"EFFECTIVE DATE" shall mean the date on which the Securities
and Exchange Commission (the "SEC") first declares effective a Registration
Statement registering the resale of 200% of the greater of (i) the number of
shares of Common Stock issuable upon conversion of all of the Series B Preferred
Stock outstanding on the Trading Day immediately preceding the day such
Registration Statement is filed (ii) the number of shares of Common Stock
issuable upon conversion of all of the Series B Preferred Stock outstanding on
the Trading Day immediately preceding the day any amendment to such Registration
Statement is filed.
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The "ISSUANCE DATE" shall mean, with respect to each share of
Series B Preferred Stock, the date of issuance of the applicable share of Series
B Preferred Stock.
A "TRADING DAY" shall mean a day on which the Principal Market
is open.
The "PRINCIPAL MARKET" shall mean the Nasdaq National Market,
the Nasdaq Small Cap Stock Market, the American Stock Exchange, the NASD OTC
Electronic Bulletin Board operated by the National Association of Securities
Dealers, Inc., or the New York Stock Exchange, whichever is at the time the
principal trading exchange or market for the Common Stock.
Holders of Series B Preferred Stock may exercise their right
to convert the Series B Preferred Stock by telecopying an executed and completed
notice of conversion in the agreed upon form (the "NOTICE OF CONVERSION") to the
Company and delivering to Company the original Notice of Conversion and the
certificate representing the Series B Preferred Stock being converted by
reputable overnight courier within three (3) business thereafter. Each Business
Day (between the hours of 6:30 a.m. and 5:00 p.m. Pacific Time) on which a
Notice of Conversion is telecopied to and received by the Company shall be
deemed a "CONVERSION DATE." The Company will deliver the certificates
representing shares of Common Stock issuable upon conversion of any share of
Series B Preferred Stock (together with the certificates representing the share
or shares of Series B Preferred Stock not so converted) to the holder thereof
via reputable overnight courier, by electronic transfer or otherwise within
three Business Days after the Conversion Date, provided the Company has received
the original Notice of Conversion and Series B Preferred Stock certificate being
so converted on or before the close of business of the third Business Day after
the Conversion Date. In addition to any other remedies which may be available to
the holders of shares of Series B Preferred Stock, in the event that the Company
fails to deliver such shares of Common Stock within such three Business Day
period, the holder will be entitled to revoke the relevant Notice of Conversion
by delivering a notice (by similar method) to such effect to the Company
whereupon the Company and such holder shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion. The Notice
of Conversion and Series B Preferred Stock certificates representing the portion
of the Series B Preferred Stock converted shall be delivered as follows:
To the Company:
Mobile PET Systems, Inc.
2240 Shelter Island Drive
San Diego, CA 92106
ATTN: CEO
Telephone No.: (619) 226-6738
Telecopier No.: (619) 226-6738
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with a copy to:
John Mann, Esq.
1330 POST OAK BOULEVARD o SUITE 2800
HOUSTON, TEXAS 77056-3060
Telephone: (713) 622-7114
Facsimile: (713) 622-7185
The Company understands that a delay in the issuance of the
shares of Common Stock beyond the Delivery Date could result in economic loss to
the holder. As compensation to the holder for such loss, the Company agrees to
pay late payments to the holder in the event that Company's failure to issue and
deliver the shares on the Delivery Date in accordance with the following
schedule (where "No. Business Days Late" is defined as the number of business
days beyond three (3) business days after the Delivery Date):
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<TABLE>
<CAPTION>
Late Payment For Each $10,000
Of Preferred Stock Liquidation
No. Business Dates Late Amount Being Converted
----------------------- ------------------------------
<S> <C>
1 $100
2 $200
3 $300
4 $400
5 $500
>5 $500 +$200 for each
Business Day Late
Beyond 5 days from
The Delivery Date
</TABLE>
The Company shall pay any payments incurred under this Section
in immediately available funds upon demand. Nothing herein shall limit the
holder's right to pursue actual damages or to cause the Company to redeem the
Preferred Shares as provided below for the Company's actions or inactions
resulting in the transfer agent's failure to issue and deliver the Common Stock
to the holder. Furthermore, in addition to any other remedies which may be
available to the holder, in the event that the Company fails to deliver such
shares of Common Stock within five (5) business days after the Delivery Date,
the Holder will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such effect to the Company whereupon the Company and the
holder shall each be restored to their respective positions immediately prior to
delivery of such Notice of Conversion. In the event the Company's actions or
inactions result in the transfer agent's failure to issue and deliver the Common
Stock to the holder within ten (10) days after the Delivery Date, holder may, at
its option, require the Company (without limiting its other remedies hereunder)
to immediately redeem all outstanding Preferred Stock in accordance with Article
XI hereof.
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If, by the relevant Delivery Date, the Company fails for any
reason to deliver the Shares to be issued upon conversion of the Preferred Stock
and after such Delivery Date, the holder of the Preferred Stock being converted
(a "Converting Holder") purchases, in an open market transaction or otherwise,
shares of Common Stock (the "Covering Shares") in order to make delivery in
satisfaction of a sale of Common Stock by the Converting Holder made after a
Conversion Date (the "Sold Shares"), which delivery such Converting Holder
anticipated to make using the Shares to be issued upon such conversion (a
"Buy-In"), the Company shall pay to the Converting Holder, in addition to all
other amounts contemplated in other provisions of this Certificate of
Designation and other agreements related hereto, and not in lieu thereof, the
Buy-In Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is
the amount equal to the excess, if any, of (x) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by the
Converting Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Holder in immediately available funds
immediately upon demand by the Converting Holder. By way of illustration and not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Converting Holder will be $1,000. The remedies set forth in this
Paragraph 5.C. shall be cumulative.
D. If the Common Stock issuable upon the conversion of the Series
B Preferred Stock shall be changed into the same or different number of shares
of any class or classes of stock, whether by capital reorganization,
reclassification or otherwise, then and in each such event, the holders of
Series B Preferred Stock shall have the right thereafter to convert such shares
into the kind and amount of shares of stock and other securities and property
receivable upon such capital reorganization, reclassification or other change
which such holders would have received had their shares of Series B Preferred
Stock been converted immediately prior to such capital reorganization,
reclassification or other change.
E. If at any time or from time to time there shall be a capital
reorganization of the Common Stock (other than a subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this Section)
or a merger or consolidation of the Company with or into another corporation, or
the sale of all or substantially all of the Company's properties and assets to
any other person (any of which events is herein referred to as a
"REORGANIZATION"), then as a part of such Reorganization, provision shall be
made so that the holders of the Series B Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series B Preferred Stock, the number
of shares of stock or other securities or property of the Company, or of the
successor corporation resulting from such Reorganization, to which such holder
would have been entitled if such holder had converted its shares of Series B
Preferred Stock immediately prior to such Reorganization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section with respect to the rights of the holders of the Series B Preferred
Stock after the Reorganization, to the end that the provisions of this Section
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(including adjustment of the number of shares issuable upon conversion of the
Series B Preferred Stock) shall be applicable after that event in as nearly
equivalent a manner as may be practicable.
F. Upon the occurrence of each adjustment or readjustment of the
Conversion Price of Series B Preferred Stock as provided herein, the Company, at
its expense, shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of such
Series B Preferred Stock a certificate executed by the president and chief
financial officer (or in the absence of a person designated as the chief
financial officer, by the treasurer) setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment are based. The Company shall, upon written request at any time of
any holder of Series B Preferred Stock, furnish or cause to be furnished to such
holder a certificate setting forth (A) the Conversion Price at the time in
effect, and (B) the number or shares of Common Stock and the amount, if any, of
other property, which at the time would be received upon the conversion of a
share of Series B Preferred Stock.
G. Upon receipt by the Company of evidence of the loss, theft,
destruction or mutilation of any Series B Preferred Stock certificate(s), and
(in the case of loss, theft or destruction) of indemnity or security reasonably
satisfactory to the Company, and upon the cancellation of the Series B Preferred
Stock certificate(s), if mutilated, the Company shall execute and deliver new
certificates for Series B Preferred Stock of like tenure and date. However, the
Company shall not be obligated to reissue such lost or stolen certificates for
shares of Series B Preferred Stock if the holder contemporaneously requests the
Company to convert such shares of Series B Preferred Stock into Common Stock.
H. The Company shall not issue any fraction of a share of Common
Stock upon any conversion. The Company shall round such fraction of a share of
Common Stock up to the nearest whole share.
I. In the event some but not all of the shares of Series B
Preferred Stock represented by a certificate or certificates surrendered by a
holder are converted, the Company shall execute and deliver to or on the order
of the holder, at the expense of the Company, a new certificate representing the
number of shares of Series B Preferred Stock which were not converted.
J. Each share of Series B Preferred Stock outstanding on
September 30, 2003 shall automatically be converted into Common Stock on such
date at the Conversion Price and such date shall be deemed the Conversion Date
with respect to such shares.
K. The Company shall pay any and all original issue and/or
transfer taxes which may be imposed upon it with respect to the issuance and
delivery of Common Stock upon conversion of the Series B Preferred Stock.
L. Subject to the provisions of this Section, if the Company at
any time shall issue any shares of Common Stock prior to the conversion of the
entire Liquidation Value
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of the Series B Preferred Stock and dividends on such Series B Preferred Stock,
otherwise than: (i) pursuant to options, warrants, or other obligations to issue
shares outstanding on the date hereof as described in writing to the holders
prior to the Issuance Date or in SEC filings made by the Company prior to the
Issuance Date, or (ii) all shares reserved for issuance pursuant to the
Company's existing stock option, incentive, or other similar plan, which plan
and which grant is approved by the Board of Directors of the Company ((i) and
(ii) collectively referred to as the "EXISTING OBLIGATIONS"), for a
consideration less than the fixed Conversion Price set forth in (i) of the
definition of Conversion Price in Section V.B. above (as adjusted from the date
hereof (the "FIXED CONVERSION PRICE"), then, and thereafter successively upon
each such issue, the fixed Conversion Price shall, from such date forward, equal
the resulting quotient of the following formula: (y) the number of shares of
Common Stock outstanding immediately prior to such issue shall be multiplied by
the Fixed Conversion Price in effect at the time of such issue and the product
shall be added to the aggregate consideration, if any received by the Company
upon such issue of additional shares of Common Stock; and (z) the sum so
obtained shall be divided by the number of shares of Common Stock outstanding
immediately after such issue. Except for the Existing Obligations and options
that may be issued under any employee incentive stock option and/or any
qualified stock option plan adopted by the Company, for purposes of this
adjustment, the issuance of any security of the Company carrying the right to
convert such security into shares of Common Stock or of any warrant, right, or
option to purchase Common Stock shall result in an adjustment to the Fixed
Conversion Price upon the issuance of shares of Common Stock upon exercise of
such conversion or purchase rights.
M. In the event a holder shall elect to convert any share or
shares of Series B Preferred Stock as provided herein, the Company cannot refuse
conversion based on any claim that such holder or anyone associated or
affiliated with such holder has been engaged in any violation of law, unless an
injunction from a court, restraining and/or enjoining conversion of all or part
of said shares of Series B Preferred Stock shall have been issued and the
Company posts a surety bond for the benefit of such holder in the amount of 143%
of the Liquidation Value of the Series B Preferred Stock and dividends sought to
be converted, which is subject to the injunction, which bond shall remain in
effect until the completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to such holder in the event it obtains a
favorable judgment.
VI. NO REISSUANCE OF SERIES B PREFERRED STOCK. No share or shares of Series
B Preferred Stock acquired by the Company by reason of purchase, conversion or
otherwise shall be reissued, and all such shares shall be canceled, retired and
eliminated from the shares which the Company shall be authorized to issue. The
Company may from time to time take such appropriate corporate action as may be
necessary to reduce the authorized number of shares of the Series B Preferred
Stock accordingly.
VII. RESERVATION OF SHARES. The Company shall, so long as any share or
shares of the Series B Preferred Stock are outstanding reserve and keep
available out of its authorized and unissued Common Stock, solely for the
purpose of effecting the conversion of the Series B Preferred Stock, such number
of shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the Series B Preferred Stock then
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outstanding; provided that the number of shares of Common Stock so reserved
shall at no time be less than 200% of the number of shares of Common Stock for
which the Series B Preferred Stock are at any time convertible and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to maintain such number of shares of Common Stock, the Company shall
immediately take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
VIII. RESTRICTIONS AND LIMITATIONS.
A. Except as expressly provided herein or as required by law, so
long as any shares of Series B Preferred Stock remain outstanding, the Company
shall not, without the approval by vote or written consent by the holders of at
least two thirds of the then outstanding shares of Series B Preferred Stock,
voting as a separate class take any action that would adversely affect the
rights, preferences or privileges of the holders of Series B Preferred Stock.
B. Without limiting the generality of the preceding paragraph,
the Company shall not so long as any shares of Series B Preferred Stock remain
outstanding amend its Articles of Incorporation without the approval by the
holders of all of the then outstanding shares of Series B Preferred Stock if
such amendment would:
1. create any other class or series of capital stock
entitled to seniority as to the payment of dividends in relation to the holders
of Series B Preferred Stock;
2. reduce the amount payable to the holders of Series B
Preferred Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Company, or change the relative seniority of the liquidation
preferences of the holders of Series B Preferred Stock to the rights upon
liquidation of the holders of other capital stock of the Company,
3. cancel or modify the conversion rights of the holders
of Series B Preferred Stock provided for in Section V herein; or
4. Cancel or modify the rights of the holders of the
Series B Preferred Stock provided for in this Section.
IX. NO DILUTION OR IMPAIRMENT.
A. The Company shall not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Certificate of Designation set forth herein, but shall at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
holders of the Series B Preferred Stock against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (a) shall not
establish a par value of any shares of stock receivable on the conversion of the
Series B Preferred Stock above
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the amount payable therefor on such conversion, (b) shall take all such action
as may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock on the conversion of
all Series B Preferred Stock from time to time outstanding, and (c) shall not
consolidate with or merge into any other person or entity, or permit any such
person or entity to consolidate with or merge into the Company (if the Company
is not the surviving person), unless such other person or entity shall expressly
assume in writing and will be bound by all of the terms of the Series B
Preferred Stock set forth herein.
B. If the Company at any time after September 1, 2000 shall issue
any shares of Common Stock prior to the conversion of all shares of the Series B
Preferred and the dividends thereon, including without limitation, shares of
Common Stock issued (i) pursuant to options (including those options delivered
pursuant to any employee, officer or director stock option plan), warrants, or
other contractual obligations, (ii) upon any private placement or secondary
offering (iii) as a result of a stock dividend or split, then upon each such
issuance of Common Stock the Maximum Conversion Price shall be reduced by:
(y)(I) the number of shares of Common Stock outstanding immediately prior to
such issuance, multiplied by the Maximum Conversion Price in effect at the time
of such issuance, plus (II) the aggregate sum, if any, received by the Company
in consideration for such issuance; divided by (z) the number of shares of
Common Stock outstanding immediately after such issuance.
X. NOTICES OF RECORD DATE. In the event of:
A. any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
B. any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company, any
merger of the Company, or any transfer of all or substantially all of the assets
of the Company to any other corporation, or any other entity or person, or
C. any voluntary or involuntary dissolution, liquidation or
winding up of the Company, then and in each such event the Company shall mail or
cause to be mailed to each holder of Series B Preferred Stock a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and a description of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, merger, dissolution, liquidation
or winding up is expected to become effective and (iii) the time, if any, that
is to be fixed, as to when the holders of record of Common Stock (or other
securities) shall be entitled to exchange their shares of Common Stock (or other
securities) for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, transfer,
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merger, dissolution, liquidation or winding up. Such notice shall be mailed at
least ten Business Days prior to the date specified in such notice on which such
action is to be taken.
XI. REDEMPTION.
A. For so long as the Company has not received a Notice of
Conversion for such shares, the Company may, at its option, repay, in whole or
in part, the Series B Preferred Stock shares at the Redemption Price (as defined
below). The Series B Preferred Stock is redeemable as a series, in whole or in
part, by the Company by providing written notice (the "REDEMPTION NOTICE") to
the holder of the Series B Preferred Stock via facsimile at his or her address
as the same shall appear on the books of the Company (the Business Day between
the hours of 6:30 a.m. and 4:00 p.m. Pacific Time the Redemption Notice is
received by the holders of the Series B Preferred Stock via facsimile is defined
to be the "REDEMPTION NOTICE DATE"). Within ten Trading Days after the
Redemption Notice Date the Company shall make payment of the Redemption Price
(as defined below) in immediately available funds to the holder for the shares
of Series B Preferred Stock which are the subject of the Redemption Notice (such
date of payment referred to as the "REDEMPTION DATE"). Partial redemptions shall
be in an aggregate principal amount of at least $100,000. If fewer than all of
the outstanding shares of Series B Preferred Stock are to be redeemed, the
Company will select those to be redeemed pro-rata amongst the then holders of
the Series B Preferred Stock based on the number of shares of Series B Preferred
Stock then outstanding.
B. In the event the Company serves a Redemption Notice, the
Redemption Price shall be equal to the greater of (i) 133 1/3% of the
Liquidation Value of the shares of Series B Preferred Stock which are subject to
such Redemption Notice, plus all accrued but unpaid dividends on such shares, or
(ii) the "Economic Benefit" of the shares of Series B Preferred Stock which are
the subject of such Redemption Notice. "ECONOMIC BENEFIT" shall mean the dollar
value derived if the shares of Series B Preferred Stock which were the subject
of the Redemption Notice were converted on the Redemption Notice Date and sold
on the Redemption Notice Date at the Closing Bid Price of the Common Stock on
the Redemption Notice Date. Notwithstanding anything to the contrary in the
foregoing, the Redemption Price shall be equal to 100% of the Liquidation Value
if the Company serves a Redemption Notice (i) on a date when the closing bid
price of the Common Stock is greater than Twelve Dollars ($12) per share and the
closing bid price for the immediately preceding five consecutive trading days
was greater than twelve dollars ($12) per share, or (ii) on or after March 1,
2002. If the Company delivers a Redemption Notice to redeem the Series B
Preferred Stock at the Liquidation Value, pursuant to the foregoing sentence,
the holders of the Series B Preferred Stock will retain their conversion rights
with respect to a maximum of one hundred percent (100%) of the number of shares
subject to the redemption (rather than the 50% percent retention referred to in
paragraph XI.C. below). If the holders of the Series B Preferred Stock elect to
so convert the Series B Preferred Stock after the receipt of the Redemption
Notice, the Company must receive notice of such election within sixty (60) days
from the time the Redemption Notice was received by the holders of the Series
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B Preferred Stock. Except for the sixty-(60) day time period set forth in the
preceding sentence, the holders shall exercise such conversion rights pursuant
to the procedures set forth in Paragraph XI.C. below.
C. The Notice of Redemption shall set forth (i) the Redemption
Date and the place fixed for redemption, (ii) the Redemption Price, (iii) a
statement that dividends on the shares of Series B Preferred Stock to be
redeemed will cease to accrue on such Redemption Date, (iv) a statement of or
reference to the conversion right set forth herein, and (v) confirmation that
the Company has the full Redemption Price reserved as set forth in F. below. If
fewer than all the shares of the Series B Preferred Stock owned by such holders
are then to be redeemed, the notice shall specify the number of shares thereof
that are to be redeemed and, if practicable, the numbers of the certificates
representing such shares. Within ten (10) Trading Days of the Redemption Notice
Date, the Company. shall wire transfer the appropriate amount of funds to the
holders of the Series B Preferred Stock. If the Company fails to comply with the
redemption provisions set forth herein by the tenth Trading Day after the
Redemption Notice Date (or in the case of a public offering as contemplated in F
below, by the tenth Trading Day after the Redemption Notice Date) relating to
the Redemption Notice, the redemption will be declared null and void and the
Company shall not be permitted to serve another Redemption Notice. For the first
five Trading Days after the Redemption Notice Date, the holders of the Series B
Preferred Stock will retain their conversion rights with respect to a maximum of
fifty percent (50%) of the number of shares subject to the redemption. If the
holders of the Series B Preferred Stock elect to so convert the Series B
Preferred Stock after the receipt of the Redemption Notice, the Company must
receive notice of such election within five (5) trading days from the time the
Redemption Notice was received by the holders of the Series B Preferred Stock.
In the event the Company has not complied with the redemption provisions set
forth herein the Company must comply with the delivery requirements of any then
outstanding Conversion Notice as set forth herein. The holders shall send the
shares of Series B Preferred Stock being redeemed or converted to the Company
within three (3) Business Days after they have received good funds for the
Redemption Price of the redeemed shares.
D. Subject to the receipt by the holders of the Series B
Preferred Stock being redeemed of the wire transfer of the Redemption Price as
described above, each share of Series B Preferred Stock to be redeemed shall be
automatically canceled and converted into a right to receive the Redemption
Price, and all rights of the Series B Preferred Stock, including the right to
conversion shall cease without further action.
E. The Redemption Price shall be adjusted proportionally upon any
adjustment of the Conversion Price as provided herein and in the event of any
stock dividend, stock split, combination of shares or similar event.
F. The Company shall not be entitled to send any Redemption
Notice and begin the redemption procedure hereunder unless it has:
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(a) 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, specifically allotted for such redemption;
(b) immediately available credit facilities, in the full
amount of the Redemption Price with a bank or similar financial institution
specifically allotted for such redemption; or
(c) a combination of the items set forth in (i) and (ii)
above, aggregating the full amount of the Redemption Price.
XII. 4.99% LIMITATION. Notwithstanding the provisions hereof, in no event
shall each holder be entitled to convert any shares of the Series B Preferred
Stock to the extent that, after such conversion, the sum of (1) the number of
shares of Common Stock beneficially owned by such holder and its affiliates
(other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted shares of the Series B Preferred
Stock), and (2) the number of shares of Common Stock issuable upon the
conversion of the shares of Series B Preferred Stock with respect to which the
determination of this proviso is being made, would result in beneficial
ownership by such holder and its affiliates of more than 4.99% of the
outstanding shares of Common Stock. For purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"). Any issuance by the Company to a holder in excess of the limit
contained in this Paragraph shall be null and void, AB INITIO, and upon notice
of such invalid issuance, the Company shall correct its books and cause its
transfer agent's books to be corrected forthwith to reflect that the holder's
ownership of Common Stock is within the limit set forth herein. Holder shall
immediately deliver any certificates for invalidly issued Common Stock to the
Company's transfer agent. The Company further agrees to (i) immediately reissue
certificates for Common Stock to the extent that a portion of the Common Stock
represented by said certificates have been validly issued and (ii) immediately
reissue all or a portion of those shares which were deemed invalidly issued (at
a price set forth in the original conversion notices applicable to such shares)
upon notice from the holder that the reissuance of such shares would not cause
such holder to have a beneficial ownership interest in excess of 4.99%. The
4.99% limitation shall not apply to the automatic conversion upon the Maturity
Date as contained herein. The Company hereby indemnifies and holds each holder
free and harmless from and against any and all liabilities, losses, costs and
expenses, including, without limitation, attorneys' fees and costs (collectively
"Liabilities") arising from or relating to claims made by any third parties with
respect to any and all purported violations by each holder under Sections 13(d)
and/or 16 resulting from a conversion(s) of the Series B Preferred Stock, unless
such claim arises from such holder's default of its obligations hereunder, or
representations or warranties contained herein. The foregoing indemnity shall
exclude Liabilities incurred by any holder in connection with any violation of
Sections 13(d) and/or 16 to the extent arising from or are related to such
holder's beneficial ownership of shares of Common Stock (i) which are not
acquired by conversion of Series B
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<PAGE>
Preferred Stock, or (ii) deemed beneficially owned through the ownership of the
unconverted shares of the Series B Preferred Stock.
XIII. "CAP REGULATIONS". The Company shall take all steps reasonably
necessary to be in a position to issue shares of Common Stock on conversion of
the Series B Preferred Stock without violating the "Cap Regulations" promulgated
by NASD to the extent applicable to the Company. If despite taking such steps,
the Company is limited in the number of shares of Common Stock it may issue by
the "Cap Regulations," to the extent that the Company cannot issue such shares
of Common Stock, due upon a Notice of Conversion, without violating the Cap
Regulations, the Company shall immediately notify Buyer the number of shares of
the Series B Preferred Stock which are not convertible as a result of said Cap
Regulations (the "Unconverted Preferred Stock") and within five (5) business
days of the applicable Notice of Conversion redeem the Unconverted Preferred
Stock for an amount in cash (the "Redemption Amount") equal to the "Economic
Benefit" of such Unconverted Preferred Stock. "ECONOMIC BENEFIT" for purposes of
this Article XIII shall mean the dollar value derived if such Unconverted
Preferred Stock were converted into Common Stock as set forth in the Notice of
Conversion and the Common Stock was sold on the date of the Notice of Conversion
at the Closing Bid Price of the Common Stock on the date of the Notice of
Conversion.
IN WITNESS WHEREOF, I have subscribed my name this 21st day of
September, 2000.
MOBILE PET SYSTEMS, INC.
By: /s/ Thomas G. Brown
-----------------------------------
Name: Thomas G. Brown
----------------------------
Title: Secretary
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