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SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
[ ] Preliminary Information Statement
[X] Definitive Information Statement
MEHL/Biophile International Corporation
(Name of Registrant as Specified in Its Charter)
MEHL/Biophile International Corporation
(Name of Person(s) Filing Information Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-b(i)(1), or 14(c)-5(g).
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies.
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fees offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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MEHL/BIOPHILE INTERNATIONAL CORPORATION
Notice of Action
by Written Consent of Shareholders
October 28, 1996
Dear Shareholder,
Enclosed is an Information Statement regarding certain action
taken by written consent of the shareholders of MEHL/Biophile International
Corporation (the "Company") in lieu of a shareholder's meeting to approve the
adoption of the Company's Restated Certificate of Incorporation (the "Restated
Certificate"). The purpose of adopting the Restated Certificate is to (i)
fulfill an existing agreement of the Company to provide the holders of the
Company's 5% Cumulative Convertible Preferred Stock, Series C ("Series C
Preferred Stock") with an aggregate liquidation preference equal to $10,000,000,
the amount of consideration paid upon issuance of the Series C Preferred Stock,
and (ii) remove certain restrictions concerning the issuance of Preferred Stock
from the Company's current Certificate of Incorporation.
On August 30, 1996, the Company's Board of Directors approved
the Restated Certificate and on October 21, 1996 the holders of approximately
54.5% of the Company's Common Stock approved the Restated Certificate.
This Information Statement is being provided under the
Delaware General Corporation Law, which provides that actions permitted to be
taken by written consent of the shareholders subject to prompt notice to the
shareholders not executing this consent of taking of corporate action without a
meeting. The rules under the Securities Act of 1934 provide that no action taken
by written consent of the shareholders may be effective unless the attached
Information Statement is sent out to the Company's shareholders at least 20 days
in advance of the effective date of the Restated Certificate. The effective date
of the Restated Certificate will be November 20, 1996.
By Order of the Board,
AnnMarie Mehl
Secretary
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MEHL/BIOPHILE INTERNATIONAL CORPORATION
4020 Newberry Road
Gainesville, Florida 32607
Information Statement Concerning
Action Taken by Written Consent of Shareholders
This Information Statement contains information regarding
certain action taken by written consent of the shareholders of MEHL/Biophile
International Corporation (the "Company") in lieu of a shareholder's meeting to
approve the adoption of the Company's Restated Certificate of Incorporation (the
"Restated Certificate"). The purpose of adopting the Restated Certificate is to
(i) fulfill an existing agreement of the Company to provide the holders of the
Company's 5% Cumulative Convertible Preferred Stock, Series C ("Series C
Preferred Stock") with an aggregate liquidation preference equal to $10,000,000
of the Series C Preferred Stock, the amount of consideration paid upon issuance,
and (ii) remove certain restrictions concerning the issuance of Preferred Stock
from the Company's current Certificate of Incorporation.
This Information Statement is provided pursuant to Schedule
14C of the Securities Exchange Act of 1934, as amended (the "Exchange Act") to
the shareholders of the Company. On August 30, 1996, the Board of Directors of
the Company approved and authorized the Restated Certificate. On October 21,
1996 the holders of 22,669,000 shares representing approximately 54.5% of the
Company's outstanding Common Stock executed a written consent to approve the
Restated Certificate.
The Board of Directors has fixed the close of business on
October 21, 1996 as the record date for the taking of written consent by the
shareholders. As of the record date, there were outstanding 41,581,168 shares of
Common Stock, having one vote per share.
The purpose of this Information Statement is to provide the
shareholders of the Company with information regarding the Restated Certificate.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
The date of this Information Statement is October 28, 1996.
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Background
On May 15, 1996, the Company completed a private placement
offering exempt from registration under the Securities Act of 1933 of 10,000
shares of 5% Cumulative Convertible Preferred Stock, Series C, par value $10 per
share (the "Series C Preferred Stock"), for an aggregate purchase price of
$10,000,000. Holders of the Series C Preferred Stock are entitled to receive
dividends payable at the annual rate of 5% per annum.
The Series C Preferred Stock is convertible into Common Stock
of the Company at the lesser of (i) 80% of the average market price on the five
trading days prior to conversion and (ii) $7.50, but in no event shall be below
$3.00. The Company has filed a registration statement covering the public sale
of the shares of Common Stock receivable upon conversion of the Series C
Preferred Stock which was declared effective by the Securities and Exchange
Commission on July 12, 1996. No holder is entitled to convert Series C Preferred
Stock into Common Stock, if after such conversion, the number of shares of
Common Stock beneficially owned by such holder would exceed 4.9% of the issued
and outstanding Common Stock of the Company.
The Company and GFL Performance Fund, Ltd., the investor in
the offering of the Series C Preferred Stock (the "Investor") agreed, as an
essential term of the sale and issuance of the Series C Preferred Stock, that
the Series C Preferred Stock would be entitled to a preference in a liquidation
of the Company equal to the value of the price per share such investor paid.
This is an extremely common, if not virtually universal feature of preferred
stock, which enables an investor of preferred stock to recover its investment in
a liquidation of the Company ahead of the holders of Common Stock and other
securities which rank junior to it.
At the time of the issuance of the Series C Preferred Stock,
the Company was not able to provide a liquidation preference equal to the per
share purchase price due to a provision in the Company's Certificate of
Incorporation that all shares of any series of Preferred Stock have a
liquidation preference of $10 per share. As a condition to the investment, the
Company agreed with the Investor that it would amend the Company's Certificate
of Incorporation to provide for an appropriate and agreed upon liquidation
preference for the Series C Preferred Stock equal to the initial purchase price
of $10,000 per share.
In the process of making this change to the Series C Preferred
Stock, the Board of Directors determined that it would be advisable to make
certain amendments and simplification to the Company's Certificate of
Incorporation which contains numerous
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amendments. Specifically, since there are no longer any shares outstanding of
the three classes of preferred stock previously issued by the Company, the Board
has retired the 12% Cumulative Convertible Preferred Stock, Series A, the 12%
Cumulative Convertible Preferred Stock, Series B and the 12% Cumulative
Convertible Preferred Stock, 1985 Series. The Board has also determined that it
would be advisable to give the Board the authority and flexibility to issue
future series of Preferred Stock having such terms and conditions as the Board
deems appropriate and not subject to the limitations contained in the current
certificate.
On August 30, 1996, the Board of Directors approved the
Restated and Amended Certificate of Incorporation (the "Restated Certificate")
and on October 21, 1996 shareholders owning in the aggregate approximately 54.5%
of the issued and outstanding Common Stock entitled to vote thereon executed a
written consent approving the Restated Certificate. The Restated Certificate
will be effective as of November 20, 1996.
The Restated Certificate
The full text of the Restated Certificate, including the
amended and restated Certificate of Designation establishing the terms and
conditions of the Series C Preferred Stock is attached hereto as Exhibit A and
incorporated by reference herein. The following is a summary of the principal
amendments made by the Restated Certificate.
1. Elimination of Specific Terms of Preferred Stock.
The Company's Certificate of Incorporation currently provides
that the Board of Directors is authorized to issue up to 200,000 of Preferred
Stock in series having such terms and preferences as the Board may fix from time
to time. The terms of the Certificate further provide the following:
a. All series of Preferred Stock shall be of equal rank unless
otherwise provided at the time any new series of Preferred Stock is created.
b. Each series shall have a liquidation preference of $10 per
share plus any accrued but unpaid dividends in the event of a liquidation,
dissolution or winding up of the Company.
c. Any series of preferred stock may be redeemed in whole or
in part at the price of $10 per share plus accrued by unpaid dividends upon not
less than 30 nor more than 60 days notice.
d. Any change in the terms or preferences of the Preferred
Stock which adversely affects the rights of the holders
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of Preferred Stock must be approved by the two-thirds vote of the holders of
Preferred Stock.
The above provisions were adopted in 1983, at the commencement
of business of the Company's predecessor, Selvac Corporation. The Board of
Directors has determined that it is appropriate to remove the provisions listed
above so that the Company is not restricted in structuring appropriate terms and
conditions for Preferred Stock investments in the future as may be advisable. As
a practical matter, the limit on the liquidation preference and redemption price
to $10 per share renders such provisions unusable for investments of more than
$2,000,000 ($10 per share multiplied by a total of 200,000 shares). These
limitations are inappropriate to the Company's financing needs. The Board has
authorized the more commonly utilized approach whereby the Board, without any
necessity for shareholder action may fix the terms, conditions and preferences
of any series of Preferred Stock as may hereafter be issued. Accordingly, as
amended and restated, Section 4.B of the Restated Certificate shall read in its
entirety as set forth below:
B. SERIAL PREFERRED STOCK. The 200,000
shares of Serial Preferred Stock
may, except as otherwise provided
in this Certificate, be issued in
one or more series with such
designations, relative rights,
voting powers, cumulative or non-
cumulative dividends, redemption
provisions, liquidation preferences
and other qualifications,
limitations and restrictions as the
Board of Directors may fix by
resolution adopted prior to the
issuance of any shares of any such
series.
2. Liquidation Preference for Series C Preferred
Stock.
As discussed above, the current terms of the Company's
Certificate of Incorporation prevented the Company from granting to the Investor
a preference upon liquidation equal to the full value of the per share purchase
price of the Series C Preferred Stock ($10,000 per share for an aggregate
liquidation preference of $10,000,000). Accordingly, with the removal of the
provisions discussed in item 1 above, the Company is amending the Certificate of
Designation for the Series C Preferred Stock to provide that upon the
liquidation, dissolution or winding up of the Company, the holders of Series C
Preferred Stock shall be entitled to receive, prior to any distributions to any
holders of Common Stock or other securities ranking junior to the Series C
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Preferred Stock, an amount equal to the stated value of $10,000 of each share
then outstanding together with accrued but unpaid dividends thereon. Section
5(5) of the Certificate of Designation, as amended, reads in its entirety as
follows:
a. Liquidation, Dissolution, Winding
Up. In the event of any voluntary
or involuntary liquidation,
dissolution or winding up of the
Corporation, the holders of the
Preferred Shares shall be entitled
to receive in cash out of the
assets of the Corporation, whether
from capital or from earnings
available for distribution to its
stockholders (the "PREFERRED
FUNDS"), before any amount shall be
paid to the holders of the Common
Stock, an amount equal to the
Stated Value per Preferred Share
plus any accrued and unpaid
dividends, provided that, if the
Preferred Funds are insufficient to
pay the full amount due to the
holders of Preferred Shares and
holders of shares of other classes
or series of preferred stock of the
Corporation that are of equal rank
with the Preferred Shares as to
payments of Preferred Funds (the
"PARI PASSU SHARES"), then each
holder of Preferred Shares and Pari
Passu Shares shall receive a
percentage of the Preferred Funds
equal to the full amount of
Preferred Funds payable to such
holder as a percentage of the full
amount of Preferred Funds payable
to all holders of Preferred Shares
and Pari Passu Shares. The
purchase or redemption by the
Corporation of stock of any class,
in any manner permitted by law,
shall not, for the purposes hereof,
be regarded as a liquidation,
dissolution or winding up of the
Corporation. Neither the
consolidation nor merger of the
Corporation with or into any other
corporation or corporations, nor
the sale or transfer by the
Corporation of less than
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substantially all of its assets,
shall, for the purposes hereof, be
deemed to be a liquidation,
dissolution or winding up of the
Corporation. No holder of Preferred
Shares shall be entitled to receive
any amounts with respect thereto upon
any liquidation, dissolution or
winding up of the Corporation other
than the amounts provided for herein.
3. No Other Changes
The Restated Certificate does not contain any other
substantive changes from the existing Certificate of Incorporation.
Discussion
The Restated Certificate enables the Company to fulfill an
existing contractual obligation to provide the customary liquidation preference
to the Investor holding the Series C Preferred Stock, without which obligation
the Company would not have been able to consummate the $10,000,000 private
placement necessary to effectuate the first phase of the Company's current
business plan.
The amendments effectuated by the Restated Certificate also
would give the Board of Directors maximum flexibility in structuring the terms
and conditions of a series of Preferred Stock so that the Board can authorize
the issuance of a series of Preferred Stock which most appropriately meets the
needs of the Company. Such flexibility would be particularly important to
utilize with regard to investments, mergers and acquisitions.
The voting rights granted to holders of a series of Preferred
Stock could result in a dilution of the overall voting power of the holders of
common stock and such voting rights could include a vote as a separate class on
types of matters on which the holders of Common Stock would also have the right
to vote and could therefore inhibit or prevent approval of such matters by the
holders of the Company's Common Stock.
In the event of a proposed merger, tender offer or other
attempts to gain control of the Company of which management does not approve, it
would be possible for the Board of Directors to authorize the issuance of
Preferred Stock with such voting rights that may impede completion of the
proposed merger, tender offer or other attempt to gain control of the Company.
This proposal, therefore, may tend to deter a future takeover attempt which some
or a majority of the holders of common stock may deem
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to be in their best interest or in which holders of the common stock may receive
a premium for their shares over the then market price. The amendment is also
proposed to provide the Company with greater flexibility in defending against
such a takeover and meeting financing requirements on terms most advantageous to
the Company and shareholders without the delay incident to the holding of a
special shareholders meeting for such a purpose. This proposal is not in
response to any takeover activity or unusual accumulation of shares of which
management of the Company is aware.
General
The Company's Annual Report on Form 10-KSB, excluding
exhibits, will be mailed to any shareholder upon written request to the Company
at 4020 Newberry Road, Gainesville, Florida 32607, Attention Investor Relations.
The Company will bear the entire cost of preparing, assembling, printing and
mailing this Information Statement, and any additional material which may be
furnished to shareholders.
By Order of the Board of Directors
AnnMarie Mehl
Secretary
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EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
MEHL/BIOPHILE INTERNATIONAL CORPORATION
It is hereby certified that:
1. (a) The present name of the corporation (hereinafter called
the "Corporation") is MEHL/BIOPHILE INTERNATIONAL CORPORATION.
(b) The name under which the Corporation was originally
incorporated is SELVAC CORPORATION, and the date of filing the original
certificate of incorporation of the Corporation with the Secretary of State of
the State of Delaware is June 28, 1982.
2. The provisions of the certificate of incorporation of the
Corporation as heretofore amended and/or supplemented, and as herein amended,
are hereby restated and integrated into the single instrument which is
hereinafter set forth, and which is entitled RESTATED CERTIFICATE OF
INCORPORATION OF MEHL/BIOPHILE INTERNATIONAL CORPORATION without any further
amendments other than the amendments herein certified and without any
discrepancy between the provisions of the certificate of incorporation as
heretofore amended and supplemented and the provisions of the said single
instrument hereinafter set forth.
3. The amendments and the restatement of the certificate of
incorporation herein certified have been duly adopted by the stockholders in
accordance with the provisions of Sections 228, 242, and 245 of the General
Corporation Law of the State of Delaware. Prompt written notice of the adoption
of the amendments and of the restatement of the certificate of incorporation
herein certified has been given to those stockholders who have not consented in
writing thereto, as provided in Section 228 of the General Corporation Law of
the State of Delaware.
4. The certificate of incorporation of the Corporation, as
amended and restated herein, shall at the effective time of this Restated
Certificate of Incorporation, read as follows:
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RESTATED CERTIFICATE OF INCORPORATION
OF
MEHL/BIOPHILE INTERNATIONAL CORPORATION
1. The name of the corporation is MEHL/BIOPHILE INTERNATIONAL
CORPORATION (the "Corporation").
2. The address of its registered office in the State of
Delaware is c/o Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
4. The total number of shares of capital stock which the
Corporation shall have authority to issue is 60,200,000, of which 60,000,000
shares shall be shares of Common Stock, par value $.01 per share, and 200,000
shares shall be shares of Serial Preferred Stock, par value $10.00 per share.
A statement of the designations, relative rights, preferences,
powers, qualifications, limitations and restrictions granted to or imposed on
the respective classes of the shares of the Corporation's stock or the holders
thereof is as follows:
A. COMMON STOCK. Each share of Common Stock shall be equal to
every other share of Common Stock in every respect. Each share of Common Stock
shall entitle the holder thereof to one vote per share upon all matters upon
which stockholders have the right to vote, except for matters, if any, upon
which holders of Serial Preferred Stock or any series thereof may have the
exclusive right to vote.
B. SERIAL PREFERRED STOCK. The 200,000 shares of Serial
Preferred Stock may, except as otherwise provided in this Certificate, be issued
in one or more series with such designations, relative rights, voting powers,
cumulative or non-cumulative dividends, redemption provisions, liquidation
preferences and other qualifications, limitations and restrictions as the Board
of Directors may fix by resolution adopted prior to the issuance of any shares
of any such series.
5. The text of the Certificate of Designations, Preferences
and Rights of 5% Cumulative Convertible Preferred Stock, Series C, of the
Corporation filed with the Delaware Secretary of State on May 15, 1996,
providing for the designations, preferences and relative, participating,
optional or other rights, and the qualifications, limitations or
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restrictions thereof, of ten thousand (10,000) shares of 5% Cumulative
Convertible Preferred Stock, Series C, of the Corporation, is hereby amended and
restated in its entirety as follows:
"The Corporation is authorized to issue 10,000 shares of 5%
Cumulative Convertible Preferred Stock, Series C, $10 par
value (the "PREFERRED SHARES"), which shall have the following
powers, designations, preferences and other special rights:
(1) Dividends. The holders of the Preferred Shares
shall be entitled to a cash dividend of five percent (5%) per
annum of the Stated Value (as defined below), on a cumulative
basis with quarterly compounding (prorated for any portion of
the applicable period during which the Preferred Shares are
outstanding). Dividends shall accrue from the date of issuance
of the Preferred Shares and shall be payable quarterly
commencing August 31, 1996, through and including the date on
which the Preferred Shares are no longer outstanding.
(2) Conversion of Preferred Shares. The holders of
the Preferred Shares shall have the right, at their option, to
convert the Preferred Shares into shares of Common Stock on
the following terms and conditions:
(a) Conversion Right. Each Preferred Share
shall be convertible, at any time after the earlier of (i) the
ninetieth (90th) day following the date of issuance or (ii)
the date the Registration Statement (the "REGISTRATION
STATEMENT"), which the Corporation is required to file
pursuant to Section 2(a) of the Registration Rights Agreement
dated May 15, 1995 by and among the Corporation and the
investor named therein (the "REGISTRATION RIGHTS AGREEMENT"),
is declared effective (the "EFFECTIVE DATE") by the U.S.
Securities and Exchange Commission (the "SEC"), into fully
paid and nonassessable shares (calculated to the nearest whole
share) of Common Stock, at the conversion price (the
"CONVERSION PRICE") in effect at the time of conversion
determined as hereinafter provided; provided, however, that in
no event shall any holder be entitled to convert Preferred
Shares if, after giving effect to such conversion, the number
of shares of Common Stock beneficially owned by such holder
and all other holders whose holdings would be aggregated with
such holder for purposes of calculating beneficial ownership
in accordance with Sections 13(d) and 16 of the Securities
Exchange Act of 1934, as
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amended, and the regulations thereunder ("SECTIONS 13(d) AND
16"), including, without limitation, any person serving as an
adviser to any holder (collectively, the "RELATED PERSONS"),
would exceed four and nine-tenths percent (4.9%) of the
outstanding shares of Common Stock (calculated in accordance
with Sections 13(d) and 16). Each Preferred Share shall have a
value of One Thousand Dollars ($1,000) (the "STATED VALUE")
for the purpose of such conversion and the number of shares of
Common Stock issuable upon conversion of each of the Preferred
Shares shall be determined by dividing the Stated Value
thereof by the Conversion Price then in effect. Every
reference herein to the Common Stock of the Corporation
(unless a different intention is expressed) shall be to the
shares of the Common Stock of the Corporation, $.01 par value,
as such stock exists immediately after the issuance of the
Preferred Shares provided for hereunder, or to stock into
which such Common Stock may be changed from time to time
thereafter.
(b) Conversion Price. The Conversion Price
shall be the lesser of (i) eighty percent (80%) (the
"CONVERSION PERCENTAGE") of the Average Market Price (as
defined below) for the Common Stock for the five (5)
consecutive trading days ending one trading day prior to the
date of the Conversion Notice (as defined below), subject to
adjustment as provided herein, or (ii) $7.50 (the "FIXED
CONVERSION PRICE"); provided, however, that in no event shall
the Conversion Price be less than $3.00 (the "FLOOR PRICE").
(c) Adjustment to Conversion Percentage. If
the Effective Date has not occurred within ninety (90) days
after the date of issuance of the Preferred Shares, or if,
after the Registration Statement has been declared effective
by the SEC, sales cannot be made pursuant to the Registration
Statement by reason of stop order, the Corporation's failure
to update the Registration Statement in accordance with the
rules and regulations of the SEC or otherwise, or if the
Common Stock is not listed or included for quotation on the
National Market of the National Association of Securities
Dealers Automated Quotation System ("NASDAQ-NM"), the New York
Stock Exchange (the "NYSE"), the American Stock Exchange (the
"AMEX"), or the NASDAQ SmallCap Market ("NASDAQ SMALLCAP")
then, as partial relief for the damages to the holder by
reason of any such delay in or reduction of its ability to
sell the underlying shares of Common Stock (which remedy shall
not
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be exclusive of any other remedies available at law or in
equity), the Conversion Percentage shall be reduced by a
number of percentage points equal to the Discount Amount (as
hereinafter defined) multiplied by the sum of: (i) the number
of months (prorated for partial months) after the end of such
90 day period and prior to the date the Registration Statement
is declared effective by the SEC; (ii) the number of months
(prorated for partial months) that sales cannot be made
pursuant to the Registration Statement (by reason of stop
order, the Corporation's failure to update the Registration
Statement or otherwise) after the Registration Statement has
been declared effective; and (iii) the number of months
(prorated for partial months) that the Common Stock is not
listed or included for quotation on the NASDAQ-NM, NYSE, AMEX,
or NASDAQ SmallCap after the Registration Statement has been
declared effective. The "DISCOUNT AMOUNT" for the first month
during which adjustment is required pursuant to this Section
shall be one and one-half (1 1/2); for the second month, two
(2); and for the third month and each month thereafter, three
(3). (For example, if the Registration Statement becomes
effective one and one-half (1 1/2) months after the end of
such 90 day period, the Conversion Percentage would be 77.5%
until any subsequent adjustment; if thereafter sales could not
be made pursuant to the Registration Statement for a period of
two (2) additional months, the Conversion Percentage would
then be 72%.) If the holder converts Preferred Shares into
Common Stock and an adjustment to the Conversion Percentage is
required subsequent to such conversion, but prior to the sale
of such Common Stock by such holder, the Corporation shall pay
to such holder, within five (5) days after receipt of a notice
of the sale of such Common Stock from such holder, an amount
equal to the Average Market Price of the Common Stock obtained
upon conversion of such Preferred Shares for the five (5)
trading days ending one (1) trading day prior to the date of
conversion multiplied by a fraction, the numerator of which
shall be the applicable Discount Amount and the denominator of
which shall be one hundred (100), multiplied by the number of
months (prorated for partial months) for which an adjustment
was required. Such amount may be paid at the Corporation's
option in cash or Common Stock ("DAMAGE SHARES") whose value
is based on the Average Market Price of the Common Stock for
the period of five (5) consecutive trading days ending on the
date of the sale of such Common Stock; provided, however, that
any amounts due as to that period during which the shares are
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not traded or included for quotation on the NASDAQ-NM, NYSE,
AMEX or NASDAQ SmallCap shall be paid in cash only; provided,
further, however, that in no event shall shares be issued
hereunder if, after giving effect to such issuance, the number
of shares of Common Stock beneficially owned by such holder
and all Related Persons would exceed four and nine tenths
percent (4.9%) of the outstanding shares of Common Stock
(calculated in accordance with Sections 13(d) and 16); cash
shall be paid in lieu of any shares which cannot be issued
pursuant to this second proviso. (For example, if the
Conversion Percentage was 77.5% at the time of conversion of
$1,000,000 in Stated Value of Preferred Shares (such that the
Preferred Shares were converted into Common Stock having an
Average Market Price for the applicable period in aggregate of
$1,290,322.50) and subsequent to conversion there was a
further two (2) month delay in the Registration Statement's
being declared effective, and such Common Stock was sold at
the end of such two (2) month period, the Corporation would
pay to the holder $70,967.74 in cash or Damage Shares.)
"AVERAGE MARKET PRICE" of any security for any period
shall be computed as the arithmetic average of the closing bid
prices for such security for each trading day in such period
on the NASDAQ SmallCap, or, if the NASDAQ SmallCap is not the
principal trading market for such security, on the principal
trading market for such security, or, if market value cannot
be calculated for such period on any of the foregoing bases,
the average fair market value during such period as reasonably
determined in good faith by the Board of Directors of the
Corporation (all as appropriately adjusted for any stock
dividend, stock split, or other similar transaction during
such period or between the end of such period or between the
end of such period and the date of conversion or dividend
payment, as applicable).
(d) Conversion Notice. On presentation and
surrender to the Corporation (or at any office or agency
maintained for the transfer of the Preferred Shares) of the
certificates of Preferred Shares so to be converted, duly
endorsed in blank for transfer or accompanied by proper
instruments of assignment or transfer in blank (a "CONVERSION
NOTICE"), the holder of such Preferred Shares shall be
entitled, subject to the limitations herein contained, to
receive in exchange therefor a certificate or certificates for
fully paid and
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nonassessable shares, which certificates shall be delivered by
the second trading day after the date of delivery of the
Conversion Notice, and cash for fractional shares, of Common
Stock on the foregoing basis. The Preferred Shares shall be
deemed to have been converted, and the person converting the
same to have become the holder of record of Common Stock, for
all purposes as of the date of delivery of the Conversion
Notice.
(e) Major Transactions. If the Corporation
shall consolidate with or merge into any corporation or
reclassify its outstanding shares of Common Stock (other than
by way of subdivision or reduction of such shares) (each a
"MAJOR TRANSACTION"), then each Preferred Share shall
thereafter be convertible into the number of shares of stock
or securities (the "RESULTING SECURITIES") or property of the
Corporation, or of the entity resulting from such
consolidation or merger, to which a holder of the number of
shares of Common Stock delivered upon conversion of such
Preferred Share would have been entitled upon such Major
Transaction had the holder of such Preferred Share exercised
its right of conversion and had such Common Stock been issued
and outstanding and had such holder been the holder of record
of such Common Stock at the time of such Major Transaction,
and the Corporation shall make lawful provision therefor as a
part of such consolidation, merger or reclassification;
provided, however, that the Corporation shall give the holders
of the Preferred Shares written notice of any Major
Transaction promptly upon the execution of any agreement
whether or not binding in connection therewith (including
without limitation a letter of intent or agreement in
principle) and in no event shall a Major Transaction be
consummated prior to forty-five (45) days after such notice.
(f) Fractional Shares. The Corporation shall
not issue any fraction of a share of Common Stock upon any
conversion, but shall pay in cash therefor at the Conversion
Price then in effect multiplied by such fraction.
(g) Reservation of Shares. The Corporation
shall, so long as any of the Preferred Shares are outstanding,
reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the
conversion of the Preferred Shares, such number of shares of
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Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Preferred Shares then
outstanding.
(h) Taxes. The Corporation shall pay any and
all taxes which may be imposed upon it with respect to the
issuance and delivery of Common Stock upon the conversion of
the Preferred Shares as herein provided. The Corporation shall
not be required in any event to pay any transfer or other
taxes by reason of the issuance of such Common Stock in names
other than those in which the Preferred Shares surrendered for
conversion are registered on the Corporation's records, and no
such conversion or issuance of Common Stock shall be made
unless and until the person requesting such issuance has paid
to the Corporation the amount of any such tax, or has
established to the satisfaction of the Corporation and its
transfer agent, if any, that such tax has been paid.
(3) Voting Rights. Holders of Preferred Shares shall
have no voting rights, except as required by law and by
Section 6 hereof.
(4) Redemption. The Corporation waives all redemption
rights with respect to the Preferred Shares.
(5) Liquidation, Dissolution, Winding Up. In the
event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the holders of the Preferred
Shares shall be entitled to receive in cash out of the assets
of the Corporation, whether from capital or from earnings
available for distribution to its stockholders (the "PREFERRED
FUNDS"), before any amount shall be paid to the holders of the
Common Stock, an amount equal to the Stated Value per
Preferred Share plus any accrued and unpaid dividends,
provided that, if the Preferred Funds are insufficient to pay
the full amount due to the holders of Preferred Shares and
holders of shares of other classes or series of preferred
stock of the Corporation that are of equal rank with the
Preferred Shares as to payments of Preferred Funds (the "PARI
PASSU SHARES"), then each holder of Preferred Shares and Pari
Passu Shares shall receive a percentage of the Preferred Funds
equal to the full amount of Preferred Funds payable to such
holder as a percentage of the full amount of Preferred Funds
payable to all holders of Preferred Shares and Pari Passu
Shares. The purchase or redemption by the Corporation of stock
of any class, in any
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manner permitted by law, shall not, for the purposes hereof,
be regarded as a liquidation, dissolution or winding up of the
Corporation. Neither the consolidation nor merger of the
Corporation with or into any other corporation or
corporations, nor the sale or transfer by the Corporation of
less than substantially all of its assets, shall, for the
purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Corporation. No holder of Preferred Shares
shall be entitled to receive any amounts with respect thereto
upon any liquidation, dissolution or winding up of the
Corporation other than the amounts provided for herein.
(6) Preferred Rank. All shares of Common Stock and
any series of Serial Preferred Stock as may be issued after
the original date of issuance of any Preferred Shares by the
Corporation shall be of junior rank to all Preferred Shares in
respect to the preferences as to distributions and payments
upon the liquidation, dissolution or winding up of the
Corporation. The rights of the shares of Common Stock shall be
subject to the preferences and relative rights of the
Preferred Shares.
(7) Vote to Change the Terms of Preferred Shares. The
affirmative vote at a meeting duly called for such purpose or
the written consent without a meeting of the holders of not
less than two-thirds (2/3) of the then outstanding Preferred
Shares shall be required to amend, alter, change or repeal any
of the powers, designations, preferences and rights of the
Preferred Shares.
6. The Corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized:
To make, alter or repeal the by-laws of the Corporation.
To authorize and cause to be executed mortgages and liens upon
the real and personal property of the Corporation.
To set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose and to
abolish any such reserve in the manner in which it was created.
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By a majority of the whole Board, to designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. The by-laws may provide that in the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board of Directors, or in the by-laws of the Corporation, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the by-laws of the Corporation; and, unless the resolution or
by-laws, expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock.
When and as authorized by the stockholders in accordance with
statute, to sell, lease or exchange all or substantially all of the property and
assets of the Corporation, including its good will and its corporate franchises,
upon such terms and conditions and for such consideration, which may consist in
whole or in part of money or property including shares of stock in, and/or other
securities of, any other corporation or corporations, as its Board of Directors
shall deem expedient and for the best interests of the Corporation.
8. Elections of directors need not be by written ballot unless
the by-laws of the Corporation shall so provide.
Meetings of stockholders may be held within or without the
State of Delaware, as the by-laws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside the State
of Delaware at such place or places as may be designated from time to time by
the Board of Directors or in the by-laws of the Corporation.
9. The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this certificate of incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
10. No director of the Corporation shall be liable to the
Corporation or is stockholders for monetary damages for breach of fiduciary duty
as a Director, except for liability (i) for any breach of the Director's duty of
loyalty to the Corporation or its
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Stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for the payment of
unlawful dividends or unlawful stock repurchases or redemptions under Section
174 of the Delaware General Corporation Law; or (iv) for any transactions from
which the Director derived an improper personal benefit."
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IN WITNESS WHEREOF, said Mehl/Biophile International
Corporation has caused this Certificate to be signed by Thomas L. Mehl, its
President this ________ day of _________________, 1996.
MEHL/BIOPHILE INTERNATIONAL CORPORATION
By: ____________________________________
Thomas L. Mehl, Sr.
President
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