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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:
[X] Preliminary Information Statement
[ ] 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):
[X] $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:
[ ] 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 __, 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 September 23, 1996 the holders of approximately
54.8% 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 are 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.
Accordingly, the effective date of the Restated Certificate will be October __,
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 September 23, 1996
the holders of 22,669,000 shares representing approximately 54.8% 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 September
23, 1996 as the record date for the taking of written consent by the
shareholders. As of the record date, there were outstanding ______ 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 __, 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 the price 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 simplifications 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
September 23, 1996 shareholders owning in the aggregate approximately 54.8% of
the issued and outstanding Common Stock entitled to vote thereon executed a
written consent approving the Restated Certificate.
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 but 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 its 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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<PAGE> 20
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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