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
Check the appropriate box:
[x] Preliminary information statement [ ] Confidential, for use of the
Commission only (as permitted
by Rule 14c-5(d)(2))
[ ] Definitive information statement
IMAGING DIAGNOSTIC SYSTEMS, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14-c-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 fee is 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: Imaging Diagnostic Systems, Inc.
(4) Date Filed: August 5, 1998
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IMAGING DIAGNOSTIC SYSTEMS, INC.
6531 NW 18TH COURT
PLANTATION, FLORIDA 33313
August 5, 1998
PRELIMINARY INFORMATION STATEMENT
THIS STATEMENT IS FOR INFORMATION PURPOSES ONLY. WE ARE NOT ASKING YOU FOR A
PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
This Information Statement is being mailed to the shareholders of Imaging
Diagnostic Systems, Inc., a Florida Corporation, (the "Company") commencing on
or about August _____, 1998, in connection with the adoption, by a majority of
the Company's shareholders entitled to take action there on, of the Amendment to
the Company's Articles of Incorporation contained herein.
Pursuant to Section 607.0704 Florida Statutes, any action to be taken at an
annual or special meeting of shareholders may be taken without a meeting,
without prior notice and without a vote if the action is taken by a majority of
the holders of outstanding stock of each voting group entitled to vote. The
Certificates of Designation of the Series B, D, E, and H Preferred Stock (the
"Certificates"), provide that, in the event there are insufficient shares to
effect a conversion, the Company is required to increase the number of
authorized shares to effect such conversion. Due to the decrease in the
Company's stock price, the Company no longer has an adequate number of common
shares authorized to meet its contractual obligations with regard to the
conversion of the Preferred Stock. The Certificates also provide that the
holders of the Preferred Shares shall be entitled to vote with the holders of
the Common Stock, as a single class, where each share of Preferred Stock shall
be entitled to that number of votes to which it would be entitled had all of its
shares of Preferred Stock been converted into shares of Common Stock were notice
of conversion given on the date of such vote.
As of the 10th day of July, 1998, Austost Anstalt Schaan, Balmore Funds S.A.,
Dominion Capital Funds, Ltd., Canadian Capital Fund Ltd., Avalon Capital Ltd.,
Richard J. Grable, Weyburn Overseas Limited, Linda B. Grable, Goodland
International Investment Ltd. and Allan L. Schwartz, (collectively "the Majority
Shareholders"), authorized, by written action, the Company's adoption of an
amendment, in the form of Exhibit A hereto (the "Amendment"), to the Company's
Certificate of Incorporation, as amended, to increase the authorized common
stock, no par value per share ("Common Stock"), of the Company from 48,000,000
shares to 100,000,000 shares (the "Written Action"). Taking into account such
provision and including the Common Stock held by the Majority Shareholders, the
Majority Shareholders were entitled to and voted the number of shares set forth
opposite their names:
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NAME NUMBER OF SHARES PERCENTAGE OF
OUTSTANDING (1)
Austost Anstalt Schaan 1,985,631 3.8%
Balmore Funds S.A. 1,985,631 3.8%
Dominion Capital Funds Ltd. 1,334,996 2.6%
Canadian Capital Fund Ltd. 636,379 1.2%
Avalon Capital Ltd. 673,401 1.3%
Weyburn Overseas Limited 3,325,942 6.5%
Goodland International
Investment Ltd. 7,760.532 15.1%
Richard J. Grable 7,995,040 15.5%
Allan L. Schwartz 3,579,980 7.0%
Linda B. Grable 3,497,800 6.8%
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TOTAL 32,775,332 63.6%
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1. Percentage calculation includes the additional shares of common stock that
would have been outstanding had all of the shares of Preferred Stock been
converted into shares of Common on the date of the Written Action.
Accordingly, all necessary corporate approvals in connection with the matters
referred to herein have been obtained, and this Information Statement is
furnished solely for the purpose of informing stockholders, in the manner
required under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), of these corporate actions before they take effect.
ACTIONS TAKEN
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The Company, as authorized by the necessary approvals of a majority of the votes
necessary for such authorization, has approved the adoption of an amendment, in
the form of Exhibit A hereto (the "Amendment"), to the Company's Articles of
Incorporation, as amended, to increase the authorized common stock, no par value
per share ("Common Stock"), of the Company from 48,000,000 shares to 100,000,000
shares. The Amendment was adopted to facilitate the conversion of approximately
$4,500,000 in Series B Convertible Stock, $100,000 in Series D Preferred Stock,
and $1,080,000 in Series H Preferred Stock and to insure that there are a
sufficient number of shares of Common Stock available for issuance upon
conversion of outstanding shares of the Company's Preferred Stock and upon
exercise of outstanding stock options and warrants. See Articles of Amendment
attached hereto as EXHIBIT A.
The form of the Certificates of Designation for the Series B, D, E and H
Preferred Stock are attached hereto as Exhibits B, C, D and E, respectively.
The Majority Shareholders consent with respect to the Amendment will take effect
immediately upon approval of this Information Statement by the Securities and
Exchange Commission.
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NO DISSENTERS' RIGHTS
- ---------------------
None of the corporate actions described in this Information Statement will
afford to stockholders the opportunity to dissent from the actions described
herein and to receive an agreed or judicially appraised value for their shares.
THE AMENDMENT
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PURPOSE OF THE AMENDMENT
A majority of the Company's shareholders has adopted, by written action, the
Amendment to increase its authorized Common Stock from 48,000,000 shares to
100,000,000 shares. The Amendment was adopted in connection with the possible
conversion of $5,680,000 of Preferred Stock, which is convertible at a
percentage of the average 5 day stock price. Due to the decrease in the
Company's stock price, the Company does not have an adequate number of shares
authorized to meet is contractual obligations. The Company believes that this
increase in authorized Common Stock will provide the Company sufficient Common
Stock for issuance upon conversion of the Series B, D and H Preferred Stock,
and for issuance in connection with any future financing activities or corporate
acquisition using the Company's Common or Preferred Stock. In addition, the
Company believes that the authorization of additional Common Stock will enhance
the ability of the Company to attract and retain qualified employees,
consultants, officers and directors by enabling the Company to create stock
option, incentives and rewards for their contributions to the success of the
Company.
INTEREST OF CERTAIN PERSONS
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All of the Preferred Shareholders will benefit from the increase in the
authorized common stock in that they will be able to convert their Preferred
Shares. However, the Company has a contractual obligation to have available
common shares for conversion and by contract, is liable for payment of damages
if such shares are not available. In addition, should the Preferred Shareholders
wish to convert and are unable to do so due to the insufficient number of common
shares available, the Company would be subject to possible litigation,
litigation costs damages and attorney fees.
Richard Grable, Allan Schwartz and Linda Grable also will benefit from the
increase in the authorized common stock to the same extent that all other
employees who were or will be issued options pursuant to the term of their
employment. In January 1998, pursuant to employment agreements dated July 4,
1994, Richard Grable, Linda Grable, and Allan Schwartz were granted options to
purchase and aggregate of 500,000 Common
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Shares each. The grants were for the July 1996 and July 1997 anniversary
dates of their employment and were never issued by prior counsel for the
Company. The options are non-qualified stock options, vesting one year from the
grant date and exercisable at an exercise price of $0.31 per share. These
options are automatically earned in July of each year. In January 1998, Richard
Grable, Linda Grable, and Allan Schwartz were granted options to purchase 22,883
and 34,602 shares of Common Shares each pursuant to the Company's incentive
stock option plan. These options were earned in July 1996 and July 1997 but
never issued. These shares are exercisable at any time at an exercise price of
$4.37 and $2.63 per share, respectively. Pursuant to their stock option
agreements Richard Grable, Linda Grable, and Allan Schwartz are entitled to
receive qualified options to purchase up to $100,000 of stock each July during
the term of their employment.
Richard Grable will additionally benefit from the increase in the authorized
common stock pursuant to a Exclusive Patent Licensing Agreement with the
Company. In June 1998, the Company finalized an exclusive Patent License
Agreement with Richard Grable, the Company's Chief Executive Officer. Mr. Grable
is the owner of patents Patent number 5,692,511, issued on December 2, 1987 (the
"Patent"), which encompasses the technology for the CTLM(TM). The Company and
Mr. Grable had previously entered into an oral agreement for the exclusive
license for the patent that was never memorialized in written form.
Pursuant to the terms of the Agreement, the Company was granted the exclusive
right to modify, customize, maintain, incorporate, manufacture, sell, and
otherwise utilize and practice the Patent, all improvements thereto and all
technology related to the process, throughout the world. This license shall
apply to any extension or re-issue of the Patent. The term of the license is for
the life of the Patent and any renewal thereof, subject to termination, under
certain conditions. As consideration for the License, the Company issued to Mr.
Grable 3,500,000 shares of common stock and is required to issue and additional
3,500,000 shares in June 1999. In addition, the Company has agreed to pay to
Mr., Grable a royalty based upon the net selling price (the dollar amount earned
from the sale by the Company, both international and domestic, before taxes
minus the cost of the goods sold and commissions or discounts paid) of all
products and goods in which the Patent is used, before taxes and after deducting
the direct cost of the product and commissions or discounts paid (the "Royalty")
as follows:
GROSS SALES PERCENTAGE
$0 to $1,999,999 in gross sales 10%
$2,000,000 to $3,999,999 in gross sales 9%
$4,000,000 to $6,999,999 in gross sales 8%
$7,000,000 to $9,999,999 in gross sales 7%
Greater than $10,000,000 in gross sales 6%
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During the second year of the Agreement there is a minimum royalty provision of
$250,000. The Company is required to have the Agreement ratified by its
Shareholders at its next special or annual meeting of Shareholders and upon
obtaining such ratification, the Royalties set forth above shall take the place
of the Development Royalties set forth in the Amendment to Grable's Employment
Agreement dated February 23, 1995, and such Amendment shall become void and have
no effect.
HOLDERS OF COMMON STOCK
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As of June 30, 1998, there were 745 record holders of the Company's common stock
with 36,271,044 shares of Common stock outstanding. After giving effect (for
voting purposes only) to the conversion of the Preferred, the outstanding shares
used to determine majority approval was 51,480,817.
Shareholders of common stock are entitled to one vote per share on all matters
for which stockholders are entitled to vote upon at all meetings of the
stockholders. Holders of the Preferred Shares have no voting rights except that
the Certificates of Designation of the Series B, D, E, and H Preferred Stock
(the "Certificates"), provide that, in the event there are insufficient shares
to effect a conversion, the Company is required to increase the number of
authorized shares to effect such conversion. The Certificates also provide that
the holders of the Preferred Shares shall be entitled to vote with the holders
of the Common Stock, as a single class, where each share of Preferred Stock
shall be entitled to that number of votes to which it would be entitled had all
of its shares of Preferred Stock been converted into shares of Common Stock were
notice of conversion given on the date of such vote.
Pursuant to Section 607.0704 Florida Statutes, any action to be taken at an
annual or special meeting of shareholders may be taken without a meeting,
without prior notice and without a vote if the action is taken by a majority of
the holders of outstanding stock of each voting group entitled to vote, provided
notice is given to all other shareholders.
PRINCIPAL STOCKHOLDERS
- ----------------------
The following table sets forth the beneficial ownership of Common Stock of the
Company as of July 10, 1998, as to (a) each person known to the Company who
beneficially owns more than 5% of the outstanding shares of its Common Stock;
(b) each current director executive officer; and (c) all executive
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officers and directors of the Company as a group, calculated as required by the
Act.
The actual number of shares of Common stock held by Richard Grable and Linda
Grable, without giving effect to options, are 7,750,040 and 3,445,800 share
respectively. Both Richard Grable and Linda Grable specifically disclaim any
beneficial interest in each other's shares.
Name and Address Number of Shares Owned % of Outstanding
Beneficial Owner Beneficially (1)(2) Shares of Common Stock
- ---------------- ---------------------- -----------------------
Richard J. Grable 12,606,606(3) 33.6%
c/o 6351 NW 18th Court
Plantation, FL 33313
Linda B. Grable 12,606,606(4) 33.6%
c/o 6351 NW 18th Court
Plantation, FL 33313
Allan L. Schwartz 4,253,390(5) 11.7%
c/o 6351 NW 18th Court
Plantation, FL 33313
All officers and directors 16,859,996 45.3%
as a group (3 persons)
- --------------------
(1) Except as indicated in the footnotes to this table, based on information
provided by such persons, the persons named in the table above have sole voting
power and investment power with respect to all shares of Common Stock shown
beneficially owned by them.
(2) Percentage of ownership is based on 36,434,747 shares of Common Stock
outstanding as of July 10,1998. Shares of Common Stock subject to stock options
that are exercisable within 60 days as of July 10, 1998 are deemed outstanding
for computing the percentage of any other person or group.
(3) Includes 556,883 shares subject to options and 3,497,800 shares owned by the
wife of Richard J. Grable, Linda B. Grable, of which he disclaims beneficial
ownership.
(4) Includes 556,883 shares subject to options and 7,995,040 shares owned by the
husband of Linda B. Grable, Richard J. Grable, of which she disclaims beneficial
ownership.
(5) Includes 664,410 shares subject to options and 9,000 shares owned by the
wife of Allan L. Schwartz, Carolyn Schwartz, of which he disclaims beneficial
ownership.
(6) Includes 1,778,176 shares subject to options and 9,000 shares owned by the
wife of Allan L. Schwartz, Carolyn Schwartz, of which he disclaims beneficial
ownership.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
- ------------------------------------------------------------
Richard J. Grable, 56
Chief Executive Officer and Director. Mr. Grable has been Chief Executive
Officer and a director of the Company since 1994 and is primarily responsible
for the development of the CTLMtm device.
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From January, 1994, to February, 1994: Mr. Grable was vice-president, research
and development, for Lintronics Technologies, Inc., Tampa, Fla., a manufacturer
of breast imaging systems.
From March, 1992, to December, 1993: Mr. Grable was a an engineering consultant
for Lintronics Technologies, Inc., Tampa, Fla., a manufacturer of breast imaging
systems.
From August, 1991 to February, 1992: Mr. Grable was an engineering consultant
for Audio Intelligence Devices, Inc., Ft. Lauderdale, Fla., a manufacturer of
surveillance devices.
From May, 1990, to July, 1991: Mr. Grable was an engineering consultant for
Telmed, Inc., Ft. Lauderdale, Fla., a software and electronic design company.
Linda B. Grable, 61
President and Chairman of the Board of Directors. Ms. Grable has been President
and Chairman of the Board of Directors of the Company since 1994.
From September, 1991, to February, 1994, Mrs. Grable was President and Director
of VCC Communications, Inc., Tampa, Fla., a manufacturer of voltage controlled
oscillators (VCO).
From August, 1988, to April, 1991: Mrs. Grable was President of Lintronics
International Ltd., Inc., Plantation, Fla., a manufacturer of breast imaging
systems.
Allan L. Schwartz, 56
Executive Vice-President, Chief Financial Officer and Director. Mr. Schwartz has
been Executive Vice-President, Chief Financial Officer and a Director of the
Company since 1994.
From April 1993, to February 1994: Mr. Schwartz was President and Director of
DynaMed Technologies, Inc., Coral Springs, Florida, a company that developed
neural network software for use with laser imaging systems.
From August, 1991, to April, 1993: Mr. Schwartz was President and Director of
Tron Industries, Inc., North Lauderdale, Florida, a developer of low voltage
neon novelty products.
From April, 1991, to July, 1991: Mr. Schwartz worked as a manufacturing
consultant for SE Enterprises, Miami, Fla., a manufacturer of prototype homes.
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Richard Grable, Allan Schwartz and Linda Grable are the "parents" and "founder"
of the Company as those terms are defined in the rules and regulations
promulgated under the Securities Act. Directors serve until the next meeting of
shareholders expected to be held in the spring of 1993. Officers serve at the
pleasure of the board of directors.
Directors of the Company serve a term of one year, or until their successors are
elected and qualified.
Family Relationships
Mr. Richard J. Grable and Mrs. Linda B. Grable are husband and wife.
Both parties disclaim, however, any beneficial interest or ownership in the
shares owned by the other party.
KEY EMPLOYEE
Robert H. Wake, 52
From April 1995, to Present: Mr. Wake has been the Company's Director of
Engineering.
From January 1994, to March, 1995: Mr. Wake was a consultant to various
companies in 3-D computer imaging.
From October 1986, to December, 1993: Mr. Wake founded and was President of
Reality Imaging Corporation, Solon, Ohio, a manufacturer of 3-D computer imaging
systems. Mr. Wake invented the Voxel Flinger 3-D imaging technology.
By order of the board of directors this _____ day of August, 1998.
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EXHIBIT A
FORM OF PROPOSED AMENDMENT TO
ARTICLES OF INCORPORATION
ARTICLES OF AMENDMENT
IMAGING DIAGNOSTIC SYSTEMS, INC
Pursuant to the written action dated July 10, 1998, duly executed by a
majority of the shareholders of Imaging Diagnostic Systems, Inc. entitled to
vote thereon, and ratification of such written action by the Company's Board of
Directors, the Corporation's Articles of Incorporation to provide for and
increase in the authorized Common Stock, pursuant to the relevant provisions of
Chapter 607 of the Florida Statutes are hereby Amended as follows:
ARTICLE I
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The name of the corporation is IMAGING DIAGNOSTIC SYSTEMS, INC.
ARTICLE III CAPITAL STOCK
-------------------------
The maximum number of shares of capital stock that this corporation is
authorized to have outstanding at any one time is 102,000,000(ONE HUNDRED TWO
MILLION) shares, no par value. The 102,000,000 shares of no par value capital
stock of the Corporation shall be designated as follows:
100,000,000 common shares
2,000,000 Preferred Shares, the rights and preferences of
which are to be designated by the Company's Board of Directors.
Except as amended above the remainder of the Company's Article of
Incorporation shall remain unchanged, and are hereby ratified and confirmed
The foregoing Amendments to the Articles of Incorporation were duly
adopted on July 10, 1998 by a majority vote of the holders of the Corporation's
common stock, no par value and the holders of the Preferred Shares, the only two
class of capital stock of the Corporation outstanding and entitled to vote
thereon, and approved by a sufficient number of votes pursuant to the Florida
Statutes.
IMAGING DIAGNOSTIC SYSTEMS, INC
By:________________________________
Name:
Title
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EXHIBIT B
SERIES B
ARTICLES OF AMENDMENT
IMAGING DIAGNOSTIC SYSTEMS, INC.
1. DESIGNATION. The designation of the series of Preferred Stock fixed
by this resolution shall be "Series B Convertible Preferred Stock" (hereinafter
referred to as the Convertible Preferred Stock").
2. CONVERSION RIGHTS.
(A) RIGHT TO CONVERT. The holder of any shares of Convertible Preferred
Stock may, (i) at any time during the period commencing on and including eighty
(80) days after issuance, convert up to thirty four percent (34%), without the
payment of any additional consideration therefor, into that number of fully paid
and nonassessable shares of common stock, no par value, of the Corporation (ii)
at any time during the period commencing on and including one hundred (100) days
after issuance, convert up to sixty eight percent (68%) in aggregate, without
the payment of any additional consideration therefor, into that number of fully
paid and nonassessable shares of common stock, no par value, of the Corporation,
and (iii) at any time during the period commencing on and including one hundred
and twenty (120) days after issuance, convert up to one hundred percent (100%)
in aggregate, without the payment of any additional consideration therefor, into
that number of fully paid and nonassessable shares of common stock, no par
value, of the Corporation as is determined by dividing (i) the sum of $10,000 by
(ii) the Conversion Price (determined as herein after provided) in effect at the
time of conversion. The "Conversion Price" shall be equal to eighty two percent
(82%) of the Market Price of the Corporation's Common Stock; provided, however,
that in no event will the Conversion price be greater than the $3.85. For
purposes of this Section 2, the Market Price shall be the average of the closing
bid prices of the Common Stock over the five consecutive trading days ending on
the trading day immediately preceding the date of the Conversion Notice (as
defined in Section 2(b) hereof), as reported by the National Association of
Securities Automated Quotation System ("NASDAQ"), or the average of the closing
bid prices of the Common Stock in the over-the-counter market over the five
consecutive trading days ending on the trading day immediately preceding the
date of the Conversion Notice, or, in the event the Common Stock is listed on a
national stock exchange, the Market Price shall be the average of the closing
prices of the Common Stock on such exchange, as reported in THE WALL STREET
JOURNAL over the five consecutive trading days immediately preceding the date of
the Conversion Notice.
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(B) MECHANICS OF CONVERSION. No fractional shares of Common Stock
shall be issued upon conversion of Convertible Preferred Stock. If upon
conversion of shares of Convertible Preferred Stock held by a registered holder
which are being converted, such register holder would, but for the provisions of
this Section 2(b), receive a fraction of a share of Common Stock thereon, then
in lieu of any such fractional share to which such holder would otherwise been
titled, the Corporation shall pay cash equal to such fraction multiplied by the
then effective Conversion Price. Before any holder of Convertible Preferred
Stock shall be entitled to convert the same into full shares of Common Stock,
such holder shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or any transfer agent for the
Convertible Preferred Stock, and shall give written notice (the "Conversion
Notice") to the Corporation at such office that such holder elects to convert
the same and shall state therein such holder's name or the name of its nominees
in which such holder wishes the certificate or certificates for shares of Common
Stock to be issued. The Corporation shall, as soon as practicable thereafter,
but in any event within three business days of the date of its receipt of the
Conversion Notice, issue and deliver or cause to be issued and delivered to such
holder of Convertible Preferred Stock, or to its nominee or nominees, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled, together with cash in lieu of any fraction of a
share. Such conversion shall be deemed to have been made on the date that the
Corporation receives the Conversion Notice, and the person or persons entitled
to receive the share of Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such shares of Common Stock
on such date. Upon the conversion of any shares of Convertible Preferred Stock,
such shares shall be restored to the status of authorized but unissued shares
and may be reissued by the Corporation at any time.
(C) NOTICES OF RECORD DATE. In the event of (i) any declaration by the
Corporation of a record date 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 (ii) any capital reorganization of the
Corporation, any classification or recapitalization of the capital stock of the
Corporation, any merger or consolidation of the Corporation, and any transfer of
all or substantially all of the assets of the Corporation to any other
Corporation, or any other entity or person, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Convertible Preferred Stock at least twenty (20) days
prior to the record date specified therein, a notice specifying (A) the date on
which any such record is to be declared for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective
and (C) the time, if any, that is to be fixed, as to when
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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, transfer, consolidation,
merger, dissolution or winding up.
(D) STOCK DIVIDENDS; STOCK SPLITS; ETC. In the event that the
Corporation shall (i) take a record of holders of shares of the Common Stock for
the purpose of determining the holders entitled to receive dividends payable in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock,
(iii) combine the outstanding shares of Common Stock into smaller number of
shares or (iv) issue, by reclassification of the Common Stock, any other
securities of the Corporation, then, in each such case, the Conversion Price
then in effect shall be adjusted so that upon conversion of each share of
Convertible Preferred Stock then outstanding the number of shares of Common
Stock into which such shares of Convertible Preferred Stock are convertible
after the happening of any of the events described in clauses (i)through(iv)
above shall be the number of such shares of Common Stock into which such shares
of Convertible Preferred Stock would have been converted if so converted
immediately prior to the happening of such event or any record date with respect
thereto.
(E) COMMON STOCK RESERVED. The Corporation shall reserve and keep
available out of its authorized but unissued Common Stock such numbers of shares
of Common Stock as shall from time to time be sufficient to effect conversion of
all of the then outstanding shares of Convertible Preferred Stock. In the event
there are insufficient shares to effect a conversion, the Corporation shall
increase the number of authorized shares to effect conversion. In the event
shareholder approval is required to increase the authorized shares, the holder
shall be entitled to vote with the holders of the Common Stock, as a single
class, where each share of Convertible Preferred Stock shall be entitled to that
number of votes to which it would be entitled had all of its shares of
Convertible Preferred Stock been converted into shares of Common Stock were
notice of conversion given on the date of such vote. No sale or disposition of
all or substantially all of the Corporation's assets shall take place without
Stock, voting as a single class.
3. DIVIDEND RIGHTS. The holders of record of Convertible Preferred Stock shall
be entitled to receive cumulative dividends thereon, out of funds legally
available therefor and to the extent permitted by law, at the rate of seven
percent (7%) per share, per annum, computed on the basis of the actual number of
days elapsed in a 365-day year, commencing on the date of issuance of such
shares of Convertible Preferred Stock and payable quarterly on the last business
day of each calendar quarter commencing with the calendar quarter next
succeeding the date of issuance of the Convertible Preferred Stock. Such
dividends shall be fully cumulative and shall accrue, whether or not
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declared by the Board of Directors of the Corporation, from the date of issuance
of the shares of Convertible Preferred Stock until the date of payment thereof
as set forth in the immediately preceding sentence. No dividends or other
distributions shall be paid on or declared and set aside for payment on the
Common Stock until full cumulative dividends on all outstanding shares of
Convertible Preferred Stock shall have been paid or declared and set aside for
payment. Such dividends shall be payable in cash or in freely tradable shares of
Common Stock, with such shares of Common Stock valued at the average closing bid
price of such shares over the five consecutive trading days immediately
preceding the date of payment thereof, as such average closing bid price is
determined pursuant to Section 2 above.
4. VOTING RIGHTS OF CONVERTIBLE PREFERRED STOCK. Except as otherwise required by
law and as provided for in Section 2(e), the holders of outstanding shares of
Convertible Preferred Stock shall not be entitled to vote on any matters
submitted to the stockholders of the Corporation.
5. RANKING. The Convertible Preferred Stock shall rank senior to any other class
of capital stock of the Corporation now or hereafter issued as to the payment of
dividends and the distribution of assets on redemption, liquidation, dissolution
or winding up of the Corporation.
6. LIQUIDATION RIGHTS. If the Corporation shall be voluntarily or involuntarily
liquidated, dissolved or wound up, at any time when any shares of Convertible
Preferred Stock shall be outstanding, the holders of the then outstanding shares
of Convertible Preferred Stock shall have a preference in distribution of the
Corporation's property available for the distribution to the holders of any
other class of capital stock of the Corporation, including but not limited to,
the Common Stock, equal to $10,000.00 consideration per share, together with an
amount equal to all accrued but unpaid dividends thereon, if any, to the date of
payment of such distribution, whether or not declared by the Board.
7. ADJUSTMENTS DUE TO MERGER OR CONSOLIDATION, ETC. In the case of any
consolidation with or merger of the Corporation with or into another
corporation, or in the case of any sale, lease or conveyance to another
corporation of the assets of the Corporation as an entirety or substantially as
an entirety, each share of Convertible Preferred Stock shall after the date of
such consolidation, merger, sale, lease or conveyance be convertible into the
number of shares of stock or other securities or property (including cash) to
which the Common Stock issuable (at the time of such consolidation, merger,
sale, lease or conveyance) upon conversion of such share of Convertible
Preferred Stock would have been entitled upon such consolidation, merger, sale,
lease or conveyance; and in any such case, if necessary, the provisions set
forth herein with respect to the rights and interests thereafter of the holders
of the shares of Convertible Preferred Stock shall be appropriately adjusted so
as to be applicable, as nearly as may reasonably be, to any shares of stock or
other securities or property thereafter deliverable on the conversion of the
shares of Convertible Preferred Stock.
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EXHIBIT C
SERIES C
CERTIFICATE OF DESIGNATION
ARTICLES OF AMENDMENT
IMAGING DIAGNOSTIC SYSTEMS, INC.
1. Designation. The designation of the series of Preferred Stock fixed
by this resolution shall be "Series D Convertible Preferred Stock" (hereinafter
referred to as the "Convertible Preferred Stock").
2. Conversion Rights.
(a) Right to Convert. The holder of any shares of Series C
Convertible Preferred Stock (the "Preferred Stock") may, at any time,
commencing 45 days from the date of issuance and for a period of three
years thereafter, convert all or a portion of the Preferred Stock,
without the payment of any additional consideration therefor, into that
number of fully paid and nonassessable shares of common stock, no par
value, of the Corporation of the Corporation as is determined by
dividing (i) the sum of $10,000 by (ii) the Conversion Price
(determined as hereinafter provided) in effect at the time of
conversion. The "Conversion Price" shall be equal to seventy five
percent (75%) of the Average Closing Price of the Corporation's Common
Stock for the five-day trading period ending on the day prior to the
date of conversion provided, however, that in no event will the
Conversion Price be greater than 75% of the Average Price on the
Closing Date. For purposes of this Section 2, the Market Price shall be
the average of the closing bid prices of the Common Stock over the five
consecutive trading days ending on the trading day immediately
preceding the date of the Conversion Notice (as defined in Section 2(b)
hereof), as (i) quoted by Bloomberg, L.P. or if not quoted by
Bloomberg, L. P., then (ii) as reported by the National Association of
Securities Automated Quotation System ("NASDAQ"), or if not quoted by
NASDAQ then; (iii) the average of the closing bid prices of the Common
Stock in the over-the-counter market over the five consecutive trading
days ending on the trading day immediately preceding the date of the
Conversion Notice; or (iv) in the event the Common Stock is listed on a
national stock exchange, the Market Price shall be the average of the
closing prices of the Common Stock on such exchange, as reported in The
Wall Street Journal over the five consecutive trading days immediately
preceding the date of the Conversion Notice.
(b) Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of the Preferred Stock. If upon
conversion of shares of Preferred Stock held by a registered holder
which are being converted, such register holder would, but for the
provisions of this Section 2(b), receive a fraction of a share of
Common Stock thereon, then in lieu of any such fractional share to
which such holder would otherwise be entitled, the Corporation shall
round up or down, as the case may be, to the nearest share. Before any
holder of Preferred Stock shall be entitled to convert the same into
full shares of Common Stock, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of
the Corporation or any transfer agent for the Preferred Stock, and
shall give written notice by facsimile or otherwise (the "Conversion
Notice") to the Corporation at such office that such holder elects to
convert the same and shall state therein such holder's name or the name
of its nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation
shall, as soon as practicable thereafter, but in any event within five
business days of the date of its receipt of the Conversion Notice and
original Preferred Stock Certificate, issue and deliver or cause to be
issued and delivered to such holder of Preferred Stock, or to its
nominee or nominees, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled. Such
conversion shall be deemed to have been made on the date that the
Corporation receives the Conversion Notice by facsimile or otherwise,
and the person or persons entitled to receive the share of Common Stock
issuable upon conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock
15
<PAGE>
on such date. Upon the conversion of any shares of Preferred Stock,
such shares shall be restored to the status of authorized but unissued
shares and may be reissued by the Corporation at any time.
(c) Notices of Record Date. In the event of (i) any
declaration by the Corporation of a record date 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 (ii)
any capital reorganization of the Corporation, any classification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, and any transfer of all or
substantially all of the assets of the Corporation to any other
Corporation, or any other entity or person, or any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation,
the Corporation shall mail to each holder of Preferred Stock at least
twenty (20) days prior to the record date specified therein, a notice
specifying (i) the date on which any such record is to be declared for
the purpose of such dividend or distribution and a description of such
dividend or distribution; (ii) the date on which any such
reorganization, reclassification, transfer, consolidation, 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,
transfer, consolidation, merger, dissolution or winding up.
(d) Stock Dividends; Stock Splits; Etc. In the event that the
Corporation shall (i) take a record of holders of shares of the Common
Stock for the purpose of determining the holders entitled to receive
dividends payable in shares of Common Stock; (ii) subdivide the
outstanding shares of Common Stock; (iii) combine the outstanding
shares of Common Stock into smaller number of shares; or (iv) issue, by
reclassification of the Common Stock, any other securities of the
Corporation, then, in each such case, the Conversion Price then in
effect shall be adjusted so that upon conversion of each share of
Convertible Preferred Stock then outstanding the number of shares of
Common Stock into which such shares of Convertible Preferred Stock are
convertible after the happening of any of the events described in
clauses (i)through(iv) above shall be the number of such shares of
Common Stock into which such shares of Preferred Stock would have been
converted if so converted immediately prior to the happening of such
event or any record date with respect thereto.
(e) Common Stock Reserved. The Corporation shall reserve and
keep available out of its authorized but unissued Common Stock such
numbers of shares of Common Stock as shall from time to time be
sufficient to effect conversion of all of the then outstanding shares
of Preferred Stock. In the event there are insufficient shares to
effect a conversion, the Corporation shall increase the number of
authorized shares to effect conversion. In the event shareholder
approval is required to increase the authorized shares, the holder
shall be entitled to vote with the holders of the Common Stock, as a
single class, where each share of Preferred Stock shall be entitled to
that number of votes to which it would be entitled had all of its
shares of Preferred Stock been converted into shares of Common Stock
were notice of conversion given on the date of such vote. No sale or
disposition of all or substantially all of the Corporation's assets
shall take place without the approval of the holders of the Convertible
Preferred Stock, voting as a single class.
(f) Voting Rights of Convertible Preferred Stock. Except as
otherwise required by law and as provided for in Section 2(e), the
holders of outstanding shares of Preferred Stock shall not be entitled
to vote on any matters submitted to the stockholders of the
Corporation.
3. Liquidation Rights. If the Corporation shall be voluntarily or
involuntarily liquidated, dissolved or wound up, at any time when any shares of
Preferred Stock shall be outstanding, the holders of the then outstanding shares
of Preferred Stock shall have a preference in distribution of the Corporation's
property available for the distribution to the holders of any other class of
capital stock of the Corporation, including but not limited to, the Common
Stock, equal to $10,000.00 consideration per share.
4. Adjustments Due to Merger or Consolidation, Etc. In the case of any
consolidation with or merger of the Corporation with or into another
corporation, or in the case of any sale, lease or conveyance to another
corporation of the assets of the Corporation as an entirety or substantially as
an entirety, each share of Preferred Stock shall after the date of such
consolidation, merger, sale, lease or conveyance be convertible into the number
of shares of stock or other securities or property (including cash) to which the
Common Stock issuable (at the time of
16
<PAGE>
such consolidation, merger, sale, lease or conveyance) upon conversion of such
share of Preferred Stock would have been entitled upon such consolidation,
merger, sale, lease or conveyance; and in any such case, if necessary, the
provisions set forth herein with respect to the rights and interests thereafter
of the holders of the shares of Preferred Stock shall be appropriately adjusted
so as to be applicable, as nearly as may reasonably be, to any shares of stock
or other securities or property thereafter deliverable on the conversion of the
shares of Convertible Preferred Stock.
17
<PAGE>
EXHIBIT D
SERIES D
CERTIFICATE OF DESIGNATION
ARTICLES OF AMENDMENT
IMAGING DIAGNOSTIC SYSTEMS, INC.
1. Designation. The designation of the series of Preferred Stock fixed
by this resolution shall be "Series D Convertible Preferred Stock" (hereinafter
referred to as the "Convertible Preferred Stock").
2. Conversion Rights.
(a) Right to Convert. The holder of any shares of Series D
Convertible Preferred Stock (the "Preferred Stock") may, at any time,
commencing 45 days from the date of issuance and for a period of three
years thereafter, convert all or a portion of the Preferred Stock,
without the payment of any additional consideration therefor, into that
number of fully paid and nonassessable shares of common stock, no par
value, of the Corporation of the Corporation as is determined by
dividing (i) the sum of $10,000 by (ii) the Conversion Price
(determined as hereinafter provided) in effect at the time of
conversion. The "Conversion Price" shall be equal to seventy five
percent (75%) of the Average Closing Price of the Corporation's Common
Stock for the five-day trading period ending on the day prior to the
date of conversion provided, however, that in no event will the
Conversion Price be greater than 75% of the Average Price on the
Closing Date. For purposes of this Section 2, the Market Price shall be
the average of the closing bid prices of the Common Stock over the five
consecutive trading days ending on the trading day immediately
preceding the date of the Conversion Notice (as defined in Section 2(b)
hereof), as (i) quoted by Bloomberg, L.P. or if not quoted by
Bloomberg, L. P., then (ii) as reported by the National Association of
Securities Automated Quotation System ("NASDAQ"), or if not quoted by
NASDAQ then; (iii) the average of the closing bid prices of the Common
Stock in the over-the-counter market over the five consecutive trading
days ending on the trading day immediately preceding the date of the
Conversion Notice; or (iv) in the event the Common Stock is listed on a
national stock exchange, the Market Price shall be the average of the
closing prices of the Common Stock on such exchange, as reported in The
Wall Street Journal over the five consecutive trading days immediately
preceding the date of the Conversion Notice.
(b) Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of the Preferred Stock. If upon
conversion of shares of Preferred Stock held by a registered holder
which are being converted, such register holder would, but for the
provisions of this Section 2(b), receive a fraction of a share of
Common Stock thereon, then in lieu of any such fractional share to
which such holder would otherwise be entitled, the Corporation shall
round up or down, as the case may be, to the nearest share. Before any
holder of Preferred Stock shall be entitled to convert the same into
full shares of Common Stock, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of
the Corporation or any transfer agent for the Preferred Stock, and
shall give written notice by facsimile or otherwise (the "Conversion
Notice") to the Corporation at such office that such holder elects to
convert the same and shall state therein such holder's name or the name
of its nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation
shall, as soon as practicable thereafter, but in any event within five
business days of the date of its receipt of the Conversion Notice and
original Preferred Stock Certificate, issue and deliver or cause to be
issued and delivered to such holder of Preferred Stock, or to its
nominee or nominees, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled. Such
conversion shall be deemed to have been made on the date that the
Corporation receives the Conversion Notice by facsimile or otherwise,
and the person or persons entitled to receive the share of Common Stock
issuable upon conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
Upon the conversion of any shares of Preferred Stock, such shares shall
be restored to the status of authorized but unissued shares and may be
reissued by the Corporation at any time.
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<PAGE>
(c) Notices of Record Date. In the event of (i) any
declaration by the Corporation of a record date 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 (ii)
any capital reorganization of the Corporation, any classification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, and any transfer of all or
substantially all of the assets of the Corporation to any other
Corporation, or any other entity or person, or any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation,
the Corporation shall mail to each holder of Preferred Stock at least
twenty (20) days prior to the record date specified therein, a notice
specifying (i) the date on which any such record is to be declared for
the purpose of such dividend or distribution and a description of such
dividend or distribution; (ii) the date on which any such
reorganization, reclassification, transfer, consolidation, 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,
transfer, consolidation, merger, dissolution or winding up.
(d) Stock Dividends; Stock Splits; Etc. In the event that the
Corporation shall (i) take a record of holders of shares of the Common
Stock for the purpose of determining the holders entitled to receive
dividends payable in shares of Common Stock; (ii) subdivide the
outstanding shares of Common Stock; (iii) combine the outstanding
shares of Common Stock into smaller number of shares; or (iv) issue, by
reclassification of the Common Stock, any other securities of the
Corporation, then, in each such case, the Conversion Price then in
effect shall be adjusted so that upon conversion of each share of
Convertible Preferred Stock then outstanding the number of shares of
Common Stock into which such shares of Convertible Preferred Stock are
convertible after the happening of any of the events described in
clauses (i)through(iv) above shall be the number of such shares of
Common Stock into which such shares of Preferred Stock would have been
converted if so converted immediately prior to the happening of such
event or any record date with respect thereto.
(e) Common Stock Reserved. The Corporation shall reserve and
keep available out of its authorized but unissued Common Stock such
numbers of shares of Common Stock as shall from time to time be
sufficient to effect conversion of all of the then outstanding shares
of Preferred Stock. In the event there are insufficient shares to
effect a conversion, the Corporation shall increase the number of
authorized shares to effect conversion. In the event shareholder
approval is required to increase the authorized shares, the holder
shall be entitled to vote with the holders of the Common Stock, as a
single class, where each share of Preferred Stock shall be entitled to
that number of votes to which it would be entitled had all of its
shares of Preferred Stock been converted into shares of Common Stock
were notice of conversion given on the date of such vote. No sale or
disposition of all or substantially all of the Corporation's assets
shall take place without the approval of the holders of the Convertible
Preferred Stock, voting as a single class.
(f) Voting Rights of Convertible Preferred Stock. Except as
otherwise required by law and as provided for in Section 2(e), the
holders of outstanding shares of Preferred Stock shall not be entitled
to vote on any matters submitted to the stockholders of the
Corporation.
3. Liquidation Rights. If the Corporation shall be voluntarily or
involuntarily liquidated, dissolved or wound up, at any time when any shares of
Preferred Stock shall be outstanding, the holders of the then outstanding shares
of Preferred Stock shall have a preference in distribution of the Corporation's
property available for the distribution to the holders of any other class of
capital stock of the Corporation, including but not limited to, the Common
Stock, equal to $10,000.00 consideration per share.
4. Adjustments Due to Merger or Consolidation, Etc. In the case of any
consolidation with or merger of the Corporation with or into another
corporation, or in the case of any sale, lease or conveyance to another
corporation of the assets of the Corporation as an entirety or substantially as
an entirety, each share of Preferred Stock shall after the date of such
consolidation, merger, sale, lease or conveyance be convertible into the number
of shares of stock or other securities or property (including cash) to which the
Common Stock issuable (at the time of such consolidation, merger, sale, lease or
conveyance) upon conversion of such share of Preferred
19
<PAGE>
Stock would have been entitled upon such consolidation, merger, sale, lease or
conveyance; and in any such case, if necessary, the provisions set forth herein
with respect to the rights and interests thereafter of the holders of the shares
of Preferred Stock shall be appropriately adjusted so as to be applicable, as
nearly as may reasonably be, to any shares of stock or other securities or
property thereafter deliverable on the conversion of the shares of Convertible
Preferred Stock.
20
<PAGE>
EXHIBIT E
SERIES E
CERTIFICATE OF DESIGNATION
ARTICLES OF AMENDMENT
IMAGING DIAGNOSTIC SYSTEMS, INC.
1. Designation. The designation of the series of Preferred Stock fixed
by this resolution shall be "Series E Convertible Preferred Stock" (hereinafter
referred to as the "Preferred Stock").
2. Conversion Rights.
(a) Right to Convert. The holder of any shares of Preferred
Stock may, at any time, commencing 45 days from the date of issuance
and for a period of three years thereafter, convert all or a portion of
the Preferred Stock, without the payment of any additional
consideration therefor, into that number of fully paid and
nonassessable shares of common stock, no par value, of the Corporation
as is determined by dividing (i) the sum of $10,000 by (ii) the
Conversion Price (determined as hereinafter provided) in effect at the
time of conversion. The "Conversion Price" shall be equal to seventy
five percent (75%) of the average of the closing bid prices of the
Corporation's Common Stock for the five-day trading period ending on
the day prior to the date of the Conversion Notice (as defined below)
provided, however, that in no event will the Conversion Price be
greater than 75% of the average of the closing bid prices of the
Corporation's Common Stock for the five-day trading period ending on
the day prior to the Closing Date. For purposes of this Section 2, the
Conversion Price shall be the average of the closing bid prices of the
Common Stock over the five consecutive trading days ending on the
trading day immediately preceding the date of the Conversion Notice (as
defined in Section 2(b) hereof), as (i) quoted by Bloomberg, L.P. or if
not quoted by Bloomberg, L. P., then (ii) as reported by the National
Association of Securities Automated Quotation System ("NASDAQ"), or if
not quoted by NASDAQ then; (iii) the average of the closing bid prices
of the Common Stock in the over-the-counter market over the five
consecutive trading days ending on the trading day immediately
preceding the date of the Conversion Notice; or (iv) in the event the
Common Stock is listed on a national stock exchange, the Conversion
Price shall be the average of the closing prices of the Common Stock on
such exchange, as reported in The Wall Street Journal over the five
consecutive trading days immediately preceding the date of the
Conversion Notice.
(b) Mechanics of Conversion. No fractional shares of Common
Stock shall be issued upon conversion of the Preferred Stock. If upon
conversion of shares of Preferred Stock held by a registered holder
which are being converted, such registered holder would, but for the
provisions of this Section 2(b), receive a fraction of a share of
Common Stock thereon, then in lieu of any such fractional share to
which such holder would otherwise be entitled, the Corporation shall
round up or down, as the case may be, to the nearest share. Before any
holder of Preferred Stock shall be entitled to convert the same into
full shares of Common Stock, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of
the Corporation or any transfer agent for the Preferred Stock, and
shall give written notice by facsimile or otherwise (the "Conversion
Notice") to the Corporation at such office that such holder elects to
convert the same and shall state therein such holder's name or the name
of its nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. The Corporation
shall, as soon as practicable thereafter, but in any event within five
business days of the date of its receipt of the Conversion Notice and
original Preferred Stock Certificate, issue and deliver or cause to be
issued and delivered to such holder of Preferred Stock, or to its
nominee or nominees, a certificate or certificates for the number of
shares of Common Stock to which such holder shall be entitled. Such
conversion shall be deemed to have been made on the date that the
Corporation receives the Conversion Notice by facsimile or otherwise,
and the person or persons entitled to receive the share of Common Stock
issuable upon conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock
21
<PAGE>
on such date. Upon the conversion of any shares of Preferred Stock,
such shares shall be restored to the status of authorized but unissued
shares and may be reissued by the Corporation at any time.
(c) Notices of Record Date. In the event of (i) any
declaration by the Corporation of a record date 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 (ii)
any capital reorganization of the Corporation, any classification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation, and any transfer of all or
substantially all of the assets of the Corporation to any other
Corporation, or any other entity or person, or any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation,
the Corporation shall mail to each holder of Preferred Stock at least
twenty (20) days prior to the record date specified therein, a notice
specifying (i) the date on which any such record is to be declared for
the purpose of such dividend or distribution and a description of such
dividend or distribution; (ii) the date on which any such
reorganization, reclassification, transfer, consolidation, 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,
transfer, consolidation, merger, dissolution or winding up.
(d) Stock Dividends; Stock Splits; Etc. In the event that the
Corporation shall (i) take a record of holders of shares of the Common
Stock for the purpose of determining the holders entitled to receive
dividends payable in shares of Common Stock; (ii) subdivide the
outstanding shares of Common Stock; (iii) combine the outstanding
shares of Common Stock into smaller number of shares; or (iv) issue, by
reclassification of the Common Stock, any other securities of the
Corporation, then, in each such case, the Conversion Price then in
effect shall be adjusted so that upon conversion of each share of
Convertible Preferred Stock then outstanding the number of shares of
Common Stock into which such shares of Convertible Preferred Stock are
convertible after the happening of any of the events described in
clauses (i) through (iv) above shall be the number of such shares of
Common Stock into which such shares of Preferred Stock would have been
converted if so converted immediately prior to the happening of such
event or any record date with respect thereto.
(e) Common Stock Reserved. The Corporation shall reserve and
keep available out of its authorized but unissued Common Stock such
numbers of shares of Common Stock as shall from time to time be
sufficient to effect conversion of all of the then outstanding shares
of Preferred Stock. In the event there are insufficient shares to
effect a conversion, the Corporation shall increase the number of
authorized shares to effect conversion. In the event shareholder
approval is required to increase the authorized shares, the holder
shall be entitled to vote with the holders of the Common Stock, as a
single class, where each share of Preferred Stock shall be entitled to
that number of votes to which it would be entitled had all of its
shares of Preferred Stock been converted into shares of Common Stock
were notice of conversion given on the date of such vote. No sale or
disposition of all or substantially all of the Corporation's assets
shall take place without the approval of the holders of the Convertible
Preferred Stock, voting as a single class.
(f) Voting Rights of Convertible Preferred Stock. Except as
otherwise required by law and as provided for in Section 2(e), the
holders of outstanding shares of Preferred Stock shall not be entitled
to vote on any matters submitted to the stockholders of the
Corporation.
3. Liquidation Rights. If the Corporation shall be voluntarily or
involuntarily liquidated, dissolved or wound up, at any time when any shares of
Preferred Stock shall be outstanding, the holders of the then outstanding shares
of Preferred Stock shall have a preference in distribution of the Corporation's
property available for the distribution to the holders of any other class of
capital stock of the Corporation, including but not limited to, the Common
Stock, equal to $10,000.00 consideration per share.
4. Adjustments Due to Merger or Consolidation, Etc. In the case of any
consolidation with or merger of the Corporation with or into another
corporation, or in the case of any sale, lease or conveyance to another
corporation of the assets of the Corporation as an entirety or substantially as
an entirety, each share of Preferred Stock shall after the date of
22
<PAGE>
such consolidation, merger, sale, lease or conveyance be convertible into the
number of shares of stock or other securities or property (including cash) to
which the Common Stock issuable (at the time of such consolidation, merger,
sale, lease or conveyance) upon conversion of such share of Preferred Stock
would have been entitled upon such consolidation, merger, sale, lease or
conveyance; and in any such case, if necessary, the provisions set forth herein
with respect to the rights and interests thereafter of the holders of the shares
of Preferred Stock shall be appropriately adjusted so as to be applicable, as
nearly as may reasonably be, to any shares of stock or other securities or
property thereafter deliverable on the conversion of the shares of Convertible
Preferred Stock.
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EXHIBIT F
SERIES F
AMENDED ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
IMAGING DIAGNOSTIC SYSTEMS, INC.
The undersigned do hereby certify that, pursuant to the authority
conferred upon the Board of Directors of IMAGING DIAGNOSTIC SYSTEMS, INC. (the
"Corporation") a corporation organized and existing under the Florida Business
Corporation Act, by Florida Statute 607.0821 and Florida Statute 607.0602 and
pursuant to the written consent dated February 19, 1998, duly executed by all of
the members of the Corporation's Board of Directors, adopting the resolutions
providing for the issuance of up to 75 shares of the Corporation's authorized
but unissued preferred stock, no par value, to be designated the Series F
Convertible Preferred Stock (the "Preferred Stock"), and the Amendment of the
Corporation's Articles of Incorporation to provide for the Preferred Stock, and
there being no shareholder action required, the Corporation Articles of
Incorporation are hereby Amended as follows:
ARTICLE III CAPITAL STOCK
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS OF SERIES F
CONVERTIBLE PREFERRED STOCK
1. Designation and Rank. The number and designation of the series of Preferred
Stock fixed by this amendment shall be 75 Shares of "Series F Convertible
Preferred Stock" (hereinafter referred to as the "Convertible Preferred Stock"),
all of which shall rank equally and be identical in all respects.
2. Conversion Rights.
(a) Right to Convert. The holder of any shares of Series F Convertible Preferred
Stock (the "Preferred Stock") may, at any time, commencing May 15, 1998 and for
a period of two years thereafter, convert all or a portion of the Preferred
Stock, without the payment of any additional consideration therefor, into that
number of fully paid and nonassessable shares of common stock, no par value, of
the Corporation as is determined by dividing (i) the sum of $10,000 by (ii) the
Conversion Price (determined as hereinafter provided) in effect at the time of
conversion. The "Conversion Price" shall be equal to seventy percent (70%) of
the Average Closing Price of the Corporation's Common Stock for the five-day
trading period ending on the day prior to the date of the conversion. For
purposes of this Section 2, the Market Price shall be the average of the closing
bid prices of the Common Stock over the five consecutive trading days ending on
the trading day immediately preceding the date of the Conversion Notice (as
defined in Section 2(b) hereof), as (i) quoted by Bloomberg, L.P. or if not
quoted by Bloomberg, L.P., then (ii) as reported by the National Association of
Securities Automated Quotation System ("NASDAQ"), or if not quoted by NASDAQ
then; (iii) the average of the closing bid prices of the Common
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Stock in the over-the-counter market over the five consecutive trading days
ending on the trading day immediately preceding the date of the Conversion
Notice; or (iv) in the event the Common Stock is listed on a national stock
exchange, the Market Price shall be the average of the closing prices of the
Common Stock on such exchange, as reported in The Wall Street Journal over the
five consecutive trading days immediately preceding the date of the Conversion
Notice.
(b) Mechanics of Conversion. No fractional shares of Common Stock shall be
issued upon conversion of the Preferred Stock. If upon conversion of shares of
Preferred Stock held by a registered holder which are being converted, such
register holder would, but for the provisions of this Section 2(b), receive a
fraction of a share of Common Stock thereon, then in lieu of any such fractional
share to which such holder would otherwise be entitled, the Corporation shall
round up or down, as the case may be, to the nearest share. Before any holder of
the Preferred Stock shall be entitled to convert the same into full shares of
Common Stock, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or any transfer agent
for the Preferred Stock, and shall give written notice by facsimile or otherwise
(the "Conversion Notice") to the Corporation at such office that such holder
elects to convert the same and shall state therein such holder's name or the
name of its nominees in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. The Corporation shall, as soon as
practicable thereafter, but in any event within five business days of the date
of its receipt of the Conversion Notice and original Preferred Stock
Certificate, issue and deliver or cause to be issued and delivered to such
holder of Preferred Stock, or to its nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled. Such conversion shall be deemed to have been made on the date that
the Corporation receives the Conversion Notice by facsimile or otherwise, and
the person or persons entitled to receive the share of Common Stock issuable
upon conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date. Upon the conversion of any
shares of Preferred Stock, such shares shall be restored to the status of
authorized but unissued shares and may be reissued as a new series by the
Corporation at any time.
(c) Notices of Record Date. In the event of (i) any declaration by the
Corporation of a record date 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 (ii) any capital reorganization of the
Corporation, any classification or recapitalization of the capital stock of the
Corporation, any merger or consolidation of the Corporation, and any transfer of
all or substantially all of the assets of the Corporation to any other
Corporation, or any other entity or person, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Preferred Stock at least twenty (20) days prior to the
record date specified therein, a notice specifying (i) the date on which any
such record is to be declared for the purpose of such dividend or distribution
and a description of such dividend or distribution; (ii) the date on which any
such reorganization, reclassification, transfer, consolidation, 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, transfer, consolidation, merger, dissolution or
winding up.
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(d) Stock Dividends; Stock Splits; Etc. In the event that the Corporation shall
(i) take a record of holders of shares of the Common Stock for the purpose of
determining the holders entitled to receive dividends payable in shares of
Common Stock; (ii) subdivide the outstanding shares of Common Stock; (iii)
combine the outstanding shares of Common Stock into smaller number of shares; or
(iv) issue, by reclassification of the Common Stock, any other securities of the
Corporation, then, in each such case, the Conversion Price then in effect shall
be adjusted so that upon conversion of each share of Convertible Preferred Stock
then outstanding the number of shares of Common Stock into which such shares of
Convertible Preferred Stock are convertible after the happening of any of the
events described in clauses (i)through(iv) above shall be the number of such
shares of Common Stock into which such shares of Preferred Stock would have been
converted if so converted immediately prior to the happening of such event or
any record date with respect thereto.
(e) Common Stock Reserved. The Corporation shall reserve and keep available out
of its authorized but unissued Common Stock such numbers of shares of Common
Stock as shall from time to time be sufficient to effect conversion of all of
the then outstanding shares of Preferred Stock. In the event there are
insufficient shares to effect a conversion, the Corporation shall increase the
number of authorized shares to effect conversion, the holder shall be entitled
to vote with the holders of the Common Stock, as a single class, where each
share of Preferred Stock shall be entitled to that number of votes to which it
would be entitled had all of its shares of Preferred Stock been converted into
shares of Common Stock were notice of conversion given on the date of such vote.
No sale or disposition of all or substantially all of the Corporation's assets
shall take place without approval of the holders of the Convertible Preferred
Stock, voting as a single class.
(f) Voting Rights of Convertible Preferred Stock. Except as otherwise required
by law and as provided for in Section 2(e), the holders of outstanding shares of
Preferred Stock shall not be entitled to vote on any matters submitted to the
stockholders of the Corporation.
3. Liquidation Rights. If the Corporation shall be voluntarily or involuntarily
liquidated, dissolved or wound up, at any time when any shares of Preferred
Stock shall be outstanding, the holders of the then outstanding shares of
Preferred Stock shall have a preference in distribution of the Corporation's
property available for the distribution to the holders of any other class of
capital stock of the Corporation, including but not limited to, the Common
Stock, equal to $10,000.00 consideration per share.
4. Adjustments Due to Merger or Consolidation, Etc. In the case of any
consolidation with or merger of the Corporation with or into another
corporation, or in the case of any sale, lease or conveyance to another
corporation of the assets of the Corporation as an entirety or substantially as
an entirety, each share of Preferred Stock shall after the date of such
consolidation, merger, sale, lease or conveyance be convertible into the number
of shares of stock or other securities or property (including cash) to which the
Common Stock issuable (at the time of such consolidation, merger, sale, lease,
or conveyance) upon conversion of such share of Preferred Stock would have been
entitled upon such consolidation, merger, sale, lease or conveyance; and in any
such case, if necessary, the provisions set forth herein with respect to the
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<PAGE>
rights and interests thereafter of the holders of the shares of Preferred Stock
shall be appropriately adjusted so as to be applicable, as nearly as may
reasonable be, to any shares of stock or other securities or property thereafter
deliverable on the conversion of the shares of Convertible Preferred Stock.
IN WITNESS WHEREOF, this Amendment to the Articles of Incorporation has
been executed and attested by the undersigned duly authorized officers of the
Corporation as of the 19th day of February 1998.
/s/Linda B. Grable, President and Director
/s/Allan L. Schwartz, Executive Vice President and Director
/s/Richard J. Grable, Chief Executive Officer and Director
27
<PAGE>
EXHIBIT H
SERIES H
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
IMAGING DIAGNOSTIC SYSTEMS, INC.
The undersigned do hereby certify that, pursuant to the authority
conferred upon the Board of Directors of IMAGING DIAGNOSTIC SYSTEMS, INC. (the
"Corporation") a corporation organized and existing under the Florida Business
Corporation Act, by Florida Statute 607.0821 and Florida Statute 607.0602 and
pursuant to the written consent dated May 28, 1998, duly executed by all of the
members of the Corporation's Board of Directors, adopting the resolutions
providing for the issuance of up to 108 shares of the Corporation's authorized
but unissued preferred stock, no par value, to be designated the Series H
Convertible Preferred Stock (the "Preferred Stock"), and the Amendment of the
Corporation's Articles of Incorporation to provide for the Preferred Stock, and
there being no shareholder action required, the Corporation Articles of
Incorporation are hereby Amended as follows:
ARTICLE III CAPITAL STOCK
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS OF SERIES H
CONVERTIBLE PREFERRED STOCK
1. Designation and Rank. The number and designation of the series of Preferred
Stock fixed by this amendment shall be 108 Shares of "Series H Convertible
Preferred Stock" (hereinafter referred to as the "Convertible Preferred Stock"),
all of which shall rank equally and be identical in all respects.
2. Conversion Rights.
(a) Right to Convert. The holder of any shares of Series H Convertible Preferred
Stock (the "Preferred Stock") may, at any time, for a period of two years
thereafter, convert all or a portion of the Preferred Stock and any accrued
interest thereon, without the payment of any additional consideration therefor,
into that number of fully paid and non-assessable shares of common stock, no par
value, of the Corporation as is determined by dividing (i) the sum of $10,000 by
(ii) the Conversion Price (determined as hereinafter provided) in effect at the
time of conversion. The "Conversion Price" shall be equal to the lesser of $.53
or seventy five percent (75%) of the Average Closing Price of the Corporation's
Common Stock for the ten-day trading period ending on the day prior to the date
of the conversion (the "Lookback Period"). On the last trading day of each
month, starting on the first day of the 5th month from the Closing Date, the
Lookback period will be increased by two trading days until the Lookback period
equals a maximum of twenty two (22) trading days. For purposes of this Section
3, the Average Price shall be the lowest closing bid price of the Common Stock
during the Lookback period as (i) quoted by
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Bloomberg, L.P. or if not quoted by Bloomberg, L.P., then (ii) as reported by
the National Association of Securities Automated Quotation System ("NASDAQ"), or
if not quoted by NASDAQ then; (iii) the average of the closing bid prices of the
Common Stock in the over-the-counter market over the five consecutive trading
days ending on the trading day immediately preceding the date of the Conversion
Notice; or (iv) in the event the Common Stock is listed on a national stock
exchange, the Market Price shall be the average of the closing prices of the
Common Stock on such exchange, as reported in The Wall Street Journal over the
five consecutive trading days immediately preceding the date of the Conversion
Notice.
(b) Mechanics of Conversion. No fractional shares of Common Stock shall be
issued upon conversion of the Preferred Stock. If upon conversion of shares of
Preferred Stock held by a registered holder which are being converted, such
register holder would, but for the provisions of this Section 3(b), receive a
fraction of a share of Common Stock thereon, then in lieu of any such fractional
share to which such holder would otherwise be entitled, the Corporation shall
round up or down, as the case may be, to the nearest share. Before any holder of
the Preferred Stock shall be entitled to convert the same into full shares of
Common Stock, such holder shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or any transfer agent
for the Preferred Stock, and shall give written notice by facsimile or otherwise
(the "Conversion Notice") to the Corporation at such office that such holder
elects to convert the same and shall state therein such holder's name or the
name of its nominees in which such holder wishes the certificate or certificates
for shares of Common Stock to be issued. The Corporation shall, as soon as
practicable thereafter, but in any event within five business days of the date
of its receipt of the Conversion Notice and original Preferred Stock
Certificate, issue and deliver or cause to be issued and delivered to such
holder of Preferred Stock, or to its nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled. Such conversion shall be deemed to have been made on the date that
the Corporation receives the Conversion Notice by facsimile or otherwise, and
the person or persons entitled to receive the share of Common Stock issuable
upon conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date. Upon the conversion of any
shares of Preferred Stock, such shares shall be restored to the status of
authorized but unissued shares and may be reissued as a new series by the
Corporation at any time.
(c) Notices of Record Date. In the event of (i) any declaration by the
Corporation of a record date 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 (ii) any capital reorganization of the
Corporation, any classification or recapitalization of the capital stock of the
Corporation, any merger or consolidation of the Corporation, and any transfer of
all or substantially all of the assets of the Corporation to any other
Corporation, or any other entity or person, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Preferred Stock at least twenty (20) days prior to the
record date specified therein, a notice specifying (i) the date on which any
such record is to be declared for the purpose of such dividend or distribution
and a description of such dividend or distribution; (ii) the date on which any
such reorganization, reclassification, transfer, consolidation, 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
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(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, transfer, consolidation, merger, dissolution or winding up.
(d) Stock Dividends; Stock Splits; Etc. In the event that the Corporation shall
(i) take a record of holders of shares of the Common Stock for the purpose of
determining the holders entitled to receive dividends payable in shares of
Common Stock; (ii) subdivide the outstanding shares of Common Stock; (iii)
combine the outstanding shares of Common Stock into smaller number of shares; or
(iv) issue, by reclassification of the Common Stock, any other securities of the
Corporation, then, in each such case, the Conversion Price then in effect shall
be adjusted so that upon conversion of each share of Convertible Preferred Stock
then outstanding the number of shares of Common Stock into which such shares of
Convertible Preferred Stock are convertible after the happening of any of the
events described in clauses (i)through(iv) above shall be the number of such
shares of Common Stock into which such shares of Preferred Stock would have been
converted if so converted immediately prior to the happening of such event or
any record date with respect thereto.
(e) Common Stock Reserved. The Corporation shall reserve and keep available out
of its authorized but unissued Common Stock such numbers of shares of Common
Stock as shall from time to time be sufficient to effect conversion of all of
the then outstanding shares of Preferred Stock. In the event there are
insufficient shares to effect a conversion, the Corporation shall increase the
number of authorized shares to effect conversion, the holder shall be entitled
to vote with the holders of the Common Stock, as a single class, where each
share of Preferred Stock shall be entitled to that number of votes to which it
would be entitled had all of its shares of Preferred Stock been converted into
shares of Common Stock were notice of conversion given on the date of such vote.
No sale or disposition of all or substantially all of the Corporation's assets
shall take place without approval of the holders of the Convertible Preferred
Stock, voting as a single class.
(f) Voting Rights of Convertible Preferred Stock. Except as otherwise required
by law and as provided for in Section 3(e), the holders of outstanding shares of
Preferred Stock shall not be entitled to vote on any matters submitted to the
stockholders of the Corporation.
4. Liquidation Rights. If the Corporation shall be voluntarily or involuntarily
liquidated, dissolved or wound up, at any time when any shares of Preferred
Stock shall be outstanding, the holders of the then outstanding shares of
Preferred Stock shall have a preference in distribution of the Corporation's
property available for the distribution to the holders of any other class of
capital stock of the Corporation, including but not limited to, the Common
Stock, equal to $10,000.00 consideration per share.
5. Adjustments Due to Merger or Consolidation, Etc. In the case of any
consolidation with or merger of the Corporation with or into another
corporation, or in the case of any sale, lease or conveyance to another
corporation of the assets of the Corporation as an entirety or substantially as
an entirety, each share of Preferred Stock shall after the date of such
consolidation, merger, sale, lease or conveyance be convertible into the number
of shares of stock or other securities or property (including cash) to which the
Common Stock issuable (at the
30
<PAGE>
time of such consolidation, merger, sale, lease, or conveyance) upon conversion
of such share of Preferred Stock would have been entitled upon such
consolidation, merger, sale, lease or conveyance; and in any such case, if
necessary, the provisions set forth herein with respect to the rights and
interests thereafter of the holders of the shares of Preferred Stock shall be
appropriately adjusted so as to be applicable, as nearly as may reasonable be,
to any shares of stock or other securities or property thereafter deliverable on
the conversion of the shares of Convertible Preferred Stock.
IN WITNESS WHEREOF, this Amendment to the Articles of Incorporation has
been executed and attested by the undersigned duly authorized officers of the
Corporation as of the 28th day of May 1998.
/s/Linda B. Grable, President and Director
/s/Allan L. Schwartz, Executive Vice President and Director
/s/Richard J. Grable, Chief Executive Officer and Director
31
