Exhibit 4.2
Certificate of Designations, Rights and Preferences
Series C Redeemable Convertible Preferred Stock
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CERTIFICATE OF DESIGNATIONS,
RIGHTS AND PREFERENCES
OF
SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK
(Pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware)
We, the undersigned duly authorized officers of AVITAR, INC., a
corporation organized and existing under the laws of the State of Delaware, do
hereby certify that:
A. AVITAR, INC. ( the "Corporation") was incorporated in the State
of Delaware on November 20, 1986.
B. Pursuant to the authority conferred upon the Board of Directors of
the Corporation (the "Board of Directors") by the provisions of the
Corporation's Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), and the provisions of Sections 141 and 151 of the General
Corporation Law of the State of Delaware, the Board of Directors has duly
adopted the following recitals and resolutions, which are not in conflict with
any provisions of the Certificate of Incorporation or the Corporation's By-Laws,
setting forth the number, terms, designations, relative rights, preferences,
privileges and restrictions of a series of Preferred Stock, par value $0.01 per
share, of the Corporation.
WHEREAS, the Certificate of Incorporation provides for a class of shares
known as Preferred Stock, consisting of 5,000,000 shares;
WHEREAS, the Certificate of Incorporation authorizes the issuance of
Preferred Stock from time to time in one or more series and authorizes the Board
of Directors to (a) determine or alter the rights, preferences, privileges and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock, (b) fix the number of shares constituting any such series and
(c)determine the designation thereof; and
WHEREAS, the Corporation plans to issue a third series of Preferred Stock
and the Board of Directors desires to determine and fix the rights, privileges,
and restrictions relating to this series of Preferred Stock and the number of
shares constituting, and the designation of, such series.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
determines and fixes the designations of, the number of shares constituting, and
the rights, preferences, privileges and restrictions relating to, a second
series of Preferred Stock, as follows:
1. Designation. 500,000 shares of Preferred stock shall be designated
hereby as "Series C Redeemable Convertible Preferred Stock" (hereinafter
referred to as the "Series C Preferred Stock") with the rights, preferences,
privileges and restrictions specified herein.
2. Voting Rights. On all matters submitted to a vote of the holders of the
Corporation's common stock, par value $0.01 per share (the "Common Stock), the
holders of Series C Preferred Stock shall be entitled to exercise one vote per
share of Series C Preferred Stock.
3. Royalties. The holders of Series C Preferred Stock shall be entitled to
receive five percent (5%) of revenues received by the Company in respect of any
products developed by Avitar Diagnostics, Inc. so long as the Series C Preferred
Stock has not been converted or redeemed as set forth below; provided, however,
that the holders of Series C Preferred Stock shall be entitled to receive
royalties for a minimum of five (5) years from purchase date of the Series C
Preferred Stock in the event the Company redeems the Series C Preferred Stock.
Such royalties shall be payable within ninety (90) days after the anniversary
date of the investment upon which the royalties are based.
4. Liquidation Preference.
A. Upon any voluntary or involuntary liquidation, dissolution or winding-up
of the Company, the holders of Series C Preferred Stock shall be entitled to
receive out of the assets of the Corporation which remain after satisfaction in
full of all valid claims of creditors of the Corporation, liquidating
distributions of an amount per share of Series C Preferred Stock equal to the
amount of unpaid royalties due to the holder on the date of liquidation. If
these liquidation distributions are not paid in full, the holders of the Series
C Preferred Stock shall share ratably in any distribution of assets in
proportion to the full respective preferential amount to which they are
entitled.
B. The merger or consolidation of the Corporation with or into any other
corporation and the sale or transfer of all or substantially all of the assets
of the Corporation shall be deemed to be a dissolution, liquidation or
winding-up of the Corporation for the purposes of this Section 4.
C. Written notices of any voluntary liquidation, dissolution or winding-up
of the Corporation, stating the payment date or dates when, and the place or
places where, the amounts distributable to holders of Series C Preferred Stock
in such circumstances shall be payable, shall be given by first-class mail,
postage pre-paid, mailed not less than twenty (20) days prior to any payment
stated therein, to the holders of Series C Preferred Stock, at the address shown
on the books of the Corporation or any transfer agent for the Series C Preferred
Stock.
D. The Corporation may issue shares of its Preferred Stock which have
liquidation, dividend, voting, and/or redemption rights which are senior or
junior to, or pari passu with, the Series C Preferred Stock.
5. Conversion.
A. A holder of Series C Preferred Stock shall be entitled, on the
anniversary date of the investment prior to the close of business on any date
fixed for the redemption of such shares pursuant to Section 6 hereof, to cause
any or all such shares to be converted (the "Conversion") into the number of
shares of Common Stock derived from dividing the purchase price paid for each
share of Series C Preferred Stock by the average closing price of the Common
Stock for the five trading days prior to the date defined in 5B below (the
"Conversion Price"), subject to adjustment as provided herein.
B. The issuance by the Corporation of shares of Common Stock upon any
Conversion of shares of the Series C Preferred Stock made at the option of the
holder thereof, shall be effective the earlier of (i) the delivery to such
holder or such holders' designee of certificates representing the shares of
Common Stock issued upon Conversion thereof or (ii) the commencement of business
on the second business day after the surrender of the certificate or
certificates for the shares of Series C Preferred Stock to be converted, duly
assigned or endorsed for transfer to the Corporation ( or accompanied by duly
executed stock powers relating thereto) as provided hereby. On and after the
effective date of any Conversion, the converted shares of Series C Preferred
Stock shall no longer be deemed to be outstanding and all rights whatsoever with
respect thereto shall terminate, and the person or persons entitled to receive
the Common Stock issuable upon such Conversion shall be treated for all purposes
as the record holder or holders of such shares of Common Stock. All shares of
Series C Preferred Stock upon Conversion shall be restored to the status of
authorized but unissued shares of preferred stock without designation as to
Class, and may be issued thereafter.
C. The Conversion Price shall be subject to adjustment if the Corporation
shall, at any time or from time to time while shares of the Series C Preferred
Stock shall be outstanding, (1) subdivide its outstanding shares of Common Stock
into a greater number of shares, (2) combine its outstanding shares of Common
Stock into a smaller number of shares or (3) pay a dividend (exclusive of the
stock dividend provided herein), or make a distribution in Common Stock (or
securities convertible into or exchangeable for shares of Common Stock) to
holders of the Common Stock or other class or series of capital stock of the
Corporation convertible into or exchangeable for shares of Common Stock, then
the Conversion Price in effect immediately prior to such subdivision or
combination, as the case may be, or immediately prior to the record date fixed
for the determination of shareholders entitled to such dividend or distribution,
shall be increased or decreased, as the case may be, to produce such results as
would have been obtained prior to the occurrence of such event. An adjustment
made pursuant hereto shall become effective immediately after the record date,
in the case of a dividend or distribution payable in Common Stock (or other
securities) and immediately after the effective date, in the case of a
subdivision or combination. Whenever any adjustment is made in the Conversion
Price pursuant to the foregoing provisions (i) or (ii), the Corporation shall,
as soon as reasonably practicable thereafter, prepare a written statement signed
by an executive officer of the Corporation setting forth the adjusted Conversion
Price, determined as provided herein, and , in reasonable detail, the facts
requiring such adjustment. The Corporation shall mail such statement to all
holders of record of shares of Series C Preferred Stock at their respective
addresses appearing on the stock records of the Corporation.
D. The Corporation shall at all times reserve and keep available out of its
authorized and unissued Common Stock, solely for issuance upon the Conversion of
shares of Series C Preferred Stock as provided herein, free from any preemptive
rights, such number of shares of Common Stock as shall from time to time be
issuable upon the Conversion of all the shares of Series of Series C Preferred
Stock then outstanding.
6. Redemption.
A. The Company, on the anniversary dates of the investment in Series C
Preferred Stock, shall have the right to redeem all, or any portion of, the
shares of Series C Preferred Stock at the price set forth below:
Anniversary Dates Redemption Price*
1-5 200%
6 185%
7 170%
8 155%
9 130%
10 & Therefter 100%
* Expressed as a percentage of the price paid by holders for each
share of Series C Preferred Stock.
Such redemption shall be made by the issuance of Common Stock, the number
of shares of which shall be derived by dividing the redemption price by the
average closing price of the Common Stock for the five trading days prior to the
date defined in 6B below. From and after the date of redemption of any shares of
Series C Preferred Stock, such shares shall no longer be deemed to be
outstanding and all rights in respect of such shares of Series C Preferred Stock
shall cease, except the right to receive the redemption price.
B. Notice of any redemption made pursuant to this Section 6 shall be sent
to the holders of Series C Preferred Stock at the address shown on the books of
the Corporation or any transfer agent for the Series C Preferred Stock by first
class mail, postage prepaid, mailed not less than thirty (30) days' prior to the
redemption date. Each notice shall state (i) the redemption date, (ii) the total
number of shares of Series C Preferred Stock to be redeemed and, if fewer than
all the shares held by such holder are to be redeemed, the number of shares to
be redeemed from such holder, (iii) the redemption price, (iv) the place or
places where certificates for such shares are to be surrendered for payment of
the redemption price and (v) Conversion rights of the shares to be redeemed, the
period within which Conversion rights may be exercised, and the Conversion Price
and number of shares Common Stock issuable upon Conversion of a share of Series
C Preferred Stock at the time. Promptly following receipt of such notice, the
holders of Series C Preferred Stock shall surrender their certificates
representing such shares to the Corporation unless they shall Convert in
accordance with Sections 5 and 6 hereof.
7. Pre-emptive Rights. The holders of Series C Preferred Stock shall have
no pre-emptive rights.
8. Stated Capital. The amount to be capital at all times for each share of
Series C Preferred Stock shall be its par value (i.e., $0.01 per share).
RESOLVED, FURTHER, that the Chairman of the Board/Chief Executive Officer
and the Secretary of the Corporation be, and they are hereby are, authorized and
directed to prepare and file a Certificate of Designation in accordance with
this resolution and as required by law.
IN WITNESS WHEREOF, we have executed this Certificate of Designation and
affirm the foregoing as true under the penalties of perjury this 23rd day of
February, 2000.
/s/ J.C. Leatherman, Jr. /s/ Peter P. Phildius
Secretary Chairman of the Board/Chief Executive
Officer
