Exhibit 3.7
CERTIFICATE OF DESIGNATION,
PREFERENCES AND RIGHTS OF
SERIES D 8% CONVERTIBLE PREFERRED STOCK OF
COMPOSITECH LTD.
PURSUANT TO SECTION 151 OF THE DELAWARE
GENERAL CORPORATION LAW
The undersigned, being the Executive Vice President, Secretary and
Treasurer of Compositech Ltd., a corporation organized and existing under and by
virtue of the laws of the State of Delaware (hereinafter, the "Corporation"),
DOES HEREBY CERTIFY:
FIRST: That pursuant to authority expressly granted and vested in the Board
of Directors of said Corporation by the provisions of the Corporation's Restated
Certificate of Incorporation (the "Certificate of Incorporation"), said Board of
Directors adopted the following resolution on June 29, 2000 determining the
designations, preferences and rights of its Series D 8% Convertible Preferred
Stock:
RESOLVED: That pursuant to the authority vested in the Board of Directors
of the Corporation by the Certificate of Incorporation, a series of preferred
stock of the Corporation be, and it hereby is, created out of the authorized but
unissued shares of the capital stock of the Corporation, such series to be
designated Series D 8% Convertible Preferred Stock (the "Series D Convertible
Preferred Stock"), to consist of five hundred (500) shares, par value $0.01 per
share, of which the preferences and relative and other rights, and the
qualifications, limitations or restrictions thereof, shall be as follows:
1. Number of Shares of Series D Convertible Preferred Stock. Of the
3,799,780 shares of authorized but undesignated preferred stock par value $0.01
("Preferred Stock") of the Corporation, five hundred (500) shares are hereby
designated and known as Series D 8% Convertible Preferred Stock, par value $0.01
per share ("Series D Convertible Preferred Stock").
2. Voting.
(a) Unless required by law, no holder of any shares of Series D Convertible
Preferred Stock (a "Holder") shall be entitled to vote at any meeting of
stockholders of the Corporation (or any written actions of stockholders in lieu
of meetings) with respect to any matters presented to the stockholders of the
Corporation for their action or consideration.
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Notwithstanding the foregoing, the Corporation shall provide each Holder of
record of Series D Convertible Preferred Stock with timely notice of every
meeting of stockholders of the Corporation and shall provide each Holder with
copies of all proxy materials distributed in connection therewith.
(b) So long as any shares of Series D Convertible Preferred Stock are
outstanding, the Corporation shall not, without first obtaining the approval (by
vote or written consent, as provided by the Delaware General Corporation Law) of
the Holders of at least 85% of the then outstanding shares of Series D
Convertible Preferred Stock:
(i) alter or change the rights, preferences or privileges of the
Series D Convertible Preferred Stock;
(ii) create any new class or series of capital stock having a
preference over the Series D Convertible Preferred Stock as to payment of
dividends or distribution of assets upon liquidation, dissolution or
winding up of the Corporation ("Senior Securities") or alter or change the
rights, preferences or privileges of any Senior Securities so as to affect
adversely the Series D Convertible Preferred Stock;
(iii) increase the authorized number of shares of Series D Convertible
Preferred Stock; or
(iv) do any act or thing not authorized or contemplated by this
Certificate of Designation which would result in taxation of the holders of
shares of the Series D Convertible Preferred Stock under Section 305 of the
Internal Revenue Code of 1986, as amended (or any comparable provision of
the Internal Revenue Code as hereafter from time to time amended).
In the event Holders of at least 85% of the then outstanding shares of
Series D Convertible Preferred Stock agree to allow the Corporation to alter or
change the rights, preferences or privileges of the shares of Series D
Convertible Preferred Stock, pursuant to subsection (b) above, so as to affect
the Series D Convertible Preferred Stock, then the Corporation will deliver
notice of such approved change to the holders of the Series D Convertible
Preferred Stock that did not agree to such alteration or change (the "Dissenting
Holders") and Dissenting Holders shall have the right for a period of thirty
(30) days from the date of notice thereof to convert any and all shares of then
held Series D Convertible Preferred Stock pursuant to the terms of this
Certificate of Designation as in effect prior to such alteration or change, or
else to continue to hold their shares of Series D Convertible Preferred Stock
pursuant to the altered or changed terms.
3. Dividends.
The Holders of shares of Series D Convertible Preferred Stock shall be
entitled to receive, before any cash dividend shall be declared and paid upon or
set aside for the Common
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Stock or any other securities which are not Senior Securities, in any fiscal
year of the Corporation, out of funds legally available for that purpose,
cumulative dividends payable in cash in an amount per share for such fiscal year
equal to $80.00. Such dividends shall accrue daily and be payable quarterly on
June 30, September 30, December 31 and March 31 of each year, commencing
September 30, 2000. In the event that the Corporation's Common Stock shall cease
for any reason to be listed on the American Stock Exchange, the New York Stock
Exchange, the NASDAQ National Market, or the NASDAQ Small-Cap Market, whichever
is at the time the principal trading exchange or market for the Common Stock,
based upon share volume (the "Principal Market"), the cash dividend from such
date forward shall be at the rate of $160.00 per share. The Corporation may pay
any such dividend in the form of registered Common Stock, valued at the closing
bid price for the Common Stock on the Principal Market on the day prior to the
dividend payment date.
4. Liquidation.
(a) If the Corporation shall commence a voluntary case under the Federal
bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency
or similar law, or consent to the entry of an order for relief in an involuntary
case under any such law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of thirty (30) consecutive days and, on account of any such event, the
Corporation shall liquidate, dissolve or wind up, or if the Corporation shall
otherwise liquidate, dissolve or wind up (each such event being considered a
"Liquidating Event"), no distribution shall be made to the holders of any shares
of capital stock of the Corporation other than Senior Securities (as defined
above) upon such Liquidating Event unless prior thereto, the Holders of shares
of Series D Convertible Preferred Stock shall have received the Liquidation
Preference (as defined in Section 4(c)) with respect to each share. If upon the
occurrence of a Liquidating Event, the assets and funds available for
distribution among the Holders of the Series D Convertible Preferred Stock and
holders of securities ranking pari passu as to preference upon liquidation with
the Series D Convertible Preferred Stock shall be insufficient to permit the
payment to such holders of the preferential amounts payable thereon, then the
entire assets and funds of the Corporation legally available for distribution to
the Series D Convertible Preferred Stock and such pari passu securities shall be
distributed ratably among such shares in proportion to the ratio that the
Liquidation Preference payable on each such share bears to the aggregate
Liquidation Preference payable on all such shares.
(b) At the option of each Holder, the sale, conveyance of disposition
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of all or substantially all of the assets of the Corporation, the effectuation
by the Corporation of a transaction or series or related transactions in which
more than 50% of the voting power of the Corporation is disposed of, or the
consolidation, merger or other business combination of the Corporation with or
into any other person or persons when the Corporation is not the survivor shall
be deemed to be a liquidation, dissolution or winding up of the Corporation
pursuant to which the Corporation shall be required to distribute, upon
consummation of and as a condition to such transaction an amount equal to the
Liquidation Preference with respect to each outstanding share of Series D
Convertible Preferred Stock held by such Holder in accordance with and subject
to the terms of this Section 4.
(c) The Liquidation Preference shall be the "Stated Value" of $1,000 per
share of Series D Convertible Preferred Stock, plus all accrued but unpaid
dividends.
(d) The Corporation's Series A Convertible Preferred Stock, 7% Series B
Convertible Preferred Stock and Series C 8% Convertible Preferred Stock shall
constitute Senior Securities and shall be ranked senior to the Series D
Convertible Preferred Stock in respect of the distribution of assets upon a
Liquidating Event and for purposes of receiving cash dividends.
5. Optional Conversion. The Holders of shares of Series D Convertible
Preferred Stock shall have the following conversion rights:
(a) Conversion Date. The Holder of any shares of Series D Convertible
Preferred Stock may convert the shares of Series D Convertible Preferred Stock
purchased by such Holder from the Corporation commencing on the 120th day from
the date on which payment for the sale of the first share of Series D
Convertible Preferred Stock is received by the Corporation, unless otherwise
agreed to in writing by the Corporation and the affected Holder (the "Original
Issuance Date").
(b) Right to Convert; Conversion Price. Subject to the terms, conditions,
and restrictions of this Section 5, the Holder of any shares of Series D
Convertible Preferred Stock shall have the right to convert each such share of
Series D Convertible Preferred Stock (except that upon any Liquidating Event,
the right of conversion shall terminate at the close of business on the business
day fixed for payment of the amount distributable on the Series D Convertible
Preferred Stock) into that number of shares of Common Stock equal to $1,000 per
share of Series D Convertible Preferred Stock (the "Stated Value") divided by an
amount (the "Conversion Price") equal to the lesser of (i) a 25% discount (50%
if the Common Stock is not listed on the Principal Market) to the market price
(the "Market Price"), which is (x) the average of the three lowest closing bid
prices on the Principal Market (and if not listed on the Principal Market, on
the OTC Bulletin Board, and if not listed on the Principal Market or the OTC
Bulletin Board, on the pink sheets) of the Common Stock during the period of
thirty consecutive days during which the Principal Market for the Common Stock
is open for business (each, a "Trading Day") ending with the last Trading Day
immediately prior to the date of conversion (the "Conversion Date") or (y) if
the Common Stock is not listed on any market or exchange, the
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fair market value of the Common Stock as determined in good faith by the Board
of Directors of the Corporation, or (ii) $1.00 (adjusted for stock splits and
the like). To illustrate, if the Market Price as of the Conversion Date is $1.00
and 100 shares of Series D Convertible Preferred Stock are being converted (the
aggregate Stated Value of the shares being converted would be $100,000), then
the Conversion Price shall be $0.75 per share of Common Stock ($1.00 x .75),
whereupon the aggregate Stated Value of $100,000 of Series D Convertible
Preferred Stock would entitle the Holder thereof to convert the 100 shares of
Series D Convertible Preferred Stock into 133,333 shares of Common Stock
($100,000 divided by $0.75 equals 133,333). In addition, if the Conversion Price
on any Conversion Date is less than $1.00, then, the Corporation shall have the
option, prior to or within two business hours (which may carry over to the next
business day if after 4:00 p.m. local time at the Corporation) of receipt of a
Conversion Notice (as defined above) from a Holder and upon prior written notice
to the Holder via facsimile, to pay the Holder in shares of Common Stock as set
forth above, or else in cash in an amount equal to (i) the closing ask price on
the Principal Market on the Conversion Date multiplied by (ii) the number of
shares of Common Stock which would otherwise be issuable to the Holder upon such
conversion, or any combination of cash and Common Stock. If notice of the
Corporation's election to pay the Holder in cash is not received by the Holder
prior to or within two business hours of the receipt by the Corporation of a
Conversion Notice, the Corporation shall issue the Holder shares of Common Stock
unless otherwise consented to in writing by the Holder. Any conversion which is
paid in cash shall be paid within three (3) Trading Days of the Conversion Date,
or else the late delivery payments set forth in Section 5(d)(ii) hereof shall
apply to such late payment, and, upon demand of the Holder in such event of late
delivery of cash, the Holder may require the Corporation to deliver the shares
otherwise issuable upon such conversion.
(i) Unless the Corporation shall have obtained the approval of its
voting stockholders to such issuance in accordance with the applicable
rules of the Principal Market, if any, the Corporation shall not issue
shares of Common Stock upon conversion of any shares of Series D
Convertible Preferred Stock if such issuance of Common Stock, when added to
the number of shares of Common Stock previously issued by the Corporation
upon conversion of or as dividends on shares of the Series D Convertible
Preferred Stock, or issued upon exercise of the Stock Purchase Warrants
issued in conjunction with the issuance of shares of Series D Convertible
Preferred Stock, would exceed 19.9% of the number of shares of the
Corporation's Common Stock which were issued and outstanding on the
Original Issuance Date (as defined below). The right to convert shares of
Series D Convertible Preferred Stock shall be pro rated among the original
purchasers of such shares and their respective subsequent transferees, if
any, in order to comply with the aforesaid overall limitation. In the event
that the Corporation has not obtained stockholder approval of such issuance
prior to receipt of a Conversion Notice which would otherwise violate this
provision, the Corporation shall honor such conversion request (resulting
in an issuance in excess of 19.9%) in cash in an amount equal to (i) the
closing ask price on the Principal Market on the day prior to the
Conversion Date multiplied by (ii) the number of shares of Common Stock
which would otherwise be issuable to the Holder upon such conversion and
the Holder shall not have the right to demand delivery of shares of Common
Stock in lieu of such cash payment.
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(ii) In no event shall a Holder be permitted to convert any shares of
Series D Convertible Preferred Stock in excess of the number of such shares
upon the conversion of which, (x) the number of shares of Common Stock
owned by such Holder (other than shares of Common Stock issuable upon
conversion of shares of Series D Convertible Preferred Stock) plus (y) the
number of shares of Common Stock issuable upon such conversion of those
shares of Series D Convertible Preferred Stock sought to be converted,
would be equal to or exceed 9.9% of the number of shares of Common Stock
then issued and outstanding, including those shares issuable upon
conversion of the Series D Convertible Preferred Stock held by such Holder
after application of this Section 5(b)(ii). As used herein, beneficial
ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder. To the extent that the limitation contained in this Section
5(b)(ii) applies, the determination of whether shares of Series D
Convertible Preferred Stock are convertible (in relation to other
securities owned by Holder) and of which shares of Series D Convertible
Preferred Stock are convertible shall be in the sole discretion of such
Holder, and the submission of shares of Series D Convertible Preferred
Stock for conversion shall be deemed to be such Holder's determination of
whether such shares of Series D Convertible Preferred Stock are convertible
(in relation to other securities owned by such Holder) and of which shares
of Series D Convertible Preferred Stock are convertible, in each case
subject to such aggregate percentage limitation, and the Corporation shall
have no obligation or right to verify or confirm the accuracy of such
determination. Nothing contained herein shall be deemed to restrict the
right of a Holder to convert such shares of Series D Convertible Preferred
Stock at such time as such conversion will not violate the provisions of
this paragraph. The provisions of this Section 5(b)(ii) may be waived by a
Holder of Series D Convertible Preferred Stock as to itself (and solely as
to itself) upon not less than 75 days' prior notice to the Corporation, and
the provisions of this Section 5(b)(ii) shall continue to apply until such
75th day (or such later date as may be specified in such notice of waiver).
No conversion in violation of this paragraph but otherwise in accordance
with this Certificate of Designation shall affect the status of the Common
Stock issued upon such conversion as validly issued, fully-paid and
nonassessable.
(c) Notice of Conversion. The right of conversion shall be exercised by the
Holder thereof by giving written notice (the "Conversion Notice") to the
Corporation, by facsimile or by registered mail or overnight delivery service,
with a copy by facsimile to the Corporation's then transfer agent for its Common
Stock, as designated by the Corporation from time to time, that the Holder
elects to convert a specified number of shares of Series D Convertible Preferred
Stock representing a specified aggregate Stated Value thereof into Common Stock
and, if such conversion will result in the conversion of all of such Holder's
shares of Series D Convertible Preferred Stock, by surrender of a certificate or
certificates for the shares so to be converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the Holders of the Series D
Convertible Preferred Stock) at any time during its usual business hours on the
date set forth in the Conversion Notice, together with a statement of the name
or names (with address) in which the certificate or certificates for shares of
Common Stock shall be issued. The Conversion
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Notice shall include therein the aggregate Stated Value of shares of Series D
Convertible Preferred Stock to be converted, and a calculation (i) of the Market
Price, (ii) the Conversion Price, and (iii) the number of shares of Common Stock
to be issued in connection with such conversion. Such calculations by the Holder
shall be conclusive except for manifest error.
(d) Issuance of Certificates; Time Conversion Effected. Promptly, but in no
event more than three (3) Trading Days, after the receipt of the Conversion
Notice referred to in Section 5(c) and surrender of the certificate or
certificates for the share or shares of Series D Convertible Preferred Stock to
be converted (if required), the Corporation shall issue and deliver, or cause to
be issued and delivered, to the Holder, registered in such name or names as such
Holder may direct, a certificate or certificates for the number of whole shares
of Common Stock into which such shares of Series D Convertible Preferred Stock
have been converted. Such conversion shall be deemed to have been effected on
the date on which such Conversion Notice shall have been received by the
Corporation and at the time specified stated in such Conversion Notice, which
must be during the calendar day of such notice, and at such time the rights of
the Holder of such share or shares of Series D Convertible Preferred Stock shall
cease, and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the Holder or Holders of record of the shares
represented thereby. Issuance of shares of Common Stock issuable upon conversion
which are requested to be registered in a name other than that of the registered
Holder shall be subject to compliance with all applicable federal and state
securities laws.
(i) The Corporation understands that a delay in the issuance of the
shares of Common Stock beyond three (3) Trading Days could result in
economic loss to the Holder. As compensation to the Holder for such loss,
the Corporation agrees to pay late payments to the Holder for late issuance
of shares of Common Stock upon conversion in accordance with the following
schedule (where "No. Trading Days Late" is defined as the number of Trading
Days beyond three (3) Trading Days from the date of receipt by the
Corporation of the Conversion Notice):
Late Payment for Each $5,000 of Aggregate
No. Trading Days Late State Value Amount Being Converted
--------------------- ----------------------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
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Late Payment for Each $5,000 of Aggregate
No. Trading Days Late State Value Amount Being Converted
--------------------- -----------------------------------------
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 + $200 for each Trading Day
Late Beyond 10 Days
The Corporation shall pay any payments incurred under this Section in
immediately available funds upon demand. Nothing herein shall limit
Holder's right to pursue injunctive relief and/or actual damages for the
Corporation's failure to issue and deliver Common Stock to the Holder,
including, without limitation, the Holder's actual net costs occasioned by
any "buy-in" of Common Stock necessitated by such late delivery.
Furthermore, in addition to any other remedies which may be available to
the Holder, in the event that the Corporation fails for any reason to
effect delivery of such shares of Common Stock within five (5) Trading Days
the date of receipt of the Conversion Notice, the Holder will be entitled
to revoke the relevant Conversion Notice by delivering a notice to such
effect to the Corporation whereupon the Corporation and the Holder shall
each be restored to their respective positions immediately prior to
delivery of such Conversion Notice except that Holder shall retain the
right to receive both the late payment amounts set forth above plus the
actual net costs of any "buy-in."
(ii) If, at any time (a) the Corporation challenges, disputes or
denies the right of the Holder to effect the conversion of the Series D
Convertible Preferred Stock into Common Stock or otherwise dishonors or
rejects any Conversion Notice properly delivered in accordance with this
Section 5 or (b) any third party who is not and has never been an Affiliate
(as defined in Rule 405 under the Securities Act of 1933, as amended) of
the Holder obtains a judgment or order from any court or public or
governmental authority which denies, enjoins, limits, modifies, or delays
the right of the Holder hereof to effect the conversion of the Series D
Convertible Preferred Stock into Common Shares, then the Holder shall have
the right, by written notice to the Corporation, to require the Corporation
to promptly redeem the Series D Convertible Preferred Stock for cash at a
redemption price equal to one hundred forty percent (140%) of the Stated
Value thereof (the "Mandatory Purchase Amount"). Under any of the
circumstances set forth above, the Corporation shall indemnify and hold
harmless the Holder and be responsible for the payment of all costs and
expenses of the Holder, including its reasonable legal fees and expenses,
as and when incurred in disputing any such action or pursuing its rights
hereunder (in addition to any other rights of the Holder). The Corporation
shall not refuse to honor any Conversion Notice unless its has actually
been enjoined by a court of competent
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jurisdiction from doing so, and if so enjoined, the Corporation shall post
with such court a performance bond equal to 150% of the Stated Value of the
shares sought to be converted by the Holder which are the subject of such
injunction.
(iii) The Holder shall be entitled to exercise its conversion
privilege notwithstanding the commencement of any case under 11
U.S.C.ss.101 et seq. (the "Bankruptcy Code"). In the event the Corporation
is a debtor under the Bankruptcy Code, the Corporation hereby waives to the
fullest extent permitted any rights to relief it may have under 11
U.S.C.ss. 362 in respect of the Holder's conversion privilege. The
Corporation agrees, without cost or expense to the Holder, to take or
consent to any and all action necessary to effectuate relief under 11
U.S.C.ss.362.
(e) Fractional Shares. No fractional shares shall be issued upon conversion
of Series D Convertible Preferred Stock into Common Stock. All fractional shares
shall be rounded up to the nearest whole share.
(f) Reorganization or Reclassification. If any capital reorganization or
reclassification of the capital stock of the Corporation shall be effected in
such a way that Holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, or, in the
case of any consolidation, merger or mandatory share exchange of the Corporation
with any other company in which such other company is the surviving entity then,
as a condition of such reorganization, reclassification or exchange, lawful and
adequate provisions shall be made whereby each Holder of a share or shares of
Series D Convertible Preferred Stock shall thereupon have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore receivable upon the
conversion of such share or shares of Series D Convertible Preferred Stock, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such Common Stock immediately theretofore receivable
upon such conversion had such reorganization, reclassification or exchange not
taken place, and in any such case appropriate provisions shall be made with
respect to the rights and interests of such Holder to the end that the
provisions hereof (including without limitation provisions for adjustments of
the conversion rights and the fixing of the Conversion Price) shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise of such conversion
rights. For clarity, it is the intention of the Corporation that the conversion
rights of the Holders of the Series D Convertible Preferred Stock shall survive
any consolidation, merger or mandatory share exchange and that the conversion
rights granted hereunder shall be exercisable against any such successor
corporation, and shall not be terminated or fixed as to amount upon the
consummation of any such transaction.
(g) Adjustments for Splits, Combinations, etc. The Conversion Price and the
number of shares of Common Stock into which the Series D Convertible Preferred
Stock shall be convertible shall be adjusted for stock splits, stock dividends,
combinations or other similar events.
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6. Mandatory Conversion.
(a) Mandatory Conversion Date. If on or after December 31, 2001 (such date
as selected by the Corporation being the "Mandatory Conversion Date"), there
remain issued and outstanding any shares of Series D Convertible Preferred Stock
and the Common Stock is listed on the Principal Market, then the Corporation
shall be entitled to require all (but not less than all) Holders of shares of
Series D Convertible Preferred Stock then outstanding to convert their shares of
Series D Convertible Preferred Stock into shares of Common Stock or, at the
option of the Corporation, to buy out all such Holders in cash, at the then
effective conversion ratio pursuant to Section 5(b) multiplied by the Mandatory
Conversion Date closing bid price. The Corporation shall provide written notice
(the "Mandatory Conversion Notice") to the Holders of shares of Series D
Convertible Preferred Stock of such mandatory conversion or such mandatory
buy-out. The Mandatory Conversion Notice shall include (i) the Stated Value of
the shares of Series D Convertible Preferred Stock to be converted or bought
out, (ii) the Conversion Price at the Mandatory Conversion Date (which may refer
to a formula for determining such price), and (iii) the number of shares of the
Corporation's Common Stock to be issued (or the amount of cash to be paid in the
event of a buy-out) upon such mandatory conversion or such mandatory buy-out.
Notwithstanding the foregoing, in no event shall the Corporation convert that
portion of the Series D Convertible Preferred Stock to the extent that (i) the
Holder will not be able to freely resell the shares of Common Stock to be
received upon such Mandatory Conversion, either pursuant to an effective
registration statement or Rule 144(k) or (ii) the issuance of Common Stock upon
the conversion of such Series D Convertible Preferred Stock, when combined with
shares of Common Stock received upon other conversions of Series D Convertible
Preferred Stock by such Holder and any other Holders of Series D Convertible
Preferred Stock or upon exercise of the Stock Purchase Warrants referred to in
Section 5(b), would exceed 19.9% of the Common Stock outstanding on the Original
Issuance Date (unless stockholder approval has been obtained as described in
Section 5(a), if necessary), or (iii) as to any individual Holder, make such
Holder the beneficial owner of 9.9% or more of the Corporation's
then-outstanding Common Stock.
(b) Surrender of Certificates. On or before the Mandatory Conversion Date,
each Holder of shares of Series D Convertible Preferred Stock shall surrender
his or its certificate or certificates for all such shares to the Corporation at
the place designated in such Mandatory Conversion Notice (or an affidavit of
lost certificate in form and content reasonably satisfactory to the Corporation
but which shall not require the posting of any bond), and shall thereafter
receive certificates for the number of shares of Common Stock to which such
Holder is entitled or, in the event of a buy-out by the Corporation, the amount
of cash such Holder is entitled within three (3) Trading Days. On the Mandatory
Conversion Date, all rights with respect to the Series D Convertible Preferred
Stock so converted, including the rights, if any, to receive notices and vote,
will terminate. All certificates evidencing shares of Series D Convertible
Preferred Stock that are required to be surrendered for conversion in accordance
with the provisions hereof, from and after the Mandatory Conversion Date, shall
be deemed to have been retired and canceled, notwithstanding the failure of the
Holder or Holders thereof to surrender such certificates on or prior to such
date. The Corporation may thereafter take such
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appropriate action as may be necessary to reduce the authorized Series D
Convertible Preferred Stock accordingly.
7. Redemption of Series D Convertible Preferred Stock.
(a) Right to Redeem Series D Convertible Preferred Stock. At any time after
the Original Issuance Date, the Corporation may, in its sole discretion, but
shall not be obligated to, redeem, in whole or in part (pro-rata among all
Holders), the then issued and outstanding shares of Series D Convertible
Preferred Stock, at a price equal to 105% of the Stated Value, plus all accrued
but unpaid dividends, from the Original Issuance Date through the date which is
ninety (90) days after the Original Issuance Date, at a price equal to 110% of
the Stated Value from the date which is ninety-one (91) days after the Original
Issuance Date through the date which is one hundred twenty (120) days from the
Original Issuance Date, at a price equal to 115% of the Stated Value from the
date which is one hundred twenty-one (121) days after the Original Issuance Date
through the date which is one hundred eighty (180) days after the Original
Issuance Date; provided, however, on or after the 120th day after the Original
Issuance Date, the Corporation may only redeem such shares if a registration
statement permitting the resale of any shares of Common Stock issuable upon
conversion by the Holder is effective on the Redemption Date. Thereafter, except
as provided for in Section 6(a), no redemption shall be permitted without the
consent of the affected Holder. Each Holder shall have five (5) Trading Days
after receipt of the Redemption Notice, as defined below, to elect instead to
convert such shares pursuant to Section 5 hereof, notwithstanding that the
shares of Series D Convertible Preferred Stock are not otherwise convertible at
such time. Any such conversions made pursuant to this Section 7 shall be made at
the Conversion Price established pursuant to Section 5(b).
(b) Notice of Redemption. The Corporation shall provide each Holder of
record of the Series D Convertible Preferred Stock being redeemed with written
notice of redemption (the "Redemption Notice") not less than five Trading Days
prior to any date stipulated by the Corporation for the redemption of the Series
D Convertible Preferred Stock (the "Redemption Date"). The Redemption Notice
shall contain (i) the Redemption Date, (ii) the number of shares of Series D
Convertible Preferred Stock to be redeemed from the Holder to whom the
Redemption Notice is delivered, and (iii) instructions for surrender to the
Corporation of the certificate or certificates representing the shares of Series
D Convertible Preferred Stock to be redeemed.
(c) Surrender of Certificates; Payment of Redemption Price. On or before
the Redemption Date, each Holder of the shares of Series D Convertible Preferred
Stock to be redeemed shall surrender the required certificate or certificates
representing such shares to the Corporation (or an affidavit of lost certificate
in form and content reasonably satisfactory to the Corporation, but which shall
not require the posting of any bond), in the manner and at the place designated
in the Redemption Notice, and upon payment to the Holder of the Redemption
Price, each such surrendered certificate shall be canceled and retired. If
payment of such redemption price is not made in full by the Redemption Date the
Holder shall
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again have the right to convert the Series D Convertible Preferred Stock as
provided in Section 5 hereof, and the Corporation shall thereafter be precluded
from exercising its rights under this Section 7. If a certificate is surrendered
and all the shares evidenced thereby are not being redeemed with the consent of
the Holder, the Corporation shall issue new certificates to be registered in the
names of the person(s) whose name(s) appear(s) as the owners on the respective
surrendered certificates and deliver such certificate to such person(s).
8. Notices. In case at any time:
(a) the Corporation shall declare any dividend upon its Common Stock
payable in cash or stock or make any other pro rata distribution to the Holders
of its Common Stock; or
(b) the Corporation shall offer for subscription pro rata to the Holders of
its Common Stock any additional shares of stock of any class or other rights; or
(c) there shall be any capital reorganization or reclassification of the
capital stock of the Corporation, or a consolidation or merger of the
Corporation with or into, or a sale of all or substantially all its assets to,
another entity or entities; or
(d) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Corporation; then, in any one or more of said cases, the
Corporation shall give, by first class mail, postage prepaid, or by facsimile or
by recognized overnight delivery service to non-U.S. residents, addressed to
each Holder of any shares of Series D Convertible Preferred Stock at the address
of such Holder as shown on the books of the Corporation, (i) at least twenty
(20) Trading Days' prior written notice of the date on which the books of the
Corporation shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up and (ii) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least twenty (20) Trading Days' prior written
notice of the date when the same shall take place. Such notice in accordance
with the foregoing clause (i) shall also specify, in the case of any such
dividend, distribution or subscription rights, the date on which the Holders of
Common Stock shall be entitled thereto and (ii) shall also specify the date on
which the Holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
9. Stock to be Reserved. The Corporation, upon the effective date of this
Certificate of Designation, has a sufficient number of shares of Common Stock
available to reserve for issuance upon the conversion of all outstanding shares
of Series D Convertible Preferred Stock, assuming immediate conversion. The
Corporation will at all times reserve and keep available out of its authorized
Common Stock, solely for the purpose of issuance upon the conversion of Series D
Convertible Preferred Stock as herein provided, such number of shares of Common
Stock as shall then be issuable upon the conversion of all outstanding shares of
Series
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D Convertible Preferred. The Corporation covenants that all shares of Common
Stock which shall be so issued shall be duly and validly issued, fully paid and
non-assessable. The Corporation will take all such action as may be so taken
without violation of any applicable law or regulation to have a sufficient
number of authorized but unissued shares of Common Stock to issue upon
conversion of the Series D Convertible Preferred Stock. The Corporation will not
take any action which results in any adjustment of the conversion rights if the
total number of shares of Common Stock issued and issuable after such action
upon conversion of the Series D Convertible Preferred Stock would exceed the
total number of shares of Common Stock then authorized by the Certificate of
Incorporation.
10. No Reissuance of Series D Convertible Preferred Stock. Shares of Series
D Convertible Preferred Stock which are converted into shares of Common Stock as
provided herein shall not be reissued.
11. Issue Tax. The issuance of certificates for shares of Common Stock upon
conversion of Series D Convertible Preferred Stock shall be made without charge
to the Holder for any United States issuance tax in respect thereof, provided
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the Holder of the Series D Convertible
Preferred Stock which is being converted.
12. Closing of Books. The Corporation will at no time close its transfer
books against the transfer of any Series D Convertible Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Series D Convertible Preferred Stock in any manner which interferes with the
timely conversion of such Series D Convertible Preferred Stock, except as may
otherwise be required to comply with applicable securities laws.
13. Definitions. As used in this Certificate of Designation, the term
"Common Stock" shall mean and include the Corporation's authorized Common Stock,
$0.01 par value, as constituted on the date of filing of this Certificate of
Designation, and shall also include any capital stock of any class of the
Corporation thereafter authorized which shall neither be limited to a fixed sum
or percentage of par value in respect of the rights of the Holders thereof to
participate in dividends nor entitled to a preference in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or winding up
of the Corporation; provided that the shares of Common Stock receivable upon
conversion of shares of Series D Convertible Preferred Stock shall include only
shares designated as Common Stock of the Corporation on the date of filing of
this instrument, or in case of any reorganization, reclassification, or stock
split of the outstanding shares thereof, the stock, securities or assets
provided for in Subparagraph 5(f) and (g).
14. Loss, Theft, Destruction of Preferred Stock. Upon receipt of evidence
satisfactory to the Corporation of the loss, theft, destruction or mutilation of
certificates representing shares of Series D Convertible Preferred Stock and, in
the case of any such loss,
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theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (which shall not include the posting of any bond), or, in the case
of any such mutilation, upon surrender and cancellation of the Series D
Convertible Preferred Stock certificate, the Corporation shall make, issue and
deliver, in lieu of such lost, stolen, destroyed or mutilated certificates for
Series D Convertible Preferred Stock, new certificates for Series D Convertible
Preferred Stock of like tenor. The Series D Convertible Preferred Stock shall be
held and owned upon the express condition that the provisions of this Section 14
are exclusive with respect to the replacement of mutilated, destroyed, lost or
stolen shares of Series D Preferred Stock and shall preclude any and all other
rights and remedies notwithstanding any law or statue existing or hereafter
enacted to the contrary with respect to the replacement of negotiable
instruments or other securities without the surrender thereof.
15. Who Deemed Absolute Owner. The Corporation may deem the person in whose
name the Series D Convertible Preferred Stock shall be registered upon the
registry books of the Corporation to be, and may treat it as, the absolute owner
of the Series D Convertible Preferred Stock for the purpose of conversion of the
Series D Convertible Preferred Stock and for all other purposes, and the
Corporation shall not be affected by any notice to the contrary. All such
payments and such conversion shall be valid and effectual to satisfy and
discharge the liability upon the Series D Convertible Preferred Stock to the
extent of the sum or sums so paid or the conversion so made.
16. Register. The Corporation shall maintain a transfer agent, which may be
the transfer agent for the Common Stock or the Corporation itself, for the
registration of the Series D Convertible Preferred Stock. Upon any transfer of
the Series D Convertible Preferred Stock in accordance with the provisions
hereof, the Corporation shall register or cause the transfer agent to register
such transfer on the Series D Convertible Preferred Stock register.
17. Withholding. To the extent required by applicable law, the Corporation
may withhold amounts for or on account of any taxes imposed or levied by or on
behalf of any taxing authority in the United States having jurisdiction over the
Corporation from any payments made pursuant to the Series D Convertible
Preferred Stock.
18. Headings. The headings of the Sections of this Certificate of
Designation are inserted for convenience only and do not constitute a part of
this Certificate of Designation.
IN WITNESS WHEREOF, Samuel S. Gross, Executive Vice President, Secretary
and Treasurer of the Corporation, under penalties of perjury, does hereby
declare and certify that this is the act and deed of the Corporation and the
facts stated herein are true and accordingly has signed this Certificate of
Designation as of this 10th day of July, 2000.
Compositech Ltd.
By
---------------------------------
Samuel S. Gross, Executive
Vice President, Secretary and Treasurer
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