SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-A/A
(Amendment No. 3)
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
LASERSIGHT INCORPORATED
-------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 65-0273162
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(State of incorporation or organization) (IRS Employer
Identification No.)
12161 Lackland Road, St. Louis, Missouri 63146
(Address of principal executive offices) (Zip Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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None Not applicable.
If this Form relates to the registration of a class of debt securities and is
effective upon filing pursuant to General Instruction A.(c)(1), please check the
following box. [ ] If this Form relates to the registration of a class of debt
securities and is to become effective simultaneously with the effectiveness of a
concurrent registration statement under the Securities Act of 1933 pursuant to
General Instructions A.(c)(2), please check the following box. [ ]
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
-----------------------------
(Title of Class)
<PAGE>
Item 1. Description of Registrant's Securities to be Registered.
The Certificate of Amendment of Certificate of Incorporation of LaserSight
Incorporated (the "Charter") provides that the authorized capital stock of the
Company consists of 20,000,000 shares of common stock, par value $.001 per share
("Common Stock"), and 10,000,000 shares of Preferred Stock, $.001 par value
("Preferred Stock"), issuable in series.
As of September 2, 1997, the only shares of Preferred Stock outstanding are
the 1,600 shares of Series B Convertible Participating Preferred Stock discussed
below. As of such date, 9,979,672 shares of Common Stock were outstanding (not
including any shares of Common Stock issuable upon exercise of outstanding
options and warrants to acquire Common Stock). All shares of the Company's
Series A Convertible Preferred Stock issued in January 1996 had previously been
converted into Common Stock.
Common Stock
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Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of Common Stock are entitled to share pro rata in
such dividends and other distributions, if any, as may be declared by the Board
of Directors out of funds legally available therefor, subject to any prior
rights accruing to any holders of Preferred Stock. Upon the liquidation or
dissolution of the Company, the holders of Common Stock are entitled to share
proportionally in all assets available for distribution to such holders. Holders
of Common Stock have no preemptive, redemption or conversion rights. The
outstanding shares of Common Stock issued are fully paid and nonassessable.
Preferred Stock
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The Charter provides that the Board of Directors is authorized, subject to
certain limitations prescribed by law, without further stockholder approval, to
issue from time to time up to an aggregate of 10,000,000 shares of Preferred
Stock in one or more series and to fix or alter the designations, preferences,
rights and any qualifications, limitations or restrictions of the shares of each
such series thereof, including the dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of such series. The rights, preferences
and privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of Preferred
Stock which the Company may designate and issue in the future.
On August 29, 1997, the Company issued 1,600 shares of Series B Convertible
Participating Preferred Stock, par value $.001 per share (the "Series B
Preferred Stock"). The Series B Preferred Stock is convertible into Common Stock
at the option of the holders of the Series B Preferred Stock at any time until
August 29, 2000, on which date all Series B Preferred Stock remaining
outstanding will automatically be converted into Common Stock. The conversion
price will equal the lesser of $6.68 per share of Common Stock or the average of
the three lowest closing bid prices of the Common Stock during the 20 trading
days preceding the conversion date (during the 30 trading days preceding the
conversion date should the five day average price of the Common Stock on
February 25, 1998 be less than $5.138 per share). The Company has the option to
redeem up to 40% of such shares of Series B Preferred Stock for cash at a
premium of 4% on or prior to October 28, 1997. After October 28, 1997 and on or
before November 27, 1997, the Company can, subject to certain conditions, elect
to redeem up to 40% of the Series B Preferred Stock then outstanding for cash at
a premium of 6.75%, and increasing to 10% through December 27, 1997, and 14%
through January 26, 1998. If the Company redeems between 40% and 70% of such
shares of Series B Preferred Stock, the premium on or prior to September 28,
1997 is 15%; on or prior to October 28, 1997 it is 20%, and up until November
27, 1997 it is 30% (lower premiums will be recalculated if the amount exceeds
40%.) No redemption aggregating more than 40% will be allowed after November 27,
1997). Dividends on the Series B Preferred Stock are payable only to the extent
that dividends are payable on the Company's Common Stock, Each outstanding share
of Series B Preferred shall entitle the holder thereof to a liquidation
preference equal to the sum of $10,000 plus the amount of unpaid dividends
accrued on such share.
On January 10, 1996, the Company issued 116 shares of Series A Convertible
Preferred Stock, par value $.001 per share (the "Series A Preferred Stock"). All
of such shares had been converted into Common Stock.
Reference is also made to the Charter which is listed as Exhibit 1 hereto.
Delaware Law and Certain Charter Provisions
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The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("DGCL"). Subject to certain exceptions, Section 203
prohibits a publicly-held Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the interested stockholder attained such status with the
approval of the Board of Directors or unless the business combination is
approved in a prescribed manner. A "business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
interested stockholder which is not shared pro rata with the other stockholders
of the Company. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within three years
did own, 15% or more of the corporation's voting stock.
The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or by-laws, unless a corporation's certificate of
incorporation or by-laws, as the case may be, requires a greater percentage. The
By-Laws may, subject to the provisions of DGCL, be amended or repealed by a
majority vote of the Board of Directors.
The Charter contains certain provisions permitted under the DGCL relating
to the liability of directors. These provisions eliminate a director's liability
for monetary damages for a breach of fiduciary duty, except in certain
circumstances involving certain wrongful acts, such as the breach of a
director's duty of loyalty or acts or omissions which involve intentional
misconduct or a knowing violation of law. The Charter contains provisions
indemnifying the directors and officers of the Company to the fullest extent
permitted by the DGCL. The Company also has a directors and officers liability
insurance policy which provides for indemnification of its directors and
officers against certain liabilities incurred in their capacities as such. The
Company believes that these provisions will assist the Company in attracting and
retaining qualified individuals to serve as directors.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Co.
Item 2. Exhibits.
The following exhibit is filed as part of this registration statement:
1. Certificate of Incorporation of LaserSight Incorporated, as amended,
(including Certificate of Designations, Preferences and Rights of
Series B Convertible Participating Preferred Stock of LaserSight
Incorporated, as corrected).
<PAGE>
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereto duly authorized.
Date: September 26, 1997 LASERSIGHT INCORPORATED
By: /s/ Gregory L. Wilson
--------------------------
Gregory L. Wilson
Chief Financial Officer
CERTIFICATE OF INCORPORATION
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OF
Smal Incorporated
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The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter called the "corporation")
is
Smal Incorporated
SECOND: The address, including street, number, city, and county, of the
registered office of the corporation in the State of Delaware is 229 South State
Street, City of Dover, County of Kent; and the name of the registered agent of
the corporation in the State of Delaware is The Prentice-Hall Corporation
System, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is Three Thousand (3,000), all of which are without par
value. All such shares are of one class and are shares of Common Stock.
FIFTH: The name and the mailing address of the incorporator are as follows:
NAME MAILING ADDRESS
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T. M. Bonovich 229 South State Street, Dover, Delaware
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of section 291 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
EIGHTH: For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and regulation
of the powers of the corporation and of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed by, or in the manner provided in, the By-Laws. The phrase "whole
Board" and the phrase "total number of directors" shall be deemed to have
the same meaning, to wit, the total number of directors which the
corporation would have if there were no vacancies. No election of directors
need be by written ballot.
2. After the original or other By-Laws of the corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and, after the corporation has received any payment for any of
its stock, the power to adopt, amend, or repeal the By-Laws of the
corporation may be exercised by the Board of Directors of the corporation;
provided, however, that any provision for the classification of directors
of the corporation for staggered terms pursuant to the provisions of
subsection (d) of Section 141 of the General Corporation Law of the State
of Delaware shall be set forth in an initial By-Law or in a By-Law adopted
by the stockholders entitled to vote of the corporation unless provisions
for such classification shall be set forth in this certificate of
incorporation.
3. Whenever the corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of, and the right to vote at, any meeting of stockholders. Whenever
the corporation shall be authorized to issue more than one class of stock,
no outstanding share of any class of stock which is denied voting power
under the provisions of the certificate of incorporation shall entitle the
holder thereof to the right to vote at any meeting of stockholders except
as the provisions of paragraph (2) of subsection (b) of section 242 of the
General Corporation Law of the State of Delaware shall otherwise require;
provided, that no share of any such class which is otherwise denied voting
power shall entitle the holder thereof to vote upon the increase or
decrease in the number of authorized shares of said class.
NINTH: The personal liability of the directors of the corporation is hereby
eliminated to the fullest extent permitted by paragraph (7) of subsection (b) of
Section 102 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented.
TENTH: The corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under said section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any By-Law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ELEVENTH: From time to time any of the provisions of this certificate of
incorporation may be amended, altered or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted in the manner and at the time prescribed by said laws, and all
rights at any tie conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
Signed on September 29, 1987.
/s/ T.M. Bonovich
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T. M. Bonovich
Incorporator
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
SMAL INCORPORATED
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It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
Smal Incorporated.
2. The certificate of incorporation of the corporation is hereby amended by
striking out Article First thereof and by substituting in lieu of said Article
the following new Article:
1. The name of the corporation is Starwood Industries, Inc.
3. The corporation has not received any payment for any of its stock.
4. The amendment of the certificate of incorporation herein certified has
been duly adopted in accordance with the provisions of Section 241 of the
General Corporation Law of the State of Delaware.
EXECUTED as of this 28th day of May, 1991.
/s/ Jonnie R. Williams
---------------------------
Jonnie R. Williams, sole Director
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
STARWOOD INDUSTRIES, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "corporation") is
Starwood Industries, Inc. (formerly Smal Incorporated).
2. The certificate of incorporation of the corporation is hereby amended by
striking out Article First thereof and by substituting in lieu of said Article
the following new Article:
1. The name of the corporation is LaserSight Incorporated
3. The corporation has not received any payment for any of its stock.
4. The amendment of the certificate of incorporation herein certified has
been duly adopted in accordance with the provisions of Section 241 of the
General Corporation Law of the State of Delaware.
EXECUTED as of this 11th day of June, 1991.
/s/ Jonnie R. Williams
--------------------------
Jonnie R. Williams, sole Director
<PAGE>
Certificate of Amendment of Certificate Of Incorporation
of
LaserSight Incorporated
-----------------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation Law
of the State of Delaware
The undersigned, Chief Executive Officer, and Secretary of LaserSight
Incorporated, a corporation existing under the laws of the State of Delaware,
does hereby certify as follows:
FIRST: The Certificate of Incorporation is amended to delete paragraph
"FOURTH:" in its entirety and to replace same with the following:
"FOURTH: The total number of Shares of stock which the Corporation
shall have the authority to issue is 15,000,000 Shares, par value one
cent (.01) per share. All such Shares are of one class, and all Shares
are Common Stock. The purpose of this amendment is to split the
Company's Common Stock on a 5,000-for-one basis."
SECOND: That such amendment has been duly adopted in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the
State of Delaware by the written consent of the holders of not less than a
majority of the outstanding stock entitled to vote thereon and that written
notice of the corporate action has been given to those stockholders who
have not consented in writing, all in accordance with the provisions of
Section 228 of the General Corporation Law.
All of the rest and remainder of the corporation's Certificate of
Incorporation shall remain in full force and effect.
IN WITNESS WHEREOF, we have signed this Certificate this 17th day of July,
1991.
ATTEST:
/s/ J.T. Lin /s/ J.T. Lin
- ------------------------ -------------------------
J.T. LIN J.T. LIN
Title: Assistant Secretary Title: Chief Executive Officer
<PAGE>
Certificate of Amendment of Certificate of Incorporation
of
LaserSight Incorporated
-----------------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation Law
of the State of Delaware
The undersigned, Chief Executive Officer, and Assistant Secretary of
LaserSight Incorporated, a corporation existing under the laws of the State of
Delaware, does hereby certify as follows:
FIRST: The Certificate of Incorporation is amended to delete paragraph
"FOURTH:" in its entirety and to replace same with the following:
"FOURTH: The total number of Shares of stock which the Corporation
shall have the authority to issue is 10,000,000 Shares, par value one
cent (.01) per Share. All such Shares are of one class, and all Shares
are Common Stock. The purpose of this amendment is to effect a
two-for-three reverse split of the Corporation's Common Stock, and
adjust par value to remain at $.01 per Share. As a result of this
amendment, the number of Shares the Corporation shall have the
authority to issue shall be reduced from 15,000,000 to 10,000,000, and
the outstanding Shares shall be reduced from 1,505,000 to 1,003,333.
SECOND: That such amendment has been duly adopted in accordance with the
provisions of the Sections 228 and 242 of the General Corporation Law of
the State of Delaware by the written consent of the holders of not less
than a majority of the outstanding stock entitled to vote thereon and that
written notice of the corporate action has been given to those stockholders
who have not consented in writing, all in accordance with the provisions of
Section 228 of the General Corporation Law.
All of the rest and remainder of the corporation's Certificate of
Incorporation shall remain in full force and effect.
IN WITNESS WHEREOF, we have signed this Certificate this second day of
September, 1991.
ATTEST:
/s/ J.T. Lin /s/ J.T. Lin
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J.T. LIN J.T. LIN
Title: Assistant Secretary Title: Chief Executive Officer
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE
OF INCORPORATION OF LASERSIGHT INCORPORATED
The undersigned, President and Secretary of LaserSight Incorporated, a
corporation existing under the laws of the State of Delaware, hereby certify as
follows:
FIRST: The Certificate of Incorporation is amended to delete Paragraph
"Fourth:" in its entirety and to replace the same with the following:
FOURTH: The total number of shares of stock which the corporation
shall have the authority to issue is 20,000,000 shares, par value one
tenth of one cent ($.001) per share. All such shares are of one class,
and all shares are common stock.
SECOND: That such Amendment has been duly adopted in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware by the duly authorized vote of the shareholders at a meeting called
for such purpose. Except as amended hereby, the rest and remainder of the
Corporation's Certificate of Incorporation shall be and remain in full force and
effect.
IN WITNESS WHEREOF, the undersigned have signed this Certificate this 30th
day of June, 1993.
LaserSight Incorporated
By: /s/ J.T. Lin
---------------------
J.T. Lin, Ph.D., President
ATTEST:
/s/ Wen S. Dai
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Wen S. Dai, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
LASERSIGHT INCORPORATED
The undersigned President and Secretary of LaserSight Incorporated, a
corporation existing under the laws of the State of Delaware, hereby certify as
follows:
1. The Certificate of Incorporation is amended to delete Paragraph Fourth
in its entirety and to replace the same with the following:
FOURTH: Number and Class of Shares Authorized; Par Value.
1. Authorized Stock. This corporation is authorized to issue the
following shares of capital stock:
(a) Common Stock. The aggregate number of shares of Common Stock
which the corporation shall have authority to issue is 20,000,000 with a
par value of $.001 per share.
(b) Preferred Stock. The aggregate number of shares of Preferred
Stock which the corporation shall have authority to issue is 10,000,000
with a par value of $.001 per share.
2. Description of Common Stock. Holders of Common Stock are entitled
to one vote for each share held of record on all matters submitted to a
vote of stockholders and may not cumulate their votes for the election of
directors. Shares of Common Stock are not redeemable, do not have any
conversion or preemptive rights, and are not subject to further calls or
assessments once fully paid.
Holders of Common Stock will be entitled to share pro rata in such
dividends and other distributions as may be declared from time to time by
the board of Directors out of funds legally available therefor, subject to
any prior rights accruing to any holders of preferred stock of the Company.
Upon liquidation or dissolution of the Company, holders of shares of Common
Stock will be entitled to share proportionally in all assets available for
distribution to such holders.
3. Description of Preferred Stock. The terms, preferences, limitations
and relative rights of the Preferred Stock are as follows:
(a) The Board of Directors is expressly authorized at any time and
from time to time to provide for the issuance of shares of Preferred Stock
in one or more series, with such voting powers, full or limited, but not to
exceed one vote per share, or without voting powers, and with such
designations, preferences and relative participating, optional or other
special rights, qualifications, limitations or restrictions, as shall be
fixed and determined in the resolution or resolutions providing for the
issuance thereof adopted by the Board of Directors, and as are not stated
and expressed in these Articles of Incorporation or any amendment hereto,
including (but without limiting the generality of the foregoing) the
following:
(i) the distinctive designation of such series and the
number of shares which shall constitute such series, which number may be
increased (except where otherwise provided by the Board of Directors in
creating such series) or decreased (but not below the number of shares
thereof then outstanding) from time to time by resolution by the Board of
Directors;
(ii) the rate of dividends payable on shares of such series,
the times of payment, whether dividends shall be cumulative, the conditions
upon which and the date from which such dividends shall be cumulative;
(iii) whether shares of such series can be redeemed, the
time or times when, and the price of prices at which shares of such series
shall be redeemable, the redemption price, terms and conditions of
redemption, and the sinking fund provisions, if any, for the purchase of
redemption of such shares;
(iv) the amount payable on shares of such series and the
rights of holders of such shares in the event of any voluntary of
involuntary liquidation, dissolution or winding up of the affairs of the
corporation;
(v) the rights, if any, of the holders of shares of such
series to convert such shares into, or exchange such shares for, shares of
Common Stock or shares of any other class or series of Preferred Stock and
the terms and conditions of such conversion or exchange; and
(vi) the rights, if any, of the holders of shares of such
series to vote.
(b) Except in respect of the relative rights and preferences that
may be provided by the Board of Directors as hereinbefore provided, all
shares of Preferred Stock shall be of equal rank and shall be identical,
and each share of a series shall be identical in all respects with the
other shares of the same series.
2. Such Amendment has been duly adopted in accordance with the provisions
of Sections 228 and 242 of the General Corporation Law of the State of Delaware
by the duly authorized vote of the shareholders at a meeting called for such
purpose. Except as amended hereby, the rest and remainder of the Corporation's
Certificate of Incorporation shall be and remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have signed this Certificate this 2nd
day of June, 1995.
LASERSIGHT INCORPORATED
By: /s/ Robert Qualls
------------------------
Robert Qualls, President
ATTEST:
/s/ Robert Qualls
- ----------------------------
Robert Qualls, Secretary
<PAGE>
LASERSIGHT INCORPORATED
CERTIFICATE OF DESIGNATION RELATING
TO THE SERIES A CONVERTIBLE PREFERRED STOCK,
PAR VALUE OF $.001 PER SHARE,
OF LASERSIGHT INCORPORATED
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
LaserSight Incorporated, a Delaware corporation (the "Corporation"), hereby
certifies that pursuant to the authority contained in Article Fourth of the
Corporation's Certificate of Incorporation, as amended ("Certificate of
Incorporation"), and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, the following resolution was
duly adopted by the Board of Directors of the Corporation ("Board"), creating a
series of its Preferred Stock designated as Series A Convertible Preferred
Stock:
RESOLVED, that there is hereby created and the Corporation be, and it
hereby is, authorized to issue 116 shares of a series of its Preferred Stock
designated Series A Convertible Preferred Stock (the "Series A Preferred") to
have the powers, preferences and rights and the qualifications, limitations or
restrictions thereof hereinafter set forth in this resolution:
1. Preference. The preferences of each share of Series A Preferred with respect
to dividend payments and distributions of the Corporation's assets upon
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation shall be equal to the preferences of every other share of 1995
Preferred (as defined in Section 12 hereof) from time to time outstanding in
every respect and prior in right to such preferences of all Common Stock of the
Corporation, whether now or hereafter authorized, except as approved in
accordance with the provisions of Section 11 hereof.
2. Voting Rights. The Holders of the Series A Preferred, by virtue of their
ownership thereof, will not have any voting rights, except as otherwise provided
herein, in the Certificate of Incorporation or by law. With respect to all
voting rights pursuant to Section 11 hereof or of any other certificate of
designation filed by the Corporation with respect to the 1995 Preferred, Holders
of Series A Preferred and Holders of 1995 Preferred shall vote together as a
single and separate class except as otherwise provided in the Certificate of
Incorporation, by law or by any other certificate of designation filed by the
Corporation with respect to a series of its Preferred Stock.
3. Liquidation Rights. If the Corporation shall be voluntarily or involuntarily
liquidated, dissolved or wound up, at any time when any shares of Series A
Preferred shall be outstanding, each then-outstanding share of Series A
Preferred shall entitle the Holder thereof to a preference against the Property
of the Corporation available for distribution to the Holders of the
Corporation's Stock equal to the sum of the Original Issue Price plus an amount
equal to all unpaid dividends accrued on such share to the date of payment.
Neither the consolidation nor merger of the Corporation into or with any
corporation or corporations, nor the sale nor transfer by the Corporation of all
or any part of its Property, nor any reduction of the authorized or issued
shares of the Stock of the Corporation of any class, whether now or hereafter
authorized, shall be deemed to be a liquidation of the Corporation within the
meaning of any of the provisions of this Section 3.
All of the preferential amounts to be paid to the Holders of 1995 Preferred as
provided in this Section 3 or in any other certificate of designation filed by
the Corporation with respect to the 1995 Preferred shall be paid or set apart
for payment before the payment or setting apart for payment of any amount for,
or the distribution of any Property of the Corporation to, the Holders of any
Common Stock of the Corporation, whether now or hereafter authorized, in
connection with such liquidation, dissolution or winding up. If upon such
liquidation, dissolution or winding-up, the assets of the Corporation
distributable as aforesaid to Holders of the Preferred Stock (including the 1995
Preferred) then outstanding shall be insufficient to permit the payment to them
of the aggregate amount of the liquidation preference applicable to such
Preferred Stock, the entire assets of the Corporation available for distribution
shall be distributed ratably among the Holders of the Preferred Stock (including
the 1995 Preferred) in accordance with the aggregate liquidation preference of
the Preferred Stock held by such Holders.
4. Dividends. Commencing the Closing Date, the Holders of Series A Preferred
shall be entitled to receive, when and as declared by the Board out of shares
legally available therefor, dividends payable in shares of Common (valued in
each case at the Market Price of the Common on the NASDAQ National Market on the
day prior to the dividend payment date) at a per share annual rate of 10% of the
Original Issue Price. Such dividends shall be payable on the effective date
applicable to a conversion, exchange or redemption of the Series A Preferred to
the holders thereof as of such effective date and shall be cumulative from the
date of issuance of the Series A Preferred and shall accrue until paid, whether
or not earned, whether or not declared by the Board and whether or not there are
shares legally available therefor on the date such dividends are payable.
5. Conversion.
(A) General. For the purposes of conversion, the Series A Preferred shall
be valued at the Original Issue Price. Subject to adjustment as provided in
Section 8 hereof, if converted, the Series A Preferred shall be converted into
Common at a price per share of Common (the "Conversion Price") equal to (i) the
lesser of (x) the Adjusted Strike Price (as defined in Section 12 hereof) or (y)
85% of the Market Price (as defined in Section 12 hereof) divided by (ii) the
Registration Factor (as defined in Section 12 hereof); provided, however, that
the Conversion Price as of any date shall not be less than the Minimum
Conversion Price (as defined in Section 12 hereof) determined as of such date.
(B) Right of Holders to Optional Conversion. Subject to the provisos to
this Section 5(B), the Holders of Series A Preferred shall have the right, at
their option, to convert such shares into Common at any time during the period
beginning 90 days after the Closing Date and ending two years after the Closing
Date; provided, however, that if the Conversion Price in effect at the time of
any optional conversion pursuant to this Section 5(B) is less than or equal to
the Cash Option Price (as defined in Section 12 hereof), the Corporation shall
have the right, but not the obligation, to redeem any or all of such shares of
Series A Preferred surrendered for conversion pursuant to this Section 5(B) for
cash in an amount equal to 115% of the aggregate Original Issue Price of the
shares of Series A Preferred to be so redeemed (such amount, the "Redemption
Amount"); and provided further, that the Corporation may at any time within two
business days after receipt of a notice of conversion pursuant to this Section
5(B), exercise any of its rights pursuant Section 6 hereof with respect to any
of the shares of Series A Preferred subject to such notice of conversion. Any
shares of Common issued pursuant to this Section 5(B) shall be valued at the
Market Price of the Common on the Effective Date (as defined in Section 5(C)
hereof).
(C) Method of Exercise; Payment; Issuance of Common; Transfer and Exchange.
The conversion right granted by Section 5(B) hereof may be exercised by a Holder
of Series A Preferred, in whole or in part, by telecopying a completed Notice
substantially in the form attached hereto as Exhibit A and delivering such
Notice, together with the stock certificate or certificates representing the
Series A Preferred to be converted, duly executed for transfer or accompanied by
executed stock powers (such execution to be either (i) accompanied by a
signature guarantee by a member firm of the New York Stock Exchange, or (ii)
evidenced by a signature on behalf of such Investor without such a guarantee,
provided that the Investor has previously delivered to the Company a written
instrument that (x) authorizes the Company to rely upon such unguaranteed
signature for all purposes relating to the transfer or conversion of Preferred
Shares, (y) includes a specimen of such unguaranteed signature on which the
Company shall be entitled to rely without further investigation, and (z) holds
the Company harmless from any loss resulting from any unauthorized or fraudulent
signature purporting on its face to be an authorized signature so long as the
Company relies on such specimen signature without gross negligence (such
instrument, a "Specimen Signature Authorization")), by express courier to the
principal office of the Corporation (or at such other place as the Corporation
may from time to time designate in a written notice sent to the Holder by
first-class mail, postage prepaid, at its address shown on the books of the
Corporation) against delivery of (1) that number of whole shares of Common equal
to the quotient of (a) the aggregate Original Issue Price of the Series A
Preferred so surrendered, divided by (b) the Conversion Price in effect on the
Effective Date, or (2) if the Conversion Price in effect on the Effective Date
is less than or equal to the Cash Option Price and the Corporation shall have
exercised its right pursuant to Section 5(B) hereof to redeem any or all of such
Series A Preferred for cash, cash in an amount equal to the Redemption Amount,
together with that number of whole shares of Common, if any, equal to the
quotient of (a) the aggregate Original Issue Price of the shares of Series A
Preferred not so redeemed by the Company, divided by (b) the Conversion Price in
effect on the Effective Date. Any conversion or redemption pursuant to Section
5(B) hereof shall irrevocably become effective upon, and only upon, the date of
acceptance (the "Effective Date") by the Corporation (which date shall in no
event be more than two business days after the date of its receipt) of the duly
completed and executed Notice, certificates for all shares of Series A Preferred
being converted or redeemed, duly executed for transfer or accompanied by
executed stock powers (such execution to be either (i) accompanied by a
signature guarantee by a member firm of the New York Stock Exchange, or (ii) a
Specimen Signature Authorization), in accordance with this Section 5. In the
event of any exercise of the conversion and/or redemption rights granted by
Section 5(B) in accordance with the terms thereof, (i) stock certificates for
the shares of Common acquired by virtue of such exercise and/or cash (as
applicable) shall promptly (and in no event more than five business days after
the Effective Date) be sent to such Holder, and unless the Series A Preferred
has been fully converted or redeemed (as applicable), a new Series A Preferred
stock certificate, representing the Series A Preferred not so converted or
redeemed shall also be delivered to such Holder forthwith and (ii) any stock
certificates for the shares of Common so acquired shall be dated the Effective
Date and the Holder making such surrender shall be deemed for all purposes to be
the Holder of the shares of Common so acquired as of the Effective Date.
(D) Mandatory Conversion. All shares of Series A Preferred outstanding two
years after the Closing Date shall, without any further action by the Holders
thereof, be converted into Common (a "Mandatory Conversion") as of such date
(the "Mandatory Conversion Date"). The number of whole shares of Common to be
delivered to each Holder of Series A Preferred upon a Mandatory Conversion
pursuant to this Section 5(D) shall equal the quotient of 1) the aggregate
Original Issue Price of the Series A Preferred so surrendered divided by (2) the
Conversion Price in effect on the Mandatory Conversion Date. Upon the Mandatory
Conversion of the Series A Preferred pursuant to this Section 5(D), the
Corporation shall promptly (and in no event more than two business days after
the Mandatory Conversion Date) transmit to each Holder of Series A Preferred
notice thereof in reasonable detail. Upon receipt from each Holder of Series A
Preferred of the certificate or certificates representing such Holder's shares
of Series A Preferred so converted duly executed for transfer or accompanied by
executed stock powers (such execution to be either (i) accompanied by a
signature guarantee by a member firm of the New York Stock Exchange, or (ii) a
Specimen Signature Authorization), the Corporation shall promptly (and in no
event more than five business days after the date of such receipt) transmit
certificates representing the shares of Common issued to such Holder as a result
of the Mandatory Conversion. Such certificates shall be dated the Mandatory
Conversion Date, and such Holders shall be deemed for all purposes to be the
Holders of such Common as of the Mandatory Conversion Date.
(E) Stock Fully Paid; Reservation of Shares. All shares of Common which may
be issued upon conversion of Series A Preferred or as a dividend pursuant to
Section 4 hereof will, upon issuance, be duly issued, fully paid and
nonassessable and free from all taxes, liens, and charges with respect to the
issue thereof. At all times that any Series A Preferred is outstanding, the
Corporation shall have authorized, and shall have reserved for the purpose of
issuance upon such conversion, a sufficient number of shares of Common to
provide for (1) the conversion into Common of all Series A Preferred then
outstanding at the then-effective Conversion Price and (2) the payment of all
dividends payable with respect to the Series A Preferred pursuant to Section 4
hereof.
6. Redemption and Call for Exchange by the Corporation.
(A) During the periods specified below, the Corporation, by written notice
to the Holders of outstanding shares of 1995 Preferred, may (but is not required
to) either:
(1) during the period beginning on the 90th day after the Closing Date
and ending 24 months after the Closing date, redeem for cash each (but not
less than all) of the then-outstanding shares of 1995 Preferred at a
redemption price per share of 1995 Preferred equal to the Original Issue
Price multiplied by the Redemption Factor (as defined in Section 12 hereof)
determined as of the date of such notice of redemption; or
(2) during the period beginning on the first day after the first
anniversary of the Closing Date and ending two years after the Closing
Date, exchange each (but not less than all) of the then-outstanding shares
of 1995 Preferred for a number of shares of Common equal to the Original
Issue Price (i) multiplied by the Redemption Factor determined as of the
date of such notice of exchange and then (ii) divided by the Market Price
determined as of the date of such notice; provided that a Registration
Statement is then effective under the Securities Act.
(B) Any notice of an optional redemption or exchange of the Series A
Preferred pursuant to Section 6(A) hereof shall be promptly delivered by the
Corporation to each Holder of outstanding Series A Preferred and shall describe
such optional redemption or exchange in reasonable detail. All shares of Series
A Preferred outstanding on the date of such notice shall, without any further
action by the Holders thereof, be redeemed or exchanged (as applicable) in
accordance with this Section 6 effective as of the date of such notice. Upon
receipt from each Holder of Series A Preferred of the certificates representing
the Series A Preferred so redeemed or exchanged duly executed for transfer or
accompanied by executed stock powers (such execution to be either (i)
accompanied by a signature guarantee by a member firm of the New York Stock
Exchange, or (ii) a Specimen Signature Authorization), the Corporation shall
promptly (and in no event more than five business days after the date of such
receipt) transmit cash or certificates representing shares of Common (as
applicable) in accordance with this Section 6. Any such certificates
representing shares of Common shall be dated the date of the notice delivered by
the Corporation pursuant to this Section 6(B), and such Holders shall be deemed
for all purposes to be the Holders of such Common as of the date of such notice.
7. Payment of Accrued Dividends. At the time of any conversion, redemption or
exchange of a share of Series A Preferred pursuant to Sections 5 or 6 hereof, as
applicable, the Corporation shall pay in Common (valued at the Market Price of
the Common on the date of conversion, redemption or exchange, as applicable) to
the Holder thereof an amount equal to all unpaid dividends accrued thereon to
the date of conversion, redemption or exchange (as applicable), whether or not
declared by the Board. If the Corporation has insufficient shares legally
available on the date specified above to pay such accrued but unpaid dividends
pursuant to this Section 7 (whether due to restrictions imposed by regulatory
authorities or applicable law), then shares to the extent legally available
shall be used to pay such amount, in which case the shares of Common shall be
issuable pro rata to each Holder whose Preferred Stock is being converted,
redeemed or exchanged, as applicable. From time to time thereafter, whenever
additional shares of Common are legally available for the payment of dividends,
such shares shall be immediately used to pay the unpaid portion of any such
shares of Common issuable as accrued dividends.
8. Certain Adjustments. For purposes of Sections 5 and 6 hereof, the number of
shares of Common issuable upon the conversion or exchange of Series A Preferred,
the Adjusted Strike Price, and the Cash Option Price shall be appropriately
adjusted, as deemed equitable by the Corporation, from time to time upon the
happening of certain events, as follows:
(A) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding Common (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination thereof), or in case of any
consolidation or merger of the Corporation with or into another corporation
(other than a merger with another corporation in which the Corporation is the
surviving corporation and which does not result in any reclassification or
change (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination
thereof) of outstanding Common, the rights of the Holders of the outstanding
Series A Preferred shall be adjusted in the manner described below:
(1) In the event that the Corporation is the surviving corporation,
the Series A Preferred shall, without payment of additional consideration
therefor, be deemed modified so as to provide that upon conversion or
exchange thereof the Holder of the Series A Preferred being converted or
exchanged, as applicable, shall procure, in lieu of each share of Common
theretofore issuable upon such conversion or exchange, the kind and amount
of shares of Stock, other securities, money and Property receivable upon
such reclassification, change, consolidation or merger by the Holder of
each share of Common had such conversion or exchange occurred immediately
prior to such reclassification, change, consolidation or merger. The
provisions of this clause (a) shall similarly apply to successive
reclassifications, changes, consolidations and mergers.
(2) In the event that the Corporation is not the surviving
corporation, the surviving corporation shall, without payment of any
additional consideration therefor, issue new Series A Preferred, providing
that upon conversion or exchange thereof, the Holder thereof shall procure
in lieu of each share of Common theretofore issuable upon conversion or
exchange, as applicable, of the Series A Preferred the kind and amount of
shares of Stock, other securities, money and Property receivable upon such
reclassification, change, consolidation or merger by the Holder of each
share of Common issuable upon conversion or exchange, as applicable,of the
Series A Preferred had such conversion or exchange, as applicable, occurred
immediately prior to such reclassification, change, consolidation or
merger. Such new Series A Preferred shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 8. The provisions of this clause (b) shall
similarly apply to successive reclassifications, changes, consolidations
and mergers.
(B) Subdivision or Combination of Shares. If the Corporation, at any time
while any of the Series A Preferred is outstanding, shall subdivide or combine
its Common, the Adjusted Strike Price, the Cash Option Price shall be
proportionately reduced, in case of subdivision of shares, as of the effective
date of such subdivision, or if the Corporation shall take a record of Holders
of its Common for the purpose of a subdividing, as of the close of business on
such record date, whichever is earlier, or shall be proportionately increased,
in the case of combination of shares, as of the effective date of such
combination or, if the Corporation shall take a record of Holders of its Common
for the purpose of so combining, as of the close of business on such record
date, whichever is earlier.
(C) Certain Dividends and Distributions. If the Corporation, at any time
while any of the Series A Preferred is outstanding, shall pay a dividend payable
in, or make any other distribution of, Common to all Holders of Common on a pro
rata basis, the Adjusted Strike Price and the Cash Option Price shall be
adjusted, as of the close of business on the date the Corporation shall take a
record of the Holders of its Common for the purpose of receiving such dividend
or other distribution (or if no such record is taken, as of the date of such
dividend or other distribution is paid), to that price determined by multiplying
each of the Adjusted Strike Price and the Cash Option Price by a fraction (a)
the numerator of which shall be the total number of shares of Common outstanding
immediately prior to the payment of such dividend or distribution and (2) the
denominator of which shall be the total number of shares of Common outstanding
immediately after the payment of such dividend or distribution (plus in the
event that the Corporation paid cash for fractional shares, the number of
additional shares which would have been outstanding had the Corporation issued
fractional shares in connection with said dividend or distribution). The number
of shares of Common at any time outstanding shall not include any shares thereof
then directly or indirectly owned or held by or for the account of the
Corporation or any Subsidiary.
9. Fractional Shares. No fractional shares of Common shall be issued in
connection with any conversion of Series A Preferred or dividend payable with
respect to the Series A Preferred, but in lieu of such fractional shares, the
Corporation shall make a cash payment therefor equal in amount to the product of
the applicable fraction, multiplied by either (1) the Conversion Price then in
effect (in the case of a conversion of Series A Preferred pursuant to Section 5
hereof) or (2) the Market Price then in effect (in the case of a dividend
payable pursuant to Section 4 hereof or an exchange pursuant to Section 6
hereof), in each case to the extent sufficient funds are legally available
therefore.
10. Status of Redeemed or Converted Series A Preferred. No shares of Series A
Preferred which have been redeemed for cash or converted into or exchanged for
Common shall be reissued by the Corporation.
11. Protective Provisions. So long as any shares of 1995 Preferred shall be
outstanding, the Corporation shall not, without the approval by the vote or
written consent of the Holders of at least a majority (or more if required by
law) of the then-outstanding shares of 1995 Preferred:
(A) Amend, waive or repeal any provisions of, or add any provision to,
(i) this Certificate of Designation, (ii) any other certificate of
designation filed by the Corporation with respect to the 1995 Preferred or
(iii) if such amendment, waiver, repeal or addition would have an adverse
effect upon the rights, preferences or priorities of the Holders of 1995
Preferred, any provision of the Corporation's Certificate of Incorporation
or of any other certificate of designation filed with the Secretary of
State of Delaware by the Corporation with respect to its Preferred Stock
(other than Parity Stock);
(B) Amend, waive or repeal any provisions of, or add any provision to,
the Corporation's By-Laws, if such amendment, waiver, repeal or addition
would have an adverse effect upon the rights, preferences or priorities of
the Holders of 1995 Preferred;
(C) Authorize, create, issue or sell any shares of Senior Stock;
(D) Enter into, or permit any Subsidiary to enter into, any agreement,
indenture or other instrument which contains any provisions restricting the
Corporation's obligation to pay dividends on the 1995 Preferred in
accordance with Section 4 hereof or of any other certificate of designation
filed by the Corporation with respect to the 1995 Preferred;
(E) Sell, lease, encumber, transfer, liquidate or otherwise dispose
of, in one transaction or a series of related transactions, all or
substantially all of the Property of the Corporation; or
(F) Dissolve the Corporation.
12. Definitions. As used in this Certificate of Designation, the following terms
have the following meanings:
"Adjusted Strike Price" shall mean 107% of the closing price of the Common
on the NASDAQ National Market on the trading day prior to the execution and
delivery of the Subscription Agreements.
"Cash Option Price" shall initially mean $10.00 per share of Common,
subject to adjustment pursuant to Section 8 hereof.
"Closing Date" shall mean the date on which Spencer Trask certifies in
writing to the Corporation that it has completed the distribution of all the
1995 Preferred to be issued pursuant to and in accordance with the Spencer Trask
Commitment Letter.
"Common" shall mean the Corporation's Common Stock, par value $.001 per
share, and any stock into which such stock may hereafter be changed.
"Conversion Price" shall have the meaning specified in Section 5(A) hereof,
as adjusted from time to time pursuant to Section 8 hereof.
"Effective Date" shall have the meaning specified in Section 5(C) hereof.
"Holders" shall mean, in respect of any Security, the Persons who shall,
from time to time, own of record such Security. The term "Holder" shall mean one
of the Holders.
"Mandatory Conversion" shall have the meaning set forth in Section 5(D)
hereof.
"Mandatory Conversion Date" shall have the meaning set forth in Section
5(D) hereof.
"Market Price" as of any date shall mean the average closing price of the
Common on the Nasdaq National Market during the five trading day period ending
on the trading day immediately preceding such date.
"Minimum Conversion Price" as of any date shall mean the highest price that
would, if all of the shares of 1995 Preferred then outstanding were converted at
such price, result in the issuance of a number of shares of Common that, when
added to the number of shares (if any) of Common issued in connection with all
previous conversions of shares of 1995 Preferred, would exceed the product of
(i) 1,401,016 shares (as such number may be equitably increased or decreased by
the Corporation from time to time to give effect to any subdivision or
combination, respectively, of the outstanding shares of Common) multiplied by
(ii) a fraction, the numerator of which is the Aggregate Issue Price of all
shares of 1995 Preferred theretofore issued (whether or not then outstanding)
and the denominator of which is $8,000,000.
"1995 Preferred" shall mean the Series A Preferred and any other series of
Preferred Stock of the Corporation issued in the aggregate amount of up to 116
shares pursuant to and in accordance with the Spencer Trask Commitment Letter.
"Original Issue Price" shall mean $50,000 per share of Series A Preferred
or 1995 Preferred, as applicable.
"Parity Stock" shall mean any shares of any class or series of Stock of the
Corporation having any preference or priority as to dividends or liquidation on
a parity with any such preference or priority of the 1995 Preferred and no
preference or priority as to dividends or liquidation superior to any such
preference or priority of the 1995 Preferred and any instrument or Security
convertible into or exchangeable for Parity Stock. Without limiting the
generality of the foregoing, a dividend rate, mandatory or optional sinking fund
payment amounts or schedules or optional redemption provisions, the existence of
a conversion right or the existence of a liquidation preference of up to 100% of
the original issue price thereof plus unpaid accrued dividends plus a premium of
up to the dividend rate or up to the percentage of the equity of the Corporation
represented by such Stock, with respect to any class or series of Stock,
differing from that of the 1995 Preferred, shall not prevent such class of Stock
from being Parity Stock.
"Person" shall mean an individual, a corporation, a partnership, a limited
liability company, a trust, an unincorporated organization or a government
organization or an agency or political subdivision thereof.
"Property" shall mean an interest in any kind of property or assets,
whether real, personal or mixed, or tangible or intangible.
"Redemption Amount" shall have the meaning specified in Section 5(B)
hereof.
"Redemption Factor" shall mean (i) during the period ending one year after
the Closing Date, 1.35 and (ii) during the period beginning on the first day
after the first anniversary of the Closing Date and ending two years after the
Closing Date (such period, the "Second Year Period"), the sum of 1.35 plus the
product of (x) the number of calendar days elapsed in the Second Year Period up
to and including the redemption date multiplied by (y) 0.30 divided by 365
(rounded to the nearest 0.0001).
"Registration Factor" shall mean (i) if the Corporation shall have filed
the Registration Statement with the SEC within 60 days after the Closing Date,
one (1.0), (ii) if the Corporation shall not have filed the Registration
Statement with the SEC (the "delay") within 60 days after the Closing Date, 1.01
(if the delay is for 7 or fewer days); 1.02 (if the delay is between 8 and 14
days); 1.03 (if the delay is between 15 and 21 days); 1.04 (if the delay is
between 22 and 28 days); 1.05 (if the delay is between 29 and 31 days); 1.06 (if
the delay is between 32 and 45 days); 1.06 plus 0.01 multiplied by the number of
full months that such delay extends beyond the 45th day.
"Registration Statement" shall mean a registration statement pursuant to
the Securities Act of 1933 to register the offer and sale of the shares of
Common issuable upon conversion of Series A Preferred.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall mean any debt or equity securities of a corporation,
whether now or hereafter authorized, and any instrument convertible into or
exchangeable for Securities or a Security. The term "Security" shall mean one of
the Securities.
"Senior Stock" shall mean any shares of any class or series of Stock of the
Corporation having any preference or priority as to dividends or Property
superior to any such preference or priority of the 1995 Preferred and any
instrument or Security convertible into or exchangeable for Senior Stock.
"Series A Preferred" shall mean the Corporation's Series A Convertible
Preferred Stock, $.001 par value per share, and any Stock into which such Stock
may hereafter be changed.
"Spencer Trask" shall mean Spencer Trask Securities Incorporated, a
Delaware corporation.
"Spencer Trask Commitment Letter" shall mean that certain commitment letter
dated December 12, 1995 between the Corporation and Spencer Trask relating to a
private placement of the 1995 Preferred.
"Stock" shall include any and all shares, interests or other equivalents
(however designated) of, or participations in, corporate stock.
"Subscription Agreements" shall mean the certain Subscription Agreements
between the Corporation and the person or persons named on the signature pages
thereof dated various dates and accepted by the Corporation on the date hereof
and relating to the purchase and sale of shares of Series A Preferred.
"Subsidiary" shall mean any corporation at least 50% of whose outstanding
Voting Securities and capital stock are owned directly or indirectly by the
Corporation or by one or more Subsidiaries or by the Corporation and one or more
Subsidiaries.
"Voting Securities" as applied to the Securities of any corporation, shall
mean Securities of any class or classes (however designated) having ordinary
voting power for the election of one or more members of the board of directors
(or other governing body) of such corporation, other than Securities having such
power only by reason of the happening of a contingency.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be duly executed this 10th day of January, 1996.
LASERSIGHT INCORPORATED
By: /s/ Michael R. Farris
-------------------------
Name: Michael R. Farris
Title: President
Attest:
/s/ Gregory L. Wilson
- ----------------------------
Gregory L. Wilson, Secretary
<PAGE>
CONVERSION NOTICE Exhibit A
(To be executed if Holder desires to make a conversion election pursuant to
Section 5(B))
To LaserSight Incorporated:
The undersigned hereby irrevocably elects to convert ________ shares of
Series A Preferred Stock ("Preferred Shares") represented by the attached stock
certificate into shares of common stock, $.001 par value (such shares, the
"Common Shares") (or, if the Conversion Price in effect at the time of this
conversion is less than or equal to the Cash Option Price and you so elect, into
the right to receive cash at the election of the Corporation) pursuant to and in
accordance with Section 5 of the Certificate of Designation relating to the
Preferred Stock and requests that certificates for any such shares of Common
Stock be issued in the name of the undersigned.
If such number of Preferred Shares shall not be all the Preferred Shares
evidenced by the Series A Preferred Stock certificate, a new stock certificate
for the balance remaining of such shares shall be registered in the name of and
delivered to the undersigned.
The undersigned will not offer for sale, sell, pledge or otherwise transfer
the Common Shares except (i) in accordance with the plan of distribution
specified in the prospectus ("Prospectus") included in the registration
statement relating to the Common Shares filed or to be filed with the SEC (the
"Registration Statement") under the Securities Act of 1933 (the "Securities
Act"), (ii) pursuant to SEC Rule 144 under the Securities Act, or (iii) pursuant
to another available exemption from registration requirements of the Securities
Act. The undersigned will deliver a Prospectus to the buyer of any Common Shares
sold pursuant to the Registration Statement. The undersigned will not sell any
Common Shares pursuant to the Registration Statement during the period, if any,
during which the undersigned's right to sell under the Registration Statement
has been suspended by the Company in accordance with the provisions of the
Subscription Agreement between the Corporation and the undersigned or the
undersigned's predecessor-in-interest.
Dated: ____________________, 199_
_______________________________
Signature Guaranteed (if required): Signature
Must be signed by registered holder(s) exactly as name(s) on certificate(s) of
Series A Preferred. Signatures must (such execution to be either (i) accompanied
by a signature guarantee by a member firm of the New York Stock Exchange, or
(ii) evidenced by a signature on behalf of such Investor without such a
guarantee, provided that the Investor has previously delivered to the Company a
written instrument that (x) authorizes the Company to rely upon such
unguaranteed signature for all purposes relating to the transfer or conversion
of Preferred Shares, (y) includes a specimen of such unguaranteed signature on
which the Company shall be entitled to rely without further investigation, and
(z) holds the Company harmless from any loss resulting from any unauthorized or
fraudulent signature purporting on its face to be an authorized signature so
long as the Company relies on such specimen signature without gross negligence).
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, please identify that person's full title.
First telefax this Conversion Notice to the Company on fax number (314)
576-1073; then return by air courier the original hard copy to the Company,
together with the original Preferred Share stock certificate by air courier to
LaserSight Incorporated, Attn: Chief Financial Officer, 12161 Lackland Road, St.
Louis, Missouri 63146.
<PAGE>
CORRECTED CERTIFICATE
OF
DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES B CONVERTIBLE PARTICIPATING PREFERRED STOCK
OF
LASERSIGHT INCORPORATED
I. DESIGNATION AND AMOUNT
The designation (this "Certificate of Designation") of this series, which
consists of 1600 shares of Preferred Stock of LaserSight Incorporated, a
Delaware corporation (the "Company"), is the Series B Convertible Participating
Preferred Stock (the "Preferred Stock") and the face amount shall be Ten
Thousand Dollars ($10,000.00) per share (the "Face Amount").
II. DIVIDENDS
The Preferred Stock will bear no dividends except as provided in Section
IX(B).
III. CERTAIN DEFINITIONS
For purposes of this Certificate of Designation, the following terms shall
have the following meanings:
A. "Business Day" means any day other than a Saturday, Sunday or a day on
which banks in New York, New York are permitted or required by law to be closed.
B. "Closing Bid Price" means, for any security as of any date, the closing
bid price of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg
Financial Markets or a comparable reporting service of national reputation
selected by the Company and reasonably acceptable to registered holders of the
Preferred Stock (each, a "Holder") then holding a majority of the then
outstanding shares of a Preferred Stock ("Majority Holders") if Bloomberg
Financial Markets is not then reporting closing bid prices of such security
(collectively, "Bloomberg"), or if the foregoing does not apply, the last
reported sale price of such security in the over-the-counter market on the
electronic bulletin board of such security as reported by Bloomberg, or, if no
sale price is reported for such security by Bloomberg, the average of the bid
prices of any market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair market value
as reasonably determined by an investment banking firm selected by the Company
and reasonably acceptable to the Majority Holders, with the costs of such
appraisal to be borne by the Company.
C. "Conversion Date" means, for any Optional Conversion, the date specified
in the notice of conversion (the "Notice of Conversion"), so long as such date
is a Business Day and the copy of the Notice of Conversion is faxed (or
delivered by other means resulting in notice) to the Company before 5:00 p.m.,
St. Louis time, on the Conversion Date indicated in the Notice of Conversion. If
the date specified in the Notice of Conversion is not a Business Day, or if the
Notice of Conversion is not so faxed or otherwise delivered before such time,
then the Conversion Date shall be the first Business Day after the date on which
the Holder faxes or otherwise delivers the Notice of Conversion to the Company.
The Conversion Date for the Required Conversion at Maturity shall be the
Maturity Date (as such terms are defined herein).
D. "Common Stock" means the common stock, $.001 par value, of the Company.
E. "Conversion Price" means, with respect to any Conversion Date, the lower
of the Fixed Conversion Price and the Variable Conversion Price, each as in
effect as of such date and subject to adjustment as provided herein; provided
that such price shall be multiplied by .93 if such Conversion Date occurs at a
time when the Common Stock a Holder receives upon conversion of the Preferred
Stock is not listed on the Nasdaq National Market ("Nasdaq"), the American Stock
Exchange or the New York Stock Exchange.
F. "Fixed Conversion Price" means $6.68 (130% of the average Closing Bid
Prices of the Common Stock for the five (5) consecutive trading days ending on
the trading day immediately preceding the Closing Date (subject to equitable
adjustment for any stock splits, stock dividends, reclassifications or similar
events during such five (5) trading day period)), and shall be subject to
adjustment as provided herein.
G. "Securities Purchase Agreement" means the Securities Purchase Agreement
dated as of August 29, 1997, among the Company and the purchasers named therein,
as amended from time to time in accordance with the term thereof.
H. "Variable Conversion Price" means, as of any Conversion Date, the
average of the three (3) lowest Closing Bid Prices per share of Common Stock
during the Lookback Period (as herein defined) (subject to equitable adjustment
for any stock splits, stock dividends, reclassifications or similar events
during the Lookback Period), subject to adjustment as provided herein. For
purposes hereof, the "Lookback Period" shall mean the period of twenty (20)
consecutive trading days ending on the trading day immediately preceding the
Conversion Date; provided, however, that in the event the average Closing Bid
Price of the Common Stock during the period of five (5) consecutive trading days
ending on the date one hundred eighty (180) days after the Closing Date is less
than the average Closing Bid Price of the Common Stock for the five (5)
consecutive trading days ending on the trading immediately preceding the Closing
Date, the Lookback Period shall be the period of thirty (30) consecutive trading
days ending on the trading day immediately preceding the Conversion Date.
I. "Warrants" means the stock purchase warrants to acquire shares of Common
Stock issued by the Company to the initial Holders in connection with the
transactions contemplated by the Securities Purchase Agreement.
IV. CONVERSION
A. Conversion at the Option of the Holder. Subject to the limitations on
conversions contained in Section IV.G, each Holder may, at any time and from
time to time after the Closing Date, convert (an "Optional Conversion") each of
its shares of Preferred Stock into a number of fully paid and nonassessable
shares of Common Stock determined by dividing the aggregate Face Amount of the
shares of Preferred Stock being converted by the Conversion Price.
B. Mechanics of Conversion. In order to effect an Optional Conversion, a
Holder shall: (x) fax (or otherwise deliver by other means resulting in notice)
a copy of the fully executed Notice of Conversion in the form of Exhibit A
hereto to the Company and (y) surrender or cause to be surrendered (or satisfy
the provisions of Section XIV.B, if applicable) the certificates representing
the Preferred Stock being converted (the "Preferred Stock Certificates")
accompanied by duly executed stock powers and the original executed version of
the Notice of Conversion as soon as practicable thereafter. Upon receipt by the
Company of the fax copy of a Notice of Conversion from a Holder, the Company
shall immediately send, via fax, a confirmation to such Holder stating that the
Notice of Conversion has been received, the date upon which the Company expects
to deliver the Common Stock issuable upon such conversion and the name and
telephone number of a contact person at the Company regarding the conversion.
C. Delivery of Common Stock Upon Conversion. Subject to Section IV.G, upon
the delivery of a Notice of Conversion, the Company shall, no later than the
later of (a) the third Business Day following the Conversion Date and (b) the
day that is the first Business Day (or the second Business Day in the event that
the Common Stock issuable upon conversion of such shares of Preferred Stock are
to be delivered outside of the United States or Canada) following the date of
the surrender of the Preferred Stock Certificates (or satisfaction of the
provisions of Section XIV.B, if applicable) and the original executed version of
the Notice of Conversion (the "Delivery Period"), issue and deliver to the
Holder (or at its direction) (x) that number of shares of Common Stock issuable
upon conversion of such shares of Preferred Stock being converted and (y) a
certificate representing the number of shares of Preferred Stock not being
converted, if any. The person or persons entitled to receive shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder of such shares at the close of business on the Conversion Date.
D. Stamp, Documentary and Other Similar Taxes. The Company shall pay all
stamp, documentary, issuance and other similar taxes which may be imposed with
respect to the issuance and delivery of the shares of Common Stock pursuant to
conversion of the Preferred Stock; provided that the Company will not be
obligated to pay stamp, transfer or other taxes resulting from the issuance of
Common Stock to any person other than the registered holder of the Preferred
Stock.
E. No Fractional Shares. No fractional shares of Common Stock are to be
issued upon the conversion of Preferred Stock, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Conversion Price of a share of
Common Stock (as determined for conversion of the Preferred Stock into whole
shares of Common Stock); provided that in the event that sufficient funds are
not legally available for the payment of such cash adjustment any fractional
shares of Common Stock shall be rounded up to the next whole number.
F. Conversion Disputes. In the case of any dispute with respect to a
conversion, the Company shall promptly issue such number of shares of Common
Stock as are not disputed in accordance with Sections IV.A and IV.C hereof. If
such dispute involves the calculation of the Conversion Price, the Company shall
submit the disputed calculations to a "Big Six" independent accounting firm
selected by the Company via facsimile within two (2) business days of receipt of
the Notice of Conversion. The accounting firm shall audit the calculations and
notify the Company and the Holder of the results no later than two (2) business
days from the date it receives the disputed calculations. The accounting firm's
calculation shall be deemed conclusive, absent manifest error. The Company shall
then issue the appropriate number of shares of Common Stock in accordance with
Sections IV.A and IV.C hereof.
G. Limitation on Conversions. Notwithstanding anything to the contrary set
forth herein, the conversion of shares of Preferred Stock shall be subject to
the following limitations (each of which limitations shall be applied
independently):
(i) Cap Amount. For so long as Common Stock is listed on the Nasdaq,
the American Stock Exchange, the New York Stock Exchange or the Nasdaq Small Cap
Market, prior to Stockholder Approval (as herein defined), unless otherwise
permitted by the such market or exchange, in no event shall the total number of
shares of Common Stock issued upon conversion of the Preferred Stock and
exercise of the Warrants (as defined in the Securities Purchase Agreement)
exceed the maximum number of shares of Common Stock that the Company can without
stockholder approval so issue pursuant to Nasdaq Rule 4460(i) (or any successor
rule) (the "Cap Amount"), which, as of the date of issuance of the Preferred
Stock, shall be 1,995,534 shares. The Cap Amount shall be allocated pro-rata to
the Holders as provided in Article XIV.C. In the event the Company is prohibited
from issuing shares of Common Stock as a result of the operation of this
subparagraph (i), the Company shall comply with Article VI.
(ii) Limitations Holdings. The Preferred Stock shall not be
convertible by a Holder to the extent (but only to the extent) that, if
converted by such Holder, the Holder would beneficially own in excess of 4.9%
(9.9% if the applicable box on the signature page of the Securities Purchase
Agreement for such Holder is marked) (the "Applicable Percentage") of the shares
of Common Stock. To the extent the foregoing limitation applies, the
determination of whether Preferred Stock shall be convertible (vis-a-vis other
securities owned by such Holder) and of which Preferred Stock shall be converted
shall be in the sole discretion of the Holder and submission of the Preferred
Stock for conversion shall be deemed to be the Holder's determination of whether
such Preferred Stock is convertible and of which Preferred Stock is convertible,
subject to such aggregate percentage limitation. No prior inability to convert
Preferred Stock pursuant to this Section shall have any effect on the
applicability of the provisions of this Section with respect to any subsequent
determination of convertibility. For the purposes of this Section, beneficial
ownership and all calculations, including without limitation, with respect to
calculations of percentage ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13D-G thereunder. The provisions of this Section may be amended and/or
implemented in a manner otherwise than in strict conformity with the terms of
this Section with the approval of the Board of Directors of the Company and the
Majority Holders: (i) with respect to any matter to cure any ambiguity herein,
to correct this subsection (or any portion thereof) which may be defective or
inconsistent with the intended Applicable Percentage beneficial ownership
limitation herein contained or to make changes or supplements necessary or
desirable to properly give effect to such Applicable Percentage limitation; and
(ii) with respect to any other matter, with the further consent of the holders
of majority of the then outstanding shares of Common Stock; the provisions of
this Section may be waived with the approval of the Majority Holders upon ninety
(90) days prior written notice from such Holders to the Company and all other
Holders. The limitations contained in this Section shall apply to a successor
Holder of Preferred Stock if, and to the extent, elected by such successor
Holder concurrently with its acquisition of such Preferred Stock, such election
to be promptly confirmed in writing to the Company (provided no transfer or
series of transfers to a successor Holder or Holders shall be used by a Holder
to evade the limitations contained herein).
H. Required Conversion at Maturity. Subject to the limitations set forth in
Section IV.G. and provided all shares of Common Stock issuable upon conversion
of all outstanding shares of Preferred Stock are then (i) authorized and
reserved for issuance, (ii) registered under the Securities Act of 1933, as
amended (the "Securities Act") for resale by all Holders of such shares of
Preferred Stock and (iii) eligible to be traded on either the Nasdaq, the Nasdaq
Small Cap Market, the New York Stock Exchange or the American Stock Exchange,
each share of Preferred Stock outstanding on the third anniversary of the
Closing Date (the "Maturity Date") (and any accrued and unpaid Conversion
Default Payments), automatically shall be converted into shares of Common Stock
on such date in accordance with the conversion formula set forth in Section IV.A
(the "Required Conversion at Maturity"). If a Required Conversion at Maturity
occurs, the Company and the Holders shall follow the applicable conversion
procedures set forth in this Article IV; provided, however, that a Notice of
Conversion shall be deemed to be delivered to the Company on the Maturity Date.
I. Electronic Transmission. In lieu of delivering physical certificates
representing the Common Stock issuable upon conversion, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of a Holder who shall have
previously instructed such Holder's prime broker to confirm such request to the
Company's transfer agent, the Company shall use its commercially reasonable
efforts to cause its transfer agent to electronically transmit the Common Stock
issuable upon conversion to the Holder by crediting the account of Holder's
prime broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC")
system.
V. RESERVATION OF AUTHORIZED SHARES OF COMMON STOCK
A. Reserved Amount. The Company shall have authorized and reserved and keep
available for issuance not less than 3,750,000 shares of Common Stock (the
"Reserved Amount") solely for the purpose of effecting the conversion of the
Preferred Stock and exercise of the warrants (the "Warrants"), in the form
attached to the Securities Purchase Agreement as Exhibit B, to acquire Common
Stock issued on the Closing Date pursuant to the terms of the Securities
Purchase Agreement. Subject to Section V.B and Article VI, the Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock a sufficient number of shares of Common Stock to provide for the
full conversion of all outstanding Preferred Stock and issuance of the shares of
Common Stock in connection therewith and the full exercise of the Warrants and
issuance of the shares of Common Stock in connection therewith. The Reserved
Amount shall be allocated among the Holders as provided in Section XIV.C. The
Board of Directors of the Company shall, not later than sixty (60) days
following the date of Closing, solicit by proxy the authorization of a number of
shares of Common Stock sufficient to increase the Reserved Amount to two hundred
percent (200%) of the number of shares of Common Stock then issuable upon
conversion of the Preferred Stock and the exercise of the Warrants.
B. Increases to Reserved Amount. Without limiting any other provision of
this Article V, if the Reserved Amount for any three (3) consecutive trading
days (the last of such three (3) trading days being the "Authorization Trigger
Date") is less than one hundred seventy-five percent (175%) of the number of
shares of Common Stock issuable upon conversion of the Preferred Stock on such
trading days, without giving effect to the limitations set forth in Section
IV(G) hereof, the Company shall as soon as practicable notify the Holders of
such occurrence and shall as soon as practicable (and in any event in the case
of the initial authorization of additional shares of Common Stock, within the
period specified in Section VIII.A(viii)), take all necessary action (including,
if necessary, stockholder approval to authorize the issuance of additional
shares of Common Stock) to increase the Reserved Amount to two hundred percent
(200%) of the number of shares of Common Stock then issuable upon conversion of
the outstanding Preferred Stock.
VI. COMPLIANCE WITH CAP AMOUNT RESTRICTIONS
A. Share Authorization. The Board of Directors of the Company shall, not
later than 60 days following the date of the Closing, solicit by proxy the
authorization (the "Stockholder Approval") by the stockholders of the Company of
the issuance of shares of Common Stock upon conversion of shares of Preferred
Stock pursuant to the terms hereof in the aggregate in excess of twenty (20)
percent of the outstanding shares of Common Stock and to eliminate any
prohibitions under applicable law or the rules or regulations of any stock
exchange, interdealer quotation system or other self-regulatory organization
with jurisdiction over the Company or any of its securities on the Company's
ability to issue shares of Common Stock in excess of the Cap Amount and use its
best efforts to obtain the Stockholder Approval no later than 120 days following
the date of the Closing.
B. Obligation to Notify. If at any time after the date of issuance of the
Preferred Stock the then unissued portion of any Holder's Cap Amount becomes
less than one hundred seventy-five percent (175%) of the number of shares of
Common Stock then issuable upon conversion of such Holder's shares of Preferred
Stock without giving effect to the limitations set forth in Section IV(G) hereof
(a "Trading Market Trigger Event"), the Company shall notify the Holders of such
occurrence as soon as practicable.
VII. FAILURE TO SATISFY CONVERSIONS
A. Conversion Default Payments. If, at any time, (x) a Holder submits a
Notice of Conversion (or is deemed to submit such notice pursuant to Section
IV.H) and the Company fails for any reason (other than because such issuance
would exceed such Holder's allocated portion of the Reserved Amount or the Cap
Amount, for which failure the Holders shall have the remedies set forth in
Article VIII) to deliver, on or prior to the second Business Day following the
expiration of the Delivery Period for such conversion (said period of time being
the "Extended Delivery Period"), such number of freely tradeable shares of
Common Stock to which such Holder is entitled upon such conversion, or (y) the
Company provides notice (including by way of public announcement) to any Holder
at any time of its intention not to issue shares of Common Stock upon exercise
by any Holder of its conversion rights in accordance with the terms of this
Certificate of Designation (other than because such issuance would exceed such
Holder's allocated portion of the Reserved Amount or the Cap Amount) (each of
(x) and (y) being a "Conversion Default"), then the Company shall pay to the
affected Holder, in the case of a Conversion Default described in clause (x)
above, and to all Holders, in the case of a Conversion Default described in
clause (y) above, an amount equal to 1% of the Face Amount of the Preferred
Stock with respect to which the Conversion Default exists (which amount shall be
deemed to be the aggregate Face Amount of all outstanding Preferred Stock in the
case of a Conversion Default described in clause (y) above) for each day such
Conversion Default exists. The Company shall promptly provide each Holder with
notice of the occurrence of a Conversion Default with respect to any of the
other Holders.
The payments to which a Holder shall be entitled pursuant to this Section
VII.A are referred to herein as "Conversion Default Payments." A Holder may
elect to receive accrued Conversion Default Payments in cash or to convert all
or any portion of such accrued Conversion Default Payments, at any time, into
Common Stock at the lowest Conversion Price in effect during the period
beginning on the date of the Conversion Default through the Cure Date for such
Conversion Default. In the event a Holder elects to receive any Conversion
Default Payments in cash, it shall so notify the Company in writing. Such
payment shall be made in accordance with and be subject to the provisions of
Section XIV.E. In the event a Holder elects to convert all or any portion of the
Conversion Default Payments, the Holder shall indicate on a Notice of Conversion
such portion of the Conversion Default Payments which such Holder elects to so
convert and such conversion shall otherwise be effected in accordance with the
provisions of Article IV. "Cure Date" means (i) with respect to a Conversion
Default described in clause (x) of its definition, the date the Company effects
the conversion of the portion of the Preferred Stock submitted for conversion
and (ii) with respect to a Conversion Default described in clause (y) of its
definition, the date the Company undertakes in writing to issue Common Stock in
satisfaction of all conversions of Preferred Stock in accordance with the terms
of this Certificate of Designation.
B. Adjustment to Conversion Price. If a Holder has not received
certificates for all shares of Common Stock prior to the tenth (10th) day after
the expiration of the Extended Delivery Period with respect to a conversion of
Preferred Stock for any reason (other than because such issuance would exceed
such Holder's allocated portion of the Reserved Amount or the Cap Amount, for
which failure the Holders shall have the remedies set forth in Article VIII),
then the Fixed Conversion Price in respect of any shares of Preferred Stock held
by such Holder shall thereafter be the lesser of (i) the Fixed Conversion Price
on the Conversion Date specified in the Notice of Conversion which resulted in
the Conversion Default and (ii) the lowest Conversion Price in effect during the
period beginning on, and including, such Conversion Date through and including
the Cure Date. If there shall occur a Conversion Default of the type described
in clause (y) of Section VII.A, then the Fixed Conversion Price with respect to
any conversion thereafter shall be the lowest Conversion Price in effect at any
time during the period beginning on, and including, the date of the occurrence
of such Conversion Default through and including the Cure Date. The Fixed
Conversion Price shall thereafter be subject to further adjustment for any
events described in Section XI.
C. Buy-In Cure. Unless a Conversion Failure described in clause (y) of
Section VII.A has occurred, if (i) the Company fails for any reason to deliver
during the Delivery Period shares of Common Stock to a Holder upon a conversion
of shares of Preferred Stock in accordance with the terms of this Certificate of
Designation and (ii) after the applicable Delivery Period with respect to such
conversion, such Holder purchases (in an open market transaction or otherwise)
shares of Common Stock to make delivery in satisfaction of a sale by such Holder
of the shares of Common Stock (the "Sold Shares") which such Holder was entitled
to upon such conversion (a "Buy-In"), the Company shall pay such Holder (in
addition to any other remedies available to the Holder) the amount by which (x)
such Holder's total purchase price (including brokerage commissions, if any) for
the shares of Common Stock so purchased exceeds (y) the net proceeds received by
such Holder from the sale of the Sold Shares; provided, that such purchase
cannot be effected after the applicable Cure Date, if any, and both such
purchase and sale must be effected in a commercially reasonable manner under the
circumstances then facing the Holder to the extent such purchase and sale are
under the control of such Holder. For example, if a Holder purchases shares of
Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to shares of Common Stock it sold for $10,000, the Company will be
required to pay the Holder $1,000. A Holder shall provide the Company written
notification indicating any amounts payable to such Holder pursuant to this
Section VII.C. The Company shall make any payments required pursuant to this
Section VII.C in accordance with and subject to the provisions of Section XIV.E.
VIII. REDEMPTION DUE TO CERTAIN EVENTS
A. Redemption Events. A "Redemption Event" means any one of the following
(after expiration of the applicable cure period in the case of the events
described in clauses (iv) and (vii)):
(i) the Common Stock (including any of the shares of Common Stock
issuable upon conversion of the Preferred Stock or upon exercise of the Warrants
or required from time to time to be reserved pursuant to this Certificate of
Designation or the Warrants) is suspended from trading on, or is not listed (and
authorized) for trading on, the Nasdaq, the Nasdaq Small Cap Market, the
American Stock Exchange, or the New York Stock Exchange for an aggregate of ten
(10) trading days in any twelve (12) month period;
(ii) the Company fails, and any such failure continues uncured for
seven (7) business days after the Company has been notified thereof in writing
by the Holder, to remove any restrictive legend on any certificate for any
shares of Common Stock issued to the Holders of Preferred Stock upon conversion
of the Preferred Stock or upon exercise of the Warrants as and when required by
this Certificate of Designation, the Warrants, the Securities Purchase
Agreement, or the Registration Rights Agreement, dated as of August 29, 1997, by
and among the Company and the other signatories thereto (the "Registration
Rights Agreement");
(iii) the Company provides notice to any Holder, including by way of
public announcement, at any time, of its intention not to issue shares of Common
Stock to any Holder upon conversion in accordance with the terms of this
Certificate of Designation; except to the extent that the Company has provided
the Holders with prior notice that it intends not to effect a conversion or
exercise because such issuance would cause the Cap Amount or the Reserved Amount
to be exceeded, in which event the Holders shall have the rights and remedies
pursuant to clauses (viii) and (ix) of this Section VIII(A) and elsewhere in
this Certificate of Designation;
(iv) the Company breaches any material covenant or other material term
or condition of this Certificate of Designation, the Warrants, the Securities
Purchase Agreement or the Registration Rights Agreement, the breach of which
would have a material adverse effect on the Company or the rights of the Holder
with respect to any of the shares of Preferred Stock or the shares of Common
Stock issuable upon conversion of the Preferred Stock or upon exercise of the
Warrants, and such breach continues for a period of ten (10) business days after
written notice thereof to the Company; provided, however, that if such breach
may be cured by the Company and the Company is using its best efforts to cure
such breach it shall not constitute a Redemption Event until such breach
continues for a period of thirty (30) days after written notice thereof to the
Company;
(v) any representation or warranty of the Company made in any
agreement, statement or certificate given in writing in connection with the
issuance of the Preferred Stock (including, without limitation, the Warrants,
the Securities Purchase Agreement and the Registration Rights Agreement), shall
be false or misleading in any material respect when made and the breach of which
would have a material adverse effect on the Company or the rights of the Holder
with respect to any of the shares of Preferred Stock or the shares of Common
Stock issuable upon conversion of the Preferred Stock or upon exercise of the
Warrants;
(vi) the Company fails: (x) to cause the registration statement
required pursuant to Section 2.1 of the Registration Rights Agreement to be
declared effective on or before the one hundred fiftieth (150th) day following
Closing in a manner which would allow the sale of all Registrable Securities (as
defined in the Registration Rights Agreement) to the fullest extent permitted
under Section 2.1 of the Registration Rights Agreement; or (y) to cause the
holders of Preferred Stock to be able to utilize such registration statement for
the resale of all of their Registrable Securities (as defined in the
Registration Rights Agreement), unless the Company is using its best efforts to
remedy such inability to utilize such registration statement, subject to the
Company's Board of Directors having determined in their good faith business
judgment by resolution that the continued effectiveness of such registration
statement would have a material adverse effect on the Company's ability to
consummate a financing, acquisition, merger or joint venture, the failure of
which to consummate would have a material adverse effect on the Company's
financial condition, results of operations or future prospects; provided that in
no event shall such failure exist for a total of more than forty-five (45) days
in any fifteen (15) month period.
(vii) the Company fails, and such failure continues uncured for five
(5) business days after the Company has been notified thereof in writing by the
Holder, for any reason to issue shares of Common Stock within ten (10) Business
Days after the expiration of the Extended Delivery Period with respect to any
conversion of Preferred Stock; except to the extent that the Company has
provided the Holders with prior notice that it intends not to effect a
conversion or exercise because such issuance would cause the Cap Amount or the
Reserved Amount to be exceeded, in which event the Holders shall have the rights
and remedies provided in clauses (viii) and (ix) of this Section VIII(A) and
elsewhere in this Certificate of Designation;
(viii) the Company fails to increase the Reserved Amount within one
hundred twenty (120) days following Closing and thereafter an Authorization
Trigger Date occurs;
(ix) the Company fails to eliminate the Cap Amount prohibitions or
other prohibitions described in Section VI.A within one hundred twenty (120)
days following the Closing and thereafter a Trading Market Trigger Event occurs;
(x) the Company fails to obtain the effectiveness of any amendment to
an existing registration statements within thirty (30) days or of any new
registration statement within ten (10) days after the shareholders meeting
required pursuant to Section V.A hereof and within thirty (30) days following
any other Registration Trigger Date (as defined in the Registration Rights
Agreement) as required by Section 3.2 of the Registration Rights Agreement; or
(xi) if there is a default under any agreement between Company or any
of its affiliates and Foothill Capital Corporation ("Foothill") which results in
the acceleration of the maturity of the debt owed by Company to Foothill (or if
the such debt is not repaid by Company to Foothill at Maturity).
B. Redemption By Holder. Upon the occurrence of a Redemption Event, each
Holder shall have the right to elect at any time and from time to time by
delivery of a Redemption Notice (as defined herein) to the Company while such
Redemption Event continues, to require the Company to purchase for cash for an
amount per share equal to the Redemption Amount (as defined herein), (i) in the
case of a Redemption Event described in clause (i) through (vii), any or all of
the then outstanding shares of Preferred Stock held by such Holder, (ii) in the
case of a Redemption Event described in clause (viii), a portion of the Holder's
Preferred Stock such that, after giving effect to such purchase, the Holder's
allocated portion of the Reserved Amount exceeds two hundred percent (200%) of
the total number of Common Stock issuable to such Holder upon conversion of its
Preferred Stock and exercise of its Warrants, (iii) in the case of a Redemption
Event described in clause (ix), a portion of the Holder's Preferred Stock such
that, after giving effect to such purchase, the Holder's allocated portion of
the Cap Amount exceeds two hundred percent (200%) of the total number of Common
Stock issuable to such Holder upon conversion of its Preferred Stock and
exercise of its Warrants and (iv) in the case of a Redemption Event described in
clause (x), a portion of the Holder's Preferred Stock such that, after giving
effect to such purchase, the Holder's allocated portion of the Registrable
Securities (as defined in the Registration Rights Agreement) exceeds two hundred
percent (200%) of the total number of Common Stock issuable to such Holder upon
conversion of its Preferred Stock and exercise of its Warrants.
C. Definition of Redemption Amount. The "Redemption Amount" with respect to
a share of Preferred Stock means an amount equal to the greater of (i) 1.25
times the aggregate Face Amount of the Preferred Stock for which a demand is
being made and (ii) an amount determined by the following formula:
<PAGE>
Face Amount
---------------------
( C P ) X M
--------------------- ---------
where:
"CP" means the Conversion Price in effect on the date of the Redemption
Notice; and
"M" means the highest closing bid price of the Company's Common Stock
during the period beginning on the date ten (10) trading days before the date of
the Redemption Notice and ending on the date five (5) trading days after the
date of the Redemption Notice, as reported on the principal securities exchange
or trading market on which the Common Stock is traded.
D. Redemption Defaults. If the Company fails to pay any Holder the
Redemption Amount with respect to any share of Preferred Stock within five (5)
business days of its receipt of a notice requiring such redemption (a
"Redemption Notice"), then the Holder delivering such Redemption Notice (i)
shall be entitled to interest on the Redemption Amount at a per annum rate equal
to the lower of (x) the sum of prime rate published from time to time by the
Wall Street Journal plus five percent (5%) and (y) the highest interest rate
permitted by applicable law from the date of the Redemption Notice until the
date of redemption hereunder, and (ii) shall have the right, at any time and
from time to time, to require the Company, upon written notice, to immediately
convert (in accordance with the terms of Section IV.A) all or any portion of the
Redemption Amount, plus interest as aforesaid, into shares of Common Stock at a
Conversion Price equal to the lower of (x) the Conversion Price in effect on the
date of the Redemption Notice and (y) the Conversion Price in effect on the date
that such Holder receives shares of Common Stock with respect to such Redemption
Amount. In the event the Company is not able to redeem all of the shares of
Preferred Stock subject to Redemption Notices, the Company shall redeem shares
of Preferred Stock from each Holder pro rata, based on the total number of
shares of Preferred Stock included by such Holder in the Redemption Notice
relative to the total number of shares of Preferred Stock in all of the
Redemption Notices. The interest provided for in this Section VIII.D shall not
be duplicative of the 1% per day payment provided for pursuant to Section VII.A
of this Certificate of Designation.
E. Additional Cap Amount Remedies. Upon a Redemption Event described in
clause (ix), any Holder who is so prohibited from converting its Preferred Stock
may elect one or both of the following: (i) require, with the consent of the
Majority Holders (including any shares of Preferred Stock held by the requesting
Holder), the Company to terminate the listing of its Common Stock on Nasdaq and
to cause its Common Stock to be listed on the Nasdaq Small Cap Market or on the
over-the-counter electronic bulletin board, at the option of the requesting
Holder; and (ii) require the Company to issue shares of Common Stock in
accordance with such holder's Notice of Conversion at a conversion price equal
to the Conversion Price in effect on the date of the Holder's written notice to
the Company of its election to receive shares of Common Stock pursuant to this
subparagraph (ii).
F. Partial Redemption Upon Sale or Licensing of Patent Rights.
(i) From time to time following the sale or license by the Company or
any subsidiary of the Company of patent rights pursuant to Section 12 of that
certain Patent Security Agreement dated as of August 29, 1997, and so long as no
Redemption Event shall have occurred and the Company is not in material
violation of any of its obligations under the Securities Purchase Agreement, the
Company shall have the right to redeem (a "Voluntary Redemption") Preferred
Stock having a Face Amount of up to $11,200,000 for an amount in cash paid by
wire transfer of immediately available funds equal to the Face Amount plus the
applicable Voluntary Redemption Premium (as defined below) of the Preferred
Stock so redeemed.
(ii) Any Voluntary Redemption pursuant to this Section VIII.F shall be
made ratably among Holders in proportion to the Face Amount of Preferred Stock
then outstanding and held by such Holders.
(iii) The "Voluntary Redemption Premium" shall be: (x) if the
aggregate Face Amount of Preferred Stock redeemed pursuant to this Section
VIII.F is equal to or less than $6,400,000, (A) with respect to Voluntary
Redemptions for which payment is made on or prior to October 28, 1997, 4.0%; (B)
with respect to Voluntary Redemptions for which payment is made after October
28, 1997 and on or prior to November 27, 1997, 6.75%; (C) with respect to
Voluntary Redemptions for which payment is made after November 27, 1997, and on
or prior to December 27, 1997, 10.0%; and (D) with respect to Voluntary
Redemptions for which payment is made after December 27, 1997 and on or prior to
January 26, 1998, 14.0%; and (y) if the aggregate Face Amount of Preferred Stock
redeemed pursuant to this Section VIII.F is greater than $6,400,000, (A) with
respect to Voluntary Redemptions for which payment is made on or prior to
September 28, 1997, 15.0%; (B) with respect to Voluntary Redemptions for which
payment is made after September 28, 1997 and on or prior to October 28, 1997,
20.0%; and (C) with respect to Voluntary Redemptions for which payment is made
after October 28, 1997 and on or prior to November 27, 1997, 30.0%; provided,
that if following one or more Voluntary Redemptions with respect to which a
Voluntary Redemption Premium determined pursuant to clause (x) above is paid, a
Voluntary Redemption is made which would cause the aggregate Face Amount of
Preferred Stock redeemed pursuant to this Section VIII.F to exceed $6,400,000,
then the Voluntary Redemption Premium for all of such prior Voluntary
Redemptions shall be recalculated pursuant to clause (y) above, and the
difference between the Voluntary Redemption Premium determined pursuant to
clause (y) with respect to each such previous Voluntary Redemption and the
Voluntary Redemption Premium paid as determined pursuant to clause (x) with
respect to such previous Voluntary Redemption shall be paid as additional
Voluntary Redemption Premium at the time of the Voluntary Redemption which
triggers the application of this provision.
(iv) No Voluntary Redemption may be made after November 27, 1997 if
the aggregate Face Amount of Preferred Stock redeemed pursuant to this Section
VIII.F would thereby be greater than $6,400,000. No Voluntary Redemption may be
made after January 26, 1998.
(v) The Company shall effect a Voluntary Redemption under this Section
VIII.F by giving prior written notice (the "Voluntary Redemption Notice"), which
notice may only be delivered on a business day on or after August 29, 1997 and
on or prior to January 12, 1998. The Voluntary Redemption Notice shall state the
Face Amount of Preferred Stock to be redeemed and the date on which the
Voluntary Redemption is to occur (which shall not be less than ten (10) business
days after the date of delivery of the Voluntary Redemption Notice) and shall be
delivered by the Company to the Holders at the address of such Holder appearing
on the register of the Company for the Preferred Stock.
Within seven (7) business days after the date of delivery of the
Voluntary Redemption Notice, each Holder shall provide the Company with
instructions as to the account to which payments associated with such Voluntary
Redemption should be deposited. On the date of the Voluntary Redemption,
provided for in the relevant Voluntary Redemption Notice, (x) the Company will
deliver the redemption amount via wire transfer to the account designated by the
Holders, (y) the Holders will deliver the certificates relating to that number
of shares of Preferred Stock being redeemed, duly executed for transfer or
accompanied by executed stock powers, in either case, transferring that number
of shares to be redeemed. Within five (5) business days after such Voluntary
Redemption the Company will deliver to the Holders new certificates representing
that number of shares held by the Holders after such Voluntary Redemption. Upon
the occurrence of the wire transfer (or, in the absence of a Holder designating
an account to which funds should be transferred, delivery of a certified check
in the amount due such Holder in connection with such Voluntary Redemption to
the address of such Holder appearing on the register of the Company for the
Preferred Stock), that number of shares to be redeemed pursuant to such
Voluntary Redemption as represented by the previously issued certificates will
be deemed no longer outstanding.
G. Capital Impairment. In the event that Section 160 of the Delaware
General Corporation Law ("GCL"), would be violated by the redemption of any
shares of Preferred Stock that are otherwise subject to redemption pursuant to
this Article VIII, the Company: (i) will redeem the greatest number of shares of
Preferred Stock possible without violation of said Section; (ii) the Company
thereafter shall use its best efforts to take all necessary steps permitted
pursuant to this Certificate of Designation and the agreements entered into in
connection with the issuance of Preferred Stock pursuant hereto in order to
remedy its capital structure in order to allow further redemptions without
violation of said Section; and (iii) from time to time thereafter as promptly as
possible the Company shall redeem shares of Preferred Stock at the request of
the Holders to the greatest extent possible without causing a violation of
Section 160 of the GCL. Any Holder shall have the right, at any time and from
time to time, to require the Company, upon written notice, to immediately
convert (in accordance with the terms of Section IV.A) all or any portion of the
Redemption Amount plus any interest or other charges which have accrued into
shares of Common Stock at a Conversion Price equal to the lowest Conversion
Price in effect during the period beginning on the date of the Redemption Notice
and ending on the Conversion Date with respect to the Conversion of such
Redemption Amount. In the event the Company is not able to redeem all the shares
of the stock subject to Redemption Notices, the Company shall redeem shares of
Preferred Stock from each Holder pro rata, based on the total number of shares
of Preferred Stock included by such Holder in the Redemption Notice relative to
the total number of Preferred Stock in all Redemption Notices. In addition, so
long as the Company is prevented from redeeming shares of Preferred Stock
pursuant to this Section VIII.G, the Company (i) will operate only in the
ordinary course of business and will not incur any expenditures outside of the
ordinary course of business, and (ii) will not enter into any acquisition,
merger or joint venture transactions.
IX. RANK; PARTICIPATION
A. Rank. All shares of the Preferred Stock shall rank (i) prior to the
Common Stock; (ii) prior to any class or series of capital stock of the Company
hereafter created (unless, with the consent of the Holders obtained in
accordance with Article XIII hereof, such class or series of capital stock
specifically, by its terms, ranks senior to or pari passu with the Preferred
Stock) (collectively, with the Common Stock, "Junior Securities"); (iii) pari
passu with any class or series of capital stock of the Company hereafter created
(with the consent of the Holders obtained in accordance with Article XIII
hereof) specifically ranking, by its terms, on parity with the Preferred Stock
(the "Pari Passu Securities"); and (iv) junior to any class or series of capital
stock of the Company hereafter created (with the consent of the Holders obtained
in accordance with Article XIII hereof) specifically ranking, by its terms,
senior to the Preferred Stock (the "Senior Securities"), in each case as to
distribution of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary.
B. Participation. Subject to the rights of the holders (if any) of Pari
Passu Securities and Senior Securities, the Holders shall, as such Holders, be
entitled to such dividends paid and distributions made to the holders of Common
Stock to the same extent as if such Holders had converted their shares of
Preferred Stock into Common Stock (without regard to any limitations on
conversion herein or elsewhere contained) and had been issued such Common Stock
on the day before the record date for said dividend or distribution. Payments
under the preceding sentence shall be made concurrently with the dividend or
distribution to the holders of Common Stock.
X. LIQUIDATION PREFERENCE
A. Liquidation of the Company. If the Company shall commence a voluntary
case under the U.S. Federal bankruptcy laws or any other applicable bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Company 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 Company shall be entered by a court having jurisdiction in the premises in
an involuntary case under the U.S. Federal bankruptcy laws or any other
applicable bankruptcy, insolvency or similar law resulting in the appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Company 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 sixty (60) consecutive
days and, on account of any such event, the Company shall liquidate, dissolve or
wind up, or if the Company shall otherwise liquidate, dissolve or wind up (a
"Liquidation Event"), no distribution shall be made to the Holders of any shares
of capital stock of the Company (other than Senior Securities) upon liquidation,
dissolution or winding up unless prior thereto the Holders shall have received
the Liquidation Preference (as herein defined) with respect to each share. If,
upon the occurrence of a Liquidation Event, the assets and funds available for
distribution among the Holders and holders of Pari Passu Securities shall be
insufficient to permit the payment to such Holders of the preferential amounts
payable thereon, then the entire assets and funds of the Company legally
available for distribution to the Preferred Stock and the 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. Certain Acts Not a Liquidation. The purchase or redemption by the
Company of stock of any class, in any manner permitted by law, shall not, for
the purposes hereof, be regarded as a liquidation, dissolution or winding up of
the Company. Neither the consolidation or merger of the Company with or into any
other entity nor the sale or transfer by the Company of less than substantially
all of its assets shall, for the purposes hereof, be deemed to be a liquidation,
dissolution or winding up of the Company.
C. Definition of Liquidation Preference. The "Liquidation Preference" with
respect to a share of Preferred Stock means an amount equal to the Face Amount
thereof plus any other amounts that may be due from the Company with respect
thereto through the date of final distribution. The Liquidation Preference with
respect to any Pari Passu Securities shall be as set forth in the Certificate of
Designation filed in respect thereof.
XI. ADJUSTMENTS TO THE CONVERSION PRICE; CERTAIN PROTECTIONS
The Conversion Price shall be subject to adjustment from time to time as
follows:
A. Stock Splits, Stock Dividends, Etc. If at any time on or after the
Closing Date, the number of outstanding shares of Common Stock is increased by a
stock split, stock dividend, combination, reclassification or other similar
event, the Fixed Conversion Price shall be proportionately reduced, or if the
number of outstanding shares of Common Stock is decreased by a reverse stock
split, combination or reclassification of shares, or other similar event, the
Fixed Conversion Price shall be proportionately increased. In such event, the
Company shall notify the Company's transfer agent of such change on or before
the effective date thereof.
B. Certain Public Announcements. In the event that (i) the Company makes a
public announcement that it intends to consolidate or merge with any other
entity (other than a merger in which the Company is the surviving or continuing
entity and its capital stock is unchanged and there is no distribution thereof))
or to sell or transfer all or substantially all of the assets of the Company or
(ii) any person, group or entity (including the Company) publicly announces a
tender offer to purchase 50% or more of the Common Stock (the date of the
announcement referred to in clause (i) or (ii) of this paragraph is hereinafter
referred to as the "Announcement Date"), then the Conversion Price shall,
effective upon the Announcement Date and continuing through the consummation of
the proposed tender offer or transaction or the Abandonment Date (as defined
below), be equal to the lesser of (x) the Conversion Price calculated as
provided in Article IV or (y) the Conversion Price which would have been
applicable for Conversion occurring on the Announcement Date. From and after the
Abandonment Date, as the case may be, the Conversion Price shall be determined
as set forth in Article IV. The "Abandonment Date" means with respect to any
proposed transaction or tender offer for which a public announcement as
contemplated by this paragraph has been made, the date which is seven trading
days after the date upon which the Company (in the case of clause (i) above or
the person, group or entity (in the case of clause (ii) above) publicly
announces the termination or abandonment of the proposed transaction or tender
offer which cause this paragraph to become operative, or such offer expires in
accordance with its terms.
C. Major Transactions. If the Company shall consolidate with or merge into
any corporation or reclassify its outstanding shares of Common Stock (other than
by way of subdivision or reduction of such shares) (each a "Major Transaction"),
then each Holder shall thereafter be entitled to receive consideration, in
exchange for each share of Preferred Stock held by it, equal to the greater of,
as determined in the sole discretion of such Holder: (i) the number of shares of
stock or securities or property of the Company, or of the entity resulting from
such consolidation or merger (the "Major Transaction Consideration"), to which a
Holder of the number of shares of Common Stock delivered upon conversion of such
shares of Preferred Stock would have been entitled upon such Major Transaction
had the Holder exercised its right of conversion (without regard to any
limitations on conversion herein contained) on the trading date immediately
preceding the public announcement of the transaction resulting in such Major
Transaction and had such Common Stock been issued and outstanding and had such
Holder been the holder of record of such Common Stock at the time of such Major
Transaction, and the Company shall make lawful provision therefor as a part of
such consolidation, merger or reclassification; and (ii) 125% of the Face Amount
of such shares of Preferred Stock in cash. No sooner than ten (10) days nor
later than five (5) days prior to the consummation of the Major Transaction, but
not prior to the public announcement of such Major Transaction, the Company
shall deliver written notice ("Notice of Major Transaction") to each Holder,
which Notice of Major Transaction shall be deemed to have been delivered one (1)
business day after the Company's sending such notice by telecopy (provided that
the Company sends a confirming copy of such notice on the same day by overnight
courier) of such Notice of Major Transaction. Such Notice of Major Transaction
shall indicate the amount and type of the Major Transaction Consideration which
such Holder would receive under clause (i) of this Section XI.B If the Major
Transaction Consideration does not consist entirely of United States dollars,
such Holder may elect to receive United States dollars in an amount equal to the
value, determined by a Big-6 accounting firm selected by the Company that is
reasonably acceptable to Holders of the Major Transaction Consideration in lieu
of the Major Transaction Consideration by delivering notice of such election to
the Company within five (5) days of the Holder's receipt of the Notice of Major
Transaction.
D. Adjustment Due to Distribution. If at any time after the Closing Date,
the Company shall declare or make any distribution of its assets (or rights to
acquire its assets) to holders of Common Stock as a partial liquidating
dividend, by way of return of capital or otherwise (including any dividend or
distribution to the Company's stockholders in cash or shares (or rights to
acquire shares) of capital stock of a subsidiary (i.e. a spin-off)) (a
"Distribution"), then the Fixed Conversion Price shall be equitably adjusted to
take account of such distribution.
E. Issuance of Other Securities With Variable Conversion Price. If, at any
time after the Closing Date the Company shall issue any securities which are
convertible into or exchangeable for Common Stock ("Convertible Securities") at
a conversion or exchange rate based on a discount from the market price of the
Common Stock at the time of conversion or exercise, then the Variable Conversion
Price in respect of any conversion of Preferred Stock after such issuance shall
be calculated utilizing the greatest percentage discount applicable to any such
Convertible Securities.
F. Purchase Rights. If at any time after the Closing Date, the Company
issues any Convertible Securities or rights to purchase stock, warrants,
securities or other property (the "Purchase Rights") pro rata to the record
holders of any class of Common Stock, then the Holders will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such Holder could have acquired if such Holder had held
the number of shares of Common Stock acquirable upon complete conversion of the
Preferred Stock (without regard to any limitations on conversion or exercise
herein or elsewhere contained) immediately before the date on which a record is
taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.
G. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article XI, the Company,
at its expense, shall promptly compute such adjustment or readjustment and
prepare and furnish to each Holder a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon the written request at any time
of any Holder, furnish to such Holder a like certificate setting forth (i) such
adjustment or readjustment, (ii) the Conversion Price at the time in effect and
(iii) the number of shares of Common Stock and the amount, if any, of other
securities or property which at the time would be received upon conversion of a
share of Preferred Stock.
XII. VOTING RIGHTS
The holders of Preferred Stock shall have no voting power whatsoever,
except as otherwise provided by the Delaware General Corporation Law (the
"General Corporation Law"), in this Article XII and in Article XIII below.
Notwithstanding the above, the Company shall provide each Holder with prior
notification of any meeting of the stockholders (and copies of proxy materials
and all other information sent to stockholders). If the Company takes a record
of its stockholders for the purpose of determining stockholders entitled to (a)
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or (b) to vote in connection with any proposed sale,
lease or conveyance of all or substantially all of the assets of the Company, or
any proposed merger, consolidation, liquidation, dissolution or winding up of
the Company, the Company shall mail a notice to each Holder, at least twenty
(20) days prior to the record date specified therein (or thirty (30) days prior
to the consummation of the transaction or event, whichever is earlier, but in no
event earlier than public announcement of such proposed transaction), of the
date on which any such record is to be taken for the purpose of such vote,
dividend, distribution, right or other event, and a brief statement regarding
the amount and character of such vote, dividend, distribution, right or other
event to the extent known at such time.
To the extent that under the General Corporation Law the vote of the
holders of the Preferred Stock, voting separately as a class or series, as
applicable, is required to authorize a given action of the Company, the
affirmative vote or consent of the Holders of at least a majority of the shares
of the Preferred Stock represented at a duly held meeting at which a quorum is
present or by written consent of the Majority Holders (except as otherwise may
be required under the General Corporation Law) shall constitute the approval of
such action by the class. To the extent that under the General Corporation Law
Holders are entitled to vote on a matter with holders of Common Stock, voting
together as one class, each share of Preferred Stock shall be entitled to a
number of votes equal to the number of shares of Common Stock into which it is
then convertible using the record date for the taking of such vote of
stockholders as the date as of which the Conversion Price is to be calculated
for this purpose.
XIII. PROTECTION PROVISIONS
So long as any shares of Preferred Stock are outstanding, the Company shall
not, without first obtaining the approval of the Majority Holders: (a) alter or
change the rights, preferences or privileges of the Preferred Stock; (b) alter
or change the rights, preferences or privileges of any capital stock of the
Company so as to affect adversely the Preferred Stock; (c) create any Senior
Securities; (d) create any Pari Passu Securities; (e) increase the authorized
number of shares of Preferred Stock; (f) redeem, or declare or pay any cash
dividend or distribution in excess of __% per annum on, any Junior Securities;
or (g) do any act or thing not authorized or contemplated by this Certificate of
Designation which would result in any taxation with respect to the 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, (or otherwise suffer to exist any such taxation as a result thereof).
If the Majority Holders agree to allow the Company to alter or change the
rights, preferences or privileges of the shares of Preferred Stock pursuant to
subsection (a) above, then the Company shall deliver notice of such approved
change to the Holders that did not agree to such alteration or change (the
"Dissenting Holders") and the Dissenting Holders shall have the right, for a
period of thirty (30) days after the date such notice was given by the Company,
to convert pursuant to the terms of this Certificate of Designation as they
existed prior to such alteration or change or to continue to hold their shares
of Preferred Stock.
XIV. MISCELLANEOUS
A. Cancellation of Preferred Stock. If any shares of Preferred Stock are
converted pursuant to Article IV, the shares so converted shall be canceled,
shall return to the status of authorized but unissued preferred stock of no
designated series, and shall not be issuable by the Company as Preferred Stock.
B. Lost or Stolen Certificates. Upon receipt by the Company of (i) evidence
of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Company, or (z) in the case of
mutilation, upon surrender and cancellation of the Preferred Stock
Certificate(s), the Company shall execute and deliver new Preferred Stock
Certificate(s) of like tenor and date. However, the Company shall not be
obligated to reissue such lost, stolen, destroyed or mutilated Preferred Stock
Certificate(s) if the Holder contemporaneously requests the Company to convert
such Preferred Stock.
C. Allocation of Cap Amount and Reserved Amount. The initial Cap Amount and
Reserved Amount shall be allocated among the Holders in the same proportion as
the number of shares of Preferred Stock initially held by such Holder bears to
the aggregate number of outstanding shares of Preferred Stock. Each increase to
the Cap Amount or Reserved Amount shall be allocated pro rata among the Holders
based on the number of shares of Preferred Stock held by each Holder at the time
of the increase in the Cap Amount or Reserved Amount, as the case may be. In the
event a Holder shall sell or otherwise transfer any of such Holder's shares of
Preferred Stock, each transferee shall be allocated a pro rata portion of such
transferor's Cap Amount and Reserved Amount. Any portion of the Cap Amount or
Reserved Amount which remains allocated to any person or entity which does not
hold any Preferred Stock shall be allocated among the remaining Holders, pro
rata based on the number of shares of Preferred Stock then held by such Holders.
D. Statements of Available Shares. Upon request, the Company shall deliver
to each Holder a written report notifying the Holders of any occurrence which
prohibits the Company from issuing Common Stock upon such conversion. The report
shall also specify (i) the total number of shares of Preferred Stock outstanding
as of the date of the request, (ii) the total number of shares of Common Stock
issued upon all conversions of Preferred Stock through the date of the request,
(iii) the total number of shares of Common Stock which are reserved for issuance
upon conversion of the Preferred Stock as of the date of the request, and (iv)
the total number of shares of Common Stock which may thereafter be issued by the
Company upon conversion of the Preferred Stock before the Company would exceed
the Cap Amount and Reserved Amount. The Company shall provide, within fifteen
(15) days after delivery to the Company of a written request by any Holder, all
of the information enumerated in clauses (i) - (iv) of this Section XIV.D.
E. Payment of Cash; Defaults. Whenever the Company is required to make any
cash payment to a Holder under this Certificate of Designation (as a Conversion
Default Payment, Redemption Amount or otherwise), such cash payment shall be
made to the Holder by the method (by certified or cashier's check or wire
transfer of immediately available funds) elected by such Holder. If such payment
is not delivered when due such Holder shall thereafter be entitled to interest
on the unpaid amount until such amount is paid in full to the Holder at a per
annum rate equal to the lower of (x) the sum of prime rate published from time
to time by the Wall Street Journal plus five percent (5%) and (y) the highest
interest rate permitted by applicable law. Payment of interest under this
Section XIV.E shall not be duplicative of the interest provided for in clause
(i) of Section VIII.D or the 1% per day payment provided for pursuant to Section
VII.A of this Certificate of Designation.
F. Remedies, Characterizations, Other Obligations, Breaches and Injunctive
Relief. The remedies provided in this Certificate of Designation shall be
cumulative and in addition to all other remedies available under this
Certificate of Designation, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a Holder's right to pursue actual damages for any
failure by the Company to comply with the terms of this Certificate of
Designation. Company covenants to each Holder that there shall be no
characterization concerning this instrument other than as expressly provided
herein; provided, however, that the Company shall be entitled to prepare
summaries of this Certificate of Designation for purposes of complying with its
disclosure obligations and in connection with bona fide disputes as to the
operations of the provisions of this Certificate of Designation. Amounts set
forth or provided for herein with respect to payments, conversion and the like
(and the computation thereof) shall be the amounts to be received by the Holder
hereof and shall not, except as expressly provided herein or in the
Intercreditor Agreement entered into with Foothill Capital Corporation in
connection with the issuance of the Preferred Stock, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the holders of Preferred Stock and that the remedy at law for any such breach
may he inadequate. The Company therefore agrees, in the event of any such breach
or threatened breach, the Holders shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
G. Specific Shall Not Limit General. No specific provision contained in
this Certificate of Designation shall limit or modify any more general provision
contained herein.
H. Failure or Indulgency Not Waiver. No failure or delay on the part of a
Holder in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, not shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be duly executed this 29th day of August, 1997.
LASERSIGHT INCORPORATED
By: /s/ Michael R. Farris
-------------------------
Name: Michael R. Farris
Title: President
Attest:
/s/ Gregory L. Wilson
- -------------------------
Gregory L. Wilson, Secretary
<PAGE>
EXHIBIT A
---------
NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert (the "Conversion")
$__________ Face Amount of the Series B Convertible Participating Preferred
Stock (the "Preferred Stock") (i.e., $_________) plus all accrued and unpaid
Conversion Default Payments relating thereto (if any) (each defined term used
but not defined in this notice shall have the meaning assigned to it in the
Designation, Preferences and Rights of Series B Convertible Participating
Preferred Stock of LaserSight Incorporated (the "Certificate of Designation")),
into shares of common stock ("Common Stock") of Lasersight Incorporated (the
"Company") according to the conditions of the Certificate of Designation, as of
the date written below. If securities are to be issued in the name of a person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto. No fee will be charged to the Holder for any conversion
except as provided herein.
The undersigned covenants that all offers and sales by the undersigned of the
securities issuable to the undersigned upon conversion of this Preferred Stock
shall be made pursuant to registration of the Common Stock under the Securities
Act of 1933, as amended (the "Act"), or pursuant to an exemption from
registration under the Act.
In the event of partial exercise, please reissue an appropriate Preferred
Stock(s) for the principal balance which shall not have been converted.
Date of Conversion:____________________________
Applicable Conversion Price:___________________
Amount of Conversion Default Payments
to be Converted, if any:_______________________
Number of Shares of
Common Stock to be Issued:_____________________
Signature:_____________________________________
Name:__________________________________________
Address:_______________________________________
ACKNOWLEDGED AND AGREED:
LASERSIGHT INCORPORATED
BY:__________________________
NAME:________________________
TITLE:_______________________ DATE:________________________________
