EXHIBIT 2.
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
(Sometimes referred to as "Public Transaction Agreement")
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Merger
Agreement") is made as of January 23, 2006 by and between General Devices, Inc.,
a Delaware corporation ("GDI"), its two wholly-owned subsidiaries GD MergerSub,
Inc., a Delaware corporation ("MergerSubI") and GD MergerSub II, Inc., a
Delaware corporation ("MergerSubII"), and Aduromed Corporation, a Delaware
corporation ("Aduromed"). GDI, MergerSubI, MergerSubII and Aduromed are
hereinafter sometimes collectively referred to as the "Constituent
Corporations."
RECITALS
A. GDI, Aduromed and MergerSubI have heretofore entered into that certain
Agreement and Plan of Merger, dated December 7, 2005 (the "Original Merger
Agreement"), pursuant to which MergerSubI had agreed to merge with and into
Aduromed, the outstanding common and series A preferred stock of Aduromed would
be converted, respectively, into shares of Common Stock (par value $0.001 per
share) and Series A Preferred Stock (par value $0.0001 per share) of GDI and
Aduromed would become the wholly-owned subsidiary of GDI.
B. GDI was incorporated in New Jersey in 1953 and was reorganized as a
Delaware corporation in September, 2000. Its current authorized capital stock
consists of (1) 100,000,000 shares of Common Stock (par value $0.0001 per share;
the "Common Stock") and (2) 40,000,000 shares of Preferred Stock (par value
$0.0001 per share; the "Preferred Stock"), of which 1,259,585 shares of its
Common Stock are issued and outstanding after the application of a one-for-five
reverse split of the GDI common stock, 6,263,701 shares of its Preferred Stock
have been designated Series A Preferred Stock, and 15,780,159 shares of it
Preferred Stock have been designated Series B Preferred Stock. None of GDI's
Preferred Stock is issued or outstanding.
C. MergerSubI was incorporated in the State of Delaware in December 2001.
Its authorized capital consists of 1,000 shares of common stock (par value of
$0.01 per share) of which 100 shares are issued and outstanding.
D. MergerSubII was incorporated in the State of Delaware on January 17 ,
2006. Its authorized capital consists of 1,000 shares of common stock (par value
of $0.01 per share) of which 1000 shares are issued and outstanding.
E. Aduromed was formed as a limited liability company in 1997 and was
reorganized as a Delaware corporation in August, 2002. Its authorized capital
stock consists of (1) 50,000,000 shares of common stock (par value $0.01 per
share; "Aduromed Common Stock") and (2) 20,000,000 shares of preferred stock
(par value $0.01 per share), of which 10,585,600 shares of its common stock are
issued and outstanding and 3,489,527 shares of a designated series A preferred
stock ("Aduromed Series A Preferred") are issued and outstanding.
F. The Board of Directors of GDI seeks the acquisition of an operating
business through merger or similar business combination so as to maximize its
shareholder value; and the Board of Directors of Aduromed now seeks a public
company with which to merge in connection with its being financed by a group of
investors pursuant to a Securities Purchase Agreement with such investors, dated
as of September 30, 2005, as amended and restated by an Amended and Restated
Securities Purchase Agreement, dated as of January 23, 2006.
G. The respective Boards of Directors of the Constituent Corporations deem
a merger of Aduromed with MergerSubII to be advantageous to their respective
shareholders, upon the terms and subject to the conditions set forth in this
Merger Agreement; and
H. The Board of Directors of each of the Constituent Corporations has
approved this Merger Agreement.
I. GDI, as the sole stockholder of MergerSubII, has approved this
Agreement, and no approval by the stockholders of GDI is required to approve the
Agreement.
J. At a special meeting of shareholders of Aduromed held on January 5,
2006, a majority of the holders of the outstanding shares of Aduromed common
stock and
2
a majority of the holders of the outstanding shares of Aduromed series A
preferred approved the Merger.
NOW THEREFORE, the parties do hereby adopt the plan of reorganization set
forth in this Merger Agreement and do hereby agree that Aduromed shall merge
with MergerSubII in the manner, upon the terms and subject to the conditions set
forth below:
1. MERGER AND EFFECTIVE TIME. At the Effective Time (as defined below),
MergerSubII shall be merged with and into Aduromed (the "Merger") and Aduromed
shall be the surviving corporation of the Merger (the "Surviving Corporation").
The Merger shall become effective upon the close of business on the later of (i)
the date which shall be ten (10) days after the filing with the SEC and mailing
to the stockholders of GDI of a definitive information statement pursuant to SEC
Rule 14(f) describing the change in control of the Board of Directors of GDI
(the Information Statement") and (ii) the date when the Certificate of Merger
shall have been executed in accordance with '103 of the Delaware General
Corporation Law ("DGCL") and filed with the Department of State, Division of
Corporations of the office of the Delaware Secretary of State pursuant to '251
of the DGCL reflecting the Merger (the "Effective Time").
2. EFFECT OF MERGER. At the Effective Time the separate corporate existence
of MergerSubII shall cease; the corporate identity, existence, powers, rights
and immunities of Aduromed as the Surviving Corporation shall continue
unimpaired by the Merger; and Aduromed shall succeed to and shall possess all
the assets, properties, rights, privileges, powers, franchises, immunities and
purposes of MergerSubII, and be subject to, and deemed to have assumed, all the
debts, liabilities, obligations, restrictions and duties of MergerSubII, all
without further act of deed.
3. GOVERNING DOCUMENTS. (a) Certificate of Merger. At the Effective Time, a
Certificate of Merger substantially in form attached as EXHIBIT A hereto, shall
be filed with the Department of State, Division of Corporations of the office of
the Delaware Secretary of State.
3
(b) By-Laws. At the Effective Time, the By-Laws of Aduromed shall remain as the
bylaws of the Surviving Corporation.
(c) Designations of Series A and Series B Preferred Stock. Prior to the
Effective Time GDI shall have executed and filed in accordance with '103 of
the DGCL with the Department of State, Division of Corporations of the office of
the Delaware Secretary of State (i) a Certificate of Designations setting forth
resolutions of its Board of Directors establishing 6,263,702 of its Preferred
Stock as Series A Preferred Stock (par value $0.0001 per share; the "Series A
Preferred") in substantially the form attached as EXHIBIT B hereto and (ii) a
Certificate of Designations setting forth resolutions of its Board of Directors
establishing 15,780,160 shares of its Preferred Stock as Series B Preferred
Stock (par value $0.0001 per share; the "Series B Preferred") in substantially
the form attached as EXHIBIT C hereto.
4. DIRECTORS AND OFFICERS. At the Effective Time, the directors and
officers of Aduromed shall remain as the officers and directors of the Surviving
Corporation. The officers and directors of GDI shall be as set forth in the
Information Statement.
5. CONVERSION OF SHARES. Subject to the terms and conditions of this
Agreement, as at the Effective Time, (i) each share of Aduromed Common Stock
immediately prior thereto shall be automatically changed and converted into
1.795 fully-paid and nonassessable, issued and outstanding shares of the Common
Stock of GDI; (ii) each share of Aduromed Series A Preferred immediately prior
thereto shall be automatically changed and converted into 1.795 fully-paid and
nonassessable, issued and outstanding shares of Series A Preferred of GDI; and
all outstanding shares of the common stock of MergerSubII shall be automatically
changed and converted into 100
4
shares of the common stock of Aduromed. All fractional shares issuable as to
both the shares of Common and Series A Preferred of GDI shall be "rounded up" to
a full share.
6. CANCELLATION OF SHARES OF ADUROMED. At the Effective Time, all of the
previously issued and outstanding shares of both the Aduromed Common Stock and
the Aduromed Series A Preferred immediately prior to the Effective Time shall be
automatically retired and cancelled.
7. STOCK CERTIFICATES. At and after the Effective Time, all of the
outstanding certificates that, prior to that date, represented shares of
Aduromed Common Stock shall be deemed for all purposes to evidence ownership of
and to represent the number of shares of GDI into which such shares of Aduromed
Common Stock are to be converted as provided herein; and all outstanding
certificates that, prior to that date, represented shares of MergerSubII common
stock shall be deemed for all purposes to evidence ownership of and to represent
the same number of shares of the Common Stock of Aduromed. At and after the
Effective Time, all of the outstanding certificates that, prior to that date,
represented shares of Aduromed Series A Preferred shall be deemed for all
purposes to evidence ownership of and to represent the number of shares of the
series of GDI's into which such shares are to be converted as provided herein.
The registered owner on the books and records of Aduromed of any such
outstanding share certificates for Aduromed Common or Series A Preferred shall,
until such certificate shall have been surrendered for transfer or otherwise
accounted for to GDI, as the Surviving Corporation, or to its transfer agent,
shall be entitled to exercise any voting and other rights with respect to, and
to receive any dividend and other distribution upon, the shares of the
5
Surviving Corporation's Common Stock and Series A Preferred, evidenced by such
outstanding certificate as above provided.
8. CONVERSION OF OPTIONS AND WARRANTS. (a) At the Effective Time, all
outstanding and unexercised portions of all options and warrants to purchase a
share of Common Stock of Aduromed shall become options and warrants,
respectively, to purchase 1.795 shares of Common Stock of GDI, all outstanding
and unexercised portions of all options and warrants to purchase a share of
Aduromed Series A Preferred, if any, shall become options and warrants to
purchase 1.795 shares of the Preferred Stock of the same series; and such
resulting options and warrants shall be, except as to fractional shares
(referred to in PARAGRAPH 8(B) below) and exercise prices (which shall be
reduced by a factor of 1.795 per share), be upon the same terms and conditions
as to vesting (with credit for time of employment with Aduromed), exercisability
and all other material terms and conditions as the options and warrants
originally granted or issued.
(b) Fractional Shares. Upon the exercise of any option or warrant assumed
by the Surviving Corporation as provided in PARAGRAPH 8(A) above, cash shall be
paid by the Surviving Corporation for any fractional share issuable upon
exercise of the option or warrant equal in each instance to the fair market
value per share upon exercise thereof multiplied by the applicable fraction less
the unpaid exercise price per share for such fraction.
9. FURTHER ASSURANCES. From time to time, as and when required by the
Surviving Corporation or by its successors or assigns, GDI shall execute and
deliver, and on behalf of MergerSubI, and MergerSubII shall execute and deliver,
such deeds,
6
assignments and other instruments, and shall take or cause to be taken all such
further action as shall be appropriate, advisable or necessary in order to vest,
perfect or confirm, of record or otherwise, in the Surviving Corporation the
title to and possession of all property, interests, assets rights privileges,
immunities, powers, franchises and authority of Aduromed, and otherwise to carry
out the purposes of this Merger Agreement. The officers and directors of the
Surviving Corporation are fully authorized in the name of and on behalf of GDI,
MergerSubI and MergerSubII, or otherwise, to take any and all such actions and
to execute and deliver any and all such deeds and other instruments as may be
necessary or appropriate to accomplish the foregoing.
10. CONDITION. The consummation of the Merger is subject to (i) the
approval of this Merger Agreement and the Merger contemplated hereby, by (A) a
majority of the holders of shares of the Aduromed Common Stock and a majority of
the holders of shares of the Aduromed Series A Preferred Stock and (B) the
holder of the shares of common stock of MergerSubII prior to the Effective Time
and (ii) compliance with all federal securities law requirements.
11. ABANDONMENT. At any time before the Effective Time, this Merger
Agreement may be terminated by mutual agreement of the respective Boards of
Directors of the Constituent Corporations, notwithstanding approval of this
Merger Agreement by the Boards of Directors and shareholders of the Constituent
Corporations.
12. AMENDMENT. At any time prior to the Effective Time, this Merger
Agreement may be amended, modified or supplemented by unanimous agreement of the
respective Boards of Directors of the Constituent Corporations, notwithstanding
approval
7
of this Merger Agreement by their shareholders; provided, however, that such
amendment, modification or supplement shall not (i) alter or change the amount
or kind of shares, securities, cash, property and/or rights to be received in
exchange for or upon conversion of any share of any class or series of stock of
Aduromed; (ii) alter or change any of the terms of the Certificate of
Incorporation of the Surviving Corporation to be effected by the Merger; or
(iii) alter or change any of the terms and conditions of this Merger Agreement
if such alteration or change would adversely affect the holders of any share of
any class or series of either of the Constituent Corporations.
13. TAX-FREE REORGANIZATION. The Merger is intended to be a tax-free plan
of reorganization within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code, as presently amended.
14. GOVERNING LAW. This Agreement shall be governed by and construed under
the internal laws of the State of Delaware without reference to the principles
of conflicts of law or choice of laws.
15. COUNTERPARTS FACSIMILE SIGNATURES. In order to facilitate the filing
and recording of this Merger Agreement, it may be executed in any number of
counterparts, each of which shall be deemed to be an original. The execution of
this Agreement may be effected by means of facsimile signatures on counterpart
copies exchanged between counsel to the parties with the original documents to
follow via overnight delivery.
8
16. ASSIGNMENT AND ASSUMPTION. MergerSubI does hereby assign all its rights
in and under the Original Merger Agreement to MergerSubII; and MergerSubII does
hereby assume the obligations of MergerSubI thereunder.
***SIGNATURES FOLLOW***
9
IN WITNESS WHEREOF, this Merger Agreement is hereby executed on behalf of
each of the Constituent Corporations and attested by their respective officer
hereunto duly authorized.
ADUROMED CORPORATION GENERAL DEVICES, INC.
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxx Xxxxxx, Xx.
--------------------------------- ------------------------------------
Xxxxxx X. Xxxxxx, President Xxxxx Xxxxxx, Xx., Pres.
GD MERGERSUB, INC. GD MERGERSUB II, INC.
By: Xxxxx Xxxxxx, Xx. By: /s/ Xxxxx Xxxxxx, Xx.
--------------------------------- ------------------------------------
Xxxxx Xxxxxx, Xx. Xxxxx Xxxxxx, Xx.
10
EXHIBITS:
Exhibit A - para. 3. Certificate of Merger
Exhibit B - para. 3. Certificate of Designations - GDI Series A Preferred
Exhibit C- para. 3. Certificate of Designations - GDI Series B Preferred
11
(EXHIBIT A TO EX. 2. AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER)
CERTIFICATE OF MERGER
OF
GD MERGERSUB II, INC.
(A DELAWARE CORPORATION)
WITH AND INTO
ADUROMED CORPORATION
(A DELAWARE CORPORATION)
--------------------------------------------------------------------------------
The undersigned corporation,
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the constituent
corporations of the merger is as follows:
NAME STATE OF INCORPORATION
--------------------- ----------------------
GD MergerSub II, Inc. Delaware
Aduromed Corporation Delaware
SECOND: That an Agreement and Plan of Merger, dated as of December 7, 2005,
as amended by an Amended and Restated Agreement and Plan of Merger, dated as of
January 20, 2006, (collectively, the "Merger Agreement") providing for the
merger (the "Merger") of GD MergerSub II, Inc. with and into Aduromed
Corporation has been approved, adopted, certified, executed and acknowledged by
each of the constituent corporations in accordance with the requirements of
Section 251 of the General Corporation Law of Delaware.
THIRD: That the name of the surviving corporation is Aduromed Corporation.
FOURTH: That the executed Merger Agreement is on file at the principal
office of Aduromed Corporation, the address of which is 000 Xxxxxxxxx Xxxxxx,
Xxxxx 00-00, Xxxxxx, Xxxxxxxxxxx 00000.
FIFTH: That a copy of the Merger Agreement will be furnished by Aduromed
Corporation as the surviving corporation, on request and without cost, to any
stockholder of either constituent corporation.
SIXTH: That the certificate of incorporation of the surviving corporation
shall be its certificate of incorporation.
SEVENTH: The merger of the constituent corporations shall be effective upon
the filing of this Certificate of Merger.
Dated: January 23, 2006
Aduromed Corporation
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
(EXHIBIT B TO EX. 2. AMENDED & RESTATED AGREEMENT AND PLAN OF MERGER)
CERTIFICATE OF DESIGNATIONS OF SERIES A PREFERRED STOCK
GENERAL DEVICES, INC.
CERTIFICATE OF DESIGNATIONS OF SERIES A PREFERRED STOCK
General Devices, Inc., a Delaware company (the "Company"), hereby
certifies that the following resolution has been duly adopted by the board of
directors of the Company:
RESOLVED, that pursuant to the authority granted to and vested in the
board of directors of the Company (the "Board") by the provisions of the
certificate of in Company of the Company, there is created a series of preferred
stock, par value $0.0001 per share, and that the voting powers, designation and
number of shares thereof and the powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof are as follows:
1. Designation and Number; Rank; Prohibited Payments.
(a) The shares of this series shall be designated as Series A
Preferred Stock. The number of shares initially constituting the Series A
Preferred Stock shall be 6,263,702 which number may, subject to any consent
right of the holders of any capital stock of the Company, be increased or
decreased by the Board; provided, however, that such number may not be
decreased below the number of the then outstanding shares of Series A
Preferred Stock.
(b) The Series A Preferred Stock shall, with respect to dividend
rights and rights upon liquidation, dissolution or winding up, rank:
(i) junior to all classes and series of any hereafter authorized
capital stock of the Company ranking senior (as to dividend rights,
redemption rights and rights upon liquidation, dissolution or winding
up) to the Series A Preferred Stock ("Senior Stock");
(ii) pari passu with all classes and series of any now or
hereafter authorized capital stock of the Company ranking on a par (as
to dividend rights, redemption rights and rights upon liquidation,
dissolution or winding up) with the Series A Preferred Stock ("Parity
Stock"), including, but not limited to, the Company's Series B
Preferred Stock (the "Series B Preferred Stock"); and
(iii) senior to all classes and series of any now or hereafter
authorized capital stock of the Company ranking junior (as to dividend
rights, redemption rights and rights upon liquidation, dissolution or
winding up) to the Series A Preferred Stock, including, without
limitation, any class of the Company's common stock, par value $0.0001
per share ("Common Stock") (such classes and series are referred to as
"Junior Stock").
2. Dividends.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive preferential dividends at an annual rate equal to six
percent (6%) per annum times the Original Issue Price (as defined below)
for each share of Series A Preferred Stock held by such holders, and such
dividends shall be payable in cash to the holders of record at the close of
business on each March 15 and September 15 of each year. Dividends on
shares of the Series A Preferred Stock shall accumulate on a daily basis
from the date on which such shares are issued and, to the extent they are
not paid in cash when due, shall compound on a semi-annual basis on each
March 15 and September 15 of each year, whether or not the Company has
earnings or profits, whether or not there are funds legally available for
the payment of such dividends and whether or not dividends are declared.
(b) Upon conversion of any share of Series A Preferred Stock into
Common Stock pursuant to Section 4, the holder of such Series A Preferred
Stock shall be entitled to receive payment of all accrued and unpaid
dividends thereon, at the option of the holder thereof, (i) in cash or (ii)
in the form of such number of additional shares of Common Stock equal to
(x) the amount of such accrued and unpaid dividends, divided by (y) the
then applicable Series A Conversion Price.
(c) In no event may any dividends be paid on the Series A Preferred
Stock unless, at the time of such payment, any and all dividends then
accrued and payable on the shares of any Senior Stock shall have been paid
in full. If dividends are paid on the shares of Series A Preferred Stock
and shares of Parity Stock in an amount less than the total amount of such
dividends at the time accrued and payable on all of such shares, such
dividends shall be allocated pro rata (in proportion to the respective
amounts due with respect thereto) among all such shares of Series A
Preferred Stock and shares of Parity Stock at the time outstanding based on
the amount of dividends then due with respect to each such share. In no
event may any dividends be paid on any Junior Stock unless, at the time of
such payment, any and all dividends then accrued and payable on the shares
of the Series A Preferred Stock have been paid in full.
3. Preference on Liquidation.
(a) Upon the liquidation or dissolution of the Company ("Liquidation
Event"), the holders of Series A Preferred Stock shall be entitled to
receive out of the Company's assets, for each share of Series A Preferred
Stock outstanding at the time thereof, distributions in the amount of
$0.31755 (subject to adjustment from time to time as a result of a stock
split, stock combination or any other similar event affecting the
outstanding number of shares of Series A Preferred Stock) (as adjusted from
time to time, the "Original Issue Price") plus an amount equal to all
accumulated but unpaid dividends thereon, whether or not declared (the
Original Issue Price together with such dividends, the "Liquidation
Preference").
(b) Distributions of the Company's cash, securities and other assets
pursuant to this Section 3 shall be made to the holders of shares of Series
A Preferred Stock and all other Parity Stock in proportion to the total
amounts to which the holders of all shares of Series A Preferred Stock and
all other Parity Stock are entitled upon a Liquidation Event.
(c) No payment or distribution shall be made in respect of any shares
of Series A Preferred Stock pursuant to Section 3(a) unless, at the time of
such distribution, all amounts due in respect of any shares of Senior Stock
have been paid in full.
(d) No payment or distribution shall be made in respect of any shares
of Junior Stock unless, at the time of such distribution, the holders of
shares of Series A Preferred Stock shall have received the Liquidation
Preference with respect to each share.
(e) Upon the payment in full of all amounts due to a holder of Series
A Preferred Stock pursuant to this Section 3, such holder shall not be
entitled to any further participation in the assets of the Company.
4. Conversion.
4.1 Right to Convert.
(a) Each share of Series A Preferred Stock shall be convertible, at
the option of the holder thereof upon exercise in accordance with Section
4.1(b), without the payment of additional consideration, into such number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing the Original Issue Price by the Series A Conversion Price (as
defined below) in effect at the time of conversion. The "Series A
Conversion Price" shall initially be equal to $0.31755. Such initial Series
A Conversion Price, and the rate at which shares of Series A Preferred
Stock may be converted into shares of Common Stock, shall be subject to
adjustment as provided below.
(b) A record holder of shares of Series A Preferred Stock may effect
the optional conversion thereof in accordance with Section 4.1(a) by making
a written demand for such conversion (a "Series A Conversion Demand") upon
the Company at its principal executive offices that sets forth (i) the
number of shares of Series A Preferred Stock to be converted; and (ii) the
proposed date of such conversion, which shall be a Business Day not less
than 5 Business Days after the date of such Series A Conversion Demand (the
"Series A Conversion Date"). The Series A Conversion Demand shall be
accompanied by the certificate representing such shares or, if such
certificate has been lost or stolen, a lost stock certificate affidavit and
indemnification agreement in form and substance satisfactory to the Company
and, if the Company shall so request, evidence that such holder shall have
posted a bond satisfactory to the Company. As soon as practicable after the
Series A Conversion Date, the Company shall issue and deliver to such
holder a certificate for the number of shares of Common Stock issuable upon
such conversion in accordance with the provisions hereof (rounded down to
the nearest whole share). Upon surrender of a certificate representing
Series A Preferred Stock to be converted in part, the Company shall after
the Series A Conversion Date issue a certificate representing the number of
full shares of Series A Preferred Stock not so converted.
(c) All outstanding shares of Series A Preferred Stock to be converted
pursuant to the Series A Conversion Demand shall, on the Series A
Conversion Date, be
converted into Common Stock for all purposes. On and after the Series A
Conversion Date, (i) no such shares of Series A Preferred Stock shall be
deemed to be outstanding or be transferable on the books of the Company or
the stock transfer agent, if any, for such shares of Series A Preferred
Stock, and (ii) the holder of such shares, as such, shall not be entitled
to receive any dividends or other distributions, to receive notices or to
vote such shares or to exercise or to enjoy any other powers, preferences
or rights in respect thereof, other than the right, upon surrender of the
certificate representing such shares, to receive a certificate for the
number of shares of Common Stock into which such shares shall have been
converted.
4.2 Adjustments to Series A Conversion Price.
(a) Definitions. For the purposes of this Section 4, the following
terms shall have the following meanings ascribed thereto:
(i) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or deemed to be issued pursuant to clause (b)
below) by the Company after the Initial Issuance Date, but shall not
include up to 4,211,799 shares of Common Stock issuable upon exercise
of options granted by the Company pursuant to a statutory employee
option plan approved in accordance with Section 7 below.
(ii) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock, but excluding
Options.
(iii) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, but shall not include options to purchase up
to 4,211,799 shares of Common Stock granted by the Company pursuant to
any statutory employee option plan approved in accordance with Section
7 below.
(b) Deemed Issue of Additional Shares of Common Stock.
(i) If the Company at any time or from time to time after the
date of the initial issuance of shares of Series A Preferred Stock
(the "Initial Issuance Date") shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders
of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto, assuming the
satisfaction of any conditions to exercisability, convertibility or
exchangeability but without regard to any provision contained therein
for a subsequent adjustment of such number) issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been
fixed, as of the close of business on such record date.
(ii) If the terms of any Option or Convertible Security, the
issuance of which resulted in an adjustment to the Series A Conversion
Price pursuant to the terms of Section 4.2(c) below, are revised
(either automatically pursuant to the provisions contained therein or
as a result of an amendment to such terms) to provide for either (1)
any increase or decrease in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of any such Option
or Convertible Security or (2) any increase or decrease in the
consideration payable to the Company upon such exercise, conversion or
exchange, then, effective upon such increase or decrease becoming
effective, the Series A Conversion Price computed upon the original
issue of such Option or Convertible Security (or upon the occurrence
of a record date with respect thereto) shall be readjusted to such
Series A Conversion Price as would have obtained had such revised
terms been in effect upon the original date of issuance of such Option
or Convertible Security. Notwithstanding the foregoing, no adjustment
pursuant to this clause (ii) shall have the effect of increasing the
Series A Conversion Price to an amount which exceeds the lower of (i)
the Series A Conversion Price on the original adjustment date, or (ii)
the Series A Conversion Price that would have resulted from any
issuances of Additional Shares of Common Stock between the original
adjustment date and such readjustment date.
(iii) If the terms of any Option or Convertible Security, the
issuance of which did not result in an adjustment to the Series A
Conversion Price pursuant to the terms of Section 4.2(c) below (either
because the consideration per share of the Additional Shares of Common
Stock subject thereto was equal to or greater than the Series A
Conversion Price then in effect, or because such Option or Convertible
Security was issued before the Initial Issuance Date), are revised
after the Initial Issuance Date (either automatically pursuant to the
provisions contained therein or as a result of an amendment to such
terms) to provide for either (1) any increase or decrease in the
number of shares of Common Stock issuable upon the exercise,
conversion or exchange of any such Option or Convertible Security or
(2) any increase or decrease in the consideration payable to the
Company upon such exercise, conversion or exchange, then such Option
or Convertible Security, as so amended, and the Additional Shares of
Common Stock subject thereto shall be deemed to have been issued
effective upon such increase or decrease becoming effective.
(iv) Upon the expiration or termination of any unexercised Option
or unconverted or unexchanged Convertible Security which resulted
(either upon its original issuance or upon a revision of its terms) in
an adjustment to the Series A Conversion Price pursuant to the terms
of Section 4.2(c) below, the Series A Conversion Price shall be
readjusted to such Series A Conversion Price as would have obtained
had such Option or Convertible Security never been issued.
(c) Adjustment of Series A Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Company shall at any
time after the Initial Issuance Date issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 4.2(b)), without consideration or
for a consideration per share less than the applicable Series A Conversion
Price in effect immediately prior to such issue, then the Series A
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest one-hundredth of a cent) determined in
accordance with the following formula:
CP(2) = CP(1) * (A + B) / (A + C)
For purposes of the foregoing formula, the following definitions shall
apply:
(A) "CP(2)" shall mean the Series A Conversion Price in effect
immediately after such issue of Additional Shares of Common
Stock;
(B) "CP(1)" shall mean the Series A Conversion Price in effect
immediately prior to such issue of Additional Shares of
Common Stock;
(C) "A" shall mean the number of shares of Common Stock
outstanding and deemed outstanding immediately prior to such
issue of Additional Shares of Common Stock (treating for
this purpose as outstanding all shares of Common Stock
issuable upon exercise of Options outstanding immediately
prior to such issue or upon conversion of Convertible
Securities (including the Series A Preferred Stock)
outstanding immediately prior to such issue);
(D) "B" shall mean the number of shares of Common Stock that
would have been issued if such Additional Shares of Common
Stock had been issued at a price per share equal to CP(1)
(determined by dividing the aggregate consideration received
by the Company in respect of such issue by CP(1)); and
(E) "C" shall mean the number of such Additional Shares of
Common Stock issued in such transaction.
(d) Determination of Consideration. For purposes of this Section 4.2,
the consideration received by the Company for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(i) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Company,
excluding amounts paid or payable for accrued interest;
(B) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time
of such issue, as determined in good faith by the
Board; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or
other assets of the Company for consideration which
covers both, be the proportion of such consideration so
received, computed as provided in clauses (I) and (II)
above, as determined in good faith by the Board.
(ii) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 4.2(b), relating to
Options and Convertible Securities, shall be determined by dividing:
(A) the total amount, if any, received or receivable by the
Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration)
payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the conversion or exchange
of such Convertible Securities, by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(e) Multiple Closing Dates. In the event the Company shall issue on
more than one date Additional Shares of Common Stock that are a part of one
transaction or a series of related transactions and that would result in an
adjustment to the Series A Conversion Price pursuant to the terms of
Section 4.2(c) above then, upon the final such issuance, the Series A
Conversion Price shall be readjusted to give effect to all such issuances
as if they occurred on the date of the first such issuance (and without
additional giving effect to any adjustments as a result of any subsequent
issuances within such period).
(f) Adjustment for Stock Splits and Combinations. If the Company shall
at any time or from time to time after the Initial Issuance Date effect a
subdivision of the outstanding Common Stock without a comparable
subdivision of the Series A Preferred Stock or combine the outstanding
shares of Series A Preferred Stock without a comparable combination of the
Common Stock, the Series A Conversion Price in effect immediately before
that subdivision or combination shall be proportionately decreased so that
the number of shares of Common Stock issuable on conversion of each share
of such series shall be increased in proportion to such increase in the
aggregate number of shares of Common Stock outstanding. If the Company
shall at any time or from time to time
after the Initial Issuance Date combine the outstanding shares of Common
Stock without a comparable combination of the Series A Preferred Stock or
effect a subdivision of the outstanding shares of Series A Preferred Stock
without a comparable subdivision of the Common Stock, the Series A
Conversion Price in effect immediately before the combination or
subdivision shall be proportionately increased so that the number of shares
of Common Stock issuable on conversion of each share of such series shall
be decreased in proportion to such decrease in the aggregate number of
shares of Common Stock outstanding. Any adjustment under this subsection
shall become effective at the close of business on the date the subdivision
or combination becomes effective.
4.3 Adjustment for Certain Dividends and Distributions. In the event
the Company at any time or from time to time after the Initial Issuance
Date shall make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other
distribution payable on the Common Stock in additional shares of Common
Stock, then and in each such event the Series A Conversion Price in effect
immediately before such event shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of
the close of business on such record date, by multiplying the Series A
Conversion Price then in effect by a fraction:
(a) the numerator of which shall be the total number of shares of
Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and
(b) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to the time
of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend
or distribution;
provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Series A Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter
the Series A Conversion Price shall be adjusted pursuant to this subsection
as of the time of actual payment of such dividends or distributions; and
provided further, however, that no such adjustment shall be made if the
holders of Series A Preferred Stock simultaneously receive (i) a dividend
or other distribution of shares of Common Stock in a number equal to the
number of shares of Common Stock as they would have received if all
outstanding shares of Series A Preferred Stock had been converted into
Common Stock on the date of such event or (ii) a dividend or other
distribution of shares of Series A Preferred Stock which are convertible,
as of the date of such event, into such number of shares of Common Stock as
is equal to the number of additional shares of Common Stock being issued
with respect to each share of Common Stock in such dividend or
distribution.
4.4 Adjustments for Other Dividends and Distributions. In the event
the Company at any time or from time to time after the Initial Issuance
Date shall make or issue, or fix a record date for the determination of
holders of capital stock of the
Company entitled to receive, a dividend or other distribution payable in
securities of the Company (other than a distribution of shares of Common
Stock in respect of outstanding shares of Common Stock) or in other
property, then and in each such event the holders of Series A Preferred
Stock shall receive, simultaneously with the distribution to the holders of
such capital stock, a dividend or other distribution of such securities or
other property in an amount equal to the amount of such securities or other
property as they would have received if all outstanding shares of Series A
Preferred Stock had been converted into Common Stock on the date of such
event.
4.5 Adjustment for Merger or Reorganization, etc. If there shall occur
any reorganization, recapitalization, reclassification, consolidation or
merger involving the Company in which the Common Stock (but not the Series
A Preferred Stock) is converted into or exchanged for securities, cash or
other property (other than a transaction covered by Sections 4.3 or 4.4),
then, following any such reorganization, recapitalization,
reclassification, consolidation or merger, each share of Series A Preferred
Stock shall thereafter be convertible in lieu of the Common Stock into
which it was convertible prior to such event into the kind and amount of
securities, cash or other property which a holder of the number of shares
of Common Stock of the Company issuable upon conversion of one share of
Series A Preferred Stock immediately prior to such reorganization,
recapitalization, reclassification, consolidation or merger would have been
entitled to receive pursuant to such transaction; and, in such case,
appropriate adjustment (as determined in good faith by the Board) shall be
made in the application of the provisions in this Section 4 with respect to
the rights and interests thereafter of the holders of the Series A
Preferred Stock, to the end that the provisions set forth in this Section 4
(including provisions with respect to changes in and other adjustments of
the Series A Conversion Price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or other property
thereafter deliverable upon the conversion of the Series A Preferred Stock.
4.6 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price pursuant to
this Section 4, the Company at its expense shall, as promptly as reasonably
practicable but in any event not later than 10 days thereafter, compute
such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of Series A Preferred Stock a certificate setting
forth such adjustment or readjustment (including the kind and amount of
securities, cash or other property into which the Series A Preferred Stock
is convertible) and showing in detail the facts upon which such adjustment
or readjustment is based. The Company shall, as promptly as reasonably
practicable after the written request at any time of any holder of Series A
Preferred Stock (but in any event not later than 10 days thereafter),
furnish or cause to be furnished to such holder a certificate setting forth
(i) the Series A Conversion Price then in effect, and (ii) the number of
shares of Common Stock and the amount, if any, of other securities, cash or
property which then would be received upon the conversion of Series A
Preferred Stock.
4.7 Notice of Record Date. In the event:
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time issuable upon conversion of the
Series A Preferred Stock) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right; or
(b) of any capital reorganization of the Company, any reclassification
of the Common Stock of the Company, or any Deemed Liquidation Event; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will send or cause to be sent to
the holders of the Series A Preferred Stock a notice specifying, as the
case may be, (i) the record date for such dividend, distribution or right,
and the amount and character of such dividend, distribution or right, or
(ii) the effective date on which such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up is
proposed to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at
the time issuable upon the conversion of the Series A Preferred Stock)
shall be entitled to exchange their shares of Common Stock (or such other
stock or securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up, and the amount per share and
character of such exchange applicable to the Series A Preferred Stock and
the Common Stock. Such notice shall be sent at least 10 days prior to the
record date or effective date for the event specified in such notice. Any
notice required by the provisions hereof to be given to a holder of shares
of Preferred Stock shall be deemed sent to such holder if deposited in the
United States mail, postage prepaid, and addressed to such holder at his,
her or its address appearing on the books of the Company.
4.8 Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of
Series A Preferred Stock. Any fractional interest in a share of Common
Stock resulting from conversion of one or more shares of Series A Preferred
Stock shall be paid in cash (computed to the nearest cent) equal to such
fraction equal to the fair market value of a share of Common Stock as of
the date of such conversion, as reasonably determined by the Company.
4.9 Reserved Common Stock. The Company will at all times when any
shares of Series A Preferred Stock are outstanding, reserve and keep
available out of its authorized but unissued stock, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series A Preferred Stock.
4.10 Provisional Conversion at the Option of the Corporation.
(a) The Company may, at its option, cause the conversion of all, but
not less than all, of the shares of the Series A Preferred Stock then
outstanding into such number
of fully paid and nonassessable shares of Common Stock, per share of Series
A Preferred Stock so converted, as is determined by dividing the Original
Issue Price by the Series A Conversion Price in effect at the time of
conversion, if (x) the Closing Price (as defined below) of the Common Stock
has exceeded 400% of the then effective Series A Conversion Price for at
least 20 Trading Days (as defined below) within a period of 30 consecutive
Trading Days ending on the Trading Day prior to the date on which the
Company notifies the holders of the Series A Preferred Stock (pursuant to
Section 4.10(b) below) that it is exercising its option to cause the
conversion of the Series A Preferred Stock pursuant to this Section 4.10
(the "Provisional Conversion Notice Date") and (y) the actual average daily
trading volume of the Common Stock, on the Over-The-Counter Bulletin Board
or any other stock quotation system or exchange upon which the Common Stock
is listed, during the 30 consecutive Trading Day period referred to in
clause (x) above is at least 100,000 shares of Common Stock (subject to
adjustment from time to time as a result of a stock split, stock
combination or any other similar event affecting the outstanding number of
shares of Common Stock).
(b) In order for the Company to exercise its rights to cause the
conversion of all of the Series A Preferred Stock pursuant to this Section
4.10, a written notice (the "Provisional Conversion Notice") shall be sent
by or on behalf of the Company, by first class mail, postage prepaid, to
the holders of record of the Series A Preferred Stock as they appear on the
stock register of the Company on the Provisional Conversion Notice Date
notifying such holders of the election of the Company to cause the
conversion of all of the Series A Preferred Stock and of the Provisional
Conversion Date (as defined below), which date shall not be less than 5
days nor be more than 10 days after the Provisional Conversion Notice Date.
(c) If a Provisional Conversion Notice shall have been given as
hereinbefore provided, then each holder of the Series A Preferred Stock
shall be entitled to all preferences and relative, participating, optional
and other special rights accorded by this certificate until and including
the Provisional Conversion Date. From and after the Provisional Conversion
Date, upon delivery by the Company of the Common Stock issuable upon
conversion of the Series A Preferred Stock, together with payment in full
of all accrued and unpaid dividends thereon as provided in Section 2(b),
the Series A Preferred Stock shall no longer be deemed to be outstanding,
and all rights of the holders of such Series A Preferred Stock (in their
capacity as holders of Series A Preferred Stock) shall cease and terminate.
(d) For purpose of this Section 4.10, following definitions shall
apply:
(i) "Closing Price" means, on any date of determination, the
closing price (or, if no closing price is reported, the last reported
sale price) per share reported by the Over-The-Counter Bulletin Board
or any other stock quotation system or exchange upon which the Common
Stock is listed.
(ii) "Provisional Conversion Date" means the date fixed for
conversion of shares of Series A Preferred Stock pursuant to this
Section 4.10.
(iii) "Trading Day" means a day on which the Common Stock (i) is
not suspended from trading on the Over-The-Counter Bulletin Board or
any other stock quotation system or exchange upon which the Common
Stock is listed and (ii) has traded at least once on the
Over-The-Counter Bulletin Board or any other stock quotation system or
exchange upon which the Common Stock is listed.
5. [Intentionally Omitted].
6. Reacquired Shares. Any shares of Series A Preferred Stock converted,
exchanged, redeemed, purchased or otherwise acquired by the Company in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares of Series A Preferred Stock shall upon their
cancellation become authorized but unissued shares of the Company's preferred
stock, par value $0.0001 per share, and, upon the filing of an appropriate
Certificate of Designation with the Secretary of State of the State of Delaware,
may be reissued as part of another class or series of the Company's preferred
stock, par value $0.0001 per share, including, without limitation, Series A
Preferred Stock, all subject to the conditions or restrictions on issuance set
forth herein.
7. Voting Rights.
(a) Each share of Series A Preferred Stock shall entitle the holder
thereof to vote, in person, by proxy or at a special or annual meeting of the
stockholders of the Company, on all matters voted on by holders of Common Stock,
voting together as a single class with the holders of the Common Stock and all
other shares entitled to vote thereon as a single class with the Common Stock.
With respect to any such matters as to which holders of the Series A Preferred
Stock shall be entitled to vote, each issued and outstanding share of Series A
Preferred Stock shall entitle the holder thereof to cast that number of votes
per share as is equal to the number of shares of Common Stock issuable upon
conversion thereof.
(b) The Company shall not, without the prior affirmative vote or
written consent of the Requisite Preferred Majority (as defined below):
(i) adversely alter or change, or engage in any action that would
result in any adverse alteration of or change to, the rights,
preferences or privileges of the Series A Preferred Stock or the
Series B Preferred Stock;
(ii) increase the authorized number of shares of the Series A
Preferred Stock or the Series B Preferred Stock;
(iii) create, authorize, sell or issue any new class or series of
the Company's capital stock or any bonds, notes or other obligations
convertible into, exchangeable for or having option rights to purchase
shares of such new class or series or reclassify any class or series
of the Company's capital stock;
(iv) increase the authorized number of members of the Board;
(v) amend or repeal any provision of, or add any provision to,
the Company's certificate of incorporation, certificates of
designations or bylaws (in
any such case, whether by merger, consolidation or otherwise) in a
manner that adversely affects the rights of the Series A Preferred
Stock, the Series B Preferred Stock or the holders thereof;
(vi) pay or set aside funds for the payment of any dividends or
make any distributions on any of the Company's capital stock (other
than the Series A Preferred Stock or the Series B Preferred Stock);
(vii) engage, or permit any of its subsidiaries to engage, in any
transaction with an affiliate of the Company or any of its
subsidiaries, or an affiliate of any such person;
(viii) make, or permit any of its subsidiaries to make, any
material change, directly or indirectly, in the nature of the
Company's or such subsidiary's business;
(ix) incur or become liable for, or permit any of its
subsidiaries to incur or become liable for, through guarantees or
otherwise, directly or indirectly, any indebtedness in excess of $5
million in the aggregate at any one time outstanding (calculated on a
consolidated basis for the Company and its subsidiaries);
(x) for so long as the outstanding shares of Series A Preferred
Stock and Series B Preferred Stock shall collectively represent 5% of
the outstanding shares of capital stock of the Company or any
successor entity thereto (calculated on a fully diluted basis),
engage, or permit any of its subsidiaries to engage, in any merger,
consolidation, acquisition, recapitalization, joint venture or
partnership;
(xi) directly or indirectly dispose of all of the equity
interests in any of its direct or indirect subsidiaries or directly or
indirectly dispose of all or substantially all of the assets of the
Company or any of its direct or indirect subsidiaries;
(xii) authorize, approve or implement any employee option plan or
similar employee equity program (it being understood that (x) the
Company contemplates authorizing a 2005 Management Stock Option Plan
providing for the issuance of options for up to 4,211,799 shares of
Common Stock and (y) the Requisite Preferred Majority shall have the
right to approve the form and substance of such 2005 Management Stock
Option Plan pursuant to this clause (xii));
(xiii) permit any of its subsidiaries to issue any of its capital
stock or other equity securities to any person or entity other than
the Company or any of the Company's wholly-owned subsidiaries or
otherwise engage in any transaction, or permit any of its subsidiaries
to engage in any transaction, which results in the Company ceasing to
directly or indirectly own 100% of the issued and outstanding capital
stock and other equity securities of Aduromed Corporation or any other
direct or indirect subsidiary of the Company; or
(xiv) enter into, or permit any of its subsidiaries to enter
into, any contract or other agreement to consummate any of the
foregoing.
(c) For the purposes hereof, the term "Requisite Preferred Majority"
shall mean the holders of more than 50% of the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock, voting together as a single class
on an as-converted basis.
8. No Impairment. The Company will not, through any reorganization,
transfer of assets, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company but will
at all times in good faith assist in the carrying out of all the provisions
hereunder and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights and liquidation
preferences granted hereunder of the holders of the Series A Preferred Stock
against impairment.
The Company has caused this Certificate of Designation to be signed as
of this 23rd day of January, 2006.
GENERAL DEVICES, INC.
By: /s/ Xxxxx Xxxxxx, Xx.
-------------------------------
Name: Xxxxx Xxxxxx, Xx.
Title: President
(EXHIBIT C TO EXHIBIT 2. AMENDED & RESTATED AGREEMENT AND PLAN OF MERGER)
CERTIFICATE OF DESIGNATIONS OF SERIES B PREFERRED STOCK
GENERAL DEVICES, INC.
CERTIFICATE OF DESIGNATIONS OF SERIES B PREFERRED STOCK
General Devices, Inc., a Delaware company (the "Company"), hereby
certifies that the following resolution has been duly adopted by the board of
directors of the Company:
RESOLVED, that pursuant to the authority granted to and vested in the
board of directors of the Company (the "Board") by the provisions of the
certificate of in Company of the Company, there is created a series of preferred
stock, par value $0.0001 per share, and that the voting powers, designation and
number of shares thereof and the powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof are as follows:
1. Designation and Number; Rank; Prohibited Payments.
(a) The shares of this series shall be designated as Series B
Preferred Stock. The number of shares initially constituting the Series B
Preferred Stock shall be 15,780,160, which number may, subject to any
consent right of the holders of any capital stock of the Company, be
increased or decreased by the Board; provided, however, that such number
may not be decreased below the number of the then outstanding shares of
Series B Preferred Stock.
(b) The Series B Preferred Stock shall, with respect to dividend
rights and rights upon liquidation, dissolution or winding up, rank:
(i) junior to all classes and series of any hereafter authorized
capital stock of the Company ranking senior (as to dividend rights,
redemption rights and rights upon liquidation, dissolution or winding
up) to the Series B Preferred Stock ("Senior Stock");
(ii) pari passu with all classes and series of any now or
hereafter authorized capital stock of the Company ranking on a par (as
to dividend rights, redemption rights and rights upon liquidation,
dissolution or winding up) with the Series B Preferred Stock ("Parity
Stock"), including, but not limited to, the Company's Series A
Preferred Stock (the "Series A Preferred Stock"); and
(iii) senior to all classes and series of any now or hereafter
authorized capital stock of the Company ranking junior (as to dividend
rights, redemption rights and rights upon liquidation, dissolution or
winding up) to the Series B Preferred Stock, including, without
limitation, any class of the Company's common stock, par value $0.0001
per share ("Common Stock") (such classes and series are referred to as
"Junior Stock").
2. Dividends.
(a) The holders of shares of Series B Preferred Stock shall be
entitled to receive preferential dividends at an annual rate equal to six
percent (6%) per annum times the Original Issue Price (as defined below)
for each share of Series B Preferred Stock held by such holders, and such
dividends shall be payable in cash to the holders of record at the close of
business on each March 15 and September 15 of each year. Dividends on
shares of the Series B Preferred Stock shall accumulate on a daily basis
from the date on which such shares are issued and, to the extent they are
not paid in cash when due, shall compound on a semi-annual basis on each
March 15 and September 15 of each year, whether or not the Company has
earnings or profits, whether or not there are funds legally available for
the payment of such dividends and whether or not dividends are declared.
(b) Upon conversion of any share of Series B Preferred Stock into
Common Stock pursuant to Section 4, the holder of such Series B Preferred
Stock shall be entitled to receive payment of all accrued and unpaid
dividends thereon, at the option of the holder thereof, (i) in cash or (ii)
in the form of such number of additional shares of Common Stock equal to
(x) the amount of such accrued and unpaid dividends, divided by (y) the
then applicable Series B Conversion Price.
(c) In no event may any dividends be paid on the Series B Preferred
Stock unless, at the time of such payment, any and all dividends then
accrued and payable on the shares of any Senior Stock shall have been paid
in full. If dividends are paid on the shares of Series B Preferred Stock
and shares of Parity Stock in an amount less than the total amount of such
dividends at the time accrued and payable on all of such shares, such
dividends shall be allocated pro rata (in proportion to the respective
amounts due with respect thereto) among all such shares of Series B
Preferred Stock and shares of Parity Stock at the time outstanding based on
the amount of dividends then due with respect to each such share. In no
event may any dividends be paid on any Junior Stock unless, at the time of
such payment, any and all dividends then accrued and payable on the shares
of the Series B Preferred Stock have been paid in full.
3. Preference on Liquidation.
(a) Upon the liquidation or dissolution of the Company ("Liquidation
Event"), the holders of Series B Preferred Stock shall be entitled to
receive out of the Company's assets, for each share of Series B Preferred
Stock outstanding at the time thereof, distributions in the amount of
$0.31755 (subject to adjustment from time to time as a result of a stock
split, stock combination or any other similar event affecting the
outstanding number of shares of Series B Preferred Stock) (as adjusted from
time to time, the "Original Issue Price") plus an amount equal to all
accumulated but unpaid dividends thereon, whether or not declared (the
Original Issue Price together with such dividends, the "Liquidation
Preference").
(b) Distributions of the Company's cash, securities and other assets
pursuant to this Section 3 shall be made to the holders of shares of Series
B Preferred Stock and all other Parity Stock in proportion to the total
amounts to which the holders of all shares of Series B Preferred Stock and
all other Parity Stock are entitled upon a Liquidation Event.
(c) No payment or distribution shall be made in respect of any shares
of Series B Preferred Stock pursuant to Section 3(a) unless, at the time of
such distribution, all amounts due in respect of any shares of Senior Stock
have been paid in full.
(d) No payment or distribution shall be made in respect of any shares
of Junior Stock unless, at the time of such distribution, the holders of
shares of Series B Preferred Stock shall have received the Liquidation
Preference with respect to each share.
(e) Upon the payment in full of all amounts due to a holder of Series
B Preferred Stock pursuant to this Section 3, such holder shall not be
entitled to any further participation in the assets of the Company.
4. Conversion.
4.1 Right to Convert.
(a) Each share of Series B Preferred Stock shall be convertible, at
the option of the holder thereof upon exercise in accordance with Section
4.1(b), without the payment of additional consideration, into such number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing the Original Issue Price by the Series B Conversion Price (as
defined below) in effect at the time of conversion. The "Series B
Conversion Price" shall initially be equal to $0.31755. Such initial Series
B Conversion Price, and the rate at which shares of Series B Preferred
Stock may be converted into shares of Common Stock, shall be subject to
adjustment as provided below.
(b) A record holder of shares of Series B Preferred Stock may effect
the optional conversion thereof in accordance with Section 4.1(a) by making
a written demand for such conversion (a "Series B Conversion Demand") upon
the Company at its principal executive offices that sets forth (i) the
number of shares of Series B Preferred Stock to be converted; and (ii) the
proposed date of such conversion, which shall be a Business Day not less
than 5 Business Days after the date of such Series B Conversion Demand (the
"Series B Conversion Date"). The Series B Conversion Demand shall be
accompanied by the certificate representing such shares or, if such
certificate has been lost or stolen, a lost stock certificate affidavit and
indemnification agreement in form and substance satisfactory to the Company
and, if the Company shall so request, evidence that such holder shall have
posted a bond satisfactory to the Company. As soon as practicable after the
Series B Conversion Date, the Company shall issue and deliver to such
holder a certificate for the number of shares of Common Stock issuable upon
such conversion in accordance with the provisions hereof (rounded down to
the nearest whole share). Upon surrender of a certificate representing
Series B Preferred Stock to be converted in part, the Company shall after
the Series B Conversion Date issue a certificate representing the number of
full shares of Series B Preferred Stock not so converted.
(c) All outstanding shares of Series B Preferred Stock to be converted
pursuant to the Series B Conversion Demand shall, on the Series B
Conversion Date, be
converted into Common Stock for all purposes. On and after the Series B
Conversion Date, (i) no such shares of Series B Preferred Stock shall be
deemed to be outstanding or be transferable on the books of the Company or
the stock transfer agent, if any, for such shares of Series B Preferred
Stock, and (ii) the holder of such shares, as such, shall not be entitled
to receive any dividends or other distributions, to receive notices or to
vote such shares or to exercise or to enjoy any other powers, preferences
or rights in respect thereof, other than the right, upon surrender of the
certificate representing such shares, to receive a certificate for the
number of shares of Common Stock into which such shares shall have been
converted.
4.2 Adjustments to Series B Conversion Price.
(a) Definitions. For the purposes of this Section 4, the following
terms shall have the following meanings ascribed thereto:
(i) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or deemed to be issued pursuant to clause (b)
below) by the Company after the Initial Issuance Date, but shall not
include up to 4,211,799 shares of Common Stock issuable upon exercise
of options granted by the Company pursuant to a statutory employee
option plan approved in accordance with Section 6 below.
(ii) "Convertible Securities" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock, but excluding
Options.
(iii) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, but shall not include options to purchase up
to 4,211,799 shares of Common Stock granted by the Company pursuant to
a statutory employee option plan approved in accordance with Section 6
below.
(b) Deemed Issue of Additional Shares of Common Stock.
(i) If the Company at any time or from time to time after the
date of the initial issuance of shares of Series B Preferred Stock
(the "Initial Issuance Date") shall issue any Options or Convertible
Securities or shall fix a record date for the determination of holders
of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares of Common
Stock (as set forth in the instrument relating thereto, assuming the
satisfaction of any conditions to exercisability, convertibility or
exchangeability but without regard to any provision contained therein
for a subsequent adjustment of such number) issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been
fixed, as of the close of business on such record date.
(ii) If the terms of any Option or Convertible Security, the
issuance of which resulted in an adjustment to the Series B Conversion
Price pursuant to the terms of Section 4.2(c) below, are revised
(either automatically pursuant to the provisions contained therein or
as a result of an amendment to such terms) to provide for either (1)
any increase or decrease in the number of shares of Common Stock
issuable upon the exercise, conversion or exchange of any such Option
or Convertible Security or (2) any increase or decrease in the
consideration payable to the Company upon such exercise, conversion or
exchange, then, effective upon such increase or decrease becoming
effective, the Series B Conversion Price computed upon the original
issue of such Option or Convertible Security (or upon the occurrence
of a record date with respect thereto) shall be readjusted to such
Series B Conversion Price as would have obtained had such revised
terms been in effect upon the original date of issuance of such Option
or Convertible Security. Notwithstanding the foregoing, no adjustment
pursuant to this clause (ii) shall have the effect of increasing the
Series B Conversion Price to an amount which exceeds the lower of (i)
the Series B Conversion Price on the original adjustment date, or (ii)
the Series B Conversion Price that would have resulted from any
issuances of Additional Shares of Common Stock between the original
adjustment date and such readjustment date.
(iii) If the terms of any Option or Convertible Security, the
issuance of which did not result in an adjustment to the Series B
Conversion Price pursuant to the terms of Section 4.2(c) below (either
because the consideration per share of the Additional Shares of Common
Stock subject thereto was equal to or greater than the Series B
Conversion Price then in effect, or because such Option or Convertible
Security was issued before the Initial Issuance Date), are revised
after the Initial Issuance Date (either automatically pursuant to the
provisions contained therein or as a result of an amendment to such
terms) to provide for either (1) any increase or decrease in the
number of shares of Common Stock issuable upon the exercise,
conversion or exchange of any such Option or Convertible Security or
(2) any increase or decrease in the consideration payable to the
Company upon such exercise, conversion or exchange, then such Option
or Convertible Security, as so amended, and the Additional Shares of
Common Stock subject thereto shall be deemed to have been issued
effective upon such increase or decrease becoming effective.
(iv) Upon the expiration or termination of any unexercised Option
or unconverted or unexchanged Convertible Security which resulted
(either upon its original issuance or upon a revision of its terms) in
an adjustment to the Series B Conversion Price pursuant to the terms
of Section 4.2(c) below, the Series B Conversion Price shall be
readjusted to such Series B Conversion Price as would have obtained
had such Option or Convertible Security never been issued.
(c) Adjustment of Series B Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Company shall at any
time after the Initial Issuance Date issue Additional Shares of Common
Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 4.2(b)), without consideration or
for a consideration per share less than the applicable Series B Conversion
Price in effect immediately prior to such issue, then the Series B
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest one-hundredth of a cent) determined in
accordance with the following formula:
CP(2) = CP(1) * (A + B) / (A + C)
For purposes of the foregoing formula, the following definitions shall
apply:
(A) "CP(2)" shall mean the Series B Conversion Price in effect
immediately after such issue of Additional Shares of Common
Stock;
(B) "CP(1)" shall mean the Series B Conversion Price in effect
immediately prior to such issue of Additional Shares of
Common Stock;
(C) "A" shall mean the number of shares of Common Stock
outstanding and deemed outstanding immediately prior to such
issue of Additional Shares of Common Stock (treating for
this purpose as outstanding all shares of Common Stock
issuable upon exercise of Options outstanding immediately
prior to such issue or upon conversion of Convertible
Securities (including the Series B Preferred Stock)
outstanding immediately prior to such issue);
(D) "B" shall mean the number of shares of Common Stock that
would have been issued if such Additional Shares of Common
Stock had been issued at a price per share equal to CP(1)
(determined by dividing the aggregate consideration received
by the Company in respect of such issue by CP(1)); and
(E) "C" shall mean the number of such Additional Shares of
Common Stock issued in such transaction.
(d) Determination of Consideration. For purposes of this Section 4.2,
the consideration received by the Company for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(i) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Company,
excluding amounts paid or payable for accrued interest;
(B) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time
of such issue, as determined in good faith by the
Board; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or
other assets of the Company for consideration which
covers both, be the proportion of such consideration so
received, computed as provided in clauses (I) and (II)
above, as determined in good faith by the Board.
(ii) Options and Convertible Securities. The consideration per
share received by the Company for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 4.2(b), relating to
Options and Convertible Securities, shall be determined by dividing:
(A) the total amount, if any, received or receivable by the
Company as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such consideration)
payable to the Company upon the exercise of such Options or the
conversion or exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the exercise of such
Options for Convertible Securities and the conversion or exchange
of such Convertible Securities, by
(B) the maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(e) Multiple Closing Dates. In the event the Company shall issue on
more than one date Additional Shares of Common Stock that are a part of one
transaction or a series of related transactions and that would result in an
adjustment to the Series B Conversion Price pursuant to the terms of
Section 4.2(c) above then, upon the final such issuance, the Series B
Conversion Price shall be readjusted to give effect to all such issuances
as if they occurred on the date of the first such issuance (and without
additional giving effect to any adjustments as a result of any subsequent
issuances within such period).
(f) Adjustment for Stock Splits and Combinations. If the Company shall
at any time or from time to time after the Initial Issuance Date effect a
subdivision of the outstanding Common Stock without a comparable
subdivision of the Series B Preferred Stock or combine the outstanding
shares of Series B Preferred Stock without a comparable combination of the
Common Stock, the Series B Conversion Price in effect immediately before
that subdivision or combination shall be proportionately decreased so that
the number of shares of Common Stock issuable on conversion of each share
of such series shall be increased in proportion to such increase in the
aggregate number of shares of Common Stock outstanding. If the Company
shall at any time or from time to time
after the Initial Issuance Date combine the outstanding shares of Common
Stock without a comparable combination of the Series B Preferred Stock or
effect a subdivision of the outstanding shares of Series B Preferred Stock
without a comparable subdivision of the Common Stock, the Series B
Conversion Price in effect immediately before the combination or
subdivision shall be proportionately increased so that the number of shares
of Common Stock issuable on conversion of each share of such series shall
be decreased in proportion to such decrease in the aggregate number of
shares of Common Stock outstanding. Any adjustment under this subsection
shall become effective at the close of business on the date the subdivision
or combination becomes effective.
4.3 Adjustment for Certain Dividends and Distributions. In the event
the Company at any time or from time to time after the Initial Issuance
Date shall make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other
distribution payable on the Common Stock in additional shares of Common
Stock, then and in each such event the Series B Conversion Price in effect
immediately before such event shall be decreased as of the time of such
issuance or, in the event such a record date shall have been fixed, as of
the close of business on such record date, by multiplying the Series B
Conversion Price then in effect by a fraction:
(a) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such
record date, and
(b) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in
payment of such dividend or distribution;
provided, however, that if such record date shall have been fixed and such
dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Series B Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter
the Series B Conversion Price shall be adjusted pursuant to this subsection
as of the time of actual payment of such dividends or distributions; and
provided further, however, that no such adjustment shall be made if the
holders of Series B Preferred Stock simultaneously receive (i) a dividend
or other distribution of shares of Common Stock in a number equal to the
number of shares of Common Stock as they would have received if all
outstanding shares of Series B Preferred Stock had been converted into
Common Stock on the date of such event or (ii) a dividend or other
distribution of shares of Series B Preferred Stock which are convertible,
as of the date of such event, into such number of shares of Common Stock as
is equal to the number of additional shares of Common Stock being issued
with respect to each share of Common Stock in such dividend or
distribution.
4.4 Adjustments for Other Dividends and Distributions. In the event
the Company at any time or from time to time after the Initial Issuance
Date shall make or issue, or fix a record date for the determination of
holders of capital stock of the
Company entitled to receive, a dividend or other distribution payable in
securities of the Company (other than a distribution of shares of Common
Stock in respect of outstanding shares of Common Stock) or in other
property, then and in each such event the holders of Series B Preferred
Stock shall receive, simultaneously with the distribution to the holders of
such capital stock, a dividend or other distribution of such securities or
other property in an amount equal to the amount of such securities or other
property as they would have received if all outstanding shares of Series B
Preferred Stock had been converted into Common Stock on the date of such
event.
4.5 Adjustment for Merger or Reorganization, etc. If there shall occur
any reorganization, recapitalization, reclassification, consolidation or
merger involving the Company in which the Common Stock (but not the Series
B Preferred Stock) is converted into or exchanged for securities, cash or
other property (other than a transaction covered by Sections 4.3 or 4.4),
then, following any such reorganization, recapitalization,
reclassification, consolidation or merger, each share of Series B Preferred
Stock shall thereafter be convertible in lieu of the Common Stock into
which it was convertible prior to such event into the kind and amount of
securities, cash or other property which a holder of the number of shares
of Common Stock of the Company issuable upon conversion of one share of
Series B Preferred Stock immediately prior to such reorganization,
recapitalization, reclassification, consolidation or merger would have been
entitled to receive pursuant to such transaction; and, in such case,
appropriate adjustment (as determined in good faith by the Board) shall be
made in the application of the provisions in this Section 4 with respect to
the rights and interests thereafter of the holders of the Series B
Preferred Stock, to the end that the provisions set forth in this Section 4
(including provisions with respect to changes in and other adjustments of
the Series B Conversion Price) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any securities or other property
thereafter deliverable upon the conversion of the Series B Preferred Stock.
4.6 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series B Conversion Price pursuant to
this Section 4, the Company at its expense shall, as promptly as reasonably
practicable but in any event not later than 10 days thereafter, compute
such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of Series B Preferred Stock a certificate setting
forth such adjustment or readjustment (including the kind and amount of
securities, cash or other property into which the Series B Preferred Stock
is convertible) and showing in detail the facts upon which such adjustment
or readjustment is based. The Company shall, as promptly as reasonably
practicable after the written request at any time of any holder of Series B
Preferred Stock (but in any event not later than 10 days thereafter),
furnish or cause to be furnished to such holder a certificate setting forth
(i) the Series B Conversion Price then in effect, and (ii) the number of
shares of Common Stock and the amount, if any, of other securities, cash or
property which then would be received upon the conversion of Series B
Preferred Stock.
4.7 Notice of Record Date. In the event:
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time issuable upon conversion of the
Series B Preferred Stock) for the purpose of entitling or enabling them to
receive any dividend or other distribution, or to receive any right to
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right; or
(b) of any capital reorganization of the Company, any reclassification
of the Common Stock of the Company, or any Deemed Liquidation Event; or
(c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will send or cause to be sent to
the holders of the Series B Preferred Stock a notice specifying, as the
case may be, (i) the record date for such dividend, distribution or right,
and the amount and character of such dividend, distribution or right, or
(ii) the effective date on which such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up is
proposed to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such other stock or securities at
the time issuable upon the conversion of the Series B Preferred Stock)
shall be entitled to exchange their shares of Common Stock (or such other
stock or securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer,
dissolution, liquidation or winding-up, and the amount per share and
character of such exchange applicable to the Series B Preferred Stock and
the Common Stock. Such notice shall be sent at least 10 days prior to the
record date or effective date for the event specified in such notice. Any
notice required by the provisions hereof to be given to a holder of shares
of Preferred Stock shall be deemed sent to such holder if deposited in the
United States mail, postage prepaid, and addressed to such holder at his,
her or its address appearing on the books of the Company.
4.8 Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of any shares of
Series B Preferred Stock. Any fractional interest in a share of Common
Stock resulting from conversion of one or more shares of Series B Preferred
Stock shall be paid in cash (computed to the nearest cent) equal to such
fraction equal to the fair market value of a share of Common Stock as of
the date of such conversion, as reasonably determined by the Company.
4.9 Reserved Common Stock. The Company will at all times when any
shares of Series B Preferred Stock are outstanding, reserve and keep
available out of its authorized but unissued stock, such number of shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Series B Preferred Stock
4.10 Provisional Conversion at the Option of the Corporation.
(a) The Company may, at its option, cause the conversion of all, but
not less than all, of the shares of the Series B Preferred Stock then
outstanding into such number
of fully paid and nonassessable shares of Common Stock, per share of Series
B Preferred Stock so converted, as is determined by dividing the Original
Issue Price by the Series B Conversion Price in effect at the time of
conversion, if (x) the Closing Price (as defined below) of the Common Stock
has exceeded 400% of the then effective Series B Conversion Price for at
least 20 Trading Days (as defined below) within a period of 30 consecutive
Trading Days ending on the Trading Day prior to the date on which the
Company notifies the holders of the Series B Preferred Stock (pursuant to
Section 4.10(b) below) that it is exercising its option to cause the
conversion of the Series B Preferred Stock pursuant to this Section 4.10
(the "Provisional Conversion Notice Date") and (y) the actual average daily
trading volume of the Common Stock, on the Over-The-Counter Bulletin Board
or any other stock quotation system or exchange upon which the Common Stock
is listed, during the 30 consecutive Trading Day period referred to in
clause (x) above is at least 100,000 shares of Common Stock (subject to
adjustment from time to time as a result of a stock split, stock
combination or any other similar event affecting the outstanding number of
shares of Common Stock).
(b) In order for the Company to exercise its rights to cause the
conversion of all of the Series B Preferred Stock pursuant to this Section
4.10, a written notice (the "Provisional Conversion Notice") shall be sent
by or on behalf of the Company, by first class mail, postage prepaid, to
the holders of record of the Series B Preferred Stock as they appear on the
stock register of the Company on the Provisional Conversion Notice Date
notifying such holders of the election of the Company to cause the
conversion of all of the Series B Preferred Stock and of the Provisional
Conversion Date (as defined below), which date shall not be less than 5
days nor be more than 10 days after the Provisional Conversion Notice Date.
(c) If a Provisional Conversion Notice shall have been given as
hereinbefore provided, then each holder of the Series B Preferred Stock
shall be entitled to all preferences and relative, participating, optional
and other special rights accorded by this certificate until and including
the Provisional Conversion Date. From and after the Provisional Conversion
Date, upon delivery by the Company of the Common Stock issuable upon
conversion of the Series B Preferred Stock, together with payment in full
of all accrued and unpaid dividends thereon as provided in Section 2(b),
the Series B Preferred Stock shall no longer be deemed to be outstanding,
and all rights of the holders of such Series B Preferred Stock (in their
capacity as holders of Series B Preferred Stock) shall cease and terminate.
(d) For purpose of this Section 4.10, following definitions shall
apply:
(i) "Closing Price" means, on any date of determination, the
closing price (or, if no closing price is reported, the last reported
sale price) per share reported by the Over-The-Counter Bulletin Board
or any other stock quotation system or exchange upon which the Common
Stock is listed.
(ii) "Provisional Conversion Date" means the date fixed for
conversion of shares of Series B Preferred Stock pursuant to this
Section 4.10.
(iii) "Trading Day" means a day on which the Common Stock (i) is
not suspended from trading on the Over-The-Counter Bulletin Board or
any other stock quotation system or exchange upon which the Common
Stock is listed and (ii) has traded at least once on the
Over-The-Counter Bulletin Board or any other stock quotation system or
exchange upon which the Common Stock is listed.
5. Reacquired Shares. Any shares of Series B Preferred Stock converted,
exchanged, redeemed, purchased or otherwise acquired by the Company in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares of Series B Preferred Stock shall upon their
cancellation become authorized but unissued shares of the Company's preferred
stock, par value $0.0001 per share, and, upon the filing of an appropriate
Certificate of Designation with the Secretary of State of the State of Delaware,
may be reissued as part of another class or series of the Company's preferred
stock, par value $0.0001 per share, including, without limitation, Series B
Preferred Stock, all subject to the conditions or restrictions on issuance set
forth herein.
6. Voting Rights.
(a) Each share of Series B Preferred Stock shall entitle the holder
thereof to vote, in person, by proxy or at a special or annual meeting of the
stockholders of the Company, on all matters voted on by holders of Common Stock,
voting together as a single class with the holders of the Common Stock and all
other shares entitled to vote thereon as a single class with the Common Stock.
With respect to any such matters as to which holders of the Series B Preferred
Stock shall be entitled to vote, each issued and outstanding share of Series B
Preferred Stock shall entitle the holder thereof to cast that number of votes
per share as is equal to the number of shares of Common Stock issuable upon
conversion thereof.
(b) The Company shall not, without the prior affirmative vote or
written consent of the Requisite Preferred Majority (as defined below):
(i) adversely alter or change, or engage in any action that would
result in any adverse alteration of or change to, the rights,
preferences or privileges of the Series A Preferred Stock or the
Series B Preferred Stock;
(ii) increase the authorized number of shares of the Series A
Preferred Stock or the Series B Preferred Stock;
(iii) create, authorize, sell or issue any new class or series of
the Company's capital stock or any bonds, notes or other obligations
convertible into, exchangeable for or having option rights to purchase
shares of such new class or series or reclassify any class or series
of the Company's capital stock;
(iv) increase the authorized number of members of the Board;
(v) amend or repeal any provision of, or add any provision to,
the Company's certificate of incorporation, certificates of
designations or bylaws (in any such case, whether by merger,
consolidation or otherwise) in a manner that
adversely affects the rights of the Series A Preferred Stock, the
Series B Preferred Stock or the holders thereof;
(vi) pay or set aside funds for the payment of any dividends or
make any distributions on any of the Company's capital stock (other
than the Series A Preferred Stock or the Series B Preferred Stock);
(vii) engage, or permit any of its subsidiaries to engage, in any
transaction with an affiliate of the Company or any of its
subsidiaries, or an affiliate of any such person;
(viii) make, or permit any of its subsidiaries to make, any
material change, directly or indirectly, in the nature of the
Company's or such subsidiary's business;
(ix) incur or become liable for, or permit any of its
subsidiaries to incur or become liable for, through guarantees or
otherwise, directly or indirectly, any indebtedness in excess of $5
million in the aggregate at any one time outstanding (calculated on a
consolidated basis for the Company and its subsidiaries);
(x) for so long as the outstanding shares of Series A Preferred
Stock and Series B Preferred Stock shall collectively represent 5% of
the outstanding shares of capital stock of the Company or any
successor entity thereto (calculated on a fully diluted basis),
engage, or permit any of its subsidiaries to engage, in any merger,
consolidation, acquisition, recapitalization, joint venture or
partnership;
(xi) directly or indirectly dispose of all of the equity
interests in any of its direct or indirect subsidiaries or directly or
indirectly dispose of all or substantially all of the assets of the
Company or any of its direct or indirect subsidiaries;
(xii) authorize, approve or implement any employee option plan or
similar employee equity program (it being understood that (x) the
Company contemplates authorizing a 2005 Management Stock Option Plan
providing for the issuance of options for up to 4,211,799 shares of
Common Stock and (y) the Requisite Preferred Majority shall have the
right to approve the form and substance of such 2005 Management Stock
Option Plan pursuant to this clause (xii));
(xiii) permit any of its subsidiaries to issue any of its capital
stock or other equity securities to any person or entity other than
the Company or any of the Company's wholly-owned subsidiaries or
otherwise engage in any transaction, or permit any of its subsidiaries
to engage in any transaction, which results in the Company ceasing to
directly or indirectly own 100% of the issued and outstanding capital
stock and other equity securities of Aduromed Corporation or any other
direct or indirect subsidiary of the Company; or
(xiv) enter into, or permit any of its subsidiaries to enter
into, any contract or other agreement to consummate any of the
foregoing.
(c) For the purposes hereof, the term "Requisite Preferred Majority"
shall mean the holders of more than 50% of the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock, voting together as a single class
on an as-converted basis.
7. No Impairment. The Company will not, through any reorganization,
transfer of assets, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Company but will
at all times in good faith assist in the carrying out of all the provisions
hereunder and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights and liquidation
preferences granted hereunder of the holders of the Series B Preferred Stock
against impairment.
The Company has caused this Certificate of Designations to be signed
as of this 23rd day of Janaury, 2006.
GENERAL DEVICES, INC.
By: /s/ Xxxxx Xxxxxx, Xx.
------------------------------------
Name: Xxxxx Xxxxxx, Xx.
Title: President
