pre14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Filed by the
Registrant þ
Filed by a Party other than the
Registrant o
Check the appropriate box:
þ Preliminary
Proxy Statement
o Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
o Definitive
Proxy Statement
o Definitive
Additional Materials
o Soliciting
Material Pursuant to
§ 240.14a-12
CAS MEDICAL SYSTEMS, INC.
(Name of Registrant as Specified In
Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act
Rules 14a-6(i)(1)
and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed
pursuant to Exchange Act
Rule 0-11
(set forth the amount on which the filing fee is calculated and
state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by
Exchange Act
Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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June [ ], 2011
Dear Fellow Stockholder:
You are cordially invited to attend a special meeting of
stockholders of CAS Medical Systems, Inc. to be held at
10:00 a.m. on [ ], August
[ ], 2011 at our offices at 44 East Industrial
Road, Branford, Connecticut.
As previously announced, on June 9, 2011, we completed a
private placement of preferred stock resulting in gross proceeds
to the company of $15 million. This transaction provided
critical capital necessary for us to fund our growth plans. To
meet our goal of increasing shareholder value, we believe
continued investments are necessary in research and development,
in enhancements to our product portfolio, and in the expansion
of our sales, marketing and distribution efforts. The funds
raised will permit us to make those investments.
In summary, the financing transaction was structured as the sale
of two securities. We sold approximately $9.55 million of
Series A Convertible Preferred Stock, which carries the
right, at present, to be converted into approximately 19.9% of
our Common Stock. We also sold to the same investors
approximately $5.45 million of a separate security,
Series A Exchangeable Preferred Stock, which will have
equivalent rights to the Series A Convertible Preferred
Stock only upon the approval of our stockholders. Therefore, if
Proposals 1 and 2 in the attached proxy statement are
approved, the investors would have beneficial ownership of our
Common Stock, on an as-converted basis, of approximately 28.7%
along with certain other rights. Stockholder approval of our
proposals will benefit the company through the reduction of the
dividend rate accretion on the Series A Exchangeable
Preferred Stock.
The terms of this important financing require us to submit
certain matters for stockholder approval in accordance with
applicable NASDAQ listing rules. The notice of special meeting,
proxy statement and proxy card accompanying this letter describe
in detail the financing transaction and the matters to be acted
upon at the meeting. We urge you to read these materials
carefully.
It is important that your shares be represented at the
meeting. Whether or not you plan to attend, please sign, date
and return your proxy card in the enclosed envelope as soon as
possible.
We look forward to seeing you at the meeting.
Sincerely yours,
Thomas M. Patton
President, Chief Executive Officer and Director
CAS
MEDICAL SYSTEMS, INC.
NOTICE OF
SPECIAL MEETING
Notice is hereby given that a special meeting of stockholders of
CAS Medical Systems, Inc. (the Company,
CASMED, us or we) will be
held at 10:00 a.m. on [ ], August
[ ], 2011 at our offices located at 44 East
Industrial Road, Branford, Connecticut, to consider and act upon
the following matters:
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1.
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To approve the issuance of preferred stock convertible into more
than 20% of our common stock, par value $0.004 per share, (our
Common Stock) outstanding, which would result in a
change of control of our Company under applicable
NASDAQ Listing Rules;
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2.
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To approve the issuance of preferred stock convertible into more
than 20% of our Common Stock outstanding, which, in the future,
may convert at a price that is less than the greater of book or
market value of our Common Stock, requiring stockholder approval
under applicable NASDAQ Listing Rules; and
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3.
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To approve the adjournment of the special meeting, if necessary,
to solicit additional proxies, in the event that there are not
sufficient votes at the time of the special meeting to
constitute a quorum or to approve the foregoing proposals.
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Stockholders of record at the close of business on July 6,
2011, the record date for the special meeting, are entitled to
notice of and to vote at the special meeting and any adjournment
or postponement of the meeting.
This Notice of Special Meeting, Proxy Statement and accompanying
proxy card are being distributed to stockholders on or about
July [ ], 2011.
Jeffery A. Baird
Secretary
THIS PROXY STATEMENT IS AVAILABLE AT WWW.CASMED.COM.
CAS
MEDICAL SYSTEMS, INC.
44 East Industrial Road
Branford, Connecticut 06405
PROXY
STATEMENT
The
Special Meeting and Voting
Our board of directors is soliciting proxies to be used at the
special meeting of stockholders to be held on
[ ], August [ ], 2011, or at
any adjournment of the special meeting. This proxy statement
contains information about the items being voted on at the
special meeting.
Who is
entitled to vote?
Record stockholders of our Common Stock at the close of business
on July 6, 2011 (the record date) can vote at
the special meeting. As of the record date,
[ ] shares of our Common Stock were issued
and outstanding. Each stockholder has one vote for each share of
Common Stock owned as of the record date. In accordance with
NASDAQ Listing Rules, the holders of our Series A
Convertible Preferred Stock are not eligible to vote on the
matters described in this proxy statement. A list of all
stockholders entitled to vote at the special meeting will be
available for examination by any stockholder for any purpose
germane to the meeting at our office at 44 East Industrial Road,
Branford, Connecticut, for the
ten-day
period immediately preceding the special meeting.
How do I
vote?
A form of proxy card and a return envelope for the proxy card
are enclosed. Giving your proxy means that you authorize the
persons named in the enclosed proxy card to vote your shares at
the special meeting in the manner you direct. You may vote by
proxy or in person at the special meeting. To vote by proxy, if
you are a registered holder, please complete, sign and return
your proxy card in the accompanying postage-paid return envelope.
If any proxy is returned without indication as to how to vote,
the Common Stock represented by the proxy will be voted by the
persons named on the proxy in favor of each proposal and in
accordance with their best judgment on any other matters which
may come before the meeting.
How do I
vote if my shares are held in street name?
If your broker holds your shares of our Common Stock in street
name, you must either direct your broker on how to vote your
shares or obtain a proxy from your broker to vote in person at
the special meeting. If your shares are held in street name, you
should check the voting form that you receive to determine
whether shares may be voted by telephone or the internet.
May I
change my vote?
You may revoke your proxy at any time before it is voted at the
meeting in several ways. You may (i) send in a revised
proxy dated later than the first, (ii) vote in person at
the meeting, or (iii) notify our Secretary in writing prior
to the meeting that you have revoked your proxy.
What
constitutes a quorum?
The holders of shares representing a majority of the outstanding
votes eligible to be cast at the meeting, present in person or
represented by proxy, constitute a quorum. Abstentions and
broker non-votes are included in the count to determine a quorum.
What is
the vote required to approve the proposals?
Proposals 1 and 2 will be approved if a quorum is present
and a majority of the votes cast by holders present in person or
represented by proxy are cast in favor of the applicable
proposal. Proposal 3 will be approved if a majority of the
votes cast by holders present in person or represented by proxy
are cast in favor of the proposal.
What is
the effect of broker non-votes and abstentions?
Under NASDAQ rules, if your broker holds your shares in its
street name, the broker may under
certain circumstances vote your shares on the agenda items even
if it does not receive instructions from you. Although they are
included in determining whether a quorum is present, broker
non-votes and abstentions are not considered votes cast on the
matters before the meeting and neither will have an effect on
the voting for these proposals.
By when
must stockholder proposals be submitted for the 2012 annual
meeting?
Stockholder proposals intended to be presented at our 2012
annual meeting pursuant to Securities Exchange Act
Rule 14a-8
must be received by our Secretary not later than
December 28, 2011, for inclusion in our proxy statement and
form of proxy relating to that meeting. Stockholder proposals
submitted outside the process provided in
Rule 14a-8
shall be considered untimely in accordance with
Rule 14a-5(e)
if made after March 4, 2012.
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BACKGROUND
AND OVERVIEW
Private
Placement of Preferred Stock
On June 8, 2011, we entered into an Investment Agreement
(the Investment Agreement) with Thomas,
McNerney & Partners, L.P., TMP Nominee II LLC and
TMP Associates II, L.P. (collectively, the
Purchasers). Pursuant to the Investment Agreement,
we agreed to issue and sell to the Purchasers
(i) 95,500 shares of a newly created series of
preferred stock, designated Series A Convertible
Preferred Stock, par value $0.001 per share (the
Series A Preferred Stock) and
(ii) 54,500 shares of a newly created series of
preferred stock, designated Series A Exchangeable
Preferred Stock, par value $0.001 per share (the
Series A Exchangeable Preferred Stock and
together with the Series A Preferred Stock, the
Preferred Stock). The Series A Preferred Stock
is convertible into authorized but unissued shares of our Common
Stock. The terms of the Series A Exchangeable Preferred
Stock provide that upon approval by our stockholders, the
Series A Exchangeable Preferred Stock will have
substantially identical terms to the Series A Preferred
Stock and will be convertible into authorized but unissued
shares of Common Stock.
Upon the closing of this private placement on June 9, 2011
(the Private Placement), we received an aggregate
cash purchase price of $15.0 million representing a
per-share purchase price of $100 for each share of the
Series A Preferred Stock and Series A Exchangeable
Preferred Stock. The net proceeds to us, after expenses, were
approximately $13.7 million, which are expected to be used
for general corporate purposes. As of the closing of the Private
Placement, the Purchasers ownership of our Common Stock,
on an as-converted basis, represented approximately 19.9% of all
outstanding shares of Common Stock. Upon approval of
Proposals 1 and 2 herein, allowing all of the Preferred
Stock to be convertible into Common Stock, the Purchasers
ownership of our Common Stock, on an as-converted basis will
represent approximately 28.7% of all outstanding shares of
Common Stock.
Terms of
the Series A Preferred Stock
The shares of Series A Preferred Stock are convertible at
the option of the holders into Common Stock at a conversion
price of $2.82 (the Conversion Price). The
Conversion Price is subject to weighted average anti-dilution
adjustments subject to limitations under NASDAQ Listing Rules.
The stated value of the Series A Preferred Stock ($100.00
per share) accretes at an annual rate of seven percent (7%),
compounded quarterly and prior to the third anniversary of the
original date of issuance, the holders may elect, pursuant to
certain requirements, to receive the accretion in the form of a
dividend of 7% per annum, payable quarterly in cash at the
holders option through the third anniversary of the
original date of issuance and thereafter such determination is
at our option. Upon our failure to pay when due any amounts owed
on the shares of Series A Preferred Stock, the failure of a
Purchaser designee to be nominated to our Board of Directors or
such other trigger events as described in the Certificate of
Designation of the Series A Preferred Stock, the dividend
rate shall be increased by an additional five percent (5%) per
annum.
After the third anniversary of the original date of issuance, we
can force conversion (Mandatory Conversion) of all,
and not less than all, of the outstanding Series A
Preferred Stock into Common Stock as long as the closing price
of our Common Stock is at least 250% of the Conversion Price for
at least 20 of the 30 consecutive trading days immediately prior
to the conversion and the average daily trading volume is
greater than 50,000 shares per day over the 30 consecutive
trading days immediately prior to such conversion. Our ability
to cause a Mandatory Conversion is subject to certain other
conditions as provided in the Certificate of Designation for the
Series A Preferred Stock filed with the Secretary of State
of the State of Delaware on June 8, 2011.
The Series A Preferred Stock is entitled to a liquidation
preference equal to the greater of 100% of the accreted value
for each share of Series A Preferred Stock outstanding on
the date of a liquidation plus all accrued and unpaid
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dividends or the amount a holder would have been entitled to had
the holder converted the shares of Series A Preferred Stock
into Common Stock immediately prior to the liquidation. The
Series A Preferred Stock will vote together with the Common
Stock as-if-converted on the original date of issuance. Holders
of Series A Preferred Stock are entitled to purchase their
pro rata share of additional stock issuances in certain future
financings.
In addition, if at any time when at least fifty percent (50%) of
the aggregate number of shares of Series A Preferred Stock
issued are outstanding, in addition to any other vote or consent
of the stockholders required by law or by the Certificate of
Incorporation, including any Certificate of Designation, or our
bylaws, we will not, without the prior written consent of the
holders of a majority of the Series A Preferred Stock:
(i) amend, alter, waive or repeal any provision of our
certificate of incorporation, including any certificate of
designation, or bylaws in any manner that would adversely affect
the rights, powers, preferences or privileges (economic or
otherwise) of the Series A Preferred Stock or Series A
Exchangeable Preferred Stock, increase the authorized number of
shares of the Series A Preferred Stock or Series A
Exchangeable Preferred Stock, or split, reverse split,
subdivide, reclassify, combine or take other corporate actions
having a similar effect with respect to the Series A
Preferred Stock or Series A Exchangeable Preferred Stock;
(ii) issue any additional shares of Series A Preferred
Stock or Series A Exchangeable Preferred Stock;
(iii) offer, sell or issue any equity or equity-linked
securities senior to or on parity with the Series A
Preferred Stock; (iv) increase or decrease the size of our
board of directors; (v) incur indebtedness (other than
indebtedness that, when aggregated with all other indebtedness
incurred since June 9, 2011 and then outstanding, is less
than $4,000,000 when so aggregated); (vi) redeem,
repurchase or otherwise acquire or offer to redeem, repurchase,
or otherwise acquire any equity or equity-linked securities
senior to or on parity with the Series A Preferred Stock,
other pursuant to certain employee or director incentive or
benefit plans; (vii) distribute assets to our stockholders;
(viii) enter into any transaction with any of our officers,
directors or affiliates, other than (A) employment
arrangements entered into in the ordinary course of business
consistent with past practices providing for annual base
compensation and benefits not exceeding $200,000 in the
aggregate, unless unanimously approved by the Compensation
Committee of the Board of Directors and (B) grants pursuant
to equity incentive plans approved by our stockholders;
(ix) adopt or amend any stockholder rights plan, poison
pill or similar anti-takeover device; (x) sell, lease,
license or otherwise dispose of any assets outside the ordinary
course of business consistent with past practices, except for
assets with a purchase price, in the aggregate, of less than
$500,000; (xi) enter into any contract, agreement or other
arrangement that would preclude us from making payment in full
in cash on of the dividends on the Series A Preferred
Stock; or (xii) authorize, commit or agree (in writing or
otherwise) to do any of the foregoing.
A copy of the complete Certificate of Designation of the
Series A Preferred Stock is attached as
Exhibit A to this proxy statement.
Terms of
the Series A Exchangeable Preferred Stock
Prior to approval by our stockholders as provided in this proxy
statement, holders of the Series A Exchangeable Preferred
Stock will not have any voting rights except as provided below
and the stated value of the Series A Exchangeable Preferred
Stock ($100.00 per share) will accrete at an annual rate of ten
percent (10%), compounded quarterly. In the event stockholder
approval is not obtained by October 1, 2011, the rate will
increase by 2% per fiscal quarter up to a maximum of 20% per
annum. Prior to the third anniversary of the original date of
issuance, the holders may elect, pursuant to certain
requirements, to receive the accretion in the form of a dividend
of 10% per annum (subject to increase as described above),
payable quarterly in cash at the holders option through
the third anniversary of the closing and thereafter such
determination is at our option.
In addition, if at any time when at least fifty percent (50%) of
the aggregate number of shares of Series A Exchangeable
Preferred Stock issued are outstanding, in addition to any other
vote or consent of the stockholders required by law or by
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the Certificate of Incorporation, including any Certificate of
Designation, or our bylaws, we will not, without the prior
written consent of the holders of a majority of the
Series A Exchangeable Preferred Stock: (i) amend,
alter, waive or repeal any provision of our certificate of
incorporation, including any certificate of designation, or
bylaws in any manner that would adversely affect the rights,
powers, preferences or privileges (economic or otherwise) of the
Series A Preferred Stock or Series A Exchangeable
Preferred Stock, increase the authorized number of shares of the
Series A Preferred Stock or Series A Exchangeable
Preferred Stock, or split, reverse split, subdivide, reclassify,
combine or take other corporate actions having a similar effect
with respect to the Series A Preferred Stock or
Series A Exchangeable Preferred Stock; (ii) issue any
additional shares of Series A Preferred Stock or
Series A Exchangeable Preferred Stock; (iii) offer,
sell or issue any equity or equity-linked securities senior to
or on parity with the Series A Exchangeable Preferred
Stock; (iv) increase or decrease the size of our board of
directors; (v) incur indebtedness (other than indebtedness
that, when aggregated with all other indebtedness incurred since
June 9, 2011 and then outstanding, is less than $4,000,000
when so aggregated); (vi) redeem, repurchase or otherwise
acquire or offer to redeem, repurchase, or otherwise acquire any
equity or equity-linked securities senior to or on parity with
the Series A Exchangeable Preferred Stock, other pursuant
to certain employee or director incentive or benefit plans;
(vii) distribute assets to our stockholders;
(viii) enter into any transaction with any of our officers,
directors or affiliates, other than (A) employment
arrangements entered into in the ordinary course of business
consistent with past practices providing for annual base
compensation and benefits not exceeding $200,000 in the
aggregate, unless unanimously approved by the Compensation
Committee of the Board of Directors and (B) grants pursuant
to equity incentive plans approved by our stockholders;
(ix) adopt or amend any stockholder rights plan, poison
pill or similar anti-takeover device; (x) sell, lease,
license or otherwise dispose of any assets outside the ordinary
course of business consistent with past practices, except for
assets with a purchase price, in the aggregate, of less than
$500,000; (xi) enter into any contract, agreement or other
arrangement that would preclude us from making payment in full
in cash on of the dividends on the Series A Exchangeable
Preferred Stock; or (xii) authorize, commit or agree (in
writing or otherwise) to do any of the foregoing.
Upon approval by the stockholders of Proposal 1 and
Proposal 2 described in this proxy statement, the terms of
the Series A Exchangeable Preferred Stock will be
automatically amended pursuant to the terms thereof, such that
the Series A Exchangeable Preferred Stock will have
substantially identical terms to those of the Series A
Preferred Stock, including with respect to the accretion rate,
mandatory redemption, anti-dilution rights, and voting rights.
A copy of the complete Certificate of Designation of the
Series A Exchangeable Preferred Stock is attached as
Exhibit B to this proxy statement.
NASDAQ
Listing Rules
Under NASDAQ Listing Rule 5635(b), prior stockholder
approval is required for issuances of securities that will
result in a change of control of the issuer (the
NASDAQ Change of Control Rule). NASDAQ may deem a
change of control to occur when, as a result of an issuance, an
investor or a group would own, or have the right to acquire, 20%
or more of the outstanding shares of common stock or voting
power and such ownership or voting power would be the largest
ownership position of the issuer. In order for the Series A
Exchangeable Preferred Stock to carry terms substantially
similar to the Series A Preferred Stock and be convertible
into Common Stock, stockholder approval is required because, for
purposes of the NASDAQ Change of Control Rule, the
Purchasers resulting ownership of our Common Stock, on an
as-converted basis, will represent approximately 28.7% of all
outstanding shares of Common Stock. We seek your approval of
Proposal 1 in order to satisfy the requirements of the
NASDAQ Change of Control Rule with respect to the issuance of
the Series A Exchangeable Preferred Stock.
Under NASDAQ Listing Rule 5635(d), prior stockholder
approval is required for the issuance, other than in a public
offering, of securities convertible into common stock at a price
less than the greater of book or market value of the
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common stock if the securities are convertible into 20% or more
of a companys common stock (the NASDAQ Private
Placement Rule). Although the initial Conversion Price of
$2.82 was equal to or greater than the greater of the book or
market value of our Common Stock on June 8, 2011, the terms
of the Series A Preferred Stock contain weighted average
anti-dilution adjustments that could result in the Conversion
Price being reduced in the future to an amount that is less than
the greater of the book or market value of our Common Stock
immediately before the Private Placement. This would occur if we
elect to enter into certain issuances of securities or other
transactions in the future that would trigger such anti-dilution
adjustments. Similarly, if stockholder approval is obtained as
contemplated herein, the Series A Exchangeable Preferred
Stock will have similar weighted average anti-dilution
protection. If Proposal 1 is approved, the issuance of our
Common Stock upon conversion of the Preferred Stock will exceed
20% of our Common Stock currently outstanding. Because the
Conversion Price in the future (due to anti-dilution
adjustments) may be below the greater of the book or market
value of our Common Stock immediately prior to the Private
Placement, we believe the NASDAQ Private Placement Rule requires
that we obtain stockholder approval of the Preferred Stock
issued in the Private Placement. We seek your approval of
Proposal 2 in order to satisfy the requirements of the
NASDAQ Private Placement Rule.
Interests
of Directors in the Matters Being Voted Upon
As a condition to the closing of the Private Placement, the
Purchasers nominated James E. Thomas and Kathleen A. Tune, who
were both appointed to serve as members of our Board of
Directors as of the closing of the transaction. Mr. Thomas
is the managing member of TMP Nominee II, LLC, one of the
Purchasers, and is the managing member of an entity that is the
general partner of the other two Purchasers. Ms. Tune is
also employed by an affiliate of the Purchasers.
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PROPOSAL 1:
APPROVAL
OF THE ISSUANCE OF PREFERRED STOCK CONVERTIBLE INTO MORE THAN
20% OF OUR COMMON STOCK OUTSTANDING, WHICH WOULD RESULT IN A
CHANGE OF CONTROL OF CASMED UNDER APPLICABLE NASDAQ
LISTING RULES
Our Common Stock is listed on the NASDAQ Global Market, and
therefore we are subject to the NASDAQ Listing Rules. Under the
NASDAQ Change of Control Rule, prior stockholder approval is
required for issuances of securities that will result in a
change of control of the issuer. NASDAQ may deem a
change of control to occur when, as a result of an issuance, an
investor or a group would own, or have the right to acquire, 20%
or more of the outstanding shares of common stock or voting
power and such ownership or voting power would be the largest
ownership position of the issuer. In order for the Series A
Exchangeable Preferred Stock to carry terms substantially
similar to the Series A Preferred Stock and be convertible
into Common Stock, stockholder approval is required because, for
purposes of the NASDAQ Change of Control Rule, the
Purchasers resulting ownership of our Common Stock, on an
as-converted basis, will represent approximately 28.7% of all
outstanding shares of Common Stock. We seek your approval of
Proposal 1 in order to satisfy the requirements of the
NASDAQ Change of Control Rule with respect to the issuance of
the Series A Exchangeable Preferred Stock.
In the event that Proposal 1 is not approved by
stockholders as submitted hereby, the Series A Exchangeable
Preferred Stock will continue to carry its current terms and
will not be convertible into Common Stock. However, the
Series A Exchangeable Preferred Stock would not be subject
to mandatory redemption by CASMED and would continue to accrue
dividends at a significantly higher rate than if stockholder
approval were obtained.
The approval of the change of control under NASDAQ Listing Rules
resulting from the Private Placement and the transactions
contemplated thereby, including the issuance of our Common Stock
upon conversion of the Preferred Stock, requires the affirmative
vote of a majority of the total votes cast on the proposal at
the special meeting, either in person or by proxy. Abstentions
and broker non-votes will have no effect with
respect to the approval of the change of control under NASDAQ
Listing Rules resulting from the Private Placement.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
PROPOSAL 1.
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PROPOSAL 2:
APPROVAL
OF THE ISSUANCE OF PREFERRED STOCK CONVERTIBLE INTO MORE THAN
20% OF OUR COMMON STOCK OUTSTANDING, WHICH, IN THE FUTURE, MAY
CONVERT AT A PRICE THAT IS LESS THAN THE GREATER OF BOOK OR
MARKET VALUE OF OUR COMMON STOCK
The implementation of Proposal 2 is conditioned on
approval of Proposal 1. Stockholders who wish to approve
Proposal 2 should also vote to approve Proposal 1.
Our Common Stock is listed on the NASDAQ Global Market, and
therefore we are subject to the NASDAQ Listing Rules. Under the
NASDAQ Private Placement Rule, prior stockholder approval is
required for the issuance, other than in a public offering, of
securities convertible into common stock at a price less than
the greater of book or market value of the common stock if the
securities are convertible into 20% or more of a companys
common stock. Although the initial Conversion Price of $2.82 was
equal to or greater than the greater of the book or market value
of our Common Stock on June 8, 2011, the terms of the
Series A Preferred Stock contain weighted average
anti-dilution adjustments that could result in the Conversion
Price being reduced in the future to an amount that is less than
the greater of the book or market value of our Common Stock
immediately before the Private Placement. This would occur if we
elect to enter into issuances of securities or other
transactions in the future that would trigger such anti-dilution
adjustments. Similarly, if stockholder approval is obtained as
contemplated herein, the Series A Exchangeable Preferred
Stock will have similar weighted average anti-dilution
protection. If Proposal 1 is approved, the issuance of our
Common Stock upon conversion of the Preferred Stock will exceed
20% of our Common Stock currently outstanding. Because the
Conversion Price in the future (due to anti-dilution
adjustments) may be below the greater of the book or market
value of our Common Stock immediately prior to the Private
Placement, we believe the NASDAQ Private Placement Rule requires
that we obtain stockholder approval of the Preferred Stock
issued in the Private Placement. We seek your approval of
Proposal 2 in order to satisfy the requirements of the
NASDAQ Private Placement Rule.
The approval of the issuance of securities convertible into more
than 20% of our Common Stock currently outstanding at a price
that may be less than the greater of book or market value of our
Common Stock requires the affirmative vote of a majority of the
total votes cast on the proposal at the special meeting, either
in person or by proxy. Abstentions and broker
non-votes will have no effect with respect to the
issuance of securities convertible into more than 20% of our
Common Stock currently outstanding at a price less than the
greater of book or market value of our Common Stock.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
PROPOSAL 2.
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PROPOSAL 3:
APPROVAL
OF THE ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY, IN THE
EVENT THAT THERE ARE NOT SUFFICIENT VOTES AT THE TIME OF THE
SPECIAL MEETING TO CONSTITUTE A QUORUM OR TO APPROVE THE
FOREGOING PROPOSALS
If it becomes necessary to establish a quorum or to obtain
additional votes in favor of Proposal 1
and/or
Proposal 2, a motion may be made to adjourn the special
meeting to a later time to permit further solicitation of
proxies. If such a motion to adjourn is made, it will require
the affirmative vote of the holders of a majority of the shares
of Common Stock represented at the meeting and entitled to vote,
even if a quorum is not present or represented at the special
meeting.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
PROPOSAL 3.
Which
stockholders own at least 5% of CASMED?
Other than a director listed in the director and officer
ownership table below, the only persons or groups known to us to
be beneficial owners of more than 5% of our outstanding Common
Stock, Series A Preferred Stock and Series A
Exchangeable Preferred Stock as of [ ], 2011
are reflected in the chart below. The following information is
based upon Schedules 13D, 13F and 13G and Forms 3 and 4
filed with the Securities and Exchange Commission by the persons
and entities shown as of the respective dates appearing below or
other information obtained by the company.
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Name and Address of
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Common Stock
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Beneficial Owners
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Beneficial Ownership
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Percent of Class
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BMI Capital Corporation
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2,760,468
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(a)
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%
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570 Lexington Avenue
New York, NY 10022
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Thomas, McNerney & Partners II, L.P.
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3,386,525
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(b)
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%
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TMP Nominee II, LLC
TMP Associates II, L.P.
60 South 6th Street, Suite 3620
Minneapolis, MN 55402
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J. Sanford Davis
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921,500
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%
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14 Longview Terrace
Madison, CT 06443
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Louis P. Scheps
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856,057
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(c)
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%
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11 Riverwalk
Branford, CT 06405
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Norman H. Pessin
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684,050
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(d)
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%
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Sandra F. Pessin
366 Madison Avenue
14th
Floor
New York, NY 10017
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(a) |
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Based upon information set forth in a Schedule 13F filed
with the SEC on February 15, 2011. BMI Capital
Corporation holds sole dispositive power over the indicated
shares. |
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(b) |
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Based upon information set forth in a Schedule 13D filed
with the SEC on June 20, 2011. Thomas, McNerney &
Partners II, L.P. (TMP II LP), TMP Associates II,
L.P. (TMPA) and TMP Nominee II, LLC
(TMPN) hold, respectively, 94,182, 334 and
984 shares of Series A Preferred Stock (which
represent in the aggregate 100% of the outstanding Series A
Preferred Stock) and |
9
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53,748, 191 and 561 shares of Series A Exchangeable
Preferred Stock (which represent in the aggregate 100% of the
outstanding Series A Exchangeable Preferred Stock). The
shares in the table above represent common stock
equivalent rights on shares of Series A Preferred
Stock. Without giving effect to any accretion in the stated
value of the Series A Preferred Stock, each share of
Series A Preferred Stock has common stock
equivalent rights equal to approximately 35.5 shares
of Common Stock, which is determined by dividing the stated
value of $100 per share of Series A Preferred Stock by an
effective conversion price of $2.82 per share. Of the shares in
the table above (i) 3,339,787 are owned directly by TMP II
LP, and Thomas, McNerney & Partners II, LLC (TMP
II LLC), the general partner of TMP II LP, may be deemed
to have shared voting power, and James Thomas, a managing member
of TMP II LLC, may be deemed to have shared power to vote such
shares, (ii) 34,894 are owned directly by TMPN, and James
Thomas, a managing member of TMPN, may be deemed to have shared
power to vote such shares, and (iii) 11,844 are directly
owned by TMPA, and TMP II LLC, the general partner of TMPA, may
be deemed to have shared voting power, and James Thomas, a
managing member of TMP II LLC, may be deemed to have shared
power to vote such shares. |
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(c) |
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Includes 714,401 shares issuable upon exercise of warrants.
Information is as of June 9, 2011. |
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(d) |
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Based upon information set forth in a Schedule 13D filed
with the SEC on June 29, 2010. Includes 284,050 shares
held by SEP IRA FBO Norman Pessin. |
How much
stock is owned by directors and executive officers?
The following table shows beneficial ownership of CASMED common
stock as of [ ], 2011 by our directors and our
executive officers. Shares issuable upon exercise of options or
warrants are shown in a separate column.
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Options and
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Shares Deemed to be
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Warrants
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Beneficially Owned
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Exercisable Within
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Percent
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Name of Beneficial Owner
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(a)
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60 Days (b)
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of Class
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Lawrence S. Burstein
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107,059
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(c)
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115,000
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%
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Evan Jones
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366,176
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(d)
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20,000
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%
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Gregory P. Rainey
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5,930
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*
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James E. Thomas
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3,390,478
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(e)
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%
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Kathleen A. Tune
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3,953
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Kenneth R. Weisshaar
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10,802
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6,666
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*
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Thomas M. Patton
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478,300
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(f)
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87,500
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%
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Jeffery A. Baird
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58,711
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110,000
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%
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Matthew P. Herwig
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25,000
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*
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Andrew E. Kersey
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75,658
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80,000
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%
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All current executive officers and directors as a group (9)
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4,446,409
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339,166
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%
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* |
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Less than one percent of the class |
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(a) |
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Includes restricted stock held by the named individuals as
follows: Mr. Burstein, Mr. Jones, Mr. Rainey,
Mr. Thomas, Ms. Tune and
Mr. Weisshaar each 3,953 shares;
Mr. Baird and Mr. Herwig each
25,000 shares; and Mr. Patton
347,917 shares. |
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(b) |
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The director or executive officer has the right to acquire
beneficial ownership of this number of shares within
60 days of the record date for the special meeting
(July 6, 2011) by exercising outstanding stock options
or warrants (as applicable). |
10
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(c) |
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Includes 75,000 shares held in Mr. Bursteins IRA
rollover account and 9,375 shares owned directly and
indirectly by a family member. |
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(d) |
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Includes 333,333 shares held by jVen Capital LLC. |
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(e) |
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See footnote (b) to the table above under the heading
Which stockholders own at least 5% of CASMED?
Mr. Thomas may be deemed to have shared voting and
dispositive power over the shares held by TMP II LP, TMPA and
TMPN. |
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(f) |
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Includes 20,000 shares held in a relatives IRA over
which Mr. Patton has dispositive power. |
Additional
Information
Solicitation
of Proxies
In addition to the use of the mails, proxies may be solicited by
the directors, officers, and employees of CASMED without
additional compensation in person, or by telephone, facsimile,
email or otherwise. Arrangements may also be made with brokerage
firms and other custodians, nominees, and fiduciaries for the
forwarding of solicitation material to the beneficial owners of
CASMED common stock, and we will reimburse these brokers,
custodians, nominees, and fiduciaries for reasonable
out-of-pocket
expenses incurred. The cost of solicitation will be borne
entirely by CASMED.
Other
Matters
Directions to the special meeting can be obtained by making a
written or oral request to our Secretary,
c/o CAS
Medical Systems, Inc., 44 East Industrial Road,
Branford, Connecticut 06405 or by telephone
(203-488-6056).
Management knows of no other matters which may be presented for
consideration at the meeting. However, if any other matters
properly come before the meeting, it is the intention of the
individuals named in the enclosed proxy to vote in accordance
with their judgment.
By order of the board of directors.
Jeffery A. Baird
Secretary
11
Exhibit A
CERTIFICATE
OF DESIGNATION
OF
SERIES A
CONVERTIBLE PREFERRED STOCK
OF
CAS
MEDICAL SYSTEMS, INC.
Pursuant to
Section 151 of the General
Corporation Law of the State of Delaware
CAS Medical Systems, Inc. (the Company), a
corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the
DGCL), hereby certifies as follows:
FIRST: The Certificate of Incorporation (the
Certificate of Incorporation) of the Company
authorizes the issuance of up to 1,000,000 shares of
preferred stock, par value $0.001 per share (the
Authorized Preferred Stock), and further
authorizes the Board of Directors of the Company by resolution
or resolutions to provide for the issuance of Authorized
Preferred Stock in series and to establish the number of shares
to be included in each such series and to fix the designation,
powers, preferences and relative rights and qualifications,
limitations or restrictions of each such series.
SECOND: On June 8, 2011, the Board of
Directors of the Company adopted the following resolution
authorizing the creation and issuance of a series of said
Authorized Preferred Stock to be known as Series A
Convertible Preferred Stock:
RESOLVED: that, pursuant to authority
conferred upon the Board of Directors by the Certificate of
Incorporation of the Company, the Board of Directors hereby
authorizes and establishes a series of 95,500 shares of
Series A Convertible Preferred Stock, and hereby fixes the
number, designation, powers, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of such
shares as follows:
1. Designation and Amount; Ranking.
(a) There shall be created from the Authorized Preferred
Stock a series of preferred stock, designated as the
Series A Convertible Preferred Stock, par value
$0.001 per share (the Series A Preferred
Stock), and the authorized number of shares of such
series shall be 95,500, which may be issued by the Company from
time to time subject to compliance with this Certificate, the
Investment Agreement (as defined in Annex I, attached
hereto) and any other conditions to issuance.
(b) The Series A Preferred Stock shall, with respect
to both dividend rights and rights upon a Liquidation (as
defined in Annex I, attached hereto) or Change of Control
(as defined in Annex I, attached hereto), rank
(i) senior to all Junior Stock (as defined in Annex I,
attached hereto), (ii) on parity with all Parity Stock (as
defined in Annex I, attached hereto) and (iii) junior
to all Senior Stock (as defined in Annex I, attached
hereto).
[SIGNATURE
PAGE FOLLOWS]
A-1
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation to be signed this 8th day of June, 2011.
CAS MEDICAL SYSTEMS, INC.
Name: Thomas M. Patton
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Title:
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President and Chief Executive Officer
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A-2
Annex I
ADDITIONAL
TERMS
OF
SERIES A
CONVERTIBLE PREFERRED STOCK
OF
CAS
MEDICAL SYSTEMS, INC.
2. Definitions. As used herein,
the following terms shall have the following meanings:
(a) Accretion Rate has the
meaning set forth in Section 3(a).
(b) Accreted Value has the
meaning set forth in Section 3(a).
(c) Accrued Dividends means, with
respect to any share of Series A Preferred Stock, as of any
date, without duplication of any dividends included within
Accreted Value, the accrued and unpaid dividends on such share
through and including such date (whether or not declared).
(d) Acquiring Person shall mean
any Person or group (within the meaning of Section 13(d)(3)
of the Exchange Act) (other than any Person who is a member of
the TMP Investor Group).
(e) A/D Rate means the Accretion
Rate or the Dividend Rate, as applicable, at the time of the
Special Triggering Event.
(f) Affiliate shall mean any
Person, directly or indirectly, controlling, controlled by or
under common control with such Person.
(g) Applicable Issuance Date
means the date of the issuance of the applicable shares of
Series A Preferred Stock (which may be issued from time to
time on one or more days).
(h) Applicable Terms means any of
the following defined terms herein: (a) Accretion Rate;
(b) Accreted Value; (c) A/D Rate; (d) Conversion
Price; (e) Dividend Rate; or (f) Stated Value.
(i) Approved Markets shall mean
the NASDAQ Global Select Market, the NASDAQ Global Market, the
NASDAQ Capital Market, NYSE Amex, or the NYSE.
(j) Authorized Preferred Stock
has the meaning set forth in the recitals.
(k) Board of Directors means the
Board of Directors of the Company or, with respect to any action
to be taken by the Board of Directors, any committee of the
Board of Directors duly authorized to take such action.
(l) Business Day means any day
except Saturday, Sunday and any day which shall be a legal
holiday or a day on which banking institutions in the State of
New York generally are authorized or required by law or other
governmental actions to close.
(m) Capital Stock of any Person
means any and all securities (including equity-linked
securities), interests (including partnership interests), rights
to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of
such Person, including any Preference Stock.
(n) Certificate means this
Certificate of Designation with respect to the Series A
Preferred Stock, as amended from time to time.
(o) Certificate of Incorporation
has the meaning set forth in the recitals.
Annex I-1
(p) Change of Control means the
consummation of any transaction or series of related
transactions (i) involving any purchase or acquisition
(whether by way of merger, share exchange, consolidation,
business combination or similar transaction or otherwise) by any
Acquiring Person, of any of securities representing a majority
of the outstanding voting power of the Company entitled to elect
the Board of Directors, (ii) involving any sale, lease,
exchange, transfer, exclusive license or disposition of all or
substantially all of the assets of the Company and its
Subsidiaries, taken together as a whole, to an Acquiring Person,
(iii) involving any merger, consolidation or business
combination in which the holders of voting securities of the
Company immediately prior to the transaction, as a group, do not
hold securities representing a majority of the outstanding
voting power entitled to elect the board of directors of the
surviving entity in such merger, consolidation or business
combination, or (iv) following which a majority of the
members of the Board of Directors do not constitute Continuing
Directors; provided that in each case such transaction or
transactions are approved by the Board of Directors.
(q) Closing Price shall mean,
with respect to the Common Stock (or other relevant Capital
Stock) on any date of determination, the most recent
consolidated closing bid price or, if no such closing bid price
is reported, the last reported bid price of the shares of the
Common Stock (or other relevant Capital Stock) on the relevant
Approved Market on such date. If the Common Stock (or other
relevant Capital Stock) is not traded on an Approved Market on
any date of determination, the Closing Price of the Common Stock
(or other relevant Capital Stock) on such date of determination
means the closing bid price as reported in the composite
transactions for the principal U.S. national or regional
securities exchange on which the Common Stock (or other relevant
Capital Stock) is so listed or quoted, or, if no closing bid
price is reported, the last reported bid price on the principal
U.S. national or regional securities exchange on which the
Common Stock (or other relevant Capital Stock) is so listed or
quoted, or if the Common Stock (or other relevant Capital Stock)
is not so listed or quoted on a U.S. national or regional
securities exchange, the last quoted bid price for the Common
Stock (or other relevant Capital Stock) in the
over-the-counter
market as reported by Pink Sheets LLC or similar organization,
or, if that bid price is not available, the market price of the
Common Stock (or other relevant Capital Stock) on that date as
determined in good faith by the Board of Directors.
(r) Common Stock means the common
stock, par value $0.004 per share, of the Company, or any other
class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or as a
result of a subdivision, combination or merger,
reclassification, consolidation or similar transaction in which
the Company is a constituent corporation.
(s) Company has the meaning set
forth in the recitals.
(t) Continuing Director means
(a) any member of the Board of Directors who was a director
of the Company on the Original Issue Date, and (b) any
individual who becomes a member of the Board of Directors after
the Original Issue Date if such individual was appointed or
nominated for election to the Board of Directors by a majority
of the Continuing Directors, but excluding any such individual
originally proposed for election in opposition to the Board of
Directors in office on the Original Issue Date in an actual or
threatened election contest relating to the election of the
directors (or comparable managers) of the Company and whose
initial assumption of office resulted from such contest or the
settlement thereof.
(u) Conversion Conditions means
the shares of Common Stock are listed on an Approved Market and
trade with a Closing Price of at least 250% of the Conversion
Price then in effect for a period of 20 Trading Days out of 30
consecutive Trading Days on average trading volume of not less
than 50,000 shares per day over the subject
30-day
trading period (as adjusted ratably for stock splits,
reclassifications and other like kind events affecting the
Common Stock).
(v) Conversion Date has the
meaning set forth in Section 7(a)(iv).
Annex I-2
(w) Conversion Price means $2.82,
subject to adjustment as set forth herein.
(x) Conversion Right has the
meaning set forth in Section 7(a)(i).
(y) Conversion Right Notice has
the meaning set forth in Section 7(a)(ii).
(z) Convertible Securities means
debt securities or shares of Capital Stock, in each case
convertible into or exchangeable, directly or indirectly, for
Common Stock.
(aa) Current Market Price means,
on any date, the average of the daily Closing Price per share of
the Common Stock or other securities on each of the twenty
(20) consecutive Trading Days preceding the earlier of the
day before the date in question and the day before the Ex-Date
with respect to the issuance or distribution giving rise to an
adjustment to the Conversion Price pursuant to Section 8.
(bb) DGCL has the meaning set
forth in the recitals.
(cc) Dividend Deferral Election
has the meaning set forth in Section 3(a).
(dd) Dividend Equivalent Amount
has the meaning set forth in Section 3(d).
(ee) Dividend Payment Date means
March 31, June 30, September 30 and December 31 of
each year.
(ff) Dividend Rate has the
meaning set forth in Section 3(a).
(gg) Dividend Record Date means,
with respect to any dividend payable on a Dividend Payment Date,
the preceding March 15, June 15, September 15 and
December 15 and, with respect to any dividend payable on any
other date, such date as may be determined by the Board of
Directors.
(hh) Exchange Act means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
(ii) Ex-Date, when used with
respect to any issuance or distribution, means the first date on
which the Common Stock or other securities trade without the
right to receive the issuance or distribution giving rise to an
adjustment to the Conversion Price pursuant to Section 8.
(jj) GAAP means United States
generally accepted accounting principles.
(kk) Holder means a holder of
record of outstanding shares of the Series A Preferred
Stock.
(ll) Indebtedness means, without
duplication, (A) all indebtedness for borrowed money,
(B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services, including,
without limitation, capital leases in accordance
with GAAP (other than trade payables entered into in the
ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) all obligations
evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with
the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or
other title retention agreement, or incurred as financing, in
either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event
of default are limited to repossession or sale of such
property), (F) all monetary obligations under any leasing
or similar arrangement which, in connection with GAAP,
consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness
referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any lien upon
or in any property or assets (including accounts and contract
rights) owned by any Person, even though the Person which owns
such assets or property has not assumed or become liable for the
Annex I-3
payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others
of the kinds referred to in clauses (A) through
(G) above. For the purposes of this definition,
Contingent Obligation mean, as to any Person,
any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or
other obligation of another Person if the primary purpose or
intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or
that any agreements relating thereto will be complied with, or
that the holders of such liability will be protected (in whole
or in part) against loss with respect thereto.
(mm) Investment Agreement means
that certain Investment Agreement, dated June 8, 2011, by
and among the Company and the purchasers named therein, as the
same may be amended from time to time.
(nn) Junior Stock means all
classes of Common Stock and each other class of Capital Stock or
series of preferred stock established after the Original Issue
Date by the Board of Directors, the terms of which do not
expressly provide that such class or series ranks senior to or
on parity with the Series A Preferred Stock as to dividend
rights
and/or
rights upon a Liquidation or Change of Control.
(oo) Junior Stock Event has the
meaning set forth in Section 3(d).
(pp) Liquidation means the
voluntary or involuntary liquidation, dissolution or
winding-up
of the Company other than a Change of Control.
(qq) Liquidation Event has the
meaning set forth in Section 4(a).
(rr) Liquidation Preference has
the meaning set forth in Section 4(a).
(ss) Mandatory Conversion has the
meaning set forth in Section 7(b)(i).
(tt) Mandatory Conversion Time
has the meaning set forth in Section 7(b)(i).
(uu) NYSE means the New York
Stock Exchange, Inc.
(vv) Option means rights, options
or warrants to subscribe for, purchase or otherwise acquire
Common Stock or Convertible Securities.
(ww) Original Issue Date means
June 9, 2011.
(xx) Parity Stock means the
Series A Exchangeable Preferred Stock and any class of
Capital Stock or series of preferred stock established after the
Original Issue Date by the Board of Directors, the terms of
which expressly provide that such class or series will rank on
parity with the Series A Preferred Stock as to dividend
rights
and/or
rights upon a Liquidation or Change of Control.
(yy) Person means any individual,
corporation, general partnership, limited partnership, limited
liability partnership, joint venture, association, joint-stock
company, trust, limited liability company, unincorporated
organization, other entity or government or any agency or
political subdivision thereof.
(zz) Preference Stock means, as
applied to the Capital Stock of any Person, Capital Stock of any
series, class or classes (however designated) which is preferred
as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person or change of control
(defined by analogy to the definition of Change of Control
herein) of such Person, over shares of Capital Stock of any
other series or class of such Person.
(aaa) Record Date means the
applicable record date as determined in accordance with
Section 213 of the DGCL.
Annex I-4
(bbb) Register has the meaning
set forth in Section 3(a).
(ccc) Registration Rights
Agreement means that certain Registration Rights
Agreement, dated June 9, 2011, between the Company and the
signatories thereto, as the same may be amended from time to
time.
(ddd) Required Holders means as
of any date the Holders of more than 50% of the then-outstanding
shares of Series A Preferred Stock, voting together as a
single class.
(eee) Senior Stock means each
class of Capital Stock or series of preferred stock established
after the Original Issue Date by the Board of Directors, the
terms of which expressly provide that such class or series will
rank senior to the Series A Preferred Stock as to dividend
rights
and/or
rights upon a Liquidation or Change of Control.
(fff) Series A Exchangeable Preferred
Stock means the Series A Exchangeable
Preferred Stock, par value $0.001 per share, of the Company.
(ggg) Series A Exchangeable Preferred
Certificate of Designation means the Certificate
of Designation for the Series A Exchangeable Preferred
Stock.
(hhh) Series A Preferred Stock
has the meaning set forth in Section 1(a).
(iii) Special Triggering Event
means any of the following events:
(i) the failure of the Company to pay when due any amounts
owed on the shares of Series A Preferred Stock to the Holders;
(ii) a failure by the Company to deliver any cash and
shares of Common Stock, when such cash and shares of Common
Stock, if any, are required to be delivered upon conversion of
the Series A Preferred Stock pursuant to the terms set
forth herein, where the Company does not remedy such default
within five (5) days after the date such cash and shares of
Common Stock, if any, are required to be delivered;
(iii) a material violation by the Company of any covenant
or agreement set forth in the Investment Agreement, where the
Company does not cure such violation within thirty
(30) days after the receipt of written notice of such
breach from one or more of the Holders party to the Investment
Agreement who are actually adversely affected by such breach;
(iv) a material violation by the Company of any term of or
condition set forth in this Certificate, where the Company does
not cure such violation within thirty (30) days after the
receipt of written notice of such breach from one or more of the
Holders who are actually adversely affected by such breach;
(v) a material and willful violation by the Company of any
term of or condition set forth in the Registration Rights
Agreement, where the Company does not cure such violation within
thirty (30) days after the receipt of written notice of
such breach from one or more of the Holders party to the
Registration Rights Agreement who are actually adversely
affected by such breach; or
(vi) the failure of any of the TMP Purchaser Designees (as
defined in the Investment Agreement) to be elected or appointed
to the Board of Directors in accordance with the terms set forth
in the Investment Agreement.
(jjj) Stated Value means $100.00
per share of Series A Preferred Stock.
(kkk) Stockholder Approval means
the affirmative vote of holders of a majority of the votes cast
with respect to the matter, either at a meeting of stockholders
of the Company validly called and at which a quorum is present
or by written consent, approving the Stockholder Proposal (as
defined in the Investment Agreement) in accordance with the
relevant provisions of the DGCL.
Annex I-5
(lll) Stockholder Approval
Threshold means 19.99% of the shares of Common
Stock outstanding immediately prior to the Original Issue Date
(not including any shares of Common Stock that are owned by the
Company and without assuming the conversion or exercise of any
Options or other Convertible Securities).
(mmm) Subsidiary means a
partnership, joint-stock company, corporation, limited liability
company, trust, unincorporated organization or other entity of
which a Person owns, directly or indirectly, more than 50% of
the stock or other interests the holder of which is generally
entitled to vote for the election of the board of directors or
other governing body of such entity.
(nnn) Trading Day means a day
during which the trading of securities generally occurs on the
Approved Market on which the Common Stock is then listed or, if
the Common Stock is not listed on an Approved Market, the NYSE.
(ooo) Transaction has the meaning
set forth in Section 9(d).
(ppp) Transfer Agent means the
Company or any duly appointed transfer agent, registrar and
conversion and dividend disbursing agent for the Series A
Preferred Stock as may be appointed by the Company from time to
time.
(qqq) TMP Investor Group means
Thomas, McNerney & Partners II, L.P., TMP
Nominee II LLC and TMP Associates II, L.P. and any of their
respective Affiliates other than any of their Affiliates that is
a portfolio company (as such term is customarily
used among private equity investors).
3. Accretion; Dividends.
(a) From and after the Applicable Issuance Date, the Stated
Value of each share of Series A Preferred Stock shall
accrete at an annual rate of seven percent (7%) (the
Accretion Rate), compounded quarterly,
beginning on the three-month period ending June 30, 2011
(the Stated Value as it has accreted as of any date, the
Accreted Value, subject to appropriate
adjustment in the event of any stock dividend, stock split,
stock distribution or combination, consolidation, subdivision,
reclassification or other corporate actions having the similar
effect with respect to the Series A Preferred Stock);
provided, however, if (i) from and after the
Original Issue Date until and including the third anniversary of
the Original Issue Date, the Company receives a written consent
from the Required Holders (which consent must be irrevocable and
delivered (x) prior to June 15, 2011 with respect to
the quarters ending June 30, 2011 through June 30,
2012, (y) prior to June 15, 2012 with respect to the
four quarters ending September 30, 2012 through
June 30, 2013 and (z) prior to June 15, 2013 with
respect to the four quarters ending September 30, 2013
through June 30, 2014) electing cash dividends for any
specified period prior to the third anniversary of the Original
Issue Date, or (ii) at any time from and after the third
anniversary of the Original Issue Date, the Company delivers a
written notice to the Holders electing cash dividends for any
specified period (provided the Company has funds legally
available to pay such cash dividend), the Holders shall be
entitled to receive on each Dividend Payment Date, in lieu of
the accretion described above for the three-month period ending
on such Dividend Payment Date, cash dividends on each share of
Series A Preferred Stock, at a rate per annum equal to
seven percent (7%) of the Accreted Value as of the Dividend
Payment Date (the Dividend Rate), and the
Board of Directors shall declare such cash dividends out of
funds legally available for that purpose; provided,
however, with respect to clause (i), to the extent the
Company does not have funds legally available to pay such cash
dividend or with the prior approval of the Required Holders, the
Company may elect not to pay a cash dividend due on any Dividend
Payment Date (a Dividend Deferral Election)
and if such an election is made, the cash dividend that would
have been payable on such Dividend Payment Date shall continue
to accrue, and shall compound quarterly at the Dividend Rate
until the accrued value of such dividend is paid, whether or not
in any fiscal year there shall be net profits or surplus legally
available for the payment of dividends in such fiscal year, so
that if in any fiscal year or years, dividends in whole or in
part are not paid upon the Series A Preferred Stock, unpaid
dividends shall accumulate and accrue at the Dividend Rate,
Annex I-6
compounded quarterly. Unless there is a Dividend Deferral
Election, any dividends due shall be payable quarterly in
arrears on each Dividend Payment Date; provided, that if
any such payment date is not a Business Day then such dividend
shall be payable on the next Business Day. Each dividend shall
be payable to the Holders as they appear on the securities
register maintained in respect of the Series A Preferred
Stock by the Company (the Register) at the
close of business on the corresponding Dividend Record Date;
provided, however, if there is a Dividend Deferral
Election, the dividend that would have otherwise been payable on
the Dividend Record Date applicable to the Dividend Deferral
Election shall be payable to the Holders as they appear on the
Register at the time such dividend is paid. Subject to the
foregoing and the availability of lawful funds, the Board of
Directors may declare any dividends subject to a Dividend
Deferral Election at any time and the payment date of such funds
shall be as determined by the Board of Directors. All dividends
paid with respect to shares of Series A Preferred Stock
shall be paid pro rata to the Holders entitled thereto. The
amount of dividends payable for any other period shorter or
longer than a full dividend period, shall be computed on the
basis of twelve
30-day
months and a
360-day
year. Dividend payments shall be aggregated per Holder and shall
be made to the nearest cent (with $.005 being rounded upward).
(b) Upon a Special Triggering Event, the then applicable
A/D Rate shall automatically be increased by an additional five
percent (5%) per annum, compounded quarterly, from and including
the date on which any such Special Triggering Event shall occur
through but excluding the date on which the Special Triggering
Event shall have been cured or waived in writing by the Required
Holders.
(c) No dividend will be declared or paid upon, or any sum
set apart for the payment of dividends upon, any outstanding
share of the Series A Preferred Stock or Parity Stock with
respect to any dividend period unless all dividends due for all
preceding dividend periods have been declared and paid, or
declared and, if such dividends are to be paid in cash, a sum of
cash sufficient for the payment thereof is set apart for the
payment of such dividend, upon all outstanding shares of
Series A Preferred Stock and Parity Stock. Notwithstanding
the foregoing, if full cumulative dividends have not been paid
on the Series A Preferred Stock and all Parity Stock, all
dividends declared and paid on the Series A Preferred Stock
and such Parity Stock shall be declared and paid pro rata so
that the amounts of dividends declared and paid per share on the
Series A Preferred Stock and such Parity Stock will in all
cases bear to each other the same ratio that accumulated and
unpaid dividends per share on the shares of Series A
Preferred Stock and such Parity Stock bear to each other.
(d) No dividends or other distributions (other than cash
paid in lieu of fractional shares or dividends on Common Stock
payable in Common Stock) may be declared, made or paid, or set
apart for payment upon, any Junior Stock, nor may any Junior
Stock be redeemed, purchased or otherwise acquired for any
consideration (or any money paid to or made available for a
sinking fund for the redemption of any Junior Stock) by or on
behalf of the Company or any of its Subsidiaries, unless
(i) all Accrued Dividends shall have been or
contemporaneously are declared and paid in cash, or are declared
and a sum of cash sufficient for the payment thereof is set
apart for such payment or are added to Accreted Value at the
request of the Holders, on the Series A Preferred Stock and
all Parity Stock for all dividend periods terminating on or
prior to the Record Date of such declaration, payment,
redemption, purchase or acquisition, (ii) the Holders
receive an equivalent dividend or distribution of the amount of
such dividend or distribution that would be payable to such
Holders if such shares of Series A Preferred Stock had been
converted into Common Stock immediately prior to the Record Date
for such dividend or distribution (such amount per share of
Series A Preferred Stock, the Dividend Equivalent
Amount) and (iii) the Company obtains the consent
required pursuant to Section 5(b) herein (such declaration
or distribution made in accordance with clauses (i) through
(iii)), a Junior Stock Event). The
restrictions set forth in this Section 3(d) shall not apply
to the purchase or other acquisition of Junior Stock
(A) pursuant to any bona fide employee or director
incentive or benefit plan or arrangement of the Company or any
Subsidiary heretofore or hereafter adopted by the Board of
Directors or the cashless exercise of Options or (B) which
purchase or acquisition has received the prior written consent
of the Required Holders.
Annex I-7
4. Liquidation; Change of Control.
(a) In the event of any Liquidation (a Liquidation
Event), the Holders shall be entitled to be paid out
of the assets and funds of the Company available for
distribution to its stockholders an amount in cash per each
share of Series A Preferred Stock equal to the greater of
(A) 100% of the Accreted Value for each share of
Series A Preferred Stock outstanding on the date of such
Liquidation Event, plus an amount equal to all Accrued Dividends
thereon to the date of the Liquidation Event or (B) the
amount to which such Holders would be entitled to receive had
such Holders, immediately prior to the Liquidation Event,
converted such shares of Series A Preferred Stock into
shares of Common Stock (determined in accordance with
Section 7(a)(i)), in either case before any payment shall
be made or any assets distributed to the holders of any of the
Junior Stock (such greater cash amount being referred to as the
Liquidation Preference). Without limiting any
rights and remedies of the Holders, if upon any such Liquidation
Event, the remaining assets and funds of the Company available
for distribution to its stockholders after payment in full of
amounts required to be paid or distributed to holders of Senior
Stock are not sufficient to pay in full the liquidation payments
payable to the Holders and holders of outstanding shares of any
Parity Stock, then the holders of all such shares of Parity
Stock shall share ratably in such distribution of the remaining
assets and funds of the Company in accordance with the amount
which would otherwise be payable on such distribution if the
amounts to which the Holders and the holders of outstanding
shares of such Parity Stock are entitled were paid in full.
(b) Unless waived in writing by the Required Holders, in
the event of a Change of Control, each Holder shall have the
right, at such Holders election, to either (i) only
to the extent then convertible in accordance with
Section 7(a)(i), convert each share of Series A
Preferred Stock and receive the amount to which such Holder is
entitled to receive upon conversion of such shares of
Series A Preferred Stock into Common Stock or
(ii) within sixty (60) days of such Change of Control,
or later if the Holders did not receive notice of such Change of
Control, require the Company to redeem (subject to the
availability of lawful funds), in whole or in part, each share
of Series A Preferred Stock held by such Holder for an
amount in cash equal to the Liquidation Preference. Unless
waived in writing by the Required Holders, the Corporation shall
not have the power to effect a Change of Control unless the
agreement for such transaction provides that the consideration
payable to the stockholders of the Corporation in such
transaction shall be allocated among the holders of capital
stock of the Corporation in accordance with this
Section 4(b). In connection with a redemption permitted
above, each Holder shall surrender his, her or its certificate
or certificates representing such redeemed shares to the
Company, in the manner and at the place designated in written
notice mailed by the Company, postage prepaid, to each Holder,
at his, her or its post office address last shown on the
Register (which notice shall be given at least ten
(10) days prior to such Change of Control or such shorter
period as may be agreed in writing by the Required Holders), and
thereupon the Liquidation Preference of such shares shall be
payable to the order of the Person whose name appears on such
certificate or certificates as the owner thereof and each
surrendered certificate shall be canceled. From and after the
date of redemption, unless there shall have been a default in
payment of the Liquidation Preference, all rights of the Holder
whose shares have been redeemed (except the right to receive the
Liquidation Preference) shall cease with respect to such shares,
and such shares shall not thereafter be transferred on the books
of the Company or be deemed to be outstanding for any purpose
whatsoever.
(c) Without limiting any other rights and remedies of the
Holders, if upon any such Change of Control, the remaining
assets and funds of the Company available for distribution to
its stockholders after payment in full of amounts required to be
paid or distributed to holders of Senior Stock are not
sufficient to pay in full amounts payable to the Holders and
holders of outstanding shares of any Parity Stock, then the
holders of all such shares shall share ratably in such
distribution of the remaining assets and funds of the Company in
accordance with the amount which would otherwise be payable on
such distribution if the amounts to which the Holders and the
holders of outstanding shares of such Parity Stock are entitled
were paid in full.
Annex I-8
(d) Unless waived in writing by the Required Holders,
written notice of any Liquidation Event or Change of Control,
stating a payment date and the place where the distributable
amounts shall be payable, shall be given no less than ten
(10) days prior to the payment date stated therein, to the
Holders at their respective addresses as the same shall appear
on the Register.
(e) The amount deemed paid or distributed to the holders of
Common Stock upon any Liquidation or Change of Control shall be
the cash or the value of the property, rights or securities paid
or distributed to such holders by the Company or the acquiring
Person. The value of such property, rights or securities shall
be determined in good faith by the Board of Directors.
5. Voting Rights.
In addition to any voting rights provided by law, the Holders
shall be entitled to the following voting rights:
(a) Each share of Series A Preferred Stock shall
entitle the Holder thereof to vote together with the holders of
Common Stock as a single class on all matters submitted for the
approval of the holders of Common Stock. For purposes of this
Section 5(a), each Holder shall be entitled to the number
of votes equal to the number of shares of Common Stock that
would be held by such Holders assuming the conversion of all
outstanding shares of Series A Preferred Stock held by such
Holder into shares of Common Stock at the Conversion Price on
the Original Issue Date (subject to any adjustments pursuant
only to Section 8(a)(i) and 8(a)(ii) below) on the Record
Date for the determination of the stockholders entitled to vote
on such matters.
(b) If at any time following the Original Issue Date at
least fifty percent (50%) of the aggregate number of shares of
Series A Preferred Stock issued on and after the Original
Issue Date are outstanding, in addition to any other vote or
consent of the stockholders required by law or by the
Certificate of Incorporation, including any Certificate of
Designation, bylaws of the Company or this Certificate, the
Company shall not, and shall not permit its Subsidiaries to (in
each case, whether by merger, consolidation, reorganization,
operation of law or otherwise), without the prior written
consent of the Required Holders:
(i) amend, alter, waive or repeal any provision of its
Certificate of Incorporation, including any certificate of
designation, or bylaws or this Certificate in any manner that
would adversely affect the rights, powers, preferences or
privileges (economic or otherwise) of the Series A
Preferred Stock or Series A Exchangeable Preferred Stock,
increase the authorized number of shares of the Series A
Preferred Stock or Series A Exchangeable Preferred Stock,
or split, reverse split, subdivide, reclassify, combine or take
other corporate actions having a similar effect with respect to
the Series A Preferred Stock or Series A Exchangeable
Preferred Stock;
(ii) except as required pursuant to the terms of the
Investment Agreement or the Series A Exchangeable Preferred
Certificate of Designation, issue any shares of Series A
Preferred Stock or Series A Exchangeable Preferred Stock;
(iii) offer, sell or issue any equity or equity-linked
securities constituting Senior Stock or Parity Stock;
(iv) increase or decrease the size of the Board of
Directors;
(v) incur Indebtedness (other than Indebtedness that, when
aggregated with all other Indebtedness incurred since the
Original Issue Date and then outstanding, is less than
$4,000,000 when so aggregated);
(vi) redeem, repurchase or otherwise acquire or offer to
redeem, repurchase, or otherwise acquire any equity or
equity-linked securities constituting Junior Stock or Parity
Stock, other than the purchase or other acquisition of Junior
Stock pursuant to any bona fide employee or director incentive
or benefit plan or arrangement of the Company or any
Annex I-9
Subsidiary heretofore or hereafter adopted by the Board of
Directors or the cashless exercise of Options;
(vii) distribute (by means of a dividend or otherwise)
assets (including property or cash) to its stockholders (other
than shares of Common Stock or cash as required to pay dividends
on the Series A Preferred Stock pursuant to Section 3
or on the Series A Exchangeable Preferred Stock pursuant to
the Series A Exchangeable Preferred Certificate of
Designation (excluding dividends payable pursuant to
Section 3(d)(ii) which shall require consent pursuant to
this Section 5(b)(vii)));
(viii) enter into any transaction with any of its officers,
directors or Affiliates (or any directors, managers, officers or
employees of any such Affiliate), other than (x) employment
arrangements entered into in the ordinary course of business
consistent with past practices providing for annual base
compensation and benefits not exceeding $200,000 in the
aggregate, unless unanimously approved by the Compensation
Committee of the Board of Directors and (y) grants pursuant
to equity incentive plans approved by the Companys
stockholders;
(ix) adopt or amend any stockholder rights plan, poison
pill or similar anti-takeover device;
(x) sell, lease, license or otherwise dispose of any assets
outside the ordinary course of business consistent with past
practices, except for assets with a purchase price, in the
aggregate, of less than $500,000;
(xi) enter into any contract, agreement or other
arrangement that would preclude the Company from making payment
in full in cash on each Dividend Payment Date of the dividends
contemplated in Section 3 above; or
(xii) authorize, commit or agree (in writing or otherwise)
to do anything contained in this clause (b).
(c) Any action to be taken at any annual or special meeting
of stockholders by the Holders may be taken without a meeting,
without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be
signed by the Holder or Holders having no less than the minimum
number of votes that would be required to take such action at a
meeting at which all of the shares of Series A Preferred
Stock were present and voted. Prompt written notice of the
taking of any action by the Holders by less than unanimous
written consent shall be given as may be required under
applicable law.
6. Redemption. The Company shall
have no right to require the redemption of the shares of
Series A Preferred Stock. Nothing herein contained shall
prevent or restrict the purchase by the Company, from time to
time either at public or private sale, of the whole or any part
of the outstanding shares of Series A Preferred Stock at
such price or prices as the Company and a Holder may determine,
subject to the provisions of applicable law and obtaining any
required consents, including the prior written consent of the
Required Holders pursuant to Section 5(b) above.
7. Conversion.
(a) Conversion Right.
(i) Subject to the Stockholder Approval Threshold for the
period prior to Stockholder Approval, each Holder shall have the
right, at such Holders option, exercisable at any time and
from time to time to convert all or any portion of such
Holders shares of Series A Preferred Stock, subject
to the terms and provisions of this Section 7 (the
Conversion Right). Upon a Holders
election to exercise the Conversion Right, the shares of
Series A Preferred Stock for which the Conversion Right is
exercised shall be converted into such whole number of shares of
Common Stock equal to the product of the number of shares of
Series A Preferred Stock being so converted multiplied by
the quotient of (A) the per share Accreted Value as of the
Conversion Date (taking into account any differing
Annex I-10
Applicable Issuance Dates) divided by (B) the Conversion
Price then in effect. In addition, upon a Holders election
to exercise the Conversion Right, the shares of Series A
Preferred Stock for which the Conversion Right is exercised
shall be entitled to receive (at the election of the Company)
either (1) an amount in cash equal to all unpaid Accrued
Dividends thereon through the Conversion Date or (2) a
number of shares of Common Stock equal to the quotient obtained
by dividing (x) an amount equal to all unpaid Accrued
Dividends thereon through the Conversion Date by (y) the
Closing Price of the Common Stock on the Conversion Date;
provided, however, the Company shall elect
clause (2) above to the extent that sufficient lawful funds
are not available to pay the amounts required by clause (1)
above. Notwithstanding the foregoing, the Stockholder Approval
Threshold shall only limit the actual number of shares of Common
Stock issuable upon a conversion of the Series A Preferred
Stock and shall not apply, or be construed to apply, to rights
of the Holders set forth herein to the extent such rights
require a determination of a number of shares of Common Stock
issuable upon conversion of the Series A Preferred Stock
(including, without limitation, rights upon a Change of Control,
Liquidation or Redemption and dividend rights set forth herein).
(ii) The Conversion Right of a Holder shall be exercised by
the Holder by the surrender to the Company prior to
4:00 p.m. Eastern Time on the Conversion Date of the
certificates representing shares of Series A Preferred
Stock to be converted at the Companys principal place of
business or the offices of the Transfer Agent, if applicable,
accompanied by written notice to the Company that the Holder
elects to convert all or a portion of the shares of
Series A Preferred Stock represented by such certificate (a
Conversion Right Notice) and specifying the
name or names (with address or addresses) in which a certificate
or certificates for shares of Common Stock are to be issued and
(if so required by the Company or the Transfer Agent) by a
written instrument or instruments of transfer in form reasonably
satisfactory to the Company or the Transfer Agent duly executed
by the Holder or its legal representative.
(iii) As promptly as practicable after the surrender of the
certificate or certificates for Series A Preferred Stock as
aforesaid and the receipt of the Conversion Right Notice and in
no event later than three (3) Trading Days thereafter, the
Company shall issue and shall deliver or cause to be issued and
delivered to such Holder, or to such other Person on such
Holders written order (A) one or more certificates
representing the number of validly issued, fully paid and
non-assessable whole shares of Common Stock to which the Holder,
or the Holders transferee, shall be entitled, (B) if
less than the full number of shares of Series A Preferred
Stock evidenced by the surrendered certificates is being
converted, a new certificate or certificates, of like tenor, for
the number of shares of Series A Preferred Stock evidenced
by the surrendered certificate or certificates, less the number
of shares being converted, (C) cash for any payment of
Accrued Dividends through the Conversion Date if the Company
elects to pay such dividends in cash pursuant to
Section 7(a)(i) and (D) cash for any fractional
interest in respect of a share of Common Stock arising upon such
conversion settled as provided in Section 7(d)(i).
(iv) Subject to the Companys ability to limit the
shares of Series A Preferred Stock subject to a Conversion
Right in order to comply with the Stockholder Approval Threshold
for the period prior to Stockholder Approval, each conversion
pursuant to Section 7(a)(i) shall be deemed to have been
made at 3:59 p.m. Eastern Time on the date of the later to
occur of giving the Conversion Right Notice and of surrendering
the certificate or certificates representing the Series A
Preferred Stock to be converted (the Conversion
Date) so that the rights of the Holder thereof as to
the Series A Preferred Stock being converted shall cease
except for the right to receive the Common Stock (and cash
dividends, if elected by the Company, and cash in lieu of
fractional shares) payable under Section 7(a), and the
Person entitled to receive shares of Common Stock shall be
treated for all purposes as having become the record holder of
those shares of Common Stock at that time.
(b) Mandatory Conversion.
(i) Upon either (x) the date and time, or the
occurrence of an event, specified by vote or written consent of
the Required Holders or (y) at any time following the third
anniversary of the Original
Annex I-11
Issue Date when the Conversion Conditions are satisfied, the
written notice of the Company (a Mandatory
Conversion) (the time of such occurrence or event, or
the date and time specified in such notice, or the time of the
event specified in such vote or written consent is referred to
herein as the Mandatory Conversion Time) each
outstanding share of Series A Preferred Stock shall
automatically be converted into the number of shares of Common
Stock (subject to the Stockholder Approval Threshold) equal to
such whole number of shares of Common Stock equal to the product
of the number of shares of Series A Preferred Stock being
so converted multiplied by the quotient of (A) the per
share Accreted Value as of the Conversion Date (taking into
account any differing Applicable Issuance Dates) divided by
(B) the Conversion Price then in effect. In addition, upon
a Mandatory Conversion, the shares of Series A Preferred
Stock shall be entitled to receive (at the election of the
Company) either (1) an amount in cash equal to all unpaid
Accrued Dividends thereon through the Mandatory Conversion Time
or (2) a number of shares of Common Stock equal to the
quotient obtained by dividing (x) an amount equal to all
unpaid Accrued Dividends thereon through the Mandatory
Conversion Time by (y) the Closing Price of the Common
Stock on the date of the Mandatory Conversion Time;
provided, however, the Company shall elect
clause (2) above to the extent that sufficient lawful funds
are not available to pay the amounts required by clause (1)
above.
(ii) All Holders shall be sent written notice of the
Mandatory Conversion Time and the place designated for mandatory
conversion of all such shares of Series A Preferred Stock
pursuant to this Section 7(b). Such notice need not be sent
in advance of the occurrence of the Mandatory Conversion Time.
Promptly following receipt of such notice, each Holder shall
surrender his, her or its certificate or certificates for all
such shares (or, if such Holder alleges that such certificate
has been lost, stolen or destroyed, a lost certificate affidavit
and agreement reasonably acceptable to the Company to indemnify
the Company against any claim that may be made against the
Company on account of the alleged loss, theft or destruction of
such certificate which agreement shall not require the posting
of a bond) to the Company at the place designated in such
notice. If so required by the Company, certificates surrendered
for conversion shall be endorsed or accompanied by written
instrument or instruments of transfer, in form satisfactory to
the Company, duly executed by the Holder or by his, her or its
attorney duly authorized in writing. Subject to the
Companys ability to limit the shares of Series A
Preferred Stock subject to a Mandatory Conversion in order to
comply with the Stockholder Approval Threshold prior to the
Stockholder Approval, all rights with respect to the
Series A Preferred Stock converted pursuant to
Section 7(b), including the rights, if any, to receive
notices and vote (other than as a holder of Common Stock), will
terminate at the Mandatory Conversion Time (notwithstanding the
failure of the Holder or Holders to surrender the certificates
at or prior to such time), except only the rights of the
Holders, upon surrender of their certificate or certificates (or
lost certificate affidavit and agreement) therefor, to receive
the items provided for in the next sentence of this
Section 7(b)(ii). As soon as practicable after the
Mandatory Conversion Time and the surrender of the certificate
or certificates (or lost certificate affidavit and agreement)
for Series A Preferred Stock, the Company shall issue and
deliver to such Holder, or to his, her or its nominees, a
certificate or certificates for the number of full shares of
Common Stock issuable on such conversion in accordance with the
provisions hereof, together with (A) cash for any payment
of Accrued Dividends through the Conversion Date if the Company
elects to pay such dividends in cash pursuant to
Section 7(b)(i) and (B) cash for any fractional
interest in respect of a share of Common Stock arising upon such
conversion settled as provided in Section 7(d)(i).
(c) If upon any Mandatory Conversion, the shares of Common
Stock issuable upon conversion of the Series A Preferred
Stock are, or will be upon issuance, equal to or in excess of
the Stockholder Approval Threshold prior to Stockholder
Approval, the Company shall convert the number of shares of
Series A Preferred Stock up to an amount that equals an
amount that is one share of Common Stock less than the
Stockholder Approval Threshold, with such Mandatory Conversion
being effected ratably among the Holders in accordance with the
number of shares of Common Stock which would otherwise be
issuable upon such Mandatory Conversion if the Stockholder
Approval Threshold was not applicable. In lieu of the foregoing,
if upon any Mandatory Conversion, the shares of Common Stock
issuable upon conversion of the Series A Preferred Stock
are, or will be upon issuance, equal to
Annex I-12
or in excess of the Stockholder Approval Threshold prior to
Stockholder Approval, upon the written instruction of the
Required Holders and subject to the Company having lawfully
available funds, the Company shall reduce the Accreted Value up
to an amount sufficient such that the number of shares of Common
Stock issuable upon conversion of the shares of Series A
Preferred Stock shall equal one share less than the Stockholder
Approval Threshold and the per share amount by which the
Accretion Rate was reduced shall be payable in cash by the
Company to the Holders in respect of each share owned.
(d) Miscellaneous.
(i) No fractional shares of Common Stock shall be issued
upon the conversion of any shares of Series A Preferred
Stock. If the conversion of any share or shares of Series A
Preferred Stock results in a fractional share of Common Stock
issuable, the Company shall pay a cash amount in lieu of issuing
such fractional share in an amount equal to such fractional
interest multiplied by the Closing Price on the Conversion Date
or date of the Mandatory Conversion Time, as applicable.
(ii) Except as otherwise provided for herein, a Holder
shall not be entitled to any rights of a holder of shares of
Common Stock until such Holder has converted such Holders
Series A Preferred Stock, and only to the extent the shares
of Series A Preferred Stock are deemed to have been
converted into shares of Common Stock in accordance with the
provisions of this Section 7.
(iii) Subject to the Stockholder Approval Threshold prior
to Stockholder Approval, the Company shall reserve and keep
available for issuance such number of its authorized but
unissued shares of Common Stock equal to 100% of the number of
shares of Common Stock issuable upon conversion of all
outstanding shares of Series A Preferred Stock. The Company
shall take all action permitted by law to increase the
authorized number of shares of Common Stock if at any time there
shall be insufficient authorized but unissued shares of Common
Stock to permit such reservation or to permit the conversion of
all outstanding shares of Series A Preferred Stock. The
Company covenants that all Common Stock that may be issued upon
conversion of Series A Preferred Stock shall upon issuance
be duly authorized, fully paid and non-assessable, free and
clear of all liens, claims, security interests and other
encumbrances. The Company further covenants that, if at any time
the Common Stock shall be listed on an Approved Market, the
Company will, if permitted by the rules of such Approved Market,
cause to be listed or quoted on such exchange or automated
quotation system, all Common Stock issuable upon conversion of
the Series A Preferred Stock.
(iv) If a Conversion Date or Mandatory Conversion Time is
on or after a Dividend Record Date but on or prior to the
related Dividend Payment Date, then Accrued Dividends will be
payable to Holders in the manner set forth above in
Sections 7(a)(i) and 7(b)(i) with respect to the exercise
of a Conversion Right or Mandatory Conversion, as applicable,
concurrent with delivery by the Company of the shares of Common
Stock issuable upon such conversion.
(v) The issuance or delivery of certificates for Common
Stock upon the conversion of shares of Series A Preferred
Stock pursuant to this Section 7 shall be made without
charge to the converting Holder for such certificates or for any
stamp or similar tax in respect of the issuance or delivery of
such certificates or the securities represented thereby, and
such certificates shall be issued or delivered in the respective
names of, or in such names as may be directed by, the Holders of
the shares converted, subject to applicable law.
8. Adjustment of Conversion Price.
(a) Irrespective of whether any shares of Series A
Preferred Stock are outstanding at the time in question, from
and after the Original Issue Date, the Conversion Price shall be
adjusted from time to time (without duplication) by the Company
as follows:
(i) Stock Dividends and
Distributions. If the Company pays dividends
or other distributions on the Common Stock in shares of Common
Stock, then the Conversion Price in effect
Annex I-13
immediately prior to the Ex-Date for such dividend or
distribution will be multiplied by the following fraction:
Where,
|
|
|
|
|
OS0
|
|
=
|
|
the number of shares of Common Stock outstanding immediately
prior to Ex-Date for such dividend or distribution.
|
|
|
|
|
|
OS1
|
|
=
|
|
the sum of the number of shares of Common Stock outstanding
immediately prior to the Ex-Date for such dividend or
distribution plus the total number of shares of Common Stock
constituting such dividend or distribution.
|
For the purposes of this clause (i), the number of shares of
Common Stock at the time outstanding shall not include shares
acquired by the Company. If any dividend or distribution
described in this clause (i) is declared but not so paid or
made, the Conversion Price shall be readjusted, effective as of
the date the Board of Directors publicly announces its decision
not to make such dividend or distribution, to such Conversion
Price that would be in effect if such dividend or distribution
had not been declared.
(ii) Subdivisions, Splits and Combination of the
Common Stock. If the Company subdivides,
splits or combines the shares of Common Stock, then the
Conversion Price in effect immediately prior to the effective
date of such share subdivision, split or combination will be
multiplied by the following fraction:
Where,
|
|
|
|
|
OS0
|
|
=
|
|
the number of shares of Common Stock outstanding immediately
prior to the effective date of such share subdivision, split or
combination.
|
|
|
|
|
|
OS1
|
|
=
|
|
the number of shares of Common Stock outstanding immediately
after the opening of business on the effective date of such
share subdivision, split or combination.
|
For the purposes of this clause (ii), the number of shares of
Common Stock at the time outstanding shall not include shares
acquired by the Company. If any subdivision, split or
combination described in this clause (ii) is announced but
the outstanding shares of Common Stock are not subdivided, split
or combined, the Conversion Price shall be readjusted, effective
as of the date the Board of Directors publicly announces its
decision not to subdivide, split or combine the outstanding
shares of Common Stock, to such Conversion Price that would be
in effect if such subdivision, split or combination had not been
announced.
(iii) Issuance of Stock Purchase
Rights. If the Company issues or distributes
to all or substantially all holders of the shares of Common
Stock Options (other than Options issued pursuant to a dividend
reinvestment plan or share purchase plan or other similar plans
approved by the Board of Directors) entitling them to subscribe
for or purchase the shares of Common Stock at less than the
Current Market Price on the date fixed for the determination of
Annex I-14
stockholders entitled to receive such Options, then the
Conversion Price in effect immediately prior to the Ex-Date for
such issuance or distribution will be multiplied by the
following fraction:
Where,
|
|
|
|
|
OS0
|
|
=
|
|
the number of shares of Common Stock outstanding immediately
prior to the Ex-Date for such distribution.
|
|
|
|
|
|
X
|
|
=
|
|
the total number of shares of Common Stock issuable pursuant to
such Options.
|
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|
|
|
|
Y
|
|
=
|
|
the number of shares of Common Stock equal to the aggregate
price payable to exercise such Options divided by the Current
Market Price on the date fixed for the determination of
stockholders entitled to receive such Options.
|
For the purposes of this clause (iii), the number of shares of
Common Stock at the time outstanding shall not include shares
acquired by the Company. In the event that such Options
described in this clause (iii) are not so issued, the
Conversion Price shall be readjusted, effective as of the date
the Board of Directors publicly announces its decision not to
issue or distribute such Options, to the Conversion Price that
would then be in effect if such issuance or distribution had not
been declared. To the extent that such Options are not exercised
prior to their expiration or shares of Common Stock are
otherwise not delivered pursuant to such Options upon the
exercise of such Options, the Conversion Price shall be
readjusted to such Conversion Price that would then be in effect
had the adjustment made upon the issuance or distribution of
such Options been made on the basis of the delivery of only the
number of shares of Common Stock actually delivered. In
determining the aggregate offering price payable for such shares
of Common Stock, there shall be taken into account any
consideration received for such rights or warrants and the value
of such consideration (if other than cash, to be determined by
the Board of Directors).
(iv) Debt or Asset
Distributions. If the Company distributes to
all or substantially all holders of shares of Common Stock
evidences of indebtedness, Capital Stock, securities, cash or
other assets (excluding any dividend or distribution referred to
in clause (i) above, any Options referred to in
clause (iii) above, any dividend or distribution paid
exclusively in cash, any consideration payable in connection
with a tender or exchange offer made by the Company or any of
its Subsidiaries, and any dividend of Capital Stock of or
relating to a Subsidiary or other business unit in the case of
certain spin-off transactions as described below), then the
Conversion Price in effect immediately prior to the Ex-Date for
such distribution will be multiplied by the following fraction:
Where,
|
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|
|
|
SP0
|
|
=
|
|
the Current Market Price per share of Common Stock on such date.
|
|
|
|
|
|
FMV
|
|
=
|
|
the fair market value of the portion of the distribution
applicable to one share of Common Stock on such date as
determined by the Board of Directors, provided that, if
FMV as set forth above is equal to or greater than
SP0
as set forth above, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Holder shall
receive on the date on which such distribution is made to
holders of Common Stock, for each share of Series A Preferred
Stock, the amount of such distribution such Holder would have
received had such Holder owned a number of shares of Common
Stock equal to the Conversion Price on the Ex-Date for such
distribution.
|
In a spin-off, where the Company makes a
distribution to all holders of shares of Common Stock consisting
of Capital Stock of any class or series, or similar equity
interests of, or relating to, a
Annex I-15
Subsidiary or other business unit, the Conversion Price will be
adjusted on the fifteenth Trading Day after the effective date
of the distribution by multiplying such Conversion Price in
effect immediately prior to such fifteenth Trading Day by the
following fraction:
Where,
|
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|
|
|
MP0
|
|
=
|
|
the average of the Closing Prices of the Common Stock over the
first ten Trading Days commencing on and including the fifth
Trading Day following the effective date of such distribution.
|
|
|
|
|
|
MP5
|
|
=
|
|
the average of the Closing Prices of the capital stock or equity
interests representing the portion of the distribution
applicable to one share of Common Stock over the first ten
Trading Days commencing on and including the fifth Trading Day
following the effective date of such distribution, or, if not
traded on a national or regional securities exchange or
over-the-counter market, the fair market value of the capital
stock or equity interests representing the portion of the
distribution applicable to one share of Common Stock on such
date as determined by the Board of Directors.
|
In the event that such distribution described in this
clause (iv) is not so paid or made, the Conversion Price
shall be readjusted, effective as of the date the Board of
Directors publicly announces its decision not to pay or make
such dividend or distribution, to the Conversion Price that
would then be in effect if such dividend or distribution had not
been declared.
(v) Cash Dividends or
Distributions. If the Company makes a
dividend or distribution consisting exclusively of cash to all
holders of the Common Stock, excluding (a) any cash that is
paid as a dividend or distributed in a Transaction or as part of
a spin-off referred to in clause (iv) above,
(b) any dividend or distribution in connection with
Liquidation, (c) any consideration payable in connection
with a tender or exchange offer made by the Company or any of
its Subsidiaries, and (d) a Junior Stock Event, then in
each event, the Conversion Price in effect immediately prior to
the Ex-Date for such distribution will be multiplied by the
following fraction:
Where,
|
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|
|
|
SP0
|
|
=
|
|
the Closing Price per share of Common Stock on the Trading Day
immediately preceding the Ex-Date.
|
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|
|
|
|
DIV
|
|
=
|
|
the amount per share of Common Stock of the cash dividend or
distribution, as determined pursuant to the introduction to this
paragraph (v).
|
In the event that any dividend or distribution described in this
clause (v) is not so made, the Conversion Price shall be
readjusted, effective as of the date the Board of Directors
publicly announces its decision not to pay such dividend or
distribution, to the Conversion Price which would then be in
effect if such dividend or distribution had not been declared.
Notwithstanding the foregoing, if DIV as set forth
above is equal to or greater than
SP0
as set forth above, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Holder shall have
the right to receive on the date on which the relevant cash
dividend or distribution is distributed to holders of Common
Stock, for each share of Series A Preferred Stock, the
amount of cash such Holder would have received had such Holder
owned a number of shares of Common Stock equal to the Conversion
Price on the Ex-Date for such dividend or distribution.
Annex I-16
(vi) Self Tender Offers and Exchange
Offers. If the Company or any of its
Subsidiaries successfully completes a tender or exchange offer
for the Common Stock where the cash and the value of any other
consideration included in the payment per share of the Common
Stock exceeds the Closing Price per share of the Common Stock on
the Trading Day immediately succeeding the expiration of the
tender or exchange offer, then the Conversion Price in effect at
the close of business on such immediately succeeding Trading Day
will be multiplied by the following fraction:
|
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|
|
|
|
OS0
x
SP0
AC + (SP0
x
OS1)
|
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|
Where,
|
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|
|
SP0
|
|
=
|
|
the Closing Price per share of Common Stock on the Trading Day
immediately succeeding the expiration of the tender or exchange
offer.
|
|
|
|
|
|
OS0
|
|
=
|
|
the number of shares of Common Stock outstanding immediately
prior to the expiration of the tender or exchange offer,
including any shares validly tendered and not withdrawn.
|
|
|
|
|
|
OS1
|
|
=
|
|
the number of shares of Common Stock outstanding immediately
after the expiration of the tender or exchange offer.
|
|
|
|
|
|
AC
|
|
=
|
|
the aggregate cash and fair market value of the other
consideration payable in the tender or exchange offer, as
determined by the Board of Directors.
|
In the event that the Company, or one of its Subsidiaries, is
obligated to purchase shares of Common Stock pursuant to any
such tender offer or exchange offer, but the Company, or such
Subsidiary, is permanently prevented by applicable law from
effecting any such purchases, or all such purchases are
rescinded, then the Conversion Price shall be readjusted to be
such Conversion Price that would then be in effect if such
tender offer or exchange offer had not been made.
(vii) Rights Plans. To the extent
that the Company has a rights plan in effect with respect to the
Common Stock upon conversion of any shares of the Series A
Preferred Stock, Holders will receive, in addition to the shares
of Common Stock, the rights under the rights plan, unless, prior
to the conversion date, the rights have separated from the
shares of Common Stock, in which case the Conversion Price will
be adjusted at the time of separation as if the Company had made
a distribution to all holders of the Common Stock as described
in clause (iv) above, subject to readjustment in the event
of the expiration, termination or redemption of such rights.
(viii) Issuances Below the Conversion
Price. If, at any time on or before the date
that is three years after the Original Issue Date, the Company
issues, or agrees to issue or sell, any Common Stock or
Convertible Securities for consideration per share less than the
Conversion Price, then the Conversion Price in effect
immediately prior to each such issuance will immediately be
reduced to the price determined by multiplying the Conversion
Price in effect immediately prior to such issuance by the
following fraction:
Where,
|
|
|
|
|
OS0
|
|
=
|
|
the number of shares of Common Stock outstanding immediately
prior to such issuance.
|
|
|
|
|
|
AC
|
|
=
|
|
the aggregate consideration paid or payable for such shares of
Common Stock or Convertible Securities.
|
|
|
|
|
|
SP
|
|
=
|
|
the Conversion Price.
|
|
|
|
|
|
OS1
|
|
=
|
|
the sum of the number of shares of Common Stock outstanding
immediately after such issuance.
|
Annex I-17
This adjustment shall become effective immediately after such
issuance.
(b) The Company may, in its sole discretion, make such
decreases in the Conversion Price, in addition to any other
decreases required by this Section 8, if the Board of
Directors, with the consent of at least one TMP Purchaser
Designee (as defined in the Investment Agreement) if at least
one TMP Purchaser Designee is then serving on the Board of
Directors, deems it advisable to avoid or diminish any income
tax to holders of the Common Stock resulting from any dividend
or distribution of shares of Common Stock (or issuance of rights
or warrants to acquire shares of Common Stock) or from any event
treated as such for income tax purposes or for any other reason.
(c) (i) All adjustments to the Conversion Price shall
be calculated to the nearest
1/10
of a cent. No adjustment in the Conversion Price shall be
required if such adjustment would be less than $0.01;
provided that any adjustments which by reason of this
subparagraph are not required to be made shall be carried
forward and taken into account in any subsequent adjustment;
provided further that on any Conversion Date adjustments
to the Conversion Price will be made with respect to any such
adjustment carried forward and which has not been taken into
account before such date.
(ii) The Conversion Price shall not be adjusted:
(1) upon the issuance of any shares of Common Stock
pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on the
Companys securities and the investment of additional
optional amounts in shares of Common Stock under any such plan,
provided such plan was approved by the Board of Directors;
(2) upon the issuance of any shares of Common Stock or
rights or warrants to purchase those shares pursuant to any
present or future employee, director or consultant benefit
agreement, plan or program of, or assumed by, the Company or any
of its Subsidiaries, provided such issuance was approved by the
Board of Directors;
(3) upon the issuance of any shares of Common Stock
pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security outstanding as of the
Original Issue Date and not substantially amended thereafter;
(4) upon the issuance of securities pursuant to any merger,
joint venture, partnership, share exchange, business combination
or similar transaction or any other direct or indirect
acquisition by the Company, whereby the Companys
securities comprise, in whole or in part, the consideration paid
by the Company in such transaction, provided such transaction
was approved by the Board of Directors;
(5) for a change in the par value or no par value of Common
Stock;
(6) for the payment of cash dividends pursuant to
Section 3(a);
(7) upon the issuance of shares of Series A Preferred
Stock or Series A Exchangeable Preferred Stock issued
pursuant to the terms of the Investment Agreement or Common
Stock issuable upon conversion thereof; or
(8) upon the issuance of any shares of Common Stock or
warrants to acquire only shares of Common Stock issued to banks,
equipment lessors or other lending institutions, or to real
property lessors, in each case, in connection with a debt
financing (limited to secured or unsecured debt for borrowed
money that is not pursuant to the issuance of Convertible
Securities), equipment leasing or real property leasing
transaction, provided such transaction was approved by the Board
of Directors.
(9) Whenever the Conversion Price is to be adjusted in
accordance with Section 8(a) or Section 8(b), the Company
shall: (i) compute the Conversion Price in accordance with
Section 8(a) or Section 8(b), taking into account the
$0.01 threshold set forth in Section 8(c) hereof;
(ii) as soon as practicable following the occurrence of an
event that requires an adjustment to the Conversion Price
pursuant to Section 8(a) or Section 8(b), taking into
account the $0.01
Annex I-18
threshold set forth in Section 8(c) hereof, provide, or
cause to be provided, a written notice to the Holders of the
occurrence of such event; and (iii) as soon as practicable
following the determination of the revised Conversion Price in
accordance with Section 8(a) or Section 8(b) hereof,
provide, or cause to be provided, a written notice to the
Holders setting forth in reasonable detail the method by which
the adjustment to the Conversion Price was determined and
setting forth the revised Conversion Price.
(d) If one or more events occurs requiring an adjustment to
be made to the Conversion Price during the same time period,
adjustments to the Conversion Price shall be determined by the
Board of Directors to reflect the combined impact of all
Conversion Price adjustment events, as set out in this
Section 8, during such period.
(e) Unless and until the Company receives the Stockholder
Approval, no adjustment pursuant to Section 8(a)(iii),
8a(iv), 8(a)(v), 8(a)(vi), 8(a)(vii), 8(a)(viii), 8(b) or 8(g)
shall cause the Conversion Price to be less than $2.42 (as
adjusted for stock splits, combinations, reclassifications or
similar events). In the event that at any time as a result of
any adjustment made pursuant to this Section 8 or
otherwise, it will be necessary for the Company to obtain
stockholder approval (other than the Stockholder Approval), then
the Company shall use its reasonable best efforts to obtain such
stockholder approval as promptly as practicable.
(f) In the event the Company shall propose to take any
action of the type described in Section 8(a)(iii), 8a(iv),
8(a)(v), 8(a)(vi), 8(a)(vii), 8(a)(viii), 8(b) or 8(g), the
Company shall give notice to each Holder, which notice shall
specify the Record Date, if any, with respect to any such action
and the approximate date on which such action is to take place.
Such notice shall also set forth such facts with respect thereto
as shall be reasonably necessary to indicate the effect on the
Conversion Price and the number of shares of Common Stock which
shall be deliverable upon conversion of shares of the
Series A Preferred Stock. Except as otherwise provided
herein, (x) in the case of any such action that would
require the fixing of a Record Date, such notice shall be given
at least ten days prior to the date so fixed and (y) in the
case of all other such actions, such notice shall be given at
least ten days prior to the taking of such proposed action.
(g) If any event occurs as to which, in the opinion of the
Board of Directors, the provisions of this Section 8 are
not strictly applicable or if strictly applicable would not
fairly protect the rights of the Holders in accordance with the
essential intent and principles of such provisions, then the
Board of Directors shall make an adjustment in the application
of such provisions, in accordance with such essential intent and
principles, so as to protect such rights as aforesaid, but in no
event shall any adjustment pursuant to this Section 8 have
the effect of increasing the Conversion Price as otherwise
determined pursuant to any of the provisions of this
Section 8 except in the case of a combination of shares of
a type contemplated in Section 8(a)(ii) hereof and then in
no event to an amount larger than the Conversion Price as
adjusted pursuant to Section 8(a)(ii) hereof.
(h) Anything in this Section 8 notwithstanding, no
adjustment to the Conversion Price shall reduce the Conversion
Price below the then par value per share of Common Stock, and
any such purported adjustment shall instead reduce the
Conversion Price to such par value.
(i) Notwithstanding the foregoing, no adjustment shall be
made to the Conversion Price pursuant to this Section 8 to
the extent the Holder actually participates on an as-converted
basis (without giving effect to the Stockholder Approval
Threshold) with the Common Stock pursuant to
Section 3(d)(ii), subject to notice of such participation
to the Holder, in the transaction that would otherwise trigger
the applicable adjustment pursuant to this Section 8.
(j) Notwithstanding the foregoing, no adjustment shall be
made to the Conversion Price pursuant to this Section 8
solely on account of any adjustment of the conversion price of
the Series A Exchangeable Preferred Stock in accordance
with the Series A Exchangeable Preferred Certificate of
Designation.
Annex I-19
9. Recapitalization, Reclassification and Changes in
Common Stock. Upon the occurrence of any:
(a) reclassification or change of the outstanding shares of
Common Stock (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as
a result of a subdivision or combination);
(b) merger or consolidation of the Company with or into
another Person (other than a Subsidiary) other than a merger or
consolidation in which the Company is the resulting or surviving
Person and which does not result in any reclassification or
change of outstanding Common Stock;
(c) any statutory share exchange of the Company with
another Person; or
(d) sale or other disposition of all or substantially all
of the property and assets of the Company (on a consolidated
basis) to any other Person (any of the foregoing events in
clauses (a) through (d), a Transaction);
then, without limiting the rights of the Holders in
Section 4 herein, the Series A Preferred Stock shall
be convertible after the Transaction into the kind and amount of
shares of stock or other securities or other property or assets
(including cash) that the Holders would have been entitled to
receive upon such Transaction had such Series A Preferred
Stock been converted into Common Stock immediately prior to such
Transaction after giving effect to any adjustment. The
provisions of this Section 9 shall apply to successive
Transactions. In the event that holders of the Common Stock
shall have the opportunity to elect the form of consideration to
be received in a Transaction, then the Company shall make
adequate provision whereby each Holder shall have a reasonable
opportunity to determine the form of consideration into which
all of such Holders shares of Series A Preferred
Stock, shall be convertible from and after the effective date of
such Transaction. Such determination shall be (i) subject
to any limitations to which all of the holders of Common Stock
are subject, including, but not limited to, pro rata reductions
applicable to any portion of the consideration payable in such
Transaction and (ii) conducted in such a manner as to be
completed by the date that is the earlier of (a) the
deadline for elections to be made by holders of Common Stock and
(b) five (5) Trading Days prior to the anticipated
effective date of such Transaction. The Company will not effect
(or enter into any agreement providing for) any Transaction
unless prior to the consummation thereof the successor Person
(if other than the Company) resulting from such Transaction
shall assume by written instrument mailed or delivered to the
Holders at the last address of each such Holder appearing on the
Register, the obligation pursuant to this Section 9. At
least twenty (20) days prior written notice of the
date on which the Transaction will be consummated shall be given
to the Holders.
10. Other Provisions.
(a) Shares of Series A Preferred Stock issued and
reacquired shall be prohibited from being reissued as such and
will be retired and canceled promptly after reacquisition
thereof and, upon compliance with the applicable requirements of
Delaware law, will have the status of authorized but unissued
shares of preferred stock of the Company undesignated as to
series and may with any and all other authorized but unissued
shares of preferred stock of the Company be designated or
redesignated and issued or reissued, as the case may be, as part
of any series of preferred stock of the Company, except that any
issuance or reissuance of shares of Series A Preferred
Stock must be in compliance with this Certificate.
(b) The shares of Series A Preferred Stock shall be
issuable only in whole shares.
(c) All notices referred to herein shall be in writing,
and, unless otherwise specified herein, all notices hereunder
shall be deemed to have been given upon the earlier of receipt
thereof or three Business Days after the date of mailing thereof
if sent by registered or certified mail (unless first-class mail
shall be specifically permitted for such notice under the terms
of this Certificate) with postage prepaid, addressed:
(i) if to the Company, to its office at 44 East Industrial
Road, Branford, CT 06405, Attention: Chief Executive Officer and
Chief Financial Officer, or (ii) if to any Holder, to such
Holder
Annex I-20
at the address of such Holder as listed in the Register, or
(iii) to such other address as the Company or any such
Holder, as the case may be, shall have designated by notice
similarly given. Any notice that was mailed in the manner herein
provided shall be conclusively presumed to have been duly given
whether or not the Holder receives the notice.
(d) If at any time the Company is required to make any
payment to a Holder pursuant to this Certificate, the Company
does not have sufficient funds legally available to make such
payment, the Company shall make as much of such required payment
as possible, ratably to each Holder in proportion to the number
of shares of Series A Preferred Stock held by such Holder,
and shall thereafter from time to time, as soon as it shall have
funds available therefor, make payment of as much of the
remaining amount of such required payment as it legally may
until it has made such payment in its entirety. For the
avoidance of doubt, such partial payments shall not reduce or
waive the rights of the Holders hereunder.
(e) The words hereby, herein,
hereof, hereunder and words of similar
import refer to this Certificate as a whole and not merely to
the specific section, paragraph or clause in which such word
appears. The words include, includes and
including shall be deemed to be followed by the
phrase without limitation. The definitions given for
terms in Section 2 and elsewhere in this Certificate shall
apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms.
(f) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of any certificate evidencing any Series A Preferred Stock
owned by a Holder and (in the case of loss, theft or
destruction) of an unsecured indemnity satisfactory to it, and
upon reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of such
certificate, if mutilated, the Company will make and deliver in
lieu of such certificate a new certificate of like tenor and for
the number of securities evidenced by such certificate which
remains outstanding.
(g) Any of the rights of the Holders set forth herein
(including, without limitation, any rights to notices,
adjustments or otherwise) may be waived by (i) any Holder
with respect to such Holder, provided that such waiver is in
writing and executed by such Holder, and (ii) the written
consent of the Required Holders with respect to all Holders, and
such waiver shall be binding on all Holders; provided,
however, prior to the effective date of an amendment to
this Certificate approved by the Required Holders which
amendment amends the Applicable Terms, the Company shall give
each Holder five (5) Business Days notice to permit
such Holder to convert such Holders shares of
Series A Preferred Stock pursuant to Section 7(a)
herein, subject to any limitations in this Certificate on the
number of shares of Series A Preferred Stock that may be
converted. Notwithstanding the foregoing, the Required Holders
shall not amend the foregoing proviso without the consent of
each Holder affected thereby.
Annex I-21
Exhibit B
CERTIFICATE
OF DESIGNATION
OF
SERIES A EXCHANGEABLE PREFERRED STOCK
OF
CAS MEDICAL SYSTEMS, INC.
Pursuant to
Section 151 of the General
Corporation Law of the State of Delaware
CAS Medical Systems, Inc. (the Company), a
corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware (the
DGCL), hereby certifies as follows:
FIRST: The Certificate of Incorporation (the
Certificate of Incorporation) of the Company
authorizes the issuance of up to 1,000,000 shares of
preferred stock, par value $0.001 per share (the
Authorized Preferred Stock), and further
authorizes the Board of Directors of the Company by resolution
or resolutions to provide for the issuance of Authorized
Preferred Stock in series and to establish the number of shares
to be included in each such series and to fix the designation,
powers, preferences and relative rights and qualifications,
limitations or restrictions of each such series.
SECOND: On June 8, 2011, the Board of
Directors of the Company adopted the following resolution
authorizing the creation and issuance of a series of said
Authorized Preferred Stock to be known as Series A
Exchangeable Preferred Stock:
RESOLVED: that, pursuant to authority
conferred upon the Board of Directors by the Certificate of
Incorporation of the Company, the Board of Directors hereby
authorizes and establishes a series of 54,500 shares of
Series A Exchangeable Preferred Stock, and hereby fixes the
number, designation, powers, preferences and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of such
shares as follows:
1. Designation and Amount; Ranking.
(a) There shall be created from the Authorized Preferred
Stock a series of preferred stock, designated as the
Series A Exchangeable Preferred Stock, par
value $0.001 per share (the Series A
Exchangeable Preferred Stock), and the authorized
number of shares of such series shall be 54,500, which may be
issued by the Company from time to time subject to compliance
with this Certificate, the Investment Agreement (as defined in
Annex I, attached hereto) and any other conditions to
issuance.
(b) The Series A Exchangeable Preferred Stock shall,
with respect to both dividend rights and rights upon a
Liquidation (as defined in Annex I or Annex II, as
applicable, attached hereto) or Change of Control (as defined in
Annex I or Annex II, as applicable, attached hereto),
rank (i) senior to all Junior Stock (as defined in
Annex I or Annex II, as applicable, attached hereto),
(ii) on parity with all Parity Stock (as defined in
Annex I or Annex II, as applicable, attached hereto)
and (iii) junior to all Senior Stock (as defined in
Annex I or Annex II, as applicable, attached hereto).
(c) Until the date the Stockholder Approval (as defined in
Annex I, attached hereto) is obtained, the Series A
Exchangeable Preferred Stock shall have the designations,
preferences, limitations and relative rights set forth in this
Section 1 and Annex I attached hereto. From and after
the date the Stockholder Approval is obtained, the Series A
Exchangeable Preferred Stock shall have the designations,
preferences, limitations and relative rights set forth in this
Section 1 and Annex II
B-1
attached hereto. Notwithstanding the foregoing, if the
Stockholder Approval has not been obtained on or prior to
December 31, 2011, the Series A Exchangeable Preferred
Stock shall have the designations, preferences, limitations and
relative rights set forth in this Section 1 and
Annex I attached hereto and shall never be deemed to have
the designations, preferences, limitations and relative rights
set forth on Annex II attached hereto. The Company shall
promptly provide each Holder (as defined in
Annex I) with written notice of the receipt of the
Stockholder Approval and the Company shall publicly announce the
receipt of the Stockholder Approval.
[SIGNATURE
PAGE FOLLOWS]
B-2
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation to be signed this 8th day of June, 2011.
CAS MEDICAL SYSTEMS, INC.
Name: Thomas M. Patton
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Title:
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President and Chief Executive Officer
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B-3
Annex I
ADDITIONAL
TERMS
OF
SERIES A EXCHANGEABLE PREFERRED STOCK
OF
CAS MEDICAL SYSTEMS, INC.
2. Definitions. As used herein,
the following terms shall have the following meanings:
(a) Accretion Rate has the
meaning set forth in Section 3(a).
(b) Accreted Value has the
meaning set forth in Section 3(a).
(c) Accrued Dividends means, with
respect to any share of Series A Exchangeable Preferred
Stock, as of any date, without duplication of any dividends
included within Accreted Value, the accrued and unpaid dividends
on such share through and including such date (whether or not
declared).
(d) Acquiring Person shall mean
any Person or group (within the meaning of Section 13(d)(3)
of the Exchange Act) (other than any Person who is a member of
the TMP Investor Group).
(e) A/D Rate means the Accretion
Rate or the Dividend Rate, as applicable, at the time of the
Special Triggering Event.
(f) Affiliate shall mean any
Person, directly or indirectly, controlling, controlled by or
under common control with such Person.
(g) Applicable Issuance Date
means the date of the issuance of the applicable shares of
Series A Exchangeable Preferred Stock (which may be issued
from time to time on one or more days).
(h) Approved Markets shall mean
the NASDAQ Global Select Market, the NASDAQ Global Market, the
NASDAQ Capital Market, NYSE Amex or the NYSE.
(i) Authorized Preferred Stock
has the meaning set forth in the recitals.
(j) Board of Directors means the
Board of Directors of the Company or, with respect to any action
to be taken by the Board of Directors, any committee of the
Board of Directors duly authorized to take such action.
(k) Business Day means any day
except Saturday, Sunday and any day which shall be a legal
holiday or a day on which banking institutions in the State of
New York generally are authorized or required by law or other
governmental actions to close.
(l) Capital Stock of any Person
means any and all securities (including equity-linked
securities), interests (including partnership interests), rights
to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of
such Person, including any Preference Stock.
(m) Certificate means this
Certificate of Designation with respect to the Series A
Exchangeable Preferred Stock, as amended from time to time.
(n) Certificate of Incorporation
has the meaning set forth in the recitals.
(o) Change of Control means the
consummation of any transaction or series of related
transactions (i) involving any purchase or acquisition
(whether by way of merger, share exchange,
Annex I-1
consolidation, business combination or similar transaction or
otherwise) by any Acquiring Person, of any of securities
representing a majority of the outstanding voting power of the
Company entitled to elect the Board of Directors,
(ii) involving any sale, lease, exchange, transfer,
exclusive license or disposition of all or substantially all of
the assets of the Company and its Subsidiaries, taken together
as a whole, to an Acquiring Person, (iii) involving any
merger, consolidation or business combination in which the
holders of voting securities of the Company immediately prior to
the transaction, as a group, do not hold securities representing
a majority of the outstanding voting power entitled to elect the
board of directors of the surviving entity in such merger,
consolidation or business combination, or (iv) following
which a majority of the members of the Board of Directors do not
constitute Continuing Directors; provided that in each case such
transaction or transactions are approved by the Board of
Directors.
(p) Closing Price shall mean,
with respect to the Common Stock (or other relevant Capital
Stock) on any date of determination, the most recent
consolidated closing bid price or, if no such closing bid price
is reported, the last reported bid price of the shares of the
Common Stock (or other relevant Capital Stock) on the relevant
Approved Market on such date. If the Common Stock (or other
relevant Capital Stock) is not traded on an Approved Market on
any date of determination, the Closing Price of the Common Stock
(or other relevant Capital Stock) on such date of determination
means the closing bid price as reported in the composite
transactions for the principal U.S. national or regional
securities exchange on which the Common Stock (or other relevant
Capital Stock) is so listed or quoted, or, if no closing bid
price is reported, the last reported bid price on the principal
U.S. national or regional securities exchange on which the
Common Stock (or other relevant Capital Stock) is so listed or
quoted, or if the Common Stock (or other relevant Capital Stock)
is not so listed or quoted on a U.S. national or regional
securities exchange, the last quoted bid price for the Common
Stock (or other relevant Capital Stock) in the
over-the-counter
market as reported by Pink Sheets LLC or similar organization,
or, if that bid price is not available, the market price of the
Common Stock (or other relevant Capital Stock) on that date as
determined in good faith by the Board of Directors.
(q) Common Stock means the common
stock, par value $0.004 per share, of the Company, or any other
class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or as a
result of a subdivision, combination or merger,
reclassification, consolidation or similar transaction in which
the Company is a constituent corporation.
(r) Company has the meaning set
forth in the recitals.
(s) Continuing Director means
(a) any member of the Board of Directors who was a director
of the Company on the Original Issue Date, and (b) any
individual who becomes a member of the Board of Directors after
the Original Issue Date if such individual was appointed or
nominated for election to the Board of Directors by a majority
of the Continuing Directors, but excluding any such individual
originally proposed for election in opposition to the Board of
Directors in office on the Original Issue Date in an actual or
threatened election contest relating to the election of the
directors (or comparable managers) of the Company and whose
initial assumption of office resulted from such contest or the
settlement thereof.
(t) Convertible Securities means
debt securities or shares of Capital Stock, in each case
convertible into or exchangeable, directly or indirectly, for
Common Stock.
(u) DGCL has the meaning set
forth in the recitals.
(v) Dividend Deferral Election
has the meaning set forth in Section 3(a).
(w) Dividend Equivalent Amount
has the meaning set forth in Section 3(d).
(x) Dividend Payment Date means
March 31, June 30, September 30 and December 31 of
each year.
Annex I-2
(y) Dividend Rate has the meaning
set forth in Section 3(a).
(z) Dividend Record Date means,
with respect to any dividend payable on a Dividend Payment Date,
the preceding March 15, June 15, September 15 and
December 15 and, with respect to any dividend payable on any
other date, such date as may be determined by the Board of
Directors.
(aa) Electing Holders has the
meaning set forth in Section 6(a).
(bb) Electing Holders
Redemption Notice has the meaning set forth
in Section 6(d).
(cc) Exchange Act means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
(dd) GAAP means United States
generally accepted accounting principles.
(ee) Holder means a holder of
record of outstanding shares of the Series A Exchangeable
Preferred Stock.
(ff) Indebtedness means, without
duplication, (A) all indebtedness for borrowed money,
(B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services, including,
without limitation, capital leases in accordance
with GAAP (other than trade payables entered into in the
ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) all obligations
evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with
the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or
other title retention agreement, or incurred as financing, in
either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event
of default are limited to repossession or sale of such
property), (F) all monetary obligations under any leasing
or similar arrangement which, in connection with GAAP,
consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness
referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any lien upon
or in any property or assets (including accounts and contract
rights) owned by any Person, even though the Person which owns
such assets or property has not assumed or become liable for the
payment of such indebtedness, and (H) all Contingent
Obligations in respect of indebtedness or obligations of others
of the kinds referred to in clauses (A) through
(G) above. For the purposes of this definition,
Contingent Obligation mean, as to any Person,
any direct or indirect liability, contingent or otherwise, of
that Person with respect to any indebtedness, lease, dividend or
other obligation of another Person if the primary purpose or
intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such
liability that such liability will be paid or discharged, or
that any agreements relating thereto will be complied with, or
that the holders of such liability will be protected (in whole
or in part) against loss with respect thereto.
(gg) Investment Agreement means
that certain Investment Agreement, dated June 8, 2011, by
and among the Company and the purchasers named therein, as the
same may be amended from time to time.
(hh) Junior Stock means all
classes of Common Stock and each other class of Capital Stock or
series of preferred stock established after the Original Issue
Date by the Board of Directors, the terms of which do not
expressly provide that such class or series ranks senior to or
on parity with the Series A Exchangeable Preferred Stock as
to dividend rights
and/or
rights upon a Liquidation or Change of Control.
(ii) Junior Stock Event has the
meaning set forth in Section 3(d).
Annex I-3
(jj) Liquidation means the
voluntary or involuntary liquidation, dissolution or
winding-up
of the Company other than a Change of Control.
(kk) Liquidation Event has the
meaning set forth in Section 4(a).
(ll) Liquidation Preference has
the meaning set forth in Section 4(a).
(mm) NYSE means the New York
Stock Exchange, Inc.
(nn) Option means rights, options
or warrants to subscribe for, purchase or otherwise acquire
Common Stock or Convertible Securities.
(oo) Original Issue Date means
June 9, 2011.
(pp) Parity Stock means the
Series A Preferred Stock and any class of Capital Stock or
series of preferred stock established after the Original Issue
Date by the Board of Directors, the terms of which expressly
provide that such class or series will rank on parity with the
Series A Exchangeable Preferred Stock as to dividend rights
and/or
rights upon a Liquidation or Change of Control.
(qq) Person means any individual,
corporation, general partnership, limited partnership, limited
liability partnership, joint venture, association, joint-stock
company, trust, limited liability company, unincorporated
organization, other entity or government or any agency or
political subdivision thereof.
(rr) Preference Stock means, as
applied to the Capital Stock of any Person, Capital Stock of any
series, class or classes (however designated) which is preferred
as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person or change of control
(defined by analogy to the definition of Change of Control
herein) of such Person, over shares of Capital Stock of any
other series or class of such Person.
(ss) Record Date means the
applicable record date as determined in accordance with
Section 213 of the DGCL.
(tt) Redemption has the meaning
set forth in Section 6(a).
(uu) Redemption Date has the
meaning set forth in Section 6(d).
(vv) Redemption Notice has
the meaning set forth in Section 6(d).
(ww) Redemption Price has
the meaning set forth in Section 6(a).
(xx) Register has the meaning set
forth in Section 3(a).
(yy) Registration Rights
Agreement means that certain Registration Rights
Agreement, dated June 9, 2011, between the Company and the
signatories thereto, as the same may be amended from time to
time.
(zz) Required Holders means as of
any date the Holders of more than 50% of the then-outstanding
shares of Series A Exchangeable Preferred Stock, voting
together as a single class.
(aaa) Senior Stock means each
class of Capital Stock or series of preferred stock established
after the Original Issue Date by the Board of Directors, the
terms of which expressly provide that such class or series will
rank senior to the Series A Exchangeable Preferred Stock as
to dividend rights
and/or
rights upon a Liquidation or Change of Control.
(bbb) Series A Exchangeable Preferred
Stock has the meaning set forth in
Section 1(a).
(ccc) Series A Preferred
Stock means the Series A Preferred Stock, par
value $0.001 per share, of the Company.
Annex I-4
(ddd) Series A Preferred Certificate of
Designation means the Certificate of Designation
for the Series A Preferred Stock.
(eee) Special Triggering Event
means any of the following events:
(i) the failure of the Company to pay when due any amounts
owed on the shares of Series A Exchangeable Preferred Stock to
the Holders;
(ii) a material violation by the Company of any covenant or
agreement set forth in the Investment Agreement, where the
Company does not cure such violation within thirty
(30) days after the receipt of written notice of such
breach from one or more of the Holders party to the Investment
Agreement who are actually adversely affected by such breach;
(iii) a material violation by the Company of any term of or
condition set forth in this Certificate, where the Company does
not cure such violation within thirty (30) days after the
receipt of written notice of such breach from one or more of the
Holders who are actually adversely affected by such breach;
(iv) a material and willful violation by the Company of any
term of or condition set forth in the Registration Rights
Agreement, where the Company does not cure such violation within
thirty (30) days after the receipt of written notice of
such breach from one or more of the Holders party to the
Registration Rights Agreement who are actually adversely
affected by such breach; or
(v) the failure of any of the TMP Purchaser Designees (as
defined in the Investment Agreement) to be elected or appointed
to the Board of Directors in accordance with the terms set forth
in the Investment Agreement.
(fff) Stated Value means $100.00
per share of Series A Exchangeable Preferred Stock.
(ggg) Stockholder Approval means
the affirmative vote of holders of a majority of the votes cast
with respect to the matter, either at a meeting of stockholders
of the Company validly called and at which a quorum is present
or by written consent, approving the Stockholder Proposal (as
defined in the Investment Agreement) in accordance with the
relevant provisions of the DGCL.
(hhh) Subsidiary means a
partnership, joint-stock company, corporation, limited liability
company, trust, unincorporated organization or other entity of
which a Person owns, directly or indirectly, more than 50% of
the stock or other interests the holder of which is generally
entitled to vote for the election of the board of directors or
other governing body of such entity.
(iii) Trading Day means a day
during which the trading of securities generally occurs on the
Approved Market on which the Common Stock is then listed or, if
the Common Stock is not listed on an Approved Market, the NYSE.
(jjj) Transaction has the meaning
set forth in Section 9(d).
(kkk) Transfer Agent means, the
Company or any duly appointed transfer agent, registrar and
dividend disbursing agent for the Series A Exchangeable
Preferred Stock as may be appointed by the Company from time to
time.
(lll) TMP Investor Group means
Thomas, McNerney & Partners II, L.P., TMP
Nominee II LLC and TMP Associates II, L.P. and any of their
respective Affiliates other than any of their Affiliates that is
a portfolio company (as such term is customarily
used among private equity investors).
3. Accretion; Dividends.
(a) From and after the Applicable Issuance Date, the Stated
Value of each share of Series A Exchangeable Preferred
Stock shall accrete at an annual rate of ten percent (10%) (the
Accretion
Annex I-5
Rate), compounded quarterly, beginning on the
three-month period ending June 30, 2011, and for the
three-month period ending December 31, 2011 and each
subsequent three-month period thereafter shall automatically
increase by two percent (2.0%) up to a maximum Accretion Rate of
twenty percent (20%), compounded quarterly (the Stated Value as
it has accreted as of any date, the Accreted
Value, subject to appropriate adjustment in the event
of any stock dividend, stock split, stock distribution or
combination, consolidation, subdivision, reclassification or
other corporate actions having the similar effect with respect
to the Series A Exchangeable Preferred Stock);
provided, however, if (i) at any time from
and after the Original Issue Date until and including the third
anniversary of the Original Issue Date, the Company receives a
written consent from the Required Holders (which consent must be
irrevocable and delivered (x) prior to June 15, 2011
with respect to the quarters ending June 30, 2011 through
June 30, 2012, (y) prior to June 15, 2012 with
respect to the four quarters ending September 30, 2012
through June 30, 2013 and (z) prior to June 15,
2013 with respect to the four quarters ending September 30,
2013 through June 30, 2014) electing cash dividends
for any specified period prior to the third anniversary of the
Original Issue Date, or (ii) at any time from and after the
third anniversary of the Original Issue Date, the Company
delivers a written notice to the Holders electing cash dividends
for any specified period (provided the Company has funds legally
available to pay such cash dividend), the Holders shall be
entitled to receive on each Dividend Payment Date, in lieu of
the accretion described above for the three-month period ending
on such Dividend Payment Date, cash dividends on each share of
Series A Exchangeable Preferred Stock, at a rate per annum
equal to the then current Accretion Rate of the Accreted Value
as of the Dividend Payment Date (the Dividend
Rate) and the Board of Directors shall declare such
cash dividends out of funds legally available for that purpose;
provided, however, with respect to clause (i), to
the extent the Company does not have funds legally available to
pay such cash dividend or with the prior approval of the
Required Holders, the Company may elect not to pay a cash
dividend due on any Dividend Payment Date (a Dividend
Deferral Election) and if such an election is made,
the cash dividend that would have been payable on such Dividend
Payment Date shall continue to accrue, and shall compound
quarterly at the Dividend Rate until the accrued value of such
dividend is paid, whether or not in any fiscal year there shall
be net profits or surplus legally available for the payment of
dividends in such fiscal year, so that if in any fiscal year or
years, dividends in whole or in part are not paid upon the
Series A Exchangeable Preferred Stock, unpaid dividends
shall accumulate and accrue at the Dividend Rate, compounded
quarterly. Unless there is a Dividend Deferral Election, any
dividends due shall be payable quarterly in arrears on each
Dividend Payment Date; provided, that if any such payment
date is not a Business Day then such dividend shall be payable
on the next Business Day. Each dividend shall be payable to the
Holders as they appear on the securities register maintained in
respect of the Series A Exchangeable Preferred Stock by the
Company (the Register) at the close of
business on the corresponding Dividend Record Date;
provided, however, if there is a Dividend Deferral
Election, the dividend that would have otherwise been payable on
the Dividend Record Date applicable to the Dividend Deferral
Election shall be payable to the Holders as they appear on the
Register at the time such dividend is paid. Subject to the
foregoing and the availability of lawful funds, the Board of
Directors may declare any dividends subject to a Dividend
Deferral Election at any time and the payment date of such funds
shall be as determined by the Board of Directors. All dividends
paid with respect to shares of Series A Exchangeable
Preferred Stock shall be paid pro rata to the Holders entitled
thereto. The amount of dividends payable for any other period
shorter or longer than a full dividend period, shall be computed
on the basis of twelve
30-day
months and a
360-day
year. Dividend payments shall be aggregated per Holder and shall
be made to the nearest cent (with $.005 being rounded upward).
(b) Upon a Special Triggering Event, the then applicable
A/D Rate shall automatically be increased by an additional five
percent (5%) per annum, compounded quarterly, from and including
the date on which any such Special Triggering Event shall occur
through but excluding the date on which the Special Triggering
Event shall have been cured or waived in writing by the Required
Holders.
Annex I-6
(c) No dividend will be declared or paid upon, or any sum
set apart for the payment of dividends upon, any outstanding
share of the Series A Exchangeable Preferred Stock or
Parity Stock with respect to any dividend period unless all
dividends due for all preceding dividend periods have been
declared and paid, or declared and, if such dividends are to be
paid in cash, a sum of cash sufficient for the payment thereof
is set apart for the payment of such dividend, upon all
outstanding shares of Series A Exchangeable Preferred Stock
and Parity Stock. Notwithstanding the foregoing, if full
cumulative dividends have not been paid on the Series A
Exchangeable Preferred Stock and all Parity Stock, all dividends
declared and paid on the Series A Exchangeable Preferred
Stock and such Parity Stock shall be declared and paid pro rata
so that the amounts of dividends declared and paid per share on
the Series A Exchangeable Preferred Stock and such Parity
Stock will in all cases bear to each other the same ratio that
accumulated and unpaid dividends per share on the shares of
Series A Exchangeable Preferred Stock and such Parity Stock
bear to each other.
(d) No dividends or other distributions (other than cash
paid in lieu of fractional shares or dividends on Common Stock
payable in Common Stock) may be declared, made or paid, or set
apart for payment upon, any Junior Stock, nor may any Junior
Stock be redeemed, purchased or otherwise acquired for any
consideration (or any money paid to or made available for a
sinking fund for the redemption of any Junior Stock) by or on
behalf of the Company or any of its Subsidiaries, unless
(i) all Accrued Dividends shall have been or
contemporaneously are declared and paid in cash, or are declared
and a sum of cash sufficient for the payment thereof is set
apart for such payment or are added to Accreted Value at the
request of the Holders, on the Series A Exchangeable
Preferred Stock and all Parity Stock for all dividend periods
terminating on or prior to the Record Date of such declaration,
payment, redemption, purchase or acquisition, (ii) the
Holders receive an equivalent dividend or distribution of the
amount of such dividend or distribution that would be payable to
such Holders if such shares of Series A Exchangeable
Preferred Stock had been converted into Common Stock (in
accordance with Annex II hereof, assuming Annex II had
been in effect as of the Original Issue Date) immediately prior
to the Record Date for such dividend or distribution (such
amount per share of Series A Exchangeable Preferred Stock,
the Dividend Equivalent Amount) and
(iii) the Company obtains the consent required pursuant to
Section 5(b) herein (such declaration or distribution made
in accordance with clauses (i) through (iii)), a
Junior Stock Event). The restrictions set
forth in this Section 3(d) shall not apply to the purchase
or other acquisition of Junior Stock (A) pursuant to any
bona fide employee or director incentive or benefit plan or
arrangement of the Company or any Subsidiary heretofore or
hereafter adopted by the Board of Directors or the cashless
exercise of Options or (B) which purchase or acquisition
has received the prior written consent of the Required Holders.
4. Liquidation; Change of Control.
(a) In the event of any Liquidation (a Liquidation
Event), the Holders shall be entitled to be paid out
of the assets and funds of the Company available for
distribution to its stockholders an amount in cash per each
share of Series A Exchangeable Preferred Stock equal to the
greater of (A) 100% of the Accreted Value for each share of
Series A Exchangeable Preferred Stock outstanding on the
date of such Liquidation Event, plus an amount equal to all
Accrued Dividends thereon to the date of the Liquidation Event
or (B) the amount to which such Holders would be entitled
to receive had such Holders, immediately prior to the
Liquidation Event, converted such shares of Series A
Exchangeable Preferred Stock (in accordance with Annex II
hereof, assuming Annex II had been in effect as of the
Original Issue Date) into shares of Common Stock (determined in
accordance with Section 7(a)(i) of Annex II), in
either case before any payment shall be made or any assets
distributed to the holders of any of the Junior Stock (such
greater cash amount being referred to as the
Liquidation Preference). Without limiting any
rights and remedies of the Holders, if upon any such Liquidation
Event, the remaining assets and funds of the Company available
for distribution to its stockholders after payment in full of
amounts required to be paid or distributed to holders of Senior
Stock are not sufficient to pay in full the liquidation payments
payable to the Holders and holders of outstanding shares of any
Parity Stock, then the holders of all such shares of Parity
Stock shall share
Annex I-7
ratably in such distribution of the remaining assets and funds
of the Company in accordance with the amount which would
otherwise be payable on such distribution if the amounts to
which the Holders and the holders of outstanding shares of such
Parity Stock are entitled were paid in full.
(b) Unless waived in writing by the Required Holders, in
the event of a Change of Control, each Holder shall have the
right, at such Holders election, to either
(i) receive the amount to which such Holder would be
entitled to receive upon conversion of such shares of
Series A Exchangeable Preferred Stock into Common Stock (in
accordance with Annex II hereof, assuming Annex II had been
in effect as of the Original Issue Date) or (ii) within
sixty (60) days of such Change of Control, or later if the
Holders did not receive notice of such Change of Control,
require the Company to redeem (subject to the availability of
lawful funds), in whole or in part, each share of Series A
Exchangeable Preferred Stock held by such Holder for an amount
in cash equal to the Liquidation Preference. Unless waived in
writing by the Required Holders, the Corporation shall not have
the power to effect a Change of Control unless the agreement for
such transaction provides that the consideration payable to the
stockholders of the Corporation in such transaction shall be
allocated among the holders of capital stock of the Corporation
in accordance with this Section 4(b). In connection with a
redemption permitted above, each Holder shall surrender his, her
or its certificate or certificates representing such redeemed
shares to the Company, in the manner and at the place designated
in written notice mailed by the Company, postage prepaid, to
each Holder, at his, her or its post office address last shown
on the Register (which notice shall be given at least ten
(10) days prior to such Change of Control or such shorter
period as may be agreed in writing by the Required Holders), and
thereupon the Liquidation Preference of such shares shall be
payable to the order of the Person whose name appears on such
certificate or certificates as the owner thereof and each
surrendered certificate shall be canceled. From and after the
date of redemption, unless there shall have been a default in
payment of the Liquidation Preference, all rights of the Holder
whose shares have been redeemed (except the right to receive the
Liquidation Preference) shall cease with respect to such shares,
and such shares shall not thereafter be transferred on the books
of the Company or be deemed to be outstanding for any purpose
whatsoever.
(c) Without limiting any other rights and remedies of the
Holders, if upon any such Change of Control, the remaining
assets and funds of the Company available for distribution to
its stockholders after payment in full of amounts required to be
paid or distributed to holders of Senior Stock are not
sufficient to pay in full amounts payable to the Holders and
holders of outstanding shares of any Parity Stock, then the
holders of all such shares shall share ratably in such
distribution of the remaining assets and funds of the Company in
accordance with the amount which would otherwise be payable on
such distribution if the amounts to which the Holders and the
holders of outstanding shares of such Parity Stock are entitled
were paid in full.
(d) Unless waived in writing by the Required Holders,
written notice of any Liquidation Event or Change of Control,
stating a payment date and the place where the distributable
amounts shall be payable, shall be given no less than ten
(10) days prior to the payment date stated therein, to the
Holders at their respective addresses as the same shall appear
on the Register.
(e) The amount deemed paid or distributed to the holders of
Common Stock upon any Liquidation or Change of Control shall be
the cash or the value of the property, rights or securities paid
or distributed to such holders by the Company or the acquiring
Person. The value of such property, rights or securities shall
be determined in good faith by the Board of Directors.
5. Voting Rights.
Other than any voting rights provided by law, the Holders shall
not be entitled to any voting rights, provided that:
(a) To the extent the Holders are entitled to vote under
applicable law, each share of Series A Exchangeable
Preferred Stock shall entitle the Holder thereof to vote
together with the other Holders as a single class on all matters
submitted for the approval of the holders of Series A
Exchange Preferred Stock.
Annex I-8
(b) If at any time following the Original Issue Date at
least fifty percent (50%) of the aggregate number of shares of
Series A Exchangeable Preferred Stock issued on and after
the Original Issue Date are outstanding, in addition to any
other vote or consent of the stockholders required by law or by
the Certificate of Incorporation, including any Certificate of
Designation, bylaws of the Company or this Certificate, the
Company shall not, and shall not permit its Subsidiaries to (in
each case, whether by merger, consolidation, reorganization,
operation of law or otherwise), without the prior written
consent of the Required Holders:
(i) amend, alter, waive or repeal any provision of its
Certificate of Incorporation, including any certificate of
designation, or bylaws or this Certificate in any manner that
would adversely affect the rights, powers, preferences or
privileges (economic or otherwise) of the Series A
Exchangeable Preferred Stock or Series A Preferred Stock,
increase the authorized number of shares of the Series A
Exchangeable Preferred Stock or Series A Preferred Stock,
or split, reverse split, subdivide, reclassify, combine or take
other corporate actions having a similar effect with respect to
the Series A Exchangeable Preferred Stock or Series A
Preferred Stock;
(ii) except as required pursuant to the terms of the
Investment Agreement or the Series A Certificate of Designation,
issue any shares of Series A Exchangeable Preferred Stock
or Series A Preferred Stock;
(iii) offer, sell or issue any equity or equity-linked
securities constituting Senior Stock or Parity Stock;
(iv) increase or decrease the size of the Board of
Directors;
(v) incur Indebtedness (other than Indebtedness that, when
aggregated with all other Indebtedness incurred since the
Original Issue Date and then outstanding, is less than
$4,000,000 when so aggregated);
(vi) redeem, repurchase or otherwise acquire or offer to
redeem, repurchase, or otherwise acquire any equity or
equity-linked securities constituting Junior Stock or Parity
Stock other than the purchase or other acquisition of Junior
Stock pursuant to any bona fide employee or director incentive
or benefit plan or arrangement of the Company or any Subsidiary
heretofore or hereafter adopted by the Board of Directors or the
cashless exercise of Options;
(vii) distribute (by means of a dividend or otherwise)
assets (including property or cash) to its stockholders (other
than shares of Common Stock or cash as required to pay dividends
on the Series A Exchangeable Preferred Stock pursuant to
Section 3 or on the Series A Preferred Stock pursuant
to the Series A Preferred Stock Certificate of Designation
(excluding dividends payable pursuant to Section 3(d)(ii)
which shall require consent pursuant to this
Section 5(b)(vii)));
(viii) enter into any transaction with any of its officers,
directors or Affiliates (or any directors, managers, officers or
employees of any such Affiliate), other than (x) employment
arrangements entered into in the ordinary course of business
consistent with past practices providing for annual base
compensation and benefits not exceeding $200,000 in the
aggregate, unless unanimously approved by the Compensation
Committee of the Board of Directors and (y) grants pursuant
to equity incentive plans approved by the Companys
stockholders;
(ix) adopt or amend any stockholder rights plan, poison
pill or similar anti-takeover device;
(x) sell, lease, license or otherwise dispose of any assets
outside the ordinary course of business consistent with past
practices, except for assets with a purchase price, in the
aggregate, of less than $500,000;
Annex I-9
(xi) enter into any contract, agreement or other
arrangement that would preclude the Company from making payment
in full in cash on each Dividend Payment Date of the dividends
contemplated in Section 3 above; or
(xii) authorize, commit or agree (in writing or otherwise)
to do anything contained in this clause (b).
(c) Any action to be taken at any annual or special meeting
of stockholders by the Holders may be taken without a meeting,
without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be
signed by the Holder or Holders having no less than the minimum
number of votes that would be required to take such action at a
meeting at which all of the shares of Series A Exchangeable
Preferred Stock were present and voted. Prompt written notice of
the taking of any action by the Holders by less than unanimous
written consent shall be given as may be required under
applicable law.
6. Redemption Rights.
(a) In the event the Series A Exchangeable Preferred
Stock remains outstanding on the date which is the five year
anniversary of the Original Issue Date, the Required Holders
(being referred to herein as the Electing
Holders) shall have the right, but not the obligation,
to require the Company to redeem (a
Redemption), from time to time, all or any
part of the outstanding shares of Series A Exchangeable
Preferred Stock for a per share amount in cash equal to the sum
of (i) the greater of (x) the Accreted Value for each
share of Series A Exchangeable Preferred Stock outstanding
on the date of such Redemption and (y) the fair market
value of each such share, as determined by the disinterested
members of the Board of Directors acting in good faith plus
(ii) an amount equal to any unpaid Accrued Dividends
thereon (the Redemption Price).
(b) If the Company is unable to redeem any shares of
Series A Exchangeable Preferred Stock then to be redeemed
because such Redemption would violate the applicable laws of the
State of Delaware, then the Company shall redeem those shares of
Series A Exchangeable Preferred Stock that it is entitled
to redeem pursuant to the laws of the State of Delaware and
shall redeem such other shares then subject to Redemption as
soon thereafter as redemption would not violate such laws.
(c) In the event of any Redemption of only a part of the
then outstanding Series A Exchangeable Preferred Stock then
entitled to be redeemed, the Company shall effect such
redemption pro rata among the Holders in proportion to the
respective amounts which would otherwise be payable in respect
to the shares of Series A Exchangeable Preferred Stock held
by them upon the date of such Redemption, if all amounts payable
on or with respect to said shares were paid in full.
(d) In the case of an election by the Electing Holders to
be redeemed pursuant to Section 6(a) above, the Electing
Holders shall give the Company written notice of such election
at least ninety (90) days prior to the Redemption Date on
which the Electing Holders desire to have shares of
Series A Exchangeable Preferred Stock so Redeemed (the
Electing Holders Redemption Notice). Not
more than ten (10) days after the receipt of the Electing
Holders Redemption Notice, written notice shall be mailed,
postage prepaid, to each Holder who has not given an Electing
Holders Redemption Notice, at his, her or its post office
address last shown on the Register, notifying such Holder of the
number of shares to be so redeemed, specifying the
Redemption Date and calling upon such Holder to surrender
to the Company, in the manner and at the place designated, his,
her or its certificate or certificates representing the
Series A Exchangeable Preferred Stock to be redeemed (such
notice hereinafter referred to as the
Redemption Notice). On or prior to each
Redemption Date, each Holder shall surrender his, her or
its certificate or certificates representing such redeemed
shares to the Company, in the manner and at the place designated
in the Redemption Notice, and thereupon the
Redemption Price of such shares shall be payable to the
order of the Person whose name appears on such certificate or
certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the
shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
From
Annex I-10
and after the Redemption Date, unless there shall have been
a default in payment of the Redemption Price, all rights of
the Holders designated for Redemption in the
Redemption Notice (except the right to receive the
Redemption Price upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the
Company or be deemed to be outstanding for any purpose
whatsoever.
(e) Except in connection with a Redemption effected
pursuant to this Section 6, the Company shall have no right
to require the redemption of the shares of Series A
Exchangeable Preferred Stock. Nothing herein contained shall
prevent or restrict the purchase by the Company, from time to
time either at public or private sale, of the whole or any part
of the outstanding shares of Series A Exchangeable
Preferred Stock at such price or prices as the Company and a
Holder may determine, subject to the provisions of applicable
law and obtaining any required consents, including the prior
written consent of the Required Holders pursuant to
Section 5(b) above.
7. [Intentionally Omitted]
8. [Intentionally Omitted]
9. Recapitalization, Reclassification and Changes in
Common Stock. Upon the occurrence of any:
(a) reclassification or change of the outstanding shares of
Common Stock (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as
a result of a subdivision or combination);
(b) merger or consolidation of the Company with or into
another Person (other than a Subsidiary) other than a merger or
consolidation in which the Company is the resulting or surviving
Person and which does not result in any reclassification or
change of outstanding Common Stock;
(c) any statutory share exchange of the Company with
another Person; or
(d) sale or other disposition of all or substantially all
of the property and assets of the Company (on a consolidated
basis) to any other Person (any of the foregoing events in
clauses (a) through (d), a Transaction);
then, without limiting the rights of the Holders in
Section 4 herein, the Series A Exchangeable Preferred
Stock shall be convertible after the Transaction into the kind
and amount of shares of stock or other securities or other
property or assets (including cash) that the Holders would have
been entitled to receive upon such Transaction had such
Series A Exchangeable Preferred Stock been converted into
Common Stock immediately prior to such Transaction (in
accordance with Annex II, assuming Annex II had been
in effect since the Original Issue Date) after giving effect to
any adjustment. The provisions of this Section 9 shall
apply to successive Transactions. In the event that holders of
the Common Stock shall have the opportunity to elect the form of
consideration to be received in a Transaction, then the Company
shall make adequate provision whereby each Holder shall have a
reasonable opportunity to determine the form of consideration
into which all of such Holders shares of Series A
Exchangeable Preferred Stock, shall be convertible from and
after the effective date of such Transaction. Such determination
shall be (i) subject to any limitations to which all of the
holders of Common Stock are subject, including, but not limited
to, pro rata reductions applicable to any portion of the
consideration payable in such Transaction and
(ii) conducted in such a manner as to be completed by the
date that is the earlier of (a) the deadline for elections
to be made by holders of Common Stock and (b) five
(5) Trading Days prior to the anticipated effective date of
such Transaction. The Company will not effect (or enter into any
agreement providing for) any Transaction unless prior to the
consummation thereof the successor Person (if other than the
Company) resulting from such Transaction shall assume by written
instrument mailed or delivered to the Holders at the last
address of each such Holder appearing on the Register, the
obligation pursuant to this Section 9. At least twenty
(20) days prior written notice of the date on which
the Transaction will be consummated shall be given to the
Holders.
Annex I-11
10. Other Provisions.
(a) Shares of Series A Exchangeable Preferred Stock
issued and reacquired shall be prohibited from being reissued as
such and will be retired and canceled promptly after
reacquisition thereof and, upon compliance with the applicable
requirements of Delaware law, will have the status of authorized
but unissued shares of preferred stock of the Company
undesignated as to series and may with any and all other
authorized but unissued shares of preferred stock of the Company
be designated or redesignated and issued or reissued, as the
case may be, as part of any series of preferred stock of the
Company, except that any issuance or reissuance of shares of
Series A Exchangeable Preferred Stock must be in compliance
with this Certificate.
(b) The shares of Series A Exchangeable Preferred
Stock shall be issuable only in whole shares.
(c) All notices referred to herein shall be in writing,
and, unless otherwise specified herein, all notices hereunder
shall be deemed to have been given upon the earlier of receipt
thereof or three Business Days after the date of mailing thereof
if sent by registered or certified mail (unless first-class mail
shall be specifically permitted for such notice under the terms
of this Certificate) with postage prepaid, addressed:
(i) if to the Company, to its office at 44 East Industrial
Road, Branford, CT 06405, Attention: Chief Executive Officer and
Chief Financial Officer, or (ii) if to any Holder, to such
Holder at the address of such Holder as listed in the Register,
or (iii) to such other address as the Company or any such
Holder, as the case may be, shall have designated by notice
similarly given. Any notice that was mailed in the manner herein
provided shall be conclusively presumed to have been duly given
whether or not the Holder receives the notice.
(d) If at any time the Company is required to make any
payment to a Holder pursuant to this Certificate, the Company
does not have sufficient funds legally available to make such
payment, the Company shall make as much of such required payment
as possible, ratably to each Holder in proportion to the number
of shares of Series A Exchangeable Preferred Stock held by
such Holder, and shall thereafter from time to time, as soon as
it shall have funds available therefor, make payment of as much
of the remaining amount of such required payment as it legally
may until it has made such payment in its entirety. For the
avoidance of doubt, such partial payments shall not reduce or
waive the rights of the Holders hereunder.
(e) The words hereby, herein,
hereof, hereunder and words of similar
import refer to this Certificate as a whole and not merely to
the specific section, paragraph or clause in which such word
appears. The words include, includes and
including shall be deemed to be followed by the
phrase without limitation. The definitions given for
terms in Section 2 and elsewhere in this Certificate shall
apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms.
(f) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of any certificate evidencing any Series A Exchangeable
Preferred Stock owned by a Holder and (in the case of loss,
theft or destruction) of an unsecured indemnity satisfactory to
it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation
of such certificate, if mutilated, the Company will make and
deliver in lieu of such certificate a new certificate of like
tenor and for the number of securities evidenced by such
certificate which remains outstanding.
(g) Any of the rights of the Holders set forth herein
(including, without limitation, any rights to notices,
adjustments or otherwise) may be waived by (i) any Holder
with respect to such Holder, provided that such waiver is in
writing and executed by such Holder, and (ii) the written
consent of the Required Holders with respect to all Holders, and
such waiver shall be binding on all Holders. Notwithstanding the
foregoing, the Required Holders shall not amend the foregoing
proviso without the consent of each Holder affected thereby.
Annex I-12
Annex II
ADDITIONAL
TERMS
OF
SERIES A EXCHANGEABLE PREFERRED STOCK
OF
CAS MEDICAL SYSTEMS, INC.
2. Definitions. As used herein,
the following terms shall have the following meanings:
(a) Accretion Rate has the
meaning set forth in Section 3(a).
(b) Accreted Value has the
meaning set forth in Section 3(a).
(c) Accrued Dividends means, with
respect to any share of Series A Exchangeable Preferred
Stock, as of any date, without duplication of any dividends
included within Accreted Value, the accrued and unpaid dividends
on such share through and including such date (whether or not
declared).
(d) Acquiring Person shall mean
any Person or group (within the meaning of Section 13(d)(3)
of the Exchange Act) (other than any Person who is a member of
the TMP Investor Group).
(e) A/D Rate means the Accretion
Rate or the Dividend Rate, as applicable, at the time of the
Special Triggering Event.
(f) Affiliate shall mean any
Person, directly or indirectly, controlling, controlled by or
under common control with such Person.
(g) Applicable Issuance Date
means the date of the issuance of the applicable shares of
Series A Exchangeable Preferred Stock (which may be issued
from time to time on one or more days).
(h) Applicable Terms means any of
the following defined terms herein: (a) Accretion Rate;
(b) Accreted Value; (c) A/D Rate; (d) Conversion
Price; (e) Dividend Rate; or (f) Stated Value.
(i) Approved Markets shall mean
the NASDAQ Global Select Market, the NASDAQ Global Market, the
NASDAQ Capital Market, NYSE Amex, or the NYSE.
(j) Authorized Preferred Stock
has the meaning set forth in the recitals.
(k) Board of Directors means the
Board of Directors of the Company or, with respect to any action
to be taken by the Board of Directors, any committee of the
Board of Directors duly authorized to take such action.
(l) Business Day means any day
except Saturday, Sunday and any day which shall be a legal
holiday or a day on which banking institutions in the State of
New York generally are authorized or required by law or other
governmental actions to close.
(m) Capital Stock of any Person
means any and all securities (including equity-linked
securities), interests (including partnership interests), rights
to purchase, warrants, options, participations or other
equivalents of or interests in (however designated) equity of
such Person, including any Preference Stock.
(n) Certificate means this
Certificate of Designation with respect to the Series A
Exchangeable Preferred Stock, as amended from time to time.
(o) Certificate of Incorporation
has the meaning set forth in the recitals.
Annex II-1
(p) Change of Control means the
consummation of any transaction or series of related
transactions (i) involving any purchase or acquisition
(whether by way of merger, share exchange, consolidation,
business combination or similar transaction or otherwise) by any
Acquiring Person, of any of securities representing a majority
of the outstanding voting power of the Company entitled to elect
the Board of Directors, (ii) involving any sale, lease,
exchange, transfer, exclusive license or disposition of all or
substantially all of the assets of the Company and its
Subsidiaries, taken together as a whole, to an Acquiring Person,
(iii) involving any merger, consolidation or business
combination in which the holders of voting securities of the
Company immediately prior to the transaction, as a group, do not
hold securities representing a majority of the outstanding
voting power entitled to elect the board of directors of the
surviving entity in such merger, consolidation or business
combination, or (iv) following which a majority of the
members of the Board of Directors do not constitute Continuing
Directors; provided that in each case such transaction or
transactions are approved by the Board of Directors.
(q) Closing Price shall mean,
with respect to the Common Stock (or other relevant Capital
Stock) on any date of determination, the most recent
consolidated closing bid price or, if no such closing bid price
is reported, the last reported bid price of the shares of the
Common Stock (or other relevant Capital Stock) on the relevant
Approved Market on such date. If the Common Stock (or other
relevant Capital Stock) is not traded on an Approved Market on
any date of determination, the Closing Price of the Common Stock
(or other relevant Capital Stock) on such date of determination
means the closing bid price as reported in the composite
transactions for the principal U.S. national or regional
securities exchange on which the Common Stock (or other relevant
Capital Stock) is so listed or quoted, or, if no closing bid
price is reported, the last reported bid price on the principal
U.S. national or regional securities exchange on which the
Common Stock (or other relevant Capital Stock) is so listed or
quoted, or if the Common Stock (or other relevant Capital Stock)
is not so listed or quoted on a U.S. national or regional
securities exchange, the last quoted bid price for the Common
Stock (or other relevant Capital Stock) in the
over-the-counter
market as reported by Pink Sheets LLC or similar organization,
or, if that bid price is not available, the market price of the
Common Stock (or other relevant Capital Stock) on that date as
determined in good faith by the Board of Directors.
(r) Common Stock means the common
stock, par value $0.004 per share, of the Company, or any other
class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or as a
result of a subdivision, combination or merger,
reclassification, consolidation or similar transaction in which
the Company is a constituent corporation.
(s) Company has the meaning set
forth in the recitals.
(t) Continuing Director means
(a) any member of the Board of Directors who was a director
of the Company on the Original Issue Date, and (b) any
individual who becomes a member of the Board of Directors after
the Original Issue Date if such individual was appointed or
nominated for election to the Board of Directors by a majority
of the Continuing Directors, but excluding any such individual
originally proposed for election in opposition to the Board of
Directors in office on the Original Issue Date in an actual or
threatened election contest relating to the election of the
directors (or comparable managers) of the Company and whose
initial assumption of office resulted from such contest or the
settlement thereof.
(u) Conversion Conditions means
the shares of Common Stock are listed on an Approved Market and
trade with a Closing Price of at least 250% of the Conversion
Price then in effect for a period of 20 Trading Days out of 30
consecutive Trading Days on average trading volume of not less
than 50,000 shares per day over the subject
30-day
trading period (as adjusted ratably for stock splits,
reclassifications and other like kind events affecting the
Common Stock).
(v) Conversion Date has the
meaning set forth in Section 7(a)(iv).
Annex II-2
(w) Conversion Price means the
Conversion Price of the Series A Preferred as of the date
of the Stockholder Approval (as defined in Annex I),
subject to adjustment as set forth herein.
(x) Conversion Right has the
meaning set forth in Section 7(a)(i).
(y) Conversion Right Notice has
the meaning set forth in Section 7(a)(ii).
(z) Convertible Securities means
debt securities or shares of Capital Stock, in each case
convertible into or exchangeable, directly or indirectly, for
Common Stock.
(aa) Current Market Price means,
on any date, the average of the daily Closing Price per share of
the Common Stock or other securities on each of the twenty
(20) consecutive Trading Days preceding the earlier of the
day before the date in question and the day before the Ex-Date
with respect to the issuance or distribution giving rise to an
adjustment to the Conversion Price pursuant to Section 8.
(bb) DGCL has the meaning set
forth in the recitals.
(cc) Dividend Deferral Election
has the meaning set forth in Section 3(a).
(dd) Dividend Equivalent Amount
has the meaning set forth in Section 3(d).
(ee) Dividend Payment Date means
March 31, June 30, September 30 and December 31 of
each year.
(ff) Dividend Rate has the
meaning set forth in Section 3(a).
(gg) Dividend Record Date means,
with respect to any dividend payable on a Dividend Payment Date,
the preceding March 15, June 15, September 15 and
December 15 and, with respect to any dividend payable on any
other date, such date as may be determined by the Board of
Directors.
(hh) Exchange Act means the
Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
(ii) Ex-Date, when used with
respect to any issuance or distribution, means the first date on
which the Common Stock or other securities trade without the
right to receive the issuance or distribution giving rise to an
adjustment to the Conversion Price pursuant to Section 8.
(jj) GAAP means United States
generally accepted accounting principles.
(kk) Holder means a holder of
record of outstanding shares of the Series A Exchangeable
Preferred Stock.
(ll) Indebtedness means, without
duplication, (A) all indebtedness for borrowed money,
(B) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services, including,
without limitation, capital leases in accordance
with GAAP (other than trade payables entered into in the
ordinary course of business), (C) all reimbursement or
payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (D) all obligations
evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with
the acquisition of property, assets or businesses, (E) all
indebtedness created or arising under any conditional sale or
other title retention agreement, or incurred as financing, in
either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and
remedies of the seller or bank under such agreement in the event
of default are limited to repossession or sale of such
property), (F) all monetary obligations under any leasing
or similar arrangement which, in connection with GAAP,
consistently applied for the periods covered thereby, is
classified as a capital lease, (G) all indebtedness
referred to in clauses (A) through (F) above secured
by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any lien upon
or in any property or assets (including accounts and contract
rights) owned by any Person, even
Annex II-3
though the Person which owns such assets or property has not
assumed or become liable for the payment of such indebtedness,
and (H) all Contingent Obligations in respect of
indebtedness or obligations of others of the kinds referred to
in clauses (A) through (G) above. For the purposes of
this definition, Contingent Obligation mean,
as to any Person, any direct or indirect liability, contingent
or otherwise, of that Person with respect to any indebtedness,
lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such
liability, or the primary effect thereof, is to provide
assurance to the obligee of such liability that such liability
will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such
liability will be protected (in whole or in part) against loss
with respect thereto.
(mm) Investment Agreement means
that certain Investment Agreement, dated June 8, 2011, by
and among the Company and the purchasers named therein, as the
same may be amended from time to time.
(nn) Junior Stock means all
classes of Common Stock and each other class of Capital Stock or
series of preferred stock established after the Original Issue
Date by the Board of Directors, the terms of which do not
expressly provide that such class or series ranks senior to or
on parity with the Series A Exchangeable Preferred Stock as
to dividend rights
and/or
rights upon a Liquidation or Change of Control.
(oo) Junior Stock Event has the
meaning set forth in Section 3(d).
(pp) Liquidation means the
voluntary or involuntary liquidation, dissolution or
winding-up
of the Company other than a Change of Control.
(qq) Liquidation Event has the
meaning set forth in Section 4(a).
(rr) Liquidation Preference has
the meaning set forth in Section 4(a).
(ss) Mandatory Conversion has the
meaning set forth in Section 7(b)(i).
(tt) Mandatory Conversion Time
has the meaning set forth in Section 7(b)(i).
(uu) NYSE means the New York
Stock Exchange, Inc.
(vv) Option means rights, options
or warrants to subscribe for, purchase or otherwise acquire
Common Stock or Convertible Securities.
(ww) Original Issue Date means
June 9, 2011.
(xx) Parity Stock means the
Series A Preferred Stock and any class of Capital Stock or
series of preferred stock established after the Original Issue
Date by the Board of Directors, the terms of which expressly
provide that such class or series will rank on parity with the
Series A Exchangeable Preferred Stock as to dividend rights
and/or
rights upon a Liquidation or Change of Control.
(yy) Person means any individual,
corporation, general partnership, limited partnership, limited
liability partnership, joint venture, association, joint-stock
company, trust, limited liability company, unincorporated
organization, other entity or government or any agency or
political subdivision thereof.
(zz) Preference Stock means, as
applied to the Capital Stock of any Person, Capital Stock of any
series, class or classes (however designated) which is preferred
as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person or change of control
(defined by analogy to the definition of Change of Control
herein) of such Person, over shares of Capital Stock of any
other series or class of such Person.
Annex II-4
(aaa) Record Date means the
applicable record date as determined in accordance with
Section 213 of the DGCL.
(bbb) Register has the meaning
set forth in Section 3(a).
(ccc) Registration Rights
Agreement means that certain Registration Rights
Agreement, dated June 9, 2011, between the Company and the
signatories thereto, as the same may be amended from time to
time.
(ddd) Required Holders means as
of any date the Holders of more than 50% of the then-outstanding
shares of Series A Exchangeable Preferred Stock, voting
together as a single class.
(eee) Senior Stock means each
class of Capital Stock or series of preferred stock established
after the Original Issue Date by the Board of Directors, the
terms of which expressly provide that such class or series will
rank senior to the Series A Exchangeable Preferred Stock as
to dividend rights
and/or
rights upon a Liquidation or Change of Control.
(fff) Series A Preferred
Stock means the Series A Preferred Stock, par
value $0.001 per share, of the Company.
(ggg) Series A Preferred Certificate of
Designation means the Certificate of Designation
for the Series A Preferred Stock.
(hhh) Series A Exchangeable Preferred
Stock has the meaning set forth in
Section 1(a).
(iii) Special Triggering Event
means any of the following events:
(i) the failure of the Company to pay when due any amounts
owed on the shares of Series A Exchangeable Preferred Stock to
the Holders;
(ii) a failure by the Company to deliver any cash and
shares of Common Stock, when such cash and shares of Common
Stock, if any, are required to be delivered upon conversion of
the Series A Exchangeable Preferred Stock pursuant to the
terms set forth herein, where the Company does not remedy such
default within five (5) days after the date such cash and
shares of Common Stock, if any, are required to be delivered;
(iii) a material violation by the Company of any covenant
or agreement set forth in the Investment Agreement, where the
Company does not cure such violation within thirty
(30) days after the receipt of written notice of such
breach from one or more of the Holders party to the Investment
Agreement who are actually adversely affected by such breach;
(iv) a material violation by the Company of any term of or
condition set forth in this Certificate, where the Company does
not cure such violation within thirty (30) days after the
receipt of written notice of such breach from one or more of the
Holders who are actually adversely affected by such breach;
(v) a material and willful violation by the Company of any
term of or condition set forth in the Registration Rights
Agreement, where the Company does not cure such violation within
thirty (30) days after the receipt of written notice of
such breach from one or more of the Holders party to the
Registration Rights Agreement who are actually adversely
affected by such breach; or
(vi) the failure of any of the TMP Purchaser Designees (as
defined in the Investment Agreement) to be elected or appointed
to the Board of Directors in accordance with the terms set forth
in the Investment Agreement.
(jjj) Stated Value means $100.00
per share of Series A Exchangeable Preferred Stock.
(kkk) Subsidiary means a
partnership, joint-stock company, corporation, limited liability
company, trust, unincorporated organization or other entity of
which a Person owns, directly or
Annex II-5
indirectly, more than 50% of the stock or other interests the
holder of which is generally entitled to vote for the election
of the board of directors or other governing body of such entity.
(lll) Trading Day means a day
during which the trading of securities generally occurs on the
Approved Market on which the Common Stock is then listed or, if
the Common Stock is not listed on an Approved Market, the NYSE.
(mmm) Transaction has the meaning
set forth in Section 9(d).
(nnn) Transfer Agent means the
Company or any duly appointed transfer agent, registrar and
conversion and dividend disbursing agent for the Series A
Exchangeable Preferred Stock as may be appointed by the Company
from time to time.
(ooo) TMP Investor Group means
Thomas, McNerney & Partners II, L.P., TMP
Nominee II LLC and TMP Associates II, L.P. and any of their
respective Affiliates other than any of their Affiliates that is
a portfolio company (as such term is customarily
used among private equity investors).
3. Accretion; Dividends.
(a) From and after the Applicable Issuance Date, the Stated
Value of each share of Series A Exchangeable Preferred
Stock shall accrete at an annual rate of seven percent (7%) (the
Accretion Rate), compounded quarterly,
beginning on the three-month period ending June 30, 2011
(the Stated Value as it has accreted as of any date, the
Accreted Value, subject to appropriate
adjustment in the event of any stock dividend, stock split,
stock distribution or combination, consolidation, subdivision,
reclassification or other corporate actions having the similar
effect with respect to the Series A Exchangeable Preferred
Stock); provided, however, if (i) from and
after the Original Issue Date until and including the third
anniversary of the Original Issue Date, the Company receives a
written consent from the Required Holders (which consent must be
irrevocable and delivered (x) prior to June 15, 2011
with respect to the quarters ending June 30, 2011 through
June 30, 2012, (y) prior to June 15, 2012 with
respect to the four quarters ending September 30, 2012
through June 30, 2013 and (z) prior to June 15,
2013 with respect to the four quarters ending September 30,
2013 through June 30, 2014) electing cash dividends
for any specified period prior to the third anniversary of the
Original Issue Date, or (ii) at any time from and after the
third anniversary of the Original Issue Date, the Company
delivers a written notice to the Holders electing cash dividends
for any specified period (provided the Company has funds legally
available to pay such cash dividend), the Holders shall be
entitled to receive on each Dividend Payment Date, in lieu of
the accretion described above for the three-month period ending
on such Dividend Payment Date, cash dividends on each share of
Series A Exchangeable Preferred Stock, at a rate per annum
equal to seven percent (7%) of the Accreted Value as of the
Dividend Payment Date (the Dividend Rate),
and the Board of Directors shall declare such cash dividends out
of funds legally available for that purpose; provided,
however, with respect to clause (i), to the extent the
Company does not have funds legally available to pay such cash
dividend or with the prior approval of the Required Holders, the
Company may elect not to pay a cash dividend due on any Dividend
Payment Date (a Dividend Deferral Election)
and if such an election is made, the cash dividend that would
have been payable on such Dividend Payment Date shall continue
to accrue, and shall compound quarterly at the Dividend Rate
until the accrued value of such dividend is paid, whether or not
in any fiscal year there shall be net profits or surplus legally
available for the payment of dividends in such fiscal year, so
that if in any fiscal year or years, dividends in whole or in
part are not paid upon the Series A Exchangeable Preferred
Stock, unpaid dividends shall accumulate and accrue at the
Dividend Rate, compounded quarterly. Unless there is a Dividend
Deferral Election, any dividends due shall be payable quarterly
in arrears on each Dividend Payment Date; provided, that
if any such payment date is not a Business Day then such
dividend shall be payable on the next Business Day. Each
dividend shall be payable to the Holders as they appear on the
securities register maintained in respect of the Series A
Exchangeable Preferred Stock by the Company (the
Register) at the close of business on the
corresponding Dividend Record Date; provided,
however, if there is a Dividend Deferral Election, the
dividend that would have otherwise been payable on the Dividend
Annex II-6
Record Date applicable to the Dividend Deferral Election shall
be payable to the Holders as they appear on the Register at the
time such dividend is paid. Subject to the foregoing and the
availability of lawful funds, the Board of Directors may declare
any dividends subject to a Dividend Deferral Election at any
time and the payment date of such funds shall be as determined
by the Board of Directors. All dividends paid with respect to
shares of Series A Exchangeable Preferred Stock shall be
paid pro rata to the Holders entitled thereto. The amount of
dividends payable for any other period shorter or longer than a
full dividend period, shall be computed on the basis of twelve
30-day
months and a
360-day
year. Dividend payments shall be aggregated per Holder and shall
be made to the nearest cent (with $.005 being rounded upward).
(b) Upon a Special Triggering Event, the then applicable
A/D Rate shall automatically be increased by an additional five
percent (5%) per annum, compounded quarterly, from and including
the date on which any such Special Triggering Event shall occur
through but excluding the date on which the Special Triggering
Event shall have been cured or waived in writing by the Required
Holders.
(c) No dividend will be declared or paid upon, or any sum
set apart for the payment of dividends upon, any outstanding
share of the Series A Exchangeable Preferred Stock or
Parity Stock with respect to any dividend period unless all
dividends due for all preceding dividend periods have been
declared and paid, or declared and, if such dividends are to be
paid in cash, a sum of cash sufficient for the payment thereof
is set apart for the payment of such dividend, upon all
outstanding shares of Series A Exchangeable Preferred Stock
and Parity Stock. Notwithstanding the foregoing, if full
cumulative dividends have not been paid on the Series A
Exchangeable Preferred Stock and all Parity Stock, all dividends
declared and paid on the Series A Exchangeable Preferred
Stock and such Parity Stock shall be declared and paid pro rata
so that the amounts of dividends declared and paid per share on
the Series A Exchangeable Preferred Stock and such Parity
Stock will in all cases bear to each other the same ratio that
accumulated and unpaid dividends per share on the shares of
Series A Exchangeable Preferred Stock and such Parity Stock
bear to each other.
(d) No dividends or other distributions (other than cash
paid in lieu of fractional shares or dividends on Common Stock
payable in Common Stock) may be declared, made or paid, or set
apart for payment upon, any Junior Stock, nor may any Junior
Stock be redeemed, purchased or otherwise acquired for any
consideration (or any money paid to or made available for a
sinking fund for the redemption of any Junior Stock) by or on
behalf of the Company or any of its Subsidiaries, unless
(i) all Accrued Dividends shall have been or
contemporaneously are declared and paid in cash, or are declared
and a sum of cash sufficient for the payment thereof is set
apart for such payment or are added to Accreted Value at the
request of the Holders, on the Series A Exchangeable
Preferred Stock and all Parity Stock for all dividend periods
terminating on or prior to the Record Date of such declaration,
payment, redemption, purchase or acquisition, (ii) the
Holders receive an equivalent dividend or distribution of the
amount of such dividend or distribution that would be payable to
such Holders if such shares of Series A Exchangeable
Preferred Stock had been converted into Common Stock immediately
prior to the Record Date for such dividend or distribution (such
amount per share of Series A Exchangeable Preferred Stock,
the Dividend Equivalent Amount) and
(iii) the Company obtains the consent required pursuant to
Section 5(b) herein (such declaration or distribution made
in accordance with clauses (i) through (iii)), a
Junior Stock Event). The restrictions set
forth in this Section 3(d) shall not apply to the purchase
or other acquisition of Junior Stock (A) pursuant to any
bona fide employee or director incentive or benefit plan or
arrangement of the Company or any Subsidiary heretofore or
hereafter adopted by the Board of Directors or the cashless
exercise of Options or (B) which purchase or acquisition
has received the prior written consent of the Required Holders.
4. Liquidation; Change of Control.
(a) In the event of any Liquidation (a Liquidation
Event), the Holders shall be entitled to be paid out
of the assets and funds of the Company available for
distribution to its stockholders an
Annex II-7
amount in cash per each share of Series A Exchangeable
Preferred Stock equal to the greater of (A) 100% of the
Accreted Value for each share of Series A Exchangeable
Preferred Stock outstanding on the date of such Liquidation
Event, plus an amount equal to all Accrued Dividends thereon to
the date of the Liquidation Event or (B) the amount to
which such Holders would be entitled to receive had such
Holders, immediately prior to the Liquidation Event, converted
such shares of Series A Exchangeable Preferred Stock into
shares of Common Stock (determined in accordance with
Section 7(a)(i)), in either case before any payment shall
be made or any assets distributed to the holders of any of the
Junior Stock (such greater cash amount being referred to as the
Liquidation Preference). Without limiting any
rights and remedies of the Holders, if upon any such Liquidation
Event, the remaining assets and funds of the Company available
for distribution to its stockholders after payment in full of
amounts required to be paid or distributed to holders of Senior
Stock are not sufficient to pay in full the liquidation payments
payable to the Holders and holders of outstanding shares of any
Parity Stock, then the holders of all such shares of Parity
Stock shall share ratably in such distribution of the remaining
assets and funds of the Company in accordance with the amount
which would otherwise be payable on such distribution if the
amounts to which the Holders and the holders of outstanding
shares of such Parity Stock are entitled were paid in full.
(b) Unless waived in writing by the Required Holders, in
the event of a Change of Control, each Holder shall have the
right, at such Holders election, to either (i) only
to the extent then convertible in accordance with
Section 7(a)(i), convert each share of Series A
Exchangeable Preferred Stock and receive the amount to which
such Holder is entitled to receive upon conversion of such
shares of Series A Exchangeable Preferred Stock into Common
Stock or (ii) within sixty (60) days of such Change of
Control, or later if the Holders did not receive notice of such
Change of Control, require the Company to redeem (subject to the
availability of lawful funds), in whole or in part, each share
of Series A Exchangeable Preferred Stock held by such
Holder for an amount in cash equal to the Liquidation
Preference. Unless waived in writing by the Required Holders,
the Corporation shall not have the power to effect a Change of
Control unless the agreement for such transaction provides that
the consideration payable to the stockholders of the Corporation
in such transaction shall be allocated among the holders of
capital stock of the Corporation in accordance with this
Section 4(b). In connection with a redemption permitted
above, each Holder shall surrender his, her or its certificate
or certificates representing such redeemed shares to the
Company, in the manner and at the place designated in written
notice mailed by the Company, postage prepaid, to each Holder,
at his, her or its post office address last shown on the
Register (which notice shall be given at least ten
(10) days prior to such Change of Control or such shorter
period as may be agreed in writing by the Required Holders), and
thereupon the Liquidation Preference of such shares shall be
payable to the order of the Person whose name appears on such
certificate or certificates as the owner thereof and each
surrendered certificate shall be canceled. From and after the
date of redemption, unless there shall have been a default in
payment of the Liquidation Preference, all rights of the Holder
whose shares have been redeemed (except the right to receive the
Liquidation Preference) shall cease with respect to such shares,
and such shares shall not thereafter be transferred on the books
of the Company or be deemed to be outstanding for any purpose
whatsoever.
(c) Without limiting any other rights and remedies of the
Holders, if upon any such Change of Control, the remaining
assets and funds of the Company available for distribution to
its stockholders after payment in full of amounts required to be
paid or distributed to holders of Senior Stock are not
sufficient to pay in full amounts payable to the Holders and
holders of outstanding shares of any Parity Stock, then the
holders of all such shares shall share ratably in such
distribution of the remaining assets and funds of the Company in
accordance with the amount which would otherwise be payable on
such distribution if the amounts to which the Holders and the
holders of outstanding shares of such Parity Stock are entitled
were paid in full.
(d) Unless waived in writing by the Required Holders,
written notice of any Liquidation Event or Change of Control,
stating a payment date and the place where the distributable
amounts shall be
Annex II-8
payable, shall be given no less than ten (10) days prior to
the payment date stated therein, to the Holders at their
respective addresses as the same shall appear on the Register.
(e) The amount deemed paid or distributed to the holders of
Common Stock upon any Liquidation or Change of Control shall be
the cash or the value of the property, rights or securities paid
or distributed to such holders by the Company or the acquiring
Person. The value of such property, rights or securities shall
be determined in good faith by the Board of Directors.
5. Voting Rights.
In addition to any voting rights provided by law, the Holders
shall be entitled to the following voting rights:
(a) Each share of Series A Exchangeable Preferred
Stock shall entitle the Holder thereof to vote together with the
holders of Common Stock as a single class on all matters
submitted for the approval of the holders of Common Stock. For
purposes of this Section 5(a), each Holder shall be
entitled to the number of votes equal to the number of shares of
Common Stock that would be held by such Holders assuming the
conversion of all outstanding shares of Series A
Exchangeable Preferred Stock held by such Holder into shares of
Common Stock at the Conversion Price on the Original Issue Date
(subject to any adjustments pursuant only to
Section 8(a)(i) and 8(a)(ii) below) on the Record Date for
the determination of the stockholders entitled to vote on such
matters.
(b) If at any time following the Original Issue Date at
least fifty percent (50%) of the aggregate number of shares of
Series A Exchangeable Preferred Stock issued on and after
the Original Issue Date are outstanding, in addition to any
other vote or consent of the stockholders required by law or by
the Certificate of Incorporation, including any Certificate of
Designation, bylaws of the Company or this Certificate, the
Company shall not, and shall not permit its Subsidiaries to (in
each case, whether by merger, consolidation, reorganization,
operation of law or otherwise), without the prior written
consent of the Required Holders:
(i) amend, alter, waive or repeal any provision of its
Certificate of Incorporation, including any certificate of
designation, or bylaws or this Certificate in any manner that
would adversely affect the rights, powers, preferences or
privileges (economic or otherwise) of the Series A
Exchangeable Preferred Stock or Series A Preferred Stock,
increase the authorized number of shares of the Series A
Exchangeable Preferred Stock or Series A Preferred Stock,
or split, reverse split, subdivide, reclassify, combine or take
other corporate actions having a similar effect with respect to
the Series A Exchangeable Preferred Stock or Series A
Preferred Stock;
(ii) except as required pursuant to the terms of the
Investment Agreement or the Series A Preferred Certificate of
Designation, issue any shares of Series A Exchangeable
Preferred Stock or Series A Preferred Stock;
(iii) offer, sell or issue any equity or equity-linked
securities constituting Senior Stock or Parity Stock;
(iv) increase or decrease the size of the Board of
Directors;
(v) incur Indebtedness (other than Indebtedness that, when
aggregated with all other Indebtedness incurred since the
Original Issue Date and then outstanding, is less than
$4,000,000 when so aggregated);
(vi) redeem, repurchase or otherwise acquire or offer to
redeem, repurchase, or otherwise acquire any equity or
equity-linked securities constituting Junior Stock or Parity
Stock, other than the purchase or other acquisition of Junior
Stock pursuant to any bona fide employee or director incentive
or benefit plan or arrangement of the Company or any Subsidiary
heretofore or hereafter adopted by the Board of Directors or the
cashless exercise of Options;
Annex II-9
(vii) distribute (by means of a dividend or otherwise)
assets (including property or cash) to its stockholders (other
than shares of Common Stock or cash as required to pay dividends
on the Series A Exchangeable Preferred Stock pursuant to
Section 3 or on the Series A Preferred Stock pursuant
to the Series A Preferred Certificate of Designation
(excluding dividends payable pursuant to Section 3(d)(ii)
which shall require consent pursuant to this
Section 5(b)(vii)));
(viii) enter into any transaction with any of its officers,
directors or Affiliates (or any directors, managers, officers or
employees of any such Affiliate), other than (x) employment
arrangements entered into in the ordinary course of business
consistent with past practices providing for annual base
compensation and benefits not exceeding $200,000 in the
aggregate, unless unanimously approved by the Compensation
Committee of the Board of Directors and (y) grants pursuant
to equity incentive plans approved by the Companys
stockholders;
(ix) adopt or amend any stockholder rights plan, poison
pill or similar anti-takeover device;
(x) sell, lease, license or otherwise dispose of any assets
outside the ordinary course of business consistent with past
practices, except for assets with a purchase price, in the
aggregate, of less than $500,000;
(xi) enter into any contract, agreement or other
arrangement that would preclude the Company from making payment
in full in cash on each Dividend Payment Date of the dividends
contemplated in Section 3 above; or
(xii) authorize, commit or agree (in writing or otherwise)
to do anything contained in this clause (b).
(c) Any action to be taken at any annual or special meeting
of stockholders by the Holders may be taken without a meeting,
without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be
signed by the Holder or Holders having no less than the minimum
number of votes that would be required to take such action at a
meeting at which all of the shares of Series A Exchangeable
Preferred Stock were present and voted. Prompt written notice of
the taking of any action by the Holders by less than unanimous
written consent shall be given as may be required under
applicable law.
6. Redemption. The Company shall
have no right to require the redemption of the shares of
Series A Exchangeable Preferred Stock. Nothing herein
contained shall prevent or restrict the purchase by the Company,
from time to time either at public or private sale, of the whole
or any part of the outstanding shares of Series A
Exchangeable Preferred Stock at such price or prices as the
Company and a Holder may determine, subject to the provisions of
applicable law and obtaining any required consents, including
the prior written consent of the Required Holders pursuant to
Section 5(b) above.
7. Conversion.
(a) Conversion Right.
(i) Each Holder shall have the right, at such Holders
option, exercisable at any time and from time to time to convert
all or any portion of such Holders shares of Series A
Exchangeable Preferred Stock, subject to the terms and
provisions of this Section 7 (the Conversion
Right). Upon a Holders election to exercise the
Conversion Right, the shares of Series A Exchangeable
Preferred Stock for which the Conversion Right is exercised
shall be converted into such whole number of shares of Common
Stock equal to the product of the number of shares of
Series A Exchangeable Preferred Stock being so converted
multiplied by the quotient of (A) the per share Accreted
Value as of the Conversion Date (taking into account any
differing Applicable Issuance Dates) divided by (B) the
Conversion Price then in effect. In addition, upon a
Holders election to exercise the Conversion Right, the
shares of Series A Exchangeable Preferred Stock for which
the Conversion Right is
Annex II-10
exercised shall be entitled to receive (at the election of the
Company) either (1) an amount in cash equal to all unpaid
Accrued Dividends thereon through the Conversion Date or
(2) a number of shares of Common Stock equal to the
quotient obtained by dividing (x) an amount equal to all
unpaid Accrued Dividends thereon through the Conversion Date by
(y) the Closing Price of the Common Stock on the Conversion
Date; provided, however, the Company shall elect
clause (2) above to the extent that sufficient lawful funds
are not available to pay the amounts required by clause (1)
above.
(ii) The Conversion Right of a Holder shall be exercised by
the Holder by the surrender to the Company prior to
4:00 p.m. Eastern Time on the Conversion Date of the
certificates representing shares of Series A Exchangeable
Preferred Stock to be converted at the Companys principal
place of business or the offices of the Transfer Agent, if
applicable, accompanied by written notice to the Company that
the Holder elects to convert all or a portion of the shares of
Series A Exchangeable Preferred Stock represented by such
certificate (a Conversion Right Notice) and
specifying the name or names (with address or addresses) in
which a certificate or certificates for shares of Common Stock
are to be issued and (if so required by the Company or the
Transfer Agent) by a written instrument or instruments of
transfer in form reasonably satisfactory to the Company or the
Transfer Agent duly executed by the Holder or its legal
representative.
(iii) As promptly as practicable after the surrender of the
certificate or certificates for Series A Exchangeable
Preferred Stock as aforesaid and the receipt of the Conversion
Right Notice and in no event later than three (3) Trading
Days thereafter, the Company shall issue and shall deliver or
cause to be issued and delivered to such Holder, or to such
other Person on such Holders written order (A) one or
more certificates representing the number of validly issued,
fully paid and non-assessable whole shares of Common Stock to
which the Holder, or the Holders transferee, shall be
entitled, (B) if less than the full number of shares of
Series A Exchangeable Preferred Stock evidenced by the
surrendered certificates is being converted, a new certificate
or certificates, of like tenor, for the number of shares of
Series A Exchangeable Preferred Stock evidenced by the
surrendered certificate or certificates, less the number of
shares being converted, (C) cash for any payment of Accrued
Dividends through the Conversion Date if the Company elects to
pay such dividends in cash pursuant to Section 7(a)(i) and
(D) cash for any fractional interest in respect of a share
of Common Stock arising upon such conversion settled as provided
in Section 7(d)(i).
(iv) Each conversion pursuant to Section 7(a)(i) shall
be deemed to have been made at 3:59 p.m. Eastern Time on
the date of the later to occur of giving the Conversion Right
Notice and of surrendering the certificate or certificates
representing the Series A Exchangeable Preferred Stock to
be converted (the Conversion Date) so that
the rights of the Holder thereof as to the Series A
Exchangeable Preferred Stock being converted shall cease except
for the right to receive the Common Stock (and cash dividends,
if elected by the Company, and cash in lieu of fractional
shares) payable under Section 7(a), and the Person entitled
to receive shares of Common Stock shall be treated for all
purposes as having become the record holder of those shares of
Common Stock at that time.
(b) Mandatory Conversion.
(i) Upon either (x) the date and time, or the
occurrence of an event, specified by vote or written consent of
the Required Holders or (y) at any time following the third
anniversary of the Original Issue Date when the Conversion
Conditions are satisfied, the written notice of the Company (a
Mandatory Conversion) (the time of such
occurrence or event, or the date and time specified in such
notice, or the time of the event specified in such vote or
written consent is referred to herein as the Mandatory
Conversion Time) each outstanding share of
Series A Exchangeable Preferred Stock shall automatically
be converted into the number of shares of Common Stock equal to
such whole number of shares of Common Stock equal to the product
of the number of shares of Series A Exchangeable Preferred
Stock being so converted multiplied by the quotient of
(A) the per share Accreted Value as of the Conversion Date
(taking into account any differing Applicable Issuance Dates)
divided by (B) the Conversion Price then in effect. In
addition, upon a Mandatory Conversion, the shares of
Series A Exchangeable Preferred Stock shall be entitled to
receive (at the election of the
Annex II-11
Company) either (1) an amount in cash equal to all unpaid
Accrued Dividends thereon through the Mandatory Conversion Time
or (2) a number of shares of Common Stock equal to the
quotient obtained by dividing (x) an amount equal to all
unpaid Accrued Dividends thereon through the Mandatory
Conversion Time by (y) the Closing Price of the Common
Stock on the date of the Mandatory Conversion Time;
provided, however, the Company shall elect
clause (2) above to the extent that sufficient lawful funds
are not available to pay the amounts required by clause (1)
above.
(ii) All Holders shall be sent written notice of the
Mandatory Conversion Time and the place designated for mandatory
conversion of all such shares of Series A Exchangeable
Preferred Stock pursuant to this Section 7(b). Such notice
need not be sent in advance of the occurrence of the Mandatory
Conversion Time. Promptly following receipt of such notice, each
Holder shall surrender his, her or its certificate or
certificates for all such shares (or, if such Holder alleges
that such certificate has been lost, stolen or destroyed, a lost
certificate affidavit and agreement reasonably acceptable to the
Company to indemnify the Company against any claim that may be
made against the Company on account of the alleged loss, theft
or destruction of such certificate which agreement shall not
require the posting of a bond) to the Company at the place
designated in such notice. If so required by the Company,
certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in
form satisfactory to the Company, duly executed by the Holder or
by his, her or its attorney duly authorized in writing. All
rights with respect to the Series A Exchangeable Preferred
Stock converted pursuant to Section 7(b), including the
rights, if any, to receive notices and vote (other than as a
holder of Common Stock), will terminate at the Mandatory
Conversion Time (notwithstanding the failure of the Holder or
Holders to surrender the certificates at or prior to such time),
except only the rights of the Holders, upon surrender of their
certificate or certificates (or lost certificate affidavit and
agreement) therefor, to receive the items provided for in the
next sentence of this Section 7(b)(ii). As soon as
practicable after the Mandatory Conversion Time and the
surrender of the certificate or certificates (or lost
certificate affidavit and agreement) for Series A
Exchangeable Preferred Stock, the Company shall issue and
deliver to such Holder, or to his, her or its nominees, a
certificate or certificates for the number of full shares of
Common Stock issuable on such conversion in accordance with the
provisions hereof, together with (A) cash for any payment
of Accrued Dividends through the Conversion Date if the Company
elects to pay such dividends in cash pursuant to
Section 7(b)(i) and (B) cash for any fractional
interest in respect of a share of Common Stock arising upon such
conversion settled as provided in Section 7(d)(i).
(c) [Intentionally omitted]
(d) Miscellaneous.
(i) No fractional shares of Common Stock shall be issued
upon the conversion of any shares of Series A Exchangeable
Preferred Stock. If the conversion of any share or shares of
Series A Exchangeable Preferred Stock results in a
fractional share of Common Stock issuable, the Company shall pay
a cash amount in lieu of issuing such fractional share in an
amount equal to such fractional interest multiplied by the
Closing Price on the Conversion Date or date of the Mandatory
Conversion Time, as applicable.
(ii) Except as otherwise provided for herein, a Holder
shall not be entitled to any rights of a holder of shares of
Common Stock until such Holder has converted such Holders
Series A Exchangeable Preferred Stock, and only to the
extent the shares of Series A Exchangeable Preferred Stock
are deemed to have been converted into shares of Common Stock in
accordance with the provisions of this Section 7.
(iii) The Company shall reserve and keep available for
issuance such number of its authorized but unissued shares of
Common Stock equal to 100% of the number of shares of Common
Stock issuable upon conversion of all outstanding shares of
Series A Exchangeable Preferred Stock. The Company shall
take all action permitted by law to increase the authorized
number of shares of Common Stock if at any time there shall be
insufficient authorized but unissued shares of Common Stock to
permit such
Annex II-12
reservation or to permit the conversion of all outstanding
shares of Series A Exchangeable Preferred Stock. The
Company covenants that all Common Stock that may be issued upon
conversion of Series A Exchangeable Preferred Stock shall
upon issuance be duly authorized, fully paid and non-assessable,
free and clear of all liens, claims, security interests and
other encumbrances. The Company further covenants that, if at
any time the Common Stock shall be listed on an Approved Market,
the Company will, if permitted by the rules of such Approved
Market, cause to be listed or quoted on such exchange or
automated quotation system, all Common Stock issuable upon
conversion of the Series A Exchangeable Preferred Stock.
(iv) If a Conversion Date or Mandatory Conversion Time is
on or after a Dividend Record Date but on or prior to the
related Dividend Payment Date, then Accrued Dividends will be
payable to Holders in the manner set forth above in
Sections 7(a)(i) and 7(b)(i) with respect to the exercise
of a Conversion Right or Mandatory Conversion, as applicable,
concurrent with delivery by the Company of the shares of Common
Stock issuable upon such conversion.
(v) The issuance or delivery of certificates for Common
Stock upon the conversion of shares of Series A
Exchangeable Preferred Stock pursuant to this Section 7
shall be made without charge to the converting Holder for such
certificates or for any stamp or similar tax in respect of the
issuance or delivery of such certificates or the securities
represented thereby, and such certificates shall be issued or
delivered in the respective names of, or in such names as may be
directed by, the Holders of the shares converted, subject to
applicable law.
8. Adjustment of Conversion Price.
(a) Irrespective of whether any shares of Series A
Exchangeable Preferred Stock are outstanding at the time in
question, from and after the Original Issue Date, the Conversion
Price shall be adjusted from time to time (without duplication)
by the Company as follows:
(i) Stock Dividends and
Distributions. If the Company pays dividends
or other distributions on the Common Stock in shares of Common
Stock, then the Conversion Price in effect immediately prior to
the Ex-Date for such dividend or distribution will be multiplied
by the following fraction:
Where,
|
|
|
|
|
OS0
|
|
=
|
|
the number of shares of Common Stock outstanding immediately
prior to Ex-Date for such dividend or distribution.
|
|
|
|
|
|
OS1
|
|
=
|
|
the sum of the number of shares of Common Stock outstanding
immediately prior to the Ex-Date for such dividend or
distribution plus the total number of shares of Common Stock
constituting such dividend or distribution.
|
For the purposes of this clause (i), the number of shares of
Common Stock at the time outstanding shall not include shares
acquired by the Company. If any dividend or distribution
described in this clause (i) is declared but not so paid or
made, the Conversion Price shall be readjusted, effective as of
the date the Board of Directors publicly announces its decision
not to make such dividend or distribution, to such Conversion
Price that would be in effect if such dividend or distribution
had not been declared.
(ii) Subdivisions, Splits and Combination of the
Common Stock. If the Company subdivides,
splits or combines the shares of Common Stock, then the
Conversion Price in effect immediately
Annex II-13
prior to the effective date of such share subdivision, split or
combination will be multiplied by the following fraction:
Where,
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|
|
|
OS0
|
|
=
|
|
the number of shares of Common Stock outstanding immediately
prior to the effective date of such share subdivision, split or
combination.
|
|
|
|
|
|
OS1
|
|
=
|
|
the number of shares of Common Stock outstanding immediately
after the opening of business on the effective date of such
share subdivision, split or combination.
|
For the purposes of this clause (ii), the number of shares of
Common Stock at the time outstanding shall not include shares
acquired by the Company. If any subdivision, split or
combination described in this clause (ii) is announced but
the outstanding shares of Common Stock are not subdivided, split
or combined, the Conversion Price shall be readjusted, effective
as of the date the Board of Directors publicly announces its
decision not to subdivide, split or combine the outstanding
shares of Common Stock, to such Conversion Price that would be
in effect if such subdivision, split or combination had not been
announced.
(iii) Issuance of Stock Purchase
Rights. If the Company issues or distributes
to all or substantially all holders of the shares of Common
Stock Options (other than Options issued pursuant to a dividend
reinvestment plan or share purchase plan or other similar plans
approved by the Board of Directors) entitling them to subscribe
for or purchase the shares of Common Stock at less than the
Current Market Price on the date fixed for the determination of
stockholders entitled to receive such Options, then the
Conversion Price in effect immediately prior to the Ex-Date for
such issuance or distribution will be multiplied by the
following fraction:
Where,
|
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|
|
|
OS0
|
|
=
|
|
the number of shares of Common Stock outstanding immediately
prior to the Ex-Date for such distribution.
|
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|
|
|
X
|
|
=
|
|
the total number of shares of Common Stock issuable pursuant to
such Options.
|
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|
|
|
|
Y
|
|
=
|
|
the number of shares of Common Stock equal to the aggregate
price payable to exercise such Options divided by the Current
Market Price on the date fixed for the determination of
stockholders entitled to receive such Options.
|
For the purposes of this clause (iii), the number of shares of
Common Stock at the time outstanding shall not include shares
acquired by the Company. In the event that such Options
described in this clause (iii) are not so issued, the
Conversion Price shall be readjusted, effective as of the date
the Board of Directors publicly announces its decision not to
issue or distribute such Options, to the Conversion Price that
would then be in effect if such issuance or distribution had not
been declared. To the extent that such Options are not exercised
prior to their expiration or shares of Common Stock are
otherwise not delivered pursuant to such Options upon the
exercise of such Options, the Conversion Price shall be
readjusted to such Conversion Price that would then be in effect
had the adjustment made upon the issuance or distribution of
such Options been made on the basis of the delivery of only the
number of shares of Common Stock actually delivered. In
determining the aggregate offering price payable for such shares
of Common Stock, there shall be taken into account any
consideration received for such rights or warrants and the value
of such consideration (if other than cash, to be determined by
the Board of Directors).
Annex II-14
(iv) Debt or Asset
Distributions. If the Company distributes to
all or substantially all holders of shares of Common Stock
evidences of indebtedness, Capital Stock, securities, cash or
other assets (excluding any dividend or distribution referred to
in clause (i) above, any Options referred to in
clause (iii) above, any dividend or distribution paid
exclusively in cash, any consideration payable in connection
with a tender or exchange offer made by the Company or any of
its Subsidiaries, and any dividend of Capital Stock of or
relating to a Subsidiary or other business unit in the case of
certain spin-off transactions as described below), then the
Conversion Price in effect immediately prior to the Ex-Date for
such distribution will be multiplied by the following fraction:
Where,
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|
SP0
|
|
=
|
|
the Current Market Price per share of Common Stock on such date.
|
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|
|
|
FMV
|
|
=
|
|
the fair market value of the portion of the distribution
applicable to one share of Common Stock on such date as
determined by the Board of Directors, provided that, if
FMV as set forth above is equal to or greater than
SP0
as set forth above, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Holder shall
receive on the date on which such distribution is made to
holders of Common Stock, for each share of Series A Exchangeable
Preferred Stock, the amount of such distribution such Holder
would have received had such Holder owned a number of shares of
Common Stock equal to the Conversion Price on the Ex-Date for
such distribution.
|
In a spin-off, where the Company makes a
distribution to all holders of shares of Common Stock consisting
of Capital Stock of any class or series, or similar equity
interests of, or relating to, a Subsidiary or other business
unit, the Conversion Price will be adjusted on the fifteenth
Trading Day after the effective date of the distribution by
multiplying such Conversion Price in effect immediately prior to
such fifteenth Trading Day by the following fraction:
Where,
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|
MP0
|
|
=
|
|
the average of the Closing Prices of the Common Stock over the
first ten Trading Days commencing on and including the fifth
Trading Day following the effective date of such distribution.
|
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|
|
|
MP5
|
|
=
|
|
the average of the Closing Prices of the capital stock or equity
interests representing the portion of the distribution
applicable to one share of Common Stock over the first ten
Trading Days commencing on and including the fifth Trading Day
following the effective date of such distribution, or, if not
traded on a national or regional securities exchange or
over-the-counter market, the fair market value of the capital
stock or equity interests representing the portion of the
distribution applicable to one share of Common Stock on such
date as determined by the Board of Directors.
|
In the event that such distribution described in this
clause (iv) is not so paid or made, the Conversion Price
shall be readjusted, effective as of the date the Board of
Directors publicly announces its decision not to pay or make
such dividend or distribution, to the Conversion Price that
would then be in effect if such dividend or distribution had not
been declared.
(v) Cash Dividends or
Distributions. If the Company makes a
dividend or distribution consisting exclusively of cash to all
holders of the Common Stock, excluding (a) any cash that is
paid as a dividend or distributed in a Transaction or as part of
a spin-off referred to in clause (iv) above,
(b) any dividend or distribution in connection with
Liquidation, (c) any
Annex II-15
consideration payable in connection with a tender or exchange
offer made by the Company or any of its Subsidiaries, and
(d) a Junior Stock Event, then in each event, the
Conversion Price in effect immediately prior to the Ex-Date for
such distribution will be multiplied by the following fraction:
Where,
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SP0
|
|
=
|
|
the Closing Price per share of Common Stock on the Trading Day
immediately preceding the Ex-Date.
|
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|
DIV
|
|
=
|
|
the amount per share of Common Stock of the cash dividend or
distribution, as determined pursuant to the introduction to this
paragraph (v).
|
In the event that any dividend or distribution described in this
clause (v) is not so made, the Conversion Price shall be
readjusted, effective as of the date the Board of Directors
publicly announces its decision not to pay such dividend or
distribution, to the Conversion Price which would then be in
effect if such dividend or distribution had not been declared.
Notwithstanding the foregoing, if DIV as set forth
above is equal to or greater than
SP0
as set forth above, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Holder shall have
the right to receive on the date on which the relevant cash
dividend or distribution is distributed to holders of Common
Stock, for each share of Series A Exchangeable Preferred
Stock, the amount of cash such Holder would have received had
such Holder owned a number of shares of Common Stock equal to
the Conversion Price on the Ex-Date for such dividend or
distribution.
(vi) Self Tender Offers and Exchange
Offers. If the Company or any of its
Subsidiaries successfully completes a tender or exchange offer
for the Common Stock where the cash and the value of any other
consideration included in the payment per share of the Common
Stock exceeds the Closing Price per share of the Common Stock on
the Trading Day immediately succeeding the expiration of the
tender or exchange offer, then the Conversion Price in effect at
the close of business on such immediately succeeding Trading Day
will be multiplied by the following fraction:
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|
|
OS0
x
SP0
AC
+
(SP0
x
OS1)
|
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Where,
|
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|
|
SP0
|
|
=
|
|
the Closing Price per share of Common Stock on the Trading Day
immediately succeeding the expiration of the tender or exchange
offer.
|
|
|
|
|
|
OS0
|
|
=
|
|
the number of shares of Common Stock outstanding immediately
prior to the expiration of the tender or exchange offer,
including any shares validly tendered and not withdrawn.
|
|
|
|
|
|
OS1
|
|
=
|
|
the number of shares of Common Stock outstanding immediately
after the expiration of the tender or exchange offer.
|
|
|
|
|
|
AC
|
|
=
|
|
the aggregate cash and fair market value of the other
consideration payable in the tender or exchange offer, as
determined by the Board of Directors.
|
In the event that the Company, or one of its Subsidiaries, is
obligated to purchase shares of Common Stock pursuant to any
such tender offer or exchange offer, but the Company, or such
Subsidiary, is permanently prevented by applicable law from
effecting any such purchases, or all such purchases are
rescinded, then the Conversion Price shall be readjusted to be
such Conversion Price that would then be in effect if such
tender offer or exchange offer had not been made.
Annex II-16
(vii) Rights Plans. To the extent
that the Company has a rights plan in effect with respect to the
Common Stock upon conversion of any shares of the Series A
Exchangeable Preferred Stock, Holders will receive, in addition
to the shares of Common Stock, the rights under the rights plan,
unless, prior to the conversion date, the rights have separated
from the shares of Common Stock, in which case the Conversion
Price will be adjusted at the time of separation as if the
Company had made a distribution to all holders of the Common
Stock as described in clause (iv) above, subject to
readjustment in the event of the expiration, termination or
redemption of such rights.
(viii) Issuances Below the Conversion
Price. If, at any time on or before the date
that is three years after the Original Issue Date, the Company
issues, or agrees to issue or sell, any Common Stock or
Convertible Securities for consideration per share less than the
Conversion Price, then the Conversion Price in effect
immediately prior to each such issuance will immediately be
reduced to the price determined by multiplying the Conversion
Price in effect immediately prior to such issuance by the
following fraction:
Where,
|
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|
|
|
OS0
|
|
=
|
|
the number of shares of Common Stock outstanding immediately
prior to such issuance.
|
|
|
|
|
|
AC
|
|
=
|
|
the aggregate consideration paid or payable for such shares of
Common Stock or Convertible Securities.
|
|
|
|
|
|
SP
|
|
=
|
|
the Conversion Price.
|
|
|
|
|
|
OS1
|
|
=
|
|
the sum of the number of shares of Common Stock outstanding
immediately after such issuance.
|
This adjustment shall become effective immediately after such
issuance.
(b) The Company may, in its sole discretion, make such
decreases in the Conversion Price, in addition to any other
decreases required by this Section 8, if the Board of
Directors, with the consent of at least one TMP Purchaser
Designee (as defined in the Investment Agreement) if at least
one TMP Purchaser Designee is then serving on the Board of
Directors, deems it advisable to avoid or diminish any income
tax to holders of the Common Stock resulting from any dividend
or distribution of shares of Common Stock (or issuance of rights
or warrants to acquire shares of Common Stock) or from any event
treated as such for income tax purposes or for any other reason.
(c) (i) All adjustments to the Conversion Price shall
be calculated to the nearest
1/10
of a cent. No adjustment in the Conversion Price shall be
required if such adjustment would be less than $0.01;
provided that any adjustments which by reason of this
subparagraph are not required to be made shall be carried
forward and taken into account in any subsequent adjustment;
provided further that on any Conversion Date adjustments
to the Conversion Price will be made with respect to any such
adjustment carried forward and which has not been taken into
account before such date.
(ii) The Conversion Price shall not be adjusted:
(1) upon the issuance of any shares of Common Stock
pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on the
Companys securities and the investment of additional
optional amounts in shares of Common Stock under any such plan,
provided such plan was approved by the Board of Directors;
(2) upon the issuance of any shares of Common Stock or
rights or warrants to purchase those shares pursuant to any
present or future employee, director or consultant benefit
agreement, plan or program of, or assumed by, the Company or any
of its Subsidiaries, provided such issuance was approved by the
Board of Directors;
Annex II-17
(3) upon the issuance of any shares of Common Stock
pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security outstanding as of the
Original Issue Date and not substantially amended thereafter;
(4) upon the issuance of securities pursuant to any merger,
joint venture, partnership, share exchange, business combination
or similar transaction or any other direct or indirect
acquisition by the Company, whereby the Companys
securities comprise, in whole or in part, the consideration paid
by the Company in such transaction, provided such transaction
was approved by the Board of Directors;
(5) for a change in the par value or no par value of Common
Stock;
(6) for the payment of cash dividends pursuant to
Section 3(a);
(7) upon the issuance of shares of Series A
Exchangeable Preferred Stock or Series A Preferred Stock
issued pursuant to the terms of the Investment Agreement or
Common Stock issuable upon conversion thereof; or
(8) upon the issuance of any shares of Common Stock or
warrants to acquire only shares of Common Stock issued to banks,
equipment lessors or other lending institutions, or to real
property lessors, in each case, in connection with a debt
financing (limited to secured or unsecured debt for borrowed
money that is not pursuant to the issuance of Convertible
Securities), equipment leasing or real property leasing
transaction, provided such transaction was approved by the Board
of Directors.
(9) Whenever the Conversion Price is to be adjusted in
accordance with Section 8(a) or Section 8(b), the Company
shall: (i) compute the Conversion Price in accordance with
Section 8(a) or Section 8(b), taking into account the
$0.01 threshold set forth in Section 8(c) hereof;
(ii) as soon as practicable following the occurrence of an
event that requires an adjustment to the Conversion Price
pursuant to Section 8(a) or Section 8(b), taking into
account the $0.01 threshold set forth in Section 8(c)
hereof, provide, or cause to be provided, a written notice to
the Holders of the occurrence of such event; and (iii) as
soon as practicable following the determination of the revised
Conversion Price in accordance with Section 8(a) or
Section 8(b) hereof, provide, or cause to be provided, a
written notice to the Holders setting forth in reasonable detail
the method by which the adjustment to the Conversion Price was
determined and setting forth the revised Conversion Price.
(d) If one or more events occurs requiring an adjustment to
be made to the Conversion Price during the same time period,
adjustments to the Conversion Price shall be determined by the
Board of Directors to reflect the combined impact of all
Conversion Price adjustment events, as set out in this
Section 8, during such period.
(e) In the event that at any time as a result of any
adjustment made pursuant to this Section 8 or otherwise, it
will be necessary for the Company to obtain stockholder
approval, then the Company shall use its reasonable best efforts
to obtain such stockholder approval as promptly as practicable.
(f) In the event the Company shall propose to take any
action of the type described in Section 8(a)(iii), 8a(iv),
8(a)(v), 8(a)(vi), 8(a)(vii), 8(a)(viii), 8(b) or 8(g), the
Company shall give notice to each Holder, which notice shall
specify the Record Date, if any, with respect to any such action
and the approximate date on which such action is to take place.
Such notice shall also set forth such facts with respect thereto
as shall be reasonably necessary to indicate the effect on the
Conversion Price and the number of shares of Common Stock which
shall be deliverable upon conversion of shares of the
Series A Exchangeable Preferred Stock. Except as otherwise
provided herein, (x) in the case of any such action that
would require the fixing of a Record Date, such notice shall be
given at least ten days prior to the date so fixed and
(y) in the case of all other such actions, such notice
shall be given at least ten days prior to the taking of such
proposed action.
Annex II-18
(g) If any event occurs as to which, in the opinion of the
Board of Directors, the provisions of this Section 8 are
not strictly applicable or if strictly applicable would not
fairly protect the rights of the Holders in accordance with the
essential intent and principles of such provisions, then the
Board of Directors shall make an adjustment in the application
of such provisions, in accordance with such essential intent and
principles, so as to protect such rights as aforesaid, but in no
event shall any adjustment pursuant to this Section 8 have
the effect of increasing the Conversion Price as otherwise
determined pursuant to any of the provisions of this
Section 8 except in the case of a combination of shares of
a type contemplated in Section 8(a)(ii) hereof and then in
no event to an amount larger than the Conversion Price as
adjusted pursuant to Section 8(a)(ii) hereof.
(h) Anything in this Section 8 notwithstanding, no
adjustment to the Conversion Price shall reduce the Conversion
Price below the then par value per share of Common Stock, and
any such purported adjustment shall instead reduce the
Conversion Price to such par value.
(i) Notwithstanding the foregoing, no adjustment shall be
made to the Conversion Price pursuant to this Section 8 to
the extent the Holder actually participates on an as-converted
basis with the Common Stock pursuant to Section 3(d)(ii),
subject to notice of such participation to the Holder, in the
transaction that would otherwise trigger the applicable
adjustment pursuant to this Section 8.
(j) Notwithstanding the foregoing, no adjustment shall be
made to the Conversion Price pursuant to this Section 8
solely on account of any adjustment of the conversion price of
the Series A Preferred Stock in accordance with the
Series A Preferred Certificate of Designation.
9. Recapitalization, Reclassification and Changes in
Common Stock. Upon the occurrence of any:
(a) reclassification or change of the outstanding shares of
Common Stock (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as
a result of a subdivision or combination);
(b) merger or consolidation of the Company with or into
another Person (other than a Subsidiary) other than a merger or
consolidation in which the Company is the resulting or surviving
Person and which does not result in any reclassification or
change of outstanding Common Stock;
(c) any statutory share exchange of the Company with
another Person; or
(d) sale or other disposition of all or substantially all
of the property and assets of the Company (on a consolidated
basis) to any other Person (any of the foregoing events in
clauses (a) through (d), a Transaction);
then, without limiting the rights of the Holders in
Section 4 herein, the Series A Exchangeable Preferred
Stock shall be convertible after the Transaction into the kind
and amount of shares of stock or other securities or other
property or assets (including cash) that the Holders would have
been entitled to receive upon such Transaction had such
Series A Exchangeable Preferred Stock been converted into
Common Stock immediately prior to such Transaction after giving
effect to any adjustment. The provisions of this Section 9
shall apply to successive Transactions. In the event that
holders of the Common Stock shall have the opportunity to elect
the form of consideration to be received in a Transaction, then
the Company shall make adequate provision whereby each Holder
shall have a reasonable opportunity to determine the form of
consideration into which all of such Holders shares of
Series A Exchangeable Preferred Stock, shall be convertible
from and after the effective date of such Transaction. Such
determination shall be (i) subject to any limitations to
which all of the holders of Common Stock are subject, including,
but not limited to, pro rata reductions applicable to any
portion of the consideration payable in such Transaction and
(ii) conducted in such a manner as to be completed by the
date that is the earlier of (a) the deadline for elections
to be made by holders of Common Stock and (b) five
(5) Trading Days prior to the anticipated effective date of
such Transaction. The Company will not effect (or enter into any
agreement providing for) any Transaction unless prior to the
consummation thereof the successor Person (if other than the
Company) resulting from such Transaction shall assume by written
instrument mailed or delivered to the Holders at the last
Annex II-19
address of each such Holder appearing on the Register, the
obligation pursuant to this Section 9. At least twenty
(20) days prior written notice of the date on which
the Transaction will be consummated shall be given to the
Holders.
10. Other Provisions.
(a) Shares of Series A Exchangeable Preferred Stock
issued and reacquired shall be prohibited from being reissued as
such and will be retired and canceled promptly after
reacquisition thereof and, upon compliance with the applicable
requirements of Delaware law, will have the status of authorized
but unissued shares of preferred stock of the Company
undesignated as to series and may with any and all other
authorized but unissued shares of preferred stock of the Company
be designated or redesignated and issued or reissued, as the
case may be, as part of any series of preferred stock of the
Company, except that any issuance or reissuance of shares of
Series A Exchangeable Preferred Stock must be in compliance
with this Certificate.
(b) The shares of Series A Exchangeable Preferred
Stock shall be issuable only in whole shares.
(c) All notices referred to herein shall be in writing,
and, unless otherwise specified herein, all notices hereunder
shall be deemed to have been given upon the earlier of receipt
thereof or three Business Days after the date of mailing thereof
if sent by registered or certified mail (unless first-class mail
shall be specifically permitted for such notice under the terms
of this Certificate) with postage prepaid, addressed:
(i) if to the Company, to its office at 44 East Industrial
Road, Branford, CT 06405, Attention: Chief Executive Officer and
Chief Financial Officer, or (ii) if to any Holder, to such
Holder at the address of such Holder as listed in the Register,
or (iii) to such other address as the Company or any such
Holder, as the case may be, shall have designated by notice
similarly given. Any notice that was mailed in the manner herein
provided shall be conclusively presumed to have been duly given
whether or not the Holder receives the notice.
(d) If at any time the Company is required to make any
payment to a Holder pursuant to this Certificate, the Company
does not have sufficient funds legally available to make such
payment, the Company shall make as much of such required payment
as possible, ratably to each Holder in proportion to the number
of shares of Series A Exchangeable Preferred Stock held by
such Holder, and shall thereafter from time to time, as soon as
it shall have funds available therefor, make payment of as much
of the remaining amount of such required payment as it legally
may until it has made such payment in its entirety. For the
avoidance of doubt, such partial payments shall not reduce or
waive the rights of the Holders hereunder.
(e) The words hereby, herein,
hereof, hereunder and words of similar
import refer to this Certificate as a whole and not merely to
the specific section, paragraph or clause in which such word
appears. The words include, includes and
including shall be deemed to be followed by the
phrase without limitation. The definitions given for
terms in Section 2 and elsewhere in this Certificate shall
apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms.
(f) Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation
of any certificate evidencing any Series A Exchangeable
Preferred Stock owned by a Holder and (in the case of loss,
theft or destruction) of an unsecured indemnity satisfactory to
it, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation
of such certificate, if mutilated, the Company will make and
deliver in lieu of such certificate a new certificate of like
tenor and for the number of securities evidenced by such
certificate which remains outstanding.
Annex II-20
(g) Any of the rights of the Holders set forth herein
(including, without limitation, any rights to notices,
adjustments or otherwise) may be waived by (i) any Holder
with respect to such Holder, provided that such waiver is in
writing and executed by such Holder, and (ii) the written
consent of the Required Holders with respect to all Holders, and
such waiver shall be binding on all Holders; provided,
however, prior to the effective date of an amendment to
this Certificate approved by the Required Holders which
amendment amends the Applicable Terms, the Company shall give
each Holder five (5) Business Days notice to permit
such Holder to convert such Holders shares of
Series A Exchangeable Preferred Stock pursuant to
Section 7(a) herein, subject to any limitations in this
Certificate on the number of shares of Series A
Exchangeable Preferred Stock that may be converted.
Notwithstanding the foregoing, the Required Holders shall not
amend the foregoing proviso without the consent of each Holder
affected thereby.
Annex II-21
SPECIAL MEETING OF STOCKHOLDERS OF
CAS MEDICAL SYSTEMS, INC.
August _, 2011
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement and proxy card
are available at www.casmed.com
Please sign, date
and mail
your proxy card in the
envelope provided as soon
as possible.
↓ Please detach along perforated line and mail
in the envelope provided. ↓
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00030300300000000000 5
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
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Approval of the issuance of preferred stock convertible into more than 20% of CAS
Medical Systems, Inc. common stock outstanding, which would result in a change of control under applicable NASDAQ Listing Rules.
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Approval of the issuance of preferred stock convertible into more than 20% of CAS Medical Systems, Inc. common stock outstanding, which, in the future, may
convert at a price that is less than the greater of book or market value, requiring
stockholder approval under applicable NASDAQ Listing Rules.
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Approval of the adjournment of the special meeting, if necessary, to solicit additional proxies, in the event that there are not
sufficient votes at the time of the special meeting to constitute a quorum or to approve the foregoing proposals.
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This proxy, when properly executed, will be voted in the manner directed by the undersigned stockholder.
If no direction is made, this proxy will be voted FOR proposals 1, 2 and 3. Please sign exactly as name appears on the left.
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PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. |
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To change the address on your account, please check the box at right and indicate your new address in the address
space above. Please note that changes to the registered name(s)
on the account may not be submitted via this method. |
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Signature of
Stockholder |
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Signature of Stockholder
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly,
each holder should sign. When signing as executor, administrator, attorney, trustee or guardian,
please give full title as such. If the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.
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CAS MEDICAL SYSTEMS, INC.
44 East Industrial Road, Branford, Connecticut 06405
This Proxy is Solicited on Behalf of the Board
of Directors
The undersigned hereby appoints Thomas M. Patton and Jeffery A. Baird, and each of them, as the
true and lawful attorneys, agents and proxies of the undersigned, each with full power of
substitution, to represent and vote all shares of common stock of CAS Medical Systems, Inc. held of
record by the undersigned on July 6, 2011 at the Special Meeting of Stockholders to be held on
August _, 2011 and at any adjournment thereof, as specified on the reverse side of this proxy card
and in their discretion upon such other matters as may properly come before such Special Meeting
and at any adjournment thereof. Any and all proxies heretofore given are hereby revoked.
(Continued and to be signed on the reverse side)
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