ARTICLE III
REGISTERED
AGENT
The street address of the registered
office of the Corporation in the State of Delaware is 2711 Centerville Road,
Suite 400, in the City of Wilmington, County of New Castle, 19808, and the
name of the Corporations registered agent at such address is The Company
Corporation.
ARTICLE IV
CAPITALIZATION
Section 4.1 Authorized Capital
Stock.
The total number of shares of all
classes of capital stock which the Corporation is authorized to issue is
45,000,000 shares, consisting of 40,000,000 shares of common stock, par value
$0.01 per share (the Common Stock), and 5,000,000
shares of preferred stock, par value $0.001 per share (the
Preferred Stock).
No holder of stock of any class or
series of the Corporation, whether now or hereafter authorized or issued, shall
be entitled, as a matter of right, to subscribe for or purchase any part of any
new or additional issue of stock of any class or series whatsoever, or of any
securities convertible into stock of any class or series, or to which are
attached or with which are issued warrants or rights to purchase any such stock,
whether now or hereafter authorized, issued or sold, whether issued for moneys,
property or services, or by way of dividend or otherwise, or any right or
subscription to any thereof, other than such, if any, as the Board of Directors
in its discretion may from time to time fix, pursuant to authority hereby
conferred upon it; and any shares of stock or convertible obligations with
warrants or rights to purchase any such stock, which the Board of Directors may
determine to offer for subscription, may be sold without being first offered to
any of the holders of the stock of the Corporation of any class or classes or
series or may, as the Board may determine, be offered to holders of any class or
classes or series of stock exclusively or to the holders of all classes or
series of stock, and if offered to more than one class or series of stock, in
such proportions as between such classes or series of stock as the Board of
Directors, in its discretion, may determine.
Effective immediately upon the date of
filing of this Certificate with the Delaware Secretary of State, every three
(3) outstanding shares of Common Stock of the Corporation will be combined
into and automatically become one (1) outstanding share of Common Stock of
the Corporation and the authorized shares of the Corporation shall remain as set
forth in this Certificate. Any fractional shares that occurs as a result of the
foregoing shall be rounded up or down to the nearest whole number.
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Section 4.2 Preferred
Stock.
(a) The Preferred Stock may be
issued from time to time in one or more classes or series. The Board of
Directors (the Board) is hereby expressly authorized to provide
for the issuance of shares of Preferred Stock in one or more classes or series
and to establish from time to time the number of shares to be included in each
such class or series and to fix the designations, powers, preferences and
relative, participating, optional and other special rights, if any, of each such
class or series and the qualifications, limitations and restrictions thereof, as
shall be stated in the resolution(s) adopted by the Board providing for the
issuance of such class or series and included in a certificate of designations
(a Preferred Stock Designation) filed pursuant to the DGCL.
Without limiting the generality of the foregoing, the resolution or resolutions
providing for the establishment of any class or series of Preferred Stock may,
to the extent permitted by law, provide that such class or series shall be
superior to, rank equally with or be junior to the Preferred Stock of any other
class or series. Except as otherwise expressly provided in the resolution or
resolutions providing for the establishment of any class or series of Preferred
Stock, no vote of the holders of shares of Preferred Stock or Common Stock shall
be a prerequisite to the issuance of any shares of any class or series of the
Preferred Stock authorized by and complying with the conditions of this
Certificate.
(b) The number of authorized
shares of Preferred Stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock, without a vote
of the holders of the Preferred Stock, or any class or series thereof, unless a
vote of any such holders of Preferred Stock is required pursuant to another
provision of this Certificate (including any Preferred Stock Designation).
Section 4.3 Common Stock.
(a) The holders of shares of
Common Stock shall be entitled to one vote for each such share of Common Stock
held on each matter properly submitted to the stockholders on which the holders
of shares of Common Stock are entitled to vote. Except as otherwise required by
law or this Certificate (including any Preferred Stock Designation), at any
annual or special meeting of the stockholders the holders of outstanding shares
of Common Stock shall have the exclusive right to vote for the election of
directors and on all other matters properly submitted to a vote of the
stockholders. Notwithstanding the foregoing, except as otherwise required by law
or this Certificate (including a Preferred Stock Designation), holders of Common
Stock shall not be entitled to vote on any amendment to this Certificate
(including any amendment to any Preferred Stock Designation) that relates solely
to the terms of one or more outstanding class or series of Preferred Stock if
the holders of such affected class or series are entitled, either separately or
together with the holders of one or more other such class or series, to vote
thereon pursuant to this Certificate (including any Preferred Stock
Designation).
(b) Subject to the rights of the
holders of Preferred Stock, the holders of shares of Common Stock shall be
entitled to receive such dividends and other distributions (payable in cash,
property or capital stock of the Corporation) when, as and if declared thereon
by the Board from time to time out of any assets or funds of the Corporation
legally available therefor and shall share equally on a per share basis in such
dividends and distributions.
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(c) In the event of any voluntary
or involuntary liquidation, dissolution or winding-up of the Corporation, and
after payment or provision for payment of the debts and other liabilities of the
Corporation, and subject to the rights of the holders of Preferred Stock in
respect thereof, the holders of shares of Common Stock shall be entitled to
receive all the remaining assets of the Corporation available for distribution
to its stockholders, ratably in proportion to the number of shares of Common
Stock held by them.
ARTICLE V
BOARD OF
DIRECTORS
Section 5.1 Board Powers.
The business and affairs of the
Corporation shall be managed by, or under the direction of, the Board. In
addition to the powers and authority expressly conferred upon the Board by
statute, this Certificate or the By-Laws (By-Laws) of the
Corporation, the Board is hereby empowered to exercise all such powers and do
all such acts and things as may be exercised or done by the Corporation,
subject, nevertheless, to the provisions of the DGCL, this Certificate and any
By-Laws; provided, however, that no By-Laws hereafter adopted by the
stockholders shall invalidate any prior act of the Board that would have been
valid if such By-Laws had not been adopted.
Section 5.2 Number, Election
and Term.
(a) The number of directors of the
Corporation, other than those who may be elected by the holders of one or more
series of Preferred Stock voting separately by class or series, shall be fixed
from time to time exclusively by the Board pursuant to a resolution adopted by a
majority of the Whole Board. For purposes of this Certificate, Whole
Board shall mean the total number of directors the Corporation would
have if there were no vacancies.
(b) Subject to
Section 5.5, a director shall hold office until the annual meeting
for the year in which his or her term expires and until his or her successor has
been elected and qualified, subject, however, to such directors earlier death,
resignation, retirement, disqualification or removal.
(c) Unless and except to the
extent that the By-Laws shall so require, the election of directors need not be
by written ballot.
(d) There shall be no cumulative
voting in the election of directors.
Section 5.3 Newly Created
Directorships and Vacancies.
Subject to Section 5.5,
newly created directorships resulting from an increase in the number of
directors and any vacancies on the Board resulting from death, resignation,
retirement, disqualification, removal or other cause may be filled solely by a
majority vote of the directors then in office, even if less than a quorum, or by
a sole remaining director (and not by stockholders), and any director so chosen
shall hold office for the remainder of the term to which the new directorship
was added or in which the vacancy occurred and until his or her successor has
been elected and qualified, subject, however, to such directors earlier death,
resignation, retirement, disqualification or removal. No decrease in the number
of directors constituting the Board shall shorten the term of any incumbent
director.
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Section 5.4 Removal.
Subject to Section 5.5, any
or all of the directors may be removed from office at any time, but only for
cause and only by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the Corporation then entitled to vote
generally in the election of directors, voting together as a single class.
Section 5.5 Preferred Stock
Directors.
Notwithstanding any other provision of
this Article V, and except as otherwise required by law, whenever
the holders of one or more series of Preferred Stock shall have the right,
voting separately by class or series, to elect one or more directors, the term
of office, the filling of vacancies, the removal from office and other features
of such directorships shall be governed by the terms of such series of Preferred
Stock as set forth in this Certificate (including any Preferred Stock
Designation).
ARTICLE VI
BY-LAWS
In furtherance and not in limitation of
the powers conferred upon it by law, the Board is expressly authorized and
empowered to adopt, amend, alter or repeal the By-Laws. The affirmative vote of
a majority of the Whole Board shall be required to adopt, amend, alter or repeal
the By-Laws. The stockholders shall, to the extent such power is at the time
conferred on them by applicable law, also have the power, by the affirmative
vote of the holders of a majority of the outstanding shares of capital stock of
the Corporation then entitled to vote generally in the election of directors,
voting together as a single class, to make, alter, amend or repeal any By-Law of
the Corporation.
ARTICLE VII
MEETINGS OF
STOCKHOLDERS
Section 7.1 No Action by
Written Consent.
Except as otherwise required by the
specific terms of any class or series of Preferred Stock as set forth in the
Preferred Stock Designation with respect to such class or series, any action
required or permitted to be taken at any annual or special meeting of
stockholders may be taken only upon the vote of stockholders at an annual or
special meeting duly noticed and called in accordance with the DGCL as amended
from time to time, and may not be taken by written consent of stockholders
without a meeting.
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Section 7.2 Meetings.
Except as otherwise required by law or
the terms of any one or more series of Preferred Stock, special meetings of
stockholders of the Corporation may be called only by the Chairman of the Board,
the Chief Executive Officer, the President, or the Board pursuant to a
resolution adopted by a majority of the Whole Board, and the ability of the
stockholders to call a special meeting is hereby specifically denied.
Section 7.3 Advance Notice.
Advance notice of stockholder
nominations for the election of directors and of business to be brought by
stockholders before any meeting of the stockholders of the Corporation shall be
given in the manner provided in the By-Laws.
Section 7.4 Location.
Meetings of stockholders may be held
within or outside the State of Delaware, as the By-Laws may provide. The books
of the Corporation may be kept (subject to any provision contained in the
statues) outside of the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the By-Laws.
ARTICLE VIII
LIMITED
LIABILITY; INDEMNIFICATION
Section 8.1 Limitation of
Personal Liability.
No person who is or was a director of
the Corporation shall be personally liable to the Corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent such exemption from liability or limitation thereof is not
permitted by the DGCL as the same exists or hereafter may be amended. If the
DGCL is hereafter amended to authorize corporate action further limiting or
eliminating the liability of directors, then the liability of a director to the
Corporation or its stockholders shall be limited or eliminated to the fullest
extent permitted by the DGCL, as so amended. Any repeal or amendment of this
Section 8.1 by the stockholders of the Corporation or by changes in
law, or the adoption of any other provision of this Certificate inconsistent
with this Section 8.1 will, unless otherwise required by law, be
prospective only (except to the extent such amendment or change in law permits
the Corporation to further limit or eliminate the liability of directors) and
shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or amendment or adoption of such
inconsistent provision with respect to acts or omissions occurring prior to such
repeal or amendment or adoption of such inconsistent provision.
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Section 8.2
Indemnification.
(a) Each person who is or was made
a party or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
proceeding) by reason of the fact that he or she is or was a
director or officer of the Corporation or, while a director or officer of the
Corporation, is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter a Covered Person), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent, or in any other capacity while serving as
a director, officer, employee or agent, shall be indemnified and held harmless
by the Corporation to the fullest extent authorized or permitted by applicable
law, as the same exists or may hereafter be amended, against all expense,
liability and loss (including, without limitation, attorneys fees, judgments,
fines, ERISA excise taxes and penalties and amounts paid in settlement)
reasonably incurred or suffered by such Covered Person in connection with such
proceeding, and such right to indemnification shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators; provided,
however, that, except for proceedings to enforce rights to
indemnification, the Corporation shall indemnify a Covered Person in connection
with a proceeding (or part thereof) initiated by such Covered Person only if
such proceeding (or part thereof) was authorized by the Board. The right to
indemnification and advancement of expenses conferred by this
Section 8.2 shall be a contract right and shall include the right to
be paid by the Corporation the expenses incurred in defending or otherwise
participating in any such proceeding in advance of its final disposition to the
fullest extent authorized by the DGCL as the same exists or is hereafter
amended.
(b) The rights conferred on any
Covered Person by this Section 8.2 shall not be exclusive of any
other rights which any Covered Person may have or hereafter acquire under law,
this Certificate, the By-Laws, an agreement, vote of stockholders or
disinterested directors, or otherwise.
(c) Any repeal or amendment of
this Section 8.2 by the stockholders of the Corporation or by
changes in law, or the adoption of any other provision of this Certificate
inconsistent with this Section 8.2, will, unless otherwise required
by law, be prospective only (except to the extent such amendment or change in
law permits the Corporation to provide broader indemnification rights on a
retroactive basis than permitted prior thereto), and will not in any way
diminish or adversely affect any right or protection existing at the time of
such repeal or amendment or adoption of such inconsistent provision in respect
of any act or omission occurring prior to such repeal or amendment or adoption
of such inconsistent provision.
(d) This Section 8.2
shall not limit the right of the Corporation, to the extent and in the manner
authorized or permitted by law, to indemnify and to advance expenses to persons
other than Covered Persons, provided, however, that if the DGCL requires or
permits the payment of such expenses incurred by a Covered Person as set forth
herein in advance of the final disposition of a proceeding, such payment shall
be made only upon delivery to the Corporation of an undertaking, by or on behalf
of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director of officer is not entitled to be
indemnified under this Section or otherwise.
(e) The Corporation may, by action
of its Board, provide indemnification and the advancement of expenses to such of
the officers, employees and agents of the Corporation and such other persons
serving at the request of the Corporation as officers, employees and agents of
another corporation, partnership, joint venture, limited liability company,
trust or other enterprise to such extent as is permitted by the laws of the
State of Delaware as the same exists or is hereafter amended and the Board shall
determine to be appropriate.
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(f) The Corporation shall have
power to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, limited liability company,
trust or other enterprise against any expense, liability or loss incurred by
such person in any such capacity or arising out of his status as such, whether
or not the Corporation would have the power to indemnify such person against
such liability under Delaware law.
(g) The rights and authority
conferred in this Article VIII shall not be exclusive of any other right
which any person may otherwise have or hereafter acquire.
ARTICLE IX
AMENDMENT OF
CERTIFICATE OF INCORPORATION
The Corporation reserves the right at
any time and from time to time to amend, alter, change or repeal any provision
contained in this Certificate (including any Preferred Stock Designation), and
any other provisions authorized by the laws of the State of Delaware at the time
in force may be added or inserted, in the manner now or hereafter prescribed by
this Certificate, the By-Laws or the DGCL; and, except as set forth in
Article VIII, all rights, preferences and privileges herein
conferred upon stockholders, directors or any other persons by and pursuant to
this Certificate in its present form or as hereafter amended are granted subject
to the right reserved in this Article; provided, however, that,
notwithstanding any other provision of this Certificate, and in addition to any
other vote that may be required by law or any Preferred Stock Designation, the
affirmative vote of the holders of a majority of the voting power of all then
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to amend, alter or repeal, or adopt any provision as part of this
Certificate.
ARTICLE X
SECTION 203 OF
THE DGCL
The Corporation elects not to be
governed by Section 203 of the DGCL.
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ARTICLE XII
SECTION 102(B)(2)
OF THE DGCL
Whenever a compromise or arrangement is
proposed between this Corporation and its creditors or any class of them and/or
between this Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this corporation
under §291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
§279 of Title 8 of the Delaware Code order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
IN WITNESS WHEREOF, VeriChip
Corporation has caused this Certificate to be duly executed in its name and on
its behalf by its Chief Executive Officer this 18th day of December, 2006.
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VERICHIP CORPORATION |
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By: |
/s/
Scott R. Silverman |
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Scott R. Silverman, Chief Executive
Officer |
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9
VERICHIP CORPORATION
CERTIFICATE OF
DESIGNATIONS OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES A
PREFERRED STOCK
The undersigned, Scott
R. Silverman and William J. Caragol hereby certify that:
1. They are the Chief Executive
Officer and Acting Chief Financial Officer, respectively, of VeriChip
Corporation, a Delaware corporation (the Corporation).
2. The Corporation is authorized
to issue 5,000,000 shares of preferred stock, none of which shares are issued
and outstanding.
3. The following resolutions were
duly adopted by the Board of Directors:
WHEREAS, the Certificate of
Incorporation of the Corporation provides for a class of its authorized stock
known as preferred stock, comprised of 5,000,000 shares, $0.001 par value per
share (the Preferred Stock), issuable from time to time in one or more
series;
WHEREAS, the Board of Directors of the
Corporation is authorized to fix the dividend rights, dividend rate, voting
rights, conversion rights, rights and terms of redemption and liquidation
preferences of any wholly unissued series of Preferred Stock and the number of
shares constituting any Series A and the designation thereof, of any of
them; and
WHEREAS, it is the desire of the Board
of Directors of the Corporation, pursuant to its authority as aforesaid, to fix
the rights, preferences, restrictions and other matters relating to a series of
Preferred Stock, which shall consist of up to 2,000 shares of the Preferred
Stock which the Corporation has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that
the Board of Directors does hereby provide for the issuance of a series of
Preferred Stock for cash or exchange of other securities, rights or property and
does hereby fix and determine the rights, preferences, restrictions and other
matters relating to such series of Preferred Stock as follows:
TERMS OF PREFERRED
STOCK
1. Designation, Amount and Par
Value. The series of Preferred Stock shall be designated as the
Corporations Series A Preferred Stock (the Series A Preferred
Stock) and the number of shares so designated shall be 2,000, which shall
not be subject to increase without any consent of the holders of the
Series A Preferred Stock (each a Holder and collectively, the
Holders) as required by applicable law. Each share of Series A
Preferred Stock shall have a par value of $0.001 per share.
2. Ranking and Voting. The
Series A Preferred Stock shall, with respect to rights upon liquidation,
winding-up or dissolution, rank:
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a. senior
to the Corporations common stock, par value $0.01 per share (Common
Stock), and any other class or series of Preferred Stock of the Corporation
(collectively, together with any warrants, rights, calls or options exercisable
for or convertible into such Preferred Stock, the Junior Shares); and
b. junior
to all existing and future indebtedness of the Corporation.
Except as required by applicable law,
the holders of shares of Series A Preferred Stock will have no right to
vote on any matters, questions or proceedings of this Corporation including,
without limitation, the election of directors.
3. Dividends and Other
Distributions. Commencing on the first anniversary of the date of the
issuance of any such shares of Series A Preferred Stock (each respectively
an Issuance Date), Holders of Series A Preferred Stock shall be
entitled to receive dividends on each outstanding share of Series A
Preferred Stock (Dividends), which shall accrue in shares of
Series A Preferred Stock at a rate equal to 10.0% per annum from the
Issuance Date. Accrued Dividends shall be payable annually on the anniversary of
the Issuance Date. No dividend shall be payable with respect to shares of
Series A Preferred Stock that are redeemed for cash or converted into
shares of Common Stock prior to the first anniversary of the Issuance Date with
respect to such shares.
a. Any
calculation of the amount of such Dividends payable pursuant to the provisions
of this Section 3 shall be made based on a 365-day year and on the
number of days actually elapsed during the applicable calendar quarter,
compounded annually.
b. So
long as any shares of Series A Preferred Stock are outstanding, no
dividends or other distributions will be paid, declared or set apart with
respect to any Junior Shares. The Common Stock shall not be redeemed while the
Series A Preferred Stock is outstanding.
4. Conversion.
a.
Mechanics of Conversion.
(i) Subject
to the terms and conditions hereof, one or more of the Series A Preferred
Stock may be converted into shares of Common Stock, at any time or times on or
after (but not before) the six-month anniversary of the issuance date of such
Series A Preferred Stock, at the option of Holder or the Company, by
(i) if at the option of Holder, delivery of a written notice to the
Company, in the form attached hereto as Exhibit A-1 (the Holder
Conversion Notice), of the Holders election to convert the Series A
Preferred Stock, or (ii) if at the option of the Company, delivery of a
written notice to Holder, in the form attached hereto as Exhibit A-2
(the Company Conversion Notice and, with the Holder Conversion Notice,
each a Conversion Notice), of the Companys election to convert the
Series A Preferred Stock. On the same Trading Day on which the Company has
received the Holder Conversion Notice or issued the Company Conversion Notice
(as the case may be) by 10:30 a.m. Eastern time, or the following Trading
Day if received after such time or on a non-Trading Day, the Company shall
transmit by facsimile or electronic mail an acknowledgment of confirmation of
receipt of the Holder Conversion Notice or issuance of the Company Conversion
Notice to the Holder and the Companys transfer agent (the Transfer
Agent) and shall authorize the credit by the Transfer Agent of such
aggregate number of Conversion Shares to which the Holder is entitled pursuant
to such Conversion Notice to Holders or its designees balance account with The
Depository Trust Company (DTC) Fast Automated Securities Transfer
(FAST) Program, through its Deposit/Withdrawal at Custodian
(DWAC) system, time being of the essence.
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(ii) No
fractional shares of Common Stock are to be issued upon conversion of
Series A Preferred Stock, but rather the Company shall issue to Holder
scrip or warrants in registered form (certificated or uncertificated) which
shall entitle Holder to receive a full share upon the surrender of such scrip or
warrants aggregating a full share.
(iii) The
Holder shall not be required to deliver the original certificates for the
Series A Preferred Stock in order to effect a conversion hereunder.
(iv) The
Company shall pay any and all taxes which may be payable with respect to the
issuance and delivery of Conversion Shares to Holder.
b.
Company Conversion. In the event of a conversion of any Series A
Preferred Stock pursuant to a Company Conversion Notice, the Company shall issue
to the Holder of such Series A Preferred Stock a number of Conversion
Shares equal to (x) the Series A Liquidation Value multiplied
by (y) the number of such Series A Preferred Stock subject to the
Company Conversion Notice divided by (z) the Conversion Price with
respect to such Series A Preferred Stock. If the Company exercises this
conversion option with respect to any Series A Preferred Stock (other than
Series A Preferred Stock issued as a dividend with respect to Series A
Preferred Stock) prior to the fourth anniversary of the issuance of such shares,
then in addition to the Conversion Shares to be issued in accordance with the
preceding sentence, the Company shall pay to such Holder an additional number of
Conversion Shares equal to the following with respect to such converted
Series A Preferred Stock (other than Series A Preferred Stock issued
as a dividend with respect to Series A Preferred Stock): (i) 35% of
the Conversion Shares issuable in respect of such Series A Preferred Stock
(other than Series A Preferred Stock issued as a dividend with respect to
Series A Preferred Stock) if converted after the six-month anniversary of
the Issuance Date but prior to the first anniversary of the Issuance Date,
(ii) 27% of the Conversion Shares issuable in respect of such Series A
Preferred Stock (other than Series A Preferred Stock issued as a dividend
with respect to Series A Preferred Stock) if converted on or after the
first anniversary but prior to the second anniversary of the Issuance Date,
(iii) 18% of the Conversion Shares issuable in respect of such
Series A Preferred Stock (other than Series A Preferred Stock issued
as a dividend with respect to Series A Preferred Stock) if converted on or
after the second anniversary but prior to the third anniversary of the Issuance
Date, and (iv) 9% of the Conversion Shares issuable in respect of such
Series A Preferred Stock (other than Series A Preferred Stock issued
as a dividend with respect to Series A Preferred Stock) if converted on or
after the third anniversary but prior to the fourth anniversary of the Issuance
Date.
c.
Holder Conversion. In the event of a conversion of any Series A
Preferred Stock pursuant to an Holder Conversion Notice, the Company shall issue
to the Holder of such Series A Preferred Stock a number of Conversion
Shares equal to (x) the Series A Liquidation Value multiplied
by (y) the number of such Series A Preferred Stock subject to the
Company Conversion Notice divided by (z) the Conversion Price with
respect to such Series A Preferred Stock.
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d. If the
Company at any time on or after the date of issuance of any Preferred Stock
subdivides (by any stock split, stock dividend, recapitalization or otherwise)
one or more classes of its outstanding shares of Common Stock into a greater
number of shares, the Conversion Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of Conversion Shares
will be proportionately increased. If the Company at any time on or after such
issuance date combines (by combination, reverse stock split or otherwise) one or
more classes of its outstanding shares of Common Stock into a smaller number of
shares, the Conversion Price in effect immediately prior to such combination
will be proportionately increased and the number of Conversion Shares will be
proportionately decreased. Any adjustment under this Section 4.c
shall become effective at the close of business on the date the subdivision or
combination becomes effective.
e. In
addition to any adjustments pursuant to Section 4.c if at any time
the Company grants, issues or sells any Options, Convertible Securities or
rights to purchase stock, warrants, securities or other property pro rata to the
record holders of any class of shares of Common Stock (the Purchase
Rights), then Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which Holder could have
acquired if Holder had held the number of shares of Common Stock acquirable upon
conversion of all Preferred Stock held by Holder immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
f.
Definitions. For purposes of this Section 4, the following terms
shall have the following meanings:
(i) The
Conversion Price means a price per share equal to the Closing Bid Price
of a share of Common Stock on the Trading Day immediately preceding the date of
the applicable Tranche Notice Date, subject to adjustment herein.
(ii)
Conversion Shares means the shares of Common Stock issuable upon
conversion of Series A Preferred Stock.
(iii) The
Closing Bid Price means, for any security as of any date, the last
closing bid price for such security on the Trading Market, as reported by
Bloomberg, or, if the Trading Market begins to operate on an extended hours
basis and does not designate the closing bid price, then the last bid price of
such security prior to 4:00 p.m., Eastern time, as reported by Bloomberg, or, if
the Trading Market is not the principal securities exchange or trading market
for such security, the last closing bid price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last closing bid
price of such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing bid price is
reported for such security by Bloomberg, the average of the bid prices of any
market makers for such security as reported in the pink sheets by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Closing Bid Price of such security on such date shall be the fair
market value as mutually determined by the Company and the holder.
4
(iv) A
Trading Day means any day on which the Common Stock is traded on the
Trading Market; provided that it shall not include any day on which the Common
Stock is (a) scheduled to trade for less than 5 hours, or
(b) suspended from trading.
(v) The
Trading Market means the OTC Bulletin Board, the NASDAQ Capital Market,
the NASDAQ Global Market, the NASDAQ Global Select Market, the NYSE Amex, or the
New York Stock Exchange, whichever is at the time the principal trading exchange
or market for the Common Stock, but does not include the Pink Sheets
inter-dealer electronic quotation and trading system.
(vi) A
Tranche Notice Date with respect to a Series A Preferred Share
shall mean the Tranche Notice Date established for the issuance of such
Series A Preferred Stock under the stock purchase agreement pursuant to
which such Series A Preferred Share was issued to the Holder thereof.
g.
Failure to Timely Deliver Conversion Shares. If the Company shall fail
(through no fault of Holder) to timely authorize the credit of the Holders
balance account with DTC for such number of Conversion Shares to which the
Holder is entitled pursuant to a Conversion Notice, then, in addition to all
other remedies available to Holder, the Company shall, subject to the
availability of lawful funds therefor, pay in cash to Holder on each day that
the issuance of such Conversion Shares is not timely effected an amount equal to
1.5% of the product of (A) the sum of the number of Conversion Shares not
issued to Holder on a timely basis and to which Holder is entitled and
(B) the Closing Bid Price of the shares of Common Stock on the Trading Day
immediately preceding the last possible date which the Company could have issued
such Conversion Shares to Holder without violating any other restrictions on the
issuance of Conversion Shares to the Holder, including the foregoing clause
(h) below. In addition to the foregoing, if after the Companys receipt of
the applicable conversion delivery documents the Company shall fail (through no
fault of Holder) to timely authorize the credit of the Holders balance account
with DTC for the number of Conversion Shares to which the Holder is entitled
upon the Holders exercise hereunder, and the Holder purchases (in an open
market transaction or otherwise) shares of Common Stock to deliver in
satisfaction of a sale by the Holder of Conversion Shares issuable upon such
exercise that the Holder anticipated receiving from the Company, then the
Company shall, within one Trading Day after the Holders request and in the
Holders discretion, either (i) pay cash, subject to the availability of
lawful funds therefor, to the Holder in an amount equal to the Holders total
purchase price (including brokerage commissions, if any) for the shares of
Common Stock so purchased (the Buy-In Price), at which point the
Companys obligation to credit such Holders balance account with DTC for the
number of Conversion Shares to which the Holder is entitled upon the Holders
exercise hereunder and to issue such Conversion Shares shall terminate, or
(ii) promptly honor its obligation to credit such Holders balance account
with DTC for the number of Conversion Shares to which the Holder is entitled
upon the Holders exercise hereunder and pay cash, subject to the availability
of lawful funds therefor, to the Holder in an amount equal to the excess (if
any) of the Buy-In Price over the product of (A) such number of shares of
Common Stock sold by Holder in satisfaction of its obligations, times
(B) the Closing Bid Price on the date of exercise.
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h.
Conversion Limitation. Notwithstanding any other provision in this
Agreement, at no time may the Company or Holder deliver a Conversion Notice if
the number of Conversion Shares to be received pursuant to such Conversion
Notice, aggregated with all other shares of Common Stock then beneficially (or
deemed beneficially) owned by Holder, would result in Holder owning, on the date
of delivery of the Conversion Notice, more than 9.99% of all Common Stock
outstanding as determined in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder. In addition, as of any
date, the aggregate number of shares of Common Stock into which the Preferred
Stock are convertible within 61 days, together with all other shares of
Common Stock then beneficially (or deemed beneficially) owned (as determined
pursuant to Rule 13d-3 under the Exchange Act) by Holder and its affiliates
(as such term is defined in Rule 12b-2 under the Exchange Act), shall not
exceed 9.99% of the total outstanding shares of Common Stock as of such date.
i.
Disputes. In the case of a dispute as to the determination of the
Conversion Price or the arithmetic calculation of the number of Conversion
Shares issued or issuable hereunder, the Company shall promptly issue to Holder
the number of Conversion Shares that are not disputed and resolve such dispute
as follows. The Company shall submit the disputed determinations or arithmetic
calculations via facsimile or electronic mail within two (2) Trading Days
of delivery of the Conversion Notice giving rise to such dispute, as the case
may be, to Holder. If Holder and the Company are unable to agree upon such
determination or calculation of the Conversion Price or the number of Conversion
Shares within three (3) Trading Days of such disputed determination or
arithmetic calculation being submitted to Holder, then the Company shall, within
two (2) Trading Days, submit via facsimile or electronic mail (a) the
disputed determination of the Conversion Price or arithmetic calculation to an
independent, reputable investment bank or independent registered public
accounting firm selected by Holder subject to the Companys approval, which may
not be unreasonably withheld or delayed, or (b) the disputed arithmetic
calculation to the Companys independent registered public accounting firm. The
Company shall cause at its expense the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and notify the
Company and Holder of the results no later than three (3) Trading Days from
the time it receives the disputed determinations or calculations. Such
investment banks or accountants determination or calculation, as the case may
be, shall be binding upon all parties absent demonstrable error.
5. Liquidation.
a. Upon
any liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, after payment or provision for payment of debts and other
liabilities of the Corporation, before any distribution or payment shall be made
to the holders of any Junior Shares by reason of their ownership thereof, the
Holders of Series A Preferred Stock shall first be entitled to be paid out
of the assets of the Corporation available for distribution to its stockholders
an amount with respect to each share of Series A Preferred Stock equal to
$10,000.00 (the Series A Liquidation Value). If, upon any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the amounts payable with respect to the shares of Series A
Preferred Stock are not paid in full, the holders of shares of Series A
Preferred Stock shall share equally and ratably in any distribution of assets of
the Corporation in proportion to the liquidation preference to which each such
holder is entitled.
6
b. After
payment has been made to the Holders of the Series A Preferred Stock of the
full amount of the Series A Liquidation Value, any remaining assets of the
Corporation shall be distributed among the holders of the Junior Shares in
accordance with the Corporations Certificates of Designations and Certificate
of Incorporation.
c. If,
upon any liquidation, dissolution or winding up of the Corporation, the assets
of the Corporation shall be insufficient to make payment in full to all Holders,
then such assets shall be distributed among the Holders at the time outstanding,
ratably in proportion to the full amounts to which they would otherwise be
respectively entitled.
6. Redemption. The Company
may redeem, for cash, any or all of the Series A Preferred Stock at any
time at the redemption price per share equal to the Series A Liquidation
Value, plus any accrued but unpaid dividends with respect to such shares of
Series A Preferred Stock (the Redemption Price). If the Company
exercises this redemption option with respect to any Series A Preferred
Stock (other than shares of Series A Preferred Stock issued as a dividend
with respect to shares of Series A Preferred Stock) prior to the fourth
anniversary of the issuance of such shares, then in addition to the Redemption
Price, the Company shall pay to holder a make-whole price per share equal to the
following with respect to such redeemed shares (other than shares of
Series A Preferred Stock issued as a dividend with respect to shares of
Series A Preferred Stock): (i) 35% of the Series A Liquidation
Value if redeemed prior to the first anniversary of the Issuance Date,
(ii) 27% of the Series A Liquidation Value if redeemed on or after the
first anniversary but prior to the second anniversary of the Issuance Date,
(iii) 18% of the Series A Liquidation Value if redeemed on or after
the second anniversary but prior to the third anniversary of the Issuance Date,
and (iv) 9% of the Series A Liquidation Value if redeemed on or after
the third anniversary but prior to the fourth anniversary of the Issuance Date.
7. Transferability. The
Series A Preferred Stock may only be sold, transferred, assigned, pledged
or otherwise disposed of (Transfer) in accordance with state and
federal securities laws. The Corporation shall keep at its principal office, or
at the offices of the Transfer Agent, a register of the Series A Preferred
Stock. Upon the surrender of any certificate representing Series A
Preferred Stock at such place, the Corporation, at the request of the record
Holder of such certificate, shall execute and deliver (at the Corporations
expense) a new certificate or certificates in exchange therefor representing in
the aggregate the number of shares represented by the surrendered certificate.
Each such new certificate shall be registered in such name and shall represent
such number of shares as is requested by the Holder of the surrendered
certificate and shall be substantially identical in form to the surrendered
certificate.
8. Miscellaneous.
a.
Notices. Any and all notices to the Corporation shall be addressed to the
Corporations Chief Executive Officer or Chief Financial Officer at the
Corporations principal place of business on file with the Secretary of State of
the State of Delaware. Any and all notices
7
or other communications
or deliveries to be provided by the Corporation to any Holder hereunder shall be
in writing and delivered personally, by facsimile, sent by a nationally
recognized overnight courier service addressed to each Holder at the facsimile
telephone number or address of such Holder appearing on the books of the
Corporation, or if no such facsimile telephone number or address appears, at the
principal place of business of the Holder. Any notice or other communication or
deliveries hereunder shall be deemed given and effective on the earliest of (i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this section prior to
5:30 p.m. Eastern time, (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this section later than 5:30 p.m. but prior to
11:59 p.m. Eastern time on such date, (iii) the second business day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.
b.
Lost or Mutilated Preferred Stock Certificate. Upon receipt of evidence
reasonably satisfactory to the Corporation (an affidavit of the registered
Holder shall be satisfactory) of the ownership and the loss, theft, destruction
or mutilation of any certificate evidencing shares of Series A Preferred
Stock, and in the case of any such loss, theft or destruction upon receipt of
indemnity reasonably satisfactory to the Corporation (provided that if the
Holder is a financial institution or other institutional investor its own
agreement shall be satisfactory) or in the case of any such mutilation upon
surrender of such certificate, the Corporation shall, at its expense, execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of such series represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
c.
Headings. The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designations and shall not be deemed to
limit or affect any of the provisions hereof.
RESOLVED, FURTHER, that the chairman,
chief executive officer, president, chief financial officer, or any
vice-president, and the secretary or any assistant secretary, of the Corporation
be and they hereby are authorized and directed to prepare and file a Certificate
of Designations of Preferences, Rights and Limitations of Series A
Preferred Stock in accordance with the foregoing resolution and the provisions
of Delaware law.
8
IN WITNESS WHEREOF, the undersigned
have executed this Certificate this 29th day of September 2009.
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/s/ Scott R. Silverman |
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Name: |
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Scott R. Silverman |
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Title: |
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Chief Executive Officer |
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By: |
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/s/ William J. Caragol |
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Name: |
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William J. Caragol |
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Acting Chief Financial Officer |
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9
Exhibit A-1
Form of Investor
Conversion Notice
INVESTOR CONVERSION
NOTICE
The undersigned hereby exercises the
right to purchase ____________ shares of Common Stock (Conversion
Shares) of VeriChip Corporation, a Delaware corporation (Company),
upon conversion of ____________ shares of Series A Preferred Stock.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Convertible Preferred Stock Purchase
Agreement dated September 29, 2009, by and between the Company and the
Investor referred to therein.
Unless otherwise instructed by the
holder, the Company will issue said shares in electronic form to the
Deposit/Withdrawal at Custodian (DWAC) account of the holder with
Depository Trust Company (DTC) pursuant to account information previously
provided to Company by the holder.
Exhibit A-2
Form of Company
Conversion Notice
VeriChip Corporation, a Delaware
corporation (Company) hereby exercises the right to cause the purchase
of ____________ shares of its Common Stock (Conversion Shares), upon
conversion of ____________ shares of Series A Preferred Stock of the
Company held by the holder thereof. Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the
Convertible Preferred Stock Purchase Agreement dated September 29, 2009, by
and between the Company and the Investor referred to therein.
Unless otherwise instructed by the
holder, the Company will issue said shares in electronic form to the
Deposit/Withdrawal at Custodian (DWAC) account of the holder with
Depository Trust Company (DTC) pursuant to account information previously
provided to Company by the holder.
VERICHIP CORPORATION
POSITIVEID
CORPORATION
CERTIFICATE OF DESIGNATIONS
OF PREFERENCES, RIGHTS AND
LIMITATIONS
OF
SERIES B PREFERRED
STOCK
The undersigned, Scott
R. Silverman and William J. Caragol hereby certify that:
1. They are the Chief Executive Officer and President and Chief
Financial Officer, respectively, of PositiveID Corporation, a Delaware
corporation (the Corporation).
2. The Corporation is authorized to issue 5,000,000 shares of
preferred stock.
3. The following resolutions were duly adopted by the Board of
Directors:
WHEREAS, the Certificate of Incorporation of the Corporation provides
for a class of its authorized stock known as preferred stock, comprised of
5,000,000 shares, $0.001 par value per share (the Preferred Stock),
issuable from time to time in one or more series, of which 2,000 shares have
previously been designed as Series A Preferred Stock, with 462 shares of
Series A Preferred Stock currently issued and outstanding;
WHEREAS, the Board of Directors of the Corporation is authorized to
fix the dividend rights, dividend rate, voting rights, conversion rights, rights
and terms of redemption and liquidation preferences of any wholly unissued
series of Preferred Stock and the number of shares constituting any series and
the designation thereof, of any of them; and
WHEREAS, it is the desire of the Board of Directors of the
Corporation, pursuant to its authority as aforesaid, to fix the rights,
preferences, restrictions and other matters relating to a series of Preferred
Stock, which shall consist of up to 1,600 shares of the Preferred Stock which
the Corporation has the authority to issue, with face value of $10,000.00 per
share, as follows:
NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for
the issuance of a series of Preferred Stock for cash or exchange of other
securities, rights or property and does hereby fix and determine the rights,
preferences, restrictions and other matters relating to such series of Preferred
Stock as follows:
TERMS OF PREFERRED
STOCK
1. Designation, Amount and Par Value. The series of
Preferred Stock shall be designated as the Corporations Series B Preferred
Stock (the Series B Preferred Stock) and the number of shares so
designated shall be 1,600 (which shall not be subject to increase without any
consent of the holders of the Series B Preferred Stock (each a
Holder and collectively, the Holders) that may be required by
applicable law. Each share of Series B Preferred Stock shall have a par value of
$0.001 per share.
2. Ranking and Voting.
a. Ranking. The Series B Preferred Stock shall, with
respect to dividend rights and rights upon liquidation, winding-up or
dissolution, rank: (i) senior to the Corporations common stock, par value
$0.01 per share (Common Stock), and any other class or series of
preferred stock of the Corporation except as set forth in clause (ii) below
(collectively, together with any warrants, rights, calls or options exercisable
for or convertible into such Preferred Stock, the Junior Securities);
and (ii) junior to the Series A Preferred Stock and all existing and
future indebtedness of the Corporation (the Senior Securities).
b. Voting. Except as required by applicable law or as set
forth herein, the holders of shares of Series B Preferred Stock will have
no right to vote on any matters, questions or proceedings of this Corporation
including, without limitation, the election of directors.
3. Dividends and Other Distributions. Commencing on the
date of the issuance of any such shares of Series B Preferred Stock (each
respectively an Issuance Date), Holders of Series B Preferred
Stock shall be entitled to receive annual dividends on each outstanding share of
Series B Preferred Stock (Dividends), which shall accrue in shares
of Series B Preferred Stock at a rate equal to 10.0% per annum from
the Issuance Date. Accrued Dividends shall be payable upon redemption of the
Series B Preferred Stock in accordance with Section 6.
a. Any calculation of the amount of such Dividends payable
pursuant to the provisions of this Section 3 shall be made based on
a 365-day year and on the number of days actually elapsed during the applicable
period, compounded annually.
b. So long as any shares of Series A Preferred Stock are
outstanding, no dividends or other distributions will be paid, declared or set
apart with respect to the Series B Preferred Stock or any Junior
Securities.
4. Protective Provision. So long as any shares of
Series B Preferred Stock are outstanding, the Corporation shall not,
without the affirmative approval of the Holders of a majority of the shares of
the Series B Preferred Stock then outstanding (voting as a class) where
such vote is required by applicable law: (a) alter or change adversely the
powers, preferences or rights given to the Series B Preferred Stock or
alter or amend this Certificate of Designations, (b) authorize or create
any class of stock ranking as to distribution of assets upon a liquidation
senior to or otherwise pari passu with the Series B Preferred Stock,
(c) amend its certificate of incorporation or other charter documents in
breach of any of the provisions hereof, (d) increase the authorized number
of shares of Series B Preferred Stock, or (e) liquidate, dissolve or
wind-up the business and affairs of the Corporation, or effect any Deemed
Liquidation Event (as defined below).
a. A Deemed Liquidation Event shall mean: (i) a
merger or consolidation in which the Corporation is a constituent party or a
subsidiary of the Corporation is a constituent party and the Corporation issues
shares of its capital stock pursuant to such merger or consolidation, except any
such merger or consolidation involving the Corporation or a subsidiary in which
the shares of capital stock of the Corporation outstanding immediately prior to
such merger or consolidation continue to represent, or are converted into or
exchanged for shares of capital stock that represent, immediately following such
merger or consolidation, at least a majority, by voting power, of the capital
stock of the surviving or resulting corporation or if the surviving or resulting
corporation is a wholly owned subsidiary of another corporation immediately
following such merger or consolidation, the parent corporation of such surviving
or resulting corporation; or (ii) the sale, lease, transfer, exclusive
license or other disposition, in a single transaction or series of related
transactions, by the Corporation or any subsidiary of the Corporation of all or
substantially all the assets of the Corporation and its subsidiaries taken as a
whole, or the sale or disposition (whether by merger or otherwise) of one or
more subsidiaries of the Corporation if substantially all of the assets of the
Corporation and its subsidiaries taken as a whole are held by such subsidiary or
subsidiaries, except where such sale, lease, transfer, exclusive license or
other disposition is to a wholly-owned subsidiary of the Corporation.
b. The Corporation shall not have the power to effect a Deemed
Liquidation Event referred to in Section 4(a) unless the agreement
or plan of merger or consolidation for such transaction provides that the
consideration payable to the stockholders of the Corporation shall be allocated
among the holders of capital stock of the Corporation in accordance with
Section 5.
5. Liquidation.
a. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after payment or provision for
payment of debts and other liabilities of the Corporation and any liquidation
preferences to the Senior Securities, before any distribution or payment shall
be made to the holders of any Junior Securities by reason of their ownership
thereof, the Holders of Series B Preferred Stock shall first be entitled to
be paid out of the assets of the Corporation available for distribution to its
stockholders an amount with respect to each outstanding share of Series B
Preferred Stock equal to $10,000.00 (the Original Series B Issue
Price), plus any accrued but unpaid Dividends thereon (collectively, the
Series B Liquidation Value). If, upon any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the amounts
payable with respect to the shares of Series B Preferred Stock are not paid
in full, the holders of shares of Series B Preferred Stock shall share
equally and ratably in any distribution of assets of the Corporation in
proportion to the liquidation preference and an amount equal to all accumulated
and unpaid Dividends, if any, to which each such holder is entitled.
b. After payment has been made to the Holders of the
Series B Preferred Stock of the full amount of the Series B
Liquidation Value, any remaining assets of the Corporation shall be distributed
among the holders of the Corporations Junior Securities in accordance with the
Corporations Certificates of Designations and Certificate of Incorporation.
c. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation shall be insufficient to make payment
in full to all Holders, then such assets shall be distributed among the Holders
at the time outstanding, ratably in proportion to the full amounts to which they
would otherwise be respectively entitled.
6. Redemption.
a. Corporations Redemption Option. Upon or after the
fourth anniversary of the initial Issuance Date, the Corporation shall have the
right, at the Corporations option, to redeem all or a portion of the shares of
Series B Preferred Stock, at a price per share equal to 100% of the
Series B Liquidation Value (the Corporation Redemption Price).
b. Early Redemption. Prior to redemption pursuant to
Section 6(a) hereof, the Corporation shall have the right, at the
Corporations option, to redeem all or a portion of the shares of Series B
Preferred Stock, at a price per share equal to the Corporation Redemption Price
plus: (i) 35% of the Series B Liquidation Value if redeemed prior to
the first anniversary of the Issuance Date, (ii) 27% of the Series B
Liquidation Value if redeemed on or after the first anniversary but prior to the
second anniversary of the Issuance Date, (iii) 18% of the Series B
Liquidation Value if redeemed on or after the second anniversary but prior to
the third anniversary of the Issuance Date, and (iv) 9% of the
Series B Liquidation Value if redeemed on or after the third anniversary
but prior to the fourth anniversary of the Issuance Date.
c. Mandatory Redemption. If the Corporation determines to
liquidate, dissolve or wind-up its business and affairs, or effect any Deemed
Liquidation Event, the Corporation shall redeem the Series B Preferred
Stock at the Corporation Redemption Price (plus the premium for early redemption
set forth in Section 6(b) above if applicable).
d. Mechanics of Redemption. If the Corporation elects to
redeem any of the Holders Series B Preferred Stock then outstanding, it
shall do so by delivering written notice thereof via facsimile and overnight
courier (Notice of Redemption at Option of Corporation) to each Holder,
which Notice of Redemption at Option of Corporation shall indicate (A) the
number of shares of Series B Preferred Stock that the Corporation is
electing to redeem and (B) the Corporation Redemption Price (plus the
premium for early redemption pursuant to Section 6(b) if
applicable).
e. Payment of Redemption Price. Upon receipt by any
Holder of a Notice of Redemption at Option of Corporation, such Holder shall
promptly submit to the Corporation such Holders Series B Preferred Stock
certificates. Upon receipt of such Holders Series B Preferred Stock
certificates, the Corporation shall pay the Corporation Redemption Price (plus
the premium for early redemption pursuant to Section 6(b) if
applicable), to such Holder, at the Corporations sole option either (i) in
cash, or (ii) by offset against any outstanding note payable from Holder or
its affiliates to the Corporation that was issued by Holder or its affiliates.
7.
Transferability. The Series B Preferred Stock may only be sold,
transferred, assigned, pledged or otherwise disposed of (Transfer) in
accordance with state and federal securities laws. The Corporation shall keep at
its principal office, or at the offices of the transfer agent, a register of the
Series B Preferred Stock. In connection with any such transfer, upon the
surrender of any certificate representing Series B Preferred Stock at such
place, the Corporation, at the request of the record Holder of such certificate,
shall execute and deliver (at the Corporations expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of shares as is
requested by the Holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate.
8. Miscellaneous.
a. Notices. Any and all notices to the Corporation shall
be addressed to the Corporations President or Chief Executive Officer at the
Corporations principal place of business on file with the Secretary of State of
the State of Delaware. Any and all notices or other communications or deliveries
to be provided by the Corporation to any Holder hereunder shall be in writing
and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service addressed to each Holder at the facsimile telephone
number or address of such Holder appearing on the books of the Corporation, or
if no such facsimile telephone number or address appears, at the principal place
of business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed given and effective on the earliest of (i) the
date of transmission, if such notice or communication is delivered via facsimile
at the facsimile telephone number specified in this Section 8 prior
to 5:30 p.m. Eastern time, (ii) the date after the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this section later than 5:30 p.m. but prior to
11:59 p.m. Eastern time on such date, (iii) the second business day
following the date of mailing, if sent by nationally recognized overnight
courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given.
b. Lost or Mutilated Preferred Stock Certificate. Upon
receipt of evidence reasonably satisfactory to the Corporation (an affidavit of
the registered Holder shall be satisfactory) of the ownership and the loss,
theft, destruction or mutilation of any certificate evidencing shares of
Series B Preferred Stock, and in the case of any such loss, theft or
destruction upon receipt of indemnity reasonably satisfactory to the Corporation
(provided that if the Holder is a financial institution or other institutional
investor its own indemnity agreement shall be satisfactory) or in the case of
any such mutilation upon surrender of such certificate, the Corporation shall,
at its expense, execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of such class
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.
c. Headings. The headings contained herein are for
convenience only, do not constitute a part of this Certificate of Designations
and shall not be deemed to limit or affect any of the provisions hereof.
RESOLVED, FURTHER, that the chairman, chief executive officer,
president or any vice-president, and the secretary or any assistant secretary,
of the Corporation be and they hereby are authorized and directed to prepare and
file a Certificate of Designations of Preferences, Rights and Limitations of
Series B Preferred Stock in accordance with the foregoing resolution and
the provisions of Delaware law.
IN WITNESS WHEREOF,
the undersigned have executed this Certificate of Designations this 28th day of April, 2010.
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/s/ Scott R. Silverman |
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Scott R. Silverman |
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Chief Executive Officer |
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/s/ William J. Caragol |
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William J. Caragol |
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President and Chief Financial Officer |
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Certificate of Elimination
To Eliminate the
Series A Preferred Stock
of
PositiveID Corporation
PositiveID Corporation,
a company organized and existing under the General Corporation Law of the State
of Delaware (the Company), hereby certifies:
FIRST:
That the Board of Directors of the Company adopted the following
resolutions at a duly called and noticed meeting of the Board of Directors:
Elimination of
the Series A Preferred Stock
WHEREAS, pursuant to authority expressly granted by the
provisions of the Certificate of Incorporation of the Company, the Board of
Directors of the Company created and authorized the issuance of a series of
preferred stock, designated Series A Preferred Stock, par value $0.001 per
share, of the Company (the Series A Preferred Stock), consisting of 2,000
shares, and thereby fixed the designation, dividend rights, voting powers,
rights on liquidation or dissolution and other preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions of the shares of such series (in addition to any
thereof set forth in the Certificate of Incorporation that are applicable to the
Companys preferred stock of all series) as set forth in a Certificate of
Designations of Preferences, Rights, and Limitations with respect to such series
filed with the Secretary of State of the State of Delaware on September 29, 2009
(as amended, the Certificate of Designations); and
WHEREAS, the Company has exchanged all shares of the
authorized and previously issued shares of Series A Preferred Stock, and as a
result none of the authorized shares of Series A Preferred Stock are outstanding
and none will be issued.
NOW, THEREFORE, BE IT RESOLVED, that the Board deems it
advisable and in the best interest of the Company that the Company eliminate all
authorized shares of Series A Preferred Stock and that, in connection with such
elimination of the Series A Preferred Stock, the Company eliminate in all
respects the Certificate of Designations; and further
RESOLVED, that for purposes of these resolutions the term
Appropriate Officer shall mean and include the Chief Executive Officer and the
President of the Company, and each of them, and shall also mean and include the
Secretary and any Assistant Secretary, and each of them, where necessary or
convenient to attest to any act of any of the aforesaid officers by and on
behalf of the Company, whether under the seal of the Company or not; and
further
RESOLVED, that the elimination of all of the authorized
shares of Series A Preferred Stock and the elimination in all respects of the
Certificate of Designations be, and hereby are, authorized and approved, and the
Appropriate Officers are, and each of them hereby is, authorized, empowered and
directed to execute and acknowledge a Certificate of Elimination reflecting the
elimination of all of the authorized shares of Series A Preferred Stock and the
elimination in all respects of the Certificate of Designations, and to file such
Certificate of Elimination with the Secretary of State of the State of
Delaware.
SECOND:
That the Certificate of Designations with respect to the Series A
Preferred Stock was filed in the office of the Secretary of State of the State
of Delaware on September 29, 2009. None of the authorized shares of Series
A Preferred Stock are outstanding and none will be issued.
THIRD:
That in accordance with
Section 151 of the General Corporation Law of the State of Delaware, the
Certificate of Incorporation of the Company is hereby amended to eliminate all
reference to the Series A Preferred Stock.
[Signatures set forth on following
page.]
IN WITNESS
WHEREOF, the Company has caused this Certificate to be signed as of October 13,
2010.
POSITIVEID CORPORATION
/s/ William J.
Caragol
William J. Caragol
President and Chief Financial
Officer
ATTEST:
/s/ Allison
Tomek
Allison Tomek
Secretary
POSITIVEID CORPORATION
CERTIFICATE OF DESIGNATIONS OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES C PREFERRED STOCK
The undersigned, Scott R. Silverman
and William J. Caragol here
by certify that:
1)
They are the Chief Executive Officer and Chief Financial Officer, respectively, of PositiveID Corporation, a Delaware corporation (the Corporation).
2)
The Corporation is authorized to issue 5,000,000 shares of preferred stock.
3)
The following resolutions were duly adopted by the Board of Directors:
WHEREAS, the Certificate of Incorporation of the Corporation provides for a class of its authorized stock known as preferred stock, comprised of 5,000,000 shares, $0.001 par value per share (the Preferred Stock), issuable from time to time in one or more series, of which 1,600 shares have been previously designated as Series B Preferred Stock, with 420 shares of Series B Preferred Stock currently issued and outstanding;
WHEREAS, the Board of Directors of the Corporation is authorized to fix the dividend rights, dividend rate, voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any wholly unissued series of Preferred Stock and the number of shares constituting any series and the designation thereof, of any of them; and
WHEREAS, it is the desire of the Board of Directors of the Corporation, pursuant to its authority as aforesaid, to fix the rights, preferences, restrictions and other matters relating to a series of Preferred Stock, which shall consist of up to 400 shares of the Preferred Stock
which the Corporation has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issuance of a series of Preferred Stock for cash or exchange of other securities, rights or property and does hereby fix and determine the rights, preferences, restrictions and other matters relating to such series of Preferred Stock as follows:
TERMS OF PREFERRED STOCK
1.
Designation, Amount and Par Value. The series of Preferred Stock
shall be designated as the Corporations Series C Preferred Stock (the Series C Preferred Stock) and the number of shares so designated shall be 400, which shall not be subject to increase without any consent of the holders of the Series C Preferred Stock (each a Holder and collectively, the Holders) as required by applicable law. Each share of Series C Preferred Stock shall have a par value of $0.001 per share.
2.
Ranking and Voting. The Series C Preferred Stock shall, with respect to rights upon liquidation, winding-up or dissolution, rank:
a.
senior to the Corporations common stock, par value
$
0.01
per share (
Common Stock
), and any other class or series of Preferred Stock of the Corporation, including the Series B Preferred Stock (collectively, together with any warrants, rights, calls or options exercisable for or convertible into such Preferred Stock, the
Junior Shares
); and
b.
junior to all existing and future indebtedness of the Corporation.
Except as required by applicable law, the holders of shares of Series C Preferred Stock will have no right to vote on any matters, questions or proceedings of this Corporation including, without limitation, the election of directors.
3.
Dividends and Other Distributions. Commencing on the first anniversary of the date of the issuance of any such shares of Series C Preferred Stock (each respectively an Issuance Date), Holders of Series C Preferred Stock shall be entitled to receive dividends on each outstanding share of Series C Preferred Stock (Dividends), which shall accrue in shares of Series C Preferred Stock at a rate equal to 10.0% per annum
from the Issuance Date. Accrued Dividends shall be payable annually on the anniversary of the Issuance Date. No dividend shall be payable with respect to shares of Series C Preferred Stock that are redeemed for cash or converted into shares of Common Stock prior to the first anniversary of the Issuance Date with respect to such shares.
a.
Any calculation of the amount of such Dividends payable pursuant to the provisions of this Section 3 shall be made based on a 365-day year and on the number of days actually elapsed during the applicable calendar quarter, compounded annually.
b.
So long as any shares of Series C Preferred Stock are outstanding, no dividends or other distributions will be paid, declared or set apart with respect to any Junior Shares. The Common Stock shall not be redeemed while the Series C Preferred Stock is outstanding.
4.
Conversion.
a.
Mechanics of Conversion.
(i)
Subject to the terms and conditions hereof, one or more of the Series C Preferred Stock may be converted into shares of Common Stock, at any time or times on or after (but not before) the six-month anniversary of the issuance date of such Series C Preferred Stock, at the option of Holder or the Company, by (i) if at the option of Holder, delivery of a written notice to the Company, in the form attached hereto as Exhibit A-1 (the Holder Conversion Notice), of the Holders election to convert the Series C Preferred Stock, or (ii) if at the option of the Company, delivery of a written notice to Holder, in the form attached hereto as Exhibit A-2 (the Company Conversion Notice and, with the Holder Conversion Notice, each a Conversion Notice), of the Companys election to convert the Series C Preferred Stock. On the same Trading Day on which the Company has received the Holder Conversion Notice or issued the Company Conversion Notice (as the case may be) by 10:30 a.m. Eastern time, or the following Trading Day if received after such time or on a non-Trading Day, the Company shall transmit by facsimile or electronic mail an acknowledgment of confirmation of receipt of the Holder Conversion Notice or issuance of the Company Conversion Notice to the Holder and the Companys transfer agent (the Transfer Agent) and shall authorize the credit by the Transfer Agent of such aggregate number of Conversion Shares to which the Holder is entitled pursuant to such Conversion Notice to Holders or its designees balance account with The Depository Trust Company (DTC) Fast Automated Securities Transfer (FAST) Program, through its Deposit/Withdrawal at Custodian (DWAC) system, time being of the essence.
(ii)
No fractional shares of Common Stock are to be issued upon conversion of Series C Preferred Stock, but rather the Company shall issue to Holder scrip or warrants in registered form (certificated or uncertificated) which shall entitle Holder to receive a full share upon the surrender of such scrip or warrants aggregating a full share.
(iii)
The Holder shall not be required to deliver the original certificates for the Series C Preferred Stock in order to effect a conversion hereunder.
(iv)
The Company shall pay any and all taxes which may be payable with respect to the issuance and delivery of Conversion Shares to Holder.
b.
Company Conversion. In the event of a conversion of any Series C Preferred Stock pursuant to a Company Conversion Notice, the Company shall issue to the Holder of such Series C Preferred Stock a number of Conversion Shares equal to (x) the Series C Liquidation Value multiplied by (y) the number of such Series C Preferred Stock subject to the Company Conversion Notice divided by (z) the Conversion Price with respect to such Series C Preferred Stock. If the Company exercises this conversion option with respect to any Series C Preferred Stock (other than Series C Preferred Stock issued as a dividend with respect to Series C Preferred Stock) prior to the fourth anniversary of the issuance of such shares, then in addition to the Conversion Shares to be issued in accordance with the preceding sentence, the Company shall pay to such Holder an additional number of Conversion Shares equal to the following with respect to such converted Series C Preferred Stock (other than Series C Preferred Stock issued as a dividend with respect to Series C Preferred Stock): (i) 35% of the Conversion Shares issuable in respect of such Series C Preferred Stock (other than Series C Preferred Stock issued as a dividend with respect to Series C Preferred Stock) if converted after the six-month anniversary of the Issuance Date but prior to the first anniversary of the Issuance Date, (ii) 27% of the Conversion Shares issuable in respect of such Series C Preferred Stock (other than Series C Preferred Stock issued as a dividend with respect to Series C Preferred Stock) if converted on or after the first anniversary but prior to the second anniversary of the Issuance Date, (iii) 18% of the Conversion Shares issuable in respect of such Series C Preferred Stock (other than Series C Preferred Stock issued as a dividend with respect to Series C Preferred Stock) if converted on or after the second anniversary but prior to the third anniversary of the Issuance Date, and (iv) 9% of the Conversion Shares issuable in respect of such Series C Preferred Stock (other than Series C Preferred Stock issued as a dividend with respect to Series C Preferred Stock) if converted on or after the third anniversary but prior to the fourth anniversary of the Issuance Date.
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c.
Holder Conversion. In the event of a conversion of any Series C Preferred Stock pursuant to an Holder Conversion Notice, the Company shall issue to the Holder of such Series C Preferred Stock a number of Conversion Shares equal to (x) the Series C Liquidation Value multiplied by (y) the number of such Series C Preferred Stock subject to the Company Conversion Notice divided by (z) the Conversion Price with respect to such Series C Preferred Stock.
d.
If the Company at any time on or after the date of issuance of any Preferred Stock subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Conversion Shares will be proportionately increased. If the Company at any time on or after such issuance date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased and the number of Conversion Shares will be proportionately decreased. Any adjustment under this Section 4.c shall become effective at the close of business on the date the subdivision or combination becomes effective.
e.
In addition to any adjustments pursuant to Section 4.c if at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the Purchase Rights), then Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which Holder could have acquired if Holder had held the number of shares of Common Stock acquirable upon conversion of all Preferred Stock held by Holder immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.
f.
Definitions. For purposes of this Section 4, the following terms shall have the following meanings:
(i)
The Conversion Price means a price per share equal to the Closing Bid Price of a share of Common Stock on the Trading Day immediately preceding the date of the applicable Tranche Notice Date, subject to adjustment herein.
(ii)
Conversion Shares means the shares of Common Stock issuable upon conversion of Series C Preferred Stock.
(iii)
The Closing Bid Price means, for any security as of any date, the last closing bid price for such security on the Trading Market, as reported by Bloomberg, or, if the Trading Market begins to operate on an extended hours basis and does not designate the closing bid price, then the last bid price of such security prior to 4:00 p.m., Eastern time, as reported by Bloomberg, or, if the Trading Market is not the principal securities exchange or trading market for such security, the last closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price is reported for such security by Bloomberg, the average of the bid prices of any market makers for such security as reported in the pink sheets by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Closing Bid Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price of such security on such date shall be the fair market value as mutually determined by the Company and the holder.
(iv)
A Trading Day means any day on which the Common Stock is traded on the Trading Market; provided that it shall not include any day on which the Common Stock is (a) scheduled to trade for less than 5 hours, or (b) suspended from trading.
(v)
The Trading Market means the OTC Bulletin Board, the NASDAQ Capital Market, the NASDAQ Global Market,
the NASDAQ Global Select Market,
the NYSE Amex, or the New York Stock Exchange, whichever is at the time the principal trading exchange or market for the Common Stock, but does not include the Pink Sheets inter-dealer electronic quotation and trading system.
(vi)
A "Tranche Notice Date" with respect to a Series C Preferred Share shall mean the Tranche Notice Date established for the issuance of such Series C Preferred Stock under the stock purchase agreement pursuant to which such Series C Preferred Share was issued to the Holder thereof.
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g.
Failure to Timely Deliver Conversion Shares.
If the Company shall fail (through no fault of Holder) to timely authorize the credit of the Holders balance account with DTC for such number of Conversion Shares to which the Holder is entitled pursuant to a Conversion Notice, then, in addition to all other remedies available to Holder, the Company shall, subject to the availability of lawful funds therefor, pay in cash to Holder on each day that the issuance of such Conversion Shares is not timely effected an amount equal to 1.5% of the product of (A) the sum of the number of Conversion Shares not issued to Holder on a timely basis and to which Holder is entitled and (B) the Closing Bid Price of the shares of Common Stock on the Trading Day immediately preceding the last possible date which the Company could have issued such Conversion Shares to Holder without violating any other restrictions on the issuance of Conversion Shares to the Holder, including the foregoing clause (h) below. In addition to the foregoing, if after the Companys receipt of the applicable conversion delivery documents the Company shall fail (through no fault of Holder) to timely authorize the credit of the Holders balance account with DTC for the number of Conversion Shares to which the Holder is entitled upon the Holders exercise hereunder, and the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of Conversion Shares issuable upon such exercise that the Holder anticipated receiving from the Company, then the Company shall, within one Trading Day after the Holders request and in the Holders discretion, either (i) pay cash, subject to the availability of lawful funds therefor, to the Holder in an amount equal to the Holders total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the Buy-In Price), at which point the Companys obligation to credit such Holders balance account with DTC for the number of Conversion Shares to which the Holder is entitled upon the Holders exercise hereunder and to issue such Conversion Shares shall terminate, or (ii) promptly honor its obligation to credit such Holders balance account with DTC for the number of Conversion Shares to which the Holder is entitled upon the Holders exercise hereunder and pay cash, subject to the availability of lawful funds therefor, to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock sold by Holder in satisfaction of its obligations, times (B) the Closing Bid Price on the date of exercise.
h.
Conversion Limitation.
i.
Notwithstanding any other provision in this Agreement, at no time may the Company or Holder deliver a Conversion Notice if the number of Conversion Shares to be received pursuant to such Conversion Notice, aggregated with all other shares of Common Stock then beneficially (or deemed beneficially) owned by Holder, would result in Holder owning, on the date of delivery of the Conversion Notice, more than 9.99% of all Common Stock outstanding as determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. In addition, as of any date, the aggregate number of shares of Common Stock into which the Preferred Stock are convertible within 61 days, together with all other shares of Common Stock then beneficially (or deemed beneficially) owned (as determined pursuant to Rule 13d-3 under the Exchange Act) by Holder and its affiliates (as such term is defined in Rule 12b-2 under the Exchange Act), shall not exceed 9.99% of the total outstanding shares of Common Stock as of such date.
ii.
Until Stockholder Approval (as defined below) is obtained, or the Holder obtains an opinion of counsel reasonably satisfactory to the Company and its counsel that such approval is not required, both the Holder and the Company shall be prohibited from delivering a Conversion Notice if, as a result of such exercise, the aggregate number of Conversion Shares issued hereunder, when aggregated with any shares of Common Stock issued to Holder or any affiliate of Holder under any other agreements or arrangements between the Company and the Holder or any applicable affiliate of the Holder, such aggregate number would, under Nasdaq Marketplace rules (or the rules of any other exchange where the shares of Common Stock are listed), exceed the Cap Amount (as defined below). If delivery of a Conversion Notice is prohibited by the preceding sentence because the Cap Amount would be exceeded, the Company shall, upon the written request of the Holder, hold a meeting of its stockholders within sixty (60) days following such request, and use its best efforts to obtain the approval of its stockholders for the transactions described herein and the other Transaction Documents (Stockholder Approval). For purposes hereof, Cap Amount means 19.99% of the Common Stock outstanding as calculated and determined in accordance with the Nasdaq Marketplace rules (subject to adjustment upon a stock split, stock dividend or similar event).
i.
Disputes.
In the case of a dispute as to the determination of the Conversion Price or the arithmetic calculation of the number of Conversion Shares issued or issuable hereunder, the Company shall promptly issue to Holder the number of Conversion Shares that are not disputed and resolve such dispute as follows. The Company shall submit the disputed determinations or arithmetic calculations via facsimile or electronic mail within two (2) Trading Days of delivery of the Conversion Notice giving rise to such dispute, as the case may be, to Holder. If Holder and the Company are unable to agree upon such determination or calculation of the Conversion Price or the number of Conversion Shares within three (3) Trading Days of such disputed determination or arithmetic calculation being submitted to Holder, then the Company shall, within two (2) Trading Days, submit via facsimile or electronic mail
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(a) the disputed determination of the Conversion Price or arithmetic calculation to an independent, reputable investment bank or independent registered public accounting firm selected by Holder subject to the Companys approval, which may not be unreasonably withheld or delayed, or (b) the disputed arithmetic calculation to the Companys independent registered public accounting firm. The Company shall cause at its expense the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and Holder of the results no later than three (3) Trading Days from the time it receives the disputed determinations or calculations. Such investment banks or accountants determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.
5.
Liquidation.
a.
Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, after payment or provision for payment of debts and other liabilities of the Corporation, before any distribution or payment shall be made to the holders of any Junior Shares by reason of their ownership thereof, the Holders of Series C Preferred Stock shall first be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders an amount with respect to each share of Series C Preferred Stock equal to $10,000.00 (the Series C
Liquidation Value
). If, upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the amounts payable with respect to the shares of Series C Preferred Stock are not paid in full, the holders of shares of Series C Preferred Stock shall share equally and ratably in any distribution of assets of the Corporation in proportion to the liquidation preference to which each such holder is entitled.
b.
After payment has been made to the Holders of the Series C Preferred Stock of the full amount of the Series C Liquidation Value, any remaining assets of the Corporation shall be distributed among the holders of the Junior Shares in accordance with the Corporations Certificates of Designations and Certificate of Incorporation.
c.
If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation shall be insufficient to make payment in full to all Holders, then such assets shall be distributed among the Holders at the time outstanding, ratably in proportion to the full amounts to which they would otherwise be respectively entitled.
6.
Redemption. The Company may redeem, for cash, any or all of the Series C Preferred Stock at any time at the redemption price per share equal to the Series C Liquidation Value, plus any accrued but unpaid dividends with respect to such shares of Series C Preferred Stock (the "Redemption Price"). If the Company exercises this redemption option with respect to any Series C Preferred Stock (other than shares of Series C Preferred Stock issued as a dividend with respect to shares of Series C Preferred Stock) prior to the fourth anniversary of the issuance of such shares, then in addition to the Redemption Price, the Company shall pay to holder a make-whole price per share equal to the following with respect to such redeemed shares (other than shares of Series C Preferred Stock issued as a dividend with respect to shares of Series C Preferred Stock): (i) 35% of the Series C Liquidation Value if redeemed prior to the first anniversary of the Issuance Date, (ii) 27% of the Series C Liquidation Value if redeemed on or after the first anniversary but prior to the second anniversary of the Issuance Date, (iii) 18% of the Series C Liquidation Value if redeemed on or after the second anniversary but prior to the third anniversary of the Issuance Date, and (iv) 9% of the Series C Liquidation Value if redeemed on or after the third anniversary but prior to the fourth anniversary of the Issuance Date.
7.
Transferability. The Series C Preferred Stock may only be sold, transferred, assigned, pledged or otherwise disposed of (Transfer) in accordance with state and federal securities laws. The Corporation shall keep at its principal office
, or at the offices of the Transfer Agent,
a register of the Series C Preferred Stock. Upon the surrender of any certificate representing Series C Preferred Stock at such place, the Corporation, at the request of the record Holder of such certificate, shall execute and deliver (at the Corporation
s expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate. Each such new certificate shall be registered in such name and shall represent such number of shares as is requested by the Holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate.
8.
Miscellaneous.
a.
Notices. Any and all notices to the Corporation shall be addressed to the Corporation
s Chief Executive Officer or Chief Financial Officer at the Corporation
s principal place of business on file with the Secretary of State of the State of Delaware. Any and all notices or other communications or deliveries to be provided by the Corporation to any Holder hereunder shall be in writing and delivered personally, by facsimile, sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile telephone number or address of such Holder appearing on the books of the Corporation, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this section prior to 5:30 p.m. Eastern time, (ii) the date after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this section later than 5:30 p.m. but prior to 11:59 p.m. Eastern time on such date, (iii) the second business day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.
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b.
Lost or Mutilated Preferred Stock Certificate. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered Holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing shares of Series C Preferred Stock, and in the case of any such loss, theft or destruction upon receipt of indemnity reasonably satisfactory to the Corporation
(provided that if the Holder is a financial institution or other institutional investor its own agreement shall be satisfactory)
or in the case of any such mutilation upon surrender of such certificate, the Corporation shall, at its expense, execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such series represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate.
c.
Headings. The headings contained herein are for convenience only, do not constitute a part of this Certificate of Designations and shall not be deemed to limit or affect any of the provisions hereof.
RESOLVED, FURTHER, that the chairman, chief executive officer,
president, chief financial officer, or any vice-president, and the secretary or any assistant secretary, of the Corporation be and they hereby are authorized and directed to prepare and file a Certificate of Designations of Preferences, Rights and Limitations of Series C Preferred Stock in accordance with the foregoing resolution and the provisions of Delaware law.
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IN WITNESS WHEREOF, the undersigned
have
executed this Certificate this 14th day of March, 2011.
By:
/s/ Scott R. Silverman
Name:
Scott R. Silverman
Title:
Chief Executive Officer
By:
/s/ William J. Caragol
Name:
William J. Caragol
Title:
President and Chief Financial Officer