CERTIFICATE OF DESIGNATION OF

SERIES A CONVERTIBLE PREFERRED STOCK

OF

MERGE HEALTHCARE INCORPORATED

MERGE HEALTHCARE INCORPORATED (the “Corporation”), a corporation organized and existing under the General Corporation Law of the State of Delaware (the “DGCL”), certifies that, pursuant to authority conferred upon the board of directors of the Corporation (the “Board”) by Article V of the Certificate of Incorporation of the Corporation, as amended from time to time (the “Certificate of Incorporation”), and pursuant to the provisions of DGCL Section 151, the Board adopted and approved the following resolution providing for the designations, preferences and relative, participating, optional and other rights, and the qualifications, limitations and restrictions of the Series A Convertible Preferred Stock:

 

WHEREAS, the Certificate of Incorporation provides for three classes of shares of capital stock known as common stock, par value $0.01 per share (the “Common Stock”), preferred stock, par value $0.01 per share (the “Preferred Stock”) and preferred series 3 special voting stock;

 

WHEREAS, the Certificate of Incorporation authorizes the issuance of 1,000,000 shares of Preferred Stock; and

 

WHEREAS, the Board is authorized by the Certificate of Incorporation as permitted by the DGCL to provide for the issuance of the shares of Preferred Stock in one or more series and to establish from time to time the number of shares to be included in each such series and to fix the voting powers, designations, preferences and relative, participating, optional and other rights of the shares of each such series and the qualifications, limitations and restrictions thereof.

 

NOW, THEREFORE, BE IT RESOLVED, that the Board does hereby provide for the issuance of a series of Preferred Stock and does hereby establish and fix the number of shares to be included in such series of Preferred Stock and the voting powers, designations, preferences, rights, qualifications, limitations and restrictions of the shares of such series of Preferred Stock as follows:

 

Section 1. Designation. The designation of this series of Preferred Stock is “Series A Convertible Preferred Stock,” par value $0.01 per share (the “Series A Preferred”).

 

Section 2. Number of Series A Preferred Shares. The authorized number of shares of Series A Preferred is 50,000.

 

Section 3. Defined Terms and Rules of Construction.

 

 

---

“Affiliate” of any Person shall mean any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For purposes of this definition, “control” when used with respect to any Person has the meaning specified in Rule 12b-2 under the Exchange Act; and the terms “controlling” and “controlled” have meanings correlative to the foregoing. In addition, references to “Affiliates” of the Investors shall include any entities or funds managed by the same investment advisor or manager or such other entity acting in a similar capacity.

 

“Board” shall have the meaning set forth in the preamble hereto.

 

“Business Day” means any day except Saturday, Sunday and any day on which banking institutions in New York, New York generally are closed as a result of federal, state or local holiday.

 

“Bylaws” shall mean the Bylaws of the Corporation in effect on the date hereof and as amended from time to time in accordance with the terms therein and herein.

 

“Capital Stock” shall mean any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (in each case however designated) stock issued by the Corporation.

 

“Certificate of Designation” shall mean this Certificate of Designation relating to the Series A Preferred, as it may be amended from time to time in accordance with the terms hereof.

 

“Certificate of Incorporation” shall have the meaning set forth in the preamble hereto.

 

“Change of Control” shall mean the occurrence of one or more of the following events: (i) any sale, lease, exchange, license or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Corporation to any person or group of related persons, as defined in Section 13(d) of the Exchange Act, other than to any of the Corporation’s wholly-owned subsidiaries; (ii) the approval by the holders of the Corporation’s Capital Stock of any plan or proposal for  the liquidation or dissolution of the Corporation; (iii) any person or group (other than any such holder or group that holds, or is comprised of persons holding, Series A Preferred) shall become the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of shares representing more than 50% of the aggregate ordinary voting power represented by issued and outstanding voting stock of the Corporation; or (iv) any reorganization, consolidation or merger by the Corporation pursuant to which persons who are beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of shares of Corporation voting stock immediately prior to such transaction no longer own a majority of the total voting power of the continuing or surviving entity.

 

“Closing Price” shall mean the price per share of the final trade of the Common Stock, on the applicable Trading Day (or the last trade of the Common Stock preceding the applicable Trading Day if no trades of such Common Stock were made on the applicable Trading Day) on the principal Trading Market on which the Common Stock is listed or admitted to trading; provided that if the Common Stock is not so listed or traded, the Closing Price shall be equal to the fair market value, as reasonably determined in good faith by the Board.

 

---

“Commission” shall mean the U.S. Securities and Exchange Commission, including the staff thereof.

 

“Common Stock” shall have the meaning set forth in the recitals hereto.

 

“Common Stock Deemed Outstanding” shall mean, at any given time, the sum of (a) the number of shares of Common Stock actually outstanding at such time, plus (b) the number of shares of Common Stock issuable upon exercise of Options actually outstanding at such time, plus (c) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities actually outstanding at such time (treating as actually outstanding any Convertible Securities issuable upon exercise of Options actually outstanding at such time), in each case, regardless of whether or not the Options or Convertible Securities are actually exercisable at such time.

 

“Conversion Cap” shall have the meaning ascribed to it in Section 8(a).

 

“Conversion Price” shall mean $4.14, but as it may be adjusted from time to time in accordance with Section 9.

 

“Conversion Stock” shall mean Common Stock or other Capital Stock of the Corporation then issuable upon conversion of the Series A Preferred in accordance with the terms of Section 8.

 

“Convertible Securities” shall mean any stock, securities (other than Options) or obligations of indebtedness directly or indirectly convertible into or exchangeable for Common Stock.

 

“Corporation” shall have the meaning set forth in the preamble hereto.

 

“Corporation Conversion Notice Period” shall have the meaning ascribed to it in Section 8(c).

 

“Credit Agreement” shall mean that certain Credit Agreement, dated as of April 29, 2014, by and among the Corporation, the Corporation’s Subsidiaries party thereto, Guggenheim Corporate Funding, LLC and the Lenders party thereto, as amended or modified, or its conditions waived, from time to time.

 

“Current Fair Market Value” shall mean the average of the VWAPs for the 30 consecutive Trading Days immediately preceding the days as of which the Current Fair Market Value is being determined.

 

“Date of Issuance” shall mean, for any Series A Preferred Share, the date on which the Corporation initially issues such Series A Preferred Share (without regard to any subsequent transfer of such Series A Preferred Share or reissuance of the certificate(s) representing such Series A Preferred Share).

 

“Deemed Change of Control Liquidation” shall have the meaning ascribed to it in Section 5(b).

 

---

“Deemed Termination of Trading Liquidation” shall have the meaning ascribed to it in Section 5(b).

 

“Dividend Rate” shall have the meaning set forth in Section 4(a).

 

“Dividend Reference Date” shall have the meaning set forth in Section 4(a).

 

“DGCL” shall have the meaning set forth in the preamble hereto.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Excluded Issuances” means any issuance or sale (or deemed issuance or sale in accordance with Section 9(d)) by the Corporation after the Date of Issuance of: (a) shares of Common Stock issued on the conversion of the Series A Preferred; (b) up to an aggregate of 4,000,000 shares of Common Stock (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends or other proportionate recapitalizations) issued directly or upon the exercise of Options to directors, officers, employees, or consultants of the Corporation in connection with their service as directors of the Corporation, their employment by the Corporation or their retention as consultants by the Corporation, in each case authorized by the Board and issued pursuant to any equity incentive plan of the Corporation  (including all such shares of Common Stock and Options outstanding prior to the Date of Issuance); or (c) shares of Common Stock issued upon the conversion or exercise of Options (other than Options covered by clause (b) above) issued prior to the Date of Issuance, provided that such securities are not amended after the date hereof to increase the number of shares of Common Stock issuable thereunder or to lower the exercise or conversion price thereof.

 

“Forced Conversion” shall have the meaning set forth in Section 8(b).

 

“Holder Redemption Period” means means (a) the 10 day period following the Refinancing Repayment Eligibility Date or (b) any time following the Optional Redemption Eligibility Date.

 

“Initial Conversion Rate” means 241.55.

 

“Internal Reorganization Event” shall mean any Organic Change which does not result in a Change of Control.

 

“Investor Forced Redemption Outside Date” shall have the meaning set forth in Section 6(a).

 

“Investors” shall mean the entities list on Exhibit A hereto.

 

“Investors Rights Agreement” shall mean that certain Investors Rights Agreement by and between the Corporation and Investors, dated on or about the Date of Issuance.

 

“Issue Date” shall mean February 25, 2015.

 

---

“Junior Securities” shall mean any class or series of Capital Stock other than (i) the Series A Preferred or (ii) any class or series of Capital Stock that is specifically designated as senior or pari passu to the Series A Preferred in any amendment, modification or supplement to the Certificate of Incorporation (including as a result of a new certificate of designation), which the holders of Series A Preferred have consented to in accordance with Section 12 hereof and, if applicable, Section 3.5 of the Investors Rights Agreement.

 

“Liquidation” shall have the meaning ascribed to it in Section 5(a).

 

“Liquidation Preference” shall have the meaning ascribed to it in Section 5(a).

 

“Liquidation Value” of any Series A Preferred Share as of any particular date shall mean $1,000.

 

“Minimum Holding” shall mean the aggregate number of shares of Common Stock and Preferred Stock which together represent at least twenty-five percent (25%) of the Capital Stock purchased by the Investors pursuant to the Purchase Agreement (as such number of shares is equitably adjusted for subsequent stock splits, stock combinations, stock dividends or other proportionate recapitalizations).

 

“Optional Redemption Eligibility Date” shall mean July 29, 2020.

 

“Options” shall mean any rights, warrants or options to subscribe for or purchase Common Stock or Convertible Securities.

 

“Organic Change” shall have the meaning ascribed to it in Section 9(e).

 

“Person” or “person” shall mean an individual, corporation, limited liability company, association, partnership, group (as such term is used in Section 13(d)(3) of the Exchange Act), trust, joint venture, business trust or unincorporated organization, or a government or any agency or political subdivision thereof.

 

“Preferred Stock” shall have the meaning set forth in the recitals hereto.

 

“Purchase Agreement” shall mean that certain Purchase Agreement by and between the Corporation and Investors, dated as of the Issue Date.

 

“Redemption Date” shall mean, as to any Series A Preferred Share, the date specified in the notice of any redemption at the Corporation’s option or at the holder’s option; provided that no such date shall be a Redemption Date unless the amount payable to such Series A Preferred Share hereunder is actually paid in full on such date, and if not so paid in full, the Redemption Date shall be the date on which such amount is fully paid.

 

“Refinancing Repayment Eligibility Date” means the date on which the Corporation delivers notice to the holders of Series A Preferred that the Corporation will repay all amounts outstanding pursuant to the Credit Agreement or any replacement credit facility entered into by the Corporation.

 

---

“Series A Dividend Reference Dates” shall have the meaning ascribed to it in Section 4(b).

 

“Series A Preferred Majority Holders” shall mean, as of any time of determination, the holders of a majority of the Series A Preferred Shares outstanding as of such time of determination.

 

“Series A Preferred” shall have the meaning ascribed to it in Section 1.

 

“Series A Preferred Share” shall have the meaning ascribed to it in Section 4(a).

 

“Series A Unpaid Dividends” shall have the meaning ascribed to it in Section 4(a).

 

“Stockholder Approval” shall mean all approvals, if any, of the stockholders of the Corporation necessary to approve the issuance of the Series A Preferred Shares with the rights and privileges in this Certificate of Designation, including any approvals by the holders of Common Stock required for the removal of the Conversion Cap in compliance with NASDAQ Stock Market Rule 5635.

 

“Subsidiary” shall mean any Person of which at least (i) a majority of the equity or (ii) a majority of the voting interests, are owned or controlled, directly or indirectly, by the Corporation, by any one or more of its Subsidiaries, or by any combination of the Corporation and one or more of its Subsidiaries.

 

“Taxes” shall mean any federal, state, local or foreign income, gross receipts, branch profits, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, escheat, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, sales, use, transfer, registration, ad valorem, value added, alternative or add-on minimum or estimated tax or other tax of any kind whatsoever, including any interest, penalty or addition thereto, whether disputed or not and including any obligation to indemnify or otherwise assume or succeed to the Tax liability of any other Person by law, by contract or otherwise.

 

“Termination of Trading” shall mean the Common Stock or other Capital Stock into which the Series A Preferred is convertible is neither listed or admitted to trading on a Trading Market for a period of at least 30 consecutive Business Days.

 

“Trading Day” shall mean any Business Day on which the Common Stock is traded, or able to be traded, on the principal national securities exchange on which the Common Stock is listed or admitted to trading.

 

“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market or the New York Stock Exchange, including any successors to any of the foregoing.

 

---

“VWAP” shall mean, for any date, the daily volume-weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or admitted to trading (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); provided that if the Common Stock is not so listed or admitted to trading, the VWAP shall be equal to the fair market value, as reasonably determined in good faith by the Board.

 

 

Section 4. Dividends.

 

 

---

 

 

 

---

Section 5. Liquidation.

 

 

 

 

---

 

Section 6. Redemption.

 

 

 

---

 

 

---

 

 

 

 

---

 

Section 7. Priority of Series A Preferred Shares. Except as specifically provided herein, so long as any Series A Preferred Shares remain outstanding, without the prior written consent of the Series A Preferred Majority Holders, the Corporation shall not, nor shall it permit any Subsidiary to, redeem, purchase or otherwise acquire directly or indirectly any Junior Securities, nor shall the Corporation directly or indirectly declare or pay any dividend or make any distribution upon any Junior Securities.

 

Section 8. Conversion.

 

 

 

---

 

 

---

 

 

Section 9. Adjustments to Conversion Price. In order to prevent dilution of the conversion rights granted under Section 8, the Conversion Price and the number of shares of Conversion Stock issuable on conversion of the Shares of Series A Preferred shall be adjusted from time to time pursuant to this Section 9.

 

 

---

 

 

 

---

 

 

---

 

 

---

 

 

 

 

---

 

 

---

 

Section 10. Voting Rights. Without limiting any rights provided to the holders of Series A Preferred Shares under the DGCL, the holders of Series A Preferred Shares shall be entitled to vote as a single class with the holders of the Common Stock on all matters submitted to a vote of stockholders of the Corporation. Each holder of Series A Preferred Shares shall be entitled to the number of votes equal to the largest number of full shares of Common Stock into which all Series A Preferred held of record by such holder could then be converted (taking into account, for the avoidance of doubt, all Unpaid Series A Dividends thereon convertible into shares of Common Stock, any Conversion Price adjustments made pursuant to Section 9 and, prior to the Stockholder Approval, the Conversion Cap) at the record date for the determination of the stockholders entitled to vote on such matters or, if no such record date is established, at the date such vote is taken or any written consent of stockholders is first executed; provided, however, that no holder of Series A Preferred shall be entitled to cast votes for the number of shares of Common Stock issuable upon conversion of such Series A Preferred Shares held by such holder that exceeds (subject to a proportionate adjustment in the event of a stock split, stock dividend, combination or other proportionate recapitalization) the quotient of (x) the aggregate purchase price paid by such holder of Series A Preferred Shares for its Series A Preferred Shares, divided by (y) the greater of (i) $4.14 and (ii) the Closing Price of the Common Stock on the Trading Day immediately prior to the Date of Issuance of such holder’s Series A Preferred Shares.  The holders of Series A Preferred Shares shall be entitled to notice of any meeting of stockholders in accordance with the Bylaws of the Corporation.

 

Section 11. Consent Rights. The Corporation will not, without first obtaining the written consent or affirmative vote of the Series A Preferred Majority Holders, take any of the following actions: (i) liquidate, dissolve or wind-up the Corporation (whether voluntary or involuntary), (ii) amend, modify, supplement or repeal any provision of the Certificate of Incorporation or Bylaws that would have an adverse effect on any right, preference, privilege or voting power of the Series A Preferred Shares or the holders thereof, (iii) authorize or issue any Capital Stock having a preference over, or being on a parity with, the Preferred Stock with respect to dividends, liquidation, redemption or voting (other than Common Stock), (iv) reclassify any Capital Stock in a way that causes such security to have preference over, or be on parity with, the Preferred Stock with respect to dividends, liquidation, redemption or voting (other than Common Stock), or (v) reduce the Liquidation Preference (as defined in the Certificate of Designation) of the Preferred Stock.

 

Section 12. Transfers.

 

 

---

 

Section 13. Replacement. Upon receipt of evidence reasonably satisfactory to the Corporation (it being understood that an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing Series A Preferred Shares, 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 Investors 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 Series A Preferred 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, and dividends shall accrue on the Series A Preferred Shares represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate.

 

Section 14. Amendment and Waiver. No amendment, modification, alteration, repeal or waiver of any provision of this Certificate of Designation shall be binding or effective without the prior written consent of the Series A Preferred Majority Holders, voting separately as a class, including any amendment, modification, alteration, repeal or waiver of the terms or relative priorities of the Series A Preferred that may be accomplished by the merger, consolidation or other transaction of the Corporation with another Person, which amendment, modification, alteration, repeal or waiver shall only be binding or effective if the Corporation has obtained the prior written consent of the Series A Preferred Majority Holders, voting separately as a class.

 

Section 15. Notices. Except as otherwise expressly provided hereunder, all notices referred to herein shall be given in writing and shall be deemed effectively given (a) if given by personal delivery, upon actual delivery, (b) if given by facsimile, upon receipt of confirmation of a completed transmittal, (c) if given by electronic mail, upon receipt of such transmission, (d) if given by mail, upon the earlier of (i) actual receipt of such notice by the intended recipient or (ii) five (5) Business Days after such notice is deposited in first class mail, postage prepaid, and (e) if by an internationally recognized overnight courier for overnight delivery, one (1) Business Day after delivery to such courier for overnight delivery, in each case, (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder’s address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder).

 

---

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Designation to be duly executed and acknowledged by its undersigned duly authorized officer this 25th day of February, 2015.

 

 

---

Guggenheim Private Debt Fund Note Issuer, LLC

NZC Guggenheim Fund LLC

Maverick Enterprises, Inc.

Verger Capital Fund LLC

 

---