UNITED
STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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SCHEDULE 14A INFORMATION
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Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Preliminary Proxy Statement
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Confidential, for
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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Retractable
Technologies, Inc.
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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which transaction applies:
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value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and state how it was
determined):
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RETRACTABLE TECHNOLOGIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 24, 2010
To
the Shareholders of Retractable Technologies, Inc.:
You are cordially invited to attend Retractable
Technologies, Inc.s 2010 Annual Meeting of shareholders. The Annual Meeting will be held at 10:00 a.m.
Central time on September 24, 2010 at the Little Elm City Hall located at
100 West Eldorado Parkway, Little Elm, Texas 75068.
Further information regarding the Annual Meeting is
set forth in the attached Proxy Statement, which was first delivered to
security holders on August 12, 2010.
At this years Annual Meeting, you will be asked to
elect five Directors (one Class 1 Director and four Class 2
Directors). You will also be asked to
approve amendments to the Articles of Incorporation conforming them to a
recently effective Texas statute.
We hope you will be able to attend the Annual
Meeting, but if you cannot do so, it is important that your shares be
represented. We urge you to read the
proxy statement carefully and to vote in accordance with the Board of Directors
recommendations by telephone or Internet, or by signing, dating, and returning
the enclosed proxy card in the postage-paid envelope provided, whether or not
you plan to attend the Annual Meeting.
Thank you for your continued support.
Sincerely,
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THOMAS J. SHAW
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CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER
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RETRACTABLE TECHNOLOGIES, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 24, 2010
Retractable Technologies, Inc.
511 Lobo Lane
Little Elm, TX 75068-0009
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 24, 2010
The Board of Directors of Retractable Technologies, Inc.
solicits the enclosed proxy for the Annual Meeting to be held at the Little Elm
City Hall located at 100 West Eldorado Parkway, Little Elm, Texas 75068, on the
24th day of September, 2010, at 10:00 a.m., Central time, and for any
adjournment thereof.
Definitive proxy materials will be filed with the
U.S. Securities and Exchange Commission on August 12, 2010 and furnished
to security holders on the same date.
What is the purpose of the Annual Meeting?
The Board of Directors is asking you to vote on the
following items:
The election of one Class 1 Director and four Class 2
Directors; and
The approval of amendments to the Articles of
Incorporation.
VOTING
INFORMATION
How do I vote?
You may vote your shares in any of the following
four ways:
Vote in Person
At the meeting, you may deliver your ballot to the
Inspector of Elections. To obtain
directions, please call the Company at (888) 806-2626.
Vote by Internet
To vote now by internet, go to
www.proxyvote.com. Have the 12-digit
control number available and follow the instructions.
Vote by Mail
You can vote by mail by requesting a paper copy of
the materials, which will include a proxy card.
Vote by Phone
You can vote by phone by calling
1-800-690-6903. Have the 12-digit
control number available and follow the instructions.
Your 12-digit control number is located in a box with an arrow pointing
to it on the right side of the enclosed proxy card.
Who may vote?
All shareholders of record on July 26, 2010,
the record date, are entitled to vote.
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May I change my vote?
You may change your vote even after you have
submitted your proxy by (1) voting again by Internet or telephone; (2) sending
a written statement revoking your proxy to the Secretary of the Company; (3) submitting
a properly signed proxy with a later date; or (4) voting in person at the
Annual Meeting.
How does the Board recommend I vote?
The Board of Directors recommends a vote For All
in the election of Class 1 and Class 2 Directors and For the
amendment of the Articles of Incorporation.
If appointed by you, the proxy holders will vote
your shares as you direct of the matters described in this Proxy
Statement. In the absence of your direction, they will vote your shares as
recommended by the Board of Directors.
Where no choice is specified by the shareholder, the proxy will be voted
in accordance with the recommendations of the Board of Directors. Unless you indicate otherwise, the proxy
holders are also authorized to vote your shares on any matters that are not
known by your Board of Directors as of the date of this Proxy Statement and
that may be properly presented for action at the Annual Meeting.
What if I do not provide voting instructions to my
broker?
If you are a beneficial owner and do not provide
voting instructions to your broker, your broker will no longer be permitted to
vote on your behalf for the election of directors. Similarly, your broker will not be able to
vote with regard to the approval of amendments to the Articles of
Incorporation. For your vote to be
counted, you need to communicate your voting decisions to your broker, bank, or
other financial institution as soon as possible before September 24, 2010.
How many votes are required to approve each item?
For the election of Directors, a plurality is
required for the election of each nominee.
For the approval of the amendments to the Articles of Incorporation, the
affirmative vote of the holders of at least two-thirds of the outstanding
shares is required.
What constitutes a quorum?
The presence, in person or by proxy, of the holders
of a majority of all the outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum at the Annual Meeting. Each share of Common
Stock entitles the holder to one (1) vote per share. On July 26,
2010, there were 23,825,149 outstanding shares of Common Stock.
Abstentions will be considered present for purposes
of calculating the vote but will not be considered to have been voted in favor
of the matters voted upon, and broker non-votes will not be considered present
for purposes of calculating the votes.
Who pays the expenses incurred in connection with
the solicitation of proxies?
The Company will pay the cost of soliciting
proxies. In addition to the use of the
mails, proxies may be solicited by the Directors, Officers, and employees of
the Company without additional compensation, by personal interview, telephone,
or other means of electronic communication.
Arrangements also may be made with brokerage firms and other custodians,
dealers, banks, and trustees, or their nominees who hold the voting securities
of record, for sending proxy materials to beneficial owners. Upon request, the Company will reimburse the
brokers, custodians, dealers, banks, or their nominees for their reasonable
out-of-pocket expenses.
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Who may I contact with questions?
Shareholders with
questions (including regarding directions) are encouraged to contact the
Companys Chief Financial Officer, Mr. Douglas W. Cowan, at 511 Lobo Lane,
Little Elm, Texas 75068 or by telephone at (888) 806-2626.
PROPOSAL NO. 1
THE ELECTION OF ONE CLASS 1
DIRECTOR AND FOUR CLASS 2 DIRECTORS
The Board of Directors has determined that the Board
shall be comprised of seven members. The
seven regular members are divided into two classes currently consisting of two Class 1
members and five Class 2 members.
The Company has nominated Thomas J. Shaw, Douglas W. Cowan, Clarence
Zierhut, and Marwan Saker to serve as Class 2 Directors and Steven R.
Wisner to serve as a Class 1 Director for a one-year term. All nominees currently serve as Class 2
Directors. The purpose of nominating
Steven R. Wisner to serve as a Class 1 Director is to comply with NYSE
Amex LLC (NYSE Amex) rules requiring that the classes of the Board of
Directors be approximately equal in size.
If the nominees are elected to serve in the proposed classes, the Board
of Directors will consist of three Class 1 Directors and four Class 2
Directors. Generally, Class 1 and Class 2
Directors serve for two year terms. If
the nominees are elected, the one Class 1 Director nominee will hold his
office until the 2011 annual meeting and the four Class 2 Director
nominees will hold their offices until the 2012 annual meeting of the
shareholders when their respective successors are elected and qualified, or
upon their earlier retirement, resignation, or removal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ALL IN THE
ELECTION OF THE ONE CLASS 1 DIRECTOR AND FOUR CLASS 2 DIRECTORS.
All Class 2 Directors terms expire in 2010
(unless reelected) and Class 1 Directors terms expire in 2011. Information regarding nominees and current
Directors is as follows.
THOMAS J. SHAW
Founder,
Chairman, President, Chief Executive Officer, and Class 2 Director
Nominee
for Class 2 Director
Director
since our inception
Qualifications, Experience, Attributes, and Skills
: Mr. Shaw,
age 59, oversees our Management and leads our design team in product
development of medical safety devices that utilize, among other things, his
unique patented friction ring technology.
Mr. Shaw has over 25 years of experience in industrial product
design and has developed several solutions to complicated mechanical
engineering challenges. He has been
granted multiple patents and has additional patents pending. Mr. Shaw has deep knowledge of the
strengths and weaknesses of our products (as their primary inventor) and of the
Company (as its Founder). Further, his
strategic knowledge of the Company and its competitive environment arising from
his ongoing role as its CEO is vital to the successful supervision of the
Company by the Board of Directors.
Finally, Mr. Shaws educational background in both Engineering and
Accounting is helpful in Board deliberations.
DOUGLAS W. COWAN
Vice
President, Chief Financial Officer, Treasurer, and Class 2 Director
Nominee
for Class 2 Director
Director
since 1999
Qualifications, Experience, Attributes, and Skills
: Mr. Cowan,
age 67, is responsible for our financial, accounting, risk management, and
forecasting functions. Mr. Cowan
has a lead role in supervising all internal control and disclosure control
procedures and statements. He also
serves as the primary contact for investors, which enables him to bring their
concerns to the Board on appropriate topics as they arise. His expertise as a CPA and experience as the
Companys CFO allow him to guide the Board, upon request, with regard to
financial matters.
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STEVEN R. WISNER
Executive
Vice President, Engineering & Production and Class 2 Director
Nominee
for Class 1 Director
Director
since 1999
Qualifications, Experience, Attributes, and Skills
: Mr. Wisner,
age 53, is responsible for the management of engineering, production, Chinese
operations, information technology, and international sales. He has extensive experience in operational
management. His role in overseeing all
engineering, production, and foreign sales allows him to provide timely and
insightful guidance regarding the effect of Board decisions on the Companys
ability to meet its goals. Mr. Wisner
has over 30 years of experience in product design, development, and
manufacturing.
MARCO LATERZA
Class 1
Director
Director
since 2005
Qualifications, Experience, Attributes, Skills, and Principal
Occupation
: Mr. Laterza, age 62, is a CPA in active
practice and has decades of experience in advising individuals and entities
with regard to corporate planning and financial issues. Such skills and experience are valuable in
his role as the designated financial expert on the Audit Committee and enable
him to provide valuable independent accounting advice to the Board. Since 1988, Mr. Laterza has owned and
operated a public accounting practice.
His practice includes corporate, partnership and individual taxation,
compilation/review of financial statements, financial planning, business
consulting, and trusts and estates.
Formerly, Mr. Laterza was employed in a number of positions from
1977 to 1985 with El Paso Natural Gas Company eventually serving as its
Director of Accounting.
AMY MACK
Class 1
Director
Director
since 2007
Qualifications, Experience, Attributes, Skills, and Principal
Occupation
: Amy Mack, age 42, has over ten years of experience
as a nurse (the primary retail user of our products) as well as experience in
running her own company. Since 2003, she
has owned and operated SPA 02, a medical spa.
Since 2000, she has owned and operated (and served as Chief Nursing
Officer for) EmergiStaff & Associates, a nursing staffing company, in
Dallas, Texas.
MARWAN SAKER
Class 2
Director
Nominee
for Class 2 Director
Director
since 2000
Qualifications, Experience, Attributes, Skills, and Principal
Occupation
: Marwan Saker, age 55, has experience in
international business as well as expertise in issues relating to international
distribution. Since 1983, Mr. Saker
has served as Chief Executive Officer of Sovana, Inc., a private export
management company that supplies agricultural equipment and supplies to
overseas markets. Mr. Saker has
acted as a representative for U.S. companies seeking distribution, licensing,
and franchising in the Middle East, Europe, and North Africa. Mr. Saker has developed successful
partnerships in more than 15 countries.
CLARENCE ZIERHUT
Class 2
Director
Nominee
for Class 2 Director
Director
since 1996
Qualifications, Experience, Attributes, Skills, and Principal
Occupation
: Clarence Zierhut, age 82, has a lifetime of
experience in conception and development of innovative products as well as
experience in adapting such products to address mass production issues. Mr. Zierhut has valuable experience and
insight arising out of successfully running his own small company. Mr. Zierhut
founded an industrial design firm in 1955, Zierhut Design, now Origin Design,
that develops new products. He ceased
management of the company for a period of time but has since resumed his
executive duties. During his
professional career, Mr. Zierhut has created over 3,000 product designs
for more than
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350
companies worldwide in virtually every field of manufacturing, and has won many
international awards for design excellence.
His clients have included Johnson & Johnson, Abbott, Gould, and
McDonnell Douglas.
Information regarding our non-Director executive
officers is as follows.
Name
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Title
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Age
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Kathryn M. Duesman
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Executive
Director, Global Health
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47
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Russell B. Kuhlman
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Vice
President, Sales
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56
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Michele M. Larios
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Vice
President, General Counsel, and Secretary
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44
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Lawrence G. Salerno
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Director
of Operations
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49
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All of the above-named executives have served in the
indicated positions for the past five years.
Family Relationships
There are no family relationships among the above
persons except that Mr. Salerno is the brother of a 5% shareholder (and
consultant to the Company) who ceased to be a 10% shareholder in 2008.
Directorships in Other Public Companies
No Directors hold Directorships in reporting
companies.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16 of the Exchange Act requires our Directors,
executive officers, and persons who own more than 10% of a registered class of
our equity securities to file with the SEC initial reports of beneficial
ownership (Form 3) and reports of changes in beneficial ownership (Forms 4
and 5) of our Common Stock and our other equity securities. Officers, Directors, and greater than 10%
shareholders are required by the SECs regulations to furnish us with copies of
all Section 16(a) reports they file.
All of our Directors, executive officers, and 10% shareholders filed all
reports timely.
PROPOSAL NO. 2
THE
APPROVAL OF AMENDMENTS TO THE ARTICLES OF INCORPORATION
Section 402.005(a)(3) of the Texas
Business Organizations Code (TBOC), effective January 1, 2010, states
that the Company must conform its Articles of Incorporation to the TBOC when it
files an amendment to its Articles of Incorporation. The Companys Articles of Incorporation were
drafted in accordance with a predecessor statute, the Texas Business
Corporation Act, and contain citations to such statute which must be removed
upon filing an amendment. Additionally,
certain vocabulary in the Companys Articles of Incorporation must be amended
to conform to the TBOC, including a change in the name of the Articles of
Incorporation to the Certificate of Formation.
Section 402.005(a)(3) is pertinent because
the Company must file an amendment to its Articles of Incorporation in order to
incorporate recently amended Certificates of Designation, Preferences, Rights
and Limitations (the Certificates of Designation) of the Series III Class B
Convertible Preferred Stock (Series III Class B) and Series IV
Class B Convertible Preferred Stock (Series IV Class B). Prior to the date the TBOC became applicable
to the Company, the Company also incorporated an amended Certificate of
Designation of Series V Class B Convertible Preferred Stock into its
Articles of Incorporation.
Therefore, in order to comply with Section 402.005(a)(3) of
the TBOC, the Company must make non-substantive amendments to its Articles of
Incorporation to conform certain citations and vocabulary to the TBOC when it
amends its Articles of Incorporation to add the amended Certificates of
Designation. Other minor amendments are
also proposed to clarify certain language and to reflect that the document, as
restated, is not being filed concurrently with the formation of the
corporation. Additionally, the Series A
Convertible Preferred Stock Certificate of Designation is deleted because there
are no shares of such stock currently outstanding and none will be issued in
the future. None of the amendments will
substantively affect the governance of the Company. Proposed
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deletions
and insertions are shown in Appendix A, except that the text of the amended
Certificates of Designation are shown in Appendix A as approved by preferred
shareholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF
AMENDMENTS TO THE ARTICLES OF INCORPORATION.
CORPORATE
GOVERNANCE
The Board of Directors has the responsibility for
establishing corporate policies and for our overall performance, although it is
not involved in day-to-day operations.
Currently, a majority (four of seven) of the Directors serving on our
Board of Directors are independent Directors as defined in Section 803 of
the Company Guide of the NYSE Amex. Our
current independent Directors are Clarence Zierhut, Marwan Saker, Marco
Laterza, and Amy Mack.
The Board of Directors, in reviewing the
independence of its members, further considered the fact that we paid Ms. Macks
company $20,875 in 2008; $9,940 in 2009; and $10,350 as of July 30, 2010
for conducting clinical trials. The
Board of Directors determined that her independence was not compromised by such
transactions.
BOARD OF DIRECTORS
The Board of Directors meets quarterly throughout
the year to review significant developments affecting the Company and to act
upon matters requiring its approval. It
also holds special meetings as required from time to time when important
matters arise requiring Board action between scheduled meetings. During the
last fiscal year, the Board of Directors met six times. No director attended fewer than 75% of the
aggregate of meetings of the Board of Directors and the Committees on which he
or she served in 2009. The Board of
Directors has established standing Audit, Compensation and Benefits, and
Nominating Committees. Each Committee
has a written charter, which is available on our website,
www.vanishpoint.com
. An executive committee which had never met
was dissolved on March 24, 2009.
We have a policy encouraging Board members
attendance at Annual Meetings. All of
the seven members of the Board attended the 2009 Annual Meeting.
Board Leadership Structure and Role in Risk Oversight
The Companys leadership structure combines the
roles of the Chairman of the Board and Chief Executive Officer (CEO). We believe it is in the shareholders best
interests for Thomas J. Shaw to serve in this dual role as CEO and
Chairman. This structure fosters an
important unity of leadership between the Board and the Company and enables the
Board to organize its functions and conduct its business in the most efficient
and effective manner. As founder of the Company
and primary inventor of our products, Thomas J. Shaw has a unique understanding
of our operations and the monopolistic environment in which we operate, which
understanding is necessary to perform the dual role of CEO and Chairman.
We have no lead independent director due to the
relatively small size of the Board and due to the fact that the independent
directors currently carry out their responsibilities effectively.
The primary responsibility for the identification,
assessment, and management of the various risks that we face belongs with
Management. The Board oversees these
risks. For instance, at every meeting,
the Board reviews the principal factors influencing our operating results,
including the competitive environment and ongoing litigation, and discusses
with our executive officers the major events, activities, and changes affecting
the Company. The oversight of risks also
occurs at the committee level. For
instance, pursuant to its charter, the Audit Committee is charged with
reviewing and discussing financial risk exposures with Management and the
measures Management has taken to monitor and control such exposures. Our Chairman, because of his dual role as
CEO, is able to ensure that risks facing the Company are appropriately brought
to the Board and/or its committees for their review.
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AUDIT COMMITTEE
We have a separately designated standing Audit
Committee established in accordance with Section 3(a)(58)(A) of the
Exchange Act. The Audit Committee
represents and assists the Board of Directors in discharging its
responsibilities relating to the accounting, reporting, and financial practices
and legal compliance of the Company. The
Audit Committee has general responsibility for oversight of the accounting and
financial processes of the Company, including oversight of: (1) the
integrity of the Companys financial statements and its financial reporting and
disclosure practices, (2) the Companys compliance with legal and
regulatory requirements, and (3) the qualification and independence of the
Companys auditors and the performance of the annual audit and interim reviews
of the Companys financial statements by the independent auditors. The Audit Committee also provides an open
avenue of communication among the independent auditors, financial and senior
management, and the Board of Directors.
The Audit Committee met a total of eight times in 2009.
The members of the
Audit Committee are independent as defined by the listing standards of the NYSE
Amex. The Audit Committee consists of
Marco Laterza, Marwan Saker, and Clarence Zierhut. Marco Laterza currently serves as its
designated Audit Committee Financial Expert.
Audit Committee Report
The Audit Committee has reviewed and discussed the
audited financial statements with Management.
The Audit Committee has discussed with the independent auditors, CF &
Co., L.L.P. (CF & Co.), the matters required to be discussed by the
Statement on Auditing Standards No. 61, as amended (AICPA,
Professional Standards
, Vol. 1, AU section 380), as adopted
by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee has received the written
disclosures and the letter from CF & Co. required by applicable
requirements of the Public Company Accounting Oversight Board regarding the
independent accountants communications with the audit committee concerning
independence, and has discussed with the independent accountant the independent
accountants independence. Based on the
review and discussions with CF & Co., the Audit Committee recommended
to the Board of Directors that the audited financial statements be included in
the Companys annual report on Form 10-K for the year ended 2009 for
filing with the Commission.
MARCO
LATERZA
MARWAN SAKER
CLARENCE ZIERHUT
NOMINATING COMMITTEE
The Nominating Committee assists the Board of
Directors by identifying qualified candidates for Director positions,
recommending Director nominees for the annual meetings, recommending candidates
for election by the Board of Directors to fill vacancies on the Board, and
recommending Director nominees for Committees upon request of the Board. The
Nominating Committee met one time in 2009.
The Nominating Committee consists of Marwan Saker, Marco Laterza, and Clarence
Zierhut. All members of our Nominating
Committee are independent as defined by the NYSE Amexs listing standards.
Director Nomination Policies
It is the policy of the Nominating Committee to
consider all bona fide candidates recommended by shareholders for nomination
for election to the Board. The Committee considers such candidates using the
same screening criteria as are applied to all other potential nominees for
election, provided that the shareholder nominations are submitted in a timely
and complete manner.
Nominees properly submitted by any shareholder will
be considered for recommendation by the Nominating Committee to the Board of
Directors and for recommendation by the Board to the shareholders in our Proxy
Statement. The procedure to be followed by shareholders in submitting such
recommendations for the next Annual Meeting is set forth in detail herein in
the Section entitled DIRECTOR NOMINATIONS TO BE CONSIDERED BY THE BOARD
IN 2011.
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We establish, through our Nominating Committee,
selection criterion that identifies desirable skills and experience for
prospective Board members, including those properly nominated by shareholders,
and addresses the issues of diversity and background. The Nominating Committee has no formal policy
with regard to the consideration of diversity in identifying nominees for
director. The Nominating Committee and
Board broadly define diversity to include diversity of professional experience
and viewpoint, as well as diversity of race, gender, nationality, and
ethnicity. The Board, with the
assistance of the Nominating Committee, selects potential new Board members
using the criteria and priorities established from time to time based upon the
needs of the Company. The composition,
skills, and needs of the Board change over time and will be considered in
establishing the desirable profile of candidates for any specific opening on
the Board of Directors.
At a minimum, recommended nominees by the Nominating
Committee for service on the Board must be well regarded and experienced
participants in their field(s) of specialty, familiar at the time of their
appointment with our business, willing to devote the time and attention
necessary to deepen and refine their understanding of the Company and the issues
facing it, and must have an understanding of the demands and responsibilities
of service on a public company board of directors. The Nominating Committee will also consider
such qualities as independence from the Company. Each nominee will be considered both on his
or her individual merits and in relation to existing or other potential members
of the Board, with a view to establishing a well-rounded, diverse,
knowledgeable, and experienced Board.
The Nominating Committee considers nominees
recommended by Board members, Management, and the shareholders. It is further empowered, when necessary in
its judgment, to retain and compensate third party search firms to assist in
identifying or evaluating potential nominees.
The Class 1 and Class 2 Director nominees
herein were recommended by the Nominating Committee and unanimously approved by
the Board of Directors.
COMPENSATION
AND BENEFITS COMMITTEE
The Compensation and Benefits Committee has
authority over the following responsibilities: discharging the Board of
Directors responsibilities relating to the compensation of our executive
officers and Directors; preparing, if necessary, an annual report on
compensation and such other reports that may be required; and administering our
equity and other incentive compensation plans.
Changes in the amount and/or form of compensation to executive officers
are not generally pursued unless first proposed by Management. The committees authority may not be
delegated except back to the full Board of Directors. The Company has not retained a compensation
consultant since 2003.
The Compensation and Benefits Committee met five
times during 2009. The Compensation and
Benefits Committee currently consists of Marco Laterza, Clarence Zierhut, and
Amy Mack. All members of our
Compensation and Benefits Committee are independent as defined by the NYSE Amex
listing standards.
COMMUNICATIONS WITH THE BOARD OF
DIRECTORS
The Board of Directors has established a Disclosure
Representative Policy and a standing Disclosure Representative position. It is
our policy that the Disclosure Representative serves as the primary contact for
shareholders and others desiring to communicate directly with the Board of
Directors. It is further our policy that
all communications addressed to the Board of Directors or the Disclosure
Representative are sent to all Board members.
The current Disclosure Representative is Mr. Marco Laterza. Communications intended for the Board of
Directors should be in writing, addressed to the attention of the Disclosure
Representative or Mr. Marco Laterza, and sent to 511 Lobo Lane, Little
Elm, Texas 75068-0009.
Periodically, shareholders contact our Chief
Financial Officer, Mr. Douglas Cowan, who responds to questions
individually unless the question is directed to the full Board of Directors or
the Disclosure Representative.
-8-
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS
The following table sets forth certain information
regarding the beneficial ownership of our capital stock as of July 30,
2010, for each person known by us to own beneficially 5% or more of the voting
capital stock. Except pursuant to
applicable community property laws, each shareholder identified in the table
possesses sole voting and investment power with respect to his or her shares,
except as noted below.
Title of Class
|
|
Name and Address of
Beneficial Owner
|
|
Amount and
Nature of
Beneficial
Ownership
|
|
Percent of
Class
(1)
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
Thomas
J. Shaw
(2)
511 Lobo Lane
P.O. Box 9
Little Elm, TX 75068-0009
|
|
14,590,000
|
|
54.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Suzanne
M. August
(3)
5793 Lois Lane
Plano, TX 75024
|
|
2,800,000
|
|
11.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Lillian
E. Salerno
(4)
432 Edwards
Lewisville, TX 75067
|
|
1,931,000
|
|
8.1
|
%
|
|
|
|
|
|
|
|
|
|
|
Lloyd
I. Miller, III
(5)
4550 Gordon Drive
Naples, FL 34102
|
|
1,224,075
|
|
5.1
|
%
|
|
|
|
|
|
|
|
|
Class B Stock
|
|
|
|
|
|
|
|
|
|
Thomas
J. Shaw
|
|
80,000
|
|
3.5
|
%
|
|
|
Lillian
E. Salerno
|
|
12,500
|
|
<1
|
%
|
(1) The Percent of Class is
calculated for the Common Stock class by dividing each beneficial owners
Amount of Beneficial Ownership, as shown in the table above, by the sum of the
total outstanding Common Stock (23,825,149 shares) plus that beneficial owners
stock equivalents (options and/or preferred stock), if any. The Percent of Class is calculated for
the Class B stock by dividing each beneficial owners Amount of Beneficial
Ownership, as shown in the table above, by the total outstanding Class B
shares (2,285,266 shares).
(2) 3,000,000 of the shares identified as
Common Stock are shares acquirable through the exercise of a stock option. 80,000 of the shares identified as Common
Stock are preferred shares which are eligible for conversion into Common
Stock. 2,800,000 of the shares are owned
by Ms. Suzanne August (see footnote 3) but are controlled by Mr. Shaw
pursuant to a Voting Agreement. These
shares are permanently controlled by Mr. Shaw until such time as they are
sold by Ms. August. These shares
are included in calculating Mr. Shaws percentages in the above table.
(3) Ms. Augusts 2,800,000 shares
are controlled by Mr. Thomas J. Shaw pursuant to a Voting Agreement. Accordingly, they are also included in the Common
Stock equivalents and percentages for Mr. Shaw in the above table.
(4) 12,500 of the shares identified as
Common Stock are preferred shares which are eligible for conversion into Common
Stock and 25,000 shares identified as Common Stock are shares which are
obtainable by the exercise of options.
-9-
(5) The number of shares held by this
person was obtained from a Schedule 13G/A filed on February 8, 2010. Pursuant to the Schedule 13G/A, Lloyd I. Miller, III
has sole voting and dispositive power for 303,300 of the shares, and shared
voting and dispositive power for 920,775 shares.
SECURITY
OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following table sets forth certain information
regarding the beneficial ownership of our capital stock as of July 30,
2010, for each Named Executive Officer specified by Item 402 of Regulation S-K
(i.e., our CEO, CFO, and three other highest paid officers) and Director of the
Company. Except pursuant to applicable
community property laws or as otherwise discussed below, each shareholder
identified in the table possesses sole voting and investment power with respect
to his or her shares.
Title of Class
|
|
Name of
Beneficial Owner
|
|
Amount and
Nature of
Beneficial
Ownership
|
|
Percent
of
Class
(1)
|
|
Common Stock
|
|
|
|
|
|
|
|
As a Group
|
|
Named
Executive Officers and Directors
|
|
15,887,650
|
|
59.6
|
%
|
As Individuals
|
|
Thomas
J. Shaw
(2)
|
|
14,590,000
|
|
54.2
|
%
|
|
|
Marwan
Saker
(3)
|
|
445,500
|
|
1.8
|
%
|
|
|
Clarence
Zierhut
(4)
|
|
62,500
|
|
<1
|
%
|
|
|
Douglas
W. Cowan
(5)
|
|
200,000
|
|
<1
|
%
|
|
|
Steven
R. Wisner
(6)
|
|
129,200
|
|
<1
|
%
|
|
|
Russell
B. Kuhlman
(7)
|
|
89,450
|
|
<1
|
%
|
|
|
Michele
M. Larios
(8)
|
|
261,000
|
|
1.1
|
%
|
|
|
Marco
Laterza
(9)
|
|
60,000
|
|
<1
|
%
|
|
|
Amy
Mack
(10)
|
|
50,000
|
|
<1
|
%
|
Class B Stock
|
|
|
|
|
|
|
|
As a Group
|
|
Named
Executive Officers and Directors
|
|
435,000
|
|
19.0
|
%
|
As Individuals
|
|
Thomas
J. Shaw
|
|
80,000
|
|
3.5
|
%
|
|
|
Marwan
Saker
|
|
355,000
|
|
15.5
|
%
|
(1) The Percent of Class is
calculated for the individuals holding Common Stock by dividing each beneficial
owners Amount of Beneficial Ownership, as shown in the table above, by the sum
of the total outstanding Common Stock (23,825,149 shares) plus that beneficial
owners stock equivalents (options and/or preferred stock), if any. The Percent of Class is calculated for
the As a Group rows by totaling all of the Percent of Class percentages
appearing in the chart for individuals for each relevant class. The Percent of Class is calculated for
the Class B stock by dividing each beneficial owners Amount of Beneficial
Ownership, as shown in the table above, by the total outstanding Class B
shares (2,285,266 shares).
(2) 3,000,000 of the shares identified as
Common Stock are shares acquirable through the exercise of a stock option.
80,000 of the shares identified as Common Stock are preferred shares which are
eligible for conversion into Common Stock.
2,800,000 of the shares are owned by Ms. Suzanne August but
are controlled by Mr. Shaw pursuant to a Voting Agreement. These shares are permanently controlled by Mr. Shaw
until such time as they are sold by Ms. August. These shares are included in calculating Mr. Shaws
percentages in the above table.
(3) 355,000 shares identified as Common
Stock are preferred shares which are eligible for conversion into Common Stock.
The shares are held as follows: Saker Investments holds 15,500 shares of Series IV
Class B Convertible Preferred Stock and 25,000 shares of Series V Class B
Convertible Preferred Stock, Sovana Cayman Islands, Inc. holds 300,000
shares of Series IV Class B Convertible Preferred Stock, and My
Investments Co. LLC holds 14,500 shares of Series IV Class B
Convertible Preferred Stock. Mr. Saker is an Officer or Director and
shareholder for each of these companies. The remaining 90,500 shares identified
as Common Stock are shares currently obtainable through the exercise of options
held by Mr. Saker.
(4) These shares identified as Common
Stock are shares acquirable by the exercise of stock options.
-10-
(5) 200,000 of these shares identified as
Common Stock are shares acquirable by the exercise of stock options.
(6) 124,200 of these shares identified as
Common Stock are shares acquirable by the exercise of stock options.
(7) 88,450 of these shares identified as
Common Stock are shares acquirable by the exercise of stock options.
(8) 250,000 of these shares identified as
Common Stock are shares acquirable by the exercise of stock options.
(9) 50,000 of these shares identified as
Common Stock are shares acquirable by the exercise of stock options.
(10) These shares identified as Common Stock
are shares acquirable by the exercise of stock options.
There
are no arrangements, the operation of which would result in a change in control
of the Company, other than:
1. Ms. Augusts shares shall cease to be
controlled by Mr. Shaw under their Voting Agreement upon their sale to a
third party; and
2. Mr. Shaw was granted an option for the
purchase of 3,000,000 shares of Common Stock.
Mr. Shaw is able to control 54.2% of the currently outstanding
shares of the Common Stock and would control 48.4% of the Common Stock assuming
the exercise of all outstanding options and conversion of all outstanding
preferred shares and convertible loans.
Certain Relationships and Related Transactions
We believe that all of the transactions set forth
below were made on terms no less favorable to us than could have been obtained
from unaffiliated third parties. In
accordance with our Audit Committee Charter, the Audit Committee has reviewed
and approved all related party transactions.
In particular, the Audit Committee
reviews all proposed transactions where the amount involved meets or exceeds
$120,000.
Thomas J. Shaw, our President and Chief Executive
Officer, beneficially owned 36.5% of the outstanding Common Stock (and
controlled another 11.8% pursuant to a Voting Agreement with Ms. Suzanne
August) as of July 30, 2010. In
1995, Mr. Shaw was paid a licensing fee of $500,000 (amortized over 17
years) by us for the exclusive worldwide licensing rights to manufacture,
market, sell, and distribute retractable medical safety products. A royalty of 5% of gross sales of all
licensed products sold to customers over the life of the Technology Licensing
Agreement is paid. Of this royalty, Ms. Suzanne
August, the former spouse of Mr. Shaw, is entitled to $100,000 per
quarter. Mr. Shaw receives the
remainder of this royalty. A royalty of
$1,183,883 and $1,766,585 was paid to Thomas J. Shaw in 2009 and 2008,
respectively. Ms. August received
$400,000 in 2009 and 2008. Royalties of
$1,548,569 were paid to Mr. Shaw and Ms. August from January 1,
2010 through July 30, 2010. In the
third quarter of 2009, the Company announced several cost cutting initiatives
to conserve its cash. As part of those
initiatives, Mr. Shaw waived $1,000,000 in royalty payments, most of which
affect cash outlays in 2009.
COMPENSATION DISCUSSION AND
ANALYSIS
COMPENSATION DISCUSSION AND ANALYSIS
The Objectives of Our Compensation Plan
Our executive officer compensation program (the Compensation
Program) is based on the belief that competitive compensation is essential to
attract, retain, motivate, and reward highly qualified and industrious
executive officers. Our Compensation
Program is intended to accomplish the following:
attract and retain highly talented and productive
executive officers;
-11-
provide incentives and rewards for superior
performance by the executive officers; and
align the interests of executive officers with the
interests of our stockholders.
What the Compensation Program Is Designed to Award
Our Compensation Program is designed to award both
superior long-term performance by our executive officers and their loyalty.
Summary of Each Element of Compensation
To achieve these objectives, the Compensation and
Benefits Committee has approved an executive officer compensation program that
consists of three basic components:
base salary;
periodic long-term incentive compensation in the
form of stock options; and
medical, life, and benefit programs (which are
generally available on the same terms to all employees).
Why We Choose to Pay Each Element of Our Compensation
Program
Base Salary
We choose to pay a significant component of our
compensation in base salary due to the fact that our financial performance is
constrained by the monopolistic activities of Becton Dickinson and Company (BD). We have been blocked from access to the
market by exclusive marketing practices engaged in by BD who dominates the
market. We believe that its monopolistic
business practices continue despite: (i) its paying $100 million to settle
a prior lawsuit with us in 2004 for anticompetitive practices, business
disparagement, and tortious interference and (ii) the fact that a final
judgment was entered in May 2010 finding that all three patents asserted
by us against BD are valid and infringed by BD.
Until such time as we believe that we have access to the market, we
believe that it is appropriate to weigh our Compensation Program heavily in
favor of base salaries rather than in incentive compensation.
Long-Term Incentives: Stock Options
Long-term incentives are provided through grants of
stock options. The grants are designed
to align the interests of executive officers with those of stockholders and to
provide each executive officer with a significant incentive to manage from the
perspective of an owner with an equity stake in the Company.
How We Determine the Amount or Formula for Payment in
Light of Our Objectives
Executive compensation remains the same until there
is a review of such compensation by the Compensation and Benefits
Committee. Compensation, other than that
of the Chief Executive Officer, has generally not been reviewed annually. Under the terms of Mr. Shaws employment
agreement, his compensation is reviewed annually.
Base Salary
The base salary for each of our executive officers
is subjectively determined primarily on the basis of the following factors:
experience, individual performance, contribution to our performance, level of
responsibility, duties and functions, salary levels in effect for comparable
positions within and without our industry, and internal base salary
comparability considerations. However,
salaries can also be affected by our long-term needs.
-12-
These base salaries are reviewed periodically and
may be adjusted based upon the factors discussed in the previous sentence, as
well as upon individual performance during the previous fiscal year, changes in
the duties, responsibilities and functions of the executive officer, and
general changes in the compensation peer group in which we compete for
executive talent. The relative weight
given to each of these factors in the Compensation and Benefits Committees
recommendation differs from individual to individual, as the Compensation and
Benefits Committee deems appropriate.
Beginning August 1, 2009, all employees above a
certain salary level had their salaries reduced by 10%. This included all executive officers. However, Mr. Shaws Employment Agreement
provides his salary is automatically increased by the percentage increase in
the consumer price index (CPI) from the previous year. The Compensation and Benefits Committee
decided to increase Mr. Shaws salary (which had also been previously cut
by 10%) by $11,254.04 for 2010.
Long-Term Incentive: Stock Options
We have issued stock options to our employees from
time to time and may do so in the future.
We did not issue any stock options in 2007. We issued new options under the 2008 Stock
Option Plan to purchase an aggregate of 962,683 shares of Common Stock in
exchange for the cancellation of tendered options pursuant to an Exchange Offer
in 2008. We issued incentive stock
options (ISOs) for the purchase of 269,956 shares of Common Stock and Non
Qualified Stock Options (NQSOs) for the purchase of 229,494 shares of Common
Stock to executive officers and Directors under the 2008 Stock Option Plan in July 2009. Options are generally granted to regular
full-time employees and officers except to our CEO.
In 2009, the Compensation and Benefits Committee
granted the first option to Thomas J. Shaw, our CEO, which option grant was
approved by the shareholders later that year.
The option was granted outside of any plan and was for the purchase of
3,000,000 shares of Common Stock. The
committee took into consideration, among other things, the following benefits
received and to be received by the Company in consideration for the grant of
the option:
Mr. Shaw has been the primary developer of all of the Companys
products and is crucial to the recent development of a number of new products
that are capable of expanding the Companys product line both inside and
(eventually) outside of the syringe market;
Mr. Shaws active participation and continuation with the Company
is crucial for the success of the Company in breaking into the market through
its several ongoing lawsuits. Mr. Shaws
participation was crucial in obtaining the Companys prior litigation settlements
for tens of millions of dollars;
Mr. Shaw had his salary reduced by 10% beginning on August 1,
2009;
Mr. Shaw only had a substantive pay raise three times since the
Companys incorporation in 1994;
Mr. Shaw has never before been granted options despite the fact it
is a standard compensation practice for a person in his position; and
Mr. Shaw has never before been granted a bonus despite the fact it
is a standard compensation practice for a person in his position.
If stock options are to be issued, Management
prepares a proposal to the Compensation and Benefits Committee. Considerations by Management in its initial
proposal in determining a suitable aggregate fair market value of options to be
granted include our financial condition, the number of options already
outstanding, and the benefit to the non-executive officer employees. The proposal includes information relating to
the expected expense of such grants to be recognized by us, the approximate number
of options to be issued, the number of options
-13-
currently
outstanding, the employees to be included, the amount of stock currently
outstanding, and the method under which the options would be awarded.
Once the dollar amount of options to be granted is
approved by the Compensation and Benefits Committee, Management begins
determining the aggregate number of shares underlying options that can be
granted under such approval (based on the fair value of an option for the
purchase of one underlying share).
Factors included in the determination of the value of an option grant
for the purchase of one share include current market price of the Companys
stock, the proposed exercise price, the proposed expiration date, the
volatility of the Companys stock, and the risk free rate. We may retain an independent outside
consultant to determine such value. In
the past we have utilized the Black-Scholes model as well as the binomial
model, but we may use other methods in the future as more appropriate methods
are developed.
Management provides the Compensation and Benefits
Committee with a proposal regarding option grants to executive officers. If the recommendation is acceptable, the
committee grants the options. If the
committee feels changes are merited, it grants options on its own terms.
With regard to many past grants, after the aggregate
number of shares underlying the options to be granted was determined, we
allocated the options to our various departments using a factor based on their
annual compensation times their performance rating. The individual employees allocation factor
was the numerator of a fraction. The
denominator was the departments sum of all factors (annual compensation times
performance ratings of all the eligible employees). The resulting fraction was multiplied by the
stock options to be awarded to determine the employees individual portion of
the aggregate approved options. Future
grants may be based on the value of contributions to the Company and not
necessarily pursuant to any formula.
The allocation was, from time to time, further
reviewed by each departments management if they believed certain employees
were not awarded an appropriate number of options, which Management would
consider.
Each stock option grant to employees allows the
employee to acquire shares of Common Stock at a fixed price per share (never
less than the closing stock price of the Common Stock on the date of grant) for
a fixed period (usually ten years). With
regard to grants prior to 2009, each option generally became exercisable after
three years, contingent upon the employees continued employment with us. The exceptions include options issued to
Officers and Directors pursuant to the Exchange Offer, which vested immediately
for non-employee Directors and after one year for employees (including employee
Directors) and options granted in 2009 which vested in one year for executive
officers and immediately for non-employee Directors. Accordingly, generally stock option grants
will provide a return to the employee only if the employee remains employed by
us during the vesting period, and then only if the market price of the
underlying Common Stock appreciates.
Future grants may vest over a shorter or longer period.
How Each Compensation Element and Decision Fits Into
Overall Compensation Objectives
Our Compensation Program is intended to accomplish
the following objectives: 1) attract and retain highly talented and productive
executive officers; 2) provide incentives and rewards for superior performance
by the executive officers; and 3) align the interests of executive officers
with the interests of our stockholders.
We ensure, through
periodic retention of compensation consulting experts to provide a benchmark
analysis of industry compensation, that overall compensation is sufficient to
attract and retain highly talented and productive executive officers. We pay the bulk of our compensation in the
form of cash compensation due to the fact that competing in an anti-competitive
environment means that results will not always be commensurate with
performance. We believe that the
performance of our executives has been outstanding. We believe this is especially true given the
anti-competitive environment in which we operate. Bonuses are granted from time to time (the
last time in 2003) to recognize extraordinary performance and/or extraordinary
job requirements. We believe this
approach and weighting of compensation elements is necessary to retain our executive
talent due to the environment in which we operate.
Periodically, we grant
stock options with the intent to provide both an incentive and reward to
executive officers for long-term performance and to align the interests of our
employees with that of the shareholders.
-14-
Allocation Between Long-Term/Current and Between
Cash/Non-Cash Compensation
All of our long-term compensation consists of
non-cash compensation in the form of stock options. We believe that the granting of stock options
incentivizes executives to maximize our long-term strengths as well as our
stock price. However, because we are
operating in a monopolistic environment and our stock price has little
relationship with our performance, the most significant component of compensation
is base salary and not stock options.
Management is incented to maximize shareholder value and will be
rewarded if they do so. However, a
significant base salary enables us to retain this competent Management despite
the current inability to provide valuable equity incentives.
How Determinations Are Made as to When Awards Are
Granted
Generally, option awards to executive officers are
granted by the Compensation and Benefits Committee and for others are granted
at the discretion of the Board after recommendation of the Compensation and
Benefits Committee or on the committees own initiative. No awards are granted if the Compensation and
Benefits Committee does not support a recommendation.
Unfortunately, our stock price does not always react
as expected to our achievements.
Accordingly, at times options have been granted to aid in retaining
competent and experienced executives without regard to the then current stock
price. However, such options always have
exercise prices that are at or above fair market value on the date of grant.
In addition, there is no relationship between the
date of grant of options and our possession of material non-public information
(i.e. we grant options without regard to whether or not we are in possession of
material non-public information as we usually are in possession of such
information). Furthermore, it is our
policy with regard to options that (although the options could be exercised)
the underlying shares could not be sold into the market while the executive was
in possession of material non-public information under our insider trading
policy. Accordingly, we believe that
there is minimal risk of the executive profiting from such material non-public
information.
What Specific Items of Corporate Performance Are Taken
Into Account in Setting Compensation Policies and Making Compensation Decisions
Cash reserves as well as trends in sales and costs
are taken into account when considering the advisability of increasing base
salaries or granting cash bonuses. However,
no specific items of corporate performance are taken into account in setting
executive compensation due to the fact that we compete in a monopolistic
environment and, therefore, significant achievement or performance is not
always correlated with corporate results.
At such times that any of these factors make it inadvisable to increase
salaries or grant bonuses as advisable, then consideration is given to
increasing option awards taking into account the value of prior option awards.
Awards are granted on the basis of historical
performance. Accordingly, there is no
discretion to change the awards once granted.
How Compensation Reflects Individual Performance
Executive compensation is
not based on the individuals contribution to specific, quantitative corporate
objectives due to the fact that we compete in a monopolistic environment. However, individuals contribution to the
Companys performance is determined pursuant to qualitative factors as
discussed above under How We Determine the Amount or Formula for Payment in
Light of Our Objectives.
Factors We Consider in Determining to Change
Compensation Materially
We consider our cash position, current liquidity
trends, and the short-term and long-term needs for cash reserves (especially in
light of the hostile environment in which we operate) when evaluating whether
we can change compensation materially at a given time.
-15-
On an individual-by-individual basis, we also
consider the value of past option compensation, the competitiveness of that
individuals base salary, and that individuals contribution to our goals.
The Impact of the Accounting and Tax Treatments of Our
Types of Compensation
Stock options granted to executives and other employees
are expensed for accounting purposes under the Stock Compensation Topic of the
Codification. We expense all of our
option costs as we do the costs of salaries and any periodic bonuses. Accordingly, the impact of tax treatment of
various compensation forms does not impact our compensation decisions. Stock option expense is not recognized for
tax purposes, except in the case of non-qualified stock options. For non-qualified stock options, the
intrinsic value of the option is recognized when the option is exercised.
Our Policy Regarding Stock Ownership and Hedging
We do not have a policy regarding stock ownership by
executive officers. We prohibit certain
stock transactions by employees and Directors, including:
1. Purchases
and sales of stock within a six month period;
2. Short
sales; and
3. Transactions
in puts, calls, or other derivative securities.
Furthermore, employees and Directors are required to
pre-clear any hedging transactions.
Benchmarking of Our Compensation Program
In 2003, we hired Trinity Executive Recruiters, Inc.
to assist us in providing benchmarks for the salary component of executive
compensation by similarly sized companies in similar industries for persons
that hold positions which are currently fulfilled by various members of our
executive team. These benchmarks support
existing executive compensation.
The Role of Our Executives and Directors in
Determining Compensation
Management establishes the initial recommendations
regarding compensation for all employees, including themselves. Such proposal is then submitted to the
Compensation and Benefits Committee for its approval.
Compensation Pursuant to Employment Agreement
We have an Employment Agreement with Mr. Thomas
J. Shaw which was modified effective January 1, 2008 to avoid adverse tax
consequences to Mr. Shaw created by the passage of the American Jobs
Creation Act of 2004. No other
executives or Directors are compensated pursuant to employment agreements.
Our Employment Agreement with Mr. Shaw (the Employment
Agreement) provides for an initial period of three years which ends December 31,
2010 that automatically and continuously renews for consecutive two-year
periods. The Employment Agreement is
terminable either by us or Mr. Shaw upon 30 days written notice or upon Mr. Shaws
death.
The Employment Agreement provides for an annual
salary of at least $416,399.88 with an annual salary increase equal to no less
than the percentage increase in the CPI over the prior year. The Employment Agreement requires that Mr. Shaws
salary be reviewed by the Compensation and Benefits Committee annually, which
shall make such increases as it considers appropriate. Mr. Shaw took a 10% salary cut in August of
2009, along with all other executive officers and other employees earning over
a certain salary. In 2010, the
Compensation and Benefits Committee increased his salary by $11,254.04.
-16-
Under the Employment Agreement, we are obligated to
provide certain benefits, including, but not limited to, participation in
qualified pension plan and profit-sharing plans, participation in the Companys
Cafeteria Plan and other such insurance benefits provided to other executives,
paid vacation, and sick leave. We are
also obligated to furnish him with a cellular telephone and suitable office
space as well as reimburse him for any reasonable and necessary out of pocket
travel and entertainment expenses incurred by him in carrying out his duties
and responsibilities, membership dues to professional organizations, and any
business-related seminars and conferences.
Pursuant to the Employment Agreement, we are
obligated to indemnify Mr. Shaw for all legal expenses, court costs, and
all liabilities incurred in connection with any proceeding involving him by
reason of his being an officer, employee, or agent of the Company. We are further obligated to pay reasonable
attorney fees and expenses and court and other costs associated with his
defense in the event that, in Mr. Shaws sole judgment, he needs to retain
counsel or otherwise expend his personal funds for his defense.
Upon his death, Mr. Shaws estate shall be
entitled to his salary through the date of death, applicable benefits, and
reimbursement of expenses.
We have the right to terminate the Employment
Agreement if Mr. Shaw incurs a permanent disability during the term of his
employment. A permanent disability means
that Mr. Shaw is unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than 12 months or is, by reason of any medically determinable
physical or mental impairment which can be expected to result in death or can
be expected to last for a continuous period of not less than 12 months,
receiving income replacement benefits for a period of not less than 3 months
under an accident and health plan covering employees of the Company. Mr. Shaw shall also be deemed to be
disabled if he is determined to be totally disabled by the Social Security
Administration. In such event, Mr. Shaw
is entitled to his salary through the date of termination, reimbursement of
expenses, and salary for a period of 24 months as well as applicable benefits.
Mr. Shaws employment may be terminated for
cause which is defined to be conviction of a felony which is materially
detrimental to the Company, proof, as determined finally by a court of
competent jurisdiction of the gross negligence or willful misconduct which is
materially detrimental to the company or proof, as determined finally by a
court of competent jurisdiction, of a breach of a fiduciary duty which is
materially detrimental to the Company.
In such event, he shall be entitled to his salary through the date of
termination plus reimbursement of expenses.
If Mr. Shaw is terminated without cause and not
at his implicit request, Mr. Shaw shall be entitled to his salary through
the date of termination, reimbursement of expenses, his salary for 24 months,
as well as applicable benefits.
If Mr. Shaw resigns (other than because of a
change in control), he is entitled to his salary through the date of
termination, reimbursement of expenses, salary for 90 days, and applicable
benefits.
Mr. Shaw has the right under this agreement to
resign in the event that there is a change in control. A Change of Control shall be deemed to have
occurred on either of the following dates: (i) the date any one person
(other than Mr. Shaw), or more than one person acting as a group, acquires
(or has acquired during the 12-month period ending on the date of the most
recent acquisition by such person or persons) ownership of stock of the Company
possessing 30% or more of the total possible voting power of the stock of the
Company (assuming the immediate conversion of all then outstanding convertible
preferred stock) or (ii) the date a majority of members of the Board of
Directors is replaced during any 12-month period by Directors whose appointment
or election is not endorsed by a majority of the members of the Companys Board
of Directors before the date of the appointment or election. Mr. Shaw further has the right to resign
if there is a change in ownership. A
change in ownership is defined to have occurred on the date that any one person
(other than Mr. Shaw) or more than one person acting as a group acquires
ownership of the Companys stock that, together with the stock previously held
by such person or group, constitutes more than 50% of the total fair market
value or total voting power (assuming the immediate conversion of all then
outstanding convertible preferred stock) of the Company. In such event Mr. Shaw is entitled to
salary through the date of termination, salary for 24 months, reimbursement of
expenses, and applicable benefits.
-17-
Mr. Shaws commitment to the Company may not be
construed as preventing him from participating in other businesses or from
investing his personal assets as may require occasional or incidental time in
the management, conservation, and protection of such investments provided such
investments or businesses cannot be construed as being competitive or in
conflict with the business of the Company.
Mr. Shaw has agreed to a one-year non-compete,
not to hire or attempt to hire employees for one year, and not make known our
customers or accounts or to call on or solicit our accounts or customers in the
event of termination of his employment for one year unless the termination is
without cause or pursuant to a change of control or ownership.
SUMMARY
OF TOTAL COMPENSATION
The following Summary Compensation Table sets forth
the total compensation paid or accrued by us over the past three fiscal years
to or for the account of the principal executive officer, the principal
financial officer, and the three highest paid additional executive officers:
SUMMARY COMPENSATION TABLE FOR 2007-2009
|
|
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Option
Awards
(1)
($)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
|
Thomas J. Shaw
|
|
2007
|
|
400,000
|
|
|
|
4,200
|
(2)
|
404,200
|
|
President and CEO
|
|
2008
|
|
416,548
|
|
|
|
4,600
|
(2)
|
421,148
|
|
(principal executive officer)
|
|
2009
|
|
399,887
|
|
1,762,500
|
|
4,808
|
(2)
|
2,167,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas W. Cowan
|
|
2007
|
|
290,109
|
|
778
|
|
4,200
|
(2)
|
295,087
|
|
Vice President, CFO
|
|
2008
|
|
290,000
|
|
6,460
|
|
4,600
|
(2)
|
301,060
|
|
(principal financial officer)
|
|
2009
|
|
278,289
|
|
57,575
|
|
3,346
|
(2)
|
339,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven R. Wisner
|
|
2007
|
|
290,000
|
|
758
|
|
4,200
|
(2)
|
294,958
|
|
Executive Vice President,
|
|
2008
|
|
290,020
|
|
6,694
|
|
4,600
|
(2)
|
301,314
|
|
Engineering and Production
|
|
2009
|
|
278,289
|
|
13,806
|
|
3,123
|
(2)
|
295,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michele M. Larios
|
|
2007
|
|
350,000
|
|
797
|
|
4,200
|
(2)
|
354,997
|
|
Vice President,
|
|
2008
|
|
350,540
|
|
6,843
|
|
4,600
|
(2)
|
361,983
|
|
General Counsel
|
|
2009
|
|
336,676
|
|
89,858
|
|
4,047
|
(2)
|
430,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell B. Kuhlman
|
|
2007
|
|
134,779
|
|
369
|
|
2,695
|
(2)
|
137,843
|
|
Vice President, Sales
|
|
2008
|
|
140,000
|
|
4,019
|
|
2,800
|
(2)
|
146,819
|
|
|
|
2009
|
|
133,769
|
|
14,688
|
|
1,606
|
(2)
|
150,063
|
|
(1)
Except for the option
granted to Mr. Shaw, all options issued during or after 2008 were granted
under the 2008 Stock Option Plan.
Options issued prior to 2008 were issued under either the 1996 Incentive
Stock Option Plan, the 1996 Stock Option Plan for Directors and Other
Individuals, or under the 1999 Stock Option Plan. The employees who had such options were
permitted to exchange them for options granted under the 2008 Stock Option Plan
pursuant to an Exchange Offer in 2008.
The fair value of each option grant prior to 2008
was estimated on the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions used for grants in 2004: no
dividend yield; expected volatility of 37%; risk free interest rate of 4.89%;
and an expected life of 9.0 years. No
options were issued in 2006 or 2007.
Options granted before 2008 were issued under the 1999 Stock
Option Plan, a copy of which Plan and amendment were filed as exhibits to our Form 10-SB
filed on June 23, 2000 and our Form 10-KSB filed on March 31,
2003, respectively. Option award expense
for grants issued before 2008 were fully amortized by the first quarter of
2007.
Option award expense for 2008 is that portion of the
fair value of the options issued under the Exchange Offer in 2008. The expense for the options issued under the
Exchange Offer was fully amortized in 2009.
The fair
-18-
value
of each 2008 option grant was estimated on the date of grant using the binomial
option pricing model with the following weighted average assumptions used for
grants in 2008: no dividend yield; expected volatility of 67.53%; risk free
interest rate of 2.83%; and an expected life of 8.61 to 8.69 years. The options were issued under the 2008 Stock
Option Plan, a copy of which Plan was filed as Appendix B to our definitive
Schedule 14A filed on August 19, 2008.
The fair value of each 2009 grant is estimated on
the date of the grant using the Black-Scholes pricing model with the following
weighted average assumptions used for grants in 2009: expected volatility of
67.53%, risk free interest rate of 3.35%, and an expected life of 8.61 to 8.69
years. Other than the options issued to Mr. Shaw,
the options were issued under the 2008 Stock Option Plan.
(2)
This amount was compensation
pursuant to our matching contributions to the 401(k) plan.
GRANTS
OF PLAN-BASED AWARDS
The following Grants of Plan-Based Awards for 2009
Table sets forth information regarding grants of awards made under any plan to
each named executive officer in the last completed fiscal year.
Grants of
Plan-Based Awards for 2009
Name
|
|
Grant
Date
|
|
Estimated
Future
Payouts
Under Equity
Incentive
Plan Awards
Target
#
|
|
All
Other
Option
Awards:
Number of
Shares of
Stocks or
Units
#
|
|
Exercise
or base
price of
option
awards
$/share
|
|
Grant
date
fair value
of stock
and option
awards
|
|
Thomas J. Shaw
|
|
7/15/09
|
|
|
|
3,000,000
|
|
$0.81
|
|
$1,762,500
|
|
President and CEO
|
|
|
|
|
|
|
|
|
|
|
|
(principal executive officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas W. Cowan
|
|
7/15/09
|
|
98,000
|
|
|
|
$0.81
|
|
$57,575
|
|
Vice President, CFO
|
|
|
|
|
|
|
|
|
|
|
|
(principal financial officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven R. Wisner
|
|
7/15/09
|
|
23,500
|
|
|
|
$0.81
|
|
$13,806
|
|
Executive Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
Engineering and Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michele M. Larios
|
|
7/15/09
|
|
123,456
|
|
29,494
|
|
$0.81
|
|
$89,858
|
|
Vice President,
|
|
|
|
|
|
|
|
|
|
|
|
General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell B. Kuhlman
|
|
7/15/09
|
|
25,000
|
|
|
|
$0.81
|
|
$14,688
|
|
Vice President, Sales
|
|
|
|
|
|
|
|
|
|
|
|
Narrative Disclosure to Summary Compensation Table and Grants of
Plan-Based Awards Table
Please see Compensation Pursuant to Employment
Agreement and POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL below
for terms of our only employment agreement in effect.
The material terms of awards reported in the Grants
of Plan-Based Awards Table include that such options vest on July 15, 2010
and expire on July 15, 2019. All
options granted to named executive officers in 2009 have an exercise price per
share equal to the close of business stock price on July 15, 2009
($0.81). The Compensation and Benefits
Committee approved the grant of these stock options on July 15, 2009. All options (except to Mr. Shaw)
-19-
were
granted under the 2008 Stock Option Plan, a copy of which Plan was filed as
Appendix B to our definitive Schedule 14A filed on August 19, 2008. Mr. Shaws stock option was granted
outside of any plan under similar terms and conditions as those set forth under
the 2008 Stock Option Plan, with the exception that Mr. Shaws option
terminates after 10 years and not five years from the date of grant. Mr. Shaws
stock option was approved by shareholders at the annual meeting in 2009.
The ratios of salary and bonus to total compensation
for 2009, for each Named Executive Officer is as follows:
Thomas
J. Shaw
|
|
18.5%
|
Steven
R. Wisner
|
|
94.3%
|
Douglas
W. Cowan
|
|
82.0%
|
Michele
M. Larios
|
|
78.2%
|
Russell
Kuhlman
|
|
89.1%
|
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The following Outstanding Equity Awards at Fiscal
Year-End Table sets forth information regarding unexercised options held by the
principal executive officer, the principal financial officer, and the three
highest paid additional executive officers as of December 31, 2009.
Outstanding Equity Awards at 2009 Fiscal Year End
|
|
|
|
|
|
Option
Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable
(1)
|
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned Options
(#)
(2)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas J. Shaw
|
|
|
|
3,000,000
|
|
|
|
0.81
|
|
7-15-19
|
|
President, CEO
|
|
|
|
|
|
|
|
|
|
|
|
(principal
executive officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas W. Cowan
|
|
102,000
|
|
|
|
|
|
1.30
|
|
11-18-18
|
|
Vice President, CFO
|
|
-
|
|
|
|
98,000
|
|
0.81
|
|
7-15-19
|
|
(principal financial officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven R. Wisner
|
|
100,700
|
|
|
|
|
|
1.30
|
|
11-18-18
|
|
Executive Vice President,
|
|
|
|
|
|
23,500
|
|
0.81
|
|
7-15-19
|
|
Engineering and Production
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michele M. Larios
|
|
97,050
|
|
|
|
|
|
1.30
|
|
11-18-18
|
|
Vice President,
|
|
|
|
|
|
123,456
|
|
0.81
|
|
7-15-19
|
|
General Counsel
|
|
|
|
29,494
|
|
|
|
0.81
|
|
7-15-19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell B. Kuhlman
|
|
63,450
|
|
|
|
|
|
1.30
|
|
11-18-18
|
|
Vice President, Sales
|
|
|
|
|
|
25,000
|
|
0.81
|
|
7-15-19
|
|
(1)
These options vested on July 15, 2010.
(2)
These options vested on July 15, 2010.
-20-
PENSION
BENEFITS
We do not have a pension plan other than the 401(k) plan
which is available to all employees the first of the month after 90 days of
service.
401(k) Plan
We implemented an employee savings and retirement
plan (the 401(k) Plan) in 2005 that is intended to be a tax-qualified
plan covering substantially all employees.
Under the terms of the 401(k) Plan, employees may elect to
contribute up to 88% of their compensation, or the statutory prescribed limit,
if less. We may, at our discretion,
match employee contributions. We made
matching contributions of approximately $76,643 and $122,000 in 2009 and 2008,
respectively. $16,930 and $21,095 of
these matching contributions were to executive officers in 2009 and 2008,
respectively. We suspended matching
contributions beginning August 1, 2009 until further notice.
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following table identifies the types and amounts
of payments that shall be made to Mr. Thomas Shaw, our CEO, in the event
of a termination of his employment or a change in control per his Employment
Agreement. Such payments shall be made
by us and shall be one-time, lump sum payments except as indicated below.
SUMMARY OF PAYMENTS UPON TERMINATION OR CHANGE IN
CONTROL
ASSUMING OCCURRENCE AS OF DECEMBER 31, 2009
(1)
Payment
Triggering Event
|
|
Salary
Through
Trigger
Event
Date
|
|
Amounts
Owed
Under
Benefit
Plans
(2)
|
|
Reimbursement
of Expenses
|
|
Undiscounted
Salary
For a Period of 24
Months
|
|
Payment
Equal to
90 Days
Salary
|
|
Value
of
Payments
(3)
|
|
Death
|
|
x
|
|
x
|
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disability
|
|
x
|
|
x
|
|
x
|
|
750,270
|
|
|
|
750,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination With Cause
|
|
x
|
|
|
|
x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination Without Cause
|
|
x
|
|
x
|
|
x
|
|
750,270
|
|
|
|
750,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation (Other Than
After a Change in Control)
|
|
x
|
|
x
|
|
x
|
|
|
|
92,499
|
|
92,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resignation (After a
Change in Control)
|
|
x
|
|
x
|
|
x
|
|
750,270
|
|
|
|
750,270
|
|
(1)
The above payments would be
paid under Mr. Shaws agreement at certain times. Any payments arising as a result of
disability or resignation would be paid not sooner than six months and one day
from the termination date but not later than seven months from the termination
date. Any payments arising as a result
of death would be paid no later than the 90
th
day following
the death. Payments arising as a result
of termination with cause or termination without cause would be paid not later
than the 30
th
day following the date of termination except
that any amount due in excess of an amount equal to the lesser of two times
annual compensation or two times the limit on compensation under section
401(17) of the Internal Revenue Code of 1986 such amount in excess shall be
paid no earlier than six months and one day after the date of termination but
in no event later than seven months after the date of termination. Under Mr. Shaws agreement, Mr. Shaw
has agreed to a one-year non-compete, not to hire or attempt to hire employees
for one year, and not make known our customers or accounts or to call on or
solicit our accounts or customers in the event of termination of his employment
for one year unless the termination is without cause or pursuant to a change of
control. However, it is not clear that
the above payments are conditioned on the performance of these contractual
obligations.
-21-
(2)
Mr. Shaw participates
in our benefit plans which do not discriminate in scope, terms, or operation in
favor of executive officers. Such plans
are generally available to all salaried employees. Accordingly, the value of such payments is
not included in the Value of Payments column.
(3)
This value does not include
payments under our benefit plans for reasons set forth in footnote 2
above. In addition, this value assumes
that the triggering event occurred on December 31, 2009. Authorized payments under the Employment
Agreement are also capped to one dollar less than the amount that would cause Mr. Shaw
to be the recipient of a parachute payment under Section 280G(b) of
the Internal Revenue Code.
COMPENSATION
OF DIRECTORS
The following table identifies the types and amounts
of compensation earned by our Directors (with the exception of those that are
named executive officers as described in footnote 1 to the table) in the last
Fiscal Year:
DIRECTOR COMPENSATION TABLE FOR 2009
Name
(1)
|
|
Fees
Earned
or Paid in
Cash
($)
|
|
Option
Awards
($)
(2)
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
Marco Laterza
|
$
|
3,000
|
$
|
29,280
|
$
|
|
|
$
|
32,280
|
|
Amy Mack
|
$
|
2,500
|
$
|
29,280
|
$
|
9,940
|
(3)
|
$
|
41,720
|
|
Marwan Saker
|
$
|
3,000
|
$
|
29,280
|
$
|
|
|
$
|
32,280
|
|
Clarence Zierhut
|
$
|
3,000
|
$
|
29,280
|
$
|
|
|
$
|
32,280
|
|
(1)
Thomas J. Shaw,
Douglas W. Cowan, and Steven Wisner are named executive officers who are also
Directors. Their compensation is
reflected in the Summary Compensation and other tables presented earlier.
(2)
Aggregate shares underlying
options granted to each Director are as follows:
Thomas
J. Shaw
|
|
3,000,000
|
Steven
R. Wisner
|
|
124,200
|
Douglas
W. Cowan
|
|
200,000
|
Marco
Laterza
|
|
50,000
|
Clarence
Zierhut
|
|
62,500
|
Marwan
Saker
|
|
90,500
|
Amy
Mack
|
|
50,000
|
The fair value of each 2009 grant is estimated on
the date of the grant using the Black Scholes pricing model with the following
assumptions: expected volatility of 67.53%, risk free interest rate of 3.35%,
and an expected life of 8.61 years.
These options were issued under the 2008 Stock Option Plan.
(3)
Ms. Macks company was
paid these funds for participating in clinical trials in 2009.
Narrative Explanation of Director Compensation Table
for 2009
In 2009 we paid each non-employee Director a fee of
$500 per meeting and reimbursed travel expenses. We have granted to each Director stock
options for Common Stock. We do not pay
any additional amounts for committee participation or special assignment.
Generally, employee Directors are compensated on an
at-will basis as discussed in the COMPENSATION DISCUSSION AND ANALYSIS. However, one employee, Mr. Thomas J.
Shaw, our President and CEO, is compensated pursuant to an employment
agreement. Please see Compensation Pursuant to Employment
Agreement, set forth above for an in depth summary of the terms of such
agreement.
-22-
Compensation Committee Interlocks and Insider Participation
The Compensation and Benefits Committee is currently
composed of Clarence Zierhut, Marco Laterza, and Amy Mack. Each of these members of this committee is an
independent Board member and none have ever been employees.
There are no interlocking Directors or executive
officers between us and any other company.
Accordingly, none of our executive officers or Directors served as a
Director or executive officer for another entity one of whose executives or
Directors served on our Board of Directors.
COMPENSATION
POLICIES AND PRACTICES AS THEY RELATE TO RISK MANAGEMENT
We do not believe that risk-taking incentives are
created by our compensation policies. We
do not have business units. We believe that
our compensation expense is a reasonable percentage of revenues overall. We have not set specific performance criteria
for the award of bonuses. Salaries are
awarded based on skill, experience, and our overall revenues. Non-cash awards to employees are made
periodically in the form of stock options, which we believe align the employees
interests with those of stockholders. We
review our compensation policies and practices as they relate to risk
management objectives if compensation amounts are materially amended or if our
risk profile changes. No changes to our
compensation policies and practices have been implemented as a result of
changes to our risk profile.
ACCOUNTING MATTERS
CF & Co. has been selected again as our
independent accountants for the year ending December 31, 2010. A representative of CF & Co. will
attend
the Annual Meeting and will have the
opportunity to make a statement if he or she so desires. The CF & Co.
representative will be available to respond to appropriate shareholder
questions at that time.
AUDIT
FEES
The aggregate fees billed by CF & Co. for
professional services rendered for the audit of our annual financial statements
for 2009 and 2008 and the reviews of the financial statements included in our
Forms 10-Q or services normally provided by the accountant in connection with
statutory and regulatory filings for those fiscal years were $257,085 and
$195,700, respectively.
AUDIT
RELATED FEES
The aggregate fees billed by CF & Co. for
professional services rendered for the audit of our 401(k) plan for 2009
and 2008 were $11,500 and $11,500, respectively.
TAX
FEES
The aggregate fees billed by CF & Co. for
preparation of federal and state income tax returns and tax consulting costs
related to notices from taxing authorities for 2009 and 2008 were $64,929 and
$91,520, respectively.
PRE-APPROVAL
POLICIES AND PROCEDURES
The engagement of CF & Co. was entered into
pursuant to the approval policies and procedures of the Audit Committee. Before CF & Co. was engaged to
render services the engagement was approved by the Audit Committee. The engagement is for audit and tax services
which were detailed separately. The
Audit Committee implemented its approval procedures, i.e., they were not
delegated to any other party. All of the
services provided were pre-approved by the Audit Committee.
-23-
DELIVERY OF
SINGLE OR MULTIPLE SETS OF DOCUMENTS TO ONE HOUSEHOLD
We have adopted a procedure approved by the SEC
called householding. Under this
procedure, certain shareholders of record who have the same address and last
name and do not participate in electronic delivery of proxy materials will
receive only one copy of our annual report and proxy statement, unless one or
more of these shareholders notifies us that they would like to receive
individual copies. This will reduce our printing costs and postage fees. Shareholders who participate in householding
will continue to receive separate proxy cards.
If you and other shareholders of record with whom
you share an address currently receive multiple copies of our annual report
and/or proxy statement, and you would like to receive only a single copy of the
annual report or proxy statement for your household, please contact Douglas W.
Cowan, 511 Lobo Lane, Little Elm, Texas 75068, (888) 806-2626.
If you participate in householding and would like to
receive a separate copy of our annual report or this proxy statement, please
contact us in the manner described in the immediately preceding paragraph. We
will deliver the requested documents to you promptly upon receipt of your
request.
ANNUAL
REPORT ON FORM 10-K
The Company will provide, without
charge, to each person solicited, upon the written or oral request of any such
person, a copy of our annual report on Form 10-K for the most recent
fiscal year, including the financial statements and the financial statement
schedules (as well as exhibits).
Such requests should be submitted to Mr. Douglas
W. Cowan, Vice President and Chief Financial Officer, at 511 Lobo Lane, P.O. Box
9, Little Elm, Texas 75068-0009, (888) 806-2626.
SHAREHOLDER PROPOSALS FOR
PRESENTATION AT THE 2011 ANNUAL MEETING
Proposals by shareholders (other than director
nominations) that are submitted for inclusion in our proxy statement for our
2011 Annual Meeting must follow the procedures set forth in Rule 14a-8
under the Securities Exchange Act of 1934 and our bylaws. To be timely under Rule 14a-8, they must
be received by our Corporate Secretary, Michele Larios, at 511 Lobo Lane,
Little Elm, Texas 75068-0009, by April 14, 2011.
If a shareholder does not submit a proposal for
inclusion in our proxy statement but does wish to propose an item of business
to be considered at the annual meeting of shareholders (other than director
nominations), that shareholder must give advance written notice of such
proposal to our Corporate Secretary at least 45 days prior to the anniversary
of the mailing date of the most recent annual meeting. For our 2011 Annual Meeting, notice must be
given by June 28, 2011, and must comply with certain other requirements
contained in our bylaws, as well as all applicable statutes and regulations.
Proposals received after this date will be considered untimely and may not, in
the Board of Directors discretion, be addressed at the next annual meeting.
We reserve the right to reject, rule out of
order, or take other appropriate action with respect to any proposal that does
not comply with these requirements.
DIRECTOR NOMINATIONS TO BE
CONSIDERED BY THE BOARD IN 2011
A shareholder may nominate a person, on their own
initiative, for consideration for recommendation by the Board to the
shareholders in our Proxy Statement for the 2011 annual meeting. Such notice must be received by April 14,
2011 and must set forth:
1.
The name and
address of the shareholder making the nomination and of the person to be
nominated;
2.
A
representation that the shareholder is a holder of record of Common Stock of
the Company entitled to vote at such meeting (specifying the number of shares
beneficially held) and intends to appear in person or by proxy at the meeting;
-24-
3.
A description
of all arrangements or understandings between the shareholder and the nominee
and any other person or persons (naming such person or persons) pursuant to
which the nomination is being made by the shareholder and any material interest
of the shareholder in making the nomination;
4.
Such other
information regarding the nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to the then current
proxy rules of the Commission; and
5.
The consent of
the nominee to serve as a Director if so recommended by the Board and duly
elected at the annual meeting by the shareholders.
We evaluate Director nominees recommended by
shareholders in the same manner in which we evaluate other Director
nominees. Please see CORPORATE
GOVERNANCE-NOMINATING COMMITTEE-
Director Nomination
Policies
for a description of the consideration given to
shareholder recommended nominees.
-25-
Appendix A
THIRD AMENDED
AND
RESTATED ARTICLES OF INCORPORATION
OF
RETRACTABLE TECHNOLOGIES, INC.
Pursuant to the provisions of Article 4.07 of
the Texas Business Corporation Act, Retractable Technologies, Inc.
(hereinafter called the Corporation) hereby adopts the following amendment
and restates the Articles of Incorporation of the Corporation as previously
amended or supplemented and as further amended by these Third Amended and
Restated Articles of Incorporation of the Corporation as follows:
ARTICLE I
The name of the Corporation is Retractable
Technologies, Inc.
ARTICLE II
The following amendment to the Articles of Incorporation was adopted by
the Board of Directors of the Corporation on May 11, 2004, and by the
shareholders of the Corporation on September 17, 2004, for the purpose of
changing the number of days of advance notice of stockholder nominations of
directors to allow conformance with securities regulations and stock exchange
rules. The Amendment deletes Section (b) of Article X of the
Second Amended and Restated Articles of Incorporation filed on August 14,
2000, and the full text of Section (b) of Article X, deleted
hereby, was as follows:
b)
Stockholder
Nomination of Director Candidates.
Advance notice of stockholder
nominations for the election of directors shall be submitted to the Board of
Directors at least five days prior to the scheduled date for the next annual
meeting of stockholders.
ARTICLE III
The amendment made by these Third Amended and
Restated Articles of Incorporation, which amendment is set forth in ARTICLE II
above, has been effected in conformity with the provisions of the Texas
Business Corporation Act.
ARTICLE IV
The amendment made by these Third Amended and
Restated Articles of Incorporation, which amendment is set forth in ARTICLE II
above, has been duly approved in the manner required by the Texas Business
Corporation Act and the constituent documents of the Corporation.
ARTICLE V
This restatement of the Articles of Incorporation of
the Corporation accurately copies the Articles of Incorporation and all
amendments thereto that are in effect to date and as further amended by these
Third Amended and Restated Articles of Incorporation of the Corporation and
there are no other changes in any provision thereof except that the number of
directors now constituting the Board of Directors and the names and addresses
of the persons now serving as directors have been inserted in lieu of similar
information concerning the initial Board of Directors and the names and
addresses of each incorporator has been omitted pursuant to Article 4.07
of the Texas
A-1
Business Corporation Act. These Third Amended and Restated Articles of
Incorporation and the amendments contained herein supersede the original
Articles of Incorporation and all amendments thereto.
ARTICLE VI
The Articles of Incorporation of the Corporation as
amended and supplemented by all certificates of amendment previously issued by
the Secretary of State and as further amended by these Third Amended and
Restated Articles of Incorporation of the Corporation is hereby restated in its
entirety as follows:
ARTICLES OF INCORPORATION
OF
RETRACTABLE TECHNOLOGIES, INC.
RESTATED CERTIFICATE OF FORMATION
OF
RETRACTABLE TECHNOLOGIES, INC.
I, the undersigned natural person of the age of
eighteen (18) years or more,
acting as an Incorporator of a corporation
under the Texas Business Corporation Act,
do hereby adopt the following
Articles
of Incorporation
Restated Certificate of Formation
for
such
Corporation
a corporation under the Texas Business Organizations Code
:
ARTICLE I
The Corporation is a for-profit corporation.
The name of the Corporation is Retractable
Technologies, Inc.
ARTICLE II
The period of its duration is perpetual.
ARTICLE III
The purpose for which the Corporation is organized
is the transaction of any or all lawful business for which corporations may be
incorporated under the
Texas Business Corporation Act
Texas Business
Organizations Code
.
ARTICLE IV
4.01
|
The aggregate number of shares which the Corporation shall have the
authority to issue is 100,000,000 shares of Common Stock, no par value,
5,000,000 shares of Preferred Stock Class A with a par value of One
Dollar ($1.00) per share and 5,000,000 shares of Preferred Stock Class B
with a par value of One Dollar ($1.00) per share.
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4.02
|
The
Corporation is authorized to issue three classes of stock, one designated as
Common Stock, no par value, one designated as Preferred Stock Class A,
par value One Dollar ($1.00) per share, and one designated as Preferred Stock
Class B, par value One Dollar ($1.00) per share, each as described in
this Article IV
above
. Provided, however, that none of the shares
of Preferred Stock of either class shall carry any voting rights for the
election of Directors or for any other matters, except where specifically
designated
herein
or required by the applicable provisions of the
Texas
Business Corporation Act
Texas Business Organizations Code
.
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4.03
|
The Directors shall have the authority to divide each class of the
Preferred Stock into series and to set the relative rights and preferences as
to and between series, including dividends, issuance of Preferred Stock,
redemption of such shares and the conversion of any shares of Preferred Stock
to other or
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A-2
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common shares. Prior to the issuance of any Preferred Stock of a
series established by resolution adopted by the Directors, the Corporation
shall file with the Secretary of State the
notice
statement
required by
Article 2.13
Section 21.156
of the
Texas
Business Corporation Act
Texas Business Organizations Code
.
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4.04
|
The relative rights and preferences of the shares of Preferred Stock
Class A are set forth in the Certificate of Designation, Preferences,
Rights, and Limitations of Series A Convertible Preferred Stock of the
Corporation filed on October 13, 1995, which certificate is attached
hereto and incorporated herein for all purposes as Exhibit A.
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4.0
5
4
|
The relative rights and preferences of the shares of the Series I
Preferred Stock Class B are set forth in the Certificate of Designation,
Preferences, Rights, and Limitations of Class B Convertible Preferred
Stock of the Corporation filed on May 15, 1996, which certificate is
attached hereto and incorporated herein for all purposes as Exhibit
B
A
.
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4.0
6
5
|
The relative rights and preferences of the shares of the Series II
Preferred Stock Class B are set forth in the Certificate of Designation,
Preferences, Rights, and Limitations of Series II Class B
Convertible Preferred Stock of the Corporation filed on May 27, 1997,
which certificate is attached hereto and incorporated herein for all purposes
as Exhibit
C
B
.
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4.0
7
6
|
The relative rights and preferences of the shares of the Series III
Preferred Stock Class B are set forth in the Certificate of Designation,
Preferences, Rights, and Limitations of Series III Class B
Convertible Preferred Stock of the Corporation
filed on July 29, 1998
as
amended on January 22, 2010
, which certificate is attached hereto
and incorporated herein for all purposes as Exhibit
D
C
.
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4.0
8
7
|
The relative rights and preferences of the shares of the Series IV
Preferred Stock Class B are set forth in the Certificate of Designation,
Preferences, Rights, and Limitations of Series IV Class B
Convertible Preferred Stock of the Corporation
filed on January 24,
2000
as amended on June 11, 2010
, which certificate is
attached hereto and incorporated herein for all purposes as Exhibit
E
D
.
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4.0
9
8
|
The relative rights and preferences of the shares of the Series V
Preferred Stock Class B are set forth in the Certificate of Designation,
Preferences, Rights, and Limitations of the Series V Class B
Convertible Preferred Stock of the Corporation
as amended
filed on
October 14, 2009, which certificate is attached hereto and incorporated
herein for all purposes as Exhibit
F
E
.
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ARTICLE V
The Corporation will not commence business until it
has received, for the issuance of its shares, consideration of the value of One
Thousand Dollars ($1,000.00), consisting of money, labor done, or property
actually received. The manner in which any exchange, reclassification,
cancellation of issued shares is as follows: the present holder of 1,000 shares
of no par value common stock may exchange such shares for 14,000,000 shares of
no par value Common Stock.
ARTICLE V
I
Cumulative voting is expressly prohibited.
ARTICLE VI
I
The street address of its registered office is 2100
Ross Avenue, Suite 2600, Dallas, TX 75201 and the name of its registered
agent is Ralph S. Janvey.
ARTICLE VII
I
The Directors of the Corporation shall be not less
than three (3) nor more than twenty-one (21) in number and the name and
address of the directors who are to serve until the annual meeting of year
indicated or until their successors are elected and qualified or until their
term is terminated are as follows:
A-3
Director
|
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Address
|
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Term Expires
|
Thomas
J. Shaw
|
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511
Lobo Lane
PO Box 9
Little Elm, TX 75068-0009
|
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2006
2012
|
|
|
|
|
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Steven
R. Wisner
|
|
511
Lobo Lane
PO Box 9
Little Elm, TX 75068-0009
|
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2006
2011
|
|
|
|
|
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Douglas
W. Cowan
|
|
511
Lobo Lane
PO Box 9
Little Elm, TX 75068-0009
|
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2006
2012
|
|
|
|
|
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Clarence
Zierhut
|
|
511
Lobo Lane
PO Box 9
Little Elm, TX 75068-0009
|
|
2006
2012
|
|
|
|
|
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Marwan
Saker
|
|
511
Lobo Lane
PO Box 9
Little Elm, TX 75068-0009
|
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2006
2012
|
|
|
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Russell
Kuhlman
Marco Laterza
|
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511
Lobo Lane
PO Box 9
Little Elm, TX 75068-0009
|
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2005
2011
|
|
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John
J. McDonald, Jr.
Amy Mack
|
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511
Lobo Lane
PO Box 9
Little Elm, TX 75068-0009
|
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2005
2011
|
ARTICLE
IX
VIII
The
name and address of the incorporator are intentionally omitted.
ARTICLE
I
X
Corporate
Governance
a)
|
Number, Election, and Terms of Directors
. The
business and affairs of the Corporation shall be managed by a Board of
Directors, which, subject to the rights of holders of shares of any class of
series of Preferred Stock of the Corporation then outstanding to elect
additional directors under specified circumstances, shall consist of not less
than three nor more than twenty-one persons. The exact number of directors
within the minimum and maximum limitations specified in the preceding
sentence shall be fixed from time to time by either (i) the Board of
Directors pursuant to a resolution adopted by the majority of the entire
Board of Directors, or (ii) the affirmative vote of the holders of
66-2/3% or more of the voting power of all of the shares of the Corporation
entitled to vote generally in the election of directors voting together as a
single class. No decrease in the number of directors constituting the Board
of Directors shall shorten the term of any incumbent director; provided,
however, that the term of existing Directors may be shortened to comply with
this Article
I
X and/or the T
exas Business Corporation Act
Texas
Business Organizations Code
. The directors shall be divided into two
classes as nearly equal in number as possible,
with
where
the
term of office of the first class
to
expire
d
at the 2001 annual
meeting of stockholders, and the term of office of the second class
to
expire
d
at the 2002 annual meeting of stockholders, and with the
members of each class to hold office until their successors shall have been
elected and qualified. At each annual meeting of stockholders following such
initial classification and election, directors elected to succeed those
directors shall be elected for a term of office to expire at the second
succeeding annual meeting of stockholders after their election.
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A-4
b)
|
Newly Created Directorships and Vacancies.
Vacancies of
generally elected directors may be filled by a majority vote of the remaining
generally elected directors, though less than a quorum, or by a sole
remaining generally elected director. Vacancies of directors elected pursuant
to a dividend default election by preferred shareholders shall be filled by
the remaining directors so elected or by a sole remaining director elected by
such shareholders, if any. In the event that no directors elected pursuant to
a dividend default election remain, the vacancy may be filled by a vote of
those shareholders that originally elected the director whose office is
vacant.
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c)
|
Removal.
Any director, or the
entire Board of Directors, may be removed from office at any annual or
special meeting called for such purpose, and then only for cause and only by
the affirmative vote of the holders of 66-2/3% or more of the voting power of
all of the shares of the Corporation entitled to vote in the election of such
director(s) being removed. As used herein, cause shall mean only the
following: proof that a director has been convicted of a felony, committed a
grossly negligent or willful misconduct resulting in a material detriment to
the Corporation, or committed a material breach of his or her fiduciary duty
to the Corporation resulting in a material detriment to the Corporation.
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d)
|
Amendment, Repeal, etc.
Notwithstanding
anything contained in
these Articles of Incorporation
this
Certificate of Formation
to the contrary and subject to the rights of the
holders of any Preferred Stock outstanding, the affirmative vote of the
holders of 66-2/3% or more of the voting power of all of the shares of the
Corporation entitled to vote in the election of Directors, voting together as
a single class, shall be required to alter, amend, or adopt any provision
inconsistent with or repeal this Article
I
X or to alter, amend,
adopt any provision inconsistent with or repeal comparable sections of the
Amended
and Restated Bylaws
bylaws
of the Corporation.
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e)
|
Call of Special Meeting to Alter Article
I
X
.
Notwithstanding anything contained in
these Articles of Incorporation
this
Certificate of Formation
to the contrary, the affirmative vote of the
holders of 66-2/3% or more of the voting power of all of the shares of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to call a special meeting of
the shareholders in order to alter, amend, adopt any provision inconsistent
with or repeal this Article
I
X, or to alter, amend, or adopt any
provision inconsistent with comparable sections of the
Amended and
Restated Bylaws
bylaws of the Corporation
.
|
ARTICLE X
I
The Board of Directors is hereby authorized to create
and issue, whether or not in connection with the issuance and sale of any of
its stock or other securities, rights (the Rights) entitling the holders
thereof to purchase from the Corporation shares of capital stock or other
securities. The times at which and the terms upon which the Rights are to be
issued will be determined by the Board of Directors and set forth in the
contracts or instruments that evidence the Rights. The authority of the Board
of Directors with respect to the Rights shall include, but not be limited to,
determination of the following:
a)
|
The initial purchase price per share of the capital stock or other
securities of the Corporation to be purchased upon exercise of the Rights.
|
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b)
|
Provisions relating to the times at which and the circumstances under
which the Rights may be exercised or sold or otherwise transferred, either
together with or separately from, any other securities of the Corporation.
|
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c)
|
Provisions that adjust the number or exercise price of the Rights or
amount or nature of the securities or other property receivable upon exercise
of the Rights in the event of a combination, split, or recapitalization of
any capital stock of the Corporation, a change in ownership of the
Corporations securities, or a reorganization, merger, consolidation, sale of
assets, or other occurrence relating to the Corporation or any capital stock
of the Corporation, and provisions restricting the ability of the Corporation
to enter into any such transaction absent an assumption by the other party or
parties thereto of the obligations of the Corporation under such Rights.
|
A-5
d)
|
Provisions that deny the holder of a specified percentage of the
outstanding securities of the Corporation the right to exercise the Rights
and/or cause the Rights held by such holder to become void.
|
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e)
|
Provisions that permit the Corporation to redeem the Rights.
|
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f)
|
The appointment of a Rights agent with respect to the Rights.
|
ARTICLE XI
I
No holder of any shares of the Corporation shall
have any preemptive right to subscribe or acquire any additional, unissued or
treasury shares of the Corporation or any securities of the Corporation which
are convertible into or which carry a right to subscribe for or acquire shares
of the Corporation.
IN WITNESS WHEREOF, Thomas J. Shaw, the President of
the Corporation, has executed
these Third Amended and Restated Articles of
Incorporation
this Restated Certificate of Formation
of Retractable
Technologies, Inc. effective as of
the 25 day of October, 2004
,
20
.
|
RETRACTABLE
TECHNOLOGIES, INC.
|
|
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|
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BY:
|
/s/
Thomas J. Shaw
|
|
|
|
|
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THOMAS
J. SHAW
|
|
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PRESIDENT
|
A-6
CERTIFICATE OF DESIGNATION, PREFERENCES
RIGHTS AND LIMITATIONS OF SERIES A
CONVERTIBLE PREFERRED STOCK
OF
RETRACTABLE TECHNOLOGIES, INC.
Pursuant to Article 2.13 of the Texas Business
Corporation Act and Article Five of its Articles of Incorporation,
Retractable Technologies, Inc., a corporation organized and existing under
the laws of the State of Texas (the Corporation),
DOES HEREBY CERTIFY that pursuant to the authority
conferred upon the Board of Directors of the Corporation by the Articles of
Incorporation, as amended, and pursuant to Article 2.13 of the Texas
Business Corporation Act, said Board of Directors, by unanimous written consent
executed May 10, 1995, adopted a resolution providing for the creation of
a series of Preferred Stock consisting of not more than five million
(5,000,000) shares of Class A Convertible Preferred Stock, which
resolution is and reads as follows:
RESOLVED that, pursuant to the authority provided in
the Corporations Articles of Incorporation and expressly granted to and vested
in the Board of Directors of Retractable Technologies, Inc. (the Corporation),
the Board of Directors hereby creates out of the Class A Preferred Stock,
par value one dollar per share, of the Corporation a series of Series A
Preferred Stock consisting of not more than five million (5,000,000) shares,
and the Board of Directors hereby fixes the designation and the powers,
preference and rights, and the qualifications, limitations and restrictions
thereof, to the extent not otherwise provided in the Corporations
qualifications, limitations and restrictions thereof, to the extent not
otherwise provided in the Corporations Articles of Incorporation, as follows:
1.
Designation of series
. The designation of
the series of Class A Preferred Stock created by this resolution shall be Series A
Convertible Preferred Stock (the Series A Preferred Stock).
2.
Dividends on Series A Preferred Stock
.
a.
Dividend Amount
. The holders of the Series A
Preferred Stock shall be entitled to receive, in any calendar year, if when and
as declared by the Board of Directors, out of any assets at the time legally
available therefor and subject to the further limitations set out herein,
dividends at the per annum rate of $0.12 per share, all such dividends due
quarterly in arrears as of the last day of each March, June, September and
December of each year, the first dividend being declarable on September 1,
1995. On each date which a dividend may be declared is hereafter called the Dividend
Date, and each quarterly period ending with a Dividend Date is hereinafter
referred to as the Dividend Period. Dividends shall be payable fifteen
calendar days after the Dividend Due Date, provided however, that if such date
on which a dividend is payable is a Saturday, Sunday or legal holiday, such
dividend shall be payable on the next following business day to the holders of
record (whether singular or plural, the Holder).
b.
Dividends Cumulative
. Dividends upon the Series A
Preferred Stock shall be accrued and be cumulative, whether or not in any
Dividend Period or Periods there shall be funds of the Corporation legally
available for the payment of such dividends.
c.
Dividend Accrual
. On each Dividend Due
Date all dividends which shall have accrued since the last Dividend Due Date on
each share of Series A Preferred Stock outstanding on such Dividend Due
Date shall accumulate and be deemed to become due. Any dividend which shall
not be paid on the Dividend Due Date on which it shall become due shall be
deemed to be past due until such dividend shall be paid or until the share of
Series A Preferred Stock with respect to which such dividend became due
shall no longer be outstanding, whichever is the earlier to occur. No interest,
sum of money in lieu of interest or other property or securities shall be
payable in respect of any dividend payment or payments which are past due.
Dividends paid on shares of Series A Preferred Stock in an amount less
that the total amount of such dividends at the time accumulated and payable on
such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. Dividend payments made with respect to a
Dividend Due Date shall be deemed to be made in payment of the dividends which
became due on that Dividend Due Date.
A-7
d.
Dividend Arrearage
. If a dividend upon any
shares of Series A Preferred Stock is in arrears, all dividends or other
distributions declared upon shares of the Series A Preferred Stock (other
than dividends paid in stock of the Corporation ranking junior to the Series A
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up) may only be declared pro rata. Except as set forth above, if a dividend
upon any shares of Series A Preferred Stock is in arrears: (i) no
dividends (in cash, stock or other property) may be paid or declared and set
aside for payment or any other distribution made upon any stock of the
Corporation ranking junior to the Series A Preferred Stock as to dividends
(other than dividends of distributions in stock of the Corporation ranking
junior to the Series A Preferred Stock as to dividends and upon
liquidation, dissolution or winding up); and (ii) no stock of the
Corporation ranking junior to the Series A Preferred Stock as to dividends
may be (A) redeemed pursuant to a sinking fund of otherwise, except (1) by
means of redemption pursuant to which all outstanding shares of the Series A
Preferred Stock are redeemed, or (2) by conversion of any such junior
stock into, or exchange of any such junior stock into, or exchange of any such
junior stock for stock of the Corporation ranking junior to the Series A
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up, or (B) purchased or otherwise acquired for any consideration by the
Corporation except (1) pursuant to an acquisition made pursuant to the
terms of one or more offers to purchase all of the outstanding shares of the Series A
Preferred Stock, which offers shall each have been accepted by the holders of
at least 50% of the shares of the Series A Preferred Stock receiving such
offer outstanding at the commencement of the first of such purchase offers, or (2) by
conversion into or exchange for stock of the Corporation ranking junior to the Series A
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up.
3.
General, Class and Series Voting
Rights
. Except as provided in this Section 3 and in Section 4
hereof or as otherwise from time to time required by law, the Series A
Preferred Stock shall have no voting rights.
So long as any shares of Series A Preferred
Stock remain outstanding, the consent of the holders of at least fifty-one
(51%) percent of the shares of Series A Preferred Stock outstanding at the
time voting separately as a class, given in person or by proxy, either in
writing at any special or annual meeting called for the purpose, shall be
necessary to permit, effect or validate any one or more of the following:
(i) The authorization,
creation or issuance, or any increase in the authorized or issued amount, of
any class or series of stock (including any class or series of Preferred Stock)
ranking equal or prior (as the terms are hereinafter defined in this Section 3)
to the Series A Preferred Stock; or
(ii) The amendment,
alteration or repeal, whether by merger, consolidation or otherwise, of any of
the provisions of the Articles of Incorporation or of this resolution which
would alter or change the powers, preferences or special rights of the shares
of the Series A Preferred Stock so as to affect them adversely; provided,
however, that any increase in the amount of authorized Preferred Stock, or the
creation and issuance of other series of Preferred Stock ranking junior to the Series A
Preferred Stock with respect to the payment of dividends and the distribution
of assets upon liquidation, dissolution or winding up, shall not be deemed to
adversely affect such powers, preferences or special rights.
The foregoing voting provisions shall not apply if,
at or prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding shares of Series A
Preferred Stock shall have been redeemed or sufficient funds shall have been
deposited in trust to effect such redemption.
4.
Default Voting Rights
. Whenever, at any
time or times, dividends payable on the shares of Series A Preferred Stock
shall be in arrears for twelve (12) consecutive quarterly dividend periods, the
holders of a majority of the outstanding shares of Series A Preferred
Stock shall have the exclusive right (voting separately as a class) to elect
one-third of the Board of Directors of the Corporation at the Corporations
next annual meeting of stockholders (to serve until the next annual meeting of
stockholders, and until their successors are duly elected and qualified) and at
each subsequent annual meeting of stockholders so long as such arrearage shall
continue, and the Common Stock voting separately as a class, shall be entitled
to elect the remainder of the Board of Directors of the Corporation. At
elections for such directors, each holder of Series A Preferred Stock
shall be entitled to one vote for each share of Preferred Stock held. The right
of the holders of Series A Preferred Stock, voting separately as a class,
to elect members of the Board of Directors of the Corporation as aforesaid
shall continue until such time as all dividends accumulated on the Series A
Preferred Stock shall have been paid in full, at which time such right shall
terminate,
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except as herein or by law expressly provided, subject to revesting in
the event of each and every subsequent default of the character above
mentioned.
Directors elected by the holders of Series A
Preferred Stock shall continue to serve as such directors until such time as
all dividends accumulated on the Series A Preferred Stock shall have been
paid in full, at which time the term of office of all persons elected as
directors by the holders of shares of Series A Preferred Stock shall
forthwith terminate. In the case of any vacancy in the office of a director
occurring among the directors elected by the holder of a class (with the Series A
Preferred Stock and Common Stock being treated as separate classes) of stock,
the remaining directors so elected by that class may by affirmative vote of a
majority thereof (or the remaining director so elected if there be but one)
elect a successor or successors to hold office for the unexpired term of the
director or directors whose place or places shall be vacant. Any director who
shall have been elected by the holders of a class of stock or by any directors
so elected as provided in the next preceding sentence hereof may be removed
during the aforesaid term of office, either for or without cause, by, and only
by, the affirmative vote of the holders of a majority of the shares of the
class of stock who elected such director or directors, given either at a
special meeting of such shareholders duly called for that purpose or pursuant
to a written consent of shareholders, and any vacancy thereby created may be
filled by the holders of that class of stock represented at such meeting or
pursuant to such written consent. Whenever the term of office of the directors
elected by the holders of Series A Preferred Stock voting as a class shall
end and the special voting powers vested in the holders of Series A
Preferred Stock voting as a class shall end and the special voting powers
vested in the holders of Series A Preferred Stock as provided in this Section 4
shall have expired, the number of directors shall be such number as may be
provided for in the Articles of Incorporation or Bylaws irrespective of any
increase made pursuant to the provisions of this Section 4.
5.
Redemption
. The outstanding shares of Series A
Preferred Stock shall be nonredeemable prior to the lapse of three (3) years
from the date of issuance. On and after such date, the Series A Preferred
Stock may be redeemed at the option of the Corporation, as a whole at any time
or in part from time to time, at the Redemption Price of $1.70 per share plus
all dividends (whether or not declared or due) accrued and unpaid to the date
of redemption (subject to the right of the holder of record of shares of Series A
Preferred Stock on a record date for the payment of a dividend on the Series A
Preferred Stock to receive the dividend due on such shares of Series A
Preferred Stock on the corresponding Dividend Due Date.)
No sinking fund shall be established for the Series A
Preferred Stock.
Notice of any proposed redemption of shares of Series A
Preferred Stock shall be mailed by means of first class mail, postage paid,
addressed to the holders of record of the shares of Series A Preferred
Stock to be redeemed, at their respective addresses then appearing on the books
of the Corporation, at least thirty (30) but not more than sixty (60) days
prior to the date fixed for such redemption (herein referred to as the Redemption
Date). Each such notice shall specify (i) the Redemption Date; (ii) the
Redemption Price; (iii) the place for payment and for delivering the stock
certificate(s) and transfer instrument(s) in order to collect the
Redemption Price; (iv) the shares of Series A Preferred Stock to be
redeemed; and (v) the then effective Conversion Price (as defined below)
and that the right of holders of shares of Series A Preferred Stock being
redeemed to exercise their conversion right shall terminate as to such shares
at the close of business on the fifth day before the Redemption Date (provided
that no default by the Corporation in the payment of the applicable Redemption
Price (including any accrued and unpaid dividends) shall have occurred and be
continuing). Any notice mailed in such manner shall be conclusively deemed to
have been duly given whether or not such notice is in fact received. If less
than all the outstanding shares of Series A Preferred Stock are to be
redeemed, the Corporation will select those to be redeemed by lot or by a
substantially equivalent method. In order to facilitate the redemption of Series A
Preferred Stock to be redeemed, which shall not be more than sixty (60) days
prior to the Redemption Date with respect thereto.
The holder of any shares of Series A Preferred
Stock redeemed upon any exercise of the Corporations redemption right shall
not be entitled to receive payment of the Redemption Price for such shares
until such holder shall cause to be delivered to the place specified in the
notice given with respect to such redemption (i) the certificate(s) representing
such shares of Series A Preferred Stock; and (ii) transfer instrument(s) satisfactory
to the Corporation and sufficient to transfer such shares of Series A
Preferred Stock to the Corporation free of any adverse interest. No interest
shall accrue on the Redemption Price of any share of Series A Preferred
Stock after its Redemption Date.
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Subject to Section 2 hereof, the Corporation
shall have the right to purchase shares of Series A Preferred Stock from
the owner of such shares on such terms as may be agreeable to such owner.
Shares of Series A Preferred Stock may be acquired by the Corporation from
any stockholder pursuant to this paragraph without offering any other
stockholder an equal opportunity to sell his stock to the Corporation, and no
purchase by the Corporation from any stockholder pursuant to this paragraph
shall be deemed to create any right on the part of any stockholder to sell any
shares of Series A Preferred Stock (or any other stock) to the
Corporation.
Notwithstanding the foregoing provisions of this Section 5,
and subject to the provisions of Section 2 hereof, if a dividend upon any
shares of Series A Preferred Stock is past due, (i) no shares of the Series A
Preferred Stock may be redeemed, except (A) by means of a redemption
pursuant to which all outstanding shares of the Series A Preferred Stock
are simultaneously redeemed (or offered to be so redeemed) or pursuant to which
the outstanding shares of the Series A Preferred Stock are redeemed on a
pro rata basis (or offered to be so redeemed), or (B) by conversion of
shares of Series A Preferred Stock into, or exchange of such shares for,
Common Stock or any other stock of the Corporation ranking junior to the Series A
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up.
6.
Liquidation
. In the event of any voluntary
or involuntary dissolution, liquidation or winding up of the Corporation (for
the purposes of this Section 6, a Liquidation), before any distribution
of assets shall be made to the holders of the Common Stock or the holders of
any other stock that ranks junior to the Series A Preferred Stock in
respect of distributions upon the Liquidation of the Corporation, the holder of
each share of Series A Preferred Stock then outstanding shall be entitled
to $1.50 per share plus all dividends (whether or not declared or due) accrued
and unpaid on such share on the date fixed for the distribution of assets of
the Corporation to the holders of Series A Preferred Stock.
If upon any Liquidation of the Corporation, the
assets available for distribution to the holder of Series A Preferred
Stock which shall then be outstanding (hereinafter in this paragraph called the
Total Amount Available) shall be insufficient to pay the holders of all
outstanding shares of Series A Preferred Stock the full amounts (including
all dividends accrued and unpaid) to which they shall be entitled by reason of
such Liquidation of the Corporation, then there shall be paid ratably to the
holders of the Series A Preferred Stock in connection with such
Liquidation of the Corporation, an amount equal to each holders pro rata share
of the Total Amount Available.
The voluntary sale, conveyance, lease, exchange or
transfer of all or substantially all the property or assets of the Corporation,
or the merger or consolidation of the Corporation into the Corporation, or any
purchase or redemption of some or all of the shares of any class or series of
stock of the Corporation, shall not be deemed to be a Liquidation of the
Corporation for the purposes of this Section 6 (unless in connection
therewith the Liquidation of the Corporation is specifically approved).
7.
Conversion Privilege
. At any time
subsequent to three years after issuance of any share of Series A
Preferred Stock, the holder of any share of Series A Preferred Stock (Holder)
shall have the right, at such Holders option (but if such share is called for
redemption or exchange at the election of the Corporation, then in respect of
such share only to and including but not after the close of business on (i) the
fifth calendar day before the date fixed for such redemption; or (ii) the
date fixed for such exchange, provided that the Corporation has set aside funds
sufficient to effect such redemption to convert such share into that number of
fully paid and non-assessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100th of a share) obtained by dividing $1.00 by the
Conversion Rate then in effect.
a.
Conversion Rate
. Each share of Series A
Preferred Stock may be converted, subject to the terms and provisions of this
paragraph 2 into one (1) share of the Corporations Common Stock, which is
a price equal to one share of Common Stock for each $1.00 of Series A
Preferred Stock or, in case an adjustment of such rate has taken place pursuant
to the provisions of subdivision (f.) of this paragraph (7), then at the
Conversion Rate as last adjusted (such rate or adjusted rate, shall be
expressed as the number of shares of Common Stock to be acquired upon
conversion of one share of Series A Preferred Stock, and shall be referred
to herein as the Conversion Rate). Each share of Series A Preferred
Stock shall be Convertible into Common Stock by surrender to the corporation of
the certificate representing such shares of Series A Preferred Stock to be
converted by the Holder and by giving written notice to the Corporation of the
Holders election to convert.
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The Corporation shall, as soon as practicable after
receipt of such written notice and the proper surrender to the Corporation of
the certificate or certificates representing shares of Series A Preferred
Stock to be converted in accordance with the above provisions, issue and
deliver for the benefit of the Holder at the office of the Corporations duly
appointed transfer agent (the Transfer Agent) to the Holder for whose account
such shares of Series A Preferred Stock were so surrendered or to such
Holders nominee or nominees, certificates for the number of shares of Common
Stock to which the Holder shall be entitled. The certificates of Common Stock
of the Corporation issued upon conversion shall bear such legends as may be
required by state or federal laws. Such conversion shall be deemed to have been
effective immediately prior to the close of business on the date on which the
Corporation shall have received both such written notice and the properly
surrendered certificates for shares of Series A Preferred Stock to be
converted (the Conversion Date), and at such time the rights of the Holder
shall cease and the person or persons entitled to receive the shares of Common
Stock issuable upon the conversion of such shares of Series A Preferred
Stock shall be deemed to be, and shall be treated for all purposes as, the
record Holder or Holders of such Common Stock on the Conversion Date. The
Corporation shall not be required to convert, and no surrender of shares of Series A
Preferred Stock or written notice of conversion with respect thereto shall be
effected for that purpose, while the stock transfer books of the Corporation
are closed for any reasonable business purpose for any reasonable period of
time, but the proper surrender of shares of Series A Preferred Stock for
conversion immediately upon the reopening of such books. During the period in
which the stock transfer books of the Corporation are closed, the Corporation
may neither declare a dividend, declare a record date for payment of dividends
nor make any payment of dividends.
b.
Dividends
. If any shares of Series A
Preferred Stock shall be converted during any dividend payment period, the
Holder shall be entitled to all dividends accrued up to and through such
Conversion Date, at the rate set forth herein, whether or not there has been a
dividend date, as set forth in paragraph 2 hereof.
c.
Cancellation
. Series A Preferred
Stock converted into Common Stock pursuant to the provisions of this paragraph
(7), shall be retired and cancelled by the Corporation and given the status of
authorized and unissued preferred stock.
d.
Reissuance if Conversion is Partial
. In
the case of any certificate representing shares of Series A Preferred
Stock which is surrendered for conversion only in part, the Corporation shall
issue and deliver to the Holder a new certificate or certificates for Series A
Preferred Stock of such denominations as requested by the Holder in the amount
of Series A Preferred Stock equal to the unconverted shares of the Series A
Preferred Stock represented by the certificate so surrendered.
e.
Reservations of Shares
. The Corporation
shall at all times during which shares of Series A Preferred Stock may be
converted into Common Stock as provided in this paragraph (e), reserve and keep
available, out of any Common Stock held as treasury stock or out of its
authorized and unissued Common Stock, or both, solely for the purpose of
delivery upon conversion of the shares of Series A Preferred Stock as
herein provided, such number of shares of Common Stock as shall then be
sufficient to effect the conversion of all shares of Series A Preferred
Stock from time to time outstanding, and shall take such action as may from
time to time be necessary to ensure that such shares of Common Stock will, when
issued upon conversion of Series A Preferred Stock, be fully paid and
nonassessable.
f.
Adjustment of Conversion Rate
. The
Conversion Rate provided in subdivision (a) of this paragraph (7), in
respect of Series A Preferred Stock, shall be subject to adjustments from
time to time as follows:
(i) While any shares of
Series A Preferred Stock shall be outstanding, in case the Corporation
shall subdivide the outstanding shares of Common Stock into a greater number of
shares of Common Stock or combine the outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or issue, by reclassification of its
shares of Common Stock, any shares of the Corporation, the Conversion Rate in
effect immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive the number of shares which it would have owned or been
entitled to receive after the happening of any of the events described above,
had such shares of Series A Preferred Stock been converted immediately
prior to the happening of such event, such adjustment to become effective
immediately after the opening of business on the day following the day upon
which such subdivision or combination or reclassification, as the case may be,
becomes effective.
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(ii) In case the
Corporation shall be consolidated with, or merge into, any other corporation,
and the Corporation does not survive, proper provisions shall be made as a part
of the terms of such consolidation or merger, whereby the Holder shall
thereafter be entitled, upon exercise of such Holders conversion rights, to
receive the kind and amount of shares of stock or other securities of the
Corporation resulting from such consolidation or merger, or such other
property, as the Holder would have received if such conversion rights were
exercised immediately prior to the effectiveness of such merger of
consolidation.
(iii) In the event the
Corporation at any time, or from time to time after June 15, 1995 makes or
issues, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock or Common Stock Equivalents (as defined herein) which
does not provide for the payment of any consideration upon the issuance,
conversion or exercise thereof, without a corresponding dividend or other
distribution to the Holder, based upon the number of shares of Common Stock
into which the Series A Preferred Stock is convertible, then and in each
such event the Conversion Rate then in effect will be increased as of the time
of such issuance or, in the event such a record date shall have been fixed, as
of the close of business on such record date, by multiplying such Conversion
Rate by a fraction:
(A) The number of which
will be the total number of shares of Common Stock issues and outstanding
immediately prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in payment of
such dividend or distribution (which, in the case of Common Stock Equivalents,
shall mean the maximum number of shares of Common Stock issuable with respect
thereto, as set forth in the instrument relative thereto without regard to any
provision for subsequent adjustment); and
(B) The denominator of
which will be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date;
provided, however, that if such record date is fixed
and such dividend is not fully paid or if such distribution is not fully made
on the date fixed therefor, the Conversion Rate will be recomputed accordingly
as of the close of business on such record date, and thereafter such Conversion
Rate will be adjusted pursuant to this subparagraph (iii) as of the time
of actual payment of such dividends of distributions.
(iv) In the event the
Corporation at any time or from time to time after June 15, 1995 makes or
issues, or fixes a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable to all holders of
Common Stock in securities of the Corporation Stock Equivalents, then, upon
making such dividend or distribution provisions will be made so that the Holder
will receive the amount of securities of the Corporation which it would have
received had its Series A Preferred Stock been converted into Common Stock
on the date of such event.
(v) In the event the
Corporation sells or issues any Common Stock, or sells or issues Common Stock
Equivalents which can be converted into Common Stock at a per share
consideration (as defined below in this subparagraph (v) of paragraph 7(B) less
than the Stipulated Price then in effect, then the Holder shall be entitled to
purchase from the Corporation in cash (for the same per share consideration at
which such Common Stock was issued or the per share price at which a share of
Common Stock is acquirable upon exercise or conversion of Common Stock Equivalents)
that additional number of shares of Common Stock which, when added to the
number of shares of Common Stock acquirable by the Holder upon conversion of
any shares of Series A Preferred Stock outstanding and held by such Holder
immediately before such issue or sale (the Acquirable Shares), will equal a
percentage of the number of shares of Common Stock Deemed Outstanding (as
defined herein) immediately after such sale or issuance that is the same as the
percentage of the number of shares of Common Stock Deemed Outstanding
immediately before such issuance or sale represented by the Acquirable Shares.
This right shall exist for a forty-five-day period following the sale or
issuance of shares of Common Stock or Common Stock Equivalents, and thereafter
shall cease to exist.
For the above purposes, the per share consideration
with respect to the sale or issuance of Common Stock will be the price per
share received by the Corporation, prior to the payment of any expenses,
commissions,
A-12
discounts and other applicable costs. With respect
to the sale or issuance of Common Stock Equivalents which are convertible into
or exchangeable for Common Stock without further consider, the per share
consideration will be determined by dividing the maximum number of shares of
Common Stock issuable with respect to such Common Stock Equivalents (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for subsequent adjustment of such number) into the aggregate
consideration receivable by the Corporation upon the sale or issuance of such
Common Stock Equivalents. With respect to the issuance of other Common Stock
Equivalents, the per share consideration will be determined by dividing the
maximum number of shares of Common Stock issuable with respect to such Common
Stock Equivalents into the total aggregate consideration received by the
Corporation upon the sale or issuance of such Common Stock Equivalents plus the
minimum aggregate amount of additional consideration received by the
Corporation upon the conversion or exercise of such Common Stock Equivalents.
In connection with the sale or issuance of Common Stock and/or Common Stock
Equivalents for non-cash consideration, the amount of consideration will be the
fair market value of such consideration as determined in good faith by the
Board of Directors of the Corporation.
(vi) As used herein,
the term Stipulated Price means initial price of $1.00 per share of Common
Stock, as adjusted from time to time pursuant to subparagraph (viii) of
this paragraph 7(f); and the term Common Stock Equivalent means any
securities (whether debt or equity securities) or rights issued by the
Corporation convertible into or entitling the holder thereof to receive shares
of, or securities convertible into, Common Stock. The number of shares of Common
Stock Deemed Outstanding at any date shall equal the sum of the number of
shares of Common Stock then outstanding plus the number of shares of Common Stock
then obtainable pursuant to Common Stock Equivalents.
(vii) In the event the
Corporation declares any dividend or distribution payable to holders of its
Common Stock (other than dividends payable out of the Corporations retained
earnings or earned surplus and dividends payable in shares of Common Stock or
in securities convertible into or exchangeable for shares of Common Stock or
rights or warrants to purchase Common Stock or securities convertible into or
exchangeable for shares of Common Stock or any other securities issued by the
Corporation), the Conversion Rate in effect immediately prior to the record
date for such dividend or distribution shall be proportionately adjusted so
that the Holder shall be entitled to receive the number of shares of Common
Stock into which such shares of Common Stock or Preferred Stock was convertible
immediately prior to such record date multiplied by a fraction, the numerator
of which is the fair market value of a share of Common Stock on such record
date and the denominator of which is such per share fair market value of a
share of Common Stock on such record date less the fair market value on such
record date of the securities or other property which are distributed as a
dividend or other distribution. The term fair market value of a share of
Common Stock or of any other security or other type of property on any date
means (A) in the case of Common Stock or any other security (I) if
the principal trading market for such Common Stock of other security is an
exchange or the NASDAQ national market on such date, the closing price on such
exchange or the NASDAQ national market on such date, provided, if trading of
such Common Stock or other security is listed on any consolidated tape, the
fair market value shall be the closing price set forth on such consolidated
tape on such date, or (II) if the principal market for such Common Stock
or other security is the over-the-counter market (other than the NASDAQ
national market) the mean between the closing bid and asked prices on such date
as set forth by NASDAQ or (B) in the case of Common Stock or any other
security for which the fair market value cannot be determined pursuant to
clause (A) above or of any other security or type of property, fair market
value thereof on such date as determined in good faith by the Board of
Directors.
(viii) Whenever the
Conversion Rate is adjusted pursuant to this paragraph (7)(f), the Stipulated
Price shall also be adjusted by multiplying it by a fraction that is the
reciprocal of the fraction used to adjust the Conversion Rate.
(ix) The Corporation
will not, by amendment of its Articles of Incorporation
Certificate of
Formation
or through any dissolution, issuance or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
at all times in good faith will assist in the carrying out of all the
provisions of this paragraph and in the taking of all such action as may be necessary
or appropriate in order to protect the conversion rights of the Holder against
impairment.
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(x) No adjustment in
the Conversion Rate shall be required, unless such adjustment would require an
increase or decrease of at least one (1) share of Common Stock in the
Conversion Rate of one share of Series A Preferred Stock, provided that
all adjustments which do not meet this minimum requirement shall be cumulated
and the adjustment will be made when the cumulated total is sufficient to
require an adjustment. All calculations made pursuant to this subparagraph (x) of
paragraph (7)(f) shall be made to the nearest one hundredth (1/100th) of a
share of Common Stock.
g.
Fractional Shares
. No fractional shares of
Common Stock or scrip representing fractional shares of Common Stock shall be
issued upon any conversion of shares of Series A Preferred Stock but, in
lieu thereof, there shall be paid an amount in cash equal to the same fraction
of the current market price of a whole share of Common Stock on the day
preceding the day of conversion.
h.
Statement to Transfer Agent
. Whenever the
Conversion Rate for shares of Series A Preferred Stock shall be adjusted
pursuant to the provisions of paragraph (7)(f) hereof, the Corporation
shall forthwith maintain at its office and, if applicable, file with the
Transfer Agent for shares of Series A Preferred Stock and for shares of
Common Stock, a statement signed by the President or a Vice President of the
Corporation and by its Treasurer or an Assistant Treasurer, stating the
adjusted Conversion Rate and setting forth in reasonable detail the method of
calculation and the facts requiring such adjustment, such calculations to be
confirmed by the Corporations independent auditors, and stating the faces on
which the calculation is based. Each adjustment shall remain in effect until a
subsequent adjustment hereunder is required.
8.
Registration Rights
.
a.
Piggyback Registration
. The Corporation,
for a period ending six months after the last share of Series A Preferred
Stock is redeemed, retired, converted or otherwise no longer outstanding, will
give written notice to the Holder not less than 20 days in advance of the
initial filing of any registration statement under the Securities Act of 1933
(other than a registration Statement pertaining to securities issuable pursuant
to employee stock option, stock purchase, or similar plans or a registration
statement pertaining to securities issuable in connection with the acquisition
of a business, whether through merger, consolidation, acquisition of assets, or
exchange of securities) covering any Common Stock or other securities of the
Corporation, and will afford the Holder the opportunity to have included in
such registration all or such part of the shares of Common Stock acquired upon
conversion of Series A Preferred Stock, as may be designated by written
notice to the Corporation not later than 10 days following receipt of such
notice from the Corporation. The Corporation shall be entitled to exclude the
shares of Common Stock held by the Holder from any one, but not more than one,
such registration if the Corporation is advised by its investment banking firm
that the inclusion of such shares will, in the opinion of such investment
banking firm, materially interfere with the orderly sale and distribution of
the securities being offered under such registration statement by the
Corporation. Notwithstanding the foregoing, the Corporation shall not be
entitled to exclude the shares of Common Stock held by the Holder if shares of
other shareholders are being included in any such registration statement and,
in such circumstances, the Holder shall be entitled to include the shares of
Common Stock held by them on a pro rata basis in the proportion that the number
of shares of Common Stock held by the Holder bears to the shares of Common
Stock held by all other shareholders, including shares in such registration
statement. The Holder shall not be entitled to include shares in more than two registration
statement pursuant to the provisions of this subdivision a of paragraph (8),
and all rights of the Holder under this subdivision a of paragraph (8) shall
terminate after the Holder has included shares of Common Stock in two
registration statements pursuant to this subdivision a of paragraph (8).
b.
Expenses
. The Corporation will pay all
out-of-pocket costs and expenses of any registration effected pursuant to the
provisions of subdivision (a) of this paragraph 8, including registration
fees, legal fees, accounting fees, printing expenses (including such number of
any preliminary and the final prospectus as may be reasonably requested), blue
sky qualification fees and expenses, and all other expenses, except for
underwriting commissions or discounts applicable to the shares of Common Stock
being sold by the Holder and the fees of counsel for the Holder, all of which
shall be paid by the Holder.
9.
Reports
.
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So long as any of the Series A Preferred Stock
shall be outstanding, the Corporation shall submit to the Holder financial
reports no less frequently than annually.
10.
Miscellaneous
.
a. As used herein, the term Common Stock shall
mean the Corporations Common Stock, $1.00 per share, or, in the case of any
reclassification or change of outstanding shares of Common Stock, the stock or
securities issued in exchange for such Common Stock. The term Common Stock
shall also include any capital stock of the Corporation authorized after June 15,
1995 which shall not be limited to a fixed sum or sums or percentage or
percentages of par value in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
b. The shares of Series A Preferred Stock shall
be fully transferrable by the Holder thereof, subject to compliance with the
applicable provisions of federal and state securities laws.
IN WITNESS WHEREOF, RETRACTABLE TECHNOLOGIES, INC.
has caused its corporate seal to be hereunto affixed and this Certificate to be
signed by its President and Secretary this
day of May, 1995.
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/s/
Thomas J. Shaw
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President
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ATTEST:
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/s/
Lillian E. Salerno
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Secretary
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A-15
CERTIFICATE OF DESIGNATION, PREFERENCES
RIGHTS AND LIMITATIONS OF CLASS B
CONVERTIBLE PREFERRED STOCK
OF
RETRACTABLE TECHNOLOGIES, INC.
Pursuant to
Article 2.13 of the Texas
Business Corporation Act and Article Four of its Articles of Incorporation
Texas law and its Certificate of Formation
, Retractable Technologies, Inc.,
a corporation organized and existing under the laws of the State of Texas (the
Corporation),
DOES HEREBY CERTIFY that pursuant to the authority
conferred upon the Board of Directors of the Corporation by the
Articles of
Incorporation
Certificate of Formation
, as amended, and pursuant to
Article 2.13
of the Texas Business Corporation Act
Texas law
, said Board of
Directors, by unanimous written consent executed May 10, 1995, adopted a
resolution providing for the creation of a series of Preferred Stock consisting
of not more than five million (5,000,000) shares of Class B Convertible
Preferred Stock, which resolution is and reads as follows:
RESOLVED that, pursuant to the authority provided in
the Corporations
Articles of Incorporation
Certificate of Formation
and expressly granted to and vested in the Board of Directors of Retractable
Technologies, Inc. (the Corporation), the Board of Directors hereby
creates out of the Preferred Stock, par value one dollar per share, of the
Corporation a series of Class B Preferred Stock consisting of not more
than five million (5,000,000) shares, and the Board of Directors hereby fixes
the designation and the powers, preference and rights, and the qualifications,
limitations and restrictions thereof, to the extent not otherwise provided in
the Corporations qualifications, limitations and restrictions thereof, to the
extent not otherwise provided in the Corporations
Articles of Incorporation
Certificate of Formation
, as follows:
1.
Designation of Series
. The designation of
the series of Preferred Stock created by this resolution shall be Class B
Convertible Preferred Stock (the Class B Preferred Stock).
2.
Dividends on Class B Preferred Stock
.
a.
Dividend Amount
. The holders of the Class B
Preferred Stock shall be entitled to receive, in any calendar year, if, when
and as declared by the Board of Directors, out of any assets at the time
legally available therefor and subject to the further limitations set out
herein, dividends at the per annum rate of $0.50 per share, all such dividends
due quarterly in arrears as of the last day of each March, June, September and
December of each year, the first dividend being declarable on December 31,
1996. On each date which a dividend may be declared is hereafter called the Dividend
Date, and each quarterly period ending with a Dividend Date is hereinafter
referred to as the Dividend Period. Dividends shall be payable fifteen
calendar days after the Dividend Due Date, provided however, that if such date
on which a dividend is payable is a Saturday, Sunday or legal holiday, such
dividend shall be payable on the next following business day to the holders of
record (whether singular or plural, the Holder).
b.
Dividends Cumulative
. Dividends upon the Class B
Preferred Stock shall be accrued and be cumulative, whether or not in any
Dividend Period or Periods there shall be funds of the Corporation legally
available for the payment of such dividends.
c.
Dividend Accrual
. On each Dividend Due
Date all dividends which shall have accrued since the last Dividend Due Date on
each share of Class B Preferred Stock outstanding on such Dividend Due
Date shall accumulate and be deemed to become due. Any dividend which shall
not be paid on the Dividend Due Date on which it shall become due shall be
deemed to be past due until such dividend shall be paid or until the share of
Class B Preferred Stock with respect to which such dividend became due
shall no longer be outstanding, whichever is the earlier to occur. No interest,
sum of money in lieu of interest or other property or securities shall be
payable in respect of any dividend payment or payments which are past due.
Dividends paid on shares of Class B Preferred Stock in an amount less than
the total amount of such dividends at the time accumulated and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. Dividend
EXHIBIT A
A-16
payments
made with respect to a Dividend Due Date shall be deemed to be made in payment
of the dividends which became due on that Dividend Due Date.
d.
Dividend Arrearage
. If a dividend upon any
shares of Class B Preferred Stock is in arrears, all dividends or other
distributions declared upon shares of the Class B Preferred Stock (other
than dividends paid in stock of the Corporation ranking junior to the Class B
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up) may only be declared pro rata. Except as set forth above, if a dividend
upon any shares of Class B Preferred Stock is in arrears: (i) no
dividends (in cash, stock or other property) may be paid or declared and set
aside for payment or any other distribution made upon any stock of the
Corporation ranking junior to the Class B Preferred Stock as to dividends
(other than dividends of distributions in stock of the Corporation ranking
junior to the Class B Preferred Stock as to dividends and upon
liquidation, dissolution or winding up); and (ii) no stock of the
Corporation ranking junior to the Class B Preferred Stock as to dividends
may be (A) redeemed pursuant to a sinking fund or otherwise, except (1) by
means of redemption pursuant to which all outstanding shares of the Class B
Preferred Stock are redeemed, or (2) by conversion of any such junior
stock into, or exchange of any such junior stock into, or exchange of any such
junior stock for stock of the Corporation ranking junior to the Class B
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up, or (B) purchased or otherwise acquired for any consideration by the
Corporation except (1) pursuant to an acquisition made pursuant to the
terms of one or more offers to purchase all of the outstanding shares of the Class B
Preferred Stock, which offers shall each have been accepted by the holders of
at least 50% of the shares of the Class B Preferred Stock receiving such
offer outstanding at the commencement of the first of such purchase offers, or (2) by
conversion into or exchange for stock of the Corporation ranking junior to the Class B
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up.
3.
General, Class and Series Voting
Rights
. Except as provided in this Section 3 and in Section 4
hereof or as otherwise from time to time required by law, the Class B
Preferred Stock shall have no voting rights.
So long as any shares of Class B Preferred
Stock remain outstanding, the consent of the holders of at least fifty-one
(51%) percent of the shares of Class B Preferred Stock outstanding at the
time voting separately as a class, given in person or by proxy, either in
writing at any special or annual meeting called for the purpose, shall be
necessary to permit, effect or validate any one or more of the following:
(i) The authorization,
creation or issuance, or any increase in the authorized or issued amount, of
any class or series of stock (including any class or series of Preferred Stock)
ranking equal or prior (as the terms are hereinafter defined in this Section 3)
to the Class B Preferred Stock; or
(ii) The amendment,
alteration or repeal, whether by merger, consolidation or otherwise, of any of
the provisions of the
Articles of Incorporation
Certificate of
Formation
or of this resolution which would alter or change the powers,
preferences or special rights of the shares of the Class B Preferred Stock
so as to affect them adversely; provided, however, that any increase in the
amount of authorized Preferred Stock, or the creation and issuance of other
series of Preferred Stock ranking junior to the Class B Preferred Stock
with respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to adversely affect
such powers, preferences or special rights.
The foregoing voting provisions shall not apply if,
at or prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding shares of Class B
Preferred Stock shall have been redeemed or sufficient funds shall have been
deposited in trust to effect such redemption.
4.
Redemption
. The outstanding shares of Class B
Preferred Stock shall be nonredeemable prior to the lapse of three (3) years
from the date of issuance. On and after such date, the Class B Preferred
Stock may be redeemed at the option of the Corporation, as a whole at any time
or in part from time to time, at the Redemption Price of $7.50 per share plus
all dividends (whether or not declared or due) accrued and unpaid to the date
of redemption (subject to the right of the holder of record of shares of Class B
Preferred Stock on a record date for the payment of a dividend on the Class B
Preferred Stock to receive the dividend due on such shares of Class B
Preferred Stock on the corresponding Dividend Due Date).
No sinking fund shall be established for the Class B
Preferred Stock.
EXHIBIT A
A-17
Notice of any proposed redemption of shares of Class B
Preferred Stock shall be mailed by means of first class mail, postage paid,
addressed to the holders of record of the shares of Class B Preferred
Stock to be redeemed, at their respective addresses then appearing on the books
of the Corporation, at least thirty (30) but not more than sixty (60) days
prior to the date fixed for such redemption (herein referred to as the Redemption
Date). Each such notice shall specify (i) the Redemption Date; (ii) the
Redemption Price; (iii) the place for payment and for delivering the stock
certificate(s) and transfer instrument(s) in order to collect the
Redemption Price; (iv) the shares of Class B Preferred Stock to be
redeemed; and (v) the then effective Conversion Price (as defined below)
and that the right of holders of shares of Class B Preferred Stock being
redeemed to exercise their conversion right shall terminate as to such shares
at the close of business on the fifth day before the Redemption Date (provided
that no default by the Corporation in the payment of the applicable Redemption
Price [including any accrued and unpaid
dividends] shall have occurred and be continuing). Any notice mailed in such
manner shall be conclusively deemed to have been duly given whether or not such
notice is in fact received. If less than all the outstanding shares of Class B
Preferred Stock are to be redeemed, the Corporation will select those to be
redeemed by lot or by a substantially equivalent method. In order to facilitate
the redemption of Class B Preferred Stock to be redeemed, which shall not
be more than sixty (60) days prior to the Redemption Date with respect thereto.
The holder of any shares of Class B Preferred
Stock redeemed upon any exercise of the Corporations redemption right shall not
be entitled to receive payment of the Redemption Price for such shares until
such holder shall cause to be delivered to the place specified in the notice
given with respect to such redemption (i) the certificate(s) representing
such shares of Class B Preferred Stock; and (ii) transfer instrument(s) satisfactory
to the Corporation and sufficient to transfer such shares of Class B
Preferred Stock to the Corporation free of any adverse interest. No interest
shall accrue on the Redemption Price of any share of Class B Preferred
Stock after its Redemption Date.
Subject to Section 2 hereof, the Corporation
shall have the right to purchase shares of Class B Preferred Stock from
the owner of such shares on such terms as may be agreeable to such owner.
Shares of Class B Preferred Stock may be acquired by the Corporation from
any stockholder pursuant to this paragraph without offering any other
stockholder an equal opportunity to sell his stock to the Corporation, and no
purchase by the Corporation from any stockholder pursuant to this paragraph
shall be deemed to create any right on the part of any stockholder to sell any
shares of Class B Preferred Stock (or any other stock) to the Corporation.
Notwithstanding the foregoing provisions of this Section 4,
and subject to the provisions of Section 2 hereof, if a dividend upon any
shares of Class B Preferred Stock is past due, (i) no shares of the Class B
Preferred Stock may be redeemed, except (A) by means of a redemption
pursuant to which all outstanding shares of the Class B Preferred Stock
are simultaneously redeemed (or offered to be so redeemed) or pursuant to which
the outstanding shares of the Class B Preferred Stock are redeemed on a
pro rata basis (or offered to be so redeemed), or (B) by conversion of
shares of Class B Preferred Stock into, or exchange of such shares for,
Common Stock or any other stock of the Corporation ranking junior to the Class B
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up.
5.
Liquidation
. In the event of any voluntary
or involuntary dissolution, liquidation or winding up of the Corporation (for
the purposes of this Section 5, a Liquidation), before any distribution
of assets shall be made to the holders of the Common Stock or the holders of
any other stock that ranks junior to the Class B Preferred Stock in
respect of distributions upon the Liquidation of the Corporation, the holder of
each share of Class B Preferred Stock then outstanding shall be entitled
to $6.25 per share plus all dividends (whether or not declared or due) accrued
and unpaid on such share on the date fixed for the distribution of assets of
the Corporation to the holders of Class B Preferred Stock.
If upon any Liquidation of the Corporation, the
assets available for distribution to the holder of Class B Preferred Stock
which shall then be outstanding (hereinafter in this paragraph called the Total
Amount Available) shall be insufficient to pay the holders of all outstanding
shares of Class B Preferred Stock the full amounts (including all
dividends accrued and unpaid) to which they shall be entitled by reason of such
Liquidation of the Corporation, then there shall be paid ratably to the holders
of the Class B Preferred Stock in connection with such Liquidation of the
Corporation, an amount equal to each holders pro rata share of the Total
Amount Available.
EXHIBIT A
A-18
The voluntary sale, conveyance, lease, exchange or
transfer of all or substantially all the property or assets of the Corporation,
or the merger or consolidation of the Corporation into another corporation, or
any purchase or redemption of some or all of the shares of any class or series
of stock of the Corporation, shall not be deemed to be a Liquidation of the Corporation
for the purposes of this Section 5 (unless in connection therewith the
Liquidation of the Corporation is specifically approved).
6.
Conversion Privilege
. At any time
subsequent to three years after issuance of any share of Class B Preferred
Stock, the holder of any share of Class B Preferred Stock (Holder) shall
have the right, at such Holders option (but if such share is called for
redemption or exchange at the election of the Corporation, then in respect of
such share only to and including but not after the close of business on (i) the
fifth calendar day before the date fixed for such redemption; or (ii) the
date fixed for such exchange, provided that the Corporation has set aside funds
sufficient to effect such redemption) to convert such share into that number of
fully paid and non-assessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100th of a share) obtained by dividing $5.00 by the
Conversion Rate then in effect.
a.
Conversion Rate
. Each share of Class B
Preferred Stock may be converted, subject to the terms and provisions of this
paragraph 6 into one (1) share of the Corporations Common Stock, which is
a price equal to one share of Common Stock for each $5.00 of Class B
Preferred Stock or, in case an adjustment of such rate has taken place pursuant
to the provisions of subdivision (f.) of this paragraph (6), then at the
Conversion Rate as last adjusted (such rate or adjusted rate, shall be
expressed as the number of shares of Common Stock to be acquired upon
conversion of one share of Class B Preferred Stock, and shall be referred
to herein as the Conversion Rate). Each share of Class B Preferred Stock
shall be Convertible into Common Stock by surrender to the Corporation of the
certificate representing such shares of Class B Preferred Stock to be
converted by the Holder and by giving written notice to the Corporation of the
Holders election to convert.
The Corporation shall, as soon as practicable after
receipt of such written notice and the proper surrender to the Corporation of
the certificate or certificates representing shares of Class B Preferred
Stock to be converted in accordance with the above provisions, issue and
deliver for the benefit of the Holder at the office of the Corporations duly
appointed transfer agent (the Transfer Agent) to the Holder for whose account
such shares of Class B Preferred Stock were so surrendered or to such
Holders nominee or nominees, certificates for the number of shares of Common
Stock to which the Holder shall be entitled. The certificates of Common Stock
of the Corporation issued upon conversion shall bear such legends as may be
required by state or federal laws. Such conversion shall be deemed to have been
effective immediately prior to the close of business on the date on which the
Corporation shall have received both such written notice and the properly
surrendered certificates for shares of Class B Preferred Stock to be
converted (the Conversion Date), and at such time the rights of the Holder
shall cease and the person or persons entitled to receive the shares of Common
Stock issuable upon the conversion of such shares of Class B Preferred
Stock shall be deemed to be, and shall be treated for all purposes as, the
record Holder or Holders of such Common Stock on the Conversion Date. The
Corporation shall not be required to convert, and no surrender of shares of Class B
Preferred Stock or written notice of conversion with respect thereto shall be
effected for that purpose, while the stock transfer books of the Corporation
are closed for any reasonable business purpose for any reasonable period of
time, but shall be required to convert upon the proper surrender of shares of Class B
Preferred Stock for conversion immediately upon the reopening of such books.
During the period in which the stock transfer books of the Corporation are
closed, the Corporation may neither declare a dividend, declare a record date
for payment of dividends nor make any payment of dividends.
b.
Dividends
. If any shares of Class B
Preferred Stock shall be converted during any dividend payment period, the
Holder shall be entitled to all dividends accrued up to and through such
Conversion Date, at the rate set forth herein, whether or not there has been a
Dividend Date, as set forth in paragraph 2 hereof.
c.
Cancellation
. Class B Preferred Stock
converted into Common Stock pursuant to the provisions of this paragraph (6),
shall be retired and cancelled by the Corporation and given the status of
authorized and unissued preferred stock.
d.
Reissuance if Conversion is Partial
. In
the case of any certificate representing shares of Class B Preferred Stock
which is surrendered for conversion only in part, the Corporation shall issue
and deliver to the Holder a new certificate or certificates for Class B
Preferred Stock of such denominations as requested by the
EXHIBIT A
A-19
Holder
in the amount of Class B Preferred Stock equal to the unconverted shares
of the Class B Preferred Stock represented by the certificate so
surrendered.
e.
Reservations of Shares
. The Corporation
shall at all times during which shares of Class B Preferred Stock may be
converted into Common Stock as provided in this paragraph (e), reserve and keep
available, out of any Common Stock held as treasury stock or out of its
authorized and unissued Common Stock, or both, solely for the purpose of
delivery upon conversion of the shares of Class B Preferred Stock as
herein provided, such number of shares of Common Stock as shall then be
sufficient to effect the conversion of all shares of Class B Preferred
Stock from time to time outstanding, and shall take such action as may from
time to time be necessary to ensure that such shares of Common Stock will, when
issued upon conversion of Class B Preferred Stock, be fully paid and
nonassessable.
f.
Adjustment of Conversion Rate
. The
Conversion Rate provided in subdivision (a) of this paragraph (6), in
respect of Class B Preferred Stock, shall be subject to adjustments from
time to time as follows:
(i) While any shares of
Class B Preferred Stock shall be outstanding, in case the Corporation
shall subdivide the outstanding shares of Common Stock into a greater number of
shares of Common Stock or combine the outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or issue, by reclassification of its
shares of Common Stock, any shares of the Corporation, the Conversion Rate in
effect immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive the number of shares which it would have owned or been
entitled to receive after the happening of any of the events described above,
had such shares of Class B Preferred Stock been converted immediately
prior to the happening of such event, such adjustment to become effective
immediately after the opening of business on the day following the day upon
which such subdivision or combination or reclassification, as the case may be,
becomes effective.
(ii) In case the
Corporation shall be consolidated with, or merge into, any other corporation,
and the Corporation does not survive, proper provisions shall be made as a part
of the terms of such consolidation or merger, whereby the Holder shall
thereafter be entitled, upon exercise of such Holders conversion rights, to
receive the kind and amount of shares of stock or other securities of the
Corporation resulting from such consolidation or merger, or such other
property, as the Holder would have received if such conversion rights were
exercised immediately prior to the effectiveness of such merger or
consolidation.
(iii) In the event the
Corporation at any time, or from time to time after June 15, 1996 makes or
issues, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock or Common Stock Equivalents (as defined herein) which
does not provide for the payment of any consideration upon the issuance,
conversion or exercise thereof, without a corresponding dividend or other
distribution to the Holder, based upon the number of shares of Common Stock
into which the Class B Preferred Stock is convertible, then and in each
such event the Conversion Rate then in effect will be increased as of the time
of such issuance or, in the event such a record date shall have been fixed, as
of the close of business on such record date, by multiplying such Conversion
Rate by a fraction:
(A) The numerator of
which will be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in payment of
such dividend or distribution (which, in the case of Common Stock Equivalents,
shall mean the maximum number of shares of Common Stock issuable with respect
thereto, as set forth in the instrument relative thereto without regard to any
provision for subsequent adjustment); and
(B) The denominator of
which will be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date;
provided,
however, that if such record date is fixed and such dividend is not fully paid
or if such distribution is not fully made on the date fixed therefor, the
Conversion Rate will be recomputed accordingly as of the close of
EXHIBIT A
A-20
business
on such record date, and thereafter such Conversion Rate will be adjusted
pursuant to this subparagraph (iii) as of the time of actual payment of
such dividends or distributions.
(iv) In the event the
Corporation at any time or from time to time after June 15, 1996 makes or
issues, or fixes a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable to all holders of
Common Stock in securities of the Corporation Stock Equivalents, then, upon
making such dividend or distribution provisions will be made so that the Holder
will receive the amount of securities of the Corporation which it would have
received had its Class B Preferred Stock been converted into Common Stock
on the date of such event.
(v) In the event the
Corporation sells or issues any Common Stock, or sells or issues Common Stock
Equivalents which can be converted into Common Stock at a per share
consideration (as defined below in this subparagraph (v)) less than the
Stipulated Price then in effect, then the Holder shall be entitled to purchase
from the Corporation in cash (for the same per share consideration at which
such Common Stock was issued or the per share price at which a share of Common
Stock is acquirable upon exercise or conversion of Common Stock Equivalents)
that additional number of shares of Common Stock which, when added to the
number of shares of Common Stock acquirable by the Holder upon conversion of
any shares of Class B Preferred Stock outstanding and held by such Holder
immediately before such issue or sale (the Acquirable Shares), will equal a
percentage of the number of shares of Common Stock Deemed Outstanding (as
defined herein) immediately after such sale or issuance that is the same as the
percentage of the number of shares of Common Stock Deemed Outstanding immediately
before such issuance or sale represented by the Acquirable Shares. This right
shall exist for a forty-five-day period following the sale or issuance of
shares of Common Stock or Common Stock Equivalents, and thereafter shall cease
to exist.
For the above purposes, the per share consideration
with respect to the sale or issuance of Common Stock will be the price per
share received by the Corporation, prior to the payment of any expenses,
commissions, discounts and other applicable costs. With respect to the sale or
issuance of Common Stock Equivalents which are convertible into or exchangeable
for Common Stock without further consideration, the per share consideration
will be determined by dividing the maximum number of shares of Common Stock
issuable with respect to such Common Stock Equivalents (as set forth in the
instrument relating thereto without regard to any provisions contained therein
for subsequent adjustment of such number) into the aggregate consideration
receivable by the Corporation upon the sale or issuance of such Common Stock
Equivalents. With respect to the issuance of other Common Stock Equivalents,
the per share consideration will be determined by dividing the maximum number
of shares of Common Stock issuable with respect to such Common Stock
Equivalents into the total aggregate consideration received by the Corporation
upon the sale or issuance of such Common Stock Equivalents plus the minimum
aggregate amount of additional consideration received by the Corporation upon
the conversion or exercise of such Common Stock Equivalents. In connection with
the sale or issuance of Common Stock and/or Common Stock Equivalents for
non-cash consideration, the amount of consideration will be the fair market
value of such consideration as determined in good faith by the Board of
Directors of the Corporation.
(vi) As used herein,
the term Stipulated Price means initial price of $5.00 per share of Common
Stock, as adjusted from time to time pursuant to subparagraph (viii) of
this paragraph 6(f); and the term Common Stock Equivalent means any
securities (whether debt or equity securities) or rights issued by the
Corporation convertible into or entitling the holder thereof to receive shares
of, or securities convertible into, Common Stock. The number of shares of Common
Stock Deemed Outstanding at any date shall equal the sum of the number of
shares of Common Stock then outstanding plus the number of shares of Common
Stock then obtainable pursuant to Common Stock Equivalents.
(vii) In the event the Corporation
declares any dividend or distribution payable to holders of its Common Stock
(other than dividends payable out of the Corporations retained earnings or
earned surplus and dividends payable in shares of Common Stock or in securities
convertible into or exchangeable for shares of Common Stock or rights or
warrants to purchase Common Stock or securities convertible into or
exchangeable for shares of Common Stock or any other securities issued by the
Corporation), the Conversion Rate in effect immediately prior to the record
date for such dividend or distribution shall be proportionately adjusted so
that the Holder shall be entitled to receive the number of shares of Common
Stock into which such
EXHIBIT A
A-21
shares of Common Stock or Preferred Stock was
convertible immediately prior to such record date multiplied by a fraction, the
numerator of which is the fair market value of a share of Common Stock on such
record date and the denominator of which is such per share fair market value of
a share of Common Stock on such record date less the fair market value on such
record date of the securities or other property which are distributed as a
dividend or other distribution. The term fair market value of a share of
Common Stock or of any other security or other type of property on any date
means (A) in the case of Common Stock or any other security (I) if
the principal trading market for such Common Stock or other security is an
exchange or the NASDAQ national market on such date, the closing price on such
exchange or the NASDAQ national market on such date, provided, if trading of
such Common Stock or other security is listed on any consolidated tape, the
fair market value shall be the closing price set forth on such consolidated
tape on such date, or (II) if the principal market for such Common Stock
or other security is the over-the-counter market (other than the NASDAQ
national market) the mean between the closing bid and asked prices on such date
as set forth by NASDAQ; or (B) in the case of Common Stock or any other
security for which the fair market value cannot be determined pursuant to
clause (A) above or of any other security or type of property, fair market
value thereof on such date as determined in good faith by the Board of
Directors.
(viii) Whenever the
Conversion Rate is adjusted pursuant to this paragraph 6(f), the Stipulated
Price shall also be adjusted by multiplying it by a fraction that is the
reciprocal of the fraction used to adjust the Conversion Rate.
(ix) The Corporation
will not, by amendment of its
Articles of Incorporation
Certificate
of Formation
or through any dissolution, issuance or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Corporation,
but at all times in good faith will assist in the carrying out of all the
provisions of this paragraph and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
Holder against impairment.
(x) No adjustment in
the Conversion Rate shall be required, unless such adjustment would require an
increase or decrease of at least one (1) share of Common Stock in the Conversion
Rate of one share of Class B Preferred Stock, provided that all
adjustments which do not meet this minimum requirement shall be cumulated and
the adjustment will be made when the cumulated total is sufficient to require
an adjustment. All calculations made pursuant to this subparagraph (x) of
paragraph 6(f) shall be made to the nearest one hundredth (1/100th) of a
share of Common Stock.
g.
Fractional Shares
. No fractional shares of
Common Stock or scrip representing fractional shares of Common Stock shall be
issued upon any conversion of shares of Class B Preferred Stock but, in
lieu thereof, there shall be paid an amount in cash equal to the same fraction
of the current market price of a whole share of Common Stock on the day
preceding the day of conversion.
h.
Statement to Transfer Agent
. Whenever the
Conversion Rate for shares of Class B Preferred Stock shall be adjusted
pursuant to the provisions of paragraph 6(f) hereof, the Corporation shall
forthwith maintain at its office and, if applicable, file with the Transfer
Agent for shares of Class B Preferred Stock and for shares of Common
Stock, a statement signed by the President or a Vice President of the
Corporation and by its Treasurer or an Assistant Treasurer, stating the
adjusted Conversion Rate and setting forth in reasonable detail the method of
calculation and the facts requiring such adjustment, such calculations to be
confirmed by the Corporations independent auditors, and stating the facts on
which the calculation is based. Each adjustment shall remain in effect until a
subsequent adjustment hereunder is required.
7.
Registration Rights
.
a.
Piggyback Registration
. The Corporation,
for a period ending six months after the last share of Class B Preferred
Stock is redeemed, retired, converted or otherwise no longer outstanding, will
give written notice to the Holder not less than 20 days in advance of the
initial filing of any registration statement under the Securities Act of 1933
(other than a registration Statement pertaining to securities issuable pursuant
to employee stock option, stock purchase, or similar plans or a registration
statement pertaining to securities issuable in connection with the acquisition
of a business, whether through merger, consolidation, acquisition of assets, or
exchange of securities)
EXHIBIT A
A-22
covering
any Common Stock or other securities of the Corporation, and will afford the
Holder the opportunity to have included in such registration all or such part
of the shares of Common Stock acquired upon conversion of Class B
Preferred Stock, as may be designated by written notice to the Corporation not
later than 10 days following receipt of such notice from the Corporation. The
Corporation shall be entitled to exclude the shares of Common Stock held by the
Holder from any one, but not more than one, such registration if the
Corporation is advised by its investment banking firm that the inclusion of
such shares will, in the opinion of such investment banking firm, materially
interfere with the orderly sale and distribution of the securities being
offered under such registration statement by the Corporation. Notwithstanding
the foregoing, the Corporation shall not be entitled to exclude the shares of
Common Stock held by the Holder if shares of other shareholders are being
included in any such registration statement and, in such circumstances, the
Holder shall be entitled to include the shares of Common Stock held by them on
a pro rata basis in the proportion that the number of shares of Common Stock
held by the Holder bears to the shares of Common Stock held by all other
shareholders, including shares in such registration statement. The Holder shall
not be entitled to include shares in more than two registration statements
pursuant to the provisions of this subdivision (a) of paragraph 7, and all
rights of the Holder under this subdivision (a) of paragraph 7 shall
terminate after the Holder has included shares of Common Stock in two
registration statements pursuant to this subdivision (a) of paragraph 7.
b.
Expenses
. The Corporation will pay all
out-of-pocket costs and expenses of any registration effected pursuant to the
provisions of subdivision (a) of this paragraph 7, including registration
fees, legal fees, accounting fees, printing expenses (including such number of
any preliminary and the final prospectus as may be reasonably requested), blue
sky qualification fees and expenses, and all other expenses, except for
underwriting commissions or discounts applicable to the shares of Common Stock
being sold by the Holder and the fees of counsel for the Holder, all of which
shall be paid by the Holder.
8.
Reports
.
So long as any of the Class B Preferred Stock
shall be outstanding, the Corporation shall submit to the Holder financial
reports no less frequently than annually.
9.
Miscellaneous
.
a. As used herein, the term Common Stock shall
mean the Corporations Common Stock, no par value, or, in the case of any
reclassification or change of outstanding shares of Common Stock, the stock or
securities issued in exchange for such Common Stock. The term Common Stock
shall also include any capital stock of the Corporation authorized after June 15,
1995 which shall not be limited to a fixed sum or sums or percentage or
percentages of par value in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
b. The shares of Class B Preferred Stock shall
be fully transferrable by the Holder thereof, subject to compliance with the
applicable provisions of federal and state securities laws.
IN WITNESS WHEREOF, RETRACTABLE TECHNOLOGIES, INC.
has caused its corporate seal to be hereunto affixed and this Certificate to be
signed by its President and Secretary this
day of May, 1995.
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/s/
Thomas J. Shaw
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President
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ATTEST:
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/s/Lillian
E. Salerno
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Secretary
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EXHIBIT A
A-23
CERTIFICATE OF DESIGNATION, PREFERENCES
RIGHTS AND LIMITATIONS OF THE SERIES II CLASS B
CONVERTIBLE PREFERRED STOCK
OF
RETRACTABLE TECHNOLOGIES, INC.
Pursuant to
Article 2.13 of the Texas
Business Corporation Act and Article Five of its Articles of Incorporation
Texas law and its Certificate of Formation
, Retractable Technologies, Inc.,
a corporation organized and existing under the laws of the State of Texas (the
Corporation),
DOES HEREBY CERTIFY that pursuant to the authority
conferred upon the Board of Directors of the Corporation by the
Articles of
Incorporation
Certificate of Formation
, as amended, and pursuant to
Article 2.13
of the Texas Business Corporation Act
Texas law
, said Board of
Directors, by unanimous written consent executed May 10, 1995, adopted a
resolution providing for the creation of a series of Preferred Stock consisting
of not more than five million (5,000,000) shares of Series II Class B
Convertible Preferred Stock, which resolution is and reads as follows:
RESOLVED that, pursuant to the authority provided in
the Corporations
Articles of Incorporation
Certificate of Formation
and expressly granted to and vested in the Board of Directors of Retractable
Technologies, Inc. (the Corporation), the Board of Directors hereby
creates out of the Preferred Stock, par value one dollar per share, of the
Corporation a series of Series II Class B Preferred Stock consisting
of not more than five million (5,000,000) shares, and the Board of Directors
hereby fixes the designation and the powers, preference and rights, and the
qualifications, limitations and restrictions thereof, to the extent not
otherwise provided in the Corporations qualifications, limitations and
restrictions thereof, to the extent not otherwise provided in the Corporations
Articles of Incorporation
Certificate of Formation
, as follows:
1.
Designation of Series
. The designation of
the series of Preferred Stock created by this resolution shall be Series II
Class B Convertible Preferred Stock (the Series II Class B
Preferred Stock).
2.
Dividends on Series II Class B
Preferred Stock
.
a.
Dividend Amount
. The holders of the Series II
Class B Preferred Stock shall be entitled to receive, in any calendar
year, if, when and as declared by the Board of Directors, out of any assets at
the time legally available therefor and subject to the further limitations set
out herein, dividends at the per annum rate of $1.00 per share, all such
dividends due quarterly in arrears as of the last day of each March, June, September and
December of each year, the first dividend being declarable on December 31,
1997. On each date which a dividend may be declared is hereafter called the Dividend
Date, and each quarterly period ending with a Dividend Date is hereinafter
referred to as the Dividend Period. Dividends shall be payable fifteen
calendar days after the Dividend Due Date, provided however, that if such date
on which a dividend is payable is a Saturday, Sunday or legal holiday, such
dividend shall be payable on the next following business day to the holders of
record (whether singular or plural, the Holder).
b.
Dividends Cumulative
. Dividends upon the Series II
Class B Preferred Stock shall be accrued and be cumulative, whether or not
in any Dividend Period or Periods there shall be funds of the Corporation
legally available for the payment of such dividends.
c.
Dividend Accrual
. On each Dividend Due
Date all dividends which shall have accrued since the last Dividend Due Date on
each share of Series II Class B Preferred Stock outstanding on such
Dividend Due Date shall accumulate and be deemed to become due. Any dividend
which shall not be paid on the Dividend Due Date on which it shall become due
shall be deemed to be past due until such dividend shall be paid or until the
share of Series II Class B Preferred Stock with respect to which such
dividend became due shall no longer be outstanding, whichever is the earlier to
occur. No interest, sum of money in lieu of interest or other property or
securities shall be payable in respect of any dividend payment or payments
which are past due. Dividends paid on shares of Series II Class B
Preferred Stock in an amount less than the total amount of such dividends at
the time accumulated and payable on such shares shall be allocated pro rata on
a share-by-share basis among all such shares at the time
EXHIBIT B
A-24
outstanding.
Dividend payments made with respect to a Dividend Due Date shall be deemed to
be made in payment of the dividends which became due on that Dividend Due Date.
d.
Dividend Arrearage
. If a dividend upon any
shares of Series II Class B Preferred Stock is in arrears, all
dividends or other distributions declared upon shares of the Series II Class B
Preferred Stock (other than dividends paid in stock of the Corporation ranking
junior to the Series II Class B Preferred Stock as to dividends and
upon liquidation, dissolution or winding up) may only be declared pro rata.
Except as set forth above, if a dividend upon any shares of Series II Class B
Preferred Stock is in arrears: (i) no dividends (in cash, stock or other
property) may be paid or declared and set aside for payment or any other
distribution made upon any stock of the Corporation ranking junior to the Series II
Class B Preferred Stock as to dividends (other than dividends of
distributions in stock of the Corporation ranking junior to the Series II Class B
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up); and (ii) no stock of the Corporation ranking junior to the Series II
Class B Preferred Stock as to dividends may be (A) redeemed pursuant
to a sinking fund or otherwise, except (1) by means of redemption pursuant
to which all outstanding shares of the Series II Class B Preferred
Stock are redeemed, or (2) by conversion of any such junior stock into, or
exchange of any such junior stock into, or exchange of any such junior stock
for stock of the Corporation ranking junior to the Series II Class B
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up, or (B) purchased or otherwise acquired for any consideration by the
Corporation except (1) pursuant to an acquisition made pursuant to the
terms of one or more offers to purchase all of the outstanding shares of the Series II
Class B Preferred Stock, which offers shall each have been accepted by the
holders of at least 50% of the shares of the Series II Class B
Preferred Stock receiving such offer outstanding at the commencement of the
first of such purchase offers, or (2) by conversion into or exchange for
stock of the Corporation ranking junior to the Series II Class B
Preferred Stock as to dividends and upon liquidation, dissolution or winding up.
3.
General, Class and Series Voting
Rights
. Except as provided in this Section 3 and in Section 4
hereof or as otherwise from time to time required by law, the Series II Class B
Preferred Stock shall have no voting rights.
So long as any shares of Series II Class B
Preferred Stock remain outstanding, the consent of the holders of at least
fifty-one (51%) percent of the shares of Series II Class B Preferred
Stock outstanding at the time voting separately as a class, given in person or
by proxy, either in writing at any special or annual meeting called for the
purpose, shall be necessary to permit, effect or validate any one or more of
the following:
(i) The authorization,
creation or issuance, or any increase in the authorized or issued amount, of
any class or series of stock (including any class or series of Preferred Stock)
ranking equal or prior (as the terms are hereinafter defined in this Section 3)
to the Series II Class B Preferred Stock; or
(ii) The amendment,
alteration or repeal, whether by merger, consolidation or otherwise, of any of
the provisions of the
Articles of Incorporation
Certificate of
Formation
or of this resolution which would alter or change the powers,
preferences or special rights of the shares of the Series II Class B
Preferred Stock so as to affect them adversely; provided, however, that any
increase in the amount of authorized Preferred Stock, or the creation and
issuance of other series of Preferred Stock ranking junior to the Series II
Class B Preferred Stock with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution or winding up, shall not
be deemed to adversely affect such powers, preferences or special rights.
The foregoing voting provisions shall not apply if,
at or prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding shares of Series II
Class B Preferred Stock shall have been redeemed or sufficient funds shall
have been deposited in trust to effect such redemption.
4.
Default Voting Rights
. Whenever, at any
time or times, dividends payable on the shares of Series II Class B
Preferred Stock shall be in arrears for twelve (12) consecutive quarterly
dividend periods, the holders of a majority of the outstanding shares of Series II
Class B Preferred Stock shall have the exclusive right (voting separately
as a class) to elect one-third of the Board of Directors of the Corporation at
the Corporations next annual meeting of stockholders (to serve until the next
annual meeting of shareholders, and until their successors are duly elected and
qualified) and at each subsequent annual meeting of stockholders so long as
such arrearage shall continue, and the Common Stock voting separately as a
class, shall be entitled to elect the remainder of the Board of Directors of
the Corporation. At elections for such directors, each holder of Series II
Class B Preferred Stock shall be entitled to one
EXHIBIT B
A-25
vote
for each share of Preferred Stock held. The right of the holders of Series II
Class B Preferred Stock, voting separately as a class, to elect members of
the Board of the Directors of the Corporation as aforesaid shall continue until
such time as all dividends accumulated on the Series II Class B
Preferred Stock shall have been paid in full, at which time such right shall
terminate, except as herein or by law expressly provided, subject to revesting
in the event of each and every subsequent default of the character above
mentioned.
Directors elected by the holders of Series II Class B
Preferred Stock shall continue to serve as such directors until such time as
all dividends accumulated on the Series II Class B Preferred Stock
shall have been paid in full, at which time the term of office of all persons
elected as directors by the holders of shares of Series II Class B
Preferred Stock shall forthwith terminate. In the case of any vacancy in the
office of a director occurring among the directors elected by the holder of a
class (with the Series II Class B Preferred Stock and Common Stock
being treated as separate classes) of stock, the remaining directors so elected
by that class may by affirmative vote of a majority thereof (or the remaining
director so elected if there be but one) elect a successor or successors to
hold office for the unexpired term of the director or directors whose place or
places shall be vacant. Any director who shall have been elected by the holders
of a class of stock or by any directors so elected as provided in the next
preceding sentence hereof may be removed during the aforesaid term of office,
either for or without cause, by, and only by, the affirmative vote of the
holders of a majority of the shares of the class of stock who elected such
director or directors, given either at a special meeting of such shareholders
duly called for that purpose or pursuant to a written consent of shareholders,
and any vacancy thereby created may be filled by the holders of that class of
stock represented at such meeting or pursuant to such written consent. Whenever
the term of office of the directors elected by the holders of Series II Class B
Preferred Stock voting as a class shall end and the special voting powers
vested in the holders of Series II Class B Preferred Stock voting as
a class shall end and the special voting powers vested in the holders of Series II
Class B Preferred Stock as provided in this Section 4 shall have
expired, the number of directors shall be such number as may be provided for in
the
Articles of Incorporation
Certificate of Formation
or Bylaws
irrespective of any increase made pursuant to the provisions of this Section 4.
5.
Redemption
. The outstanding shares of Series II
Class B Preferred Stock shall be nonredeemable prior to the lapse of three
(3) years from the date of issuance. On and after such date, the Series II
Class B Preferred Stock may be redeemed at the option of the Corporation,
as a whole at any time or in part from time to time, at the Redemption Price of
$15.00 per share plus all dividends (whether or not declared or due) accrued
and unpaid to the date of redemption (subject to the right of the holder of
record of shares of Series II Class B Preferred Stock on a record
date for the payment of a dividend on the Series II Class B Preferred
Stock to receive the dividend due on such shares of Series II Class B
Preferred Stock on the corresponding Dividend Due Date).
No sinking fund shall be established for the Series II
Class B Preferred Stock.
Notice of any proposed redemption of shares of Series II
Class B Preferred Stock shall be mailed by means of first class mail,
postage paid, addressed to the holders of record of the shares of Series II
Class B Preferred Stock to be redeemed, at their respective addresses then
appearing on the books of the Corporation, at least thirty (30) but not more
than sixty (60) days prior to the date fixed for such redemption (herein
referred to as the Redemption Date). Each such notice shall specify (i) the
Redemption Date; (ii) the Redemption Price; (iii) the place for
payment and for delivering the stock certificate(s) and transfer
instrument(s) in order to collect the Redemption Price; (iv) the
shares of Series II Class B Preferred Stock to be redeemed; and (v) the
then effective Conversion Price (as defined below) and that the right of
holders of shares of Series II Class B Preferred Stock being redeemed
to exercise their conversion right shall terminate as to such shares at the
close of business on the fifth day before the Redemption Date (provided that no
default by the Corporation in the payment of the applicable Redemption Price
[including any accrued and unpaid dividends] shall have occurred and be
continuing). Any notice mailed in such manner shall be conclusively deemed to
have been duly given whether or not such notice is in fact received. If less
than all the outstanding shares of Series II Class B Preferred Stock
are to be redeemed, the Corporation will select those to be redeemed by lot or
by a substantially equivalent method. In order to facilitate the redemption of Series II
Class B Preferred Stock to be redeemed, which shall not be more than sixty
(60) days prior to the Redemption Date with respect thereto.
The holder of any shares of Series II Class B
Preferred Stock redeemed upon any exercise of the Corporations redemption
right shall not be entitled to receive payment of the Redemption Price for such
shares until such holder shall cause to be delivered to the place specified in
the notice given with respect to such redemption (i)
EXHIBIT B
A-26
the
certificate(s) representing such shares of Series II Class B
Preferred Stock; and (ii) transfer instrument(s) satisfactory to the
Corporation and sufficient to transfer such shares of Series II Class B
Preferred Stock to the Corporation free of any adverse interest. No interest
shall accrue on the Redemption Price of any share of Series II Class B
Preferred Stock after its Redemption Date.
Subject to Section 2 hereof, the Corporation
shall have the right to purchase shares of Series II Class B
Preferred Stock from the owner of such shares on such terms as may be agreeable
to such owner. Shares of Series II Class B Preferred Stock may be
acquired by the Corporation from any stockholder pursuant to this paragraph
without offering any other stockholder an equal opportunity to sell his stock
to the Corporation, and no purchase by the Corporation from any stockholder
pursuant to this paragraph shall be deemed to create any right on the part of
any stockholder to sell any shares of Series II Class B Preferred Stock
(or any other stock) to the Corporation.
Notwithstanding the foregoing provisions of this Section 5,
and subject to the provisions of Section 2 hereof, if a dividend upon any
shares of Series II Class B Preferred Stock is past due, (i) no
shares of the Series II Class B Preferred Stock may be redeemed,
except (A) by means of a redemption pursuant to which all outstanding
shares of the Series II Class B Preferred Stock are simultaneously
redeemed (or offered to be so redeemed) or pursuant to which the outstanding
shares of the Series II Class B Preferred Stock are redeemed on a pro
rata basis (or offered to be so redeemed), or (B) by conversion of shares
of Series II Class B Preferred Stock into, or exchange of such shares
for, Common Stock or any other stock of the Corporation ranking junior to the Series II
Class B Preferred Stock as to dividends and upon liquidation, dissolution
or winding up.
6.
Liquidation
. In the event of any voluntary
or involuntary dissolution, liquidation or winding up of the Corporation (for
the purposes of this Section 6, a Liquidation), before any distribution
of assets shall be made to the holders of the Common Stock or the holders of
any other stock that ranks junior to the Series II Class B Preferred
Stock in respect of distributions upon the Liquidation of the Corporation, the
holder of each share of Series II Class B Preferred Stock then
outstanding shall be entitled to $12.50 per share plus all dividends (whether
or not declared or due) accrued and unpaid on such share on the date fixed for
the distribution of assets of the Corporation to the holders of Series II Class B
Preferred Stock.
If upon any Liquidation of the Corporation, the
assets available for distribution to the holder of Series II Class B
Preferred Stock which shall then be outstanding (hereinafter in this paragraph
called the Total Amount Available) shall be insufficient to pay the holders
of all outstanding shares of Series II Class B Preferred Stock the
full amounts (including all dividends accrued and unpaid) to which they shall
be entitled by reason of such Liquidation of the Corporation, then there shall
be paid ratably to the holders of the Series II Class B Preferred
Stock in connection with such Liquidation of the Corporation, an amount equal
to each holders pro rata share of the Total Amount Available.
The voluntary sale, conveyance, lease, exchange or
transfer of all or substantially all the property or assets of the Corporation,
or the merger or consolidation of the Corporation into another corporation, or
any purchase or redemption of some or all of the shares of any class or series
of stock of the Corporation, shall not be deemed to be a Liquidation of the
corporation for the purposes of this Section 6 (unless in connection
therewith the Liquidation of the Corporation is specifically approved).
7.
Conversion Privilege
. At any time
subsequent to three years after issuance of any share of Series II Class B
Preferred Stock, the holder of any share of Series II Class B
Preferred Stock (Holder) shall have the right, at such Holders option (but
if such share is called for redemption or exchange at the election of the
Corporation, then in respect of such share only to and including but not after
the close of business on (i) the fifth calendar day before the date fixed
for such redemption; or (ii) the date fixed for such exchange, provided
that the Corporation has set aside funds sufficient to effect such redemption)
to convert such share into that number of fully paid and non-assessable shares
of Common Stock (calculated as to each conversion to the nearest 1/100th of a
share) obtained by dividing $10.00 by the Conversion Rate then in effect.
a.
Conversion Rate
.
Each share of Series II Class B Preferred Stock may be converted,
subject to the terms and provisions of this paragraph 7 into one (1) share
of the Corporations Common Stock, which is a price equal to one share of
Common Stock for each $10.00 of Series II Class B Preferred Stock or,
in case an adjustment of such rate has taken place pursuant to the provisions
of subdivision (f.) of this paragraph (7),
EXHIBIT B
A-27
then at the Conversion Rate as last adjusted (such
rate or adjusted rate, shall be expressed as the number of shares of Common Stock
to be acquired upon conversion of one share of Series II Class B
Preferred Stock, and shall be referred to herein as the Conversion Rate).
Each share of Series II Class B Preferred Stock shall be Convertible
into Common Stock by surrender to the Corporation of the certificate
representing such shares of Series II Class B Preferred Stock to be
converted by the Holder and by giving written notice to the Corporation of the
Holders election to convert.
The Corporation shall, as
soon as practicable after receipt of such written notice and the proper
surrender to the Corporation of the certificate or certificates representing
shares of Series II Class B Preferred Stock to be converted in
accordance with the above provisions, issue and deliver for the benefit of the
Holder at the office of the Corporations duly appointed transfer agent (the Transfer
Agent) to the Holder for whose account such shares of Series II Class B
Preferred Stock were so surrendered or to such Holders nominee or nominees,
certificates for the number of shares of Common Stock to which the Holder shall
be entitled. The certificates of Common Stock of the Corporation issued upon
conversion shall bear such legends as may be required by state or federal laws.
Such conversion shall be deemed to have been effective immediately prior to the
close of business on the date on which the Corporation shall have received both
such written notice and the properly surrendered certificates for shares of Series II
Class B Preferred Stock to be converted (the Conversion Date), and at
such time the rights of the Holder shall cease and the person or persons
entitled to receive the shares of Common Stock issuable upon the conversion of
such shares of Series II Class B Preferred Stock shall be deemed to be,
and shall be treated for all purposes as, the record Holder or Holders of such
Common Stock on the Conversion Date. The Corporation shall not be required to
convert, and no surrender of shares of Series II Class B Preferred
Stock or written notice of conversion with respect thereto shall be effected
for that purpose, while the stock transfer books of the Corporation are closed
for any reasonable business purpose for any reasonable period of time, but shall
be required to convert upon the proper surrender of shares of Series II Class B
Preferred Stock for conversion immediately upon the reopening of such books.
During the period in which the stock transfer books of the Corporation are
closed, the Corporation may neither declare a dividend, declare a record date
for payment of dividends nor make any payment of dividends.
b.
Dividends
. If any
shares of Class B Preferred Stock shall be converted during any dividend
payment period, the Holder shall be entitled to all dividends accrued up to and
through such Conversion Date, at the rate set forth herein, whether or not
there has been a Dividend Date, as set forth in paragraph 2 hereof.
c.
Cancellation
. Class B
Preferred Stock converted into Common Stock pursuant to the provisions of this
paragraph (7) shall be retired and cancelled by the Corporation and given
the status of authorized and unissued preferred stock.
d.
Reissuance if
Conversion is Partial
. In the case of any certificate representing shares
of Series II Class B Preferred Stock which is surrendered for
conversion only in part, the Corporation shall issue and deliver to the Holder
a new certificate or certificates for Series II Class B Preferred
Stock of such denominations as requested by the Holder in the amount of Series II
Class B Preferred Stock equal to the unconverted shares of the Series II
Class B Preferred Stock represented by the certificate so surrendered.
e.
Reservations of Shares
.
The Corporation shall at all times during which shares of Series II Class B
Preferred Stock may be converted into Common Stock as provided in this
paragraph (e), reserve and keep available, out of any Common Stock held as
treasury stock or out of its authorized and unissued Common Stock, or both,
solely for the purpose of delivery upon conversion of the shares of Series II
Class B Preferred Stock as herein provided, such number of shares of
Common Stock as shall then be sufficient to effect the conversion of all shares
of Series II Class B Preferred Stock from time to time outstanding,
and shall take such action as may from time to time be necessary to ensure that
such shares of Common Stock will, when issued upon conversion of Series II
Class B Preferred Stock, be fully paid and nonassessable.
f.
Adjustment of
Conversion Rate
. The Conversion Rate provided in subdivision (a) of
this paragraph (7), in respect of Class B Preferred Stock, shall be
subject to adjustments from time to time as follows:
(i) While any shares of
Series II Class B Preferred Stock shall be outstanding, in case the
Corporation shall subdivide the outstanding shares of Common Stock into a
greater number of shares of
EXHIBIT B
A-28
Common Stock or combine the outstanding shares of
Common Stock into a smaller number of shares of Common Stock, or issue, by
reclassification of its shares of Common Stock any shares of the Corporation,
the Conversion Rate in effect immediately prior thereto shall be adjusted so
that the Holder shall be entitled to receive the number of shares which it
would have owned or been entitled to receive after the happening of any of the
events described above, had such shares of Series II Class B
Preferred Stock been converted immediately prior to the happening of such
event, such adjustment to become effective immediately after the opening of
business on the day following the day upon which such subdivision or
combination or reclassification, as the case may be, becomes effective.
(ii) In case the
Corporation shall be consolidated with, or merge into, any other corporation,
and the Corporation does not survive, proper provisions shall be made as a part
of the terms of such consolidation or merger, whereby the Holder shall
thereafter be entitled, upon exercise of such Holders conversion rights, to
receive the kind and amount of shares of stock or other securities of the
Corporation resulting from such consolidation or merger, or such other
property, as the Holder would have received if such conversion rights were
exercised immediately prior to the effectiveness of such merger or
consolidation.
(iii) In the event the
Corporation at any time, or from time to time after June 15, 1997 makes or
issues, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock or Common Stock Equivalents (as defined herein) which
does not provide for the payment of any consideration upon the issuance,
conversion or exercise thereof, without a corresponding dividend or other
distribution to the Holder, based upon the number of shares of Common Stock
into which the Series II Class B Preferred Stock is convertible, then
and in each such event the Conversion Rate then in effect will be increased as
of the time of such issuance or, in the event such a record date shall have
been fixed, as of the close of business on such record date, by multiplying
such Conversion Rate by a fraction:
(A) The numerator of
which will be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in payment of
such dividend or distribution (which, in the case of Common Stock Equivalents,
shall mean the maximum number of shares of Common Stock issuable with respect
thereto, as set forth in the instrument relative thereto without regard to any
provision for subsequent adjustment); and
(B) The denominator of
which will be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date;
provided, however, that if such record date is fixed
and such dividend is not fully paid or if such distribution is not fully made
on the date fixed therefor, the Conversion Rate will be recomputed accordingly
as of the close of business on such record date, and thereafter such Conversion
Rate will be adjusted pursuant to this subparagraph (iii) as of the time
of actual payment of such dividends or distributions.
(iv) In the event the
Corporation at any time or from time to time after June 15, 1997 makes or
issues, or fixes a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable to all holders of
Common Stock in securities of the Corporation or Common Stock Equivalents,
then, upon making such dividend or distribution provisions will be made so that
the Holder will receive the amount of securities of the Corporation which it
would have received had its Series II Class B Preferred Stock been
converted into Common Stock on the date of such event.
(v) In the event the
Corporation sells or issues any Common Stock, or sells or issues Common Stock
Equivalents which can be converted into Common Stock at a per share
consideration (as defined below in this subparagraph (v)) less than the
Stipulated Price then in effect, then the Holder shall be entitled to purchase
from the Corporation in cash (for the same per share consideration at which
such Common Stock was issued or the per share price at which a share of Common
Stock is
EXHIBIT B
A-29
acquirable upon exercise or conversion of Common
Stock Equivalents) that additional number of shares of Common Stock which, when
added to the number of shares of Common Stock acquirable by the Holder upon
conversion of any shares of Series II Class B Preferred Stock
outstanding and held by such Holder immediately before such issue or sale (the Acquirable
Shares), will equal a percentage of the number of shares of Common Stock
Deemed Outstanding (as defined herein) immediately after such sale or issuance
that is the same as the percentage of the number of shares of Common Stock
Deemed Outstanding immediately before such issuance or sale represented by the
Acquirable Shares. This right shall exist for a forty-five-day period following
the sale or issuance of shares of Common Stock or Common Stock Equivalents, and
thereafter shall cease to exist.
For the above purposes, the
per share consideration with respect to the sale or issuance of Common Stock
will be the price per share received by the Corporation, prior to the payment
of any expenses, commissions, discounts and other applicable costs. With
respect to the sale or issuance of Common Stock Equivalents which are
convertible into or exchangeable for Common Stock without further
consideration, the per share consideration will be determined by dividing the
maximum number of shares of Common Stock issuable with respect to such Common
Stock Equivalents (as set forth in the instrument relating thereto without
regard to any provisions contained therein for subsequent adjustment of such
number) into the aggregate consideration receivable by the Corporation upon the
sale or issuance of such Common Stock Equivalents. With respect to the issuance
of other Common Stock Equivalents, the per share consideration will be
determined by dividing the maximum number of shares of Common Stock issuable
with respect to such Common Stock Equivalents into the total aggregate
consideration received by the Corporation upon the sale or issuance of such
Common Stock Equivalents plus the minimum aggregate amount of additional
consideration received by the Corporation upon the conversion or exercise of
such Common Stock Equivalents. In connection with the sale or issuance of
Common Stock and/or Common Stock Equivalents for non-cash consideration, the
amount of consideration will be the fair market value of such consideration as
determined in good faith by the Board of Directors of the Corporation.
(vi) As used herein,
the term Stipulated Price means initial price of $10.00 per share of Common
Stock, as adjusted from time to time pursuant to subparagraph (viii) of
this paragraph 7(f); and the term Common Stock Equivalent means any
securities (whether debt or equity securities) or rights issued by the
Corporation convertible into or entitling the holder thereof to receive shares
of, or securities convertible into, Common Stock. The number of shares of Common
Stock Deemed Outstanding at any date shall equal the sum of the number of
shares of Common Stock then outstanding plus the number of shares of Common
Stock then obtainable pursuant to Common Stock Equivalents.
(vii) In the event the
Corporation declares any dividend or distribution payable to holders of its
Common Stock (other than dividends payable out of the Corporations retained
earnings or earned surplus and dividends payable in shares of Common Stock or
in securities convertible into or exchangeable for shares of Common Stock or
rights or warrants to purchase Common Stock or securities convertible into or
exchangeable for shares of Common Stock or any other securities issued by the
Corporation), the Conversion Rate in effect immediately prior to the record
date for such dividend or distribution shall be proportionately adjusted so
that the Holder shall be entitled to receive the number of shares of Common
Stock into which such shares of Common Stock or Preferred Stock was convertible
immediately prior to such record date multiplied by a fraction, the numerator
of which is the fair market value of a share of Common Stock on such record
date and the denominator of which is such per share fair market value of a
share of Common Stock on such record date less the fair market value on such
record date of the securities or other property which are distributed as a
dividend or other distribution. The term fair market value of a share of
Common Stock or of any other security or other type of property on any date
means (A) in the case of Common Stock or any other security (I) if
the principal trading market for such Common Stock or other security is an
exchange or the NASDAQ national market on such date, the closing price on such
exchange or the NASDAQ national market on such date, provided, if trading of
such Common Stock or other security is listed on any consolidated tape, the
fair market value shall be the closing price set forth on such consolidated
tape on such date, or (II) if the principal market for such Common Stock
or other security is the over-the-counter market
EXHIBIT B
A-30
(other than the NASDAQ national market) the mean
between the closing bid and asked prices on such date as set forth by NASDAQ or
(B) in the case of Common Stock or any other security for which the fair
market value cannot be determined pursuant to clause (A) above or of any
other security or type of property, fair market value thereof on such date as
determined in good faith by the Board of Directors.
(viii) Whenever the
Conversion Rate is adjusted pursuant to this paragraph 7(f), the Stipulated
Price shall also be adjusted by multiplying it by a fraction that is the
reciprocal of the fraction used to adjust the Conversion Rate.
(ix) The Corporation
will not, by amendment of its
Articles of Incorporation
Certificate
of Formation
or through any dissolution, issuance or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms to be observed or performed hereunder by the Corporation,
but at all times in good faith will assist in the carrying out of all the
provisions of this paragraph and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the
Holder against impairment.
(x) No adjustment in
the Conversion Rate shall be required, unless such adjustment would require an
increase or decrease of at least one (1) share of Common Stock in the Conversion
Rate of one share of Series II Class B Preferred Stock, provided that
all adjustments which do not meet this minimum requirement shall be cumulated
and the adjustment will be made when the cumulated total is sufficient to
require an adjustment. All calculations made pursuant to this subparagraph (x) of
paragraph 7(f) shall be made to the nearest one-hundredth (1/100th) of a
share of Common Stock.
g.
Fractional Shares
.
No fractional shares of Common Stock or scrip representing fractional shares of
Common Stock shall be issued upon any conversion of shares of Series II Class B
Preferred Stock but, in lieu thereof, there shall be paid an amount in cash
equal to the same fraction of the current market price of a whole share of
Common Stock on the day preceding the day of conversion.
h.
Statement to Transfer
Agent
. Whenever the Conversion Rate for shares of Series II Class B
Preferred Stock shall be adjusted pursuant to the provisions of paragraph 7(f) hereof,
the Corporation shall forthwith maintain at its office and, if applicable, file
with the Transfer Agent for shares of Series II Class B Preferred
Stock and for shares of Common Stock, a statement signed by the President or a
Vice President of the Corporation and by its Treasurer or an Assistant Treasurer,
stating the adjusted Conversion Rate and setting forth in reasonable detail the
method of calculation and the facts requiring such adjustment, such
calculations to be confirmed by the Corporations independent auditors, and
stating the facts on which the calculation is based. Each adjustment shall
remain in effect until a subsequent adjustment hereunder is required.
8.
Registration Rights
.
a.
Piggyback Registration
. The Corporation,
for a period ending six months after the last share of Series II Class B
Preferred Stock is redeemed, retired, converted or otherwise no longer
outstanding, will give written notice to the Holder not less than 20 days in
advance of the initial filing of any registration statement under the
Securities Act of 1933 (other than a registration Statement pertaining to
securities issuable pursuant to employee stock option, stock purchase, or
similar plans or a registration statement pertaining to securities issuable in
connection with the acquisition of a business, whether through merger,
consolidation, acquisition of assets, or exchange of securities) covering any
Common Stock or other securities of the Corporation, and will afford the Holder
the opportunity to have included in such registration all or such part of the
shares of Common Stock acquired upon conversion of Series II Class B
Preferred Stock, as may be designated by written notice to the Corporation not
later than 10 days following receipt of such notice from the Corporation. The
Corporation shall be entitled to exclude the shares of Common Stock held by the
Holder from any one, but not more than one, such registration if the
Corporation is advised by its investment banking firm that the inclusion of
such shares will, in the opinion of such investment banking firm, materially
interfere with the orderly sale and distribution of the securities being
offered under such registration statement by the Corporation. Notwithstanding
the foregoing, the Corporation shall not be entitled to exclude the shares of
Common Stock held by the Holder if shares of other shareholders are being
included in any such registration statement and, in such circumstances, the
Holder shall be entitled to include the shares of Common Stock held by them on
a pro rata basis in the proportion that the number of shares of Common
EXHIBIT B
A-31
Stock
held by the Holder bears to the shares of Common Stock held by all other
shareholders, including shares in such registration statement. The Holder shall
not be entitled to include shares in more than two registration statements
pursuant to the provisions of this subdivision (a) of paragraph 8, and all
rights of the Holder under this subdivision (a) of paragraph 8 shall
terminate after the Holder has included shares of Common Stock in two
registration statements pursuant to this subdivision (a) of paragraph 8.
b.
Expenses
. The Corporation will pay all
out-of-pocket costs and expenses of any registration effected pursuant to the
provisions of subdivision (a) of this paragraph 8, including registration
fees, legal fees, accounting fees, printing expenses (including such number of
any preliminary and the final prospectus as may be reasonably requested), blue
sky qualification fees and expenses, and all other expenses, except for
underwriting commissions or discounts applicable to the shares of Common Stock
being sold by the Holder and the fees of counsel for the Holder, all of which
shall be paid by the Holder.
c. Notwithstanding anything to the contrary
contained herein, in the event that the Corporation files an initial
registration statement under the Securities Act of 1933, as amended (other than
a registration statement pertaining to securities issuable in connection with
the acquisition of a business, whether through merger, consolidation,
acquisition of assets or exchange of securities) concerning any Common Stock of
the Corporation, it will afford the Holder the opportunity to convert his
shares into that number of fully paid and non-assessable shares of Common Stock
prior to the three year holding period stated in paragraph 7 above. The
Corporation may also, at its option, accelerate its redemption rights pursuant
to paragraph 4 above in the event that the Corporation files an initial
registration statement under the Securities Act of 1933, as amended.
9.
Reports
.
So long as any of the Series II Class B
Preferred Stock shall be outstanding, the Corporation shall submit to the
Holder financial reports no less frequently than annually.
10.
Miscellaneous
.
a. As used herein, the term Common Stock shall
mean the Corporations Common Stock, no par value, or, in the case of any
reclassification or change of outstanding shares of Common Stock, the stock or
securities issued in exchange for such Common Stock. The term Common Stock
shall also include any capital stock of the Corporation authorized after June 15,
1995 which shall not be limited to a fixed sum or sums or percentage or
percentages of par value in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
b. The shares of Series II Class B
Preferred Stock shall be fully transferable by the Holder thereof, subject to compliance
with the applicable provisions of federal and state securities laws.
IN WITNESS WHEREOF, RETRACTABLE TECHNOLOGIES, INC.
has caused its corporate seal to be hereunto affixed and this Certificate to be
signed by its President and Secretary this 10
th
day of May,
1999
|
/s/Thomas
J. Shaw
|
|
President
|
|
|
ATTEST:
|
|
|
|
/s/Shayne
Blythe
|
|
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Secretary
|
|
|
|
|
EXHIBIT B
A-32
AMENDED CERTIFICATE OF DESIGNATION, PREFERENCES, RIGHTS AND LIMITATIONS
OF THE SERIES III CLASS B CONVERTIBLE PREFERRED STOCK
OF
RETRACTABLE TECHNOLOGIES, INC.
Pursuant
to the
Article 2.13 of the Texas Business Corporation Act and Article Four
of its Articles of Incorporation
Texas law and its Certificate of
Formation
, as amended
(the Articles of Incorporation)
, Retractable
Technologies, Inc., a corporation organized and existing under the laws of
the State of Texas (the Corporation),
DOES
HEREBY CERTIFY that pursuant to the authority conferred upon the Board of
Directors of the Corporation by the
Articles of Incorporation
Certificate
of Formation
, as amended, and pursuant to
the Texas Business Corporation
Act
Texas law
, said Board of Directors, by unanimous written consent
executed July 2, 1998, adopted a resolution providing for the creation of
a series of Preferred Stock consisting of not more than two million (2,000,000)
shares of Series III Class B Convertible Preferred Stock, which
resolution is and reads as follows:
RESOLVED
that, pursuant to the authority provided in the Corporations
Articles of
Incorporation
Certificate of Formation
and expressly granted to and
vested in the Board of Directors of Retractable Technologies, Inc. (the Corporation),
the Board of Directors hereby creates out of the Preferred Stock, par value one
($1.00) dollar per share, of the Corporation a series of Preferred Stock called
the Series III Class B Preferred Stock, consisting of not more than
two million (2,000,000) shares, and the Board of Directors hereby fixes the
designation and the powers, preference and rights, and the qualifications,
limitations and restrictions thereof, to the extent not otherwise provided in
the Corporations qualifications, limitations and restrictions thereof, to the
extent not otherwise provided in the Corporations
Articles of Incorporation
Certificate of Formation
, as follows:
1.
Designation of Series. The
designation of the series of Preferred Stock created by this resolution shall
be Series III Class B Convertible Preferred Stock (the Series III
Class B Preferred Stock).
2.
Dividends on Series III
Class B Preferred Stock.
a.
Dividend Amount. The holders
of the Series III Class B Preferred Stock shall be entitled to
receive, in any calendar year, if, when and as declared by the Board of
Directors, out of any assets at the time legally available therefor and subject
to the further limitations set out herein, dividends at the per annum rate of
$1.00 per share, all such dividends due quarterly in arrears as of the last day
of each March, June, September and December of each year, the first
dividend being declarable on December 31, 1998. On each date which a
dividend may be declared is hereafter called the Dividend Date, and each
quarterly period ending with a Dividend Date is hereinafter referred to as the Dividend
Period. Dividends shall be payable fifteen calendar days after the Dividend
Due Date, provided however, that if such date on which a dividend is payable is
a Saturday, Sunday or legal holiday, such dividend shall be payable on the next
following business day to the holders of record (whether singular or plural,
the Holder).
b.
Dividends Cumulative.
Dividends upon the Series III Class B Preferred Stock shall be
accrued and be cumulative, whether or not in any Dividend Period or Periods
there shall be funds of the Corporation legally available for the payment of
such dividends.
c.
Dividend Accrual. On each Dividend Due Date all
dividends which shall have accrued since the last Dividend Due Date on each
share of Series III Class B Preferred Stock outstanding on such
Dividend Due Date shall accumulate and be deemed to become due. Any dividend
which shall not be paid on the Dividend Due Date on which it shall become due
shall be deemed to be past due until such dividend shall be paid or until the
share of Series III Class B Preferred Stock with respect to which
such dividend became due shall no longer be outstanding, whichever is the
earlier to occur. No interest, sum of money in lieu of interest or other
property or securities shall be payable in respect of any dividend payment or
payments which are past due. Dividends paid on shares of Series III Class B
Preferred Stock in an amount less than the total amount of such dividends at
the time accumulated and payable on such shares shall be allocated pro rata on
a share-by-share basis among all such shares at the time outstanding. Dividend
payments made
EXHIBIT C
A-33
with respect to a Dividend Due Date shall be deemed
to be made in payment of the dividends which became due on that Dividend Due
Date.
d.
Dividend Arrearage. If a dividend upon any shares of
Series III Class B Preferred Stock is in arrears, all dividends or other
distributions declared upon shares of the Series III Class B
Preferred Stock (other than dividends paid in stock of the Corporation ranking
junior to the Series III Class B Preferred Stock as to dividends and
upon liquidation, dissolution or winding up) may only be declared pro rata.
Except as set forth above, if a dividend upon any shares of Series III Class B
Preferred Stock is in arrears: (i) no dividends (in cash, stock or other
property) may be paid or declared and set aside for payment upon any stock of
the Corporation ranking junior to the Series III Class B Preferred
Stock as to dividends (other than dividends of distributions in stock of the
Corporation ranking junior to the Series III Class B Preferred Stock
as to dividends and upon liquidation, dissolution or winding up); and (ii) no
preferred stock of the Corporation ranking junior to the Series III Class B
Preferred Stock as to dividends may be
redeemed pursuant to a sinking fund or otherwise, except (1) by
means of redemption pursuant to which all outstanding shares of the Series III
Class B Preferred Stock are redeemed, or (2) by conversion of any
such junior stock into, or exchange of any such junior stock into, or exchange
of any such junior stock for stock of the Corporation ranking junior to the Series III
Class B Preferred Stock as to dividends and upon liquidation, dissolution
or winding up. Notwithstanding anything
in this Certificate to the contrary, the Corporation shall be entitled to
purchase any of its shares ranking junior to the Series III Class B
Preferred Stock (including Common shares) on any terms it fixes, even where a
dividend upon shares of Series III Class B Preferred Stock is in
arrears, so long as: (A) the cash
assets of the Corporation as of its latest reporting period equals or exceeds
$40,000,000 or (B) if the cash assets of the Corporation as of its latest
reporting period was less than $40,000,000, the amount of funds utilized to
purchase such shares within the next quarter does not exceed 25% of the value
of the cash assets as of the previous reporting period.
3.
General, Class and Series Voting
Rights. Except as provided in this Section 3, or as otherwise from time to
time required by law, the Series III Class B Preferred Stock shall
have no voting rights.
So long as any shares of Series III Class B
Preferred Stock remain outstanding, the consent of the holders of at least
fifty-one (51%) percent of the shares of Series III Class B Preferred
Stock outstanding at the time voting separately as a class, given in person or
by proxy, either in writing at any special or annual meeting called for the
purpose, shall be necessary to permit, effect or validate any one or more of
the following:
(i)
The authorization, creation or issuance, or any
increase in the authorized or issued amount, of any class or series of stock
(including any class or series of Preferred Stock) ranking equal or prior (as
the terms are hereinafter defined in this Section 3) to the Series III
Class B Preferred Stock; or
(ii)
The amendment, alteration, or repeal, whether by
merger, consolidation, or otherwise, of any of the provisions of the
Articles
of Incorporation
Certificate of Formation
or of this resolution
which would alter or change the powers, preferences or special rights of the
shares of the Series III Class B Preferred Stock so as to affect them
adversely; provided, however, that any increase in the amount of authorized
Preferred Stock, or the creation and issuance of other series of Preferred
stock ranking junior to the Series III Class B Preferred Stock with
respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to adversely affect
such powers, preferences or special rights.
The foregoing voting provisions shall not apply if,
at or prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding shares of Series III
Class B Preferred Stock shall have been redeemed or sufficient funds shall
have been deposited in trust to effect such redemption.
4.
Redemption. The outstanding
shares of Series III Class B Preferred Stock shall be nonredeemable
prior to the lapse of three (3) years from the date of issuance. On and
after such date, the Series III Class B Preferred Stock may be
redeemed at the option of the Corporation, as a whole at any time or in part
from time to time, at the Redemption Price of $15.00 per share plus all
dividends (whether or not declared or due) accrued and unpaid to the date of
redemption (subject to the right of the holder of record of shares of Series III
Class B Preferred
EXHIBIT C
A-34
Stock on a record date for the payment of a dividend
on the Series III Class B Preferred Stock to receive the dividend due
on such shares of Series III Class B Preferred Stock on the
corresponding Dividend Due Date).
No sinking fund shall be established for the Series III
Class B Preferred Stock.
Notice of any proposed redemption of shares of Series III
Class B Preferred Stock shall be mailed by means of first class mail,
postage paid, addressed to the holders of record of the shares of Series III
Class B Preferred Stock to be redeemed, at their respective addresses then
appearing on the books of the Corporation, at least thirty (30) days but not
more than sixty (60) days prior to the date fixed for such redemption (herein
referred to as the Redemption Date). Each such notice shall specify (i) the
Redemption Date; (ii) the Redemption Price; (iii) the place for
payment and for delivering the stock certificate(s) and transfer
instrument(s) in order to collect the Redemption Price; (iv) the
shares of Series III Class B Preferred Stock to be redeemed; and (v) the
then effective Conversion Price (as defined below) and that the right of
holders of shares of Series III Class B Preferred Stock being
redeemed to exercise their Conversion right shall terminate as to such shares
at the close of business on the fifth day before the Redemption Date, provided
that no default by the Corporation in the payment of the applicable Redemption
Price (including any accrued and unpaid dividends) shall have occurred and be
continuing. Any notice mailed in such manner shall be conclusively deemed to
have been duly given whether or not such notice is, in fact, received. If less
than all the outstanding shares of Series III Class B Preferred Stock
are to be redeemed, the Corporation will select those to be redeemed by lot or
by a substantially equivalent method. In order to facilitate the redemption of Series III
Class B Preferred Stock to be redeemed, notice of any such proposed
redemption, shall not be more than sixty (60) days prior to the Redemption Date
with respect thereto.
The holder of any shares of Series III Class B
Preferred Stock redeemed upon any exercise of the Corporations redemption
right shall not be entitled to receive payment of the Redemption Price for such
shares until such holder shall cause to be delivered to the place specified in
the notice given with respect to such redemption (i) the certificate(s) representing
such shares of Series III Class B Preferred Stock; and (ii) transfer
instrument(s) satisfactory to the Corporation and sufficient to transfer
such shares free of any adverse interest. No interest shall accrue on the
Redemption Price of any share of Series III Class B Preferred Stock
after its Redemption Date.
Notwithstanding anything in this Certificate to the
contrary, the Corporation shall have the right to purchase shares of Series III
Class B Preferred Stock from any owner of such shares on such terms as may
be agreeable to such owner. Shares of Series III Class B Preferred
Stock may be acquired by the Corporation from any stockholder pursuant to this
paragraph without offering any other stockholder an equal opportunity to sell
his stock to the Corporation, and no purchase by the Corporation from any
stockholder pursuant to this paragraph shall be deemed to create any right on
the part of any stockholder to sell any shares of Series III Class B Preferred
Stock (or any other stock) to the Corporation.
Notwithstanding the foregoing provisions of this Section 4,
and subject to the provisions of Section 2 hereof, if a dividend upon any
shares of Series III Class B Preferred Stock is past due, (i) no
shares of the Series III Class B Preferred Stock may be redeemed,
except (A) by means of a redemption pursuant to which all outstanding
shares of the Series III Class B Preferred Stock are simultaneously
redeemed (or offered to be so redeemed) or pursuant to which the outstanding
shares of the Series III Class B Preferred Stock are redeemed on a
pro rata basis (or offered to be so redeemed), or (B) by conversion of
shares of Series III Class B Preferred Stock into, or exchange of
such shares for, Common Stock or any other stock of the Corporation ranking
junior to the Series III Class B Preferred Stock as to dividends and
upon liquidation, dissolution or winding up.
5.
Liquidation. In the event of
any voluntary or involuntary dissolution, liquidation or winding up of the
Corporation (for the purposes of this Section 5, a Liquidation), before
any distribution of assets shall be made to the holders of the Common Stock or
the holders of any other stock that ranks junior to the Series III Class B
Preferred Stock in respect of distributions upon the Liquidation of the
Corporation, the holder of each share of Series III Class B Preferred
Stock then outstanding shall be entitled to $12.50 per share plus all dividends
(whether or not declared or due) accrued and unpaid on such share on the date
fixed for the distribution of assets of the Corporation to the holders of Series III
Class B Preferred Stock.
EXHIBIT C
A-35
If upon any Liquidation of the Corporation, the assets
available for distribution to the holder of Series III Class B
Preferred Stock which shall then be outstanding (hereinafter in this paragraph
called the Total Amount Available) shall be insufficient to pay the holders
of all outstanding shares of Series III Class B Preferred Stock the
full amounts (including all dividends accrued and unpaid) to which they shall
be entitled by reason of such Liquidation of the Corporation, then there shall
be paid ratably to the holders of the Series III Class B Preferred
Stock in connection with such Liquidation of the Corporation, an amount equal
to each holders pro rata share of the Total Amount Available.
The voluntary sale, conveyance, lease, exchange or
transfer of all or substantially all the property or assets of the Corporation,
or the merger or consolidation of the Corporation into another corporation, or
any purchase or redemption of some or all of the shares of any class or series
of stock of the Corporation, shall not be deemed to be a Liquidation of the
Corporation for the purposes of this Section 5 (unless in connection
therewith the Liquidation of the Corporation is specifically approved).
6.
Conversion Privilege. At any
time subsequent to three years after issuance of any share of Series III Class B
Preferred Stock, the holder of any share of Series III Class B
Preferred Stock (Holder) shall have the right, at such Holders option (but
if such share is called for redemption or exchange at the election of the
Corporation, then in respect of such share only to and including but not after
the close of business on (i) the fifth calendar day before the date fixed
for such redemption; or (ii) the date fixed for such exchange, provided
that the Corporation has set aside funds sufficient to effect such redemption)
to convert such share into that number of fully paid and non-assessable shares
of Common Stock (calculated as to each conversion to the nearest 1/100th of a
share) obtained by dividing $10.00 by the Conversion Rate then in effect.
a.
Conversion Rate. Each share of Series III Class B
Preferred Stock may be converted, subject to the terms and provisions of this
paragraph 6 into one (1) share of the Corporations Common Stock, which is
a price equal to one share of Common Stock for each $10.00 of Series III Class B
Preferred Stock or, in case an adjustment of such rate has taken place pursuant
to the provisions of subdivision (f) of this paragraph 6, then at the
Conversion Rate as last adjusted (such rate or adjusted rate, shall be
expressed as the number of shares of Common Stock to be acquired upon
conversion of one share of Series III Class B Preferred Stock, and
shall be referred to herein as the Conversion Rate). Each share of Series III
Class B Preferred Stock shall be Convertible into Common Stock by
surrender to the Corporation of the certificate representing such shares of Series III
Class B Preferred Stock to be converted by the Holder and by giving
written notice to the Corporation of the Holders election to convert.
The Corporation shall, as soon as practicable after
receipt of such written notice and the proper surrender to the Corporation of
the certificate or certificates representing shares of Series III Class B
Preferred Stock to be converted in accordance with the above provisions, issue
and deliver for the benefit of the Holder at the office of the Corporations
duly appointed transfer agent (the Transfer Agent) to the Holder for whose
account such shares of Series III Class B Preferred Stock were so
surrendered or to such Holders nominee or nominees, certificates for the
number of shares of Common Stock to which the Holder shall be entitled. The
certificates of Common Stock of the Corporation issued upon conversion shall
bear such legends as may be required by state or federal laws. Such conversion
shall be deemed to have been effective immediately prior to the close of
business on the date on which the Corporation shall have received both such
written notice and the properly surrendered certificates for shares of Series III
Class B Preferred Stock to be converted (the Conversion Date), and at
such time the rights of the Holder shall cease and the person or persons
entitled to receive the shares of Common Stock issuable upon the conversion of
such shares of Series III Class B Preferred Stock shall be deemed to
be, and shall be treated for all purposes as, the record Holder or Holders of
such Common Stock on the Conversion Date. The Corporation shall not be required
to convert, and no surrender of shares of Series III Class B Preferred
Stock or written notice of conversion with respect thereto shall be effected
for that purpose, while the stock transfer books of the Corporation are closed
for any reasonable business purpose for any reasonable period of time, but
shall be required to convert upon the proper surrender of shares of Series III
Class B Preferred Stock for conversion immediately upon the reopening of
such books. During the period in which the stock transfer books of the
Corporation are closed, the Corporation may neither declare a dividend, declare
a record date for payment of dividends nor make any payment of dividends.
EXHIBIT C
A-36
b.
Dividends. If any shares of Series III Class B
Preferred Stock shall be converted during any dividend payment period, the
Holder shall be entitled to all dividends accrued up to and through such
Conversion Date, at the rate set forth herein, whether or not there has been a
Dividend Date, as set forth in paragraph 2 hereof.
c.
Cancellation. Series III Class B Preferred
Stock converted into Common stock pursuant to the provisions of this paragraph
6 shall be retired and cancelled by the Corporation and given the status of
authorized and unissued preferred stock.
d.
Reissuance if Conversion is Partial. In the case of
any certificate representing shares of Series III Class B Preferred
Stock which is surrendered for conversion only in part, the Corporation shall
issue and deliver to the Holder a new certificate or certificates for Series III
Class B Preferred Stock of such denominations as requested by the Holder
in the amount of Series III Class B Preferred Stock equal to the
unconverted shares of the Series III Class B Preferred Stock
represented by the certificate so surrendered.
e.
Reservations of Shares. The Corporation shall at all
times during which shares of Series III Class B Preferred Stock may
be converted into Common Stock as provided in this paragraph (e), reserve and
keep available, out of any Common Stock held as treasury stock or out of its
authorized and unissued Common Stock, or both, solely for the purpose of
delivery upon conversion of the shares of Series III Class B
Preferred Stock as herein provided, such number of shares of Common Stock as
shall then be sufficient to effect the conversion of all shares of Series III
Class B Preferred Stock from time to time outstanding, and shall take such
action as may from time to time be necessary to ensure that such shares of
Common Stock will, when issued upon conversion of Series III Class B
Preferred Stock, be fully paid and nonassessable.
f.
Adjustment of Conversion Rate. The Conversion Rate
provided in subdivision (a) of this paragraph 6, in respect of Series III
Class B Preferred Stock, shall be subject to adjustments from time to time
as follows:
(i)
While any shares of Series III
Class B Preferred Stock shall be outstanding, in case the Corporation
shall subdivide the outstanding shares of Common Stock into a greater number of
shares of Common Stock or combine the outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or issue, by reclassification of its
shares of Common Stock, any shares of the Corporation, the Conversion Rate in
effect immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive the number of shares which it would have owned or been
entitled to receive after the happening of any of the events described above,
had such shares of Series III Class B Preferred Stock been converted
immediately prior to the happening of such event, such adjustment to become
effective immediately after the opening of business on the day following the
day upon which such subdivision or combination or reclassification, as the case
may be, becomes effective.
(ii)
In case the Corporation
shall be consolidated with, or merge into, any other corporation, and the
Corporation does not survive, proper provisions shall be made as a part of the
terms of such consolidation or merger, whereby the Holder shall thereafter be
entitled, upon exercise of such Holders conversion rights, to receive the kind
and amount of shares of stock or other securities of the Corporation resulting
from such consolidation or merger, or such other property, as the Holder would
have received if such conversion rights were exercised immediately prior to the
effectiveness of such merger or consolidation.
(iii)
In the event the Corporation
at any time, or from time to time after August 1, 1998 makes or issues, or
fixes a record date for the determination of holders of Common Stock entitled
to receive, a dividend or other distribution payable in additional shares of
Common Stock or Common Stock Equivalents (as defined herein) which does not
provide for the payment of any consideration upon the issuance, conversion or exercise
thereof, without a corresponding dividend or other distribution to the Holder,
based upon the number of shares of Common Stock into which the Series III Class B
Preferred Stock is convertible, then and in each such event the Conversion Rate
then in effect will be increased as of the time of such issuance or, in the
event such a record date
EXHIBIT C
A-37
shall have been fixed, as of the close of business
on such record date, by multiplying such Conversion rate by a fraction:
(A)
The numerator of which will
be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock issuable in payment of
such dividend or distribution (which, in the case of Common Stock Equivalents,
shall mean the maximum number of shares of Common Stock issuable with respect
thereto, as set forth in the instrument relative thereto without regard to any
provision for subsequent adjustment); and
(B)
The denominator of which
will be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the
date fixed therefor, the Conversion Rate will be recomputed accordingly as of
the close of business on such record date, and thereafter such Conversion Rate
will be adjusted pursuant to this subparagraph (iii) as of the time of
actual payment of such dividends or distributions.
(iv)
In the event the Corporation
at any time or from time to time after August 1, 1998 makes or issues, or
fixes a record date for the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable to all holders of Common
Stock in securities of the Corporation or Common Stock Equivalents, then, upon
making such dividend or distribution provisions will be made so that the Holder
will receive the amount of securities of the Corporation which it would have
received had its Series III Class B Preferred Stock been converted
into Common Stock on the date of such event.
(v)
In the event the Corporation
sells or issues any Common Stock, or sells or issues Common Stock Equivalents
which can be converted into Common Stock at a per share consideration (as
defined below in this subparagraph (v)) less than the Stipulated Price then
in effect, then the Holder shall be entitled to purchase from the Corporation
in cash (for the same per share consideration at which such Common Stock was
issued or the per share price at which a share of Common Stock is acquirable
upon exercise or conversion of Common Stock Equivalents) that additional number
of shares of Common Stock which, when added to the number of shares of Common
Stock acquirable by the Holder upon conversion of any shares of Series III
Class B Preferred Stock outstanding and held by such Holder immediately
before such issue or sale (the Acquirable Shares), will equal a percentage of
the number of shares of Common Stock Deemed Outstanding (as defined herein)
immediately after such sale or issuance that is the same as the percentage of
the number of shares of Common Stock Deemed Outstanding immediately before such
issuance or sale represented by the Acquirable Shares. This right shall exist
for a forty-five-day period following the sale or issuance of shares of Common
Stock or Common Stock Equivalents, and thereafter shall cease to exist.
For the above purposes, the per share consideration
with respect to the sale or issuance of Common Stock will be the price per
share received by the Corporation, prior to the payment of any expenses,
commissions, discounts and other applicable costs. With respect to the sale or
issuance of Common Stock Equivalents which are convertible into or exchangeable
for Common Stock without further consideration, the per share consideration
will be determined by dividing the maximum number of shares of Common Stock
issuable with respect to such Common Stock Equivalents (as set forth in the
instrument relating thereto without regarding to any provisions contained
therein for subsequent adjustment of such number) into the aggregate
consideration receivable by the Corporation upon the sale or issuance of such
Common Stock Equivalents. With respect to the issuance of other Common Stock
Equivalents, the per share consideration will be determined by dividing the maximum
number of shares of Common Stock issuable with respect to such Common Stock
Equivalents into the total aggregate consideration received by the Corporation
upon the sale or issuance of such Common Stock Equivalents plus the minimum
aggregate amount of additional consideration received by the Corporation upon
the conversion or
EXHIBIT C
A-38
exercise of such Common Stock Equivalents. In
connection with the sale or issuance of Common Stock and/or Common Stock
Equivalents for non-cash consideration, the amount of consideration will be the
fair market value of such consideration as determined in good faith by the
Board of Directors of the Corporation.
(vi)
As used herein, the term Stipulated
Price means initial price of $10.00 per share of Common Stock, as adjusted
from time to time pursuant to subparagraph (viii) of this paragraph 6(f);
and the term Common Stock Equivalent means any securities (whether debt or
equity securities) or rights issued by the Corporation convertible into or
entitling the holder thereof to receive shares of, or securities convertible
into, Common Stock. The number of shares of Common Stock Deemed Outstanding
at any date shall equal the sum of the number of shares of Common Stock then
outstanding plus the number of shares of Common Stock then obtainable pursuant
to Common Stock Equivalents.
(vii)
In the event the Corporation
declares any dividend or distribution payable to holders of its Common Stock
(other than dividends payable out of the Corporations retained earnings or
earned surplus and dividends payable in shares of Common Stock or in securities
convertible into or exchangeable for shares of Common Stock or rights or
warrants to purchase Common Stock or securities convertible into or
exchangeable for shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock or any other securities issued by the
Corporation), the Conversion Rate in effect immediately prior to the record
date for such dividend or distribution shall be proportionately adjusted so
that the Holder shall be entitled to receive the number of shares of Common
Stock into which such shares of Common Stock or Preferred Stock was convertible
immediately prior to such record date multiplied by a fraction, the numerator
of which is the fair market value of a share of Common Stock on such record
date and the denominator of which is such per share fair market value of a
share of Common Stock on such record date less the fair market value on such
record date of the securities or other property which are distributed as a
dividend or other distribution. The term fair market value of a share of
Common Stock or of any other security or other type of property on any date
means (A) in the case of Common Stock or any other security (I) if
the principal trading market for such Common Stock or other security is an
exchange or the NASDAQ national market on such date, the closing price on such
exchange or the NASDAQ national market on such date, provided, if trading of
such Common Stock or other security is listed on any consolidated tape, the
fair market value shall be the closing price set forth on such consolidated
tape on such date, or (II) if the principal market for such Common Stock
or other security is the over-the-counter market (other than the NASDAQ
national market) the mean between the closing bid and asked prices on such date
as set forth by NASDAQ or (B) in the case of Common Stock or any other
security for which the fair market value cannot be determined pursuant to
clause (A) above or of any other security or type of property, fair market
value thereof on such date as determined in good faith by the Board of
Directors.
(viii)
Whenever the Conversion Rate
is adjusted pursuant to this paragraph 6(f), the Stipulated Price shall also be
adjusted by multiplying it by a fraction that is the reciprocal of the fraction
used to adjust the Conversion Rate.
(ix)
The Corporation will not, by
amendment of its
Articles of Incorporation
Certificate of Formation
or through any dissolution, issuance or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Corporation, but at
all times in good faith will assist in the carrying out of all the provisions
of this paragraph and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the Holder against
impairment.
(x)
No adjustment in the
Conversion Rate shall be required, unless such adjustment would require an
increase or decrease of at least one (1) share of Common Stock in the
Conversion Rate of one share of Series III Class B Preferred Stock,
provided that all adjustments which do not meet this
EXHIBIT C
A-39
minimum requirement shall be cumulated and the
adjustment will be made when the cumulated total is sufficient to require an
adjustment.
All calculations made pursuant to this subparagraph (x) of
paragraph 6(f) shall be made to the nearest one-hundredth (1/100th) of a
share of Common Stock.
g.
Fractional Shares. No fractional shares of Common
Stock or scrip representing fractional shares of Common Stock shall be issued
upon any conversion of shares of Series III Class B Preferred Stock
but, in lieu thereof, there shall be paid an amount in cash equal to the same
fraction of the current market price of a whole share of Common Stock on the
day preceding the day of conversion.
h.
Statement to Transfer Agent. Whenever the Conversion
Rate for shares of Series III Class B Preferred Stock shall be
adjusted pursuant to the provisions of paragraph 6(f) hereof, the
Corporation shall forthwith maintain at its office and, if applicable, file
with the Transfer Agent for shares of Series III Class B Preferred
Stock and for shares of Common Stock, a statement signed by the President or a
Vice President of the Corporation and by its Treasurer or an Assistant
Treasurer, stating the adjusted Conversion Rate and setting forth in reasonable
detail the method of calculation and the facts requiring such adjustment, such
calculations to be confirmed by the Corporations independent auditors, and
stating the facts on which the calculation is based. Each adjustment shall
remain in effect until a subsequent adjustment hereunder is required.
7.
Registration Rights.
a.
Piggyback Registration. The Corporation, for a
period ending six months after the last share of Series III Class B
Preferred Stock is redeemed, retired, converted or otherwise no longer
outstanding, will give written notice to the Holder not less than 20 days in
advance of the initial filing of any registration statement under the
Securities Act of 1933 (other than a registration Statement pertaining to
securities issuable pursuant to employee stock option, stock purchase, or
similar plans or a registration statement pertaining to securities issuable in
connection with the acquisition of a business, whether through merger,
consolidation, acquisition of assets, or exchange of securities) covering any
Common Stock or other securities of the Corporation, and will afford the Holder
the opportunity to have included in such registration all or such part of the
shares of Common Stock acquired upon conversion of Series III Class B
Preferred Stock, as may be designated by written notice to the Corporation not
later than 10 days following receipt of such notice from the Corporation. The
Corporation shall be entitled to exclude the shares of Common Stock held by the
Holder from any one, but not more than one, such registration if the
Corporation in its sole discretion decides that the inclusion of such shares
will materially interfere with the orderly sale and distribution of the
securities being offered under such registration statement by the Corporation.
Notwithstanding the foregoing, the Corporation shall not be entitled to exclude
the shares of Common Stock held by the Holder if shares of other shareholders
are being included in any such registration statement and, in such
circumstances, the Holder shall be entitled to include the shares of Common
Stock held by them on a pro rata basis in the proportion that the number of
shares of Common Stock held by the Holder bears to the shares of Common Stock
held by all other shareholders, including shares in such registration
statement. The Holder shall not be entitled to include shares in more than two
registration statements pursuant to the provisions of this subdivision (a) of
paragraph 7, and all rights of the Holder under this subdivision (a) of
paragraph 7 shall terminate after the Holder has included shares of Common
Stock in two registration statements pursuant to this subdivision (a) of
paragraph 7.
b.
Expenses. The Corporation
will pay all out-of-pocket costs and expenses of any registration effected
pursuant to the provisions of subdivision (a) of this paragraph 7,
including registration fees, legal fees, accounting fees, printing expenses
(including such number of any preliminary and the final prospectus as may be
reasonably requested), blue sky qualification fees and expenses, and all other
expenses, except for underwriting commissions or discounts applicable to the
shares of Common Stock being sold by the Holder and the fees of counsel for the
Holder, all of which shall be paid by the Holder.
c.
Notwithstanding anything to
the contrary contained herein, in the event that the Corporation files an
initial registration statement under the Securities Act of 1933, as amended
(other than a registration statement
EXHIBIT C
A-40
pertaining to securities issuable in connection with
the acquisition of a business, whether through merger, consolidation,
acquisition of assets or exchange of securities) concerning any Common Stock of
the Corporation, it will afford the Holder the opportunity to convert his
shares into that number of fully paid and non-assessable shares of Common Stock
prior to the three year holding period stated in paragraph 6 above. The
Corporation may also, at its option at any time within one-hundred and eighty
(180) days after an initial registration statement is deemed effective, demand
the conversion of the Series III Class B Preferred Stock into that
number of fully paid and non-assessable shares of Common Stock as provided
herein.
8.
Reports.
So long as any of the Series III Class B
Preferred Stock shall be outstanding, the Corporation shall submit to the
Holder financial reports no less frequently than annually.
9.
Miscellaneous.
a.
As used herein, the term Common Stock shall mean
the Corporations Common Stock, no par value, or, in the case of any
reclassification or change of outstanding shares of Common Stock, the stock or
securities issued in exchange for such Common Stock. The term Common Stock
shall also include any capital stock of the Corporation authorized after March 31,
1998 which shall not be limited to a fixed sum or sums or percentage or
percentages of par value in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation.
b.
The shares of Series III Class B Preferred
Stock shall be fully transferable by the Holder thereof, subject to compliance
with the applicable provisions of federal and state securities laws.
IN
WITNESS WHEREOF, RETRACTABLE TECHNOLOGIES, INC. has caused its corporate
seal to be hereunto affixed and this Amended Certificate to be signed by its
President and Secretary as of this 22nd day of January, 2010.
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/s/
Thomas J. Shaw
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Thomas
J. Shaw
President
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ATTEST:
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/s/
Michele Larios
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Michele
M. Larios
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Secretary
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EXHIBIT C
A-41
AMENDED CERTIFICATE OF DESIGNATION, PREFERENCES, RIGHTS AND LIMITATIONS
OF THE SERIES IV CLASS B CONVERTIBLE PREFERRED STOCK
OF
RETRACTABLE TECHNOLOGIES, INC.
Pursuant
to
Article 2.13 of the Texas Business Corporation Act and Article Four
of its Articles of Incorporation
Texas law and its Certificate of
Formation
, as amended
(the Articles of Incorporation)
, Retractable
Technologies, Inc., a corporation organized and existing under the laws of
the State of Texas (the Corporation),
DOES
HEREBY CERTIFY that, pursuant to the authority conferred upon the Board of
Directors of the Corporation by the
Articles of Incorporation
Certificate
of Formation
, as amended, and pursuant to
the Texas Business Corporation
Act
Texas law
, said Board of Directors, by unanimous written
consent, executed December 20, 1999, adopted a resolution providing for
the creation of a series of Preferred Stock consisting of not more than one
million three hundred thousand (1,300,000) shares of Series IV Class B
Convertible Preferred Stock, which resolution is and reads as follows:
RESOLVED
that pursuant to the authority provided in the Corporations
Articles of
Incorporation
Certificate of Formation
and expressly granted to and
vested in the Board of Directors of the Corporation, the Board of Directors
hereby creates out of the Preferred Stock, par value One Dollar ($1.00) per
share, of the Corporation a series of Preferred Stock called the Series IV
Class B Preferred Stock, consisting of not more than one million three
hundred thousand (1,300,000) shares, and the Board of Directors hereby fixes
the designation and the powers, preference and rights, and the qualifications,
limitations and restrictions thereof, to the extent not otherwise provided in
the Corporations qualifications, limitations and restrictions thereof, to the
extent not otherwise provided in the Corporations
Articles of Incorporation
Certificate of Formation
, as follows:
1.
Designation of Series. The
designation of the series of Preferred Stock created by this resolution shall
be Series IV Class B Convertible Preferred Stock (the Series IV
Class B Preferred Stock).
2.
Dividends on Series IV Class B
Preferred Stock.
a.
Dividend Amount. The holders
of the Series IV Class B Preferred Stock shall be entitled to receive,
in any calendar year, if, when and as declared by the Board of Directors, out
of any assets at the time legally available therefor and subject to the further
limitations set out herein, dividends at the per annum rate of $1.00 per share,
all such dividends due quarterly in arrears as of the last day of each March,
June, September and December of each year, the first dividend being
declarable on December 31, 2000. On each date which a dividend may be
declared is hereafter called the Dividend Date, and each quarterly period
ending with a Dividend Date is hereinafter referred to as the Dividend Period.
Dividends shall be payable fifteen calendar days after the Dividend Due Date,
provided however, that if such date on which a dividend is payable is a Saturday,
Sunday or legal holiday, such dividend shall be payable on the next following
business day to the holders of record (whether singular or plural, the Holder).
b.
Dividends Cumulative.
Dividends upon the Series IV Class B Preferred Stock shall be accrued
and be cumulative, whether or not in any Dividend Period or Periods there shall
be funds of the Corporation legally available for the payment of such
dividends.
c.
Dividend Accrual. On each
Dividend Due Date all dividends which shall have accrued since the last
Dividend Due Date on each share of Series IV Class B Preferred Stock
outstanding on such Dividend Due Date shall accumulate and be deemed to become due.
Any dividend which shall not be paid on the Dividend Due Date on which it shall
become due shall be deemed to be past due until such dividend shall be paid
or until the share of Series IV Class B Preferred Stock with respect
to which such dividend became due shall no longer be outstanding, whichever is
the earlier to occur. No interest, sum of money in lieu of interest or other
property or securities shall be payable in respect of any dividend payment or
payments which are past due. Dividends paid on shares of Series IV Class B
Preferred Stock in an amount less than the total amount of such dividends at
the time accumulated and payable on such shares shall be allocated pro rata on
a share-by-share basis among all such shares at
EXHIBIT D
A-42
the time outstanding. Dividend payments made with
respect to a Dividend Due Date shall be deemed to be made in payment of the
dividends which became due on that Dividend Due Date.
d.
Dividend Arrearage. If a
dividend upon any shares of Series IV Class B Preferred Stock is in
arrears, all dividends or other distributions declared upon shares of the Series IV
Class B Preferred Stock (other than dividends paid in stock of the
Corporation ranking junior to the Series IV Class B Preferred Stock
as to dividends and upon liquidation, dissolution or winding up) may only be
declared pro rata. Except as set forth above, if a dividend upon any shares of Series IV
Class B Preferred Stock is in arrears: (i) no dividends (in cash,
stock or other property) may be paid or declared and set aside for payment upon
any stock of the Corporation ranking junior to the Series IV Class B
Preferred Stock as to dividends (other than dividends of distributions in stock
of the Corporation ranking junior to the Series IV Class B Preferred
Stock as to dividends and upon liquidation, dissolution or winding up); and (ii) no
preferred stock of the Corporation ranking junior to the Series IV Class B
Preferred Stock as to dividends may be redeemed pursuant to a sinking fund or
otherwise, except (1) by means of redemption pursuant to which all
outstanding shares of the Series IV Class B Preferred Stock are
redeemed, or (2) by conversion of any such junior stock into, or exchange
of any such junior stock into, or exchange of any such junior stock for stock
of the Corporation ranking junior to the Series IV Class B Preferred
Stock as to dividends and upon liquidation, dissolution or winding up. Notwithstanding
anything in this Certificate to the contrary, the Corporation shall be entitled
to purchase any of its shares ranking junior to the Series IV Class B
Preferred Stock (including Common shares) on any terms it fixes, even where a
dividend upon shares of Series IV Class B Preferred Stock is in
arrears, so long as: (A) the cash
assets of the Corporation as of its latest reporting period equals or exceeds
$40,000,000 or (B) if the cash assets of the Corporation as of its latest
reporting period was less than $40,000,000, the amount of funds utilized to
purchase such shares within the next quarter does not exceed 25% of the value
of the cash assets as of the previous reporting period.
3.
General, Class and Series Voting
Rights. Except as provided in this Section 3, or as otherwise from time to
time required by law, the Series IV Class B Preferred Stock shall
have no voting rights.
So long as any shares of Series IV Class B
Preferred Stock remain outstanding, the consent of the holders of at least
fifty-one percent (51%) of the shares of Series IV Class B Preferred
Stock outstanding at the time voting separately as a class, given in person or
by proxy, either in writing at any special or annual meeting called for the
purpose, shall be necessary to permit, effect or validate any one or more of
the following:
(i)
The authorization, creation
or issuance, or any increase in the authorized or issued amount, of any class
or series of stock (including any class or series of Preferred Stock) ranking
equal or prior to the Series IV Class B Preferred Stock; or
(ii)
The amendment, alteration,
or repeal, whether by merger, consolidation or otherwise, of any of the
provisions of the
Articles of Incorporation
Certificate of Formation
or of this resolution which would alter or change the powers, preferences or
special rights of the shares of the Series IV Class B Preferred Stock
so as to affect them adversely; provided, however, that any increase in the
amount of authorized Preferred Stock, or the creation and issuance of other
series of Preferred stock ranking junior to the Series IV Class B
Preferred Stock with respect to the payment of dividends and the distribution
of assets upon liquidation, dissolution or winding up, shall not be deemed to
adversely affect such powers, preferences or special rights.
The foregoing voting provisions shall not apply if,
at or prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding shares of Series IV
Class B Preferred Stock shall have been redeemed or sufficient funds shall
have been deposited in trust to effect such redemption.
4.
Redemption. The outstanding
shares of Series IV Class B Preferred Stock shall be nonredeemable
prior to the lapse of three (3) years from the date of issuance. On and
after such date, the Series IV Class B Preferred Stock may be
redeemed at the option of the Corporation, as a whole at any time or in part
from time to time, at the Redemption Price of $11.00 per share plus all
dividends (whether or not declared or due) accrued and unpaid to the date of
redemption (subject to the right of the holder of record of shares of Series IV
Class B Preferred
EXHIBIT D
A-43
Stock on a record date for the payment of a dividend
on the Series IV Class B Preferred Stock to receive the dividend due
on such shares of Series IV Class B Preferred Stock on the
corresponding Dividend Due Date).
No sinking fund shall be established for the Series IV
Class B Preferred Stock.
Notice of any proposed redemption of shares of Series IV
Class B Preferred Stock shall be mailed by means of first class mail,
postage paid, addressed to the holders of record of the shares of Series IV
Class B Preferred Stock to be redeemed, at their respective addresses then
appearing on the books of the Corporation, at least thirty (30) days but not
more than sixty (60) days prior to the date fixed for such redemption (herein
referred to as the Redemption Date). Each such notice shall specify (i) the
Redemption Date; (ii) the Redemption Price; (iii) the place for
payment and for delivering the stock certificate(s) and transfer instrument(s) in
order to collect the Redemption Price; (iv) the shares of Series IV Class B
Preferred Stock to be redeemed; and (v) the then effective Conversion
Price (as defined below) and that the right of holders of shares of Series IV
Class B Preferred Stock being redeemed to exercise their conversion right
shall terminate as to such shares at the close of business on the fifth day
before the Redemption Date, provided that no default by the Corporation in the
payment of the applicable Redemption Price (including any accrued and unpaid
dividends) shall have occurred and be continuing. Any notice mailed in such
manner shall be conclusively deemed to have been duly given whether or not such
notice is, in fact, received. If less than all the outstanding shares of Series IV
Class B Preferred Stock are to be redeemed, the Corporation will select
those to be redeemed by lot or by a substantially equivalent method. In order
to facilitate the redemption of Series IV Class B Preferred Stock to
be redeemed, notice of any such proposed redemption shall not be more than
sixty (60) days prior to the Redemption Date with respect thereto.
The holder of any shares of Series IV Class B
Preferred Stock redeemed upon any exercise of the Corporations redemption
right shall not be entitled to receive payment of the Redemption Price for such
shares until such holder shall cause to be delivered to the place specified in
the notice given with respect to, such redemption (i) the certificate(s) representing
such shares of Series IV Class B Preferred Stock; and (ii) transfer
instrument(s) satisfactory to the Corporation and sufficient to transfer
such shares free of any adverse interest. No interest shall accrue on the
Redemption Price of any share of Series IV Class B Preferred Stock after
its Redemption Date.
Notwithstanding anything in this Certificate to the
contrary, the Corporation shall have the right to purchase shares of Series IV
Class B Preferred Stock from any owner of such shares on such term as may
be agreeable to such owner. Shares of Series IV Class B Preferred
Stock may be acquired by the Corporation from any stockholder pursuant to this
paragraph without offering any other stockholder an equal opportunity to sell
his stock to the Corporation, and no purchase by the Corporation from any
stockholder pursuant to this paragraph shall be deemed to create any right on
the part of any stockholder to sell any shares of Series IV Class B
Preferred Stock (or any other stock) to the Corporation.
Notwithstanding the foregoing provisions of this Section 4,
and subject to the provisions of Section 2 hereof, if a dividend upon any
shares of Series IV Class B Preferred Stock is past due, no shares of
the Series IV Class B Preferred Stock may be redeemed, except (i) by
means of a redemption pursuant to which all outstanding shares of the Series IV
Class B Preferred Stock are simultaneously redeemed (or offered to be so
redeemed) or pursuant to which the outstanding shares of the Series IV Class B
Preferred Stock are redeemed on a pro rata basis (or offered to be so
redeemed), or (ii) by conversion of shares of Series IV Class B
Preferred Stock into, or exchange of such shares for, Common Stock or any other
stock of the Corporation ranking junior to the Series IV Class B
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up.
5.
Liquidation. In the event of
any voluntary or involuntary dissolution, liquidation or winding up of the
Corporation (for the purposes of this Section 5, a Liquidation), before
any distribution of assets shall be made to the holders of the Common Stock or
the holders of any other stock that ranks junior to the Series IV Class B
Preferred Stock in respect of distributions upon the Liquidation of the
Corporation, the holder of each share of Series IV Class B Preferred
Stock then outstanding shall be entitled to $11.00 per share plus all dividends
(whether or not declared or due) accrued and unpaid on such share on the date
fixed for the distribution of assets of the Corporation to the holders of Series IV
Class B Preferred Stock.
EXHIBIT D
A-44
If upon any Liquidation of the Corporation, the
assets available for distribution to the holder of Series IV Class B
Preferred Stock which shall then be outstanding (hereinafter in this paragraph
called the Total Amount Available) shall be insufficient to pay the holders
of all outstanding shares of Series IV Class B Preferred Stock the
full amounts (including all dividends accrued and unpaid) to which they shall
be entitled by reason of such Liquidation of the Corporation, then there shall
be paid ratably to the holders of the Series IV Class B Preferred
Stock in connection with such Liquidation of the Corporation, an amount equal
to each holders pro rata share of the Total Amount Available.
The voluntary sale, conveyance, lease, exchange or
transfer of all or substantially all the property or assets of the Corporation,
or the merger or consolidation of the Corporation into another corporation, or
any purchase or redemption of some or all of the shares of any class or series
of stock of the Corporation, shall not be deemed to be a Liquidation of the
Corporation for the purposes of this Section 5 (unless in connection
therewith the Liquidation of the Corporation is specifically approved).
6.
Conversion Privilege. At any
time subsequent to three years after issuance of any share of Series IV Class B
Preferred Stock, the holder of any share of Series IV Class B
Preferred Stock (Holder) shall have the right, at such Holders option (but
if such share is called for redemption or exchange at the election of the
Corporation, then in respect of such share only to and including but not after
the close of business on (i) the fifth calendar day before the date fixed
for such redemption; or (ii) the date fixed for such exchange, provided
that the Corporation has set aside funds sufficient to effect such redemption)
to convert such share into that number of fully paid and non-assessable shares
of Common Stock (calculated as to each conversion to the nearest 1/100th of a
share) obtained by dividing $10.00 by the Conversion Rate then in effect.
a.
Conversion Rate. Each share
of Series IV Class B Preferred Stock may be converted, subject to the
terms and provisions of this paragraph 6 into one (1) share of the
Corporations Common Stock, which is a price equal to one share of Common Stock
for each $10.00 of Series IV Class B Preferred Stock or, in case an
adjustment of such rate has taken place pursuant to the provisions of
subdivision (f) of this paragraph 6, then at the Conversion Rate as last
adjusted (such rate or adjusted rate, shall be expressed as the number of
shares of Common Stock to be acquired upon conversion of one share of Series IV
Class B Preferred Stock, and shall be referred to herein as the Conversion
Rate) (Conversion Price). Each share of Series IV Class B
Preferred Stock shall be Convertible into Common Stock by surrender to the
Corporation of the certificate representing such shares of Series IV Class B
Preferred Stock to be converted by the Holder and by giving written notice to
the Corporation of the Holders election to convert.
The Corporation shall, as soon as practicable after
receipt of such written notice and the proper surrender to the Corporation of
the certificate or certificates representing shares of Series IV Class B
Preferred Stock to be converted in accordance with the above provisions, issue
and deliver for the benefit of the Holder at the office of the Corporations
duly appointed transfer agent (the Transfer Agent) to the Holder for whose
account such shares of Series IV Class B Preferred Stock were so
surrendered or to such Holders nominee or nominees, certificates for the
number of shares of Common Stock to which the Holder shall be entitled. The
certificates of Common Stock of the Corporation issued upon conversion shall
bear such legends as may be required by state or federal laws.
Such conversion shall be deemed to have been
effective immediately prior to the close of business on the date on which the
Corporation shall have received both such written notice and the properly
surrendered certificates for shares of Series IV Class B Preferred
Stock to be converted (the Conversion Date), and at such time the rights of
the Holder shall cease and the person or persons entitled to receive the shares
of Common Stock issuable upon the conversion of such shares of Series IV Class B
Preferred Stock shall be deemed to be, and shall be treated for all purposes
as, the record Holder or Holders of such Common Stock on the Conversion Date.
The Corporation shall not be required to convert, and no surrender of shares of
Series IV Class B Preferred Stock or written notice of conversion
with respect thereto shall be effected for that purpose, while the stock
transfer books of the Corporation are closed for any reasonable business
purpose for any reasonable period of time, but shall be required to convert
upon the proper surrender of shares of Series IV Class B Preferred
Stock for conversion immediately upon the reopening of such books. During the
period in which the stock transfer books of
EXHIBIT D
A-45
the Corporation are closed, the Corporation may
neither declare a dividend, declare a record date for payment of dividends nor
make any payment of dividends.
b.
Dividends. If any shares of Series IV
Class B Preferred Stock shall be converted during any dividend payment
period, the Holder shall be entitled to all dividends accrued up to and through
such Conversion Date, at the rate set forth herein, whether or not there has
been a Dividend Date, as set forth in paragraph 2 hereof.
c.
Cancellation. Series IV
Class B Preferred Stock converted into Common stock pursuant to the
provisions of this paragraph 6 shall be retired and cancelled by the
Corporation and given the status of authorized and unissued preferred stock.
d.
Reissuance if Conversion is
Partial. In the case of any certificate representing shares of Series IV Class B
Preferred Stock which is surrendered for conversion only in part, the
Corporation shall issue and deliver to the Holder a new certificate or
certificates for Series IV Class B Preferred Stock of such
denominations as requested by the Holder in the amount of Series IV Class B
Preferred Stock equal to the unconverted shares of the Series IV Class B
Preferred Stock represented by the certificate so surrendered.
e.
Reservations of Shares. The
Corporation shall at all times during which shares of Series IV Class B
Preferred Stock may be converted into Common Stock as provided in this
paragraph (e), reserve and keep available, out of any Common Stock held as
treasury stock or out of its authorized and unissued Common Stock, or both,
solely for the purpose of delivery upon conversion of the shares of Series IV
Class B Preferred Stock as herein provided, such number of shares of
Common Stock as shall then be sufficient to effect the conversion of all shares
of Series IV Class B Preferred Stock from time to time outstanding,
and shall take such action as may from time to time be necessary to ensure that
such shares of Common Stock will, when issued upon conversion of Series IV
Class B Preferred Stock, be fully paid and nonassessable.
f.
Adjustment of Conversion
Rate. The Conversion Rate provided in subdivision (a) of this paragraph 6,
in respect of Series IV Class B Preferred Stock, shall be subject to
adjustments from time to time as follows:
(i)
While any shares of Series IV
Class B Preferred Stock shall be outstanding, in case the Corporation
shall subdivide the outstanding shares of Common Stock into a greater number of
shares of Common Stock or combine the outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or issue, by reclassification of its
shares of Common Stock, any shares of the Corporation, the Conversion Rate in
effect immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive the number of shares which it would have owned or been
entitled to receive after the happening of any of the events described above,
had such shares of Series IV Class B Preferred Stock been converted
immediately prior to the happening of such event, such adjustment to become
effective immediately after the opening of business on the day following the
day upon which such subdivision or combination or reclassification, as the case
may be, becomes effective.
(ii)
In case the Corporation
shall be consolidated with, or merge into, any other corporation, and the
Corporation does not survive, proper provisions shall be made as a part of the
terms of such consolidation or merger, whereby the Holder shall thereafter be
entitled, upon exercise of such Holders conversion rights, to receive the kind
and amount of shares of stock or other securities of the Corporation resulting
from such consolidation or merger, or such other property, as the Holder would
have received if such conversion rights were exercised immediately prior to the
effectiveness of such merger or consolidation.
(iii)
In the event the Corporation
at any time, or from time to time after December 31, 1999, makes or
issues, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend distribution payable in additional shares of
Common Stock or
EXHIBIT D
A-46
Common Stock Equivalents (as defined which does not
provide for the payment of any consideration upon the issuance, conversion or
thereof, without a corresponding dividend or other distribution to the Holder,
based upon the number of shares of Common Stock into which the Series IV Class B
Preferred Stock is convertible, then and in each such event the Conversion Rate
then in effect will be increased as of the time of such issuance or, in the
event such a record date shall have been fixed, as of the close of business on
such record date, by multiplying such Conversion rate by a fraction:
(A)
The numerator of which will
be the total number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date
plus the number of shares of Common Stock issuable in payment of such dividend
or distribution (which, in the case of Common Stock Equivalents, shall mean the
maximum number of shares of Common Stock issuable with respect thereto, as set
forth in the instrument relative thereto without regard to any provision for
subsequent adjustment); and
(B)
The denominator of which
will be the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Conversion Rate will be recomputed accordingly as of the
close of business on such record date, and thereafter such Conversion Rate will
be adjusted pursuant to this subparagraph (iii) as of the time of actual
payment of such dividends or distributions.
(iv)
In the event the Corporation
at any time or from time to time after December 31, 1999, makes or issues,
or fixes a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable to all holders of
Common Stock in securities of the Corporation or Common Stock Equivalents,
then, upon making such dividend or distribution provisions will be made so that
the Holder will receive the amount of securities of the Corporation which it
would have received had its Series IV Class B Preferred Stock been
converted into Common Stock on the date of such event.
(v)
In the event the Corporation
sells or issues any Common Stock, or sells or issues Common Stock Equivalents
which can be converted into Common Stock at a per share consideration (as
defined below in this subparagraph (v)) less than the Stipulated Price then in
effect, then the Holder shall be entitled to purchase from the Corporation in
cash (for the same per share consideration at which such Common Stock was
issued or the per share price at which a share of Common Stock is acquirable
upon exercise or conversion of Common Stock Equivalents) that additional number
of shares of Common Stock which, when added to the number of shares of Common
Stock acquirable by the Holder upon conversion of any shares of Series IV Class B
Preferred Stock outstanding and held by such Holder immediately before such
issue or sale (the Acquirable Shares), will equal a percentage of the number
of shares of Common Stock Deemed Outstanding (as defined herein) immediately
after such sale or issuance that is the same as the percentage of the number of
shares of Common Stock Deemed Outstanding immediately before such issuance or
sale represented by the Acquirable Shares. This right shall exist for a 45-day
period following the sale or issuance of shares of Common Stock or Common Stock
Equivalents, and thereafter shall cease to exist.
For the above purposes, the per share consideration
with respect to the sale or issuance of Common Stock will be the price per
share received by the Corporation, prior to the payment of any expenses,
commissions, discounts and other applicable costs. With respect to the sale or
issuance of Common Stock Equivalents which are convertible into or exchangeable
for Common Stock without further consideration, the per share consideration
will be determined by dividing the maximum number of shares of Common Stock
issuable with respect to such Common Stock Equivalents (as set forth in the instrument
relating thereto without regarding to any provisions contained therein for
subsequent adjustment of such number) into the
EXHIBIT D
A-47
aggregate consideration receivable by the
Corporation upon the sale or issuance of such Common Stock Equivalents. With
respect to the issuance of other Common Stock Equivalents, the per share
consideration will be determined by dividing the maximum number of shares of
Common Stock issuable with respect to such Common Stock Equivalents into the
total aggregate consideration received by the Corporation upon the sale or
issuance of such Common Stock Equivalents plus the minimum aggregate amount of
additional consideration received by the Corporation upon the conversion or
exercise of such Common Stock Equivalents. In connection with the sale or
issuance of Common Stock and/or Common Stock Equivalents for non-cash
consideration, the amount of consideration will be the fair market value of
such consideration as determined in good faith by the Board of Directors of the
Corporation.
(vi)
As used herein, the term Stipulated
Price means initial price of $10.00 per share of Common Stock, as adjusted
from time to time pursuant to subparagraph (viii) of this paragraph 6(f);
and the term Common Stock Equivalent means any securities (whether debt or
equity securities) or rights issued by the Corporation convertible into or
entitling the holder thereof to receive shares of, or securities convertible
into, Common Stock. The number of shares of Common Stock Deemed Outstanding
at any date shall equal the sum of the number of shares of Common Stock then
outstanding plus the number of shares of Common Stock then obtainable pursuant
to Common Stock Equivalents.
(vii)
In the event the Corporation
declares any dividend or distribution payable to holders of its Common Stock
(other than dividends payable out of the Corporations retained earnings or
earned surplus and dividends payable in shares of Common Stock or in securities
convertible into or exchangeable for shares of Common Stock or rights or
warrants to purchase Common Stock or securities convertible into or
exchangeable for shares of Common Stock or any other securities issued by the
Corporation), the Conversion Rate in effect immediately prior to the record
date for such dividend or distribution shall be proportionately adjusted so
that the Holder shall be entitled to receive the number of shares of Common
Stock into which such shares of Common Stock or Preferred Stock was convertible
immediately prior to such record date multiplied by a fraction, the numerator
of which is the fair market value of a share of Common Stock on such record
date and the denominator of which is such per share fair market value of a
share of Common Stock on such record date less the fair market value on such
record date of the securities or other property which are distributed as a
dividend or other distribution. The term fair market value of a share of
Common Stock or of any other security or other type of property on any date
means (A) in the case of Common Stock or any other security (I) if
the principal trading market for such Common Stock or other security is an
exchange or the NASDAQ national market on such date, the closing price on such
exchange or the NASDAQ national market on such date, provided, if trading of
such Common Stock or other security is listed on any consolidated tape, the
fair market value shall be the closing price set forth on such consolidated
tape on such date, or (II) if the principal market for such Common Stock
or other security is the over-the-counter market (other than the NASDAQ
national market) the mean between the closing bid and asked prices on such date
as set forth by NASDAQ or (B) in the case of Common Stock or any other
security for which the fair market value cannot be determined pursuant to
clause (A) above or of any other security or type of property, fair market
value thereof on such date as determined in good faith by the Board of
Directors.
(viii)
Whenever the Conversion Rate
is adjusted pursuant to this paragraph 6(f), the Stipulated Price shall also be
adjusted by multiplying it by a fraction that is the reciprocal of the fraction
used to adjust the Conversion Rate.
(ix)
The Corporation will not, by
amendment of its
Articles of Incorporation
Certificate of Formation
or through any dissolution, issuance or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Corporation, but at
all times in good faith will assist
EXHIBIT D
A-48
in the carrying out of all the provisions of this
paragraph and in the taking of all such action as may be necessary or appropriate
in order to protect the conversion rights of the Holder against impairment.
(x)
No adjustment in the
Conversion Rate shall be required, unless such adjustment would require an
increase or decrease of at least one (1) share of Common Stock in the
Conversion Rate of one share of Series B Preferred Stock, provided that
all adjustments which do not meet this minimum requirement cumulated and the
adjustment will be made when the cumulated total is sufficient to require an
adjustment. All calculations made pursuant to this subparagraph (x) of
paragraph 6(f) shall be made to the nearest one-hundredth (1/100th) of a
share of Common Stock.
g.
Fractional Shares. No
fractional shares of Common Stock or scrip representing fractional shares of
Common Stock shall be issued upon any conversion of shares of Series IV Class B
Preferred Stock but, in lieu thereof, there shall be paid an amount in cash
equal to the same fraction of the current market price of a whole share of
Common Stock on the day preceding the day of conversion.
h.
Statement to Transfer Agent.
Whenever the Conversion Rate for shares of Series IV Class B
Preferred Stock shall be adjusted pursuant to the provisions of paragraph 6(f) hereof,
the Corporation shall forthwith maintain at its office and, if applicable, file
with the Transfer Agent for shares of Series IV Class B Preferred
Stock and for shares of Common Stock, a statement signed by the President or a
Vice President of the Corporation and by its Treasurer or an Assistant
Treasurer, stating the adjusted Conversion Rate and setting forth in reasonable
detail the method of calculation and the facts requiring such adjustment, such
calculations to be confirmed by the Corporations independent auditors, and
stating the facts on which the calculation is based. Each adjustment shall
remain in effect until a subsequent adjustment hereunder is required.
7.
Registration Rights.
a.
Piggyback Registration. The
Corporation, for a period ending six months after the last share of Series IV
Class B Preferred Stock is redeemed, retired, converted or otherwise no
longer outstanding, will give written notice to the Holder not less than 20
days in advance of the initial filing of any registration statement under the
Securities Act of 1933, as amended (other than a registration statement
pertaining to securities issuable pursuant to employee stock option, stock
purchase, or similar plans or a registration statement pertaining to securities
issuable in connection with the acquisition of a business, whether through
merger, consolidation, acquisition of assets, or exchange of securities),
covering any Common Stock or other securities of the Corporation, and will
afford the Holder the opportunity to have included in such registration all or
such part of the shares of Common Stock acquired upon conversion of Series IV
Class B Preferred Stock, as may be designated by written notice to the
Corporation not later than 10 days following receipt of such notice from the
Corporation. The Corporation shall be entitled to exclude the shares of Common
Stock held by the Holder from any one, but not more than one, such registration
if the Corporation in its sole discretion decides that the inclusion of such
shares will materially interfere with the orderly sale and distribution of the
securities being offered under such registration statement by the Corporation.
Notwithstanding the foregoing, the Corporation shall not be entitled to exclude
the shares of Common Stock held by the Holder if shares of other shareholders
are being included in any such registration statement and, in such
circumstances, the Holder shall be entitled to include the shares of Common
Stock held by them on a pro rata basis in the proportion that the number of
shares of Common Stock held by the Holder bears to the shares of Common Stock
held by all other shareholders, including shares in such registration
statement. The Holder shall not be entitled to include shares in more than two
registration statements pursuant to the provisions of this subdivision (a) of
paragraph 7, and all rights of the Holder under this subdivision (a) of
paragraph 7 shall terminate after the Holder has included shares of Common
Stock in two registration statements pursuant to this subdivision (a) of
paragraph 7.
b.
Expenses. The Corporation
will pay all out-of-pocket costs and expenses of any registration effected
pursuant to the provisions of subdivision (a) of this paragraph 7,
including registration fees, legal fees,
EXHIBIT D
A-49
accounting fees, printing expenses (including such
number of any preliminary and the final prospectus as may be reasonably
requested), blue sky qualification fees and expenses, and all other expenses,
except for underwriting commissions or discounts applicable to the shares of
Common Stock being sold by the Holder and the fees of counsel for the Holder,
all of which shall be paid by the Holder.
c.
Notwithstanding anything to
the contrary contained herein, in the event that the Corporation files an
initial registration statement under the Securities Act of 1933, as amended
(other than a registration statement pertaining to securities issuable in
connection with the acquisition of a business, whether through merger,
consolidation, acquisition of assets or exchange of securities), concerning any
Common Stock of the Corporation, it will afford the Holder the opportunity to
convert his shares into that number of fully paid and non-assessable shares of
Common Stock prior to the 3-year holding period stated in paragraph 6 above.
The Corporation may also, at its option at any time within one-hundred eighty
(180) days after an initial registration statement is deemed effective, demand
the conversion of the Series IV Class B Preferred Stock into that
number of fully paid and nonassessable shares of Common Stock as provided
herein.
8.
Reports.
So long as any of the Series IV Class B
Preferred Stock shall be outstanding, the Corporation shall submit to the
Holder financial reports no less frequently than annually.
9.
Miscellaneous.
a.
As used herein, the term Common
Stock shall mean the Corporations Common Stock, no par value, or, in the case
of any reclassification or change of outstanding shares of Common Stock, the
stock or securities issued in exchange for such Common Stock.
b.
The shares of Series IV
Class B Preferred Stock shall be fully transferable by the Holder thereof,
subject to compliance with the applicable provisions of federal and state
securities laws.
IN
WITNESS WHEREOF, RETRACTABLE TECHNOLOGIES, INC. has caused its corporate
seal to be hereunto affixed and this Amended Certificate to be signed by its
President and Secretary as of this day of 11th day of June, 2010.
|
/s/
Thomas J. Shaw
|
|
Thomas
J. Shaw
President
|
|
|
ATTEST:
|
|
/s/
Michele M. Larios
|
|
|
Michele
M. Larios
|
|
Secretary
|
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|
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|
EXHIBIT D
A-50
AMENDED CERTIFICATE OF DESIGNATION, PREFERENCES, RIGHTS AND LIMITATIONS
OF THE SERIES V CLASS B CONVERTIBLE PREFERRED STOCK
OF
RETRACTABLE TECHNOLOGIES, INC.
Pursuant
to
Article 2.13 of the Texas Business Corporation Act and Article Four
of its Third Amended and Restated Articles of Incorporation
Texas law
and its Certificate of Formation
(the Articles of Incorporation)
,
Retractable Technologies, Inc., a corporation organized and existing under
the laws of the State of Texas (the Corporation),
DOES
HEREBY CERTIFY that, pursuant to the authority conferred upon the Board of
Directors of the Corporation by the
Articles of Incorporation
Certificate
of Formation
, as amended, and pursuant to
the Texas Business Corporation
Act
Texas law
, said Board of Directors, on April 15, 2002, at a
meeting duly called and noticed adopted a resolution by all necessary action on
the part of the Corporation providing for the creation of a series of Preferred
Stock consisting of not more than 1,500,000 shares of Series V Class B
Convertible Preferred Stock, which resolution was amended by a Board resolution
dated June 20, 2002 to increase the number of shares to 3,097,855 and
which resolution now reads as follows:
RESOLVED
that, pursuant to the authority provided in the Corporations
Articles of
Incorporation
Certificate of Formation
and expressly granted to and
vested in the Board of Directors of the Corporation, the Board of Directors
hereby creates out of the Preferred Stock, par value One Dollar ($1.00) per
share, of the Corporation a series of Preferred Stock called the Series V Class B
Preferred Stock, consisting of not more than 3,097,855 shares, which shall be
subordinate to the
Series A Convertible Preferred and
Series I
through IV Class B Convertible Preferred Stock, and the Board of Directors
hereby fixes the designation and the powers, preference and rights, and the
qualifications, limitations, and restrictions thereof, to the extent not
otherwise provided in the Corporations qualifications, limitations, and
restrictions thereof, to the extent not otherwise provided in the Corporations
Articles of Incorporation
Certificate of Formation
, as follows:
1.
Designation of Series. The
designation of the series of Preferred Stock created by these resolutions shall
be Series V Class B Convertible Preferred Stock (the Series V
Class B Preferred Stock).
2.
Dividends on Series V Class B
Preferred Stock
a.
Dividend
Amount. The holders of the Series V Class B Preferred Stock shall be
entitled to receive, in any calendar year, if, when, and as declared by the
Board of Directors, out of any assets at the time legally available therefor
and subject to the further limitations set out herein, dividends at the per
annum rate of $.32 per share, all such dividends due quarterly in arrears as of
the last day of each March, June, September, and December of each year,
the first dividend being declarable on December 31, 2002. On each date
which a dividend may be declared is hereafter called the Dividend Date, and
each quarterly period ending with a Dividend Date is hereinafter referred to as
the Dividend Period. Dividends shall be payable 15 calendar days after the
Dividend Due Date; provided, however, that if such date on which a dividend is
payable is a Saturday, Sunday, or legal holiday, such dividend shall be payable
on the next following business day to the holders of record (whether singular
or plural, the Holder).
b.
Dividends
Cumulative. Dividends upon the Series V Class B Preferred Stock shall
be accrued and be cumulative, whether or not in any Dividend Period or Periods
there shall be funds of the Corporation legally available for the payment of
such dividends.
c.
Dividend
Accrual. On each Dividend Due Date all dividends which shall have accrued since
the last Dividend Due Date on each share of Series V Class B
Preferred Stock outstanding on such Dividend Due Date shall accumulate and be
deemed to become due. Any dividend which shall not be paid on the Dividend
Due Date on which it shall become due shall be deemed to be past due until
such dividend shall be paid or until the share of Series V Class B
Preferred Stock with respect to which such dividend became due shall no longer
be outstanding, whichever is the earlier to occur. No interest, sum of money in
lieu of interest, or other property or securities shall be payable in respect
of any dividend
EXHIBIT E
A-51
payment or payments which are past due. Dividends
paid on shares of Series V Class B Preferred Stock in an amount less
than the total amount of such dividends at the time accumulated and payable on
such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. Dividend payments made with respect to a
Dividend Due Date shall be deemed to be made in payment of the dividends which
became due on that Dividend Due Date.
d.
Dividend
Arrearage. If a dividend upon any shares of Series V Class B
Preferred Stock is in arrears, all dividends or other distributions declared
upon shares of the Series V Class B Preferred Stock (other than
dividends paid in stock of the Corporation ranking junior to the Series V Class B
Preferred Stock as to dividends and upon liquidation, dissolution, or winding
up) may only be declared pro rata. Except as set forth above, if a dividend
upon any shares of Series V Class B Preferred Stock is in arrears: (i) no
dividends (in cash, stock, or other property) may be paid or declared and set
aside for payment upon any stock of the Corporation ranking junior to the Series V
Class B Preferred Stock as to dividends (other than dividends of
distributions in stock of the Corporation ranking junior to the Series V Class B
Preferred Stock as to dividends and upon liquidation, dissolution, or winding
up); and (ii) no preferred stock of the Corporation ranking junior to the Series V
Class B Preferred Stock as to dividends may be redeemed pursuant to a
sinking fund or otherwise, except (1) by means of redemption pursuant to
which all outstanding shares of the Series V Class B Preferred Stock
are redeemed, or (2) by conversion of any such junior stock into, or
exchange of any such junior stock into, or exchange of any such junior stock
for stock of the Corporation ranking junior to the Series V Class B
Preferred Stock as to dividends and upon liquidation, dissolution, or winding
up. Notwithstanding anything in this Certificate to the contrary, the
Corporation shall be entitled to purchase any of its shares ranking junior to
the Series V Class B Preferred Stock (including Common shares) on any
terms it fixes, even where a dividend upon shares of Series V Class B
Preferred Stock is in arrears, so long as:
(A) the cash assets of the Corporation as of its latest reporting
period equals or exceeds $40,000,000 or (B) if the cash assets of the
Corporation as of its latest reporting period was less than $40,000,000, the
amount of funds utilized to purchase such shares within the next quarter does
not exceed 25% of the value of the cash assets as of the previous reporting period.
3.
General, Class, and Series Voting
Rights. Except as provided in this Section 3, or as otherwise from time to
time required by law, the Series V Class B Preferred Stock shall have
no voting rights.
So long as any shares of Series V Class B
Preferred Stock remain outstanding, the consent of the holders of at least 51%
of the shares of Series V Class B Preferred Stock outstanding at the
time voting separately as a class, given in person or by proxy, either in
writing at any special or annual meeting called for the purpose, shall be
necessary to permit, effect, or validate any one or more of the following:
(i)
The
authorization, creation, or issuance, or any increase in the authorized or
issued amount, of any class or series of stock (including any class or series
of Preferred Stock) ranking equal or prior to the Series V Class B
Preferred Stock; or
(ii)
The amendment,
alteration, or repeal, whether by merger, consolidation, or otherwise, of any
of the provisions of the
Articles of Incorporation
Certificate of
Formation
or of this resolution which would alter or change the powers,
preferences, or special rights of the shares of the Series V Class B
Preferred Stock so as to affect them adversely; provided, however, that any
increase in the amount of authorized Preferred Stock, or the creation and
issuance of other series of Preferred Stock ranking junior to the Series V
Class B Preferred Stock with respect to the payment of dividends and the
distribution of assets upon liquidation, dissolution, or winding up, shall not
be deemed to adversely affect such powers, preferences, or special rights.
The foregoing voting provisions shall not apply if,
at or prior to the time when the act with respect to which such vote would
otherwise be required shall be effected, all outstanding shares of Series V
Class B Preferred Stock shall have been redeemed or sufficient funds shall
have been deposited in trust to effect such redemption.
EXHIBIT E
A-52
4.
Redemption. The outstanding
shares of Series V Class B Preferred Stock shall be nonredeemable
prior to the lapse of two (2) years from the date of issuance. On and
after such date, the Series V Class B Preferred Stock may be redeemed
at the option of the Corporation, as a whole at any time or in part from time
to time, at the Redemption Price of $4.40 per share plus all dividends (whether
or not declared or due) accrued and unpaid to the date of redemption (subject
to the right of the holder of record of shares of Series V Class B
Preferred Stock on a record date for the payment of a dividend on the Series V
Class B Preferred Stock to receive the dividend due on such shares of Series V
Class B Preferred Stock on the corresponding Dividend Due Date).
No sinking fund shall be established for the Series V
Class B Preferred Stock.
Notice of any proposed redemption of shares of Series V
Class B Preferred Stock shall be mailed by means of first class mail,
postage paid, addressed to the holders of record of the shares of Series V
Class B Preferred Stock to be redeemed, at their respective addresses then
appearing on the books of the Corporation, at least thirty (30) days but not
more than sixty (60) days prior to the date fixed for such redemption (herein
referred to as the Redemption Date). Each such notice shall specify (i) the
Redemption Date; (ii) the Redemption Price; (iii) the place for
payment and for delivering the stock certificate(s) and transfer
instrument(s) in order to collect the Redemption Price; (iv) the
shares of Series V Class B Preferred Stock to be redeemed; and (v) the
then effective Conversion Price (as defined below) and that the right of
holders of shares of Series V Class B Preferred Stock being redeemed
to exercise their conversion right shall terminate as to such shares at the
close of business on the fifth day before the Redemption Date, provided that no
default by the Corporation in the payment of the applicable Redemption Price
(including any accrued and unpaid dividends) shall have occurred and be continuing.
Any notice mailed in such manner shall be conclusively deemed to have been duly
given whether or not such notice is, in fact, received. If less than all the
outstanding shares of Series V Class B Preferred Stock are to be
redeemed, the Corporation will select those to be redeemed by lot or by a
substantially equivalent method. In order to facilitate the redemption of Series V
Class B Preferred Stock to be redeemed, notice of any such proposed
redemption shall not be more than sixty (60) days prior to the Redemption Date
with respect thereto.
The holder of any shares of Series V Class B
Preferred Stock redeemed upon any exercise of the Corporations redemption
right shall not be entitled to receive payment of the Redemption Price for such
shares until such holder shall cause to be delivered to the place specified in
the notice given with respect to such redemption (i) the certificate(s) representing
such shares of Series V Class B Preferred Stock; and (ii) transfer
instrument(s) satisfactory to the Corporation and sufficient to transfer
such shares free of any adverse interest. No interest shall accrue on the
Redemption Price of any share of Series V Class B Preferred Stock
after its Redemption Date.
Notwithstanding anything in this Certificate to the
contrary, the Corporation shall have the right to purchase shares of Series V
Class B Preferred Stock from the owner of such shares on such term as may
be agreeable to such owner. Shares of Series V Class B Preferred
Stock may be acquired by the Corporation from any stockholder pursuant to this
paragraph without offering any other stockholder an equal opportunity to sell
his stock to the Corporation, and no purchase by the Corporation from any
stockholder pursuant to this paragraph shall be deemed to create any right on
the part of any stockholder to sell any shares of Series V Class B
Preferred Stock (or any other stock) to the Corporation.
Notwithstanding the foregoing provisions of this Section 4,
and subject to the provisions of Section 2 hereof, if a dividend upon any
shares of Series V Class B Preferred Stock is past due, no shares of
the Series V Class B Preferred Stock may be redeemed, except (i) by
means of a redemption pursuant to which all outstanding shares of the Series V
Class B Preferred Stock are simultaneously redeemed (or offered to be so
redeemed) or pursuant to which the outstanding shares of the Series V Class B
Preferred Stock are redeemed on a pro rata basis (or offered to be so
redeemed), or (ii) by conversion of shares of Series V Class B
Preferred Stock into, or exchange of such shares for, Common Stock or any other
stock of the Corporation ranking junior to the Series V Class B
Preferred Stock as to dividends and upon liquidation, dissolution, or winding
up.
5.
Liquidation. In the event of
any voluntary or involuntary dissolution, liquidation, or winding up of the
Corporation (for the purposes of this Section 5, a Liquidation), before
any distribution of assets shall be made to the holders of the Common Stock or
the holders of any other stock that ranks junior to the Series V Class B
EXHIBIT E
A-53
Preferred Stock in respect of distributions upon the
Liquidation of the Corporation, the holder of each share of Series V Class B
Preferred Stock then outstanding shall be entitled to $4.40 per share plus all
dividends (whether or not declared or due) accrued and unpaid on such share on
the date fixed for the distribution of assets of the Corporation to the holders
of Series V Class B Preferred Stock.
If upon any Liquidation of the Corporation, the
assets available for distribution to the holder of Series V Class B
Preferred Stock which shall then be outstanding (hereinafter in this paragraph
called the Total Amount Available) shall be insufficient to pay the holders
of all outstanding shares of Series V Class B Preferred Stock the
full amounts (including all dividends accrued and unpaid) to which they shall
be entitled by reason of such Liquidation of the Corporation, then there shall
be paid ratably to the holders of the Series V Class B Preferred
Stock in connection with such Liquidation of the Corporation, an amount equal
to each holders pro rata share of the Total Amount Available.
The voluntary sale, conveyance, lease, exchange, or
transfer of all or substantially all the property or assets of the Corporation,
or the merger or consolidation of the Corporation into another corporation, or
any purchase or redemption of some or all of the shares of any class or series
of stock of the Corporation, shall not be deemed to be a Liquidation of the
Corporation for the purposes of this Section 5 (unless in connection
therewith the Liquidation of the Corporation is specifically approved).
6.
Conversion Privilege. At any
time after issuance of any share of Series V Class B Preferred Stock,
the holder of any share of Series V Class B Preferred Stock (Holder)
shall have the right, at such Holders option (but if such share is called for
redemption or exchange at the election of the Corporation, then in respect of
such share only to and including but not after the close of business on (i) the
fifth calendar day before the date fixed for such redemption; or (ii) the
date fixed for such exchange, provided that the Corporation has set aside funds
sufficient to effect such redemption) to convert such share into that number of
fully paid and nonassessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100th of a share) obtained by dividing $4.00 by the
Conversion Rate then in effect.
a.
Conversion
Rate. Each share of Series V Class B Preferred Stock may be
converted, subject to the terms and provisions of this paragraph 6 into one (1) share
of the Corporations Common Stock, which is a price equal to one share of
Common Stock for each $4.00 of Series V Class B Preferred Stock or,
in case an adjustment of such rate has taken place pursuant to the provisions
of subdivision (f) of this paragraph 6, then at the Conversion Rate as
last adjusted (such rate or adjusted rate, shall be expressed as the number of
shares of Common Stock to be acquired upon conversion of one share of Series V
Class B Preferred Stock, and shall be referred to herein as the Conversion
Rate) (Conversion Price). Each share of Series V Class B Preferred
Stock shall be Convertible into Common Stock by surrender to the Corporation of
the certificate representing such shares of Series V Class B
Preferred Stock to be converted by the Holder and by giving written notice to
the Corporation of the Holders election to convert.
The Corporation shall, as soon as practicable after
receipt of such written notice and the proper surrender to the Corporation of
the certificate or certificates representing shares of Series V Class B
Preferred Stock to be converted in accordance with the above provisions, issue
and deliver for the benefit of the Holder at the office of the Corporations
duly appointed transfer agent (the Transfer Agent) to the Holder for whose
account such shares of Series V Class B Preferred Stock were so
surrendered or to such Holders nominee or nominees, certificates for the
number of shares of Common Stock to which the Holder shall be entitled. The
certificates of Common Stock of the Corporation issued upon conversion shall
bear such legends as may be required by state or federal laws. Such conversion
shall be deemed to have been effective immediately prior to the close of
business on the date on which the Corporation shall have received both such
written notice and the properly surrendered certificates for shares of Series V
Class B Preferred Stock to be converted (the Conversion Date), and at
such time the rights of the Holder shall cease and the person or persons
entitled to receive the shares of Common Stock issuable upon the conversion of
such shares of Series V Class B Preferred Stock shall be deemed to
be, and shall be treated for all purposes as, the record Holder or Holders of
such Common Stock on the Conversion Date. The Corporation shall not be required
to convert, and no surrender of shares of Series V Class B Preferred
Stock or written notice of
EXHIBIT E
A-54
conversion with respect thereto shall be effected
for that purpose, while the stock transfer books of the Corporation are closed
for any reasonable business purpose for any reasonable period of time, but
shall be required to convert upon the proper surrender of shares of Series V
Class B Preferred Stock for conversion immediately upon the reopening of
such books. During the period in which the stock transfer books of the
Corporation are closed, the Corporation may neither declare a dividend, declare
a record date for payment of dividends, nor make any payment of dividends.
b.
Dividends. If any shares of Series V
Class B Preferred Stock shall be converted during any dividend payment
period, the Holder shall be entitled to all dividends accrued up to and through
such Conversion Date, at the rate set forth herein, whether or not there has
been a Dividend Date, as set forth in paragraph 2 hereof.
c.
Cancellation. Series V Class B
Preferred Stock converted into Common Stock pursuant to the provisions of this
paragraph 6 shall be retired by the Corporation and given the status of
authorized and unissued Preferred Stock.
d.
Reissuance if Conversion is
Partial. In the case of any certificate representing shares of Series V Class B
Preferred Stock which is surrendered for conversion only in part, the
Corporation shall issue and deliver to the Holder a new certificate or
certificates for Series V Class B Preferred Stock in the amount of Series V
Class B Preferred Stock equal to the unconverted shares of the Series V
Class B Preferred Stock represented by the certificate so surrendered.
e.
Reservations of Shares. The
Corporation shall at all times during which shares of Series V Class B
Preferred Stock may be converted into Common Stock as provided in this
paragraph (e), reserve and keep available, out of any Common Stock held as
treasury stock or out of its authorized and unissued Common Stock, or both,
solely for the purpose of delivery upon conversion of the shares of Series V
Class B Preferred Stock as herein provided, such number of shares of
Common Stock as shall then be sufficient to effect the conversion of all shares
of Series V Class B Preferred Stock from time to time outstanding,
and shall take such action as may from time to time be necessary to ensure that
such shares of Common Stock will, when issued upon conversion of Series V Class B
Preferred Stock, be fully paid and nonassessable.
f.
Adjustment of Conversion
Rate. The Conversion Rate provided in subdivision (a) of this paragraph 6,
in respect of Series V Class B Preferred Stock, shall be subject to
adjustments from time to time as follows:
(i)
While any shares of Series V
Class B Preferred Stock shall be outstanding, in case the Corporation
shall subdivide the outstanding shares of Common Stock into a greater number of
shares of Common Stock or combine the outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or issue, by reclassification of its
shares of Common Stock, any shares of the Corporation, the Conversion Rate in
effect immediately prior thereto shall be adjusted so that the Holder shall be
entitled to receive the number of shares which it would have owned or been
entitled to receive after the happening of any of the events described above,
had such shares of Series V Class B Preferred Stock been converted
immediately prior to the happening of such event, such adjustment to become
effective immediately after the opening of business on the day following the
day upon which such subdivision or combination or reclassification, as the case
may be, becomes effective.
(ii)
In case the Corporation
shall be consolidated with, or merge into, any other corporation, and the
Corporation does not survive, proper provisions shall be made as a part of the
terms of such consolidation or merger, whereby the Holder shall thereafter be
entitled, upon exercise of such Holders conversion rights, to receive the kind
and amount of shares of stock or other securities of the Corporation resulting
from such consolidation or merger, or such other property, as the Holder would
have received if such conversion rights were exercised immediately prior to the
effectiveness of such merger or consolidation.
EXHIBIT E
A-55
(iii)
In the event the Corporation
at any time makes or issues, a record date for the determination of holders of
Common Stock entitled to receive, a dividend distribution payable in additional
shares of Common Stock or Common Stock Equivalents (as defined in subparagraph (iv) of
this paragraph 6(f)) which does not provide for the payment of any
consideration upon the issuance, conversion or thereof, without a corresponding
dividend or other distribution to the Holder, based upon the number of shares
of Common Stock into which the Series V Class B Preferred Stock is
convertible, then and in each such event the Conversion Rate then in effect
will be increased as of the time of such issuance or, in the event such a
record date shall have been fixed, as of the close of business on such record
date, by multiplying such Conversion rate by a fraction:
(A)
The numerator
of which will be the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution (which, in the case of Common Stock
Equivalents, shall mean the maximum number of shares of Common Stock issuable
with respect thereto, as set forth in the instrument relative thereto without
regard to any provision for subsequent adjustment); and
(B)
The denominator
of which will be the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date; provided, however, that if such record date is
fixed and such dividend is not fully paid or if such distribution is not fully
made on the date fixed therefor, the Conversion Rate will be recomputed
accordingly as of the close of business on such record date, and thereafter
such Conversion Rate will be adjusted pursuant to this subparagraph (iii) as
of the time of actual payment of such dividends or distributions.
(iv)
In the event the Corporation
at any time makes or issues, or fixes a record date for the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable to all holders of Common Stock in securities of the Corporation or
Common Stock Equivalents, then, upon making such dividend or distribution,
provisions will be made so that the Holder will receive the amount of
securities of the Corporation which it would have received had its Series V
Class B Preferred Stock been converted into Common Stock on the date of
such event.
(v)
In the event
the Corporation sells or issues any Common Stock, or sells or issues Common
Stock Equivalents which can be converted into Common Stock at a per share
consideration (as defined below in this subparagraph (v) of paragraph
6(f)) less than the Stipulated Price then in effect, then the Holder shall be
entitled to purchase from the Corporation in cash (for the same per share
consideration at which such Common Stock was issued or the per share price at
which a share of Common Stock is acquirable upon exercise or conversion of
Common Stock Equivalents) that additional number of shares of Common Stock
which, when added to the number of shares of Common Stock acquirable by the
Holder upon conversion of any shares of Series V Class B Preferred
Stock outstanding and held by such Holder immediately before such issue or sale
(the Acquirable Shares), will equal a percentage of the number of shares of
Common Stock Deemed Outstanding (as defined herein) immediately after such sale
or issuance that is the same as the percentage of the number of shares of
Common Stock Deemed Outstanding immediately before such issuance or sale
represented by the Acquirable Shares. This right shall exist for a 45-day
period following the sale or issuance of shares of Common Stock or Common Stock
Equivalents, and thereafter shall cease to exist.
For the above purposes, the per share consideration
with respect to the sale or issuance of Common Stock will be the price per
share received by the Corporation, prior to the payment of any expenses,
commissions, discounts and other applicable costs. With respect to the sale or
issuance of Common Stock Equivalents which are convertible into or exchangeable
for
EXHIBIT E
A-56
Common Stock without further consideration, the per
share consideration will be determined by dividing the maximum number of shares
of Common Stock issuable with respect to such Common Stock Equivalents (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for subsequent adjustment of such number) into the aggregate
consideration receivable by the Corporation upon the sale or issuance of such
Common Stock Equivalents. With respect to the issuance of other Common Stock
Equivalents, the per share consideration will be determined by dividing the
maximum number of shares of Common Stock issuable with respect to such Common
Stock Equivalents into the total aggregate consideration received by the
Corporation upon the sale or issuance of such Common Stock Equivalents plus the
minimum aggregate amount of additional consideration received by the
Corporation upon the conversion or exercise of such Common Stock Equivalents.
In connection with the sale or issuance of Common Stock and/or Common Stock
Equivalents for noncash consideration, the amount of consideration will be the
fair market value of such consideration as determined in good faith by the
Board of Directors of the Corporation.
(vi)
As used herein,
the term Stipulated Price means initial price of $4.00 per share of Common
Stock, as adjusted from time to time pursuant to subparagraph (viii) of
this paragraph 6(f); and the term Common Stock Equivalent means any
securities (whether debt or equity securities) or rights issued by the
Corporation convertible into or entitling the holder thereof to receive shares
of, or securities convertible into, Common Stock. The number of shares of Common
Stock Deemed Outstanding at any date shall equal the sum of the number of
shares of Common Stock then outstanding plus the number of shares of Common
Stock then obtainable pursuant to Common Stock Equivalents.
(vii)
In the event
the Corporation declares any dividend or distribution payable to holders of its
Common Stock (other than dividends payable out of the Corporations retained
earnings or earned surplus and dividends payable in shares of Common Stock or
in securities convertible into or exchangeable for shares of Common Stock or
rights or warrants to purchase Common Stock or securities convertible into or
exchangeable for shares of Common Stock or any other securities issued by the
Corporation), the Conversion Rate in effect immediately prior to the record
date for such dividend or distribution shall be proportionately adjusted so
that the Holder shall be entitled to receive the number of shares of Common
Stock into which such shares of Common Stock or Preferred Stock was convertible
immediately prior to such record date multiplied by a fraction, the numerator
of which is the fair market value of a share of Common Stock on such record
date and the denominator of which is such per share fair market value of a
share of Common Stock on such record date less the fair market value on such
record date of the securities or other property which are distributed as a
dividend or other distribution. The term fair market value of a share of
Common Stock or of any other security or other type of property on any date
means (A) in the case of Common Stock or any other security (I) if
the principal trading market for such Common Stock or other security is an
exchange or the NASDAQ national market on such date, the closing price on such
exchange or the NASDAQ national market on such date, provided, if trading of
such Common Stock or other security is listed on any consolidated tape, the
fair market value shall be the closing price set forth on such consolidated
tape on such date, or (II) if the principal market for such Common Stock
or other security is the over-the-counter market (other than the NASDAQ
national market) the mean between the closing bid and asked prices on such date
as set forth by NASDAQ or (B) in the case of Common Stock or any other
security for which the fair market value cannot be determined pursuant to
clause (A) above or of any other security or type of property, fair market
value thereof on such date as determined in good faith by the Board of
Directors.
(viii)
Whenever the
Conversion Rate is adjusted pursuant to this paragraph 6(f), the Stipulated
Price shall also be adjusted by multiplying it by a fraction that is the
reciprocal of the fraction used to adjust the Conversion Rate.
EXHIBIT E
A-57
(ix)
The Corporation
will not, by amendment of its
Articles of Incorporation
Certificate
of Formation
or through any dissolution, issuance, or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Corporation, but at all times in good faith will assist in the carrying out of
all the provisions of this paragraph and in the taking of all such action as
may be necessary or appropriate in order to protect the conversion rights of
the Holder against impairment.
(x)
No adjustment
in the Conversion Rate shall be required, unless such adjustment would require
an increase or decrease of at least one (1) share of Common Stock in the
Conversion Rate of one share of Series V Class B Preferred Stock,
provided that all adjustments which do not meet this minimum requirement
cumulated and the adjustment will be made when the cumulated total is
sufficient to require an adjustment. All calculations made pursuant to this
subparagraph (x) of paragraph 6(f) shall be made to the nearest
1/100th of a share of Common Stock.
g.
Fractional Shares. No
fractional shares of Common Stock or scrip representing fractional shares of
Common Stock shall be issued upon any conversion of shares of Series V Class B
Preferred Stock but, in lieu thereof, there shall be paid an amount in cash
equal to the same fraction of the current market price of a whole share of
Common Stock on the day preceding the day of conversion.
h.
Statement to Transfer Agent.
Whenever the Conversion Rate for shares of Series V Class B Preferred
Stock shall be adjusted pursuant to the provisions of paragraph 6(f) hereof,
the Corporation shall forthwith maintain at its office and, if applicable, file
with the Transfer Agent for shares of Series V Class B Preferred
Stock and for shares of Common Stock, a statement signed by the President of
the Corporation and by its Treasurer, stating the adjusted Conversion Rate and
setting forth in reasonable detail the method of calculation and the facts
requiring such adjustment, such calculations to be confirmed by the Corporations
independent Accountants, and stating the facts on which the calculation is
based. Each adjustment shall remain in effect until a subsequent adjustment
hereunder is required.
7.
Registration Rights
a.
Piggyback Registration. The
Corporation, for a period ending six months after the last share of Series V
Class B Preferred Stock is redeemed, retired, converted, or otherwise no
longer outstanding, will give written notice to the holder not less than 20
days in advance of the initial filing of any registration statement under the
Securities Act of 1933, as amended (other than a registration statement
pertaining to securities issuable pursuant to employee stock option, stock
purchase, or similar plans or a registration statement pertaining to securities
issuable in connection with the acquisition of a business, whether through a
merger, consolidation, acquisition of assets, or exchange of securities),
covering any Common Stock or other securities of the Corporation, and will
afford the holder the opportunity to have included in such registration all or
such part of the shares of Common Stock acquired upon conversion of Series V
Class B Preferred Stock, as may be designated by written notice to the
Corporation not later than ten days following receipt of such notice from the
Corporation. The Corporation shall be entitled to exclude the shares of Common
Stock held by the holder from any one, but not more than one, such registration
if the Corporation in its sole discretion decides that the inclusion of such
shares will materially interfere with the orderly sale and distribution of the
securities being offered under such registration statement by the Corporation.
Notwithstanding the foregoing, the Corporation shall not be entitled to exclude
the shares of Common Stock held by the Holder if shares of other shareholders
are being included in any such registration statement and, in such
circumstances, the Holder shall be entitled to include the shares of Common
Stock held by them on a pro-rata basis in the proportion that the number of
shares of Common Stock held by the Holder bears to the shares of Common Stock
held by all other shareholders, including shares in such registration
statement. The Holder shall not be entitled to include shares in more than two
registration statements pursuant to the provisions of this subdivision (a) of
paragraph 7, and all rights of the Holder under this subdivision (a) of
EXHIBIT E
A-58
paragraph 7 shall terminate after the Holder has
included shares of Common Stock in two registration statements pursuant to this
subdivision (a) of paragraph 7.
b.
Expenses. The Corporation
will pay all out-of-pocket costs and expenses of any registration effected
pursuant to the provisions of subdivision (a) of this paragraph 7,
including registration fees, legal fees, accounting fees, printing expenses
(including such number of any preliminary and the final prospectus as may be
reasonably requested), blue sky qualification fees and expenses, and all other
expenses, except for underwriting commissions or discounts applicable to the
shares of Common Stock being sold by the Holder and the fees of counsel for the
Holder, all of which shall be paid by the Holder.
c.
Notwithstanding anything to
the contrary contained herein, in the event that the Corporation files an
initial registration statement under the Securities Act of 1933, as amended
(other than a registration statement pertaining to securities issuable in
connection with the acquisition of a business, whether through merger,
consolidation, acquisition of assets, or exchange of securities), concerning
any Common Stock of the Corporation, it may, at its option, at any time within
180 days after the initial registration statement is deemed effective, demand
the conversion of the Series V Class B Convertible Preferred shares
into that number of fully paid and nonassessable shares of Common Stock as
provided herein.
8.
Reports
So long as any of the Series V Class B
Preferred Stock shall be outstanding, the Corporation shall submit to the
Holder financial reports no less frequently than annually.
9.
Miscellaneous
a.
As used herein, the term Common
Stock shall mean the Corporations Common Stock, no par value, or, in the case
of any reclassification or change of outstanding shares of Common Stock, the
stock or securities issued in exchange for such Common Stock.
b.
The shares of Series V Class B
Preferred Stock shall be fully transferable by the Holder thereof, subject to
compliance with the applicable provisions of federal and state securities laws.
IN
WITNESS WHEREOF, RETRACTABLE TECHNOLOGIES, INC. has caused its corporate
seal to be hereunto affixed and this Amended Certificate to be signed by its
President and Secretary this 14th day of October, 2009.
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s/
Thomas J. Shaw
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Thomas
J. Shaw
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President
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ATTEST:
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s/Michele
M. Larios
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Michele
M. Larios
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Secretary
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EXHIBIT E
A-59
Appendix B
RETRACTABLE TECHNOLOGIES, INC.
AUDIT COMMITTEE CHARTER
I.
STATEMENT
OF PURPOSE
A.
The Audit
Committee shall represent and assist the Board of Directors in discharging its
responsibilities relating to the accounting, reporting, and financial practices
and legal compliance of Retractable Technologies, Inc. (the Company).
The Audit Committee has general responsibility for oversight of the accounting
and financial reporting processes of the Company, including oversight of: (1) the integrity of the Companys
financial statements and its financial reporting and disclosure practices, (2) the
Companys compliance with legal and regulatory requirements, and (3) the
qualification and independence of the Companys auditors and the performance of
the annual audit and interim reviews of the Companys financial statements by
the independent auditors. The Audit Committee should also provide an open
avenue of communication among the independent auditors, financial and senior
management, and the Board of Directors.
B.
While the Audit
Committee has the responsibilities and powers set forth in this Charter, it is
not the duty of the Audit Committee to plan or conduct audits or to determine
that the Companys financial statements are complete and accurate and are in
accordance with generally accepted accounting principles (GAAP). This is the responsibility of management and
the Companys independent auditors.
II.
AUDIT COMMITTEE MEMBERS
A.
The Audit
Committee shall consist of at least three members appointed by the Board of
Directors, one of whom shall be appointed as Chairperson. The Audit Committee
shall consist entirely of independent members of the Board of Directors. Independent
means a director who: (i) satisfies
all criteria for independence established by the Securities and Exchange
Commission (the SEC) with regard to members of an Audit Committee and (ii) meets
the NYSE Amex LLC (the AMEX)
definition of independent (including all criteria imposed with respect to
service on an audit committee). If a member of the Audit Committee ceases to be
independent, that member shall notify the Company immediately.
B.
Each member of
the Audit Committee shall be able to read and understand fundamental financial
statements, including the Companys balance sheet, statement of operations,
statement of changes in stockholders equity, cash flow statement, and related
notes to financial statements as determined in the Board of Directors
judgment.
C.
At least one
member of the Audit Committee shall have past employment experience in finance
or accounting, requisite professional certification in accounting, or any other
comparable experience or background which results in the individuals financial
sophistication, including, but not limited to, being or having been a chief
executive officer, chief financial officer, or other senior officer with
financial oversight responsibilities in compliance with criteria established by
the AMEX and, in addition, shall
have such accounting or related financial management expertise as required to
be an audit committee financial expert in compliance with the criteria
established by the SEC, both as determined in the Board of Directors judgment.
The identity of such financial expert and whether such financial expert meets
the SECs independence criteria shall be disclosed in the Companys annual
report as filed with the SEC and such other reports as the SEC may require.
D.
The members of
the Audit Committee shall be elected by the Board of Directors and shall serve
until their successors shall be duly elected and qualified. Unless a chair is
elected by the full Board of Directors, the members of the Audit Committee may
designate a chair by majority vote of the full Audit Committee.
B-1
III.
POWERS, DUTIES, AND
RESPONSIBILITIES
A.
Oversight of Company
Relationship with Its Independent Auditors
1.
The Audit
Committee of the Company shall have sole authority and responsibility to
appoint and engage a public accounting firm to serve as the Companys
independent auditors and to perform the Companys annual audit and related
work. This authority shall include the sole discretion to retain and discharge
such independent auditors and to approve the terms and conditions of all audit
engagements as well as all significant non-audit engagements with such
independent auditors, including a determination of the compensation to be paid
to such independent auditors.
2.
The Audit
Committee shall oversee the work performed by the Companys independent
auditors (including resolution of disagreements between management and the
independent auditors regarding financial reporting). Such independent auditors
shall report directly to the Audit Committee, although they shall remain
accountable to the entire Board of Directors as well as to the Audit Committee.
3.
The Audit
Committee shall review with the independent auditors the scope of the audit,
pre-approve the audit services (which may entail providing comfort letters in
connection with securities underwritings) to be performed by the independent
auditors, review the results of the annual audit examination, review the
interim results, and review any other reports of the independent auditors with
respect to the Companys financial statements or policies.
4.
The Audit
Committee shall pre-approve all non-audit services provided to the Company by
the independent auditors. Pre-approval
shall be either: (i) specifically
granted by the Audit Committee or (ii) granted pursuant to pre-approval
policies and procedures established by the Audit Committee, provided the Audit
Committee is informed of each non-audit service. In no event shall approval be
granted for any non-audit service that the SEC, AMEX, or other applicable regulatory authority determines is
impermissible. As may be required by the SEC, the Audit Committee shall
disclose the approval of non-audit services and/or any pre-approval policies
and procedures in periodic reports filed by the Company with the SEC.
5.
The Audit
Committee shall periodically assess the independence of the Companys auditors
as defined by the rules, regulations, and standards of the SEC, the AMEX, and other applicable
authorities. The Audit Committee shall, at least annually, obtain and review a
formal written statement by the Companys independent auditors delineating all
relationships between the independent auditors and the Company as required by
applicable requirements of the Public Company Accounting Oversight Board.
Furthermore, the Audit Committee shall actively engage in a dialogue with the
independent auditors regarding any disclosed relationships or services that may
impact the objectivity and independence of the independent auditors. The Audit Committee is responsible for
recommending that the Board take appropriate action to oversee the independence
of the independent auditors.
B.
Audit Practices and
Financial Reporting Matters
1.
The Audit
Committee shall obtain and review all reports and other information that the
independent auditors are required by law, rule, or regulation to submit to the
Audit Committee, including periodic reports on:
(1) all critical accounting policies and practices to be used by
the Company, (2) all alternative treatments of financial information
within GAAP in effect from time to time that have been discussed with
management, the ramification of the use of such alternative disclosures and
treatment, and the treatment preferred by the independent auditors, and (3) other
material written communications between the independent auditors and management
of the Company, such as any management letter or schedule of unadjusted
differences.
2.
The Audit
Committee shall discuss with the independent auditors the matters required to
be discussed by Statement on Auditing Standards No. 61, as amended (AICPA
Professional Standards, Vol. 1, AU section 380), as adopted by the Public
Company Accounting Oversight Board in Rule 3200T, relating to the conduct of the audit and
certain information related to the auditors judgments about the quality, not just
the acceptability, of the Companys accounting principles.
B-2
3.
The Audit
Committee shall review and discuss with management and the independent auditors
the Companys annual audited financial statements and quarterly financial
statements, including a discussion of the Companys disclosures under Managements
Discussion and Analysis of Financial Condition and Results of Operation and a
discussion with the independent auditors of their judgments as to the quality
of the Companys accounting principles.
4.
The Audit
Committee shall review with management and the independent auditors the results
of any significant matters identified as a result of the independent auditors
interim review procedures prior to the filing of each quarterly report.
5.
The Audit
Committee shall review changes in the accounting policies of the Company and
accounting and financial reporting proposals that may have a significant impact
on the Companys financial reports, and make reports on the foregoing to the
Board of Directors.
6.
The Audit
Committee shall review as necessary and appropriate with the independent
auditors any audit problems or difficulties and managements response,
including any restrictions on the scope of the independent auditors activities
or access to information and any significant disagreements with management.
C.
Company Governance Policies
and Compliance
1.
The Audit
Committee shall prepare the report that SEC rules require to be included
in the Companys annual proxy statement.
2.
The Audit
Committee shall review and discuss with management financial risk exposures and
measures management has taken to monitor and control such exposures.
3.
The Audit
Committee shall annually review and assess the adequacy of this Charter and
make recommendations to the Board of Directors necessary to provide for the
continued adequacy of the Charter to achieve its stated purpose.
4.
The Audit
Committee shall review with management and the independent auditors any correspondence
with regulators or governmental agencies and any employee complaints or
published reports, which raise material issues regarding the Companys
financial statements or accounting policies.
5.
Any complaints
regarding accounting, internal accounting controls, or auditing matters shall
be submitted orally or in writing to the Companys Audit Committee Financial
Expert. The Company encourages its
employees to submit such concerns or complaints when and if they arise, and
will accept anonymous submissions. The
source of any such concerns or complaints shall be kept confidential, if
requested. All such complaints shall be
retained by the Audit Committee for five years and shall be referred to
management or the Board of Directors at the discretion of the Audit Committee.
6.
The Audit
Committee shall review and, if appropriate, approve any related party
transactions.
7.
The Audit
Committee shall oversee managements internal control over financial reporting
as part of its oversight responsibilities for the Companys financial
reporting. The Audit Committee shall
obtain a report from management as to all material weaknesses and significant
deficiencies in internal controls based upon managements evaluation. The Audit Committee shall be reasonably
knowledgeable and informed about the evaluation process and managements
assessment.
D.
General
Powers
1.
The Audit
Committee shall have the ability (but not the obligation) to conduct or
authorize, if it considers appropriate, investigations into any matters within
the scope of its responsibilities.
2.
The Audit
Committee shall have the authority (without separate approval from the Board of
Directors) to obtain advice, services, and assistance from independent counsel,
and accounting or other advisors, as
B-3
the
Audit Committee deems necessary to assist it in carrying out its
responsibilities, and to determine the compensation for any such advisors.
3.
The Audit
Committee shall perform such activities consistent with this Charter, the
Companys Third Amended and Restated Bylaws, as they may be amended, and
applicable law as the Board of Directors or the Audit Committee deems necessary
or appropriate.
4.
The Audit
Committee may otherwise make regular reports and recommendations to the Board
of Directors within the scope of its functions.
5.
The Company
shall provide for appropriate funding, as determined by the Audit Committee, in
its capacity as a committee for: 1) payment of compensation to the independent
auditors employed for the purpose of preparing or issuing an audit report or
review or attestation, 2) payment to any advisors employed by the Audit
Committee and 3) payment of ordinary administrative expenses that are necessary
or appropriate in carrying out its duties.
IV.
AUDIT COMMITTEE MEETINGS
A.
The Audit
Committee shall meet as often as it determines, but not less frequently than
quarterly. The meetings may be either in person or in any other manner
permitted by law and at such times and places as the Board of Directors or the
Audit Committee determines. The Audit Committee may request any officer or
employee of the Company or the Companys outside counsel or independent
auditors to attend a meeting of the Audit Committee or to meet with any members
of, or consultants to, the Audit Committee.
B.
The majority of
the members of the Audit Committee shall constitute a quorum for Audit
Committee meetings and, unless otherwise required by this Charter or the
Companys Third Amended and Restated Bylaws, as they may be amended, action may
be taken by majority vote of the members present at such meetings. Minutes
shall be maintained of each meeting.
C.
At the next
meeting of the Board of Directors following any meeting of the Audit Committee,
a report of the Audit Committee findings and actions shall be rendered by the
Chairman of the Audit Committee.
The above constitutes the complete Audit Committee
Charter of Retractable Technologies, Inc. effective as of December 20,
2009.
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s/
Thomas J. Shaw
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THOMAS
J. SHAW
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Chairman
of the Board
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ATTEST:
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s/
Michele Larios
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MICHELE
LARIOS, Secretary
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B-4
RETRACTABLE TECHNOLOGIES, INC.
COMPENSATION AND BENEFITS COMMITTEE CHARTER
A
.
PURPOSES OF THE COMMITTEE
The purposes of the Compensation and Benefits
Committee of the Board of Directors (the Committee) of Retractable
Technologies, Inc. (the Company) are to:
(1) discharge the Board of Directors responsibilities relating to
the compensation of the Companys executives and directors; (2) prepare,
if necessary, an annual report on compensation to be included in the Companys
annual meeting proxy statement and such other reports on compensation that may
be required; and (3) administer the Companys equity and other incentive
compensation plans in effect on the date hereof, as amended from time to time,
and any additional plans adopted by the Company.
B.
COMPOSITION
1.
The Committee
shall be comprised of no fewer than three members. Committee members shall be
elected by the Board and may be replaced by the Board. Unless a chair is
elected by the full Board, the members of the Committee may designate a chair
by majority vote of the full Committee.
2.
The Committee
shall consist entirely of independent members of the Board. Independent
means a director who meets the NYSE Amex LLC (AMEX) definition of independent. If a member of the Committee ceases to be
independent, that member shall notify the Company immediately.
C.
POWERS, DUTIES, AND
RESPONSIBILITIES
In fulfilling its duties and responsibilities under
this Charter, the Committee shall, among other things:
1.
Review and approve corporate
goals and objectives related to executive officer compensation. Specifically,
the Committee shall approve corporate goals and objectives relevant to the
Companys Chief Executive Officer (CEO) compensation, and in light of such
goals and objectives, evaluate the performance of the CEO and shall set
compensation for the CEO. In considering
the appropriate compensation of the CEO, the Committee shall consider all
material elements of his compensation as specified in Item 402(b) of
Regulation S-K.
2.
Together with management
review the performance of executive officers other than the CEO and set their
compensation in accordance with established goals and objectives. In
considering the appropriate compensation of executive officers, the Committee
shall consider all material elements of compensation as specified in Item 402(b) of
Regulation S-K.
3.
Review and evaluate an
appropriate compensation program for members of the Board of Directors that
will fairly compensate them for their service while seeking to align the
interests of Board members with the long term interests of the Company and its
stockholders. The Committee, from time to time, shall recommend the amount and
form of directors compensation. In performing its duties, the Committee shall
take into account the burdens on and obligations and commitments required of
directors, the additional time commitments required in connection with service
on and acting as Chair of certain committees, and the types and amounts of
compensation paid to directors of other companies in the Companys peer group.
4.
In the absence of action by
the Board, serve as the grantor and administrator for the Companys equity and
other incentive compensation plans.
5.
R
etain and terminate any outside compensation consultant and other
advisors deemed necessary by the Committee as well as approve the fees charged
by such consultants and advisors and other retention terms.
6.
P
erform any other activities required by applicable law, rules or
regulation, including the rules of the Securities and Exchange Commission
and any stock exchange or market on which the Companys securities may be
listed from time to time, and perform such other activities that are consistent
with this Charter, set forth in the
B-5
Companys
Third Amended and Restated Bylaws, as they may be amended from time to time,
and governing laws as the Committee or the Board of Directors deems necessary
or appropriate.
7.
R
eport to the Board of Directors regarding its meetings. The Committee shall also, if necessary,
prepare a Compensation Committee Report (as defined by Item 407(e)(5) of
Regulation S-K) to be included in the Companys annual report after a review
and discussion of the Companys Compensation Discussion and Analysis with
management and shall prepare such other reports as may be required.
8.
Review and
reassess the adequacy of this Charter annually and recommend any proposed
changes to the Board.
D.
MEETINGS
The Committee shall meet periodically at the request
of two-thirds of the members of the Board of Directors, or at the request
of management, and as often as it deems
necessary or appropriate, in its judgment, either in person or in any other
manner permitted by law and at such times and places as the Committee
determines. The majority of the members of the Committee shall constitute a quorum.
The above constitutes the complete Compensation and
Benefits Committee Charter of Retractable Technologies, Inc. effective as
of December 20, 2009.
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s/
Thomas J. Shaw
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THOMAS
J. SHAW
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Chairman
of the Board
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ATTEST:
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s/
Michele M. Larios
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MICHELE
M. LARIOS, Secretary
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B-6
RETRACTABLE TECHNOLOGIES, INC.
NOMINATING COMMITTEE CHARTER
A.
PURPOSE
The Nominating Committee (the Committee) is
appointed by the Board of Directors (the Board): (1) to assist the Board
by identifying qualified candidates for director and to recommend to the Board
the director nominees for the next annual meeting of shareholders; (2) to
recommend to the Board candidates for election by the Board to fill vacancies
occurring on the Board; and (3) to recommend to the Board director
nominees for each Board Committee, upon request of the Board.
B.
COMPOSITION
1.
The Committee
shall be comprised of no fewer than three members. Committee members shall be
elected by the Board and may be replaced by the Board. Unless a chair is
elected by the full Board, the members of the Committee may designate a chair
by majority vote of the full Committee.
2.
The Committee
shall consist entirely of independent members of the Board. Independent
means a director who satisfies all criteria for independence established by the
NYSE Amex LLC (AMEX) definition of independent. If a member of the
Committee ceases to be independent, that member shall notify the Company
immediately.
C.
POWERS, DUTIES, AND
RESPONSIBILITIES
In fulfilling its duties and responsibilities under
this Charter, the Committee shall, among other things:
1.
Evaluate and
propose nominees for election and re-election to the Board of Directors at each
annual meeting of stockholders of the Company.
2.
Evaluate and
recommend to the Board candidates for election by the Board to fill vacancies
occurring on the Board.
3.
Assist in
attracting and recruiting qualified candidates to serve on the Board.
4.
Determine desired
Board member skills and attributes and conduct searches for prospective
directors whose skills and attributes reflect those desired. At a minimum,
nominees for service on the Board must be well regarded and experienced
participants in their field(s) of specialty, familiar at the time of their
appointment with the Companys business, willing to devote the time and
attention necessary to deepen and refine their understanding of the Company and
the issues facing it, and must have an understanding of the demands and
responsibilities of service on a public company board of directors. The
Committee will also consider such qualities as independence from the Company,
as the definition of independence may be revised from time to time. Each
nominee will be considered both on his or her individual merits and in relation
to existing or other potential members of the Board, with a view to
establishing a well-rounded, diverse, knowledgeable, and experienced Board.
5.
Consider all
bona fide candidates recommended by shareholders for nomination for election to
the Board. The Committee will consider such candidates using the same screening
criteria as are applied to all other potential nominees for election, provided
that the shareholder nominations are submitted in a timely and complete manner,
under the requirements of the Securities and Exchange Commission (the SEC)
and the Companys Third Amended and Restated Bylaws, as they may be amended
from time to time as follows:
The shareholder must deliver written notice of such shareholders
nomination, either by personal delivery or by registered or certified United
States mail, postage prepaid, to the Secretary of the Company, within the time
period for Notice of Shareholder Business as set forth in the Third Amended and
Restated Bylaws, as they may be amended.
Such notice shall set forth:
B-7
A.
The name and
address of the shareholder making the nomination and of the person to be
nominated;
B.
A
representation that the shareholder is a holder of record of Common Stock of
the Company entitled to vote at such meeting (specifying the number of shares
beneficially held) and intends to appear in person or by proxy at the meeting;
C.
A description
of all arrangements or understandings between the shareholder and the nominee
and any other person or persons (naming such person or persons) pursuant to
which the nomination is being made by the shareholder and any material interest
of the shareholder in making the nomination;
D.
Such other
information regarding the nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to the then current
proxy rules of the SEC; and
E.
The consent of
the nominee to serve as a Director if so recommended by the Board and duly
elected at the annual meeting by the shareholders.
6.
Evaluate and
make recommendations to the Board concerning the appointment of directors to
Board committees and the selection of Board committee chairs, upon request of the
Board.
7.
As necessary in
the Committees judgment from time to time, retain and compensate third party
search firms to assist in identifying or evaluating potential nominees to the
Board.
8.
Evaluate and
consider matters relating to the qualifications of directors.
9.
Review and
maintain oversight of matters relating to the independence of Board and
committee members, keeping in mind the independence standards of the
Sarbanes-Oxley Act of 2002, the rules of the AMEX and any other applicable rules and regulations promulgated by
the SEC.
10.
Make regular reports to the Board concerning its
activities.
11.
Annually review and reassess the adequacy of this
Charter and recommend any proposed changes to the Board of Directors for
approval.
12.
Annually prepare a report detailing disclosure
issues relating to the nomination process required to be included in the
Companys Proxy Statement, if any.
D.
LIMITATION
ON POWERS, DUTIES, AND RESPONSIBILITIES
Notwithstanding anything to the contrary herein,
under circumstances where the Company is legally required by contract or
otherwise to provide third parties with the ability to nominate and/or appoint
directors (e.g., preferred stock rights to elect directors upon dividend
default), the selection and nomination of such directors is not subject to
approval by the Nominating Committee.
E.
MEETINGS
The Nominating Committee shall meet at least once
per year and as often as it deems necessary or appropriate, in its judgment,
either in person or in any other manner permitted by law, and at such times and
places as the Committee determines. The majority of the members of the
Nominating Committee shall constitute a quorum.
B-8
The above constitutes the complete Nominating
Committee Charter of Retractable Technologies, Inc. effective as of December 20,
2009.
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s/
Thomas J. Shaw
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THOMAS
J. SHAW
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ATTEST:
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s/
Michele Larios
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MICHELE
LARIOS, Secretary
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B-9
Appendix C
FORM OF PROXY CARD
RETRACTABLE
TECHNOLOGIES, INC.
511 LOBO LANE
LITTLE ELM, TX
75068-0009
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VOTE BY INTERNET -
www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic delivery
of information up until 11:59 p.m. Eastern time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access
the web site and follow the instructions to obtain your records and to create
an electronic voting instruction form.
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ELECTRONIC
DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
If you would like to
reduce the costs incurred by Retractable Technologies, Inc. in mailing
proxy materials, you can consent to receiving all future proxy statements,
proxy cards and annual reports electronically via email or the Internet. To
sign up for electronic delivery, please follow the instructions above to vote
using the Internet and, when prompted, indicate that you agree to receive or
access shareholder communications electronically in future years.
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VOTE BY PHONE - 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions up until
11:59 p.m. Eastern time the day before the cut-off date or meeting date.
Have your proxy card in hand when you call and then follow the instructions.
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VOTE BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid envelope we
have provided or return it to Retractable Technologies, Inc., c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK
BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR
YOUR RECORDS
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DETACH AND RETURN THIS
PORTION ONLY
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THIS PROXY
CARD IS VALID ONLY WHEN SIGNED AND DATED.
RETRACTABLE TECHNOLOGIES, INC.
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For
All
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Withhold
All
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For All
Except
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To
withhold authority to vote for any individual nominees(s), mark "For All
Except" and write the number(s) of the nominee(s) on the line below.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR
ALL" IN THE ELECTION OF DIRECTORS AND A VOTE "FOR" PROPOSAL 2.
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Vote on Directors
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1.
ELECTION OF DIRECTORS:
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Nominee for Class 1 Director
01)
Steven R. Wisner
Nominees for Class 2 Directors
02)
Thomas J. Shaw
03)
Douglas W. Cowan
04)
Marwan Saker
05)
Clarence Zierhut
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Vote
on Proposal
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For
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Against
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Abstain
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2. APPROVAL OF
AMENDMENTS TO THE ARTICLES OF INCORPORATION
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3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
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The undersigned
hereby revokes all previous proxies related to the shares covered hereby and
confirms all their said proxies and their substitutes may do so by virtue
hereof.
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PLEASE SIGN, DATE, AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
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(
NOTE:
Please sign exactly as your name(s) appear(s) hereon. All holders must sign.
When signing as attorney, executor, administrator, or other fiduciary, please
give full title as such. Joint owners
should each sign personally. If a
corporation, please sign in full corporate name, by authorized officer. If a
partnership, please sign in partnership name by authorized person.)
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For address changes and/or comments, please check this
box and write them on the back where indicated.
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It is
understood that, when properly executed, the shares represented by this proxy
will be voted in the manner directed herein by the undersigned shareholder.
WHERE NO CHOICE IS SPECIFIED BY THE SHAREHOLDER, THE
PROXY WILL BE VOTED "FOR ALL" IN THE ELECTION OF DIRECTORS AND
"FOR" PROPOSAL 2. IF THE PROXY IS EXECUTED IN SUCH A MANNER SO AS
NOT TO WITHHOLD AUTHORITY TO VOTE FOR THE ELECTION OF ANY NOMINEE, IT SHALL
BE DEEMED TO GRANT AUTHORITY TO VOTE FOR SUCH NOMINEE.
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Please
indicate if you plan to attend this meeting.
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o
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Yes
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No
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To obtain information about
voting in person, please call the Company at (888) 806-2626.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint
Owners)
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Date
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C-1
ANNUAL
MEETING OF SHAREHOLDERS OF
RETRACTABLE
TECHNOLOGIES, INC.
September 24,
2010
COMMON
STOCK
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting:
The proxy materials including the Proxy Statement and Form 10-K
are available at www.proxyvote.com
â
PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED.
â
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PROXY FOR COMMON STOCK
RETRACTABLE TECHNOLOGIES, INC.
511 Lobo Lane
Little Elm, Texas 75068-0009
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby acknowledges
receipt of the Notice of the Annual Meeting of Shareholders of Retractable Technologies,
Inc. (the Company) to be held on September 24, 2010, at 10:00 a.m., Central
time, at the Little Elm City Hall located at 100 West Eldorado Parkway, Little
Elm, Texas 75068 (the Annual Meeting), and the Proxy Statement in connection
therewith, and appoints Thomas J. Shaw and Steven R. Wisner, and each of them,
individually, as the lawful agents and proxies of the undersigned (with all powers
the undersigned would possess if personally present, including full power of substitution),
and hereby authorizes each of them to represent and to vote, as designated on
the reverse side, all the shares of Common Stock of the Company held of record
by the undersigned as of the close of business on July 26, 2010, at the Annual
Meeting or any adjournment or postponement thereof.
At the Annual Meeting, the
following matters proposed by the Companys Board of Directors will be voted on
by the holders of Common Stock:
1. Election of one Class 1 Director and four Class 2 Directors;
and
2. Approval of Amendments to the Articles of
Incorporation.
The matters to be voted on are not related
to or conditioned on the approval of other matters.
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Address Changes/Comments: ___________________________________________________
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(If you noted any
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C-2
Retractable Technologies (AMEX:RVP)
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Retractable Technologies (AMEX:RVP)
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