**Exhibit3.3**

 

**CORRECTED**

**CERTIFICATEOF DESIGNATIONS**

**OF**

**SERIESA CONVERTIBLE PREFERRED STOCK**

**OF**

**VISTAMEDICAL TECHNOLOGIES, INC.**

 

Vista MedicalTechnologies, Inc., a corporation organized and existing under any by virtue ofthe General Corporation Law of the State of Delaware (the “Corporation), herebycertifies that:

 

1.                                       Theoriginal Certificate of Designations of Series A Convertible Preferred Stock(the “Original Certificate”) was filed with the Secretary of State of Delawareon February 27, 2003, and that the Original Certificate requires correction, aspermitted by Section 103 of the General Corporation Law of the State ofDelaware.

 

2.                                       TheOriginal Certificate, by virtue of an administrative filing error, inaccuratelyset forth (i) the applicable dividend rate, (ii) the threshold at which sharesof Series A Preferred Stock would automatically convert to Common Stock, (iii)certain provisions regarding redemption of the Series A Preferred Stock, (iv)certain of the Protective Provisions, (v) the rights of the holders of Series APreferred Stock to elect directors of the Corporation, and (vi) certain othergrammatical statements.  The OriginalCertificate, as corrected, shall read in its entirety as follows:

 

**CERTIFICATEOF DESIGNATIONS**

**OF**

**SERIES ACONVERTIBLE PREFERRED STOCK**

**OF**

**VISTAMEDICAL TECHNOLOGIES, INC.**

 

**(Pursuantto Section 151 of the**

**DelawareGeneral Corporation Law)**

 

Vista MedicalTechnologies, Inc., a corporation organized and existing under the GeneralCorporation Law of the State of Delaware (hereinafter called the “Company”),hereby certifies that the following resolution was adopted by the Board ofDirectors of the Company as required by Section 151 of the General CorporationLaw at a meeting duly called and held on February 19, 2003

 

RESOLVED, that pursuantto the authority granted to and vested in the Board of Directors of the Company(hereinafter called the “Board of Directors” or the “Board”) in accordance withthe provisions of the Certificate of Incorporation of the Company, the Board herebycreates a series of Preferred Stock, par value $0.01 per share (the “PreferredStock”), of the Company and hereby states the designation and number of shares,and fixes the relative rights, preferences, and limitations thereof as follows:

 

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(1)                                  Designation;Voting Rights.

 

(a)                                  Theseries of Preferred Stock established hereby shall be designated the “Series AConvertible Preferred Stock” (and shall be referred to herein as the “**Series APreferred Shares**”) and the authorized number of Series A PreferredShares shall be One Million (1,000,000). Such number of shares may be increased or decreased by resolution of theBoard; provided, that no decrease shall reduce the number of shares of Series APreferred Shares to a number less than the number of shares then outstanding.

 

(b)                                 Theholders of the outstanding Series A Preferred Shares (collectively, the “**Holders**”and each a “**Holder**”) shall, except as otherwise expressly provided in thisCertificate of Designation, have the right to one vote for each share of CommonStock into which such series of Preferred Stock could then be converted (withany fractional share determined on an aggregate conversion basis being roundedup to the next whole share), and with respect to such vote, such holder shallhave full voting rights and powers equal to the voting rights and powers of theholders of Common Stock, and shall be entitled, notwithstanding any provisionhereof, to notice of any stockholders’ meeting in accordance with the Company’sBylaws (the “Bylaws”), and shall be entitled to vote, together as a singleclass with holders of Common Stock, with respect to any matter upon whichholders of Common Stock have the right to vote, except for the election ofdirectors as provided in Section 8 below or as otherwise required by law.  Except as otherwise provided herein or asrequired by law, the Preferred Stock shall vote together with the Common Stockat any annual or special meeting of the stockholders and not as a separateclass.

 

(2)                                  DividendProvisions.

 

The Holders of shares of Series A Preferred Sharesshall be entitled to receive dividends, out of any assets legally availabletherefor, prior and in preference to any declaration or payment of any cashdividend on the Common Stock, at the rate of $0.1425 per share (subject toappropriate adjustments for stock splits, dividends, combinations or otherrecapitalizations on such shares) per annum (the “Series A Preferred DividendPreference”), payable out of funds legally available therefor.  Such dividends shall be payable only when,as and if declared by the Board of Directors and be cumulative and shall accruefrom the date of the initial issuance of the applicable Series A PreferredShares by the Company.  No dividendsshall be declared or set aside for the Common Stock or any other class orseries of the Company’s capital stock which ranks junior with respect todividend payments to the Series A Preferred Shares (collectively, the “JuniorStock”) (other than dividends of Common Stock or other securities and rightsconvertible into or entitling the holder thereof to receive, directly orindirectly, solely additional shares of the Common Stock of the Company), andno other distribution shall be made on or with respect to any shares of JuniorStock unless prior thereto, all declared and unpaid dividends on the Series APreferred Shares shall be declared, set aside and paid on all the thenoutstanding shares of Series A Preferred Shares and, in the case of any suchdividends or distributions declared or paid on shares of Common Stock, anequivalent dividend or distribution is declared or paid or set apart, as thecase may be, on the Series A Preferred Shares, payable on the same day as iffully converted into Common Stock

 

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(3)                                  LiquidationPreference.

 

(a)                                  Inthe event of any liquidation, dissolution or winding up of the Company, whethervoluntary or involuntary (each, a “Liquidation”), the Holders of Series APreferred Shares shall be entitled to receive, prior to and in preference toany distribution of any of the assets of the Company to the holders of CommonStock by reason of their ownership thereof, an amount per share equal to thesum of (i) four (4) times the Original Series A Issue Price for eachoutstanding Series A Preferred Share and (ii) an amount equal to allaccrued and unpaid dividends on such share (“Dividends Due”).  If upon a Liquidation the assets and fundsthus distributed among the Holders of Series A Preferred Shares shall beinsufficient to permit the payment to such holders of the Original Series AIssue Price plus Dividends Due for all outstanding Series A Preferred Shares(“Liquidation Preference”), then the entire assets and funds of the Companylegally available for distribution shall be distributed ratably among theHolders of Series A Preferred Shares. For purposes of this Certificate of Designations, the term “OriginalSeries A Issue Price” shall be deemed to mean $0.95 for each outstanding SeriesA Preferred Share (subject to appropriate adjustments for stock splits,dividends, combinations or other recapitalizations with respect to suchshares).

 

(b)                                 Afterthe distribution in full of the Liquidation Preference  has been paid, the remaining assets of theCompany available for distribution to stockholders shall be distributed amongthe holders of Series A Preferred Shares and Common Stock pro rata on anas-if-converted to Common Stock basis.

 

(c)                                  (i)  Aconsolidation or merger of the Company with or into any other corporation,corporations or other entity (other than any merger effected solely for thepurpose of changing the domicile of the Company), or a sale, conveyance ordisposition of all or substantially all of the assets of the Company (otherthan a “Major Transaction” as defined below) or the effectuation by the Companyof a transaction or series of related transactions in which more than 50% ofthe voting power of the Company is disposed of (a “Change of ControlTransaction”), shall be deemed to be a Liquidation.  In the event that the Company is a party to a Change of ControlTransaction, then upon the closing of such Change of Control Transaction eachHolder of Preferred Stock shall be entitled to receive, for each share ofPreferred Stock then held, the greater of (i) the amount of cash, securities orother property to which such holder would be entitled to receive in aLiquidation or (ii) the amount of cash, securities or other property to whichsuch holder would be entitled to receive in a Liquidation if such holder hadconverted such shares of Preferred Stock into Common Stock immediately prior tothe closing of such Change of Control Transaction.

 

(ii)                                  Inany of such events, if the consideration received by the Company is other thancash, its value will be deemed its fair market value as determined in goodfaith by the Board of Directors.  Anysecurities shall be valued as follows:

 

(A)                              Securitiesnot subject to investment letter or other similar restrictions on freemarketability:

 

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(1)                                  Iftraded on a securities exchange or through the Nasdaq National Market System,the value shall be deemed to be the average of the closing prices of thesecurities on such exchange over the thirty (30) day period ending three (3)business days prior to the closing;

 

(2)                                  Ifactively traded over-the-counter, the value shall be deemed to be the averageof the closing bid or sale prices (whichever is applicable) over the thirty(30) day period ending three (3) business days prior to the closing; and

 

(3)                                  Ifthere is no active public market, the value shall be the fair market valuethereof as determined in good faith by the Board of Directors.

 

(B)                                Themethod of valuation of securities subject to investment letter or otherrestrictions on free marketability (other than restrictions arising solely byvirtue of a stockholder’s status as an affiliate or former affiliate) shall beto make an appropriate discount from the market value determined as above in3(c)(ii)(A) (1), (2) or (3) to reflect the approximate fair market valuethereof, as determined in good faith by the Board of Directors.

 

(iii)                               In the event of anyLiquidation, the Company shall give, by mailing notice by United States PostalService via certified or registered mail, return receipt requested, addressedto each holder of any shares of Preferred Stock, at the address of such holderas shown on the books of the Company, (A) at least ten (10) days priorwritten notice of the date on which the books of the Company shall close or arecord shall be taken for determining rights to vote in respect of any suchLiquidation, and (B) in the case of any such Liquidation at least ten (10)days prior written notice of the date when the same shall take place.

 

(iv)                              Anynotice required by the provisions of this Section 3 to be given to the holdersof shares of Preferred Stock shall be deemed given when received by each holderof record at his address appearing on the books of the Company.

 

(4)                                  Conversion.  The Holders of the Series A Preferred Sharesshall have conversion rights as follows (the “Conversion Rights”):

 

(a)                                  Rightto Convert.  Each share of PreferredStock shall be convertible, at the option of the Holder thereof, at any timeafter the date of issuance of such share at the office of the Company or anytransfer agent for the Preferred Stock, into such number of fully paid andnonassessable shares of Common Stock as is determined by dividing the OriginalSeries A Issue Price, as applicable, by the applicable Conversion Price at thetime in effect for such share.  As ofthe filing of this Certificate of Designation (the “Filing Date”), the initial“Conversion Price” per share for shares of Series A Preferred Shares shall bethe Original Series A Issue Price; provided, however, that theapplicable Conversion Price for the Series A Preferred Stock shall be subjectto adjustment as set forth in subsection 4(d) below.

 

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(b)                                 AutomaticConversion.  Each share of PreferredStock shall automatically be converted into shares of Common Stock at theapplicable Conversion Price at the time in effect for such shares immediatelyand without further action by the Company or the holder of such shares upon theearlier of (i) the date on which the Company has redeemed in the aggregatein one or more redemptions at least 310,000 shares (as adjusted for any stocksplits, stock dividends, recapitalizations and the like) of Series A PreferredShares in accordance with Sections 5 or 6 below or (ii) the date specifiedby the written consent or agreement of the holders of at least two-thirds ofthe then outstanding Series A Preferred Shares.

 

(c)                                  Mechanicsof Conversion.  Before any holder ofPreferred Stock shall be entitled to convert the same into shares of CommonStock, such holder shall surrender the certificate or certificates therefor,duly endorsed, at the office of the Company or of any transfer agent for thePreferred Stock, and shall give written notice by mail, postage prepaid, to theCompany at its principal corporate office, of the election to convert the sameand shall state therein the name or names in which the certificate orcertificates for shares of Common Stock are to be issued.  The Company shall, as soon as practicablethereafter, issue and deliver at such office to such holder of Preferred Stock,or to the nominee or nominees of such holder, a certificate or certificates forthe number of shares of Common Stock to which such holder shall be entitled asaforesaid.  Such conversion shall bedeemed to have been made immediately prior to the close of business on the dateof such surrender of the shares of Preferred Stock to be converted, and theperson or persons entitled to receive the shares of Common Stock issuable uponsuch conversion shall be treated for all purposes as the record holder orholders of such shares of Common Stock as of such date.

 

(d)                                 ConversionPrice Adjustments of Preferred Stock. The Conversion Price of the Series A Preferred Shares shall be subjectto adjustment from time to time as follows:

 

(i)                                     StockSplits, Dividends and Distributions. In the event the Company should at any time or from time to time afterthe date of initial issuance of any Series A Preferred Shares (the “PurchaseDate”) fix a record date for the effectuation of a split or subdivision of theoutstanding shares of Common Stock or the determination of holders of CommonStock entitled to receive a dividend or other distribution payable inadditional shares of Common Stock or other securities or rights convertibleinto, or entitling the holder thereof to receive directly or indirectly,additional shares of Common Stock (hereinafter referred to as “Common StockEquivalents”) without payment of any consideration by such holder for theadditional shares of Common Stock or the Common Stock Equivalents (includingthe additional shares of Common Stock issuable upon conversion or exercisethereof)****, then, as of such recorddate (or the date of such dividend, distribution, split or subdivision if norecord date is fixed), the applicable Conversion Price of the Series APreferred Shares shall be appropriately decreased so that the number of sharesof Common Stock issuable on conversion of each share of such series shall beincreased in proportion to such increase of the aggregate of shares of CommonStock outstanding and those issuable with respect to such Common StockEquivalents.

 

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(ii)                                  Combinations.  If the number of shares of Common Stockoutstanding at any time after the Purchase Date is decreased by a combinationof the outstanding shares of Common Stock, then, following the record date ofsuch combination, the applicable Conversion Price for the Series A PreferredShares shall be appropriately increased so that the number of shares of Common Stockissuable on conversion of each share of such series shall be decreased inproportion to such decrease in outstanding shares.

 

(iii)                               Other Distributions.  In the event the Company shall declare adistribution payable in securities of other persons, evidences of indebtednessissued by the Company or other persons, or assets (excluding cash dividends) oroptions or rights not referred to in subsection 4(d)(i), then, in each suchcase for the purpose of this subsection 4(d), (x) the Dividends Due must be paidprior to payment of such declared distribution and (y) the Holders of PreferredStock shall be entitled to a proportionate share of any such distribution asthough they were the holders of the number of shares of Common Stock into whichtheir shares of Preferred Stock are convertible as of the record date fixed forthe determination of the holders of Common Stock entitled to receive suchdistribution.

 

(e)                                  Recapitalizations.  If at any time or from time to time thereshall be a recapitalization of the Common Stock (other than a subdivision,combination or merger or sale of assets transaction provided for elsewhere inthis Section 4), provision shall be made so that the Holders of the PreferredStock shall thereafter be entitled to receive upon conversion of the PreferredStock the number of shares of stock or other securities or property of theCompany or otherwise, to which a holder of Common Stock deliverable uponconversion would have been entitled on such recapitalization.  In any such case, appropriate adjustmentshall be made in the application of the provisions of this Section 4 withrespect to the rights of the Holders of the Preferred Stock after therecapitalization to the end that the provisions of this Section 4 (includingadjustment of the applicable Conversion Price then in effect and the number ofshares purchasable upon conversion of the Preferred Stock) shall be applicableafter that event as nearly equivalent as may be practicable.

 

(f)                                    NoImpairment.  The Company will not,by amendment of its Certificate of Incorporation or through any reorganization,recapitalization, transfer of assets, consolidation, merger, dissolution, issueor sale of securities or any other voluntary action, avoid or seek to avoid theobservance or performance of any of the terms to be observed or performedhereunder by the Company, but will at all times in good faith assist in thecarrying out of all the provisions of this Section 4 and in the taking of allsuch action as may be necessary or appropriate in order to protect theConversion Rights of the Holders of the Preferred Stock against impairment.

 

(g)                                 NoFractional Shares and Certificate as to Adjustments.

 

(i)                                     Nofractional shares shall be issued upon conversion of the Preferred Stock, andthe number of shares of Common Stock to be issued shall be rounded up to thenearest whole share.  Whether or notfractional shares are issuable upon such conversion shall be determined on thebasis of the total number of shares of Preferred

 

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Stock the holder is at the time converting into Common Stock and thenumber of shares of Common Stock issuable upon such aggregate conversion.

 

(ii)                                  Uponthe occurrence of each adjustment or readjustment of the applicable ConversionPrice of the Series A Preferred Shares pursuant to this Section 4, the Company,at its expense, shall promptly compute such adjustment or readjustment inaccordance with the terms hereof and prepare and furnish to each holder ofPreferred Stock to which an adjustment or readjustment of the applicableConversion Price has been made a certificate setting forth such adjustment orreadjustment and showing in detail the facts upon which such adjustment orreadjustment is based.  The Companyshall, upon the written request at any time of any Holder of Preferred Stock,furnish or cause to be furnished to such Holder a like certificate settingforth (A) such adjustment and readjustment, (B) the applicable Conversion Priceat the time in effect, and (C) the number of shares of Common Stock and theamount, if any, of other property which at the time would be received upon theconversion of a share of the Series A Preferred Shares.

 

(h)                                 Noticesof Record Date.  In the event of anytaking by the Company of a record of the holders of any class of securities forthe purpose of determining the holders thereof who are entitled to receive anydividend (other than a cash dividend) or other distribution, any right tosubscribe for, purchase or otherwise acquire any shares of stock of any classor any other securities or property, or to receive any other right, the Companyshall mail to each holder of Preferred Stock, at least ten (10) days prior tothe date specified therein, a notice specifying the date on which any suchrecord is to be taken for the purpose of such dividend, distribution or right,and the amount and character of such dividend, distribution or right.

 

(i)                                     Reservationof Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of itsauthorized but unissued shares of Common Stock solely for the purpose ofeffecting the conversion of the shares of Preferred Stock such number of itsshares of Common Stock as shall from time to time be sufficient to effect theconversion of all outstanding shares of Preferred Stock; and if at any time thenumber of authorized but unissued shares of Common Stock shall not besufficient to effect the conversion of all then outstanding shares of PreferredStock, in addition to such other remedies as shall be available to the holderof such Preferred Stock, the Company will take such corporate action as may, inthe opinion of its counsel, be necessary to increase its authorized butunissued shares of Common Stock to such number of shares as shall be sufficientfor such purposes.

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(j)                                     Notices.  Any notice required by the provisions ofthis Section 4 to be given to the holders of shares of Preferred Stock shall bedeemed given when received in writing by the applicable holder of record at hisaddress appearing on the books of the Company.

 

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(5)                                  RedemptionUpon Major Transaction and Company Redemption Option.

 

(a)                                  RedemptionUpon Major Transaction. In the event of the completion of a MajorTransaction (as defined in Section 5(b)) prior to the date which is threehundred ninety (390) days after the date of the initial issuance of any SeriesA Preferred Shares, the Company may, at its sole option, redeem that number ofthe outstanding Series A Preferred Shares, by paying in cash therefor, equal to(i) 310,000 shares, at a per share price of $2.90, if the Net Gain (as definedin Section 5(c) below) is between $2,000,000 and $3,000,000, (ii) 350,000shares, at a per share price of $2.86, if the Net Gain is between $3,000,001and $4,500,000, (iii) 400,000 shares, at a per share price of $2.88, if the NetGain is between $4,500,001 and $6,000,000, (iv) 460,000 shares, at a per shareprice of $2.93, if the Net Gain is between $6,000,001 and $7,500,000, (v)520,000 shares, at a per share price of $2.79, if the Net Gain is between$7,500,001 and $8,500,000 and (vi) 580,000 shares, at a per share price of$2.67, if the Net Gain is greater than $8,500,000.  The amount to be paid by the Company upon a redemption under thisSection 5(a) is referred to as the “**MajorTransaction Redemption Price**.”

 

(b)                                 “MajorTransaction”.  A “**MajorTransaction**” shall be deemed to have occurred upon the sale,transfer or other disposition of substantially all of the Company’s assetsrelated to both its OEM endoscopic business and its 3D business in a singletransaction or a series of related transactions.

 

(c)                                  “NetGain”.  **“Net Gain”** shall be deemed to be the amount received by theCompany in the Major Transaction, net of (i) expenses incurred in connectiontherewith, including without limitation, (A) advisory fees or other amounts tobe paid to investment bankers in connection with the Major Transaction and (B)professional fees, including without limitation, legal fees, accounting feesand related expenses, and (ii) the net book value of assets transferred inconnection therewith.

 

(d)                                 Mechanicsof Conversion/Redemption Upon Major Transaction.  No sooner than thirty (30) days nor later than ten (10) daysprior to the consummation of a Major Transaction, but not prior to the publicannouncement of such Major Transaction, the Company shall deliver writtennotice thereof via facsimile and overnight courier (“**Notice of Major Transaction**”)to each Holder.  The Company may (at itsoption) redeem from the Holders the Series A Preferred Shares as set forth inSection 5(a) in the event that the Major Transaction is completed.  Such redemption shall occur no earlier thanthe date which is three hundred seventy (370) days after the date of theinitial issuance of any Series A Preferred Shares and no later than the datewhich is three hundred ninety (390) days after the date of the initial issuanceof any Series A Preferred Shares (such period being the “Redemption Period”).

 

(e)                                  RedemptionAt Option of the Company.  Duringthe Redemption Period, in the event that a Major Transaction has not occurred,the Company, solely at its option, may deliver notice (“**Notice of Company Redemption**”)to the Holder of the Company’s election to redeem that number of shares ofSeries A Preferred Shares, and at the applicable per share price, set forth inany of Sections 5(a)(ii) through 5(a)(vi) above  (such determination to be made at the option of the Company, andthe per share price paid to be referred to as the “**Company Redemption Price**”).  Such redemption shall occur during theRedemption Period.

 

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(f)                                    Paymentof Redemption Price.  Upon (i) theoccurrence of a Major Transaction and the election of the Company to redeemshares or (ii) the delivery by the Company of a Notice of Company Redemption,the Company shall immediately notify each Holder by facsimile of the mechanicsof the delivery of each Holder’s Preferred Stock Certificates and each Holdershall thereafter promptly (or in the case of a Notice of Company Redemption,prior to the specified date) send such Holder’s Preferred Stock Certificates tobe redeemed to the Company.  The Companyshall deliver the applicable Major Transaction Redemption Price or CompanyRedemption Price, as applicable, to such Holder during the Redemption Period;provided that a Holder’s Preferred Stock certificates shall have been sodelivered to the Company.

 

(g)                                 Inthe case of the occurrence of a Major Transaction, if the Company shall fail toredeem all of the Series A Preferred Shares submitted for redemption, inaddition to any remedy such Holder may have under this Certificate ofDesignation and the Securities Purchase Agreement between the Company and theinitial Holders (the “**Securities Purchase Agreement**”), theRedemption Price payable in respect of such unredeemed Series A PreferredShares shall bear interest at the rate of 1.25% per month (prorated for partialmonths) until paid in full.  In the caseof a Notice of Company Redemption, until the Company pays such unpaid CompanyRedemption Price, as applicable, in full to each Holder, Holders of the SeriesA Preferred Shares submitted for redemption pursuant to this Section 5 and forwhich the applicable Company Redemption Price, as applicable, has not beenpaid, shall have the option (the “**Void Optional Redemption Option**”) to, inlieu of redemption, require the Company to promptly return to each Holder allof the Series A Preferred Shares that were submitted for redemption by suchHolder under this Section 5 and for which the Company Redemption Price, asapplicable, has not been paid, by sending written notice thereof to the Companyvia facsimile (the “**Void Optional Redemption Notice**”).  Upon the Company’s receipt of such VoidOptional Redemption Notice(s) and prior to payment of the full CompanyRedemption Price, as applicable, to each Holder, (i) the Notice of CompanyRedemption shall be null and void with respect to those Series A PreferredShares submitted for redemption and for which the Company Redemption Price, asapplicable, has not been paid, and (ii) the Company shall immediately returnany Series A Preferred Shares submitted to the Company by each Holder forredemption under this Section 5(g) and for which the Company Redemption Price, asapplicable, has not been paid.

 

(6)                                  RedemptionUpon OEM Transaction or 3D Transaction.

 

(a)                                  RedemptionUpon OEM/3D Transaction. In the event an OEM Transaction or a 3DTransaction (each as defined in Section 6(b)), but not both, has been completedprior to the date which is three hundred and ninety (390) days following theinitial issuance of any Series A Preferred Shares, the Company may, at its soleoption, redeem that number of the outstanding Series A Preferred Shares, bypaying in cash therefor, equal to (i) 310,000 shares, at a per share price of$2.90, if the Net Gain (as defined in Section 6(c) below) is between $2,000,000and $3,000,000, (ii) 350,000 shares, at a per share price of $2.86, if the NetGain is between $3,000,001 and $4,500,000, (iii) 400,000 shares, at a per shareprice of $2.88, if the Net Gain is between $4,500,001 and $6,000,000, (iv)460,000 shares, at a per share price of $2.93, if the Net Gain is between$6,000,001 and $7,500,000, (v) 520,000 shares, at a per share

 

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price of $2.79, if theNet Gain is between $7,500,001 and $8,500,000 and (vi) 580,000 shares, at a pershare price of $2.67, if the Net Gain is greater than $8,500,000.  The amount to be paid by the Company upon aredemption under this Section 6(a) is referred to as the “**OEM/3D Redemption Price**.”  Notwithstanding the foregoing, upon therequest of the Holders of a majority of the outstanding shares of Series AShares and with the consent of the Company (which consent shall not beunreasonably withheld), the particular subsection of this Section 6(a) thatdefines the number of shares to be redeemed and the price per share of suchredemption (which subsection would otherwise apply) shall be changed to asubsection appearing earlier in this Section 6(a).  Additionally, and notwithstanding the foregoing, upon the mutualconsent of the Company and the Holders of a majority of the outstanding sharesof Series A Shares, the particular subsection of this Section 6(a) that definesthe number of shares to be redeemed and the price per share of such redemption(which subsection would otherwise apply) shall be changed to a subsectionappearing later in this Section 6(a).

 

(b)                                 “OEMTransaction”.  An “**OEMTransaction**” shall be deemed to have occurred upon the sale,transfer or other disposition of substantially all of the Company’s assetsrelated to its OEM endoscopic business in one transaction or a series ofrelated transactions.

 

(c)                                  “3DTransaction”.  A “**3DTransaction**” shall be deemed to have occurred upon the sale,transfer or other disposition of substantially all of the Company’s assetsrelated to its 3D business in one transaction or a series of relatedtransactions.

 

(d)                                 “NetGain”.  **“Net Gain”** (A) in the event of an OEM Transaction, shall bedeemed to be the amount received by the Company in the OEM Transactionmultiplied by 3.33, net of (i) expenses incurred in connection therewith,including without limitation, (x) advisory fees or other amounts to be paid toinvestment bankers in connection with the OEM Transaction and (y) professionalfees, including without limitation, legal fees, accounting fees and relatedexpenses for the OEM Transaction and (ii) the net book value of assetstransferred in connection therewith; and (B) in the event of a 3D Transaction,shall be deemed to be the amount received by the Company in the 3D Transactionmultiplied by 1.43, net of (i) expenses incurred in connection therewith,including without limitation, (x) advisory fees or other amounts to be paid toinvestment bankers in connection with the 3D Transaction and (y) professionalfees, including without limitation, legal fees, accounting fees and relatedexpenses for the 3D Transaction and (ii) the net book value of assetstransferred in connection therewith.

 

(e)                                  Mechanicsof Conversion/Redemption Upon OEM/3D Transaction.  No sooner than thirty (30) days nor later than ten (10) daysprior to the consummation of an OEM Transaction or 3D Transaction (not a MajorTransaction), but not prior to the public announcement of such transaction, theCompany shall deliver written notice thereof via facsimile and overnightcourier (“**Noticeof OEM/3D Transaction**”) to each Holder.  The Company may (at its option) redeem from the Holders theSeries A Preferred Shares as set forth in Section 6(a) in the event that suchOEM Transaction or 3D Transaction is completed.

 

(f)                                    Paymentof Redemption Price.  In the eventof the completion of an OEM Transaction or 3D Transaction (but not both) andthe election of the Company to redeem

 

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shares, the Company shallimmediately notify each Holder by facsimile of the mechanics of the delivery ofeach Holder’s Preferred Stock Certificates and each Holder shall thereafterpromptly send such Holder’s Preferred Stock Certificates to be redeemed to theCompany.  The Company shall deliver theapplicable OEM/3D Redemption Price to such Holder during the Redemption Period;provided that a Holder’s Preferred Stock Certificates shall have been sodelivered to the Company.

 

(7)                                  ProtectiveProvisions.  So long as any Series APreferred Shares remain outstanding, the Company shall not without firstobtaining the approval (by vote or written consent) of the holders of at leasttwo-thirds of the then outstanding Series A Preferred Shares, voting togetheras a single class:

 

(a)                                  authorizeor issue, whether by reclassification or otherwise, any new class or series ofstock or any other securities convertible into equity securities of the Companyhaving a preference or priority over, or being on parity with the Series APreferred Shares with respect to liquidation preference, redemption rights ordividend preference; or

 

(b)                                 recapitalize,reorganize or enter into a Change of Control Transaction; or

 

(c)                                  amendor repeal any provision of the Company’s Certificate of Incorporation or theBylaws; or

 

(d)                                 declareor pay any dividend or distribution on any shares of the Company’s CommonStock; or

 

(e)                                  redeem,retire or purchase any shares of Preferred Stock (except in accord with Section5 or Section 6 hereof) or Common Stock (other than the repurchase of CommonStock pursuant to the terms of Company’s currently existing stock option,employee stock purchase or stock incentive plans); or

 

(f)                                    increaseor decrease the total number of authorized Series A Preferred Shares; or

 

(g)                                 changeor alter the rights, preferences or privileges of any series of PreferredStock; or

 

(h)                                 enterinto any agreement that expressly restricts the Company’s ability to redeemshares or pay dividends; or

 

(i)                                     sellto any party any shares of the Company’s Common Stock (other than shares ofCommon Stock issued upon the exercise options pursuant to the terms ofCompany’s currently existing stock option, employee stock purchase or stock incentiveplans)****at a price per share lessthan $2.00 (as adjusted as a result of any reverse stock split or other stockcombination which results in a pro rata reduction in the number of shares ofCommon Stock) at any point prior to the date which is five (5) years followingthe initial issuance of any Series A Preferred Shares; or

 

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(j)                                     incurover $50,000 on any single capital expenditure transaction; or

 

(k)                                  incurover $300,000 in the aggregate on capital expenditures; or

 

(l)                                     revisethe terms of its existing primary credit line; or

 

(m)                               issueany options having an exercise price lower than the then market value of theCommon Stock as of the date of issuance of the option; or

 

(n)                                 increasethe number of authorized shares of Common Stock available for issuance underthe Company’s currently existing stock option, employee stock purchase or stockincentive plans; or

 

(o)                                 establisha new stock option, employee stock purchase or stock incentive plan; or

 

(p)                                 inthe event of the consummation of a Major Transaction, maintain a balance ofless than $1,500,000 in its primary bank account until the earlier of (A) suchtime as some or all Series A Preferred Shares are redeemed pursuant to theprovisions hereof or (B) such time as the Company delivers notice to theHolders of its determination to not exercise any rights hereunder with respectto the redemption of Series A Preferred Shares.

 

(8)                                  Electionof Directors.   Notwithstanding theprovisions of subsection 1(b) above for so long as any Series A PreferredShares remain outstanding after three hundred ninety (390) days following theinitial issuance of any Series A Preferred Shares, the holders of Series APreferred Shares, voting as a separate class, shall be entitled to elect thegreater of two directors of the Company or twenty-five percent (25%) of thetotal number of directors of the Company (collectively, the “Series ADirectors”).  At any meeting held forthe purpose of electing or nominating directors, the presence in person or byproxy of the Holders of a majority of the Series A Shares then outstandingshall constitute a quorum of the Series A Preferred Shares for the election ornomination of the Series A Directors.  Avacancy in or removal of the director in the directorships elected solely bythe Holders of Series A Preferred Shares shall be filled only by the vote ofthe holders of Series A Preferred Shares.

 

(9)                                  Statusof Converted Stock.  In the eventany shares of Preferred Stock shall be converted pursuant to Section 4 hereof,the shares so converted shall be cancelled and shall not be issuable by theCompany, and this Certificate of Designations shall be appropriately amended toeffect the corresponding reduction in the Company’s authorized capital stock.

 

(10)                            Repurchaseof Shares.  In connection withrepurchases by the Company of shares of its Common Stock pursuant to agreementswith certain of the holders thereof approved by the Board of Directors, eachholder of Preferred Stock shall be deemed to

 

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have waived the application, in whole or in part, of any provisions ofthe Delaware General Corporation Law or any applicable law of any other statewhich might limit, prevent or prohibit such repurchases.

 

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IN WITNESS WHEREOF, this Corrected Certificate ofDesignation is executed on behalf of the Company by its Chief Executive Officerthis 3rd day of March, 2003

 

 
|   | /s/ John Lyon                       |
|--------|-------------------------------------|
|   | John Lyon, Chief Executive  Officer |

 

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