ex4-1



 



Exhibit 4.1



CERTIFICATE OF DESIGNATIONS,

PREFERENCES AND RIGHTS

OF

SERIES J PREFERRED STOCK

OF

HEARX LTD.



(PURSUANT TO SECTION 151 OF THE

DELAWARE GENERAL CORPORATION LAW)



     HEARx Ltd., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the “Company”), hereby certifies that
the following resolutions were adopted by the Board of Directors of the Company
pursuant to authority of the Board of Directors as required by Section 151 of
the Delaware General Corporation Law.


     RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Company (the “Board of Directors” or the “Board”) in
accordance with the provisions of the Amended and Restated Certificate of
Incorporation of the Company, the Board of Directors hereby authorizes a series
of the Company’s previously authorized Preferred Stock, par value $1.00 per
share (the “Preferred Stock”), and hereby states the designations and number of
shares and fixes the relative rights, preferences, privileges, powers and
restrictions thereof as follows:


SERIES J PREFERRED STOCK:



     Section 1. Designation, Amount and Par Value. The series of preferred
stock shall be designated as Series J Preferred Stock (the “Preferred Stock”)
and the number of shares so designated shall be 233 (which shall not be subject
to increase or modification without the consent of the holders of the Preferred
Stock (each, a “Holder” and collectively, the “Holders”)). Each share of
Preferred Stock shall have a par value of $1.00 per share and a stated value
equal to the sum of $10,000 plus all unpaid and accrued dividends to the date
of determination to the extent not paid in cash in accordance with the terms
hereof (the “Stated Value”).


     Section 2. Dividends. Holders shall be entitled to receive, out of funds
legally available therefor, and the Company shall pay, cumulative dividends at
the rate per share (as a percentage of the Stated Value per share) of 6% per
annum, payable on the last day of each of the Company’s fiscal quarters (each,
a “Dividend Date”), in cash. Dividends on the Preferred Stock shall be
calculated on the basis of a 360-day year, shall accrue daily commencing on the
Original Issue Date (as defined in Section 7), and shall be deemed to accrue
from such date whether or not earned or declared and whether or not there are
profits, surplus or other funds of the Company legally available for the
payment of dividends. Dividends earned but not paid on the applicable Dividend
Date shall bear simple interest calculated at a rate of 18% per annum (or the
maximum rate allowed by law, if lower) from such Dividend Date to the date on
which the


1






 


dividends are actually paid; such interest shall be paid in cash unless the
Holders and the Company agree in writing to pay such amounts in Common Stock.


     Section 3. Voting Rights. Except as otherwise provided herein and as
otherwise required by law, the Preferred Stock shall have no voting rights. So
long as any shares of Preferred Stock are outstanding, the Company shall not,
without the affirmative vote of the Holders of a majority of the shares of the
Preferred Stock then outstanding, (a) alter or change adversely the powers,
preferences or rights given to the Preferred Stock or alter or amend this
Certificate of Designation, (b) authorize or create any class of stock ranking
as to dividends or distribution of assets upon a Liquidation (as defined in
Section 4) senior to or otherwise pari passu with the Preferred Stock, (c)
amend its certificate or articles of incorporation or other charter documents
so as to affect adversely any rights of the Holders, or (d) enter into any
agreement with respect to the foregoing.


     Section 4. Liquidation. Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary (a “Liquidation”), the Holders
shall be entitled to receive out of the assets of the Company, whether such
assets are capital or surplus, for each share of Preferred Stock an amount
equal to the Stated Value per share (plus any accrued and unpaid dividends
thereon) before any distribution or payment shall be made to the holders of any
Junior Securities but after any payment or distribution to be made to the
holders of any Senior Securities (as defined in Section 7), and if the assets
of the Company shall be insufficient to pay in full such amounts and amounts
payable to the holders of shares pari passu with the Preferred Stock ( “Pari
Passu Securities”), then the entire assets to be distributed to the Holders and
holders of Pari Passu Securities, shall be distributed among the Holders and
holders of Pari Passu Securities, ratably in accordance with the respective
amounts that would be payable on such shares if all amounts payable thereon
were paid in full. A sale, conveyance or disposition of 50% or more of the
assets of the Company or the effectuation by the Company of a transaction or
series of related transactions in which more than 50% of the voting power of
the Company is disposed of, or a consolidation or merger of the Company with or
into any other company or companies into one or more companies not wholly owned
by the Company shall not be treated as a Liquidation, but instead shall be
subject to the provisions of Section 6. The Company shall mail written notice
of any Liquidation not less than 30 days prior to the payment date stated
therein to each record Holder.


     Section 5. Redemption at the Company’s Option. At any time and from time
to time, the Company shall have the right, exercisable at its sole option, to
redeem all or a portion of the Preferred Stock then held by a Holder for a
redemption price equal to the Optional Redemption Amount (as defined in Section
7). At least five (5) business days prior to the date on which the redemption
will take place (the “Redemption Date”), the Company shall mail or fax written
notice of such redemption to the Holder at the address set forth on the
Company’s records, which notice shall specify (i) the number of shares of
Preferred Stock to be redeemed, (ii) the date fixed for redemption, (iii) the
Optional Redemption Amount, and (iv) instructions for delivery of certificates
representing the Preferred Stock duly endorsed for transfer to the Company.
Promptly following receipt of the stock certificates, the Corporation shall
pay, by wire transfer to the person designated in writing to the Company by the
Holder, the Optional Redemption Amount for the


2






 


shares subject to such redemption. The redemption of the Preferred Stock shall
be deemed to have occurred on the date that the applicable Optional Redemption
Amount is received by the Holder regardless of the date on which the stock
certificates are actually exchanged for the Optional Redemption Amount.


     Section 6. Redemption Upon Change of Control. Upon the occurrence of a
Change of Control Transaction, each Holder shall (in addition to all other
rights it may have hereunder or under applicable law), have the right,
exercisable at the sole option of such Holder, to require the Company to redeem
all or a portion of the Preferred Stock then held by such Holder for a
redemption price equal to the Change of Control Redemption Amount (as defined
in Section 7). The Change of Control Redemption Amount shall be due and
payable within ten trading days of the date on which the notice for the payment
therefor is provided by a Holder (the “Change of Control Redemption Date”). If
the Company fails to pay the Change of Control Redemption Amount hereunder in
full pursuant to this Section on the date such amount is due in accordance with
this Section, the Company will pay interest thereon at a rate of 18% per annum
(or such lesser rate permitted by applicable law), accruing daily from such
date until the Change of Control Redemption Amount, plus all such interest
thereon, is paid in full.


     Section 7. Definitions. For the purposes hereof, the following terms shall
have the following meanings:


     “Change of Control Redemption Amount” for each share of Preferred Stock
means 120% of the Stated Value thereof plus accrued and unpaid dividends from
the Original Issue Date to the Change of Control Redemption Date.


     “Change of Control Transaction” means the occurrence, only upon or after
the approval thereof by the Board of Directors, of any of (i) an acquisition
after the date hereof by an individual or legal entity or “group” (as described
in Rule 13d-5(b)(1) promulgated under the Exchange Act) of control (whether
through legal or beneficial ownership of capital stock of the Company, by
contract or otherwise) of in excess of 50% of the voting securities of the
Company (provided, however, that in no event shall the transaction between the
Company and Helix Hearing Care of America Corp. be deemed a “Change of Control
Transaction”), (ii) the merger of the Company into another entity that is not
wholly owned by the Company, or pursuant to which the Company is not the
surviving entity, consolidation or sale of 50% or more of the assets of the
Company in one or a series of related transactions, or (iii) the execution by
the Company of an agreement to which the Company is a party or by which it is
bound, providing for any of the events set forth above in (i) or (ii).


     “Commission” means the Securities and Exchange Commission.


     “Common Stock” means the Company’s common stock, $.10 par value per share,
and stock of any other class into which such shares may hereafter have been
reclassified or changed.


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


3






 


     “Junior Securities” means the Common Stock and all other equity securities
of the Company other than those securities that are outstanding on the Original
Issue Date and which are explicitly senior in rights or liquidation preference
to the Preferred Stock.


     “Optional Redemption Amount” for each share of Preferred Stock means the
Stated Value thereof plus accrued and unpaid dividends from the Original Issue
Date to the Redemption Date.


     “Original Issue Date” shall mean the date of the first issuance of any
shares of the Preferred Stock regardless of the number of transfers of any
particular shares of Preferred Stock and regardless of the number of
certificates which may be issued to evidence such Preferred Stock.


     “Person” means a corporation, an association, a partnership, an
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.


     “Exchange Agreement” means the Exchange Agreement, dated as of the
Original Issue Date, to which the Company and the original Holder are parties,
as amended, modified or supplemented from time to time in accordance with its
terms.


     “Securities Act “ means the Securities Act of 1933, as amended.


     “Senior Securities” means the shares of the Company’s 1998 Convertible
Preferred Stock issued by the Company and outstanding on the Original Issue
Date.


     “Transaction Documents” shall have the meaning set forth in the Exchange
Agreement.


4






 


     IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf
of the Company on this December 4, 2001.



	 	 	 
	 	 	
HEARx LTD.
	 
	By:	 	
/s/ Paul A Brown



Paul A. Brown, M.D.

Chairman and Chief Executive Officer




5