Attached files
file | filename |
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8-K - FORM 8-K - Savara Inc | a55992e8vk.htm |
EX-5.1 - EX-5.1 - Savara Inc | a55992exv5w1.htm |
EX-4.1 - EX-4.1 - Savara Inc | a55992exv4w1.htm |
EX-4.2 - EX-4.2 - Savara Inc | a55992exv4w2.htm |
EX-10.1 - EX-10.1 - Savara Inc | a55992exv10w1.htm |
EX-99.1 - EX-99.1 - Savara Inc | a55992exv99w1.htm |
Exhibit 3.1
ADVENTRX PHARMACEUTICALS, INC.
CERTIFICATE OF DESIGNATION OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
2.19446320054018% SERIES F CONVERTIBLE PREFERRED STOCK
RIGHTS AND LIMITATIONS
OF
2.19446320054018% SERIES F CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
DELAWARE GENERAL CORPORATION LAW
The undersigned, Brian M. Culley and Patrick L. Keran, do hereby certify that:
1. They are the Chief Executive Officer and President and Secretary, respectively, of ADVENTRX
Pharmaceuticals, Inc., a Delaware corporation (the Corporation).
2. The Corporation is authorized to issue 1,000,000 shares of preferred stock, of which (a)
1,993 shares were previously designated as 0% Series A Convertible Preferred Stock, but all of
which have been converted by the Corporation as of the date hereof and, pursuant to Section 11(i)
of the Certificate of Designation of Preferences, Rights and Limitations of 0% Series A Convertible
Preferred Stock filed with the Secretary of State of the State of Delaware on June 8, 2009, all of
which have resumed the status of authorized but unissued and undesignated shares of preferred
stock; (b) 1,361 shares were previously designated as 5% Series B Convertible Preferred Stock,
but all of which have been converted by the Corporation as of the date hereof and, pursuant to
Section 11(i) of the Certificate of Designation of Preferences, Rights and Limitations of 5% Series
B Convertible Preferred Stock filed with the Secretary of State of the State of Delaware on June
29, 2009, all of which have resumed the status of authorized but unissued and undesignated shares
of preferred stock; (c) 922 shares were previously designated as 5% Series C Convertible Preferred
Stock, but all of which have been converted by the Corporation as of the date hereof and, pursuant
to Section 11(i) of the Certificate of Designation of Preferences, Rights and Limitations of 5%
Series C Convertible Preferred Stock filed with the Secretary of State of the State of Delaware on
August 5, 2009, all of which have resumed the status of authorized but unissued and undesignated
shares of preferred stock; (d) 11,283 shares were previously designated as 4.25660% Series D
Convertible Preferred Stock, but all of which have been converted by the Corporation as of the
date hereof and, pursuant to Section 11(i) of the Certificate of Designation of Preferences, Rights
and Limitations of 4.25660% Series D Convertible Preferred Stock filed with the Secretary of State
of the State of Delaware on October 5, 2009, all of which have resumed the status of authorized but
unissued and undesignated shares of preferred stock; and (e) 19,000 shares were previously
designated as 3.73344597664961% Series E Convertible Preferred Stock, but all of which have been
converted by the Corporation as of the date hereof and, pursuant to Section 11(i) of the
Certificate of Designation of Preferences, Rights and Limitations of 3.73344597664961% Series E
Convertible Preferred Stock filed with the Secretary of State of the State of Delaware on January
4, 2010, all of which have resumed the status of authorized but
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unissued and undesignated shares of preferred stock; therefore, all of which are presently
undesignated and may be issued with such rights and powers as the board of directors of the
Corporation (the Board of Directors) may designate.
3. The following resolutions were duly adopted by the board of directors of the Corporation
(the Board of Directors):
WHEREAS, the certificate of incorporation of the Corporation provides for a class of its
authorized stock known as preferred stock, consisting of 1,000,000 shares, $0.001 par value per
share, issuable from time to time in one or more series;
WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate,
voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any
wholly unissued series of preferred stock and the number of shares constituting any series and the
designation thereof, of any of them; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid,
to fix the rights, preferences, restrictions and other matters relating to a series of the
preferred stock, which shall consist of, except as otherwise set forth in the Purchase Agreement
(as hereinafter defined), up to 20,000 shares of the preferred stock which the
Corporation has the authority to issue, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the
issuance of a series of preferred stock for cash or exchange of other securities, rights or
property and does hereby fix and determine the rights, preferences, restrictions and other matters
relating to such series of preferred stock as follows:
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TERMS OF PREFERRED STOCK
Section 1. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
Affiliate means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a Person, as
such terms are used in and construed under Rule 405 of the Securities Act.
Alternate Consideration shall have the meaning set forth in Section 7(e).
Bankruptcy Event means any of the following events: (a) the Corporation or
any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X)
thereof commences a case or other proceeding under any bankruptcy, reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation
or similar law of any jurisdiction relating to the Corporation or any Significant Subsidiary
thereof, (b) there is commenced against the Corporation or any Significant Subsidiary
thereof any such case or proceeding that is not dismissed within 60 days after commencement,
(c) the Corporation or any Significant Subsidiary thereof is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such case or proceeding is
entered, (d) the Corporation or any Significant Subsidiary thereof suffers any appointment
of any custodian or the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such appointment, (e) the Corporation or
any Significant Subsidiary thereof makes a general assignment for the benefit of creditors,
(f) the Corporation or any Significant Subsidiary thereof calls a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of its debts, or (g) the
Corporation or any Significant Subsidiary thereof, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the foregoing.
Beneficial Ownership Limitation shall have the meaning set forth in Section
6(d).
Business Day means any day except any Saturday, any Sunday, any day which is
a federal legal holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action to close.
Buy-In shall have the meaning set forth in Section 6(c)(iv).
Change of Control Transaction means the occurrence after the date hereof of
any of (a) 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 effective
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control (whether through legal or beneficial ownership of capital stock of the
Corporation, by contract or otherwise) of in excess of 40% of the voting securities of the
Corporation (other than by means of conversion of Preferred Stock and/or exercise of the
Warrants), (b) the Corporation merges into or consolidates with any other Person, or any
Person merges into or consolidates with the Corporation and, after giving effect to such
transaction, the stockholders of the Corporation immediately prior to such transaction own
less than 60% of the aggregate voting power of the Corporation or the successor entity of
such transaction, (c) the Corporation sells or transfers all or substantially all of its
assets to another Person and the stockholders of the Corporation immediately prior to such
transaction own less than 60% of the aggregate voting power of the acquiring entity
immediately after the transaction, (d) a replacement at one time or within a one year period
of more than one-half of the members of the Board of Directors which is not approved by a
majority of those individuals who are members of the Board of Directors on the Original
Issue Date (or by those individuals who are serving as members of the Board of Directors on
any date whose nomination to the Board of Directors was approved by a majority of the
members of the Board of Directors who are members on the Original Issue Date), or (e) the
execution by the Corporation of an agreement to which the Corporation is a party or by
which it is bound (other than the Purchase Agreement) providing for any of the events set
forth in clauses (a) through (d) above.
Closing means the closing of the purchase and sale of the Securities pursuant
to Section 2.1 of the Purchase Agreement.
Closing Date means the Trading Day on which all of the Transaction Documents
have been executed and delivered by the applicable parties thereto and all conditions
precedent to (i) each Holders obligations to pay the Subscription Amount and (ii) the
Corporations obligations to deliver the Securities have been satisfied or waived.
Commission means the United States Securities and Exchange Commission.
Common Stock means the Corporations common stock, par value $0.001 per
share, and stock of any other class of securities into which such securities may hereafter
be reclassified or changed.
Common Stock Equivalents means any securities of the Corporation or the
Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.
Conversion Amount means the sum of the Stated Value at issue.
Conversion Date shall have the meaning set forth in Section 6(a).
Conversion Price shall have the meaning set forth in Section 6(b).
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Conversion Shares means, collectively, the shares of Common Stock issuable
upon conversion of the shares of Preferred Stock in accordance with the terms hereof.
Dividend Payment Date shall have the meaning set forth in Section 3(a).
Exchange Act means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
Fundamental Transaction shall have the meaning set forth in Section 7(e).
GAAP means United States generally accepted accounting principles.
Holder shall have the meaning given such term in Section 2.
Indebtedness means (a) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than accrued liabilities or trade accounts payable incurred in the
ordinary course of business), (b) all guaranties, endorsements and other contingent
obligations in respect of indebtedness of others, whether or not the same are or should be
reflected in the Corporations balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar transactions in
the ordinary course of business, and (c) the present value of any lease payments in excess
of $50,000 due under leases required to be capitalized in accordance with GAAP.
Junior Securities means the Common Stock and all other Common Stock
Equivalents of the Corporation other than those securities which are explicitly senior or
pari passu to the Preferred Stock in dividend rights or redemption or
liquidation preference.
Liens means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
Liquidation shall have the meaning set forth in Section 5.
Make-Whole Payment shall have the meaning set forth in Section 3(a).
New York Courts shall have the meaning set forth in Section 11(d).
Notice of Conversion shall have the meaning set forth in Section 6(a).
Original Issue Date means 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.
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Person means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint stock
company, government (or an agency or subdivision thereof) or other entity of any kind.
Preferred Stock shall have the meaning set forth in Section 2.
Purchase Agreement means the Securities Purchase Agreement, dated as of
May 2, 2010, among the Corporation and the original Holders, as amended, modified or
supplemented from time to time in accordance with its terms.
Securities means the Preferred Stock, the Warrants and the Underlying Shares.
Securities Act means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
Share Delivery Date shall have the meaning set forth in Section 6(c).
Stated Value shall have the meaning set forth in Section 2, as the same may
be increased pursuant to Section 3 and as adjusted for reverse and forward stock splits and
the like after the Original Issue Date.
Subscription Amount shall mean, as to each Holder, the aggregate amount to be
paid for the Preferred Stock and Warrants purchased pursuant to the Purchase Agreement as
specified below such Holders name on the signature page of the Purchase Agreement and next
to the heading Subscription Amount, in United States dollars and in immediately available
funds.
Subsidiary means any subsidiary of the Corporation as set forth on
Schedule 3.1(a) of the Purchase Agreement and shall, where applicable, also include
any direct or indirect subsidiary of the Corporation formed or acquired after the date of
the Purchase Agreement.
Substantial Original Holder means any Holder that (a) was an original party
to the Purchase Agreement and (b) holds at least fifteen percent (15%) of the Preferred
Stock purchased by such Holder pursuant to the Purchase Agreement.
Successor Entity shall have the meaning set forth in Section 7(e).
Trading Day means a day on which the principal Trading Market is open for
business.
Trading Market means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE Amex, the
Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
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the New York Stock Exchange or the OTC Bulletin Board (or any successors to any of the
foregoing).
Transaction Documents means this Certificate of Designation, the Purchase
Agreement, the Warrants, all exhibits and schedules thereto and hereto and any other
documents or agreements executed in connection with the transactions contemplated pursuant
to the Purchase Agreement.
Transfer Agent means American Stock Transfer & Trust Company LLC, the current
transfer agent of the Company, with a mailing address of 6201 15th Avenue, 2nd Floor,
Brooklyn, NY 11219 and a facsimile number of (718) 921-8310, and any successor transfer
agent of the Corporation.
Triggering Event shall have the meaning set forth in Section 10(a).
Triggering Redemption Amount means, for each share of Preferred Stock, the
sum of (a) the greater of (i) 130% of the Stated Value (105% of the Stated Value in the case
of a Triggering Event resulting solely from a Change in Control Transaction) and (ii) the
product of (y) the VWAP on the Trading Day immediately preceding the date of the Triggering
Event and (z) the Stated Value divided by the then Conversion Price and (b) the Make-Whole
Payment and all liquidated damages and other costs, expenses or amounts due in respect of
the Preferred Stock.
Triggering Redemption Payment Date shall have the meaning set forth in
Section 10(b).
Underlying Shares means the shares of Common Stock issued and issuable upon
conversion or redemption of the Preferred Stock and upon exercise of the Warrants.
VWAP means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted as
reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to
4:02 p.m. (New York City time)), (b) if the OTC Bulletin Board is not a Trading Market, the
volume weighted average price of the Common Stock for such date (or the nearest preceding
date) on the OTC Bulletin Board, (c) if the Common Stock is not then listed or quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in
the Pink Sheets published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the
Common Stock so reported, or (d) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good faith by the Holders
of a majority in interest of the Securities then outstanding and reasonably acceptable to
the Corporation, the fees and expenses of which shall be paid by the Corporation.
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Warrants means, collectively, the
Series A and the Series B Common Stock purchase warrants delivered to
the Holder at the Closing in accordance with Section 2.2(a) of the Purchase Agreement, which
Warrants shall be in the form of Exhibit B attached to the Purchase
Agreement.
Warrant Shares means the shares of Common Stock issuable upon exercise of the
Warrants.
Section 2. Designation, Amount and Par Value. The series of preferred
stock shall be designated as its
2.19446320054018% Series F Convertible Preferred Stock (the
Preferred Stock) and the number of shares so designated shall be up to
20,000 (which shall not be subject to increase without the written
consent of all 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 $0.001 per share and a stated value equal to $1,000, subject to increase set forth in
Section 3 below (the Stated Value).
Section 3. Dividends.
a) Dividends in Cash; Make-Whole. Subject to the Make-Whole Payment provision
set forth below in this Section 3(a), Holders shall be entitled to receive, and the
Corporation shall pay, cumulative dividends at the rate per share (as a percentage of the
Stated Value per share) of 2.19446320054018% per annum until May 6, 2020 and 0% per
annum thereafter, payable quarterly on January 1, April 1, July 1 and October 1, beginning
on July 1, 2010 and each Conversion Date (with respect only to Preferred Stock being
converted) (each such date, a Dividend Payment Date) (if any Dividend Payment Date is not
a Trading Day, the applicable payment shall be due on the next succeeding Trading Day) in
cash; provided, however, upon the conversion of Preferred Stock prior to
May 6, 2020, the Corporation shall pay to the Holders of the Preferred Stock so
converted cash with respect to the Preferred Stock so converted in an amount equal to U.S.
$219.446320054018 per $1,000 of Stated Value, less the amount of any dividend paid on such
Preferred Stock before the relevant Conversion Date (the Make-Whole Payment).
b) Dividend Calculations. Dividends on the Preferred Stock shall be calculated
on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall
accrue daily commencing on the Original Issue Date, 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 Corporation legally available for the payment of dividends.
c) Late Fees. Any dividends that are not paid within three Trading Days
following a Dividend Payment Date shall continue to accrue and shall entail a late fee,
which must be paid in cash, at the rate of 18% per annum or the lesser rate permitted by
applicable law, which shall accrue daily from the Dividend Payment Date through and
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including the date of actual payment in full; provided, however, that the foregoing
shall not apply if the Corporation has instructed the escrow agent named in accordance with
the escrow agreement contemplated by Section 2.2(a) and (b) of the Purchase Agreement in a
timely manner to pay dividends with respect to a Dividend Payment Date.
d) So long as any Holder is a Substantial Original Holder, neither the Corporation nor
any Subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly
any Junior Securities except as expressly permitted by Section 10(a)(vi). So long as any
Holder is a Substantial Original Holder, neither the Corporation nor any Subsidiary thereof
shall directly or indirectly pay or declare any dividend or make any distribution upon
(other than a dividend or distribution described in Section 3 or dividends due and paid in
the ordinary course on preferred stock of the Corporation at such times when the Corporation
is in compliance with its payment and other obligations hereunder), nor shall any
distribution be made in respect of, any Junior Securities, nor shall any monies be set aside
for or applied to the purchase or redemption (through a sinking fund or otherwise) of any
Junior Securities or shares pari passu with the Preferred Stock.
e) The Corporation acknowledges and agrees that the capital of the Corporation (as such
term is used in Section 154 of the Delaware General Corporation Law) in respect of the
Preferred Stock and any future issuances of the Corporations capital stock shall be equal
to the aggregate par value of such Preferred Stock or capital stock, as the case may be, and
that, on or after the date of the Purchase Agreement, it shall not increase the capital of
the Corporation with respect to any shares of the Corporations capital stock issued and
outstanding on such date. The Corporation also acknowledges and agrees that it shall not
create any special reserves under Section 171 of the Delaware General Corporation Law
without the prior written consent of each Holder.
Section 4. Voting Rights. Except as otherwise provided herein or as otherwise
required by law, the Preferred Stock shall have no voting rights. However, as long as any Holder
is a Substantial Original Holder, the Corporation shall not, without the affirmative vote of a
majority of the then outstanding shares of the Preferred Stock, (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, redemption or
distribution of assets upon a Liquidation (as defined in Section 5) senior to, or otherwise
pari passu with, the Preferred Stock, (c) amend its certificate of incorporation or
other charter documents in any manner that adversely affects any rights of the Holders, (d)
increase the number of authorized shares of Preferred Stock, or (e) enter into any agreement with
respect to any of the foregoing. Notwithstanding anything to the contrary set forth in this
Section 4, the holders of Preferred Stock shall not have a separate class vote with respect to any
action taken in connection with a Change of Control Transaction which results in a mandatory
conversion of the Preferred Stock pursuant to Section 6(a)(2).
Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary (a Liquidation), the Holders shall be
entitled
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to receive out of the assets, whether capital or surplus, of the Corporation available to
stockholders an amount equal to the Stated Value, plus the Make-Whole Payment, plus any fees or
liquidated damages then due and owing thereon under this Certificate of Designation, for each share
of Preferred Stock before any distribution or payment shall be made to the holders of any Junior
Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts,
then the entire assets to be distributed to the Holders shall be ratably distributed among the
Holders in accordance with the respective amounts that would be payable on such shares if all
amounts payable thereon were paid in full. A Fundamental Transaction or Change of Control
Transaction shall not be deemed a Liquidation. The Corporation shall mail written notice of any
such Liquidation, not less than 45 days prior to the payment date stated therein, to each Holder.
Section 6. Conversion.
a) Conversions at Option of Holder; and Mandatory Conversion.
1) Conversion at the Option of the Holder. Each share of Preferred Stock shall
be convertible, at any time and from time to time from and after the Original Issue Date at
the option of the Holder thereof, into that number of shares of Common Stock (subject to the
limitations set forth in Section 6(d)) determined by dividing the Stated Value of such share
of Preferred Stock by the Conversion Price. Holders shall effect conversions by providing
the Corporation with the form of conversion notice attached hereto as Annex A (a
Notice of Conversion). Each Notice of Conversion shall specify the number of
shares of Preferred Stock to be converted, the number of shares of Preferred Stock owned
prior to the conversion at issue, the number of shares of Preferred Stock owned subsequent
to the conversion at issue and the date on which such conversion is to be effected, which
date may not be prior to the date the applicable Holder delivers by facsimile such Notice of
Conversion to the Corporation (such date, the Conversion Date). If no Conversion
Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such
Notice of Conversion to the Corporation is deemed delivered hereunder. The calculations and
entries set forth in the Notice of Conversion shall control in the absence of manifest or
mathematical error. To effect conversions of shares of Preferred Stock, a Holder shall not
be required to surrender the certificate(s) representing the shares of Preferred Stock to
the Corporation unless all of the shares of Preferred Stock represented thereby are so
converted, in which case such Holder shall deliver the certificate representing such shares
of Preferred Stock promptly following the Conversion Date at issue. Shares of Preferred
Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be
canceled and shall not be reissued. The Corporation shall maintain records showing the
number of shares of Preferred Stock converted for each Holder and the applicable Conversion
Date. Each Holder and any assignee, by acceptance of a certificate for the Preferred Stock,
acknowledges and agrees that, by reason of the provisions of this paragraph, the number of
shares of Preferred Stock represented by such certificate may at any given time be less than
the amount stated on the face thereof.
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2) Mandatory Conversion. Upon the consummation of a Change of Control
Transaction, other than a Change of Control Transaction described in clauses (d) or (e) of
the definition of Change of Control Transaction, each share of Preferred Stock will be
automatically converted, without cost and on the terms of this Section 6, into the number of
whole shares of Common Stock into which the share of Preferred Stock would be convertible
under Section 6(a)(1) above. Any dividends or distributions accrued or declared but unpaid
at the time of conversion with respect to the Preferred Stock converted, including the
Make-Whole Payment, will be paid to the holder of Common Stock issued on conversion of the
Preferred Stock. A conversion on the consummation of a Change of Control Transaction will
be conditioned on, and will be deemed to have occurred immediately before, the consummation
of the Change of Control Transaction.
b) Conversion Price. The conversion price for the Preferred Stock shall equal
$3.7025, subject to adjustment herein (the Conversion Price).
c) Mechanics of Conversion
i. Delivery of Certificate Upon Conversion. Not later than three (3)
Trading Days after each Conversion Date (the Share Delivery Date), the
Corporation shall deliver, or cause to be delivered, to the converting Holder a
certificate or certificates representing the Conversion Shares which shall be free
of restrictive legends and trading restrictions representing the number of
Conversion Shares being acquired upon the conversion of the Preferred Stock. The
Corporation shall use its best efforts to deliver any certificate or certificates
required to be delivered by the Corporation under this Section 6 electronically
through the Depository Trust Company or another established clearing corporation
performing similar functions.
ii. Failure to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to or as directed by
the applicable Holder by the Share Delivery Date, the Holder shall be entitled to
elect by written notice to the Corporation at any time on or before its receipt of
such certificate or certificates, to rescind such Conversion, in which event the
Corporation shall promptly return to the Holder any original Preferred Stock
certificate delivered to the Corporation and the Holder shall promptly return to the
Corporation the Common Stock certificates issued to such Holder pursuant to the
rescinded Conversion Notice.
iii. Obligation Absolute. The Corporations obligation to issue and
deliver the Conversion Shares upon conversion of Preferred Stock in accordance with
the terms hereof are absolute and unconditional, irrespective of any action or
inaction by a Holder to enforce the same, any waiver or consent with respect to any
provision hereof, the recovery of any judgment against any Person or any action to
enforce the same, or any setoff, counterclaim, recoupment, limitation or
termination, or any breach or alleged breach by such Holder or any other Person
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of any obligation to the Corporation or any violation or alleged violation of
law by such Holder or any other person, and irrespective of any other circumstance
which might otherwise limit such obligation of the Corporation to such Holder in
connection with the issuance of such Conversion Shares; provided,
however, that such delivery shall not operate as a waiver by the Corporation
of any such action that the Corporation may have against such Holder. In the event
a Holder shall elect to convert any or all of the Stated Value of its Preferred
Stock, the Corporation may not refuse conversion based on any claim that such Holder
or any one associated or affiliated with such Holder has been engaged in any
violation of law, agreement or for any other reason, unless an injunction from a
court, on notice to Holder, restraining and/or enjoining conversion of all or part
of the Preferred Stock of such Holder shall have been sought and obtained, and the
Corporation posts a surety bond for the benefit of such Holder in the amount of 150%
of the Stated Value of Preferred Stock which is subject to the injunction, which
bond shall remain in effect until the completion of arbitration/litigation of the
underlying dispute and the proceeds of which shall be payable to such Holder to the
extent it obtains judgment. In the absence of such injunction, the Corporation
shall issue Conversion Shares and, if applicable, cash, upon a properly noticed
conversion. If the Corporation fails to take those actions within its control to
deliver to a Holder such certificate or certificates pursuant to Section 6(c)(i) on
the second Trading Day after the Share Delivery Date applicable to such conversion,
the Corporation shall pay to such Holder, in cash, as liquidated damages and not as
a penalty, for each $10,000 of Stated Value of Preferred Stock being converted, $50
per Trading Day for each Trading Day after such second Trading Day after the Share
Delivery Date until such certificates are delivered or Holder rescinds such
conversion. Nothing herein shall limit a Holders right to pursue actual damages or
declare a Triggering Event pursuant to Section 10 hereof for the Corporations
failure to deliver Conversion Shares in accordance with its obligations as specified
herein and such Holder shall have the right to pursue all remedies available to it
hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall not
prohibit a Holder from seeking to enforce damages pursuant to any other Section
hereof or under applicable law.
iv. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Corporation fails for any reason to take those actions within its control to deliver
to a Holder the applicable certificate or certificates by the Share Delivery Date
pursuant to Section 6(c)(i), and if after such Share Delivery Date such Holder is
required by its brokerage firm to purchase (in an open market transaction or
otherwise), or the Holders brokerage firm otherwise purchases, shares of Common
Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares
which such Holder was entitled to receive upon the conversion relating to such Share
Delivery Date (a Buy-In), then the Corporation shall (A) pay in cash to
such Holder (in addition to any other remedies available to or
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elected by such Holder) the amount, if any, by which (x) such Holders total
purchase price (including any brokerage commissions) for the Common Stock so
purchased exceeds (y) the product of (1) the aggregate number of shares of Common
Stock that such Holder was entitled to receive from the conversion at issue
multiplied by (2) the actual sale price at which the sell order giving rise to such
purchase obligation was executed (including any brokerage commissions) and (B) at
the option of such Holder, either reissue (if surrendered) the shares of Preferred
Stock equal to the number of shares of Preferred Stock submitted for conversion (in
which case, such conversion shall be deemed rescinded) or deliver to such Holder the
number of shares of Common Stock that would have been issued if the Corporation had
timely complied with its delivery requirements under Section 6(c)(i). For example,
if a Holder purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of shares of
Preferred Stock with respect to which the actual sale price of the Conversion Shares
(including any brokerage commissions) giving rise to such purchase obligation was a
total of $10,000 under clause (A) of the immediately preceding sentence, the
Corporation shall be required to pay such Holder $1,000. The Holder shall provide
the Corporation written notice indicating the amounts payable to such Holder in
respect of the Buy-In and, upon request of the Corporation, evidence of the amount
of such loss. Nothing herein shall limit a Holders right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with respect
to the Corporations failure to timely deliver certificates representing shares of
Common Stock upon conversion of the shares of Preferred Stock as required pursuant
to the terms hereof.
v. Reservation of Shares Issuable Upon Conversion. The Corporation
covenants that it will at all times reserve and keep available out of its authorized
and unissued shares of Common Stock for the sole purpose of issuance upon conversion
of the Preferred Stock, as herein provided, free from preemptive rights or any other
actual contingent purchase rights of Persons other than the Holder (and the other
holders of the Preferred Stock), not less than such aggregate number of shares of
the Common Stock as shall (subject to the terms and conditions set forth in the
Purchase Agreement) be issuable (taking into account the adjustments and
restrictions of Section 7) upon the conversion of the then outstanding shares of
Preferred Stock. The Corporation covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly authorized, validly issued, fully
paid and nonassessable.
vi. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of the Preferred Stock. As
to any fraction of a share which the Holder would otherwise be entitled to purchase
upon such conversion, the Corporation shall at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Conversion Price or round up to the next whole share.
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vii. Transfer Taxes. The issuance of certificates for shares of the
Common Stock on conversion of this Preferred Stock shall be made without charge to
any Holder for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificates, provided that the Corporation shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in a
name other than that of the Holders of such shares of Preferred Stock and the
Corporation shall not be required to issue or deliver such certificates unless or
until the Person or Persons requesting the issuance thereof shall have paid to the
Corporation the amount of such tax or shall have established to the satisfaction of
the Corporation that such tax has been paid.
d) Beneficial Ownership Limitation. The Corporation shall not effect any
conversion of the Preferred Stock, and a Holder shall not have the right to convert any
portion of the Preferred Stock, to the extent that, after giving effect to the conversion
set forth on the applicable Notice of Conversion, such Holder (together with such Holders
Affiliates, and any Persons acting as a group together with such Holder or any of such
Holders Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation
(as defined below). For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by such Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon conversion of the Preferred Stock with respect to which
such determination is being made, but shall exclude the number of shares of Common Stock
which are issuable upon (i) conversion of the remaining, unconverted Stated Value of
Preferred Stock beneficially owned by such Holder or any of its Affiliates and (ii) exercise
or conversion of the unexercised or unconverted portion of any other securities of the
Corporation subject to a limitation on conversion or exercise analogous to the limitation
contained herein (including, without limitation, the Preferred Stock or the Warrants)
beneficially owned by such Holder or any of its Affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. To the extent that the limitation contained in this
Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in
relation to other securities owned by such Holder together with any Affiliates) and of how
many shares of Preferred Stock are convertible shall be in the sole discretion of such
Holder, and the submission of a Notice of Conversion shall be deemed to be such Holders
determination of whether the shares of Preferred Stock may be converted (in relation to
other securities owned by such Holder together with any Affiliates) and how many shares of
the Preferred Stock are convertible, in each case subject to the Beneficial Ownership
Limitation. To ensure compliance with this restriction, each Holder will be deemed to
represent to the Corporation each time it delivers a Notice of Conversion that such Notice
of Conversion has not violated the restrictions set forth in this paragraph and the
Corporation shall have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status as contemplated above
shall be determined in accordance with Section
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13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For
purposes of this Section 6(d), in determining the number of outstanding shares of Common
Stock, a Holder may rely on the number of outstanding shares of Common Stock as stated in
the most recent of the following: (i) the Corporations most recent periodic or annual
report filed with the Commission, as the case may be, (ii) a more recent public announcement
by the Corporation or (iii) a more recent written notice by the Corporation or the Transfer
Agent setting forth the number of shares of Common Stock outstanding. Upon the written or
oral request of a Holder, the Corporation shall within two Trading Days confirm orally and
in writing to such Holder the number of shares of Common Stock then outstanding. In any
case, the number of outstanding shares of Common Stock shall be determined after giving
effect to the conversion or exercise of securities of the Corporation, including the
Preferred Stock, by such Holder or its Affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. The Beneficial Ownership
Limitation shall be 4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock issuable upon
conversion of Preferred Stock held by the applicable Holder. A Holder, upon not less than
61 days prior notice to the Corporation, may increase or decrease the Beneficial Ownership
Limitation provisions of this Section 6(d) applicable to its Preferred Stock provided that
the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of shares of Common
Stock upon conversion of this Preferred Stock held by the Holder and the provisions of this
Section 6(d) shall continue to apply. Any such increase or decrease will not be effective
until the 61st day after such notice is delivered to the Corporation and shall
only apply to such Holder and no other Holder. The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict conformity with the terms of
this Section 6(d) to correct this paragraph (or any portion hereof) which may be defective
or inconsistent with the intended Beneficial Ownership Limitation contained herein or to
make changes or supplements necessary or desirable to properly give effect to such
limitation. The limitations contained in this paragraph shall apply to a successor holder of
Preferred Stock.
Section 7. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Corporation, at any time while
this Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on shares of Common Stock or
any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Corporation upon conversion of, or payment of a
dividend on, this Preferred Stock), (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, (iii) combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the
event of a reclassification of shares of the Common Stock, any shares of capital stock of
the Corporation, then the Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock
15
(excluding any treasury shares of the Corporation) outstanding immediately before such
event, and of which the denominator shall be the number of shares of Common Stock
outstanding immediately after such event. Any adjustment made pursuant to this Section 7(a)
shall become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision, combination or
re-classification.
b) RESERVED.
c) Subsequent Rights Offerings. If the Corporation, at any time while this
Preferred Stock is outstanding, shall issue rights, options or warrants to all holders of
Common Stock (and not to the Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share that is lower than the VWAP on the record date referenced
below, then the Conversion Price shall be multiplied by a fraction of which the denominator
shall be the number of shares of the Common Stock outstanding on the date of issuance of
such rights, options or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase, and of which the numerator shall be the number of
shares of the Common Stock outstanding on the date of issuance of such rights, options or
warrants plus the number of shares which the aggregate offering price of the total number of
shares so offered (assuming delivery to the Corporation in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such VWAP. Such
adjustment shall be made whenever such rights, options or warrants are issued, and shall
become effective immediately after the record date for the determination of stockholders
entitled to receive such rights, options or warrants.
d) Pro Rata Distributions. If the Corporation, at any time while this Preferred
Stock is outstanding, distributes to all holders of Common Stock (and not to the Holders)
evidences of its indebtedness or assets (including cash and cash dividends) or rights or
warrants to subscribe for or purchase any security, then in each such case the Conversion
Price shall be adjusted by multiplying such Conversion Price in effect immediately prior to
the record date fixed for determination of stockholders entitled to receive such
distribution by a fraction of which the denominator shall be the VWAP determined as of the
record date mentioned above, and of which the numerator shall be such VWAP on such record
date less the then fair market value at such record date of the portion of such assets or
evidence of indebtedness or rights or warrants so distributed applicable to one outstanding
share of the Common Stock as determined by the Board of Directors of the Corporation in good
faith. In either case the adjustments shall be described in a statement delivered to the
Holders describing the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment shall be made
whenever any such distribution is made and shall become effective immediately after the
record date mentioned above.
e) Fundamental Transaction. If, at any time while this Preferred Stock is
outstanding, (i) the Corporation, directly or indirectly, in one or more related
transactions
16
effects any merger or consolidation of the Corporation with or into another Person,
(ii) the Corporation, directly or indirectly, effects any sale, lease, license, assignment,
transfer, conveyance or other disposition of all or substantially all of its assets in one
or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender
offer or exchange offer (whether by the Corporation or another Person) is completed pursuant
to which holders of Common Stock are permitted to sell, tender or exchange their shares for
other securities, cash or property and has been accepted by the holders of 50% or more of
the outstanding Common Stock, (iv) the Corporation, directly or indirectly, in one or more
related transactions effects any reclassification, reorganization or recapitalization of the
Common Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property, (v) the
Corporation, directly or indirectly, in one or more related transactions consummates a stock
or share purchase agreement or other business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of arrangement) with another Person
whereby such other Person acquires more than 50% of the outstanding shares of Common Stock
(not including any shares of Common Stock held by the other Person or other Persons making
or party to, or associated or affiliated with the other Persons making or party to, such
stock or share purchase agreement or other business combination) (each a Fundamental
Transaction), then, upon any subsequent conversion of this Preferred Stock, the Holder
shall have the right to receive, for each Conversion Share that would have been issuable
upon such conversion immediately prior to the occurrence of such Fundamental Transaction
(without regard to any limitation in Section 6(d) on the conversion of this Preferred
Stock), the number of shares of Common Stock of the successor or acquiring corporation or of
the Corporation, if it is the surviving corporation, and any additional consideration (the
Alternate Consideration) receivable as a result of such Fundamental Transaction by
a holder of the number of shares of Common Stock for which this Preferred Stock is
convertible immediately prior to such Fundamental Transaction (without regard to any
limitation in Section 6(d) on the conversion of this Preferred Stock). For purposes of any
such conversion, the determination of the Conversion Price shall be appropriately adjusted
to apply to such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental Transaction, and the
Corporation shall apportion the Conversion Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the securities, cash
or property to be received in a Fundamental Transaction, then the Holder shall be given the
same choice as to the Alternate Consideration it receives upon any conversion of this
Preferred Stock following such Fundamental Transaction. To the extent necessary to
effectuate the foregoing provisions, any successor to the Corporation or surviving entity in
such Fundamental Transaction shall file a new Certificate of Designation with the same terms
and conditions and issue to the Holders new preferred stock consistent with the foregoing
provisions and evidencing the Holders right to convert such preferred stock into Alternate
Consideration. The Corporation shall cause any successor entity in a Fundamental
Transaction in which the Corporation is not the survivor (the Successor Entity) to
assume in writing all of the obligations of the
17
Corporation under this Certificate of Designation and the other Transaction Documents
(as defined in the Purchase Agreement) in accordance with the provisions of this Section
7(e) pursuant to written agreements and shall, at the option of the holder of this Preferred
Stock, deliver to the Holder in exchange for this Preferred Stock a security of the
Successor Entity evidenced by a written instrument substantially similar in form and
substance to this Preferred Stock which is convertible for a corresponding number of shares
of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of
Common Stock acquirable and receivable upon conversion of this Preferred Stock (without
regard to any limitations on the conversion of this Preferred Stock) prior to such
Fundamental Transaction, and with a conversion price which applies the conversion price
hereunder to such shares of capital stock (but taking into account the relative value of the
shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares
of capital stock, such number of shares of capital stock and such conversion price being for
the purpose of protecting the economic value of this Preferred Stock immediately prior to
the consummation of such Fundamental Transaction), and which is reasonably satisfactory in
form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction,
the Successor Entity shall succeed to, and be substituted for (so that from and after the
date of such Fundamental Transaction, the provisions of this Certificate of Designation and
the other Transaction Documents referring to the Corporation shall refer instead to the
Successor Entity), and may exercise every right and power of the Corporation and shall
assume all of the obligations of the Corporation under this Certificate of Designation and
the other Transaction Documents with the same effect as if such Successor Entity had been
named as the Corporation herein.
f) Calculations. All calculations under this Section 7 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this
Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding any treasury
shares of the Corporation) issued and outstanding.
g) Notice to the Holders.
i. Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 7, the Corporation shall promptly
deliver to each Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment.
ii. Notice to Allow Conversion by Holder. If (A) the Corporation shall
declare a dividend (or any other distribution in whatever form) on the Common Stock,
(B) the Corporation shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Corporation shall authorize the granting to
all holders of the Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of any
stockholders of the Corporation shall be required in
18
connection with any reclassification of the Common Stock, any consolidation or
merger to which the Corporation is a party, any sale or transfer of all or
substantially all of the assets of the Corporation, or any compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property or (E)
the Corporation shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Corporation, then, in each case, the
Corporation shall cause to be filed at each office or agency maintained for the
purpose of conversion of this Preferred Stock, and shall cause to be delivered to
each Holder at its last address as it shall appear upon the stock books of the
Corporation, at least twenty (20) calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution, redemption,
rights or warrants, or if a record is not to be taken, the date as of which the
holders of the Common Stock of record to be entitled to such dividend,
distributions, redemption, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale, transfer or share
exchange is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to exchange
their shares of the Common Stock for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share exchange,
provided that the failure to deliver such notice or any defect therein or in the
delivery thereof shall not affect the validity of the corporate action required to
be specified in such notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information regarding the Corporation
or any of the Subsidiaries, the Corporation shall simultaneously file such notice
with the Commission pursuant to a Current Report on Form 8-K. The Holder shall
remain entitled to convert the Conversion Amount of this Preferred Stock (or any
part hereof) during the 20-day period commencing on the date of such notice through
the effective date of the event triggering such notice except as may otherwise be
expressly set forth herein.
Section 8. [INTENTIONALLY DELETED]
Section 9. Negative Covenants. As long as any Holder is a Substantial
Original Holder, unless at least 80% in Stated Value of the then outstanding shares of Preferred
Stock shall have otherwise given prior written consent, the Corporation shall not, and shall not
permit any of the Subsidiaries to, directly or indirectly:
a) amend its charter documents, including, without limitation, its certificate of
incorporation and bylaws, in any manner that materially and adversely affects any rights of
the Holder; provided, however, that this covenant shall in no event apply to
amendments to increase the Corporations authorized number of shares of Common Stock;
19
b) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a
de minimis number of shares of its Common Stock, Common Stock Equivalents or
Junior Securities, other than as to (i) the Conversion Shares or Warrant Shares as permitted
or required under the Transaction Documents and (ii) repurchases of Common Stock or Common
Stock Equivalents of departing officers and directors of the Corporation, provided that such
repurchases shall not exceed an aggregate of $100,000 in any fiscal year for all officers
and directors;
c) pay cash dividends or distributions on Junior Securities of the Corporation;
d) enter into any transaction with any Affiliate of the Corporation which would be
required to be disclosed in any public filing with the Commission, unless such transaction
is made on an arms-length basis and expressly approved by a majority of the disinterested
directors of the Corporation (even if less than a quorum otherwise required for board
approval); or
e) enter into any agreement with respect to any of the foregoing.
Section 10. Redemption Upon Triggering Events.
a) Triggering Event means, wherever used herein any of the following events
(whatever the reason for such event and whether such event shall be voluntary or involuntary or
effected by operation of law or pursuant to any judgment, decree or order of any court, or any
order, rule or regulation of any administrative or governmental body):
i. if the Corporation fails to provide at all times the Registration Statement
or usable prospectus that permits the Corporation to issue the Conversion Shares,
subject to a grace period of 30 calendar days in the aggregate in any 365-day
period;
ii. the Corporation shall fail to take those actions within its control to
deliver certificates representing Conversion Shares issuable upon a conversion
hereunder that comply with the provisions hereof prior to the fifth Trading Day
after such shares are required to be delivered hereunder, or the Corporation shall
provide written notice to any Holder, including by way of public announcement, at
any time, of its intention not to comply with requests for conversion of any shares
of Preferred Stock in accordance with the terms hereof;
iii. the Corporation shall fail for any reason to pay in full the amount of
cash due pursuant to a Buy-In within five Trading Days after notice therefor is
delivered hereunder;
20
iv. the Corporation shall fail to have available a sufficient number of
authorized and unreserved shares of Common Stock to issue to such Holder upon a
conversion hereunder;
v. unless specifically addressed elsewhere in this Certificate of Designation
as a Triggering Event, the Corporation shall fail to observe or perform in all
material respects any other covenant, agreement or warranty contained in, or
otherwise commit any material breach of the Transaction Documents, and such material
failure or breach shall not, if subject to the possibility of a cure by the
Corporation, have been cured in all material respects within 30 calendar days after
the date on which written notice of such failure or breach shall have been delivered
to the Corporation; provided, however, that this paragraph shall be effective only
as to those Holders that were a party to the Purchase Agreement;
vi. the Corporation shall redeem more than a de minimis number
of Junior Securities other than as to repurchases of Common Stock or Common Stock
Equivalents from departing directors, officers, employees or consultants and
provided that, while any of the Preferred Stock remains outstanding, such
repurchases shall not exceed an aggregate of $100,000 in any fiscal year from all
directors, officers, employees and consultants;
vii. the Corporation shall be party to a Change of Control Transaction
described in clauses (a) through (d) of the definition of Change of Control
Transaction;
viii. there shall have occurred a Bankruptcy Event;
ix. the Common Stock shall fail to be listed or quoted for trading on a Trading
Market for more than five Trading Days, which need not be consecutive Trading Days;
provided, however, that this paragraph shall be effective only as to those Holders
that were a party to the Purchase Agreement; or
x. any monetary judgment, writ or similar final process shall be entered or
filed against the Corporation, any subsidiary or any of their respective property or
other assets for more than $150,000, and such judgment, writ or similar final
process shall remain unvacated, unbonded or unstayed for a period of 60 calendar
days (unless the Company shall provide the Holders with reasonable written evidence
that such judgment, writ or process is covered by an insurance policy issued by a
reputable insurer of recognized standing).
b) Upon the occurrence of a Triggering Event, 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 Corporation to redeem all of the Preferred
Stock then held by such Holder for a redemption price, in cash, equal to the
21
Triggering Redemption Amount. The Triggering Redemption Amount, in cash, shall be due
and payable within five Trading Days of the date on which the notice for the payment
therefor is provided by a Holder (the Triggering Redemption Payment Date). If the
Corporation fails to pay in full the Triggering Redemption Amount hereunder on the date such
amount is due in accordance with this Section, the Corporation will pay interest thereon at
a rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law,
accruing daily from such date until the Triggering Redemption Amount, plus all such interest
thereon, is paid in full. For purposes of this Section, a share of Preferred Stock is
outstanding until such date as the applicable Holder shall have received Conversion Shares
upon a conversion (or attempted conversion) thereof that meets the requirements hereof or
has been paid the Triggering Redemption Amount in cash.
Section 11. Miscellaneous.
a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holders hereunder including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service, addressed to the Corporation, at 6725 Mesa Ridge Rd.,
Suite 100, San Diego, California 92121, Attention: Corporate Secretary, facsimile number
(858) 552-0876, or such other facsimile number or address as the Corporation may specify for
such purposes by notice to the Holders delivered in accordance with this Section 11, with a
copy sent by facsimile or overnight courier service to: DLA Piper LLP (US), 4365 Executive
Drive, Suite 1100, San Diego, California 92121, Attention: Michael S. Kagnoff. Any and all
notices or other communications or deliveries to be provided by the Corporation hereunder
shall be in writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service addressed to each Holder at the facsimile number or
address of such Holder appearing on the books of the Corporation, or if no such facsimile
number or address appears on the books of the Corporation, at the principal place of
business of such Holder, as set forth in the Purchase Agreement. Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via facsimile at
the facsimile number set forth in this Section prior to 5:30 p.m. (New York City time) on
any date, (ii) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth in this Section
on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any
Trading Day, (iii) the second Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service, or (iv) upon actual receipt by the party to
whom such notice is required to be given.
b) Absolute Obligation. Except as expressly provided herein, no provision of
this Certificate of Designation shall alter or impair the obligation of the Corporation,
which is absolute and unconditional, to pay liquidated damages and accrued interest, as
22
applicable, on the shares of Preferred Stock at the time, place, and rate, and in the
coin or currency, herein prescribed.
c) Lost or Mutilated Preferred Stock Certificate. If a Holders Preferred
Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall
execute and deliver, in exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a
new certificate for the shares of Preferred Stock so lost, stolen or destroyed, but only
upon receipt of evidence of such loss, theft or destruction of such certificate, and of the
ownership hereof reasonably satisfactory to the Corporation (including indemnity or security
reasonably satisfactory to the Corporation).
d) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Certificate of Designation shall be governed by and
construed and enforced in accordance with the internal laws of the State of Delaware,
without regard to the principles of conflict of laws thereof. Each party agrees that all
legal proceedings concerning the interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought against a party hereto or
its respective Affiliates, directors, officers, shareholders, employees or agents) shall be
commenced in the state and federal courts sitting in the City of New York, Borough of
Manhattan (the New York Courts). Each party hereto hereby irrevocably submits to
the exclusive jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of any of the Transaction Documents), and
hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any
claim that it is not personally subject to the jurisdiction of such New York Courts, or such
New York Courts are improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Certificate of Designation and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any other manner
permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Certificate of Designation or the transactions
contemplated hereby. If any party shall commence an action or proceeding to enforce any
provisions of this Certificate of Designation, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys fees and other costs
and expenses incurred in the investigation, preparation and prosecution of such action or
proceeding.
e) Waiver. Any waiver by the Corporation or a Holder of a breach of any
provision of this Certificate of Designation shall not operate as or be construed to be a
23
waiver of any other breach of such provision or of any breach of any other provision of
this Certificate of Designation or a waiver by any other Holders. The failure of the
Corporation or a Holder to insist upon strict adherence to any term of this Certificate of
Designation on one or more occasions shall not be considered a waiver or deprive that party
(or any other Holder) of the right thereafter to insist upon strict adherence to that term
or any other term of this Certificate of Designation on any other occasion. Any waiver by
the Corporation or a Holder must be in writing.
f) Severability. If any provision of this Certificate of Designation is
invalid, illegal or unenforceable, the balance of this Certificate of Designation shall
remain in effect, and if any provision is inapplicable to any Person or circumstance, it
shall nevertheless remain applicable to all other Persons and circumstances. If it shall be
found that any interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum rate of interest permitted under applicable
law.
g) Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the next succeeding
Business Day.
h) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designation and shall not be deemed to limit or
affect any of the provisions hereof.
i) Status of Converted or Redeemed Preferred Stock. Shares of Preferred Stock
may only be issued pursuant to the Purchase Agreement. If any shares of Preferred Stock
shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the
status of authorized but unissued shares of preferred stock and shall no longer be
designated as 2.19446320054018% Series F Convertible Preferred Stock.
*********************
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RESOLVED, FURTHER, that the Chairman, the president or any vice-president, and the secretary
or any assistant secretary, of the Corporation be and they hereby are authorized and directed to
prepare and file this Certificate of Designation of Preferences, Rights and Limitations in
accordance with the foregoing resolution and the provisions of Delaware law.
IN
WITNESS WHEREOF, the undersigned have executed this Certificate this
3rd day of
May, 2010.
/s/ Brian M. Culley
|
/s/ Patrick L. Keran | |||
Name: Brian M. Culley
|
Name: Patrick L. Keran | |||
Title: Chief Executive Officer
|
Title: President and Secretary |
ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF PREFERRED STOCK)
The
undersigned hereby elects to convert the number of shares of
2.19446320054018% Series F
Convertible Preferred Stock indicated below into shares of common stock, par value $0.001 per share
(the Common Stock), of ADVENTRX Pharmaceuticals, Inc., a Delaware corporation (the
Corporation), according to the conditions hereof, as of the date written below. If shares
of Common Stock are to be issued in the name of a Person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith
such certificates and opinions as may be required by the Corporation in accordance with the
Purchase Agreement. No fee will be charged to the Holders for any conversion, except for any such
transfer taxes.
Conversion calculations:
Date to Effect Conversion:
|
Number of shares of Preferred Stock owned prior to Conversion:
|
Number of shares of Preferred Stock to be Converted:
|
Stated Value of shares of Preferred Stock to be Converted:
|
Number of shares of Common Stock to be Issued:
|
Applicable Conversion Price:
|
$3.7025 |
Number of shares of Preferred Stock subsequent to Conversion:
|
Address for Delivery:
|
or
DWAC Instructions*:
Name of DTC Participant (Holders prime broker-dealer):
|
DTC Participant Number:
|
Name of Account at DTC Participant to be credited with the shares:
|
Account Number at DTS Participant to be credited with the shares:
|
* | You must contact your broker-dealer and ask them to initiate the DWAC or you will not receive the shares. |
(Print Name of Holder) | ||||
By: | ||||
Name: | ||||
Title: | ||||
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