Attached files
file | filename |
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8-K - Talon Therapeutics, Inc. | v187788_8k.htm |
EX-3.2 - Talon Therapeutics, Inc. | v187788_ex3-2.htm |
EX-10.3 - Talon Therapeutics, Inc. | v187788_ex10-3.htm |
EX-10.4 - Talon Therapeutics, Inc. | v187788_ex10-4.htm |
EX-10.2 - Talon Therapeutics, Inc. | v187788_ex10-2.htm |
EX-99.1 - Talon Therapeutics, Inc. | v187788_ex99-1.htm |
EX-10.1 - Talon Therapeutics, Inc. | v187788_ex10-1.htm |
EX-99.2 - Talon Therapeutics, Inc. | v187788_ex99-2.htm |
EXHIBIT
3.1
CERTIFICATE
OF DESIGNATION
OF
SERIES
A-1 CONVERTIBLE PREFERRED STOCK
OF
HANA
BIOSCIENCES, INC.
Pursuant
to Section 151 of the General
Corporation
Law of the State of Delaware
Hana
Biosciences, Inc. (the “Company”), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the “DGCL”), hereby
certifies as follows:
FIRST: The
Amended and Restated Certificate of Incorporation (the “Certificate of
Incorporation”) of the Company authorizes the issuance of up to
10,000,000 shares of preferred stock, par value $0.001 per share (the “Authorized Preferred
Stock”), and further authorizes the Board of Directors of the Company by
resolution or resolutions to provide for the issuance of Authorized Preferred
Stock in series and to establish the number of shares to be included in each
such series and to fix the designation, voting powers, preferences and relative
rights and qualifications, limitations or restrictions of each such
series.
SECOND:
On June 4, 2010, the Board of Directors of the Company adopted the following
resolution authorizing the creation and issuance of a series of said Authorized
Preferred Stock to be known as “Series A-1 Convertible Preferred
Stock”:
RESOLVED: that,
pursuant to authority conferred upon the Board of Directors by the Certificate
of Incorporation of the Company, the Board of Directors hereby authorizes and
establishes a series of one million one hundred thousand (1,100,000) shares of
Series A-1 Convertible Preferred Stock, and hereby fixes the number,
designation, powers, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
such shares as follows:
1. Designation and Amount;
Ranking.
(a) There
shall be created from the Authorized Preferred Stock a series of preferred
stock, designated as the “Series A-1 Convertible Preferred Stock”, par value
$0.001 per share (the “Preferred Stock”),
and the authorized number of shares of such series shall be one million one
hundred thousand (1,100,000), which may be issued by the Company from time to
time subject to compliance with this Certificate, the Investment Agreement and
any other conditions to issuance. Such number of shares may be
decreased by resolution of the Board of Directors; provided that no
decrease shall reduce the number of shares of Preferred Stock to a number less
than that number of shares of Preferred Stock then outstanding plus the number
of shares of Preferred Stock issuable pursuant to the Investment Agreement (as
defined in Annex I).
(b) The
Preferred Stock shall, with respect to both dividend rights and rights upon a
Liquidation (as defined in Annex I or Annex II, as applicable, attached hereto)
or Change of Control (as defined in Annex I or Annex II, as applicable, attached
hereto), rank (i) senior to all Junior Stock (as defined in Annex I or Annex II,
as applicable, attached hereto), (ii) on parity with all Parity Stock (as
defined in Annex I or Annex II, as applicable, attached hereto) and (iii) junior
to all Senior Stock (as defined in Annex I or Annex II, as applicable, attached
hereto).
(c)
Until the consummation of the Second Closing (as defined in the Investment
Agreement) in accordance with the terms of the Investment Agreement, the
Preferred Stock shall have the designations, preferences, limitations and
relative rights set forth in this Section 1 and Annex I attached hereto. From
and after the consummation of the Second Closing in accordance with the terms of
the Investment Agreement, the Preferred Stock shall have the designations,
preferences, limitations and relative rights set forth in this Section 1 and
Annex II attached hereto. Notwithstanding the foregoing, if the Second Closing
has not been consummated in accordance with the terms of the Investment
Agreement on or prior to December 7, 2010, the Preferred Stock shall have the
designations, preferences, limitations and relative rights set forth in this
Section 1 and Annex I attached hereto and shall never be deemed to have the
designations, preferences, limitations and relative rights set forth on Annex II
attached hereto. The Company shall promptly provide each Holder (as defined in
Annex I) with written notice of the consummation of the Second Closing and the
Company shall publicly announce the consummation of the Second
Closing.
[SIGNATURE
PAGE FOLLOWS]
- 2
-
IN
WITNESS WHEREOF, the Company has caused this Certificate of Designation to be
signed this 7th day of June, 2010.
HANA
BIOSCIENCES, INC.
|
||
By:
|
/s/ Steven R. Deitcher
|
|
Name:
Steven R. Deitcher
|
||
Title: President
& CEO
|
[Signature
Page to Series A-1 Certificate of Designation]
ANNEX I
ADDITIONAL
TERMS
OF
SERIES
A-1 CONVERTIBLE PREFERRED STOCK
OF
HANA
BIOSCIENCES, INC.
2. Definitions. As
used herein, the following terms shall have the following meanings:
(a) “Accretion Rate” has
the meaning set forth in Section 3(a).
(b) “Accreted Value” has
the meaning set forth in Section 3(a).
(c) “Accrued Dividends”
means, with respect to any share of Preferred Stock, as of any date, the accrued
and unpaid dividends on such share through and including such date (whether or
not declared).
(d) “Acquiring Person”
shall mean any Person or group (within the meaning of Section 13(d)(3) of the
Exchange Act) (other than any Person who is a member of the Warburg Pincus
Investor Group).
(e) “A/D Rate” means the
Accretion Rate or the Dividend Rate, as applicable, at the time of the Special
Triggering Event.
(f) “Affiliate” shall
mean any Person, directly or indirectly, controlling, controlled by or under
common control with such Person.
(g) “Applicable Issuance
Date” means the date of the issuance of the applicable shares of
Preferred Stock (which may be issued from time to time on one or more
days).
(h) “Applicable Price”
means the greater of the Current Market Price per share of outstanding Common
Stock (A) on the date the Company issues any Common Stock or Convertible
Securities, (B) on the date the Company fixes the offering price or conversion
price of the Common Stock or Convertible Securities to be issued, and (C) on the
date of the first announcement of such issuance.
(i)
“Applicable Terms”
means any of the following defined terms herein: (a) Accretion Rate;
(b) Accreted Value; (c) A/D Rate; (d) Common Stock Equivalent; (e) Common Stock
Equivalent Conversion Rate; (f) Conversion Price; (g) Dividend Rate; (h)
Equivalent Conversion Price; or (i) Stated Value.
(j)
“Approved
Markets” shall mean the NASDAQ Global Select Market, the NASDAQ Global
Market, the NASDAQ Capital Market or the NYSE.
(k) “Authorized Preferred
Stock” has the meaning set forth in the recitals.
Annex
I-1
(l)
“Board of Directors”
means the Board of Directors of the Company or, with respect to any action to be
taken by the Board of Directors, any committee of the Board of Directors duly
authorized to take such action.
(m) “Business Day” means
any day except Saturday, Sunday and any day which shall be a legal holiday or a
day on which banking institutions in the State of New York generally are
authorized or required by law or other governmental actions to
close.
(n) “Capital Stock” of any
Person means any and all securities (including equity-linked securities),
interests (including partnership interests), rights to purchase, warrants,
options, participations or other equivalents of or interests in (however
designated) equity of such Person, including any Preference Stock.
(o) “Cash and Cash
Equivalents” means all cash and cash equivalents determined in accordance
with GAAP.
(p) “Certificate” means
this Certificate of Designation with respect to the Preferred Stock, as amended
from time to time.
(q) “Certificate of
Incorporation” has the meaning set forth in the recitals.
(r)
“Change of Control”
means the consummation of any transaction or series of related transactions
involving (i) any purchase or acquisition (whether by way of merger, share
exchange, consolidation, business combination or similar transaction or
otherwise) by any Acquiring Person, of any of (A) securities representing a
majority of the outstanding voting power of the Company entitled to elect the
Board of Directors or (B) the majority of the outstanding shares of Common
Stock, (ii) any sale, lease, exchange, transfer, exclusive license or
disposition of all or substantially all of the assets of the Company and its
Subsidiaries, taken together as a whole, to an Acquiring Person, or (iii) any
merger, consolidation or business combination in which the holders of voting
securities of the Company immediately prior to the transaction, as a group, do
not hold securities representing a majority of the outstanding voting power
entitled to elect the board of directors of the surviving entity in such merger,
consolidation or business combination.
(s) “Closing
Price” shall mean, with respect to the Common Stock (or other
relevant Capital Stock) on any date of determination, the closing sale price or,
if no closing sale price is reported, the last reported sale price of the shares
of the Common Stock (or other relevant Capital Stock) on the relevant Approved
Market on such date. If the Common Stock (or other relevant Capital
Stock) is not traded on an Approved Market on any date of determination, the
Closing Price of the Common Stock (or other relevant Capital Stock) on such date
of determination means the closing sale price as reported in the composite
transactions for the principal U.S. national or regional securities exchange on
which the Common Stock (or other relevant Capital Stock) is so listed or quoted,
or, if no closing sale price is reported, the last reported sale price on the
principal U.S. national or regional securities exchange on which the Common
Stock (or other relevant Capital Stock) is so listed or quoted, or if the Common
Stock (or other relevant Capital Stock) is not so listed or quoted on a U.S.
national or regional securities exchange, the last quoted bid price for the
Common Stock (or other relevant Capital Stock) in the over-the-counter market as
reported by Pink Sheets LLC or similar organization, or, if that bid price is
not available, the market price of the Common Stock (or other relevant Capital
Stock) on that date as determined in good faith by the Board of
Directors.
Annex
I-2
(t)
“Common Stock” means
the common stock, par value $0.001 per share, of the Company, or any other class
of stock resulting from successive changes or reclassifications of such Common
Stock consisting solely of changes in par value, or from par value to no par
value, or as a result of a subdivision, combination or merger, reclassification,
consolidation or similar transaction in which the Company is a constituent
corporation.
(u) “Common Stock
Equivalent” means, on the date in question, with respect to a share of
Preferred Stock, the number of shares of Common Stock that would be issuable if
the share of Preferred Stock was converted into shares of Common Stock at the
Common Stock Equivalent Conversion Rate.
(v) “Common Stock Equivalent
Conversion Rate” means the quotient obtained by dividing (A) the per
share Accreted Value by (B) the Equivalent Conversion Price.
(w) “Company” has the
meaning set forth in the recitals.
(x) “Conversion Date” has
the meaning set forth in Section 7(a)(iv).
(y) “Conversion Price”
means $0.184, subject to adjustment as set forth herein.
(z)
“Conversion Right” has
the meaning set forth in Section 7(a)(i).
(aa) “Conversion Right
Notice” has the meaning set forth in Section 7(a)(ii).
(bb) “Convertible
Securities” means debt securities or shares of Capital Stock convertible
into or exchangeable, directly or indirectly, for Common Stock.
(cc) “Current Market Price”
means, on any date, the average of the daily Closing Price per share of the
Common Stock or other securities on each of the twenty (20) consecutive Trading
Days preceding the earlier of the day before the date in question and the day
before the Ex-Date with respect to the issuance or distribution giving rise to
an adjustment to the Conversion Price pursuant to Section 8.
(dd) “DGCL” has the meaning
set forth in the recitals.
(ee) “Dividend Deferral
Election” has the meaning set forth in Section 3(a).
(ff) “Dividend Equivalent
Amount” has the meaning set forth in Section 3(d).
(gg) “Dividend Payment
Date” means March 31, June 30, September 30 and December 31 of each
year.
(hh) “Dividend Rate” has
the meaning set forth in Section 3(a).
Annex
I-3
(ii) “Dividend Record Date”
means, with respect to any dividend payable on a Dividend Payment Date, the
preceding March 15, June 15, September 15 and December 15 and, with respect to
any dividend payable on any other date, such date as may be determined by the
Board of Directors.
(jj) “EBITDA” means, for
any period, earnings before interest, taxes, depreciation and amortization for
such period, each as determined in accordance with GAAP.
(kk) “Electing Holders” has
the meaning set forth in Section 6(a).
(ll) “Electing Holders Redemption
Notice” has the meaning set forth in Section 6(d).
(mm) “Equivalent Conversion
Price” means the product of 0.70 times the Conversion Price on the date
in question.
(nn) “Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
(oo)
“Ex-Date”, when used
with respect to any issuance or distribution, means the first date on which the
Common Stock or other securities trade without the right to receive the issuance
or distribution giving rise to an adjustment to the Conversion Price pursuant to
Section 8.
(pp) “Excess Authorized Shares
Threshold” means the difference obtained by subtracting (i) the sum of
(A) the number of shares of Common Stock outstanding at the time of
determination on a Fully Diluted Basis plus (B) the Reserved Shares at the time
of determination from (ii) the authorized shares of Common Stock at the time of
determination.
(qq) “Fully Diluted Basis”
means all outstanding shares of Common Stock assuming the exercise of all
outstanding shares of Convertible Securities (excluding any outstanding shares
of Preferred Stock) without regard to any restrictions or conditions with
respect to exercisability thereof.
(rr) “GAAP” means United
States generally accepted accounting principles.
(ss) “Holder” means a
holder of record of outstanding shares of the Preferred Stock.
Annex
I-4
(tt) “Indebtedness” means,
without duplication, (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services, including, without limitation, “capital leases” in
accordance with GAAP (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with GAAP, consistently
applied for the periods covered thereby, is classified as a capital lease, (G)
all indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any lien upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above. For the purposes of this definition, “Contingent
Obligation” mean, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto.
(uu) “Investment Agreement”
means that certain Investment Agreement, dated June 7, 2010, by and among the
Company and the purchasers named therein, as the same may be amended from time
to time.
(vv) “Junior Stock” means
all classes of Common Stock and each other class of Capital Stock or series of
preferred stock established after the Original Issue Date by the Board of
Directors, the terms of which do not expressly provide that such class or series
ranks senior to or on parity with the Preferred Stock as to dividend rights
and/or rights upon a Liquidation or Change of Control.
(ww) “Junior Stock Event”
has the meaning set forth in Section 3(d).
(xx) “Liquidation” means
the voluntary or involuntary liquidation, dissolution or winding-up of the
Company.
(yy) “Liquidation Event”
has the meaning set forth in Section 4(a).
(zz) “Liquidation
Preference” has the meaning set forth in Section 4(a).
(aaa) “Mandatory Conversion”
has the meaning set forth in Section 7(b)(i).
(bbb) “Mandatory Conversion
Time” has the meaning set forth in Section 7(b)(i).
(ccc) “Net Debt” means, as
of any particular date, the aggregate amount of Indebtedness less all Cash and
Cash Equivalents as of such date.
(ddd) “NYSE” means the New
York Stock Exchange, Inc.
Annex
I-5
(eee) “Option” means rights,
options or warrants to subscribe for, purchase or otherwise acquire Common Stock
or Convertible Securities.
(fff) “Original Issue Date”
means June 7, 2010.
(ggg) “Parity Stock” means
any class of Capital Stock or series of preferred stock established after the
Original Issue Date by the Board of Directors, the terms of which expressly
provide that such class or series will rank on parity with the Preferred Stock
as to dividend rights and/or rights upon a Liquidation or Change of
Control.
(hhh) “Person” means any
individual, corporation, general partnership, limited partnership, limited
liability partnership, joint venture, association, joint-stock company, trust,
limited liability company, unincorporated organization, other entity or
government or any agency or political subdivision thereof.
(iii) “Preference Stock”
means, as applied to the Capital Stock of any Person, Capital Stock of any
series, class or classes (however designated) which is preferred as to the
payment of dividends or distributions, or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of such Person or change
of control (defined by analogy to the definition of Change of Control herein) of
such Person, over shares of Capital Stock of any other series or class of such
Person.
(jjj) “Preferred Stock” has
the meaning set forth in Section 1(a).
(kkk) “Record Date” means
the record date as determined in accordance with Section 213 of the
DGCL.
(lll) “Redemption” has the
meaning set forth in Section 6(a).
(mmm) “Redemption Date” has
the meaning set forth in Section 6(d).
(nnn) “Redemption Notice”
has the meaning set forth in Section 6(d).
(ooo) “Redemption Price” has
the meaning set forth in Section 6(a).
(ppp) “Register” has the
meaning set forth in Section 3(a).
(qqq) “Registration Rights
Agreement” means that certain Registration Rights Agreement, dated June
7, 2010, between the Company and the signatories thereto, as the same may be
amended from time to time.
(rrr) “Required Holders”
means as of any date the Holders of more than 50% of the then-outstanding shares
of Preferred Stock, voting together as a single class.
Annex
I-6
(sss) “Reserved Shares”
means shares of Common Stock reserved for issuance pursuant to any (i) plan
providing for the reinvestment of dividends or interest payable on the Company’s
securities (other than the Preferred Stock) and the investment of additional
optional amounts in shares of Common Stock under any such plan, provided such
plan was approved by the Board of Directors and (ii) employee, director or
consultant benefit plan or program of or assumed by the Company or any of its
Subsidiaries, provided such plan (or assumption thereof) was approved by the
Board of Directors; provided, however, the Reserved
Shares shall not exceed eleven million (11,000,000) shares unless the prior
written consent of the Required Holders has been obtained.
(ttt) “Senior Stock” means
each class of Capital Stock or series of preferred stock established after the
Original Issue Date by the Board of Directors, the terms of which expressly
provide that such class or series will rank senior to the Preferred Stock as to
dividend rights and/or rights upon a Liquidation or Change of
Control.
(uuu) “Series A-2 Preferred
Stock” means the series of preferred stock, par value $0.001 per share,
of the Company designated as the “Series A-2 Convertible
Preferred Stock” having the rights and privileges set forth in the
Certificate of Designation for such Series A-2 Preferred Stock.
(vvv) “Special Triggering
Event” means any of the following events:
(i) the
failure of the Company to pay when due any amounts owed on the shares of
Preferred Stock to the Holders, including failure to redeem the shares of
Preferred Stock required to be redeemed on the applicable Redemption
Date;
(ii) a
failure by the Company to deliver any cash and shares of Common Stock, when such
cash and shares of Common Stock, if any, are required to be delivered upon
conversion of the Preferred Stock pursuant to the terms set forth herein, where
the Company does not remedy such default within five (5) days after the date
such cash and shares of Common Stock, if any, are required to be
delivered;
(iii)
a material violation by the Company of any term of or condition set forth
in the Investment Agreement, where the Company does not cure such violation
within thirty (30) days after the receipt of written notice of such breach from
one or more of the Holders party to the Investment Agreement who are actually
adversely affected by such breach;
(iv) a
material violation by the Company of any term of or condition set forth in this
Certificate, where the Company does not cure such violation within thirty (30)
days after the receipt of written notice of such breach from one or more of the
Holders who are actually adversely affected by such breach;
(v) a
material violation by the Company of any term of or condition set forth in the
Registration Rights Agreement, where the Company does not cure such violation
within thirty (30) days after the receipt of written notice of such breach from
one or more of the Holders party to the Registration Rights Agreement who are
actually adversely affected by such breach; or
(vi) the
failure of any of the WP Board Designees (as defined in the Investment
Agreement) to be elected or appointed to the Board of Directors in accordance
with the terms set forth in the Investment Agreement.
Annex
I-7
(www) “Stated Value” means
$100.00 per share of Preferred Stock.
(xxx) “Stockholder Approval”
means the affirmative vote of holders of a majority of the outstanding shares of
Common Stock entitled to vote, either at a meeting of stockholders of the
Company validly called and at which a quorum is present or by written consent,
approving (a) the Capitalization Proposal (as defined in the Investment
Agreement) and (b) the 242(b)(2) Proposal (as defined in the Investment
Agreement), in each case in accordance with the relevant provisions of the
DGCL.
(yyy) “Subsidiary” means a
partnership, joint-stock company, corporation, limited liability company, trust,
unincorporated organization or other entity of which a Person owns, directly or
indirectly, more than 50% of the stock or other interests the holder of which is
generally entitled to vote for the election of the board of directors or other
governing body of such entity.
(zzz) “Trading Day” means a
day during which the trading of securities generally occurs on the Approved
Market on which the Common Stock is then listed or, if the Common Stock is not
listed on an Approved Market, the NYSE.
(aaaa) “Transaction” has the
meaning set forth in Section 9(d).
(bbbb) “Transfer Agent” means
Corporate Stock Transfer, the Company’s duly appointed transfer agent, registrar
and conversion and dividend disbursing agent for the Preferred Stock, or such
other Transfer Agent as may be appointed by the Company from time to
time.
(cccc) “Warburg Pincus Investor
Group” means Warburg Pincus LLC, Warburg Pincus Private Equity X, L.P.,
Warburg Pincus X Partners, L.P. and any of their respective Affiliates other
than any of their Affiliates that is a “portfolio company” (as such term is
customarily used among private equity investors).
Annex
I-8
3. Accretion;
Dividends.
(a) From
and after the Applicable Issuance Date until and including the seventh
anniversary of the Applicable Issuance Date for the related shares of Preferred
Stock, the Stated Value of each share of Preferred Stock shall accrete at an
annual rate of twelve percent (12%) until the first anniversary of the
Applicable Issuance Date for the related shares of Preferred Stock and on the
first anniversary and each subsequent one-year anniversary thereafter shall
automatically increase by one-half percent (0.50%) (as adjusted, the “Accretion Rate”),
compounded quarterly, beginning on the three-month period ending June 30, 2010
(the Stated Value as it has accreted as of any date, the “Accreted Value”,
subject to appropriate adjustment in the event of any stock dividend, stock
split, stock distribution or combination, consolidation, subdivision,
reclassification or other corporate actions having the similar effect with
respect to the Preferred Stock). Following the seventh anniversary of
the Applicable Issuance Date for the related shares of Preferred Stock, the
Holders shall be entitled to receive, on each Dividend Payment Date, cash
dividends on each share of Preferred Stock, at a rate per annum equal to fifteen
and one-half percent (15.5%) of the Accreted Value as of the Dividend Payment
Date (the “Dividend
Rate”) and the Board of Directors shall declare such cash dividends out
of funds legally available for that purpose; provided, however, (i) to the
extent the Company does not have funds legally available to pay such cash
dividend, or (ii) with the prior approval of the Required Holders, in the case
of each of (i) and (ii), the Company may elect not to pay the cash dividend due
on any Dividend Payment Date (a “Dividend Deferral
Election”) and if such an election is made, the cash dividend that would
have been payable on such Dividend Payment Date shall continue to accrue, and
shall compound quarterly at the Dividend Rate until the accrued value of such
dividend is paid, whether or not in any fiscal year there shall be net profits
or surplus legally available for the payment of dividends in such fiscal year,
so that if in any fiscal year or years, dividends in whole or in part are not
paid upon the Preferred Stock, unpaid dividends shall accumulate and accrue at
the Dividend Rate, compounded quarterly. Unless there is a Dividend
Deferral Election, dividends shall be payable quarterly in arrears, on each
Dividend Payment Date, commencing on the first Dividend Payment Date following
the seventh anniversary of the Applicable Issuance Date for the related shares
of Preferred Stock; provided, that if any
such payment date is not a Business Day then such dividend shall be payable on
the next Business Day. Each dividend shall be payable to the Holders
as they appear on the securities register maintained in respect of the Preferred
Stock by the Company (the “Register”) at the
close of business on the corresponding Dividend Record Date; provided, however, if there is
a Dividend Deferral Election, the dividend that would have otherwise been
payable on the Dividend Record Date applicable to the Dividend Deferral Election
shall be payable to the Holders as they appear on the Register at the time such
dividend is paid. The Board of Directors may declare any dividends
subject to a Dividend Deferral Election at anytime (subject to the availability
of lawful funds) and the payment date of such funds shall be as determined by
the Board of Directors. All dividends paid with respect to shares of
Preferred Stock shall be paid pro rata to the Holders entitled
thereto. The amount of dividends payable for any other period shorter
or longer than a full dividend period, shall be computed on the basis of twelve
30-day months and a 360-day year. Dividend payments shall be
aggregated per Holder and shall be made to the nearest cent (with $.005 being
rounded upward).
(b) Upon
a Special Triggering Event, the then applicable A/D Rate shall automatically be
increased by an additional three percent (3%) per annum, compounded quarterly,
from and including the date on which any such Special Triggering Event shall
occur through but excluding the date on which the Special Triggering Event shall
have been cured or waived in writing by the Required Holders.
(c) No
dividend will be declared or paid upon, or any sum set apart for the payment of
dividends upon, any outstanding share of the Preferred Stock or Parity Stock
with respect to any dividend period unless all dividends for all preceding
dividend periods have been declared and paid, or declared and, if such dividends
are to be paid in cash, a sum of cash sufficient for the payment thereof is set
apart for the payment of such dividend, upon all outstanding shares of Preferred
Stock and Parity Stock. Notwithstanding the foregoing, if full
cumulative dividends have not been paid on the Preferred Stock and all Parity
Stock, all dividends declared and paid on the Preferred Stock and such Parity
Stock shall be declared and paid pro rata so that the amounts of dividends
declared and paid per share on the Preferred Stock and such Parity Stock will in
all cases bear to each other the same ratio that accumulated and unpaid
dividends per share on the shares of Preferred Stock and such Parity Stock bear
to each other.
Annex
I-9
(d) No
dividends or other distributions (other than cash paid in lieu of fractional
shares) may be declared, made or paid, or set apart for payment upon, any Junior
Stock, nor may any Junior Stock be redeemed, purchased or otherwise acquired for
any consideration (or any money paid to or made available for a sinking fund for
the redemption of any Junior Stock) by or on behalf of the Company or any of its
Subsidiaries, unless (i) all Accrued Dividends shall have been or
contemporaneously are declared and paid in cash, or are declared and a sum of
cash sufficient for the payment thereof is set apart for such payment, on the
Preferred Stock and all Parity Stock for all dividend periods terminating on or
prior to the Record Date of such declaration, payment, redemption, purchase or
acquisition, (ii) the Holders receive an equivalent dividend or distribution of
the amount of such dividend or distribution that would be payable to such
Holders if such shares of Preferred Stock had been converted into the Common
Stock Equivalent immediately prior to the Record Date for such dividend or
distribution (such amount per share of Preferred Stock, the “Dividend Equivalent
Amount”), (iii) the Company obtains the consent required pursuant to
Section 5(b) herein and (iv) the Company reserves an aggregate amount equal to
the product of (I) the number of shares of Common Stock that would have been
issuable upon conversion of any additional shares of Preferred Stock (determined
by reference to the Common Stock Equivalent) that could be issued pursuant to
the Investment Agreement (without regard to any restrictions or conditions with
respect thereof) had such additional shares of Preferred Stock been issued and
were outstanding immediately prior to the Record Date for payment of such
dividend or distribution times (II) the Dividend Equivalent Amount payable upon
a share of Preferred Stock (such declaration or distribution made in accordance
with clauses (i) through (iv)), a “Junior Stock
Event”). The restrictions set forth in this Section 3(d) shall
not apply to the purchase or other acquisition of Junior Stock (A) pursuant to
any bona fide employee or director incentive or benefit plan or arrangement of
the Company or any Subsidiary heretofore or hereafter adopted by the Board of
Directors or the cashless exercise of Options or (B) which purchase or
acquisition has received the prior written consent of the Required
Holders.
4. Liquidation; Change of
Control.
(a) In
the event of any Liquidation (a “Liquidation Event”),
the Holders shall be entitled to be paid out of the assets and funds of the
Company available for distribution to its stockholders an amount in cash per
each share of Preferred Stock equal to the greater of (A) 250% of the Accreted
Value for each share of Preferred Stock outstanding on the date of such
Liquidation Event, plus an amount equal to all Accrued Dividends thereon to the
date of the Liquidation Event or (B) the amount to which such Holders would be
entitled to receive had such Holders, immediately prior to the Liquidation
Event, converted such shares of Preferred Stock into the Common Stock
Equivalent, in either case before any payment shall be made or any assets
distributed to the holders of any of the Junior Stock (such greater cash amount
being referred to as the “Liquidation
Preference”). Without limiting any rights and remedies of the
Holders, if upon any such Liquidation Event, the remaining assets and funds of
the Company available for distribution to its stockholders after payment in full
of amounts required to be paid or distributed to holders of Senior Stock are not
sufficient to pay in full the liquidation payments payable to the Holders and
holders of outstanding shares of any Parity Stock, then the holders of all such
shares of Parity Stock shall share ratably in such distribution of the remaining
assets and funds of the Company in accordance with the amount which would
otherwise be payable on such distribution if the amounts to which the Holders
and the holders of outstanding shares of such Parity Stock are entitled were
paid in full.
Annex
I-10
(b) Unless
waived in writing by the Required Holders, in the event of a Change of Control,
each Holder shall have the right, at such Holder’s election, to either (i) only
to the extent then convertible in accordance with Section 7(a)(i), convert each
share of Preferred Stock and receive the amount to which such Holder is entitled
to receive upon conversion of such shares of Preferred Stock into Common Stock
or (ii) within sixty (60) days of such Change of Control, or later if the
Holders did not receive notice of such Change of Control, require the Company to
redeem (subject to the availability of lawful funds), in whole or in part, each
share of Preferred Stock held by such Holder for an amount in cash equal to the
Liquidation Preference. Unless waived in writing by the Required
Holders, in the event of a Change of Control that occurs prior to the seventh
anniversary of the Applicable Issuance Date, for purposes of determining the
amount to which such Holder is entitled to receive upon conversion of such
shares of Preferred Stock into Common Stock or the Liquidation Preference, the
Accreted Value (including for purposes of Section 7(a)(i)) upon such Change of
Control shall be deemed to be increased to the Accreted Value that would be in
effect if the Change of Control had occurred on the seventh anniversary of the
Applicable Issuance Date. Unless waived in writing by the Required
Holders, the Corporation shall not have the power to effect a Change of Control
unless the agreement for such transaction provides that the consideration
payable to the stockholders of the Corporation in such transaction shall be
allocated among the holders of capital stock of the Corporation in accordance
with this Section 4(b). In connection with a redemption permitted
above, each Holder shall surrender his, her or its certificate or certificates
representing such redeemed shares to the Company, in the manner and at the place
designated in written notice mailed by the Company, postage prepaid, to each
Holder, at his, her or its post office address last shown on the Register (which
notice shall be given at least ten (10) days prior to such Change of Control or
such shorter period as may be agreed in writing by the Required Holders), and
thereupon the Liquidation Preference of such shares shall be payable to the
order of the Person whose name appears on such certificate or certificates as
the owner thereof and each surrendered certificate shall be
canceled. From and after the date of redemption, unless there shall
have been a default in payment of the Liquidation Preference, all rights of the
Holder whose shares have been redeemed (except the right to receive the
Liquidation Preference) shall cease with respect to such shares, and such shares
shall not thereafter be transferred on the books of the Company or be deemed to
be outstanding for any purpose whatsoever.
(c) Without
limiting any other rights and remedies of the Holders, if upon any such Change
of Control, the remaining assets and funds of the Company available for
distribution to its stockholders after payment in full of amounts required to be
paid or distributed to holders of Senior Stock are not sufficient to pay in full
amounts payable to the Holders and holders of outstanding shares of any Parity
Stock, then the holders of all such shares shall share ratably in such
distribution of the remaining assets and funds of the Company in accordance with
the amount which would otherwise be payable on such distribution if the amounts
to which the Holders and the holders of outstanding shares of such Parity Stock
are entitled were paid in full.
(d) Unless
waived in writing by the Required Holders, written notice of any Liquidation
Event or Change of Control, stating a payment date and the place where the
distributable amounts shall be payable, shall be given no less than ten (10)
days prior to the payment date stated therein, to the Holders at their
respective addresses as the same shall appear on the Register.
Annex
I-11
(e) The
amount deemed paid or distributed to the holders of Common Stock upon any
Liquidation or Change of Control shall be the cash or the value of the property,
rights or securities paid or distributed to such holders by the Company or the
acquiring Person. The value of such property, rights or securities
shall be determined in good faith by the Board of Directors.
5. Voting
Rights.
In
addition to any voting rights provided by law, the Holders shall be entitled to
the following voting rights:
(a) Each
share of Preferred Stock shall entitle the Holder thereof to vote together with
the holders of Common Stock as a single class on all matters submitted for the
approval of the holders of Common Stock. For purposes of this Section
5(a), each Holder shall be entitled to the number of votes equal to the number
of shares of Common Stock that would be held by such Holders assuming the
conversion of all outstanding shares of Preferred Stock held by such Holder into
shares of Common Stock at the Common Stock Equivalent Conversion Rate on the
Record Date for the determination of the stockholders entitled to vote on such
matters.
(b) If
at any time following the Original Issue Date at least twenty-five percent (25%)
of the aggregate number of shares of Preferred Stock issued on and after the
Original Issue Date are outstanding, in addition to any other vote or consent of
the stockholders required by law or by the Certificate of Incorporation,
including any Certificate of Designation, bylaws of the Company or this
Certificate, the Company shall not, and shall not permit its Subsidiaries to (in
each case, whether by merger, consolidation, reorganization, operation of law or
otherwise), without the prior written consent of the Required
Holders:
(i) amend,
alter, waive or repeal any provision of its Certificate of Incorporation (other
than the amendments to the Certificate of Incorporation required to effect the
Stockholder Approval), including any Certificate of Designation, or bylaws or
this Certificate in any manner that would adversely affect the rights, powers,
preferences or privileges (economic or otherwise) of the Preferred Stock or
split, reverse split, subdivide, reclassify, combine or take other corporate
actions having a similar effect with respect to the Preferred
Stock;
(ii)
increase the size of the Board of Directors to more than
nine (9);
(iii) incur
Indebtedness (other than Indebtedness for borrowed money that, when aggregated
with all other Indebtedness for borrowed money incurred within the previous
twelve months from the date of incurrence, is less than $2,500,000 when so
aggregated), except to the extent that the Company has EBITDA in excess of
$5,000,000 at the time of incurrence and then only to the extent that the ratio
of Net Debt to EBITDA for the Company and its consolidated Subsidiaries for the
twelve months preceding such date (after giving pro forma effect to the action
proposed to be taken) would not exceed 3.0x;
Annex
I-12
(iv) distribute
(by means of a dividend or otherwise) assets (including property or cash) (other
than shares of Common Stock or cash as required to pay dividends on the
Preferred Stock pursuant to Section 3 (excluding dividends payable pursuant to
Section 3(d)(ii) which shall require consent pursuant to this Section 5(b)(iv)))
or engage in a self tender offer, redemption or share repurchase (whether
privately negotiated or open market repurchases);
(v) offer,
sell, authorize or create, increase the authorized amount of, or issue shares of
Preferred Stock or Series A-2 Preferred Stock or any class or series of Senior
Stock, Parity Stock or Junior Stock (other than (a) the increase in Common Stock
required in connection with the Stockholder Approval, (b) the issuance of Common
Stock approved by the Board of Directors and (c) shares of Preferred Stock
issued pursuant to the terms of the Investment Agreement or Common Stock
issuable upon conversion thereof);
(vi) effect
or cause to be effected or enter any contract, agreement or other arrangement
that would, directly or indirectly, result or have the effect of causing, a
Liquidation Event or Change of Control;
(vii) enter
into any contract, agreement or other arrangement that would, directly or
indirectly, preclude the Company from (x) complying with any of its obligations
under Section 6 or (y) making payment in full in cash on each Dividend Payment
Date of the dividends contemplated in Section 3 above; or
(viii) adopt
or amend any stockholder rights plan, poison pill or similar takeover
device.
(c) Any
action to be taken at any annual or special meeting of stockholders by the
Holders may be taken without a meeting, without prior notice and without a vote,
if a consent or consents in writing, setting forth the action so taken, shall be
signed by the Holder or Holders having no less than the minimum number of votes
that would be required to take such action at a meeting at which all of the
shares of Preferred Stock were present and voted. Prompt written
notice of the taking of any action by the Holders by less than unanimous written
consent shall be given as may be required under applicable law.
6. Redemption
Rights.
(a) In
the event the Preferred Stock remains outstanding on the date which is the six
month anniversary of the Original Issue Date, the Required Holders (being
referred to herein as the “Electing Holders”)
shall have the right, but not the obligation, to require the Company to redeem
(a “Redemption”), from
time to time, all or any part of the outstanding shares of Preferred Stock for a
per share amount in cash equal to the greater of (i) the sum of 250% of the
Accreted Value for each share of Preferred Stock outstanding on the date of such
Redemption plus an amount equal to any unpaid Accrued Dividends thereon or (ii)
the product obtained by multiplying the Current Market Price of a share of
Common Stock by the Common Stock Equivalent (the “Redemption
Price”).
Annex
I-13
(b) If
the Company is unable to redeem any shares of Preferred Stock then to be
redeemed because such Redemption would violate the applicable laws of the State
of Delaware, then the Company shall redeem those shares of Preferred Stock that
it is entitled to redeem pursuant to the laws of the State of Delaware and shall
redeem such other shares then subject to Redemption as soon thereafter as
redemption would not violate such laws.
(c) In
the event of any Redemption of only a part of the then outstanding Preferred
Stock then entitled to be redeemed, the Company shall effect such redemption pro
rata among the Holders in proportion to the respective amounts which would
otherwise be payable in respect to the shares of Preferred Stock held by them
upon the date of such Redemption, if all amounts payable on or with respect to
said shares were paid in full.
(d) The
Electing Holders shall give the Company written notice of their election to be
redeemed pursuant to this Section 6 at least ninety (90) days prior to any
applicable date (the “Redemption Date”) on
which the Electing Holders desire to have shares of Preferred Stock so Redeemed
(the “Electing Holders
Redemption Notice”). Not more than ten (10) days after the
receipt of the Electing Holders Redemption Notice, written notice shall be
mailed, postage prepaid, to each Holder who has not given an Electing Holders
Redemption Notice, at his, her or its post office address last shown on the
Register, notifying such Holder of the number of shares to be so redeemed,
specifying the Redemption Date and the date on which such Holder’s conversion
rights (pursuant to Section 7 hereof), if any, as to such Preferred Stock
terminate and calling upon such Holder to surrender to the Company, in the
manner and at the place designated, his, her or its certificate or certificates
representing the Preferred Stock to be redeemed (such notice hereinafter
referred to as the “Redemption
Notice”). On or prior to each Redemption Date, each Holder
shall surrender his, her or its certificate or certificates representing such
redeemed shares to the Company, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the Person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by any
such certificate are redeemed, a new certificate shall be issued representing
the unredeemed shares. From and after the Redemption Date, unless
there shall have been a default in payment of the Redemption Price, all rights
of the Holders designated for Redemption in the Redemption Notice (except the
right to receive the Redemption Price upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Company or be deemed to be
outstanding for any purpose whatsoever.
(e) Except
in connection with a Redemption effected pursuant to this Section 6, the Company
shall have no right to require the redemption of the shares of Preferred
Stock. Nothing herein contained shall prevent or restrict the
purchase by the Company, from time to time either at public or private sale, of
the whole or any part of the outstanding shares of Preferred Stock at such price
or prices as the Company and a Holder may determine, subject to the provisions
of applicable law and obtaining any required consents, including the prior
written consent of the Required Holders pursuant to Section 5(b)
above.
Annex
I-14
7. Conversion.
(a) Conversion
Right.
(i) Subject
to the Excess Authorized Shares Threshold, each Holder shall have the right, at
such Holder’s option, exercisable at any time and from time to time to convert
all or any portion of such Holder’s shares of Preferred Stock, subject to the
terms and provisions of this Section 7 (the “Conversion
Right”). Upon a Holder’s election to exercise the Conversion
Right, the shares of Preferred Stock for which the Conversion Right is exercised
shall be converted into such whole number of shares of Common Stock equal to the
product of the number of shares of Preferred Stock being so converted multiplied
by the quotient of (A) the per share Accreted Value as of the Conversion Date
(taking into account any differing Applicable Issuance Dates) divided by
(B) the Equivalent Conversion Price then in effect. In addition, upon
a Holder’s election to exercise the Conversion Right, the shares of Preferred
Stock for which the Conversion Right is exercised shall be entitled to receive
(at the election of the Company) either (1) an amount in cash equal to all
unpaid Accrued Dividends thereon through the Conversion Date or (2) a number of
shares of Common Stock equal to the quotient obtained by dividing (x) an amount
equal to all unpaid Accrued Dividends thereon through the Conversion Date by (y)
the Closing Price of the Common Stock on the Trading Day immediately prior to
the Conversion Date; provided, however, the Company
shall elect clause (2) above to the extent that sufficient lawful funds are not
available to pay the amounts required by clause (1)
above. Notwithstanding the foregoing, the Excess Authorized Shares
Threshold shall only limit the actual number of shares of Common Stock issuable
upon a conversion of the Preferred Stock and shall not apply, or be construed to
apply, to rights of the Holders set forth herein to the extent such rights
require a determination of the Common Stock Equivalent or a number of shares of
Common Stock issuable upon conversion of the Preferred Stock (including, without
limitation, rights upon a Change of Control, Liquidation or Redemption and the
voting and dividend rights set forth herein).
(ii) The
Conversion Right of a Holder shall be exercised by the Holder by the surrender
to the Company of the certificates representing shares of Preferred Stock to be
converted at any time during usual business hours at the Company’s principal
place of business or the offices of the Transfer Agent, accompanied by written
notice to the Company that the Holder elects to convert all or a portion of the
shares of Preferred Stock represented by such certificate (a “Conversion Right
Notice”) and specifying the name or names (with address or addresses) in
which a certificate or certificates for shares of Common Stock are to be issued
and (if so required by the Company or the Transfer Agent) by a written
instrument or instruments of transfer in form reasonably satisfactory to the
Company or the Transfer Agent duly executed by the Holder or its legal
representative.
Annex
I-15
(iii) As
promptly as practicable after the surrender of the certificate or certificates
for Preferred Stock as aforesaid and the receipt of the Conversion Right Notice
and in no event later than three (3) Trading Days thereafter, the Company shall
issue and shall deliver or cause to be issued and delivered to such Holder, or
to such other Person on such Holder’s written order (A) one or more certificates
representing the number of validly issued, fully paid and non-assessable whole
shares of Common Stock to which the Holder, or the Holder’s transferee, shall be
entitled, (B) if less than the full number of shares of Preferred Stock
evidenced by the surrendered certificates is being converted, a new certificate
or certificates, of like tenor, for the number of shares of Preferred Stock
evidenced by the surrendered certificate or certificates, less the number of
shares being converted, (C) cash for any payment of Accrued Dividends through
the Conversion Date if the Company elects to pay such dividends in cash pursuant
to Section 7(a)(i) and (D) cash for any fractional interest in respect of a
share of Common Stock arising upon such conversion settled as provided in
Section 7(c)(i).
(iv) Subject
to the Company’s ability to limit the shares of Preferred Stock subject to a
Conversion Right in order to comply with the Excess Authorized Shares Threshold,
each conversion pursuant to Section 7(a)(i) shall be deemed to have been made at
the close of business on the date of the later to occur of giving the Conversion
Right Notice and of surrendering the certificate or certificates representing
the Preferred Stock to be converted (the “Conversion Date”) so
that the rights of the Holder thereof as to the Preferred Stock being converted
shall cease except for the right to receive the Common Stock (and cash
dividends, if elected by the Company, and cash in lieu of fractional shares)
payable under Section 7(a), and the Person entitled to receive shares of Common
Stock shall be treated for all purposes as having become the record holder of
those shares of Common Stock at that time.
(b) Mandatory
Conversion.
(i) Upon
the date and time, or the occurrence of an event, specified by vote or written
consent of the Required Holders (a “Mandatory
Conversion”) (the time of such closing or the date and time specified or
the time of the event specified in such vote or written consent is referred to
herein as the “Mandatory Conversion
Time”) each outstanding share of Preferred Stock shall automatically be
converted into the number of shares of Common Stock (subject to the Excess
Authorized Shares Threshold) equal to such whole number of shares of Common
Stock equal to the product of the number of shares of Preferred Stock being so
converted multiplied by the quotient of (A) the per share Accreted Value as of
the Conversion Date (taking into account any differing Applicable Issuance
Dates) divided by (B) the Equivalent Conversion Price then in
effect. In addition, upon a Mandatory Conversion, the shares of
Preferred Stock shall be entitled to receive (at the election of the Company)
either (1) an amount in cash equal to all unpaid Accrued Dividends thereon
through the Mandatory Conversion Time or (2) a number of shares of Common Stock
equal to the quotient obtained by dividing (x) an amount equal to all unpaid
Accrued Dividends thereon through the Mandatory Conversion Time by (y) the
Closing Price of the Common Stock on the Trading Day immediately prior to the
Mandatory Conversion Time; provided, however, the Company
shall elect clause (2) above to the extent that sufficient lawful funds are not
available to pay the amounts required by clause (1) above.
Annex
I-16
(ii) All
Holders shall be sent written notice of the Mandatory Conversion Time and the
place designated for mandatory conversion of all such shares of Preferred Stock
pursuant to this Section 7(b). Such notice need not be sent in
advance of the occurrence of the Mandatory Conversion Time. Promptly
following receipt of such notice, each Holder shall surrender his, her or its
certificate or certificates for all such shares (or, if such Holder alleges that
such certificate has been lost, stolen or destroyed, a lost certificate
affidavit and agreement reasonably acceptable to the Company to indemnify the
Company against any claim that may be made against the Company on account of the
alleged loss, theft or destruction of such certificate which agreement shall not
require the posting of a bond) to the Company at the place designated in such
notice. If so required by the Company, certificates surrendered for
conversion shall be endorsed or accompanied by written instrument or instruments
of transfer, in form satisfactory to the Company, duly executed by the Holder or
by his, her or its attorney duly authorized in writing. Subject to
the Company’s ability to limit the shares of Preferred Stock subject to a
Mandatory Conversion in order to comply with the Excess Authorized Shares
Threshold, all rights with respect to the Preferred Stock converted pursuant to
Section 7(b), including the rights, if any, to receive notices and vote (other
than as a holder of Common Stock), will terminate at the Mandatory Conversion
Time (notwithstanding the failure of the Holder or Holders to surrender the
certificates at or prior to such time), except only the rights of the Holders,
upon surrender of their certificate or certificates (or lost certificate
affidavit and agreement) therefor, to receive the items provided for in the next
sentence of this Section 7(b)(ii). As soon as practicable after the
Mandatory Conversion Time and the surrender of the certificate or certificates
(or lost certificate affidavit and agreement) for Preferred Stock, the Company
shall issue and deliver to such Holder, or to his, her or its nominees, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof, together
with (A) cash for any payment of Accrued Dividends through the Conversion Date
if the Company elects to pay such dividends in cash pursuant to Section 7(b)(i)
and (B) cash for any fractional interest in respect of a share of Common Stock
arising upon such conversion settled as provided in Section
7(c)(i).
(iii) If
upon any Mandatory Conversion, the shares of Common Stock issuable upon
conversion of the Preferred Stock are, or will be upon issuance, equal to or in
excess of the Excess Authorized Shares Threshold, the Company shall convert the
number of shares of Preferred Stock up to an amount that equals an amount that
is one share of Common Stock less than the Excess Authorized Shares Threshold,
with such Mandatory Conversion being effected ratably among the Holders in
accordance with the number of shares of Common Stock which would otherwise be
issuable upon such Mandatory Conversion if the Excess Authorized Shares
Threshold was not applicable. In lieu of the foregoing, if upon any
Mandatory Conversion, the shares of Common Stock issuable upon conversion of the
Preferred Stock are, or will be upon issuance, equal to or in excess of the
Excess Authorized Shares Threshold, upon the written instruction of the Required
Holders and subject to the Company having lawfully available funds, the Company
shall reduce the Accreted Value up to an amount sufficient such that the number
of shares of Common Stock issuable upon conversion of the shares of Preferred
Stock shall equal one share less than the Excess Authorized Shares Threshold and
the per share amount by which the Accretion Rate was reduced shall be payable in
cash by the Company to the Holders in respect of each share owned.
Annex
I-17
(c) Miscellaneous.
(i) No
fractional shares of Common Stock shall be issued upon the conversion of any
shares of Preferred Stock. If the conversion of any share or shares
of Preferred Stock results in a fractional share of Common Stock issuable, the
Company shall pay a cash amount in lieu of issuing such fractional share in an
amount equal to such fractional interest multiplied by the Closing Price on the
Trading Day immediately prior to the Conversion Date or Mandatory Conversion
Time, as applicable.
(ii) Except
as otherwise provided for herein, a Holder shall not be entitled to any rights
of a holder of shares of Common Stock until such Holder has converted such
Holder’s Preferred Stock, and only to the extent the shares of Preferred Stock
are deemed to have been converted into shares of Common Stock in accordance with
the provisions of this Section 7.
(iii) Subject
to the Excess Authorized Shares Threshold, the Company shall use its best
efforts to reserve and keep available for issuance such number of its authorized
but unissued shares of Common Stock equal to 100% of the number of shares of
Common Stock issuable upon conversion of all outstanding shares of Preferred
Stock; provided, however, that at all
times following the Original Issue Date the Company shall keep a minimum of
ninety million (90,000,000) shares of Common Stock available for issuance upon
conversion of the Preferred Stock. The Company shall take all action
permitted by law to increase the authorized number of shares of Common Stock if
at any time there shall be insufficient authorized but unissued shares of Common
Stock to permit such reservation or to permit the conversion of all outstanding
shares of Preferred Stock. The Company covenants that all Common
Stock that may be issued upon conversion of Preferred Stock shall upon issuance
be duly authorized, fully paid and non-assessable, free and clear of all liens,
claims, security interests and other encumbrances. The Company
further covenants that, if at any time the Common Stock shall be listed on an
Approved Market, the Company will, if permitted by the rules of such Approved
Market, cause to be listed or quoted on such exchange or automated quotation
system, all Common Stock issuable upon conversion of the Preferred
Stock.
(iv) If
a Conversion Date or Mandatory Conversion Time is on or after a Dividend Record
Date but on or prior to the related Dividend Payment Date, then Accrued
Dividends will be payable to Holders in the manner set forth above in Sections
7(a)(i) and 7(b)(i) with respect to the exercise of a Conversion Right or
Mandatory Conversion, as applicable, concurrent with delivery by the Company of
the shares of Common Stock issuable upon such conversion.
(v) The
issuance or delivery of certificates for Common Stock upon the conversion of
shares of Preferred Stock pursuant to this Section 7 shall be made without
charge to the converting Holder for such certificates or for any tax in respect
of the issuance or delivery of such certificates or the securities represented
thereby, and such certificates shall be issued or delivered in the respective
names of, or in such names as may be directed by, the Holders of the shares
converted.
Annex
I-18
8. Adjustment of Conversion
Price.
(a) Irrespective
of whether any shares of Preferred Stock are outstanding at the time in
question, from and after the Original Issue Date, the Conversion Price shall be
adjusted from time to time (without duplication) by the Company as
follows:
(i) Stock Dividends and
Distributions. If the Company pays dividends or other
distributions on the Common Stock in shares of Common Stock, then the Conversion
Price in effect immediately prior to the Ex-Date for such dividend or
distribution will be multiplied by the following fraction:
OS0
|
OS1
|
Where,
|
OS0
|
=
|
the
number of shares of Common Stock outstanding immediately prior to Ex-Date
for such dividend or distribution.
|
|
OS1
|
=
|
the
sum of the number of shares of Common Stock outstanding immediately prior
to the Ex-Date for such dividend or distribution plus the total number of
shares of Common Stock constituting such dividend or
distribution.
|
For the
purposes of this clause (i), the number of shares of Common Stock at the time
outstanding shall not include shares acquired by the Company. If any
dividend or distribution described in this clause (i) is declared but not so
paid or made, the Conversion Price shall be readjusted, effective as of the date
the Board of Directors publicly announces its decision not to make such dividend
or distribution, to such Conversion Price that would be in effect if such
dividend or distribution had not been declared.
(ii) Subdivisions, Splits and
Combination of the Common Stock. If the Company subdivides,
splits or combines the shares of Common Stock, then the Conversion Price in
effect immediately prior to the effective date of such share subdivision, split
or combination will be multiplied by the following fraction:
OS0
|
OS1
|
Where,
|
OS0
|
=
|
the
number of shares of Common Stock outstanding immediately prior to the
effective date of such share subdivision, split or
combination.
|
|
OS1
|
=
|
the
number of shares of Common Stock outstanding immediately after the opening
of business on the effective date of such share subdivision, split or
combination.
|
Annex
I-19
For the
purposes of this clause (ii), the number of shares of Common Stock at the time
outstanding shall not include shares acquired by the Company. If any
subdivision, split or combination described in this clause (ii) is announced but
the outstanding shares of Common Stock are not subdivided, split or combined,
the Conversion Price shall be readjusted, effective as of the date the Board of
Directors publicly announces its decision not to subdivide, split or combine the
outstanding shares of Common Stock, to such Conversion Price that would be in
effect if such subdivision, split or combination had not been
announced.
(iii)
Issuance of Stock Purchase
Rights. If the Company issues or distributes to all or
substantially all holders of the shares of Common Stock Options (other than
Options issued pursuant to a dividend reinvestment plan or share purchase plan
or other similar plans approved by the Board of Directors) entitling them to
subscribe for or purchase the shares of Common Stock at less than the Current
Market Price on the date fixed for the determination of stockholders entitled to
receive such Options, then the Conversion Price in effect immediately prior to
the Ex-Date for such issuance or distribution will be multiplied by the
following fraction:
OS0 +
Y
|
OS0 +
X
|
Where,
|
OS0
|
=
|
the
number of shares of Common Stock outstanding immediately prior to the
Ex-Date for such distribution.
|
|
X
|
=
|
the
total number of shares of Common Stock issuable pursuant to such rights or
warrants.
|
|
Y
|
=
|
the
number of shares of Common Stock equal to the aggregate price payable to
exercise such rights or warrants divided by the Current Market Price on
the date fixed for the determination of stockholders entitled to receive
such rights or warrants.
|
For the
purposes of this clause (iii), the number of shares of Common Stock at the time
outstanding shall not include shares acquired by the Company. In the
event that such Options described in this clause (iii) are not so issued, the
Conversion Price shall be readjusted, effective as of the date the Board of
Directors publicly announces its decision not to issue or distribution such
Options, to the Conversion Price that would then be in effect if such issuance
or distribution had not been declared. To the extent that such
Options are not exercised prior to their expiration or shares of Common Stock
are otherwise not delivered pursuant to such Options upon the exercise of such
Options, the Conversion Price shall be readjusted to such Conversion Price that
would then be in effect had the adjustment made upon the issuance or
distribution of such Options been made on the basis of the delivery of only the
number of shares of Common Stock actually delivered. In determining
the aggregate offering price payable for such shares of Common Stock, there
shall be taken into account any consideration received for such rights or
warrants and the value of such consideration (if other than cash, to be
determined by the Board of Directors).
Annex
I-20
(iv) Debt or Asset
Distributions. If the Company distributes to all or
substantially all holders of shares of Common Stock evidences of indebtedness,
Capital Stock, securities, cash or other assets (excluding any dividend or
distribution referred to in clause (i) above, any Options referred to in clause
(iii) above, any dividend or distribution paid exclusively in cash, any
consideration payable in connection with a tender or exchange offer made by the
Company or any of its Subsidiaries, and any dividend of Capital Stock of or
relating to a Subsidiary or other business unit in the case of certain spin-off
transactions as described below), then the Conversion Price in effect
immediately prior to the Ex-Date for such distribution will be multiplied by the
following fraction:
SP0 -
FMV
|
SP0
|
Where,
|
SP0
|
=
|
the
Current Market Price per share of Common Stock on such
date.
|
|
FMV
|
=
|
the
fair market value of the portion of the distribution applicable to one
share of Common Stock on such date as determined by the Board of
Directors, provided
that, if “FMV” as set forth above is equal to or greater than
“SP0” as
set forth above, in lieu of the foregoing adjustment, adequate provision
shall be made so that each Holder shall receive on the date on which such
distribution is made to holders of Common Stock, for each share of
Preferred Stock, the amount of such distribution such Holder would have
received had such Holder owned a number of shares of Common Stock equal to
the Conversion Price on the Ex-Date for such
distribution.
|
In a
“spin-off”, where the Company makes a distribution to all holders of shares of
Common Stock consisting of Capital Stock of any class or series, or similar
equity interests of, or relating to, a Subsidiary or other business unit, the
Conversion Price will be adjusted on the fifteenth Trading Day after the
effective date of the distribution by multiplying such Conversion Price in
effect immediately prior to such fifteenth Trading Day by the following
fraction:
MP0
|
MP0 +
MP5
|
Where,
|
MP0
|
=
|
the
average of the Closing Prices of the Common Stock over the first ten
Trading Days commencing on and including the fifth Trading Day following
the effective date of such
distribution.
|
Annex
I-21
MP5
|
=
|
the
average of the Closing Prices of the capital stock or equity interests
representing the portion of the distribution applicable to one share of
Common Stock over the first ten Trading Days commencing on and including
the fifth Trading Day following the effective date of such distribution,
or, if not traded on a national or regional securities exchange or
over-the-counter market, the fair market value of the capital stock or
equity interests representing the portion of the distribution applicable
to one share of Common Stock on such date as determined by the Board of
Directors.
|
In the
event that such distribution described in this clause (iv) is not so paid or
made, the Conversion Price shall be readjusted, effective as of the date the
Board of Directors publicly announces its decision not to pay or make such
dividend or distribution, to the Conversion Price that would then be in effect
if such dividend or distribution had not been declared.
(v) Cash Dividends or
Distributions. If the Company makes a dividend or distribution
consisting exclusively of cash to all holders of the Common Stock, excluding (a)
any cash that is paid as a dividend or distributed in a Transaction or as part
of a “spin-off” referred to in clause (iv) above, (b) any dividend or
distribution in connection with Liquidation, and (c) any consideration payable
in connection with a tender or exchange offer made by the Company or any of its
Subsidiaries, then in each event, the Conversion Price in effect immediately
prior to the Ex-Date for such distribution will be multiplied by the following
fraction:
SP0 -
DIV
|
SP0
|
Where,
|
SP0
|
=
|
the
Closing Price per share of Common Stock on the Trading Day immediately
preceding the Ex-Date.
|
|
DIV
|
=
|
the
amount per share of Common Stock of the cash dividend or distribution, as
determined pursuant to the introduction to this paragraph
(v).
|
In the
event that any dividend or distribution described in this clause (v) is not so
made, the Conversion Price shall be readjusted, effective as of the date the
Board of Directors publicly announces its decision not to pay such dividend or
distribution, to the Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
Notwithstanding
the foregoing, if “DIV” as set forth above is equal to or greater than “SP0” as set
forth above, in lieu of the foregoing adjustment, adequate provision shall be
made so that each Holder shall have the right to receive on the date on which
the relevant cash dividend or distribution is distributed to holders of Common
Stock, for each share of Preferred Stock, the amount of cash such Holder would
have received had such Holder owned a number of shares of Common Stock equal to
the Conversion Price on the Ex-Date for such dividend or
distribution.
Annex
I-22
(vi) Self Tender Offers and
Exchange Offers. If the Company or any of its Subsidiaries
successfully completes a tender or exchange offer for the Common Stock where the
cash and the value of any other consideration included in the payment per share
of the Common Stock exceeds the Closing Price per share of the Common Stock on
the Trading Day immediately succeeding the expiration of the tender or exchange
offer, then the Conversion Price in effect at the close of business on such
immediately succeeding Trading Day will be multiplied by the following
fraction:
OS0 x
SP0
|
AC
+ (SP0
x OS1)
|
Where,
|
SP0
|
=
|
the
Closing Price per share of Common Stock on the Trading Day immediately
succeeding the expiration of the tender or exchange
offer.
|
|
OS0
|
=
|
the
number of shares of Common Stock outstanding immediately prior to the
expiration of the tender or exchange offer, including any shares validly
tendered and not withdrawn.
|
|
OS1
|
=
|
the
number of shares of Common Stock outstanding immediately after the
expiration of the tender or exchange
offer.
|
|
AC
|
=
|
the
aggregate cash and fair market value of the other consideration payable in
the tender or exchange offer, as determined by the Board of
Directors.
|
In the
event that the Company, or one of its Subsidiaries, is obligated to purchase
shares of Common Stock pursuant to any such tender offer or exchange offer, but
the Company, or such Subsidiary, is permanently prevented by applicable law from
effecting any such purchases, or all such purchases are rescinded, then the
Conversion Price shall be readjusted to be such Conversion Price that would then
be in effect if such tender offer or exchange offer had not been
made.
(vii) Rights
Plans. To the extent that the Company has a rights plan in
effect with respect to the Common Stock upon conversion of any shares of the
Preferred Stock, Holders will receive, in addition to the shares of Common
Stock, the rights under the rights plan, unless, prior to the conversion date,
the rights have separated from the shares of Common Stock, in which case the
Conversion Price will be adjusted at the time of separation as if the Company
had made a distribution to all holders of the Common Stock as described in
clause (iv) above, subject to readjustment in the event of the expiration,
termination or redemption of such rights.
(viii) Issuances Below the
Applicable Price. If the Company issues, or agrees to issue or
sell, any Common Stock or Convertible Securities for consideration per share
less than the Applicable Price, then the Conversion Price in effect immediately
prior to each such issuance will immediately be reduced to the price determined
by multiplying the Conversion Price in effect immediately prior to such issuance
by the following fraction:
OS0 +
(AC/SP)
|
OS1
|
Annex
I-23
Where,
|
OS0
|
=
|
the
number of shares of Common Stock outstanding immediately prior to such
issuance.
|
|
AC
|
=
|
the
aggregate consideration paid or payable for such shares of Common Stock or
Convertible Securities.
|
|
SP
|
=
|
the
Applicable Price.
|
|
OS1
|
=
|
the
sum of the number of shares of Common Stock outstanding immediately after
such issuance.
|
This
adjustment shall become effective immediately after such issuance.
(b) The
Company may make such decreases in the Conversion Price, in addition to any
other decreases required by this Section 8, if the Board of Directors deems it
advisable to avoid or diminish any income tax to holders of the Common Stock
resulting from any dividend or distribution of shares of Common Stock (or
issuance of rights or warrants to acquire shares of Common Stock) or from any
event treated as such for income tax purposes or for any other
reason.
(c) (i) All
adjustments to the Conversion Price shall be calculated to the nearest 1/10 of a
cent. No adjustment in the Conversion Price shall be required if such
adjustment would be less than $0.01; provided that any adjustments
which by reason of this subparagraph are not required to be made shall be
carried forward and taken into account in any subsequent adjustment; provided further that on any Conversion
Date adjustments to the Conversion Price will be made with respect to any such
adjustment carried forward and which has not been taken into account before such
date.
(ii) The
Applicable Conversion Price shall not be adjusted:
(1) upon
the issuance of any shares of Common Stock pursuant to any present or future
plan providing for the reinvestment of dividends or interest payable on the
Company’s securities and the investment of additional optional amounts in shares
of Common Stock under any such plan, provided such plan was approved by the
Board of Directors;
(2) upon
the issuance of any shares of Common Stock or rights or warrants to purchase
those shares pursuant to any present or future employee, director or consultant
benefit plan or program of or assumed by the Company or any of its Subsidiaries,
provided such issuance was approved by the Board of Directors;
(3) upon
the issuance of any shares of Common Stock pursuant to any option, warrant,
right or exercisable, exchangeable or convertible security outstanding as of the
Original Issue Date and not substantially amended thereafter;
Annex
I-24
(4) upon
the issuance of securities pursuant to any merger, joint venture, partnership,
share exchange, business combination or similar transaction or any other direct
or indirect acquisition by the Company, whereby the Company’s securities
comprise, in whole or in part, the consideration paid by the Company in such
transaction, provided such transaction was approved by the Board of
Directors;
(5) for
a change in the par value or no par value of Common Stock;
(6) for
the payment of cash dividends pursuant to Section 3(a);
(7) upon
the issuance of shares of Preferred Stock issued pursuant to the terms of the
Investment Agreement or Common Stock issuable upon conversion thereof;
or
(8) upon
the issuance of any shares of Common Stock or warrants to acquire only shares of
Common Stock issued to banks, equipment lessors or other lending institutions,
or to real property lessors, in each case, in connection with a debt financing
(limited to secured or unsecured debt for borrowed money that is not pursuant to
the issuance of Convertible Securities), equipment leasing or real property
leasing transaction, provided such transaction was approved by the Board of
Directors.
(d) Whenever
the Conversion Price is to be adjusted in accordance with Section 8(a) or
Section 8(b), the Company shall: (i) compute the Conversion Price in accordance
with Section 8(a) or Section 8(b), taking into account the $0.01 threshold set
forth in Section 8(c) hereof; (ii) as soon as practicable following the
occurrence of an event that requires an adjustment to the Conversion Price
pursuant to Section 8(a) or Section 8(b), taking into account the $0.01
threshold set forth in Section 8(c) hereof, provide, or cause to be provided, a
written notice to the Holders of the occurrence of such event; and (iii) as soon
as practicable following the determination of the revised Conversion Price in
accordance with Section 8(a) or Section 8(b) hereof, provide, or cause to be
provided, a written notice to the Holders setting forth in reasonable detail the
method by which the adjustment to the Conversion Price was determined and
setting forth the revised Conversion Price.
(e) If
one or more events occurs requiring an adjustment to be made to the Conversion
Price during the same time period, adjustments to the Conversion Price shall be
determined by the Board of Directors to reflect the combined impact of all
Conversion Price adjustment events, as set out in this Section 8, during such
period.
(f) In
the event that at any time as a result of any adjustment made pursuant to this
Section 8 or otherwise, it will be necessary for the Company to obtain
stockholder approval, then the Company shall use its reasonable best efforts to
obtain such stockholder approval as promptly as practicable.
Annex
I-25
(g) In
the event the Company shall propose to take any action of the type described in
Section 8(a), the Company shall give notice to each Holder, which notice shall
specify the Record Date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be reasonably
necessary to indicate the effect on the Conversion Price and the number of
shares of Common Stock which shall be deliverable upon conversion of shares of
the Preferred Stock. Except as otherwise provided herein, (x) in the
case of any action that would require the fixing of a Record Date, such notice
shall be given at least ten days prior to the date so fixed and (y) in the case
of all other action, such notice shall be given at least ten days prior to the
taking of such proposed action.
(h) If
any event occurs as to which, in the opinion of the Board of Directors, the
provisions of this Section 8 are not strictly applicable or if strictly
applicable would not fairly protect the rights of the Holders in accordance with
the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
rights as aforesaid, but in no event shall any adjustment pursuant to this
Section 8 have the effect of increasing the Conversion Price as otherwise
determined pursuant to any of the provisions of this Section 8 except in the
case of a combination of shares of a type contemplated in Section 8(a)(ii)
hereof and then in no event to an amount larger than the Conversion Price as
adjusted pursuant to Section 8(a)(ii) hereof.
(i)
Anything in this Section 8 notwithstanding, no adjustment to
the Conversion Price shall reduce the Conversion Price below the then par value
per share of Common Stock, and any such purported adjustment shall instead
reduce the Conversion Price to such par value.
(j)
Notwithstanding the foregoing, no adjustment shall be
made to the Conversion Price pursuant to this Section 8 to the extent the Holder
actually participates on an as-converted basis (without giving effect to the
Excess Authorized Shares Threshold) with the Common Stock pursuant to Section
3(d)(ii), subject to notice of such participation to the Holder, in the
transaction that would otherwise trigger the applicable adjustment pursuant to
this Section 8 and the Company makes the required reserve set forth in Section
3(d)(iv).
9. Recapitalization,
Reclassification and Changes in Common Stock. Upon the
occurrence of any:
(a) reclassification
or change of the outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination);
(b) merger
or consolidation of the Company with or into another Person (other than a
Subsidiary) other than a merger or consolidation in which the Company is the
resulting or surviving Person and which does not result in any reclassification
or change of outstanding Common Stock;
(c) any
statutory share exchange of the Company with another Person; or
Annex
I-26
(d) sale
or other disposition of all or substantially all of the property and assets of
the Company (on a consolidated basis) to any other Person (any of the foregoing
events in clauses (a) through (d), a “Transaction”); then,
without limiting the rights of the Holders in Section 4 herein, the Preferred
Stock shall be convertible after the Transaction into the kind and amount of
shares of stock or other securities or other property or assets (including cash)
that the Holders would have been entitled to receive upon such Transaction had
such Preferred Stock been converted into the number of shares of Common Stock
equal to the Common Stock Equivalent immediately prior to such Transaction after
giving effect to any adjustment. The provisions of this Section 9
shall apply to successive Transactions. In the event that holders of
the Common Stock shall have the opportunity to elect the form of consideration
to be received in a Transaction, then the Company shall make adequate provision
whereby each Holder shall have a reasonable opportunity to determine the form of
consideration into which all of such Holder’s shares of Preferred Stock, shall
be convertible from and after the effective date of such
Transaction. Such determination shall be (i) subject to any
limitations to which all of the holders of Common Stock are subject, including,
but not limited to, pro rata reductions applicable to any portion of the
consideration payable in such Transaction and (ii) conducted in such a manner as
to be completed by the date that is the earlier of (a) the deadline for
elections to be made by holders of Common Stock and (b) five (5) Trading Days
prior to the anticipated effective date of such Transaction. The
Company will not effect (or enter into any agreement providing for) any
Transaction unless prior to the consummation thereof the successor Person (if
other than the Company) resulting from such Transaction shall assume by written
instrument mailed or delivered to the Holders at the last address of each such
Holder appearing on the Register, the obligation pursuant to this Section
9. At least twenty (20) days’ prior written notice of the date on
which the Transaction will be consummated shall be given to the
Holders.
10. Other
Provisions.
(a) Shares
of Preferred Stock issued and reacquired shall be prohibited from being reissued
as such and will be retired and canceled promptly after reacquisition thereof
and, upon compliance with the applicable requirements of Delaware law, will have
the status of authorized but unissued shares of preferred stock of the Company
undesignated as to series and may with any and all other authorized but unissued
shares of preferred stock of the Company be designated or redesignated and
issued or reissued, as the case may be, as part of any series of preferred stock
of the Company, except that any issuance or reissuance of shares of Preferred
Stock must be in compliance with this Certificate.
(b) The
shares of Preferred Stock shall be issuable only in whole shares.
(c) All
notices referred to herein shall be in writing, and, unless otherwise specified
herein, all notices hereunder shall be deemed to have been given upon the
earlier of receipt thereof or three Business Days after the date of mailing
thereof if sent by registered or certified mail (unless first-class mail shall
be specifically permitted for such notice under the terms of this Certificate)
with postage prepaid, addressed: (i) if to the Company, to its office at 7000
Shoreline Court, Suite 370, South San Francisco, CA 94080,
Attention: Chief Executive Officer and Chief Financial Officer, or
(ii) if to any Holder, to such Holder at the address of such Holder as listed in
the Register, or (iii) to such other address as the Company or any such Holder,
as the case may be, shall have designated by notice similarly
given. Any notice that was mailed in the manner herein provided shall
be conclusively presumed to have been duly given whether or not the Holder
receives the notice.
Annex
I-27
(d) If
at any time the Company is required to make any payment to a Holder pursuant to
this Certificate, the Company does not have sufficient funds legally available
to make such payment, the Company shall, to the extent permitted by applicable
law, revalue its consolidated assets and liabilities and reduce its stated
capital so as to increase the amount of capital and surplus legally available to
enable such payment, and the Company shall make as much of such required payment
as possible, ratably to each Holder in proportion to the number of shares of
Preferred Stock held by such Holder, and shall thereafter from time to time, as
soon as it shall have funds available therefor, make payment of as much of the
remaining amount of such required payment as it legally may until it has made
such payment in its entirety. For the avoidance of doubt, such
partial payments shall not reduce or waive the rights of the Holders
hereunder.
(e) The
words “hereby”, “herein”, “hereof”, “hereunder” and words of similar import
refer to this Certificate as a whole and not merely to the specific section,
paragraph or clause in which such word appears. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”. The definitions given for terms in Section 2 and
elsewhere in this Certificate shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may require,
any pronoun shall include the corresponding masculine, feminine and neuter
forms.
(f) The
Company shall replace any mutilated certificate at the Holder's expense upon
surrender of that certificate to the Company. The Company shall
replace certificates that become destroyed, stolen or lost at the Holder's
expense upon delivery to the Company of satisfactory evidence that the
certificate has been destroyed, stolen or lost.
(g) Any
of the rights of the Holders set forth herein (including, without limitation,
any rights to notices, adjustments or otherwise) may be waived by (i) any Holder
with respect to such Holder, provided that such waiver is in writing and
executed by such Holder, and (ii) the written consent of the Required Holders
with respect to all Holders, and such waiver shall be binding on all Holders;
provided, however, prior to the
effective date of an amendment to this Certificate approved by the Required
Holders which amendment amends the Applicable Terms, the Company shall give each
Holder five (5) Business Days’ notice to permit such Holder to convert such
Holder’s shares of Preferred Stock pursuant to Section 7(a) herein, subject to
any limitations in the Investment Agreement on the number of shares of Preferred
Stock that may be converted. Notwithstanding the foregoing, the
Required Holders shall not amend the foregoing proviso without the consent of
each Holder affected thereby.
Annex
I-28
ANNEX II
ADDITIONAL
TERMS
OF
SERIES
A-1 CONVERTIBLE PREFERRED STOCK
OF
HANA
BIOSCIENCES, INC.
2. Definitions. As
used herein, the following terms shall have the following meanings:
(a) “Accretion Rate” has
the meaning set forth in Section 3(a).
(b) “Accreted Value” has
the meaning set forth in Section 3(a).
(c) “Accrued Dividends”
means, with respect to any share of Preferred Stock, as of any date, the accrued
and unpaid dividends on such share through and including such date (whether or
not declared).
(d) “Acquiring Person”
shall mean any Person or group (within the meaning of Section 13(d)(3) of the
Exchange Act) (other than any Person who is a member of the Warburg Pincus
Investor Group).
(e) “A/D Rate” means the
Accretion Rate or the Dividend Rate, as applicable, at the time of the Special
Triggering Event.
(f) “Affiliate” shall
mean any Person, directly or indirectly, controlling, controlled by or under
common control with such Person.
(g) “Applicable Issuance
Date” means the date of the issuance of the applicable shares of
Preferred Stock (which may be issued from time to time on one or more
days).
(h) “Applicable Price”
means the greater of the Current Market Price per share of outstanding Common
Stock (A) on the date the Company issues any Common Stock or Convertible
Securities, (B) on the date the Company fixes the offering price or
conversion price of the Common Stock or Convertible Securities to be issued, and
(C) on the date of the first announcement of such issuance.
(i) “Applicable Terms”
means any of the following defined terms herein: (a) Accretion Rate;
(b) Accreted Value; (c) A/D Rate; (d) Conversion Price; (e) Dividend Rate; or
(f) Stated Value.
(j) “Approved Markets”
shall mean the NASDAQ Global Select Market, the NASDAQ Global Market, the NASDAQ
Capital Market or the NYSE.
(k) “Authorized Preferred
Stock” has the meaning set forth in the recitals.
Annex
II-1
(l) “Board of Directors”
means the Board of Directors of the Company or, with respect to any action to be
taken by the Board of Directors, any committee of the Board of Directors duly
authorized to take such action.
(m) “Business Day” means
any day except Saturday, Sunday and any day which shall be a legal holiday or a
day on which banking institutions in the State of New York generally are
authorized or required by law or other governmental actions to
close.
(n) “Capital Stock” of any
Person means any and all securities (including equity-linked securities),
interests (including partnership interests), rights to purchase, warrants,
options, participations or other equivalents of or interests in (however
designated) equity of such Person, including any Preference Stock.
(o) “Cash and Cash
Equivalents” means all cash and cash equivalents determined in accordance
with GAAP.
(p) “Certificate” means
this Certificate of Designation with respect to the Preferred Stock, as amended
from time to time.
(q) “Certificate of
Incorporation” has the meaning set forth in the recitals.
(r) “Change of Control”
means the consummation of any transaction or series of related transactions
involving (i) any purchase or acquisition (whether by way of merger, share
exchange, consolidation, business combination or similar transaction or
otherwise) by any Acquiring Person, of any of (A) securities representing a
majority of the outstanding voting power of the Company entitled to elect the
Board of Directors or (B) the majority of the outstanding shares of Common
Stock, (ii) any sale, lease, exchange, transfer, exclusive license or
disposition of all or substantially all of the assets of the Company and its
Subsidiaries, taken together as a whole, to an Acquiring Person, or (iii) any
merger, consolidation or business combination in which the holders of voting
securities of the Company immediately prior to the transaction, as a group, do
not hold securities representing a majority of the outstanding voting power
entitled to elect the board of directors of the surviving entity in such merger,
consolidation or business combination.
(s) “Closing
Price” shall mean, with respect to the Common Stock (or other
relevant Capital Stock) on any date of determination, the closing sale price or,
if no closing sale price is reported, the last reported sale price of the shares
of the Common Stock (or other relevant Capital Stock) on the relevant Approved
Market on such date. If the Common Stock (or other relevant Capital
Stock) is not traded on an Approved Market on any date of determination, the
Closing Price of the Common Stock (or other relevant Capital Stock) on such date
of determination means the closing sale price as reported in the composite
transactions for the principal U.S. national or regional securities exchange on
which the Common Stock (or other relevant Capital Stock) is so listed or quoted,
or, if no closing sale price is reported, the last reported sale price on the
principal U.S. national or regional securities exchange on which the Common
Stock (or other relevant Capital Stock) is so listed or quoted, or if the Common
Stock (or other relevant Capital Stock) is not so listed or quoted on a U.S.
national or regional securities exchange, the last quoted bid price for the
Common Stock (or other relevant Capital Stock) in the over-the-counter market as
reported by Pink Sheets LLC or similar organization, or, if that bid price is
not available, the market price of the Common Stock (or other relevant Capital
Stock) on that date as determined in good faith by the Board of
Directors.
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II-2
(t) “Common Stock” means
the common stock, par value $0.001 per share, of the Company, or any other class
of stock resulting from successive changes or reclassifications of such Common
Stock consisting solely of changes in par value, or from par value to no par
value, or as a result of a subdivision, combination or merger, reclassification,
consolidation or similar transaction in which the Company is a constituent
corporation.
(u) “Company” has the
meaning set forth in the recitals.
(v) “Conversion Date” has
the meaning set forth in Section 7(a)(iv).
(w) “Conversion Price”
means $ 0.184, subject to adjustment as set forth herein.
(x) “Conversion Right” has
the meaning set forth in Section 7(a)(i).
(y) “Conversion Right
Notice” has the meaning set forth in Section 7(a)(ii).
(z) “Convertible
Securities” means debt securities or shares of Capital Stock convertible
into or exchangeable, directly or indirectly, for Common Stock.
(aa) “Current Market Price”
means, on any date, the average of the daily Closing Price per share of the
Common Stock or other securities on each of the twenty (20) consecutive Trading
Days preceding the earlier of the day before the date in question and the day
before the Ex-Date with respect to the issuance or distribution giving rise to
an adjustment to the Conversion Price pursuant to Section 8.
(bb) “DGCL” has the meaning
set forth in the recitals.
(cc) “Dividend Deferral
Election” has the meaning set forth in Section 3(a).
(dd) “Dividend Equivalent
Amount” has the meaning set forth in Section 3(d).
(ee) “Dividend Payment
Date” means March 31, June 30, September 30 and December 31 of each
year.
(ff) “Dividend Rate” has
the meaning set forth in Section 3(a).
(gg) “Dividend Record Date”
means, with respect to any dividend payable on a Dividend Payment Date, the
preceding March 15, June 15, September 15 and December 15 and, with respect to
any dividend payable on any other date, such date as may be determined by the
Board of Directors.
(hh) “EBITDA” means, for
any period, earnings before interest, taxes, depreciation and amortization for
such period, each as determined in accordance with GAAP.
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II-3
(ii) “Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
(jj) “Ex-Date”, when used
with respect to any issuance or distribution, means the first date on which the
Common Stock or other securities trade without the right to receive the issuance
or distribution giving rise to an adjustment to the Conversion Price pursuant to
Section 8.
(kk) “GAAP” means United
States generally accepted accounting principles.
(ll) “Holder” means a
holder of record of outstanding shares of the Preferred Stock.
(mm) “Indebtedness” means,
without duplication, (A) all indebtedness for borrowed money, (B) all
obligations issued, undertaken or assumed as the deferred purchase price of
property or services, including, without limitation, “capital leases” in
accordance with GAAP (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations with respect
to letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title retention agreement, or incurred as
financing, in either case with respect to any property or assets acquired with
the proceeds of such indebtedness (even though the rights and remedies of the
seller or bank under such agreement in the event of default are limited to
repossession or sale of such property), (F) all monetary obligations under any
leasing or similar arrangement which, in connection with GAAP, consistently
applied for the periods covered thereby, is classified as a capital lease, (G)
all indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any lien upon or in any property or assets
(including accounts and contract rights) owned by any Person, even though the
Person which owns such assets or property has not assumed or become liable for
the payment of such indebtedness, and (H) all Contingent Obligations in respect
of indebtedness or obligations of others of the kinds referred to in clauses (A)
through (G) above. For the purposes of this definition, “Contingent
Obligation” mean, as to any Person, any direct or indirect liability,
contingent or otherwise, of that Person with respect to any indebtedness, lease,
dividend or other obligation of another Person if the primary purpose or intent
of the Person incurring such liability, or the primary effect thereof, is to
provide assurance to the obligee of such liability that such liability will be
paid or discharged, or that any agreements relating thereto will be complied
with, or that the holders of such liability will be protected (in whole or in
part) against loss with respect thereto.
(nn) “Investment Agreement”
means that certain Investment Agreement, dated June 7, 2010, by and among the
Company and the purchasers named therein, as the same may be amended from time
to time.
(oo) “Junior Stock” means
all classes of Common Stock and each other class of Capital Stock or series of
preferred stock established after the Original Issue Date by the Board of
Directors, the terms of which do not expressly provide that such class or series
ranks senior to or on parity with the Preferred Stock as to dividend rights
and/or rights upon a Liquidation or Change of Control.
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II-4
(pp) “Junior Stock Event”
has the meaning set forth in Section 3(d).
(qq) “Liquidation” means
the voluntary or involuntary liquidation, dissolution or winding-up of the
Company.
(rr) “Liquidation Event”
has the meaning set forth in Section 4(a).
(ss)
“Liquidation
Preference” has the meaning set forth in Section 4(a).
(tt) “Mandatory Conversion”
has the meaning set forth in Section 7(b)(i).
(uu) “Mandatory Conversion
Time” has the meaning set forth in Section 7(b)(i).
(vv) “Net Debt” means, as
of any particular date, the aggregate amount of Indebtedness less all Cash and
Cash Equivalents as of such date.
(ww) “NYSE” means the New
York Stock Exchange, Inc.
(xx) “Option” means rights,
options or warrants to subscribe for, purchase or otherwise acquire Common Stock
or Convertible Securities.
(yy) “Original Issue Date”
means June 7, 2010.
(zz) “Parity Stock” means
Series A-2 Preferred Stock and any class of Capital Stock or series of preferred
stock established after the Original Issue Date by the Board of Directors, the
terms of which expressly provide that such class or series will rank on parity
with the Preferred Stock as to dividend rights and/or rights upon a Liquidation
or Change of Control.
(aaa) “Person” means any
individual, corporation, general partnership, limited partnership, limited
liability partnership, joint venture, association, joint-stock company, trust,
limited liability company, unincorporated organization, other entity or
government or any agency or political subdivision thereof.
(bbb) “Preference Stock”
means, as applied to the Capital Stock of any Person, Capital Stock of any
series, class or classes (however designated) which is preferred as to the
payment of dividends or distributions, or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of such Person or change
of control (defined by analogy to the definition of Change of Control herein) of
such Person, over shares of Capital Stock of any other series or class of such
Person.
(ccc) “Preferred Stock” has
the meaning set forth in Section 1(a).
(ddd) “Record
Date” means the record date as determined in accordance with
Section 213 of the DGCL.
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II-5
(eee) “Register” has the
meaning set forth in Section 3(a).
(fff) “Registration Rights
Agreement” means that certain Registration Rights Agreement, dated June
7, 2010, between the Company and the signatories thereto, as the same may be
amended from time to time.
(ggg) “Required Holders”
means as of any date the Holders of more than 50% of the then-outstanding shares
of Preferred Stock, voting together as a single class.
(hhh)
“Senior Stock”
means each class of Capital Stock or series of preferred stock established after
the Original Issue Date by the Board of Directors, the terms of which expressly
provide that such class or series will rank senior to the Preferred Stock as to
dividend rights and/or rights upon a Liquidation or Change of
Control.
(iii) “Series A-2 Preferred
Stock” means the series of preferred stock, par value $0.001 per share,
of the Company designated as the “Series A-2 Convertible
Preferred Stock” having the rights and privileges set forth in the
Certificate of Designation for such Series A-2 Preferred Stock.
(jjj) “Special Triggering
Event” means any of the following events:
(i) the
failure of the Company to pay when due any amounts owed on the shares of
Preferred Stock to the Holders;
(ii)
a failure by the Company to deliver any cash and shares
of Common Stock, when such cash and shares of Common Stock, if any, are required
to be delivered upon conversion of the Preferred Stock pursuant to the terms set
forth herein, where the Company does not remedy such default within five (5)
days after the date such cash and shares of Common Stock, if any, are required
to be delivered;
(iii) a
material violation by the Company of any term of or condition set forth in the
Investment Agreement, where the Company does not cure such violation within
thirty (30) days after the receipt of written notice of such breach from one or
more of the Holders party to the Investment Agreement who are actually adversely
affected by such breach;
(iv)
a material violation by the Company of any term of or
condition set forth in this Certificate, where the Company does not cure such
violation within thirty (30) days after the receipt of written notice of such
breach from one or more of the Holders who are actually adversely affected by
such breach;
(v)
a material violation by the Company of any term of or condition set
forth in the Registration Rights Agreement, where the Company does not cure such
violation within thirty (30) days after the receipt of written notice of such
breach from one or more of the Holders party to the Registration Rights
Agreement who are actually adversely affected by such breach;
or
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II-6
(vi) the
failure of any of the WP Board Designees (as defined in the Investment
Agreement) to be elected or appointed to the Board of Directors in accordance
with the terms set forth in the Investment Agreement.
(kkk) “Stated Value” means
$100.00 per share of Preferred Stock.
(lll) “Subsidiary” means a
partnership, joint-stock company, corporation, limited liability company, trust,
unincorporated organization or other entity of which a Person owns, directly or
indirectly, more than 50% of the stock or other interests the holder of which is
generally entitled to vote for the election of the board of directors or other
governing body of such entity.
(mmm)
“Trading
Day” means a day during which the trading of securities generally occurs
on the Approved Market on which the Common Stock is then listed or, if the
Common Stock is not listed on an Approved Market, the NYSE.
(nnn) “Transaction” has the
meaning set forth in Section 9(d).
(ooo) “Transfer Agent” means
Corporate Stock Transfer, the Company’s duly appointed transfer agent, registrar
and conversion and dividend disbursing agent for the Preferred Stock, or such
other Transfer Agent as may be appointed by the Company from time to
time.
(ppp) “Warburg Pincus Investor
Group” means Warburg Pincus LLC, Warburg Pincus Private Equity X, L.P.,
Warburg Pincus X Partners, L.P. and any of their respective Affiliates other
than any of their Affiliates that is a “portfolio company” (as such term is
customarily used among private equity investors).
3. Accretion;
Dividends.
(a) From
and after the Applicable Issuance Date until and including the fifth anniversary
of the Applicable Issuance Date for the related shares of Preferred Stock, the
Stated Value of each share of Preferred Stock shall accrete at an annual rate of
nine percent (9%) (the “Accretion Rate”),
compounded quarterly, beginning on the three-month period ending June 30, 2010
(the Stated Value as it has accreted as of any date, the “Accreted Value”,
subject to appropriate adjustment in the event of any stock dividend, stock
split, stock distribution or combination, consolidation, subdivision,
reclassification or other corporate actions having the similar effect with
respect to the Preferred Stock). Following the fifth anniversary of
the Applicable Issuance Date for the related shares of Preferred Stock, the
Holders shall be entitled to receive, on each Dividend Payment Date, cash
dividends on each share of Preferred Stock, at a rate per annum equal to nine
percent (9%) of the Accreted Value as of the Dividend Payment Date (the “Dividend Rate”) and
the Board of Directors shall declare such cash dividends out of funds legally
available for that purpose; provided, however, (i) to the
extent the Company does not have funds legally available to pay such cash
dividend, or (ii) with the prior approval of the Required Holders, in the case
of each of (i) and (ii), the Company may elect not to pay the cash dividend due
on any Dividend Payment Date (a “Dividend Deferral
Election”) and if such an election is made, the cash dividend that would
have been payable on such Dividend Payment Date shall continue to accrue, and
shall compound quarterly at the Dividend Rate until the accrued value of such
dividend is paid, whether or not in any fiscal year there shall be net profits
or surplus legally available for the payment of dividends in such fiscal year,
so that if in any fiscal year or years, dividends in whole or in part are not
paid upon the Preferred Stock, unpaid dividends shall accumulate and accrue at
the Dividend Rate, compounded quarterly. Unless there is a Dividend
Deferral Election, dividends shall be payable quarterly in arrears, on each
Dividend Payment Date, commencing on the first Dividend Payment Date following
the fifth anniversary of the Applicable Issuance Date for the related shares of
Preferred Stock; provided, that if any
such payment date is not a Business Day then such dividend shall be payable on
the next Business Day. Each dividend shall be payable to the Holders
as they appear on the securities register maintained in respect of the Preferred
Stock by the Company (the “Register”) at the
close of business on the corresponding Dividend Record Date; provided, however, if there is
a Dividend Deferral Election, the dividend that would have otherwise been
payable on the Dividend Record Date applicable to the Dividend Deferral Election
shall be payable to the Holders as they appear on the Register at the time such
dividend is paid. The Board of Directors may declare any dividends
subject to a Dividend Deferral Election at anytime (subject to the availability
of lawful funds) and the payment date of such funds shall be as determined by
the Board of Directors. All dividends paid with respect to shares of
Preferred Stock shall be paid pro rata to the Holders entitled
thereto. The amount of dividends payable for any other period shorter
or longer than a full dividend period, shall be computed on the basis of twelve
30-day months and a 360-day year. Dividend payments shall be
aggregated per Holder and shall be made to the nearest cent (with $.005 being
rounded upward).
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II-7
(b) Upon
a Special Triggering Event, the then applicable A/D Rate shall automatically be
increased by an additional three percent (3%) per annum to twelve percent (12%)
per annum, compounded quarterly, from and including the date on which any such
Special Triggering Event shall occur through but excluding the date on which the
Special Triggering Event shall have been cured or waived in writing by the
Required Holders.
(c) No
dividend will be declared or paid upon, or any sum set apart for the payment of
dividends upon, any outstanding share of the Preferred Stock or Parity Stock
with respect to any dividend period unless all dividends for all preceding
dividend periods have been declared and paid, or declared and, if such dividends
are to be paid in cash, a sum of cash sufficient for the payment thereof is set
apart for the payment of such dividend, upon all outstanding shares of Preferred
Stock and Parity Stock. Notwithstanding the foregoing, if full
cumulative dividends have not been paid on the Preferred Stock and all Parity
Stock, all dividends declared and paid on the Preferred Stock and such Parity
Stock shall be declared and paid pro rata so that the amounts of dividends
declared and paid per share on the Preferred Stock and such Parity Stock will in
all cases bear to each other the same ratio that accumulated and unpaid
dividends per share on the shares of Preferred Stock and such Parity Stock bear
to each other.
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II-8
(d) No
dividends or other distributions (other than cash paid in lieu of fractional
shares) may be declared, made or paid, or set apart for payment upon, any Junior
Stock, nor may any Junior Stock be redeemed, purchased or otherwise acquired for
any consideration (or any money paid to or made available for a sinking fund for
the redemption of any Junior Stock) by or on behalf of the Company or any of its
Subsidiaries, unless (i) all Accrued Dividends shall have been or
contemporaneously are declared and paid in cash, or are declared and a sum of
cash sufficient for the payment thereof is set apart for such payment, on the
Preferred Stock and all Parity Stock for all dividend periods terminating on or
prior to the Record Date of such declaration, payment, redemption, purchase or
acquisition, (ii) the Holders receive an equivalent dividend or distribution of
the amount of such dividend or distribution that would be payable to such
Holders if such shares of Preferred Stock had been converted into Common Stock
immediately prior to the Record Date for such dividend or distribution (such
amount per share of Preferred Stock, the “Dividend Equivalent
Amount”), (iii) the Company obtains the consent required pursuant to
Section 5(b) herein and (iv) the Company reserves an aggregate amount equal to
the product of (I) the number of shares of Common Stock that would have been
issuable upon conversion of any additional shares of Preferred Stock that could
be issued pursuant to the Investment Agreement (without regard to any
restrictions or conditions with respect thereof) had such additional shares of
Preferred Stock been issued and were outstanding immediately prior to the Record
Date for payment of such dividend or distribution times (II) the Dividend
Equivalent Amount payable upon a share of Preferred Stock (such declaration or
distribution made in accordance with clauses (i) through (iv)), a “Junior Stock
Event”). The restrictions set forth in this Section 3(d) shall
not apply to the purchase or other acquisition of Junior Stock (A) pursuant to
any bona fide employee or director incentive or benefit plan or arrangement of
the Company or any Subsidiary heretofore or hereafter adopted by the Board of
Directors or the cashless exercise of Options or (B) which purchase or
acquisition has received the prior written consent of the Required
Holders.
4. Liquidation; Change of
Control.
(a) In
the event of any Liquidation (a “Liquidation Event”),
the Holders shall be entitled to be paid out of the assets and funds of the
Company available for distribution to its stockholders an amount in cash per
each share of Preferred Stock equal to the greater of (A) 100% of the Accreted
Value for each share of Preferred Stock outstanding on the date of such
Liquidation Event, plus an amount equal to all Accrued Dividends thereon to the
date of the Liquidation Event or (B) the amount to which such Holders would be
entitled to receive had such Holders, immediately prior to the Liquidation
Event, converted such shares of Preferred Stock into shares of Common Stock
(determined in accordance with Section 7(a)(i)), in either case before any
payment shall be made or any assets distributed to the holders of any of the
Junior Stock (such greater cash amount being referred to as the “Liquidation
Preference”). Without limiting any rights and remedies of the
Holders, if upon any such Liquidation Event, the remaining assets and funds of
the Company available for distribution to its stockholders after payment in full
of amounts required to be paid or distributed to holders of Senior Stock are not
sufficient to pay in full the liquidation payments payable to the Holders and
holders of outstanding shares of any Parity Stock, then the holders of all such
shares of Parity Stock shall share ratably in such distribution of the remaining
assets and funds of the Company in accordance with the amount which would
otherwise be payable on such distribution if the amounts to which the Holders
and the holders of outstanding shares of such Parity Stock are entitled were
paid in full.
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II-9
(b) Unless
waived in writing by the Required Holders, in the event of a Change of Control,
each Holder shall have the right, at such Holder’s election, to either (i)
convert each share of Preferred Stock and receive the amount to which such
Holder is entitled to receive upon conversion of such shares of Preferred Stock
into Common Stock (determined in accordance with Section 7(a)(i)) or (ii) within
sixty (60) days of such Change of Control, or later if the Holders did not
receive notice of such Change of Control, require the Company to redeem (subject
to the availability of lawful funds), in whole or in part, each share of
Preferred Stock held by such Holder for an amount in cash equal to the
Liquidation Preference. Unless waived in writing by the Required
Holders, in the event of a Change of Control that occurs prior to the fifth
anniversary of the Applicable Issuance Date, for purposes of determining the
amount to which such Holder is entitled to receive upon conversion of such
shares of Preferred Stock into Common Stock or the Liquidation Preference, the
Accreted Value (including for purposes of Section 7(a)(i)) upon such Change of
Control shall be deemed to be increased to the Accreted Value that would be in
effect if the Change of Control had occurred on the fifth anniversary of the
Applicable Issuance Date. Unless waived in writing by the Required
Holders, the Corporation shall not have the power to effect a Change of Control
unless the agreement for such transaction provides that the consideration
payable to the stockholders of the Corporation in such transaction shall be
allocated among the holders of capital stock of the Corporation in accordance
with this Section 4(b). In connection with a redemption permitted
above, each Holder shall surrender his, her or its certificate or certificates
representing such redeemed shares to the Company, in the manner and at the place
designated in written notice mailed by the Company, postage prepaid, to each
Holder, at his, her or its post office address last shown on the Register (which
notice shall be given at least ten (10) days prior to such Change of Control or
such shorter period as may be agreed in writing by the Required Holders), and
thereupon the Liquidation Preference of such shares shall be payable to the
order of the Person whose name appears on such certificate or certificates as
the owner thereof and each surrendered certificate shall be
canceled. From and after the date of redemption, unless there shall
have been a default in payment of the Liquidation Preference, all rights of the
Holder whose shares have been redeemed (except the right to receive the
Liquidation Preference) shall cease with respect to such shares, and such shares
shall not thereafter be transferred on the books of the Company or be deemed to
be outstanding for any purpose whatsoever.
(c) Without
limiting any other rights and remedies of the Holders, if upon any such Change
of Control, the remaining assets and funds of the Company available for
distribution to its stockholders after payment in full of amounts required to be
paid or distributed to holders of Senior Stock are not sufficient to pay in full
amounts payable to the Holders and holders of outstanding shares of any Parity
Stock, then the holders of all such shares shall share ratably in such
distribution of the remaining assets and funds of the Company in accordance with
the amount which would otherwise be payable on such distribution if the amounts
to which the Holders and the holders of outstanding shares of such Parity Stock
are entitled were paid in full.
(d) Unless
waived in writing by the Required Holders, written notice of any Liquidation
Event or Change of Control, stating a payment date and the place where the
distributable amounts shall be payable, shall be given no less than ten (10)
days prior to the payment date stated therein, to the Holders at their
respective addresses as the same shall appear on the Register.
(e) The
amount deemed paid or distributed to the holders of Common Stock upon any
Liquidation or Change of Control shall be the cash or the value of the property,
rights or securities paid or distributed to such holders by the Company or the
acquiring Person. The value of such property, rights or securities
shall be determined in good faith by the Board of
Directors.
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II-10
5. Voting
Rights.
In
addition to any voting rights provided by law, the Holders shall be entitled to
the following voting rights:
(a) Each
share of Preferred Stock shall entitle the Holder thereof to vote together with
the holders of Common Stock as a single class on all matters submitted for the
approval of the holders of Common Stock. For purposes of this Section
5(a), each Holder shall be entitled to the number of votes equal to the number
of shares of Common Stock that would be held by such Holders assuming the
conversion of all outstanding shares of Preferred Stock held by such Holder into
shares of Common Stock at the Conversion Price on the Record Date for the
determination of the stockholders entitled to vote on such matters.
(b) If
at any time following the initial Applicable Issuance Date at least twenty-five
percent (25%) of the aggregate number of shares of Preferred Stock issued on and
after the initial Applicable Issuance Date are outstanding, in addition to any
other vote or consent of the stockholders required by law or by the Certificate
of Incorporation, including any Certificate of Designation, bylaws of the
Company or this Certificate, the Company shall not, and shall not permit its
Subsidiaries to (in each case, whether by merger, consolidation, reorganization,
operation of law or otherwise), without the prior written consent of the
Required Holders:
(i) amend,
alter, waive or repeal any provision of its Certificate of Incorporation,
including any Certificate of Designation, or bylaws or this Certificate in any
manner that would adversely affect the rights, powers, preferences or privileges
(economic or otherwise) of the Preferred Stock or split, reverse split,
subdivide, reclassify, combine or take other corporate actions having a similar
effect with respect to the Preferred Stock;
(ii) increase
the size of the Board of Directors to more than nine (9);
(iii) incur
Indebtedness (other than Indebtedness for borrowed money that, when aggregated
with all other Indebtedness for borrowed money incurred within the previous
twelve months from the date of incurrence, is less than $2,500,000 when so
aggregated), except to the extent that the Company has EBITDA in excess of
$5,000,000 at the time of incurrence and then only to the extent that the ratio
of Net Debt to EBITDA for the Company and its consolidated Subsidiaries for the
twelve months preceding such date (after giving pro forma effect to the action
proposed to be taken) would not exceed 3.0x;
(iv) distribute
(by means of a dividend or otherwise) assets (including property or cash) (other
than shares of Common Stock or cash as required to pay dividends on the
Preferred Stock pursuant to Section 3 (excluding dividends payable pursuant to
Section 3(d)(ii) which shall require consent pursuant to this Section 5(b)(iv)))
or engage in a self tender offer, redemption or share repurchase (whether
privately negotiated or open market repurchases);
Annex
II-11
(v) offer,
sell, authorize or create, increase the authorized amount of, or issue shares of
Preferred Stock or Series A-2 Preferred Stock or any class or series of Senior
Stock, Parity Stock or Junior Stock (other than (a) the issuance of Common Stock
approved by the Board of Directors and (b) shares of Preferred Stock and Series
A-2 Preferred Stock issued pursuant to the terms of the Investment Agreement or
Common Stock issuable upon conversion thereof);
(vi) enter
into any contract, agreement or other arrangement that would, directly or
indirectly, preclude the Company from making payment in full in cash on each
Dividend Payment Date of the dividends contemplated in Section 3 above;
or
(vii) adopt
or amend any stockholder rights plan, poison pill or similar takeover
device.
(c) Any
action to be taken at any annual or special meeting of stockholders by the
Holders may be taken without a meeting, without prior notice and without a vote,
if a consent or consents in writing, setting forth the action so taken, shall be
signed by the Holder or Holders having no less than the minimum number of votes
that would be required to take such action at a meeting at which all of the
shares of Preferred Stock were present and voted. Prompt written
notice of the taking of any action by the Holders by less than unanimous written
consent shall be given as may be required under applicable law.
6. Redemption.
The Company shall have no right to require the redemption of the
shares of Preferred Stock. Nothing herein contained shall prevent or
restrict the purchase by the Company, from time to time either at public or
private sale, of the whole or any part of the outstanding shares of Preferred
Stock at such price or prices as the Company and a Holder may determine, subject
to the provisions of applicable law and obtaining any required consents,
including the prior written consent of the Required Holders pursuant to Section
5(b) above.
7. Conversion.
(a) Conversion
Right.
(i) Each
Holder shall have the right, at such Holder’s option, exercisable at any time
and from time to time to convert all or any portion of such Holder’s shares of
Preferred Stock, subject to the terms and provisions of this Section 7 (the
“Conversion
Right”). Upon a Holder’s election to exercise the Conversion
Right, the shares of Preferred Stock for which the Conversion Right is exercised
shall be converted into such whole number of shares of Common Stock equal to the
product of the number of shares of Preferred Stock being so converted multiplied
by the quotient of (A) the per share Accreted Value as of the Conversion Date
(taking into account any differing Applicable Issuance Dates) divided by
(B) the Conversion Price then in effect. In addition, upon a Holder’s
election to exercise the Conversion Right, the shares of Preferred Stock for
which the Conversion Right is exercised shall be entitled to receive (at the
election of the Company) either (1) an amount in cash equal to all unpaid
Accrued Dividends thereon through the Conversion Date or (2) a number of shares
of Common Stock equal to the quotient obtained by dividing (x) an amount equal
to all unpaid Accrued Dividends thereon through the Conversion Date by (y) the
Closing Price of the Common Stock on the Trading Day immediately prior to the
Conversion Date; provided, however, the Company
shall elect clause (2) above to the extent that sufficient lawful funds are not
available to pay the amounts required by clause (1) above.
Annex
II-12
(ii) The
Conversion Right of a Holder shall be exercised by the Holder by the surrender
to the Company of the certificates representing shares of Preferred Stock to be
converted at any time during usual business hours at the Company’s principal
place of business or the offices of the Transfer Agent, accompanied by written
notice to the Company that the Holder elects to convert all or a portion of the
shares of Preferred Stock represented by such certificate (a “Conversion Right
Notice”) and specifying the name or names (with address or addresses) in
which a certificate or certificates for shares of Common Stock are to be issued
and (if so required by the Company or the Transfer Agent) by a written
instrument or instruments of transfer in form reasonably satisfactory to the
Company or the Transfer Agent duly executed by the Holder or its legal
representative.
(iii) As
promptly as practicable after the surrender of the certificate or certificates
for Preferred Stock as aforesaid and the receipt of the Conversion Right Notice
and in no event later than three (3) Trading Days thereafter, the Company shall
issue and shall deliver or cause to be issued and delivered to such Holder, or
to such other Person on such Holder’s written order (A) one or more certificates
representing the number of validly issued, fully paid and non-assessable whole
shares of Common Stock to which the Holder, or the Holder’s transferee, shall be
entitled, (B) if less than the full number of shares of Preferred Stock
evidenced by the surrendered certificates is being converted, a new certificate
or certificates, of like tenor, for the number of shares of Preferred Stock
evidenced by the surrendered certificate or certificates, less the number of
shares being converted, (C) cash for any payment of Accrued Dividends through
the Conversion Date if the Company elects to pay such dividends in cash pursuant
to Section 7(a)(i) and (D) cash for any fractional interest in respect of a
share of Common Stock arising upon such conversion settled as provided in
Section 7(c)(i).
(iv) Each
conversion pursuant to Section 7(a)(i) shall be deemed to have been made at the
close of business on the date of the later to occur of giving the Conversion
Right Notice and of surrendering the certificate or certificates representing
the Preferred Stock to be converted (the “Conversion Date”) so
that the rights of the Holder thereof as to the Preferred Stock being converted
shall cease except for the right to receive the Common Stock (and cash
dividends, if elected by the Company, and cash in lieu of fractional shares)
payable under Section 7(a), and the Person entitled to receive shares of Common
Stock shall be treated for all purposes as having become the record holder of
those shares of Common Stock at that time.
Annex
II-13
(b) Mandatory
Conversion.
(i) Upon
the date and time, or the occurrence of an event, specified by vote or written
consent of the Required Holders (a “Mandatory
Conversion”) (the time of such closing or the date and time specified or
the time of the event specified in such vote or written consent is referred to
herein as the “Mandatory Conversion
Time”) each outstanding share of Preferred Stock shall automatically be
converted into the number of shares of Common Stock equal to such whole number
of shares of Common Stock equal to the product of the number of shares of
Preferred Stock being so converted multiplied by the quotient of (A)
the per share Accreted Value as of the Conversion Date (taking
into account any differing Applicable Issuance Dates) divided by (B) the
Conversion Price then in effect. In addition, upon a Mandatory
Conversion, the shares of Preferred Stock shall be entitled to receive (at the
election of the Company) either (1) an amount in cash equal to all unpaid
Accrued Dividends thereon through the Mandatory Conversion Time or (2) a number
of shares of Common Stock equal to the quotient obtained by dividing (x) an
amount equal to all unpaid Accrued Dividends thereon through the Mandatory
Conversion Time by (y) the Closing Price of the Common Stock on the Trading Day
immediately prior to the Mandatory Conversion Time; provided, however, the Company
shall elect clause (2) above to the extent that sufficient lawful funds are not
available to pay the amounts required by clause (1) above.
(ii) All
Holders shall be sent written notice of the Mandatory Conversion Time and the
place designated for mandatory conversion of all such shares of Preferred Stock
pursuant to this Section 7(b). Such notice need not be sent in
advance of the occurrence of the Mandatory Conversion Time. Promptly
following receipt of such notice, each Holder shall surrender his, her or its
certificate or certificates for all such shares (or, if such Holder alleges that
such certificate has been lost, stolen or destroyed, a lost certificate
affidavit and agreement reasonably acceptable to the Company to indemnify the
Company against any claim that may be made against the Company on account of the
alleged loss, theft or destruction of such certificate which agreement shall not
require the posting of a bond) to the Company at the place designated in such
notice. If so required by the Company, certificates surrendered for
conversion shall be endorsed or accompanied by written instrument or instruments
of transfer, in form satisfactory to the Company, duly executed by the Holder or
by his, her or its attorney duly authorized in writing. All rights
with respect to the Preferred Stock converted pursuant to Section 7(b),
including the rights, if any, to receive notices and vote (other than as a
holder of Common Stock), will terminate at the Mandatory Conversion Time
(notwithstanding the failure of the Holder or Holders to surrender the
certificates at or prior to such time), except only the rights of the Holders,
upon surrender of their certificate or certificates (or lost certificate
affidavit and agreement) therefor, to receive the items provided for in the next
sentence of this Section 7(b)(ii). As soon as practicable after the
Mandatory Conversion Time and the surrender of the certificate or certificates
(or lost certificate affidavit and agreement) for Preferred Stock, the Company
shall issue and deliver to such Holder, or to his, her or its nominees, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof, together
with (A) cash for any payment of Accrued Dividends through the Conversion Date
if the Company elects to pay such dividends in cash pursuant to Section 7(b)(i)
and (B) cash for any fractional interest in respect of a share of Common Stock
arising upon such conversion settled as provided in Section
7(c)(i).
(c) Miscellaneous.
(i) No
fractional shares of Common Stock shall be issued upon the conversion of any
shares of Preferred Stock. If the conversion of any share or shares
of Preferred Stock results in a fractional share of Common Stock issuable, the
Company shall pay a cash amount in lieu of issuing such fractional share in an
amount equal to such fractional interest multiplied by the Closing Price on the
Trading Day immediately prior to the Conversion Date or Mandatory Conversion
Time, as applicable.
Annex
II-14
(ii) Except
as otherwise provided for herein, a Holder shall not be entitled to any rights
of a holder of shares of Common Stock until such Holder has converted such
Holder’s Preferred Stock, and only to the extent the shares of Preferred Stock
are deemed to have been converted into shares of Common Stock in accordance with
the provisions of this Section 7.
(iii) The
Company shall reserve and keep available for issuance such number of its
authorized but unissued shares of Common Stock equal to 100% of the number of
shares of Common Stock issuable upon conversion of all outstanding shares of
Preferred Stock. The Company shall take all action permitted by law
to increase the authorized number of shares of Common Stock if at any time there
shall be insufficient authorized but unissued shares of Common Stock to permit
such reservation or to permit the conversion of all outstanding shares of
Preferred Stock. The Company covenants that all Common Stock that may
be issued upon conversion of Preferred Stock shall upon issuance be duly
authorized, fully paid and non-assessable, free and clear of all liens, claims,
security interests and other encumbrances. The Company further
covenants that, if at any time the Common Stock shall be listed on an Approved
Market, the Company will, if permitted by the rules of such Approved Market,
cause to be listed or quoted on such exchange or automated quotation system, all
Common Stock issuable upon conversion of the Preferred Stock.
(iv)
If a Conversion Date or Mandatory Conversion Time is on or
after a Dividend Record Date but on or prior to the related Dividend Payment
Date, then Accrued Dividends will be payable to Holders in the manner set forth
above in Sections 7(a)(i) and 7(b)(i) with respect to the exercise of a
Conversion Right or Mandatory Conversion, as applicable, concurrent with
delivery by the Company of the shares of Common Stock issuable upon such
conversion.
(v) The
issuance or delivery of certificates for Common Stock upon the conversion of
shares of Preferred Stock pursuant to this Section 7 shall be made without
charge to the converting Holder for such certificates or for any tax in respect
of the issuance or delivery of such certificates or the securities represented
thereby, and such certificates shall be issued or delivered in the respective
names of, or in such names as may be directed by, the Holders of the shares
converted.
8. Adjustment of Conversion
Price.
(a) Irrespective
of whether any shares of Preferred Stock are outstanding at the time in
question, from and after the Original Issue Date, the Conversion Price shall be
adjusted from time to time (without duplication) by the Company as
follows:
(i) Stock Dividends and
Distributions. If the Company pays dividends or other
distributions on the Common Stock in shares of Common Stock, then the Conversion
Price in effect immediately prior to the Ex-Date for such dividend or
distribution will be multiplied by the following fraction:
OS0
|
OS1
|
Annex
II-15
Where,
OS0
|
=
|
the
number of shares of Common Stock outstanding immediately prior to Ex-Date
for such dividend or distribution.
|
||
OS1
|
|
=
|
|
the
sum of the number of shares of Common Stock outstanding immediately prior
to the Ex-Date for such dividend or distribution plus the total number of
shares of Common Stock constituting such dividend or
distribution.
|
For the
purposes of this clause (i), the number of shares of Common Stock at the time
outstanding shall not include shares acquired by the Company. If any
dividend or distribution described in this clause (i) is declared but not so
paid or made, the Conversion Price shall be readjusted, effective as of the date
the Board of Directors publicly announces its decision not to make such dividend
or distribution, to such Conversion Price that would be in effect if such
dividend or distribution had not been declared.
(ii) Subdivisions, Splits and
Combination of the Common Stock. If the Company subdivides,
splits or combines the shares of Common Stock, then the Conversion Price in
effect immediately prior to the effective date of such share subdivision, split
or combination will be multiplied by the following fraction:
OS0
|
OS1
|
Where,
OS0
|
=
|
the
number of shares of Common Stock outstanding immediately prior to the
effective date of such share subdivision, split or
combination.
|
||
OS1
|
|
=
|
|
the
number of shares of Common Stock outstanding immediately after the opening
of business on the effective date of such share subdivision, split or
combination.
|
For the
purposes of this clause (ii), the number of shares of Common Stock at the time
outstanding shall not include shares acquired by the Company. If any
subdivision, split or combination described in this clause (ii) is announced but
the outstanding shares of Common Stock are not subdivided, split or combined,
the Conversion Price shall be readjusted, effective as of the date the Board of
Directors publicly announces its decision not to subdivide, split or combine the
outstanding shares of Common Stock, to such Conversion Price that would be in
effect if such subdivision, split or combination had not been
announced.
Annex
II-16
(iii) Issuance of Stock Purchase
Rights. If the Company issues or distributes to all or
substantially all holders of the shares of Common Stock Options (other than
Options issued pursuant to a dividend reinvestment plan or share purchase plan
or other similar plans approved by the Board of Directors) entitling them to
subscribe for or purchase the shares of Common Stock at less than the Current
Market Price on the date fixed for the determination of stockholders entitled to
receive such Options, then the Conversion Price in effect immediately prior to
the Ex-Date for such issuance or distribution will be multiplied by the
following fraction:
OS0
+ Y
|
OS0 +
X
|
Where,
OS0
|
=
|
the
number of shares of Common Stock outstanding immediately prior to the
Ex-Date for such distribution.
|
||
|
||||
X
|
=
|
the
total number of shares of Common Stock issuable pursuant to such rights or
warrants.
|
||
Y
|
|
=
|
|
the
number of shares of Common Stock equal to the aggregate price payable to
exercise such rights or warrants divided by the Current Market Price on
the date fixed for the determination of stockholders entitled to receive
such rights or warrants.
|
For the
purposes of this clause (iii), the number of shares of Common Stock at the time
outstanding shall not include shares acquired by the Company. In the
event that such Options described in this clause (iii) are not so issued, the
Conversion Price shall be readjusted, effective as of the date the Board of
Directors publicly announces its decision not to issue or distribution such
Options, to the Conversion Price that would then be in effect if such issuance
or distribution had not been declared. To the extent that such
Options are not exercised prior to their expiration or shares of Common Stock
are otherwise not delivered pursuant to such Options upon the exercise of such
Options, the Conversion Price shall be readjusted to such Conversion Price that
would then be in effect had the adjustment made upon the issuance or
distribution of such Options been made on the basis of the delivery of only the
number of shares of Common Stock actually delivered. In determining
the aggregate offering price payable for such shares of Common Stock, there
shall be taken into account any consideration received for such rights or
warrants and the value of such consideration (if other than cash, to be
determined by the Board of Directors).
(iv) Debt or Asset
Distributions. If the Company distributes to all or
substantially all holders of shares of Common Stock evidences of indebtedness,
Capital Stock, securities, cash or other assets (excluding any dividend or
distribution referred to in clause (i) above, any Options referred to in clause
(iii) above, any dividend or distribution paid exclusively in cash, any
consideration payable in connection with a tender or exchange offer made by the
Company or any of its Subsidiaries, and any dividend of Capital Stock of or
relating to a Subsidiary or other business unit in the case of certain spin-off
transactions as described below), then the Conversion Price in effect
immediately prior to the Ex-Date for such distribution will be multiplied by the
following fraction:
Annex
II-17
SP0 - FMV
|
SP0
|
Where,
SP0
|
=
|
the
Current Market Price per share of Common Stock on such
date.
|
||
FMV
|
|
=
|
|
the
fair market value of the portion of the distribution applicable to one
share of Common Stock on such date as determined by the Board of
Directors, provided
that, if “FMV” as set forth above is equal to or greater than
“SP0” as
set forth above, in lieu of the foregoing adjustment, adequate provision
shall be made so that each Holder shall receive on the date on which such
distribution is made to holders of Common Stock, for each share of
Preferred Stock, the amount of such distribution such Holder would have
received had such Holder owned a number of shares of Common Stock equal to
the Conversion Price on the Ex-Date for such
distribution.
|
In a
“spin-off”, where the Company makes a distribution to all holders of shares of
Common Stock consisting of Capital Stock of any class or series, or similar
equity interests of, or relating to, a Subsidiary or other business unit, the
Conversion Price will be adjusted on the fifteenth Trading Day after the
effective date of the distribution by multiplying such Conversion Price in
effect immediately prior to such fifteenth Trading Day by the following
fraction:
MP0
|
MP0 +
MP5
|
Where,
MP0
|
=
|
the
average of the Closing Prices of the Common Stock over the first ten
Trading Days commencing on and including the fifth Trading Day following
the effective date of such distribution.
|
||
MP5
|
|
=
|
|
the
average of the Closing Prices of the capital stock or equity interests
representing the portion of the distribution applicable to one share of
Common Stock over the first ten Trading Days commencing on and including
the fifth Trading Day following the effective date of such distribution,
or, if not traded on a national or regional securities exchange or
over-the-counter market, the fair market value of the capital stock or
equity interests representing the portion of the distribution applicable
to one share of Common Stock on such date as determined by the Board of
Directors.
|
In the
event that such distribution described in this clause (iv) is not so paid or
made, the Conversion Price shall be readjusted, effective as of the date the
Board of Directors publicly announces its decision not to pay or make such
dividend or distribution, to the Conversion Price that would then be in effect
if such dividend or distribution had not been declared.
Annex
II-18
(v) Cash Dividends or
Distributions. If the Company makes a dividend or distribution
consisting exclusively of cash to all holders of the Common Stock, excluding (a)
any cash that is paid as a dividend or distributed in a Transaction or as part
of a “spin-off” referred to in clause (iv) above, (b) any dividend or
distribution in connection with Liquidation, and (c) any consideration payable
in connection with a tender or exchange offer made by the Company or any of its
Subsidiaries, then in each event, the Conversion Price in effect immediately
prior to the Ex-Date for such distribution will be multiplied by the following
fraction:
SP0 - DIV
|
SP0
|
Where,
SP0
|
=
|
the
Closing Price per share of Common Stock on the Trading Day immediately
preceding the Ex-Date.
|
||
DIV
|
|
=
|
|
the
amount per share of Common Stock of the cash dividend or distribution, as
determined pursuant to the introduction to this paragraph
(v).
|
In the
event that any dividend or distribution described in this clause (v) is not so
made, the Conversion Price shall be readjusted, effective as of the date the
Board of Directors publicly announces its decision not to pay such dividend or
distribution, to the Conversion Price which would then be in effect if such
dividend or distribution had not been declared.
Notwithstanding
the foregoing, if “DIV” as set forth above is equal to or greater than “SP0” as set
forth above, in lieu of the foregoing adjustment, adequate provision shall be
made so that each Holder shall have the right to receive on the date on which
the relevant cash dividend or distribution is distributed to holders of Common
Stock, for each share of Preferred Stock, the amount of cash such Holder would
have received had such Holder owned a number of shares of Common Stock equal to
the Conversion Price on the Ex-Date for such dividend or
distribution.
(vi) Self Tender Offers and
Exchange Offers. If the Company or any of its Subsidiaries
successfully completes a tender or exchange offer for the Common Stock where the
cash and the value of any other consideration included in the payment per share
of the Common Stock exceeds the Closing Price per share of the Common Stock on
the Trading Day immediately succeeding the expiration of the tender or exchange
offer, then the Conversion Price in effect at the close of business on such
immediately succeeding Trading Day will be multiplied by the following
fraction:
OS0 x SP0
|
AC
+ (SP0
x OS1)
|
Where,
Annex
II-19
SP0
|
=
|
the
Closing Price per share of Common Stock on the Trading Day immediately
succeeding the expiration of the tender or exchange
offer.
|
||
OS0
|
=
|
the
number of shares of Common Stock outstanding immediately prior to the
expiration of the tender or exchange offer, including any shares validly
tendered and not withdrawn.
|
||
OS1
|
=
|
the
number of shares of Common Stock outstanding immediately after the
expiration of the tender or exchange offer.
|
||
|
||||
AC
|
|
=
|
|
the
aggregate cash and fair market value of the other consideration payable in
the tender or exchange offer, as determined by the Board of
Directors.
|
In the
event that the Company, or one of its Subsidiaries, is obligated to purchase
shares of Common Stock pursuant to any such tender offer or exchange offer, but
the Company, or such Subsidiary, is permanently prevented by applicable law from
effecting any such purchases, or all such purchases are rescinded, then the
Conversion Price shall be readjusted to be such Conversion Price that would then
be in effect if such tender offer or exchange offer had not been
made.
(vii) Rights
Plans. To the extent that the Company has a rights plan in
effect with respect to the Common Stock upon conversion of any shares of the
Preferred Stock, Holders will receive, in addition to the shares of Common
Stock, the rights under the rights plan, unless, prior to the conversion date,
the rights have separated from the shares of Common Stock, in which case the
Conversion Price will be adjusted at the time of separation as if the Company
had made a distribution to all holders of the Common Stock as described in
clause (iv) above, subject to readjustment in the event of the expiration,
termination or redemption of such rights.
(viii) Issuances Below the
Applicable Price. If the Company issues, or agrees to issue or
sell, any Common Stock or Convertible Securities for consideration per share
less than the Applicable Price, then the Conversion Price in effect immediately
prior to each such issuance will immediately be reduced to the price determined
by multiplying the Conversion Price in effect immediately prior to such issuance
by the following fraction:
OS0 + (AC/SP)
|
OS1
|
Where,
OS0
|
=
|
the
number of shares of Common Stock outstanding immediately prior to such
issuance.
|
||
AC
|
=
|
the
aggregate consideration paid or payable for such shares of Common Stock or
Convertible
Securities.
|
Annex
II-20
SP
|
=
|
the
Applicable Price.
|
||
OS1
|
=
|
the
sum of the number of shares of Common Stock outstanding immediately after
such issuance.
|
This
adjustment shall become effective immediately after such issuance.
(b) The
Company may make such decreases in the Conversion Price, in addition to any
other decreases required by this Section 8, if the Board of Directors deems it
advisable to avoid or diminish any income tax to holders of the Common Stock
resulting from any dividend or distribution of shares of Common Stock (or
issuance of rights or warrants to acquire shares of Common Stock) or from any
event treated as such for income tax purposes or for any other
reason.
(c) (i) All
adjustments to the Conversion Price shall be calculated to the nearest 1/10 of a
cent. No adjustment in the Conversion Price shall be required if such
adjustment would be less than $0.01; provided that any adjustments
which by reason of this subparagraph are not required to be made shall be
carried forward and taken into account in any subsequent adjustment; provided further that on any
Conversion Date adjustments to the Conversion Price will be made with respect to
any such adjustment carried forward and which has not been taken into account
before such date.
(ii) The
Applicable Conversion Price shall not be adjusted:
(1) upon
the issuance of any shares of Common Stock pursuant to any present or future
plan providing for the reinvestment of dividends or interest payable on the
Company’s securities and the investment of additional optional amounts in shares
of Common Stock under any such plan, provided such plan was approved by the
Board of Directors;
(2) upon
the issuance of any shares of Common Stock or rights or warrants to purchase
those shares pursuant to any present or future employee, director or consultant
benefit plan or program of or assumed by the Company or any of its Subsidiaries,
provided such issuance was approved by the Board of Directors;
(3) upon
the issuance of any shares of Common Stock pursuant to any option, warrant,
right or exercisable, exchangeable or convertible security outstanding as of the
Original Issue Date and not substantially amended thereafter;
(4) upon
the issuance of securities pursuant to any merger, joint venture, partnership,
share exchange, business combination or similar transaction or any other direct
or indirect acquisition by the Company, whereby the Company’s securities
comprise, in whole or in part, the consideration paid by the Company in such
transaction, provided such transaction was approved by the Board of
Directors;
Annex
II-21
(5) for
a change in the par value or no par value of Common Stock;
(6) for
the payment of cash dividends pursuant to Section 3(a);
(7) upon
the issuance of shares of Preferred Stock and Series A-2 Preferred Stock issued
pursuant to the terms of the Investment Agreement or Common Stock issuable upon
conversion thereof; or
(8) upon
the issuance of any shares of Common Stock or warrants to acquire only shares of
Common Stock issued to banks, equipment lessors or other lending institutions,
or to real property lessors, in each case, in connection with a debt financing
(limited to secured or unsecured debt for borrowed money that is not pursuant to
the issuance of Convertible Securities), equipment leasing or real property
leasing transaction, provided such transaction was approved by the Board of
Directors.
(9) Whenever
the Conversion Price is to be adjusted in accordance with Section 8(a) or
Section 8(b), the Company shall: (i) compute the Conversion Price in accordance
with Section 8(a) or Section 8(b), taking into account the $0.01 threshold set
forth in Section 8(c) hereof; (ii) as soon as practicable following the
occurrence of an event that requires an adjustment to the Conversion Price
pursuant to Section 8(a) or Section 8(b), taking into account the $0.01
threshold set forth in Section 8(c) hereof, provide, or cause to be provided, a
written notice to the Holders of the occurrence of such event; and (iii) as soon
as practicable following the determination of the revised Conversion Price in
accordance with Section 8(a) or Section 8(b) hereof, provide, or cause to be
provided, a written notice to the Holders setting forth in reasonable detail the
method by which the adjustment to the Conversion Price was determined and
setting forth the revised Conversion Price.
(d) If
one or more events occurs requiring an adjustment to be made to the Conversion
Price during the same time period, adjustments to the Conversion Price shall be
determined by the Board of Directors to reflect the combined impact of all
Conversion Price adjustment events, as set out in this Section 8, during such
period.
(e) In
the event that at any time as a result of any adjustment made pursuant to this
Section 8 or otherwise, it will be necessary for the Company to obtain
stockholder approval, then the Company shall use its reasonable best efforts to
obtain such stockholder approval as promptly as practicable.
(f) In
the event the Company shall propose to take any action of the type described in
Section 8(a), the Company shall give notice to each Holder, which notice shall
specify the Record Date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice
shall also set forth such facts with respect thereto as shall be reasonably
necessary to indicate the effect on the Conversion Price and the number of
shares of Common Stock which shall be deliverable upon conversion of shares of
the Preferred Stock. Except as otherwise provided herein, (x) in the
case of any action that would require the fixing of a Record Date, such notice
shall be given at least ten days prior to the date so fixed and (y) in the case
of all other action, such notice shall be given at least ten days prior to the
taking of such proposed action.
Annex
II-22
(g) If
any event occurs as to which, in the opinion of the Board of Directors, the
provisions of this Section 8 are not strictly applicable or if strictly
applicable would not fairly protect the rights of the Holders in accordance with
the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
rights as aforesaid, but in no event shall any adjustment pursuant to this
Section 8 have the effect of increasing the Conversion Price as otherwise
determined pursuant to any of the provisions of this Section 8 except in the
case of a combination of shares of a type contemplated in Section 8(a)(ii)
hereof and then in no event to an amount larger than the Conversion Price as
adjusted pursuant to Section 8(a)(ii) hereof.
(h) Anything
in this Section 8 notwithstanding, no adjustment to the Conversion Price shall
reduce the Conversion Price below the then par value per share of Common Stock,
and any such purported adjustment shall instead reduce the Conversion Price to
such par value.
(i) Notwithstanding
the foregoing, no adjustment shall be made to the Conversion Price pursuant to
this Section 8 to the extent the Holder actually participates on an as-converted
basis with the Common Stock pursuant to Section 3(d)(ii), subject to notice of
such participation to the Holder, in the transaction that would otherwise
trigger the applicable adjustment pursuant to this Section 8 and the Company
makes the required reserve set forth in Section 3(d)(iv).
9. Recapitalization,
Reclassification and Changes in Common Stock. Upon the
occurrence of any:
(a) reclassification
or change of the outstanding shares of Common Stock (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination);
(b) merger
or consolidation of the Company with or into another Person (other than a
Subsidiary) other than a merger or consolidation in which the Company is the
resulting or surviving Person and which does not result in any reclassification
or change of outstanding Common Stock;
(c) any
statutory share exchange of the Company with another Person; or
Annex
II-23
(d) sale
or other disposition of all or substantially all of the property and assets of
the Company (on a consolidated basis) to any other Person (any of the foregoing
events in clauses (a) through (d), a “Transaction”); then,
without limiting the rights of the Holders in Section 4 herein, the Preferred
Stock shall be convertible after the Transaction into
the kind and amount of shares of stock or other securities or other property or
assets (including cash) that the Holders would have been entitled to receive
upon such Transaction had such Preferred Stock been converted into Common Stock
immediately prior to such Transaction after giving effect to any
adjustment. The provisions of this Section 9 shall apply to
successive Transactions. In the event that holders of the Common
Stock shall have the opportunity to elect the form of consideration to be
received in a Transaction, then the Company shall make adequate provision
whereby each Holder shall have a reasonable opportunity to determine the form of
consideration into which all of such Holder’s shares of Preferred Stock, shall
be convertible from and after the effective date of such
Transaction. Such determination shall be (i) subject to any
limitations to which all of the holders of Common Stock are subject, including,
but not limited to, pro rata reductions applicable to any portion of the
consideration payable in such Transaction and (ii) conducted in such a manner as
to be completed by the date that is the earlier of (a) the deadline for
elections to be made by holders of Common Stock and (b) five (5) Trading Days
prior to the anticipated effective date of such Transaction. The
Company will not effect (or enter into any agreement providing for) any
Transaction unless prior to the consummation thereof the successor Person (if
other than the Company) resulting from such Transaction shall assume by written
instrument mailed or delivered to the Holders at the last address of each such
Holder appearing on the Register, the obligation pursuant to this Section
9. At least twenty (20) days’ prior written notice of the date on
which the Transaction will be consummated shall be given to the
Holders.
10. Other
Provisions.
(a) Shares
of Preferred Stock issued and reacquired shall be prohibited from being reissued
as such and will be retired and canceled promptly after reacquisition thereof
and, upon compliance with the applicable requirements of Delaware law, will have
the status of authorized but unissued shares of preferred stock of the Company
undesignated as to series and may with any and all other authorized but unissued
shares of preferred stock of the Company be designated or redesignated and
issued or reissued, as the case may be, as part of any series of preferred stock
of the Company, except that any issuance or reissuance of shares of Preferred
Stock must be in compliance with this Certificate.
(b) The
shares of Preferred Stock shall be issuable only in whole shares.
(c) All
notices referred to herein shall be in writing, and, unless otherwise specified
herein, all notices hereunder shall be deemed to have been given upon the
earlier of receipt thereof or three Business Days after the date of mailing
thereof if sent by registered or certified mail (unless first-class mail shall
be specifically permitted for such notice under the terms of this Certificate)
with postage prepaid, addressed: (i) if to the Company, to its office at 7000
Shoreline Court, Suite 370, South San Francisco, CA 94080,
Attention: Chief Executive Officer and Chief Financial Officer, or
(ii) if to any Holder, to such Holder at the address of such Holder as listed in
the Register, or (iii) to such other address as the Company or any such Holder,
as the case may be, shall have designated by notice similarly
given. Any notice that was mailed in the manner herein provided shall
be conclusively presumed to have been duly given whether or not the Holder
receives the notice.
Annex
II-24
(d) If
at any time the Company is required to make any payment to a Holder pursuant to
this Certificate, the Company does not have sufficient funds legally available
to make such payment, the Company shall, to the extent permitted by applicable
law, revalue its consolidated assets and liabilities and reduce its stated
capital so as to increase the amount of capital and surplus legally available to
enable such payment, and the Company shall make as much of such required payment
as possible, ratably to each Holder in proportion to the number of shares of
Preferred Stock held by such Holder, and shall thereafter from time to time, as
soon as it shall have funds available therefor, make payment of as much of the
remaining amount of such required payment as it legally may until it has made
such payment in its entirety. For the avoidance of doubt, such
partial payments shall not reduce or waive the rights of the Holders
hereunder.
(e) The
words “hereby”, “herein”, “hereof”, “hereunder” and words of similar import
refer to this Certificate as a whole and not merely to the specific section,
paragraph or clause in which such word appears. The words “include”,
“includes” and “including” shall be deemed to be followed by the phrase “without
limitation”. The definitions given for terms in Section 2 and
elsewhere in this Certificate shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may require,
any pronoun shall include the corresponding masculine, feminine and neuter
forms.
(f) The
Company shall replace any mutilated certificate at the Holder's expense upon
surrender of that certificate to the Company. The Company shall
replace certificates that become destroyed, stolen or lost at the Holder's
expense upon delivery to the Company of satisfactory evidence that the
certificate has been destroyed, stolen or lost.
(g) Any
of the rights of the Holders set forth herein (including, without limitation,
any rights to notices, adjustments or otherwise) may be waived by (i) any Holder
with respect to such Holder, provided that such waiver is in writing and
executed by such Holder, and (ii) the written consent of the Required Holders
with respect to all Holders, and such waiver shall be binding on all Holders;
provided, however, prior to the
effective date of an amendment to this Certificate approved by the Required
Holders which amendment amends the Applicable Terms, the Company shall give each
Holder five (5) Business Days’ notice to permit such Holder to convert such
Holder’s shares of Preferred Stock pursuant to Section 7(a) herein, subject to
any limitations in the Investment Agreement on the number of shares of Preferred
Stock that may be converted. Notwithstanding the foregoing, the
Required Holders shall not amend the foregoing proviso without the consent of
each Holder affected thereby.
Annex
II-25