Attached files
file | filename |
---|---|
8-K - FORM 8-K - Fibrocell Science, Inc. | c10249e8vk.htm |
Exhibit 3.2
FIBROCELL SCIENCE, INC.
AMENDED AND RESTATED
CERTIFICATE OF DESIGNATIONS OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES D 6% CUMULATIVE PERPETUAL CONVERTIBLE PREFERRED STOCK
CERTIFICATE OF DESIGNATIONS OF PREFERENCES,
RIGHTS AND LIMITATIONS
OF
SERIES D 6% CUMULATIVE PERPETUAL CONVERTIBLE PREFERRED STOCK
PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW
DELAWARE GENERAL CORPORATION LAW
The undersigned, David Pernock and Declan Daly, do hereby certify that:
1. They are the Chairman and Secretary, respectively, of Fibrocell Science, Inc., a Delaware
corporation (the Corporation).
2. The Corporation is authorized to issue 5,000,000 shares of preferred stock, of which 25,192
shares have been designated as Series A, Series B and Series C shares.
3. The following resolutions were duly adopted by the board of directors of the Corporation
(the Board of Directors):
WHEREAS, the certificate of incorporation of the Corporation provides for a class of its
authorized stock known as preferred stock, consisting of 5,000,000 shares, $0.001 par value per
share, issuable from time to time in one or more series;
WHEREAS, the Board of Directors is authorized to fix the dividend rights, dividend rate,
voting rights, conversion rights, rights and terms of redemption and liquidation preferences of any
wholly unissued series of preferred stock and the number of shares constituting any series and the
designation thereof, of any of them; and
WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid,
to fix the rights, preferences, restrictions and other matters relating to a series of the
preferred stock, which shall consist of, except as otherwise set forth in the Purchase Agreement,
up to 8,000 shares of the preferred stock which the Corporation has the authority to issue, as
follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for
designation of 8,000 shares of preferred stock of the Corporation a Series D 6% Cumulative
Perpetual Convertible Preferred Stock (as hereinafter defined as the Preferred Stock) and the
issuance of such Preferred Stock for cash or exchange of other securities, rights or property and
does hereby fix and determine the rights, preferences, restrictions and other matters relating to
such Preferred Stock as follows:
TERMS OF PREFERRED STOCK
Section 1. Definitions. For the purposes hereof, the following terms shall
have the following meanings:
Affiliate means any Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common control with a Person, as
such terms are used in and construed under Rule 405 of the Securities Act.
Alternate Consideration shall have the meaning set forth in Section 7(e).
Bankruptcy Event means any of the following events: (a) the Corporation or
any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X)
thereof commences a case or other proceeding under any bankruptcy, reorganization,
arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation
or similar law of any jurisdiction relating to the Corporation or any Significant Subsidiary
thereof, (b) there is commenced against the Corporation or any Significant Subsidiary
thereof any such case or proceeding that is not dismissed within 60 days after commencement,
(c) the Corporation or any Significant Subsidiary thereof is adjudicated insolvent or
bankrupt or any order of relief or other order approving any such case or proceeding is
entered, (d) the Corporation or any Significant Subsidiary thereof suffers any appointment
of any custodian or the like for it or any substantial part of its property that is not
discharged or stayed within 60 calendar days after such appointment, (e) the Corporation or
any Significant Subsidiary thereof makes a general assignment for the benefit of creditors,
(f) the Corporation or any Significant Subsidiary thereof calls a meeting of its creditors
with a view to arranging a composition, adjustment or restructuring of its debts, or (g) the
Corporation or any Significant Subsidiary thereof, by any act or failure to act, expressly
indicates its consent to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the foregoing.
Base Conversion Price shall have the meaning set forth in Section 7(b).
Beneficial Ownership Limitation shall have the meaning set forth in Section
6(d).
Business Day means any day except any Saturday, any Sunday, any day which is
a federal legal holiday in the United States or any day on which banking institutions in the
State of New York are authorized or required by law or other governmental action to close.
Buy-In shall have the meaning set forth in Section 6(c)(iv).
2
Change of Control Transaction means the occurrence after the date hereof of
any of (a) an acquisition after the date hereof by an individual or legal entity or group
(as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control
(whether through legal or beneficial ownership of capital stock of the Corporation, by
contract or otherwise) of in excess of 50% of the voting securities of the Corporation
(other than by means of conversion or exercise of Preferred Stock and the Securities issued
together with the Preferred Stock), (b) the Corporation merges into or consolidates with any
other Person, or any Person merges into or consolidates with the Corporation and, after
giving effect to such transaction, the stockholders of the Corporation immediately prior to
such transaction own less than 50% of the aggregate voting power of the Corporation or the
successor entity of such transaction, (c) the Corporation sells or transfers all or
substantially all of its assets to another Person and the stockholders of the Corporation
immediately prior to such transaction own less than 50% of the aggregate voting power of the
acquiring entity immediately after the transaction, (d) a replacement at one time or within
a one year period of more than one-half of the members of the Board of Directors which is
not approved by a majority of those individuals who are members of the Board of Directors on
the Original Issue Date (or by those individuals who are serving as members of the Board of
Directors on any date whose nomination to the Board of Directors was approved by a majority
of the members of the Board of Directors who are members on the Original Issue Date), or (e)
the execution by the Corporation of an agreement to which the Corporation is a party or by
which it is bound, providing for any of the events set forth in clauses (a) through (d)
above.
Closing means the closing of the purchase and sale of the Securities pursuant
to the Purchase Agreement.
Closing Date means the Trading Day on which all of the Transaction Documents
have been executed and delivered by the applicable parties thereto and all conditions
precedent to (i) each Holders obligations to pay the Subscription Amount and (ii) the
Corporations obligations to deliver the Securities have been satisfied or waived.
Commission means the United States Securities and Exchange Commission.
Common Stock means the Corporations common stock, par value $0.001 per
share, and stock of any other class of securities into which such securities may hereafter
be reclassified or changed.
Common Stock Equivalents means any securities of the Corporation or the
Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock,
including, without limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or exchangeable for, or
otherwise entitles the holder thereof to receive, Common Stock.
Conversion Amount means the sum of the Stated Value at issue.
3
Conversion Date shall have the meaning set forth in Section 6(a).
Conversion Price shall have the meaning set forth in Section 6(b).
Conversion Shares means, collectively, the shares of Common Stock issuable
upon conversion of the shares of Preferred Stock in accordance with the terms hereof.
Conversion Shares Registration Statement means a registration statement that
registers the resale of all Conversion Shares of the Holders, who shall be named as selling
stockholders therein.
Delaware Courts shall have the meaning set forth in Section 11(d).
Dilutive Issuance shall have the meaning set forth in Section 7(b).
Dilutive Issuance Notice shall have the meaning set forth in Section 7(b).
Dividend Notice Period shall have the meaning set forth in Section 3(a).
Dividend Payment Date shall have the meaning set forth in Section 3(a).
Dividend Share Amount shall have the meaning set forth in Section 3(a).
Effective Date means the date that the Conversion Shares Registration
Statement filed by the Corporation is first declared effective by the Commission.
Equity Conditions means, during the period in question, (a) the Corporation
shall have honored all conversions scheduled to occur or occurring by virtue of one or more
Notices of Conversion of the applicable Holder on or prior to the dates so requested or
required, if any, (b) the Corporation shall have paid all liquidated damages and other
amounts owing to the applicable Holder in respect of the Preferred Stock, (c)(i) there is an
effective Conversion Shares Registration Statement pursuant to which the Holders are
permitted to utilize the prospectus thereunder to resell all of the Conversion Shares
issuable pursuant to this Certificate of Designation (and the Corporation believes, in good
faith, that such effectiveness will continue uninterrupted for the foreseeable future) or
(ii) all of the Conversion Shares issuable pursuant to the Transaction Documents (and shares
issuable in lieu of cash payments of dividends, if applicable) may be resold pursuant to
Rule 144 without volume or manner-of-sale restrictions or current public information
requirements as determined by the counsel to the Corporation as set forth in a written
opinion letter to such effect, addressed and acceptable to the Transfer Agent and the
affected Holders, (d) the Common Stock is trading on a Trading Market and all of the shares
issuable pursuant to the Transaction Documents are listed or quoted for trading on such
Trading Market (and the Corporation believes, in good faith, that trading of the Common
Stock on a Trading
4
Market will continue uninterrupted for the foreseeable future), (e) there is a sufficient number of authorized, but unissued and otherwise
unreserved, shares of Common Stock for the issuance of all of the shares then issuable
pursuant to the Transaction Documents, (f) there is no existing Triggering Event and no
existing event which, with the passage of time or the giving of notice, would constitute a
Triggering Event, (g) the issuance of the shares in question (or, in the case of a
redemption, the shares issuable upon conversion in full of the redemption amount) to the
applicable Holder would not violate the limitations set forth in Section 6(d) herein, (h)
there has been no public announcement of a pending or proposed Fundamental Transaction or
Change of Control Transaction that has not been consummated and (i) the applicable Holder is
not in possession of any information provided by the Corporation that constitutes, or may
constitute, material non-public information.
Exchange Act means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
Exempt Issuance means the issuance of (a) shares of Common Stock or options
to employees, consultants, officers or directors of the Corporation pursuant to any stock or
option plan or agreement duly adopted by a majority of the non-employee members of the Board
of Directors of the Corporation or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise or exchange of or
conversion of any securities exercisable or exchangeable for or convertible into shares of
Common Stock issued and outstanding on the date the Purchase Agreement or to be issued upon
the conversion of any of the Companys preferred stock, including, without limitation, the
Preferred Stock (as defined herein), provided that such securities have not been amended
since the date of the Purchase Agreement to increase the number of such securities or to
decrease the exercise price, exchange price or conversion price of any such securities, (c)
securities issued pursuant to acquisitions or strategic transactions approved by a majority
of the disinterested directors of the Corporation, provided that any such issuance shall
only be to a Person (or to the equityholders of a Person) which is, itself or through its
subsidiaries, an operating company or an asset in a business synergistic with the business
of the Corporation and shall provide to the Corporation additional benefits in addition to
the investment of funds, but shall not include a transaction in which the Corporation is
issuing securities primarily for the purpose of raising capital or to an entity whose
primary business is investing in securities, and (d) securities issued to the Placement
Agent in the transactions pursuant to which the Preferred Stock is being issued (including
all future transactions pursuant to which Preferred Stock is being issued).
Forced Conversion Amount means the sum of (a) 100% of the aggregate Stated
Value then outstanding, (b) accrued but unpaid dividends and (c) all liquidated damages and
other amounts due in respect of the Preferred Stock.
Forced Conversion Date shall have the meaning set forth in Section 8(a).
Forced Conversion Notice shall have the meaning set forth in Section 8(a).
5
Forced Conversion Notice Date shall have the meaning set forth in Section
8(a).
Fundamental Transaction shall have the meaning set forth in Section 7(e).
GAAP means United States generally accepted accounting principles.
Holder shall have the meaning given such term in Section 2.
Indebtedness means (a) any liabilities for borrowed money or amounts owed in
excess of $50,000 (other than trade accounts payable incurred in the ordinary course of
business), (b) all guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in the
Corporations balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the ordinary
course of business, and (c) the present value of any lease payments in excess of $50,000 due
under leases required to be capitalized in accordance with GAAP.
Junior Securities means the Common Stock and all other Common Stock
Equivalents of the Corporation other than those securities which are explicitly senior or
pari passu to the Preferred Stock in dividend rights or liquidation
preference.
Liens means a lien, charge, security interest, encumbrance, right of first
refusal, preemptive right or other restriction.
Liquidation shall have the meaning set forth in Section 5.
Notice of Conversion shall have the meaning set forth in Section 6(a).
Optional Redemption shall have the meaning set forth in Section 8(b).
Optional Redemption Amount means the sum of (a) 150% of the aggregate Stated
Value then outstanding, (b) accrued but unpaid dividends and (c) all liquidated damages and
other amounts due in respect of the Preferred Stock.
Optional Redemption Date shall have the meaning set forth in Section 8(b).
Optional Redemption Notice shall have the meaning set forth in Section 8(b).
Optional Redemption Notice Date shall have the meaning set forth in Section
8(b).
Original Issue Date means the date of the first issuance of any shares of the
Preferred Stock regardless of the number of transfers of any particular shares of Preferred
Stock and regardless of the number of certificates which may be issued to evidence such
Preferred Stock.
6
Permitted Indebtedness means the Indebtedness existing on the Original Issue
Date and set forth on Schedule 3.1(aa) attached to the Purchase Agreement.
Permitted Lien means the individual and collective reference to the
following: (a) Liens for taxes, assessments and other governmental charges or levies not yet
due or Liens for taxes, assessments and other governmental charges or levies being contested
in good faith and by appropriate proceedings for which adequate reserves (in the good faith
judgment of the management of the Corporation) have been established in accordance with
GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the
Corporations business, such as carriers, warehousemens and mechanics Liens, statutory
landlords Liens, and other similar Liens arising in the ordinary course of the
Corporations business, and which (x) do not individually or in the aggregate materially
detract from the value of such property or assets or materially impair the use thereof in
the operation of the business of the Corporation and its consolidated Subsidiaries or (y)
are being contested in good faith by appropriate proceedings, which proceedings have the
effect of preventing for the foreseeable future the forfeiture or sale of the property or
asset subject to such Lien, and (c) Liens incurred in connection with Permitted
Indebtedness.
Person means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint stock
company, government (or an agency or subdivision thereof) or other entity of any kind.
Preferred Stock shall have the meaning set forth in Section 2.
Purchase Agreement means the Subscription Agreement among the Corporation and
the original Holders, as amended, modified or supplemented from time to time in accordance
with its terms.
Rule 144 means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same effect as such
Rule.
Rule 424 means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the same purpose
and effect as such Rule.
Securities means the Preferred Stock, the Warrants, the Warrant Shares and
the Underlying Shares.
Securities Act means the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
7
Series A Preferred Stock means the Series A 6% Convertible Preferred Stock of
the Corporation.
Series B Preferred Stock means the Series B 6% Convertible Preferred Stock of
the Corporation.
Share Delivery Date shall have the meaning set forth in Section 6(c).
Stated Value shall have the meaning set forth in Section 2, as the same may
be increased pursuant to Section 3.
Subscription Amount shall mean, as to each Holder, the aggregate amount to be
paid for the Preferred Stock purchased pursuant to the Purchase Agreement in United States
dollars and in immediately available funds.
Subsidiary means any United States subsidiary of the Corporation.
Successor Entity shall have the meaning set forth in Section 7(e).
Threshold Period shall have the meaning set forth in Section 8(a).
Trading Day means a day on which the principal Trading Market is open for
business.
Trading Market means any of the following markets or exchanges on which the
Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the
Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New
York Stock Exchange or the OTC Bulletin Board (or any successors to any of the foregoing).
Transaction Documents means this Certificate of Designation, the Purchase
Agreement, the Warrants, the Escrow Agreement, all exhibits and schedules thereto and hereto
and any other documents or agreements executed in connection with the transactions
contemplated pursuant to the Purchase Agreement.
Transfer Agent means American Stock Transfer and Trust Company, the current
transfer agent of the Corporation, with a mailing address of 59 Maiden Lane, New York, NY
10038 and a facsimile number of (718) 921 8355, and any successor transfer agent of the
Corporation.
Triggering Event shall have the meaning set forth in Section 10(a).
8
Triggering Redemption Amount means, for each share of Preferred Stock, the
sum of (a) the greater of (i) 130% of the Stated Value and (ii) the product of (y) the VWAP
on the Trading Day immediately preceding the date of the Triggering Event and (z) the Stated
Value divided by the then Conversion Price, (b) all accrued but unpaid
dividends thereon and (c) all liquidated damages and other costs, expenses or amounts
due in respect of the Preferred Stock.
Triggering Redemption Payment Date shall have the meaning set forth in
Section 10(b).
Underlying Shares means the shares of Common Stock issued and issuable upon
conversion or redemption of the Preferred Stock, upon exercise of the Warrants and issued
and issuable in lieu of the cash payment of interest on the Preferred Stock in accordance
with the terms of this Certificate of Designation.
VWAP means, for any date, the price determined by the first of the following
clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date) on the Trading Market on which the Common Stock is then listed or quoted as
reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to
4:02 p.m. (New York City time)), (b) if the Common Stock is not then listed or quoted for
trading on the OTC Bulletin Board and if prices for the Common Stock are then reported in
the Pink Sheets published by Pink OTC Markets, Inc. (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price per share of the
Common Stock so reported, or (c) in all other cases, the fair market value of a share of
Common Stock as determined by an independent appraiser selected in good faith by the Holders
of a majority in interest of the Preferred Stock then outstanding and reasonably acceptable
to the Corporation, the fees and expenses of which shall be paid by the Corporation.
Warrants means, collectively, the Common Stock purchase warrants delivered to
the purchasers of the Preferred Stock in accordance with the Purchase Agreement.
Warrant Shares means the shares of Common Stock issuable upon exercise of the
Warrants.
Section 2. Designation, Amount and Par Value. The series of preferred
stock shall be designated as its Series D 6% Cumulative Perpetual Convertible Preferred
Stock (the Preferred Stock) and the number of shares so designated shall be 8,000
(which shall not be subject to increase without the written consent of a majority of the
holders of the then outstanding Preferred Stock (each, a Holder and collectively,
the Holders)). Each share of Preferred Stock shall have a par value of $0.001 per
share and a stated value equal to $1,000.00. subject to increase set forth in Section 3
below (the Stated Value).
9
Section 3. Dividends.
a) Dividends in Cash or in Kind. Holders shall be entitled to receive, and the
Corporation shall pay, cumulative dividends at the rate per share (as a percentage of the
Stated Value per share) of 6% per annum (subject to increase pursuant to Section 10(b)),
payable quarterly in arrears on January 15, April 15, July 15 and October 15, beginning
on July 15, 2011, and on each Conversion Date (with respect only to Preferred Stock being
converted) and on each Optional Redemption Date (with respect only to Preferred Stock being
redeemed) (each such date, a Dividend Payment Date) (if any Dividend Payment Date
is not a Trading Day, the applicable payment shall be due on the next succeeding Trading
Day) in cash, or at the Corporations option, in duly authorized, validly issued, fully
paid and non-assessable shares of Common Stock equal to 110% of the cash dividend amount
payable on such Dividend Payment Date as set forth in this Section 3(a), or a combination
thereof (the amount to be paid in shares of Common Stock, the Dividend Share
Amount). The form of dividend payments to each Holder shall be determined in the
following order of priority: (i) if funds are legally available for the payment of dividends
and the Equity Conditions have not been met during the 20 consecutive Trading Days
immediately prior to the applicable Dividend Payment Date (provided, however, that for the
July 15, 2011 payment only, the Equity Condition set forth in clause (c) of the definition
of Equity Conditions must have been met on the Trading Day prior to the date of such payment
only and must be met on the date that such Dividend Share Amount is payable) (the
Dividend Notice Period), in cash only, (ii) if funds are legally available for the
payment of dividends and the Equity Conditions have been met during the Dividend Notice
Period, at the sole election of the Corporation, in cash or shares of Common Stock which
shall be valued solely for such purpose at 80% of the average of the VWAPs for the 10
consecutive Trading Days ending on the Trading Day that is immediately prior to the Dividend
Payment Date, (iii) if funds are not legally available for the payment of dividends and the
Equity Conditions have been met during the Dividend Notice Period, in shares of Common Stock
which shall be valued solely for such purpose at 80% of the average of the VWAPs for the 10
consecutive Trading Days ending on the Trading Day that is immediately prior to the Dividend
Payment Date, (iv) if funds are not legally available for the payment of dividends and the
Equity Condition relating to an effective Conversion Shares Registration Statement has been
waived by such Holder, as to such Holder only, in unregistered shares of Common Stock which
shall be valued solely for such purpose at 80% of the average of the VWAPs for the 10
consecutive Trading Days ending on the Trading Day that is immediately prior to the Dividend
Payment Date, and (v) if funds are not legally available for the payment of dividends and
the Equity Conditions have not been met during the Dividend Notice Period, then, at the
election of such Holder, such dividends shall accrue to the next Dividend Payment Date or
shall be accreted to, and increase, the outstanding Stated Value. The Holders shall have
the same rights and remedies with respect to the delivery of any such shares as if such
shares were being issued pursuant to Section 6. Notwithstanding anything to the contrary
herein, any dividend payments to the Preferred Stock shall be junior in right to such
dividend payments on the Series A Preferred Stock and Series B Preferred Stock.
10
b) Corporations Ability to Pay Dividends in Cash or Kind. If the Corporation
is unable to legally pay cash dividends on the Closing Date, then as of such date, the
Corporation shall have notified the Holders of the Corporations inability to pay such cash
dividends on the Closing Date. The Corporation shall promptly notify the
Holders at any time the Corporation shall become able or unable, as the case may be, to
legally pay cash dividends. If at any time the Corporation has the right to pay dividends in
cash or shares of Common Stock, the Corporation must provide the Holders with at least 20
Trading Days notice of its election to pay a regularly scheduled dividend in shares of
Common Stock (the Corporation may indicate in such notice that the election contained in
such notice shall continue for later periods until revised by a subsequent notice). If at
any time the Corporation delivers a notice to the Holders of its election to pay the
dividends in shares of Common Stock, the Corporation shall timely file a prospectus
supplement pursuant to Rule 424 disclosing such election. The aggregate number of shares of
Common Stock otherwise issuable to the Holder on a Dividend Payment Date shall be reduced by
the number of shares of Common Stock previously issued to the Holder in connection with such
Dividend Payment Date.
c) Dividend Calculations. Dividends on the Preferred Stock shall be calculated
on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall
accrue daily commencing on the Original Issue Date, and shall be deemed to accrue from such
date whether or not earned or declared and whether or not there are profits, surplus or
other funds of the Corporation legally available for the payment of dividends. Payment of
dividends in shares of Common Stock shall otherwise occur pursuant to Section 6(c)(i) herein
and, solely for purposes of the payment of dividends in shares, the Dividend Payment Date
shall be deemed the Conversion Date. Dividends shall cease to accrue with respect to any
Preferred Stock converted, provided that, the Corporation actually delivers the Conversion
Shares within the time period required by Section 6(c)(i) herein. Except as otherwise
provided herein, if at any time the Corporation pays dividends partially in cash and
partially in shares, then such payment shall be distributed ratably among the Holders based
upon the number of shares of Preferred Stock held by each Holder on such Dividend Payment
Date.
d) Late Fees. Any dividends, whether paid in cash or shares of Common Stock,
that are not paid within three Trading Days following a Dividend Payment Date shall continue
to accrue and shall entail a late fee, which must be paid in cash, at the rate of 12% per
annum or the lesser rate permitted by applicable law which shall accrue daily from the
Dividend Payment Date through and including the date of actual payment in full.
11
e) Other Securities. So long as any Preferred Stock shall remain outstanding,
neither the Corporation nor any Subsidiary thereof shall redeem, purchase or otherwise
acquire directly or indirectly any Junior Securities. So long as any Preferred Stock shall
remain outstanding, neither the Corporation nor any Subsidiary thereof shall directly or
indirectly pay or declare any dividend or make any distribution upon (other than a dividend
or distribution described in Section 6 or dividends due and paid in the ordinary course on
preferred stock of the Corporation at such times when the Corporation is in compliance with
its payment and other obligations hereunder), nor shall any distribution be made in respect
of, any Junior Securities as long as any dividends due on the Preferred Stock remain unpaid,
nor shall any monies be set aside for or applied to the purchase or
redemption (through a sinking fund or otherwise) of any Junior Securities or shares
pari passu with the Preferred Stock.
f) Special Reserves. The Corporation acknowledges and agrees that the capital
of the Corporation (as such term is used in Section 154 of the Delaware General Corporation
Law) in respect of the Preferred Stock and any future issuances of the Corporations capital
stock shall be equal to the aggregate par value of such Preferred Stock or capital stock, as
the case may be, and that, on or after the date of the Purchase Agreement, it shall not
increase the capital of the Corporation with respect to any shares of the Corporations
capital stock issued and outstanding on such date. The Corporation also acknowledges and
agrees that it shall not create any special reserves under Section 171 of the Delaware
General Corporation Law without the prior written consent of each Holder.
Section 4. Voting Rights. Except as otherwise provided herein or as otherwise
required by law, the Preferred Stock shall have no voting rights. However, as long as any shares of
Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the
Holders of a majority of the then outstanding shares of the Preferred Stock, (a) alter or change
adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this
Certificate of Designation, (b) authorize or create any class of stock ranking as to dividends,
redemption or distribution of assets upon a Liquidation (as defined in Section 5) senior to, or
otherwise pari passu with, the Preferred Stock, (c) amend its certificate of
incorporation or other charter documents in any manner that adversely affects any rights of the
Holders, (d) increase the number of authorized shares of Preferred Stock, or (e) enter into any
agreement with respect to any of the foregoing.
Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary (a Liquidation), the Holders shall be
entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount
equal to the Stated Value, plus any accrued and unpaid dividends thereon and any other fees or
liquidated damages then due and owing thereon under this Certificate of Designation, for each share
of Preferred Stock after any distribution or payment to the holders of the Series A Preferred Stock
and Series B Preferred Stock, and before any distribution or payment shall be made to the holders
of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full
such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed
among the Holders in accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full. A Fundamental Transaction or Change of Control
Transaction shall not be deemed a Liquidation. The Corporation shall mail written notice of any
such Liquidation, not less than 45 days prior to the payment date stated therein, to each Holder.
12
Section 6. Conversion.
a) Conversions at Option of Holder. Each share of Preferred Stock shall be
convertible, at any time and from time to time from and after the Original Issue Date at
the option of the Holder thereof, into that number of shares of Common Stock (subject
to the limitations set forth in Section 6(d)) determined by dividing the Stated Value of
such share of Preferred Stock by the Conversion Price. Holders shall effect conversions by
providing the Corporation with the form of conversion notice attached hereto as Annex
A (a Notice of Conversion). Each Notice of Conversion shall specify the number
of shares of Preferred Stock to be converted, the number of shares of Preferred Stock owned
prior to the conversion at issue, the number of shares of Preferred Stock owned subsequent
to the conversion at issue and the date on which such conversion is to be effected, which
date may not be prior to the date the applicable Holder delivers by facsimile such Notice of
Conversion to the Corporation (such date, the Conversion Date). If no Conversion
Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such
Notice of Conversion to the Corporation is deemed delivered hereunder. The calculations and
entries set forth in the Notice of Conversion shall control in the absence of manifest or
mathematical error. To effect conversions of shares of Preferred Stock, a Holder shall not
be required to surrender the certificate(s) representing the shares of Preferred Stock to
the Corporation unless all of the shares of Preferred Stock represented thereby are so
converted, in which case such Holder shall deliver the certificate representing such shares
of Preferred Stock promptly following the Conversion Date at issue. Shares of Preferred
Stock converted into Common Stock or redeemed in accordance with the terms hereof shall be
canceled and shall not be reissued.
b) Conversion Price. The conversion price for the Preferred Stock shall equal
$0.50, subject to adjustment herein (the Conversion Price).
c) Mechanics of Conversion
i. Delivery of Certificate Upon Conversion. Not later than three (3)
Trading Days after each Conversion Date (the Share Delivery Date), the
Corporation shall deliver, or cause to be delivered, to the converting Holder (A) a
certificate or certificates representing the Conversion Shares which, on or after
the earlier of (i) the six month anniversary of the Original Issue Date or (ii) the
Effective Date, shall be free of restrictive legends and trading restrictions (other
than those which may then be required by the Purchase Agreement) representing the
number of Conversion Shares being acquired upon the conversion of the Preferred
Stock (including, if the Corporation has given continuous notice pursuant to Section
3(b) for payment of dividends in shares of Common Stock at least 20 Trading Days
prior to the date on which the Notice of Conversion is delivered to the Corporation,
shares of Common Stock representing the payment of accrued dividends otherwise
determined pursuant to Section 3(a) but assuming that the Dividend Notice Period is
the 20 Trading Days period immediately prior to the date on which the Notice of
Conversion is delivered to the Corporation and excluding for such issuance the
condition that the Corporation deliver the Dividend Share Amount as to such dividend
payment), and (B) a bank check in the amount of accrued and unpaid dividends (if the
Corporation has elected or is required to pay accrued
dividends in cash). On or
after the earlier of (i) the six
month anniversary of the Original Issue Date or (ii) the Effective Date, the
Corporation shall use its best efforts to deliver any certificate or certificates
required to be delivered by the Corporation under this Section 6 electronically
through the Depository Trust Company or another established clearing corporation
performing similar functions.
13
ii. Failure to Deliver Certificates. If, in the case of any Notice of
Conversion, such certificate or certificates are not delivered to or as directed by
the applicable Holder by seventh (7th) Trading Day after the Share
Delivery Date, the Holder shall be entitled to elect by written notice to the
Corporation at any time on or before its receipt of such certificate or
certificates, to rescind such Conversion, in which event the Corporation shall
promptly return to the Holder any original Preferred Stock certificate delivered to
the Corporation and the Holder shall promptly return to the Corporation the Common
Stock certificates issued to such Holder pursuant to the rescinded Conversion
Notice.
iii. Obligation Absolute; Partial Liquidated Damages. The
Corporations obligation to issue and deliver the Conversion Shares upon conversion
of Preferred Stock in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by a Holder to enforce the
same, any waiver or consent with respect to any provision hereof, the recovery of
any judgment against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged breach
by such Holder or any other Person of any obligation to the Corporation or any
violation or alleged violation of law by such Holder or any other person, and
irrespective of any other circumstance which might otherwise limit such obligation
of the Corporation to such Holder in connection with the issuance of such Conversion
Shares; provided, however, that such delivery shall not operate as a
waiver by the Corporation of any such action that the Corporation may have against
such Holder. In the event a Holder shall elect to convert any or all of the Stated
Value of its Preferred Stock, the Corporation may not refuse conversion based on any
claim that such Holder or any one associated or affiliated with such Holder has been
engaged in any violation of law, agreement or for any other reason, unless an
injunction from a court, on notice to Holder, restraining and/or enjoining
conversion of all or part of the Preferred Stock of such Holder shall have been
sought and obtained, and the Corporation posts a surety bond for the benefit of such
Holder in the amount of 150% of the Stated Value of Preferred Stock which is subject
to the injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the underlying dispute and the proceeds of which shall
14
be
payable to such Holder to the extent it obtains judgment. In the
absence of such injunction, the Corporation shall issue Conversion Shares and, if applicable, cash,
upon a properly noticed conversion. If the Corporation fails to deliver to a Holder
such certificate or certificates pursuant to Section 6(c)(i) on the second
(2nd) Trading Day after the Share Delivery Date applicable to such
conversion, the Corporation shall pay to such Holder, in cash, as liquidated
damages and not as a penalty, for each $10,000 of Stated Value of Preferred
Stock being converted, $100 per Trading Day (increasing to $200 per Trading Day on
the tenth (10th) Trading Day after such damages begin to accrue) for each
Trading Day after such second (2nd) Trading Day after the Share Delivery
Date until such certificates are delivered or Holder rescinds such conversion.
Nothing herein shall limit a Holders right to pursue actual damages or declare a
Triggering Event pursuant to Section 10 hereof for the Corporations failure to
deliver Conversion Shares within the period specified herein and such Holder shall
have the right to pursue all remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or injunctive
relief. The exercise of any such rights shall not prohibit a Holder from seeking to
enforce damages pursuant to any other Section hereof or under applicable law.
iv. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon
Conversion. In addition to any other rights available to the Holder, if the
Corporation fails for any reason to deliver to a Holder the applicable certificate
or certificates by the Share Delivery Date pursuant to Section 6(c)(i), and if after
such Share Delivery Date such Holder is required by its brokerage firm to purchase
(in an open market transaction or otherwise), or the Holders brokerage firm
otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by
such Holder of the Conversion Shares which such Holder was entitled to receive upon
the conversion relating to such Share Delivery Date (a Buy-In), then the
Corporation shall (A) pay in cash to such Holder (in addition to any other remedies
available to or elected by such Holder) the amount, if any, by which (x) such
Holders total purchase price (including any brokerage commissions) for the Common
Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of
Common Stock that such Holder was entitled to receive from the conversion at issue
multiplied by (2) the actual sale price at which the sell order giving rise to such
purchase obligation was executed (including any brokerage commissions) and (B) at
the option of such Holder, either reissue (if surrendered) the shares of Preferred
Stock equal to the number of shares of Preferred Stock submitted for conversion (in
which case, such conversion shall be deemed rescinded) or deliver to such Holder the
number of shares of Common Stock that would have been issued if the Corporation had
timely complied with its delivery requirements under Section 6(c)(i). For example,
if a Holder purchases shares of Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to an attempted conversion of shares of
Preferred Stock with respect to which the actual sale price of the Conversion Shares
(including any brokerage commissions) giving rise to such purchase
15
obligation was a
total of $10,000 under clause (A) of the immediately preceding sentence, the
Corporation shall be
required to pay such Holder $1,000. The Holder shall provide
the Corporation written notice indicating the amounts payable to such Holder in
respect of the Buy-In and, upon request of the Corporation, evidence of the amount
of such loss. Nothing herein shall limit a Holders right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of
specific performance and/or injunctive relief with respect to the Corporations
failure to timely deliver certificates representing shares of Common Stock upon
conversion of the shares of Preferred Stock as required pursuant to the terms
hereof.
v. Reservation of Shares Issuable Upon Conversion. The Corporation
covenants that it will at all times reserve and keep available out of its authorized
and unissued shares of Common Stock for the sole purpose of issuance upon conversion
of the Preferred Stock and payment of dividends on the Preferred Stock, each as
herein provided, free from preemptive rights or any other actual contingent purchase
rights of Persons other than the Holder (and the other holders of the Preferred
Stock), not less than such aggregate number of shares of the Common Stock as shall
(subject to the terms and conditions set forth in the Purchase Agreement) be
issuable (taking into account the adjustments and restrictions of Section 7) upon
the conversion of the then outstanding shares of Preferred Stock and payment of
dividends hereunder. The Corporation covenants that all shares of Common Stock that
shall be so issuable shall, upon issue, be duly authorized, validly issued, fully
paid and nonassessable and, if the Conversion Shares Registration Statement is then
effective under the Securities Act, shall be registered for public resale in
accordance with such Conversion Shares Registration Statement.
vi. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the conversion of the Preferred Stock. As
to any fraction of a share which the Holder would otherwise be entitled to purchase
upon such conversion, the Corporation shall at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction
multiplied by the Conversion Price or round up to the next whole share.
vii. Transfer Taxes. The issuance of certificates for shares of the
Common Stock on conversion of this Preferred Stock shall be made without charge to
any Holder for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificates, provided that the Corporation shall
not be required to pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate upon conversion in a
name other than that of the Holders of such shares of Preferred Stock and the
Corporation shall not be required to issue or deliver such certificates unless or
until the Person or Persons requesting the issuance thereof shall have paid to the
Corporation the amount of such tax or shall have established to the satisfaction of
the Corporation that such tax has been paid.
16
d) Beneficial Ownership Limitation. The Corporation shall not effect any
conversion of the Preferred Stock, and a Holder shall not have the right to convert any
portion of the Preferred Stock, to the extent that, after giving effect to the conversion
set forth on the applicable Notice of Conversion, such Holder (together with such Holders
Affiliates, and any Persons acting as a group together with such Holder or any of such
Holders Affiliates) would beneficially own in excess of the Beneficial Ownership Limitation
(as defined below). For purposes of the foregoing sentence, the number of shares of Common
Stock beneficially owned by such Holder and its Affiliates shall include the number of
shares of Common Stock issuable upon conversion of the Preferred Stock with respect to which
such determination is being made, but shall exclude the number of shares of Common Stock
which are issuable upon (i) conversion of the remaining, unconverted Stated Value of
Preferred Stock beneficially owned by such Holder or any of its Affiliates and (ii) exercise
or conversion of the unexercised or unconverted portion of any other securities of the
Corporation subject to a limitation on conversion or exercise analogous to the limitation
contained herein (including, without limitation, the Preferred Stock or the Warrants)
beneficially owned by such Holder or any of its Affiliates. Except as set forth in the
preceding sentence, for purposes of this Section 6(d), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. To the extent that the limitation contained in this
Section 6(d) applies, the determination of whether the Preferred Stock is convertible (in
relation to other securities owned by such Holder together with any Affiliates) and of how
many shares of Preferred Stock are convertible shall be in the sole discretion of such
Holder, and the submission of a Notice of Conversion shall be deemed to be such Holders
determination of whether the shares of Preferred Stock may be converted (in relation to
other securities owned by such Holder together with any Affiliates) and how many shares of
the Preferred Stock are convertible, in each case subject to the Beneficial Ownership
Limitation. To ensure compliance with this restriction, each Holder will be deemed to
represent to the Corporation each time it delivers a Notice of Conversion that such Notice
of Conversion has not violated the restrictions set forth in this paragraph and the
Corporation shall have no obligation to verify or confirm the accuracy of such
determination. In addition, a determination as to any group status as contemplated above
shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 6(d), in determining the
number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding
shares of Common Stock as stated in the most recent of the following: (i) the Corporations
most recent periodic or annual report filed with the Commission, as the case may be, (ii) a
more recent public announcement by the Corporation or (iii) a more recent written notice by
the Corporation or the Transfer Agent setting forth the number of shares of Common Stock
outstanding. Upon the written or oral request of a Holder, the Corporation shall within two
Trading Days confirm orally and in writing to such Holder the number of shares of Common
Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall
be determined after giving effect to the conversion or exercise of securities of the
Corporation, including the Preferred Stock, by such Holder or
17
its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The
Beneficial Ownership Limitation shall be 4.99% of the number of shares of the
Common Stock outstanding immediately after giving effect to the issuance of shares of Common
Stock issuable upon conversion of Preferred Stock held by the applicable Holder. A Holder,
upon not less than 61 days prior notice to the
Corporation, may increase or decrease the Beneficial Ownership Limitation provisions of
this Section 6(d) applicable to its Preferred Stock provided that the Beneficial Ownership
Limitation in no event exceeds 9.99% of the number of shares of Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock upon conversion of
this Preferred Stock held by the holder, and the provisions of this Section 6(d) shall
continue to apply. Any such increase or decrease will not be effective until the
61st day after such notice is delivered to the Corporation and shall only apply
to such Holder and no other Holder. The provisions of this paragraph shall be construed and
implemented in a manner otherwise than in strict conformity with the terms of this Section
6(d) to correct this paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation contained herein or to make
changes or supplements necessary or desirable to properly give effect to such limitation.
The limitations contained in this paragraph shall apply to a successor holder of Preferred
Stock.
Section 7. Certain Adjustments.
a) Stock Dividends and Stock Splits. If the Corporation, at any time while
this Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions payable in shares of Common Stock on shares of Common Stock or
any other Common Stock Equivalents (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Corporation upon conversion of, or payment of a
dividend on, this Preferred Stock), (ii) subdivides outstanding shares of Common Stock into
a larger number of shares, (iii) combines (including by way of a reverse stock split)
outstanding shares of Common Stock into a smaller number of shares, or (iv) issues, in the
event of a reclassification of shares of the Common Stock, any shares of capital stock of
the Corporation, then the Conversion Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding any treasury shares of
the Corporation) outstanding immediately before such event, and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such event. Any
adjustment made pursuant to this Section 7(a) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective date in the case of
a subdivision, combination or re-classification.
18
b) Subsequent Equity Sales. If, at any time while this Preferred Stock is
outstanding, the Corporation or any Subsidiary, as applicable sells or grants any option to
purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or
announces any sale, grant or any option to purchase or other disposition), any Common Stock
or Common Stock Equivalents entitling any Person to acquire shares of Common Stock at an
effective price per share that is lower than the then Conversion Price (such lower price,
the Base Conversion Price and such issuances, collectively, a Dilutive
Issuance) (if the holder of the Common Stock or Common Stock Equivalents so issued
shall at any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to warrants,
options or rights per share which are issued in connection with such issuance, be entitled
to receive shares of Common Stock at an effective price per share that is lower than the
Conversion Price, such issuance shall be deemed to have occurred for less than the
Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be
reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such
Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no
adjustment will be made under this Section 7(b) in respect of an Exempt Issuance. The
Corporation shall notify the Holders in writing indicating therein the applicable issuance
price, or applicable reset price, exchange price, conversion price and other pricing terms
(such notice, the Dilutive Issuance Notice). For purposes of clarification,
whether or not the Corporation provides a Dilutive Issuance Notice pursuant to this Section
7(b), upon the occurrence of any Dilutive Issuance, the Holders are entitled to receive a
number of Conversion Shares based upon the Base Conversion Price on or after the date of
such Dilutive Issuance, regardless of whether a Holder accurately refers to the Base
Conversion Price in the Notice of Conversion.
c) Subsequent Rights Offerings. If the Corporation, at any time while this
Preferred Stock is outstanding, shall issue rights, options or warrants to all holders of
Common Stock (and not to the Holders) entitling them to subscribe for or purchase shares of
Common Stock at a price per share that is lower than the VWAP on the record date referenced
below, then the Conversion Price shall be multiplied by a fraction of which the denominator
shall be the number of shares of the Common Stock outstanding on the date of issuance of
such rights, options or warrants plus the number of additional shares of Common Stock
offered for subscription or purchase, and of which the numerator shall be the number of
shares of the Common Stock outstanding on the date of issuance of such rights, options or
warrants plus the number of shares which the aggregate offering price of the total number of
shares so offered (assuming delivery to the Corporation in full of all consideration payable
upon exercise of such rights, options or warrants) would purchase at such VWAP. Such
adjustment shall be made whenever such rights, options or warrants are issued, and shall
become effective immediately after the record date for the determination of stockholders
entitled to receive such rights, options or warrants.
19
d) Pro Rata Distributions. If the Corporation, at any time while this Preferred
Stock is outstanding, distributes to all holders of Common Stock (and not to the Holders)
evidences of its indebtedness or assets (including cash and cash dividends) or rights or
warrants to subscribe for or purchase any security (other than the Common Stock, which shall
be subject to Section 7(b)), then in each such case the Conversion Price shall be adjusted
by multiplying such Conversion Price in effect immediately prior to the
record date fixed
for determination of stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the VWAP determined as of the record date mentioned above,
and of which the numerator shall be such VWAP on such record date less the then fair market
value at such record date of the portion of such assets or evidence of indebtedness or
rights or warrants so distributed applicable to one outstanding share of the Common Stock as
determined by the Board of Directors of the
Corporation in good faith. In either case the adjustments shall be described in a
statement delivered to the Holders describing the portion of assets or evidences of
indebtedness so distributed or such subscription rights applicable to one share of Common
Stock. Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.
e) Fundamental Transaction. If, at any time while this Preferred Stock is
outstanding, (i) the Corporation, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Corporation with or into another
Person, (ii) the Corporation, directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or substantially all of its
assets in one or a series of related transactions, (iii) any, direct or indirect, purchase
offer, tender offer or exchange offer (whether by the Corporation or another Person) is
completed pursuant to which holders of Common Stock are permitted to sell, tender or
exchange their shares for other securities, cash or property and has been accepted by the
holders of 50% or more of the outstanding Common Stock, (iv) the Corporation, directly or
indirectly, in one or more related transactions effects any reclassification, reorganization
or recapitalization of the Common Stock or any compulsory share exchange pursuant to which
the Common Stock is effectively converted into or exchanged for other securities, cash or
property, (v) the Corporation, directly or indirectly, in one or more related transactions
consummates a stock or share purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement)
with another Person whereby such other Person acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock held by the other Person or
other Persons making or party to, or associated or affiliated with the other Persons making
or party to, such stock or share purchase agreement or other business combination) (each a
Fundamental Transaction), then, upon any subsequent conversion of this Preferred
Stock, the Holder shall have the right to receive, for each Conversion Share that would have
been issuable upon such conversion immediately prior to the occurrence of such Fundamental
Transaction (without regard to any limitation in Section 6(d) on the conversion of this
Preferred Stock), the number of shares of Common Stock of the successor or acquiring
corporation or of the Corporation, if it is the surviving corporation, and any additional
consideration (the Alternate Consideration) receivable as a result of such
Fundamental Transaction by a holder of the number of shares of Common Stock for which this
Preferred Stock is convertible immediately prior to such Fundamental Transaction (without
regard to any limitation in Section 6(d) on the conversion of this Preferred Stock). For
purposes of any such conversion, the determination of the Conversion Price shall be
appropriately adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of Common
20
Stock in such Fundamental
Transaction, and the Corporation shall apportion the Conversion Price among the Alternate
Consideration in a reasonable manner reflecting the relative value of any different
components of the Alternate Consideration. If holders of Common Stock are given any choice
as to the securities, cash or property to be received in a Fundamental Transaction, then the
Holder shall be given the same choice as to the Alternate Consideration it receives upon any
conversion of this Preferred Stock following such Fundamental Transaction. To the
extent necessary to effectuate the foregoing provisions, any successor to the Corporation or
surviving entity in such Fundamental Transaction shall file a new Certificate of Designation
with the same terms and conditions and issue to the Holders new preferred stock consistent
with the foregoing provisions and evidencing the Holders right to convert such preferred
stock into Alternate Consideration. The Corporation shall cause any successor entity in a
Fundamental Transaction in which the Corporation is not the survivor (the Successor
Entity) to assume in writing all of the obligations of the Corporation under this
Certificate of Designation and the other Transaction Documents in accordance with the
provisions of this Section 7(e) pursuant to written agreements in form and substance
reasonably satisfactory to a majority in interest of the Holders and approved by majority in
interest of the Holders (without unreasonable delay) prior to such Fundamental Transaction
and shall, at the option of the holder of this Preferred Stock, deliver to the Holder in
exchange for this Preferred Stock a security of the Successor Entity evidenced by a written
instrument substantially similar in form and substance to this Preferred Stock which is
convertible for a corresponding number of shares of capital stock of such Successor Entity
(or its parent entity) equivalent to the shares of Common Stock acquirable and receivable
upon conversion of this Preferred Stock (without regard to any limitations on the conversion
of this Preferred Stock) prior to such Fundamental Transaction, and with a conversion price
which applies the conversion price hereunder to such shares of capital stock (but taking
into account the relative value of the shares of Common Stock pursuant to such Fundamental
Transaction and the value of such shares of capital stock, such number of shares of capital
stock and such conversion price being for the purpose of protecting the economic value of
this Preferred Stock immediately prior to the consummation of such Fundamental Transaction),
and which is reasonably satisfactory in form and substance to a majority in interest of the
Holders. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall
succeed to, and be substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Certificate of Designation and the other Transaction
Documents referring to the Corporation shall refer instead to the Successor Entity), and
may exercise every right and power of the Corporation and shall assume all of the
obligations of the Corporation under this Certificate of Designation and the other
Transaction Documents with the same effect as if such Successor Entity had been named as the
Corporation herein.
f) Calculations. All calculations under this Section 7 shall be made to the
nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this
Section 7, the number of shares of Common Stock deemed to be issued and outstanding as of a
given date shall be the sum of the number of shares of Common Stock (excluding any treasury
shares of the Corporation) issued and outstanding.
21
g) Notice to the Holders.
i. Adjustment to Conversion Price. Whenever the Conversion Price is
adjusted pursuant to any provision of this Section 7, the Corporation shall promptly
deliver to each Holder a notice setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment.
ii. Notice to Allow Conversion by Holder. If (A) the Corporation shall
declare a dividend (or any other distribution in whatever form) on the Common Stock,
(B) the Corporation shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (C) the Corporation shall authorize the granting to
all holders of the Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of any
stockholders of the Corporation shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Corporation is a party, any sale or transfer of all or substantially all of the
assets of the Corporation, or any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property or (E) the Corporation shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of the
affairs of the Corporation, then, in each case, the Corporation shall cause to be
filed at each office or agency maintained for the purpose of conversion of this
Preferred Stock, and shall cause to be delivered to each Holder at its last address
as it shall appear upon the stock books of the Corporation, at least twenty (20)
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or warrants, or if a
record is not to be taken, the date as of which the holders of the Common Stock of
record to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of the
Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange, provided that the failure
to deliver such notice or any defect therein or in the delivery thereof shall not
affect the validity of the corporate action required to be specified in such notice.
To the extent that any notice provided hereunder constitutes, or contains,
material, non-public information regarding the Corporation or any of the
Subsidiaries, the Corporation shall simultaneously file such notice with the
Commission pursuant to a Current Report on Form 8-K. The Holder shall remain
entitled to convert the Conversion Amount of this Preferred Stock (or any part
hereof) during the 20-day period commencing on the date of such notice through the
effective date of the event triggering such notice except as may otherwise be
expressly set forth herein.
22
Section 8. Forced Conversion and Optional Redemption.
a) Forced Conversion. Notwithstanding anything herein to the contrary, if, at
any time after the six month anniversary of the date of the Purchase Agreement, the
VWAP for each of any 20 consecutive Trading Day period, which 20 consecutive Trading
Day period shall have commenced only after the Effective Date (Threshold Period),
exceeds 200% of the then effective Conversion Price, the Corporation may, within 1 Trading
Day after the end of any such Threshold Period, deliver a written notice to all Holders (a
Forced Conversion Notice and the date such notice is delivered to all Holders, the
Forced Conversion Notice Date) to cause each Holder to convert all or part of such
Holders Preferred Stock (as specified in such Forced Conversion Notice) plus all accrued
but unpaid dividends thereon and all liquidated damages and other amounts due in respect of
the Preferred Stock pursuant to Section 6, it being agreed that the Conversion
Date for purposes of Section 6 shall be deemed to occur on the 30th Trading
Day following the Forced Conversion Notice Date (such third Trading Day, the Forced
Conversion Date). The Corporation may not deliver a Forced Conversion Notice, and any
Forced Conversion Notice delivered by the Corporation shall not be effective, unless all of
the Equity Conditions have been met on each Trading Day during the applicable Threshold
Period through and including the later of the Forced Conversion Date and the Trading Day
after the date that the Conversion Shares issuable pursuant to such conversion are actually
delivered to the Holders pursuant to the Forced Conversion Notice. Any Forced Conversion
Notices shall be applied ratably to all of the Holders based on each Holders initial
purchases of Preferred Stock hereunder, provided that any voluntary conversions by a Holder
shall be applied against such Holders pro rata allocation, thereby
decreasing the aggregate amount forcibly converted hereunder if less than all shares of the
Preferred Stock are forcibly converted. For purposes of clarification, a Forced Conversion
shall be subject to all of the provisions of Section 6, including, without limitation, the
provisions requiring payment of liquidated damages and limitations on conversions.
b) Optional Redemption. Subject to the provisions of this Section 8, at any
time after the 24 month anniversary of the date of the Purchase Agreement, the Corporation
may deliver a notice to the Holders (an Optional Redemption Notice and the date
such notice is deemed delivered hereunder, the Optional Redemption Notice Date) of
its irrevocable election to redeem some or all of the then outstanding Preferred Stock, for
cash in an amount equal to the Optional Redemption Amount on the 30th Trading Day
following the Optional Redemption Notice Date (such date, the Optional Redemption
Date and such redemption, the Optional Redemption). The Optional Redemption
Amount is payable in full on the Optional Redemption Date. The Corporation may only effect
an Optional Redemption if each of the Equity Conditions shall have been met on each Trading
Day occurring during the period commencing on the Optional Redemption Notice Date through to
the Optional Redemption Date and
23
through and including the date payment of the Optional
Redemption Amount is actually made. If any of the Equity Conditions shall cease to be
satisfied at any time during the 30 Trading Day period, then a Holder may elect to nullify
the Optional Redemption Notice as to such Holder by notice to the Corporation within 3
Trading Days after the first day on which any such Equity Condition has not been met
(provided that if, by a provision of the Transaction Documents, the Corporation is obligated
to notify the Holders of the non-existence of an Equity Condition, such notice period shall
be extended to the third
Trading Day after proper notice from the Corporation) in which case the Optional
Redemption Notice shall be null and void, ab initio. The Corporation
covenants and agrees that it will honor all Notices of Conversion tendered from the time of
delivery of the Optional Redemption Notice through the date the Optional Redemption Amount
is paid in full.
c) Redemption Procedure. The payment of cash pursuant to an Optional
Redemption shall be made on the Optional Redemption Date. If any portion of the cash
payment for a Optional Redemption has not been paid by the Corporation on the Optional
Redemption Date, interest shall accrue thereon until such amount is paid in full at a rate
equal to the lesser of 18% per annum or the maximum rate permitted by applicable law.
Notwithstanding anything to the contrary herein, any redemption rights pursuant to this
section of Section 9 shall be junior in right to such payments on the Series A Preferred
Stock and Series B Preferred Stock.
Section 9. Negative Covenants. As long as any shares of Preferred Stock are
outstanding, the Corporation shall not, and shall not permit any of the Subsidiaries to, directly
or indirectly:
a) amend its charter documents, including, without limitation, its certificate of
incorporation and bylaws, in any manner that materially and adversely affects any rights of
the Holder;
b) pay cash dividends or distributions on Junior Securities of the Corporation;
c) enter into any transaction with any Affiliate of the Corporation which would be
required to be disclosed in any public filing with the Commission, unless such transaction
is made on an arms-length basis and expressly approved by a majority of the disinterested
directors of the Corporation (even if less than a quorum otherwise required for board
approval); or
d) enter into any agreement with respect to any of the foregoing.
24
Section 10. Redemption Upon Triggering Events.
a) Triggering Event means, wherever used herein any of the following events
(whatever the reason for such event and whether such event shall be voluntary or involuntary
or effected by operation of law or pursuant to any judgment, decree or order of any court,
or any order, rule or regulation of any administrative or governmental body):
i. the Corporation shall fail to deliver certificates representing Conversion
Shares issuable upon a conversion hereunder that comply with the provisions hereof
prior to the fifth Trading Day after such shares are required to
be delivered hereunder, or the Corporation shall provide written notice to any
Holder, including by way of public announcement, at any time, of its intention not
to comply with requests for conversion of any shares of Preferred Stock in
accordance with the terms hereof;
ii. the Corporation shall fail for any reason to pay in full the amount of cash
due pursuant to a Buy-In within seven calendar days after notice therefor is
delivered hereunder within seven days of the date due and payable;
iii. the Corporation shall fail to have available a sufficient number of
authorized and unreserved shares of Common Stock to issue to such Holder upon a
conversion hereunder;
iv. unless specifically addressed elsewhere in this Certificate of Designation
as a Triggering Event, the Corporation shall fail to observe or perform any other
material covenant, agreement or warranty contained in, or otherwise commit any
material breach of the Transaction Documents, and such failure or material breach
shall not, if subject to the possibility of a cure by the Corporation, have been
cured within 30 calendar days after the date on which written notice of such failure
or breach shall have been delivered;
v. [RESERVED];
vi. the Corporation shall be party to a Change of Control Transaction;
vii. there shall have occurred a Bankruptcy Event; or
viii. commencing on the Effective Date, the Common Stock shall fail to be
listed or quoted for trading on a Trading Market for more than five consecutive
Trading Days.
25
b) Upon the occurrence of a Triggering Event, each Holder shall (in addition to all
other rights it may have hereunder or under applicable law) have the right, exercisable at
the sole option of such Holder, to require the Corporation to, (A) with respect to the
Triggering Events set forth in Sections 10(a)(i), (ii), (iv), (vi) (as to Changes of Control
approved by the Board of Directors of the Corporation), (vii) (as to voluntary filings only)
and (viii), redeem all of the Preferred Stock then held by such Holder for a redemption
price, in cash, equal to the Triggering Redemption Amount or
(B) at the option of each Holder and with respect to the Triggering Events set forth in Sections 10(a)(iii), (vi) (as
to Changes of Control not approved by the Board of Directors of the Corporation) and (vii)
(as to involuntary filings only), either (a) redeem all of the Preferred Stock then held by
such Holder for a redemption price, in shares of Common Stock, equal to a number of shares
of Common Stock equal to the Triggering Redemption Amount divided by 75% of the average of
the 10 VWAPs immediately prior to the date of election hereunder or (b) increase the
dividend rate on all of the outstanding Preferred
Stock held by such Holder to 18% per annum thereafter. The Triggering Redemption
Amount, in cash or in shares, shall be due and payable or issuable, as the case may be,
within five Trading Days of the date on which the notice for the payment therefor is
provided by a Holder (the Triggering Redemption Payment Date). If the Corporation
fails to pay in full the Triggering Redemption Amount hereunder on the date such amount is
due in accordance with this Section (whether in cash or shares of Common Stock), the
Corporation will pay interest thereon at a rate equal to the lesser of 18% per annum or the
maximum rate permitted by applicable law, accruing daily from such date until the Triggering
Redemption Amount, plus all such interest thereon, is paid in full. For purposes of this
Section, a share of Preferred Stock is outstanding until such date as the applicable Holder
shall have received Conversion Shares upon a conversion (or attempted conversion) thereof
that meets the requirements hereof or has been paid the Triggering Redemption Amount in
cash.
Section 11. Miscellaneous.
a) Notices. Any and all notices or other communications or deliveries to be
provided by the Holders hereunder including, without limitation, any Notice of Conversion,
shall be in writing and delivered personally, by facsimile, or sent by a nationally
recognized overnight courier service, addressed to the Corporation, at the address set forth
above Attention: Declan Daly, facsimile number (484) 713-6001, or such other facsimile
number or address as the Corporation may specify for such purposes by notice to the Holders
delivered in accordance with this Section 11. Any and all notices or other communications
or deliveries to be provided by the Corporation hereunder shall be in writing and delivered
personally, by facsimile, or sent by a nationally recognized overnight courier service
addressed to each Holder at the facsimile number or address of such Holder appearing on the
books of the Corporation, or if no such facsimile number or address appears on the books of
the Corporation, at the principal place of business of such Holder, as set forth in the
Purchase Agreement. Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number set forth in this
Section prior to 5:30 p.m. (New York City time) on any date, (ii) the next Trading Day after
the date of transmission, if such notice or communication is delivered via facsimile at the
facsimile number set forth in this Section on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading Day following
the date of mailing, if sent by U.S. nationally recognized overnight courier service, or
(iv) upon actual receipt by the party to whom such notice is required to be given.
26
b) Absolute Obligation. Except as expressly provided herein, no provision of
this Certificate of Designation shall alter or impair the obligation of the Corporation,
which is absolute and unconditional, to pay liquidated damages, accrued dividends and
accrued interest, as applicable, on the shares of Preferred Stock at the time, place, and
rate, and in the coin or currency, herein prescribed.
c) Lost or Mutilated Preferred Stock Certificate. If a Holders Preferred
Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall
execute and deliver, in exchange and substitution for and upon cancellation of a mutilated
certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a
new certificate for the shares of Preferred Stock so mutilated, lost, stolen or destroyed,
but only upon receipt of evidence of such loss, theft or destruction of such certificate,
and of the ownership hereof reasonably satisfactory to the Corporation.
d) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Certificate of Designation shall be governed by and
construed and enforced in accordance with the internal laws of the State of Delaware,
without regard to the principles of conflict of laws thereof. Each party agrees that all
legal proceedings concerning the interpretation, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought against a party hereto or
its respective Affiliates, directors, officers, shareholders, employees or agents) shall be
commenced in the state and federal courts sitting in the State of Delaware (the
Delaware Courts). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the Delaware Courts for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents), and hereby
irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of such Delaware Courts, or such
Delaware Courts are improper or inconvenient venue for such proceeding. Each party hereby
irrevocably waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address in effect for
notices to it under this Certificate of Designation and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any other manner
permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any legal
proceeding arising out of or relating to this Certificate of Designation or the transactions
contemplated hereby. If any party shall commence an action or proceeding to enforce any
provisions of this Certificate of Designation, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys fees and other costs
and expenses incurred in the investigation, preparation and prosecution of such action or
proceeding.
27
e) Waiver. Any waiver by the Corporation or a Holder of a breach of any
provision of this Certificate of Designation shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other provision of this
Certificate of Designation or a waiver by any other Holders. The failure of the Corporation
or a Holder to insist upon strict adherence to any term of this Certificate of Designation
on one or more occasions shall not be considered a waiver or deprive that party (or any
other Holder) of the right thereafter to insist upon strict adherence to that
term or any other term of this Certificate of Designation on any other occasion. Any
waiver by the Corporation or a Holder must be in writing.
f) Severability. If any provision of this Certificate of Designation is
invalid, illegal or unenforceable, the balance of this Certificate of Designation shall
remain in effect, and if any provision is inapplicable to any Person or circumstance, it
shall nevertheless remain applicable to all other Persons and circumstances. If it shall be
found that any interest or other amount deemed interest due hereunder violates the
applicable law governing usury, the applicable rate of interest due hereunder shall
automatically be lowered to equal the maximum rate of interest permitted under applicable
law.
g) Next Business Day. Whenever any payment or other obligation hereunder shall
be due on a day other than a Business Day, such payment shall be made on the next succeeding
Business Day.
h) Headings. The headings contained herein are for convenience only, do not
constitute a part of this Certificate of Designation and shall not be deemed to limit or
affect any of the provisions hereof.
i) Status of Converted or Redeemed Preferred Stock. Shares of Preferred Stock
may only be issued pursuant to the Purchase Agreement. If any shares of Preferred Stock
shall be converted, redeemed or reacquired by the Corporation, such shares shall resume the
status of authorized but unissued shares of preferred stock and shall no longer be
designated as Series D 6% Cumulative Perpetual Convertible Preferred Stock.
*********************
28
RESOLVED, FURTHER, that the Chairman, the president or any vice-president, and the secretary or
any assistant secretary, of the Corporation be and they hereby are authorized and directed to
prepare and file this Certificate of Designation of Preferences, Rights and Limitations in
accordance with the foregoing resolution and the provisions of Delaware law.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this 8th day of
December 2010.
Name: David Pernock
|
Name: Declan Daly | |
Title: Chairman
|
Title: Secretary |
29
ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES
OF PREFERRED STOCK)
OF PREFERRED STOCK)
The undersigned hereby elects to convert the number of shares of Series D 6% Convertible Preferred
Stock indicated below into shares of common stock, par value $0.001 per share (the Common
Stock), of Fibrocell Science, Inc., a Delaware corporation (the Corporation),
according to the conditions hereof, as of the date written below. If shares of Common Stock are to
be issued in the name of a Person other than the undersigned, the undersigned will pay all transfer
taxes payable with respect thereto and is delivering herewith such certificates and opinions as may
be required by the Corporation in accordance with the Purchase Agreement. No fee will be charged to
the Holders for any conversion, except for any such transfer taxes.
Conversion calculations:
Date to Effect Conversion:
Number of shares of Preferred Stock owned prior to Conversion:
Number of shares of Preferred Stock to be Converted:
Stated Value of shares of Preferred Stock to be Converted:
Number of shares of Common Stock to be Issued:
Applicable Conversion Price:
Number of shares of Preferred Stock subsequent to Conversion:
Address for Delivery:
or
DWAC Instructions:
Broker no:
Account no:
or
DWAC Instructions:
Broker no:
Account no:
[HOLDER] |
||||
By: | ||||
Name: | ||||
Title: |
30