[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
EXHIBIT 10.53
MODIFICATION AGREEMENT
This MODIFICATION AGREEMENT ("Agreement"), dated as of December 12,
2002, is entered into by and between AMPHORA DISCOVERY CORP., a Delaware
corporation ("Amphora"), and CALIPER TECHNOLOGIES CORP., a Delaware corporation
("Caliper").
BACKGROUND
A. Caliper and Amphora have previously entered into a LabChip
Solutions Agreement dated as of September 21, 2001 (the "LabChip Solutions
Agreement") and an Intellectual Property Agreement dated as of September 21,
2001 (the "Intellectual Property Agreement", and together with the LabChip
Solutions Agreement, the "Existing Agreements"). Any capitalized terms used in
this Agreement but not defined herein shall have the meaning ascribed to them in
the Existing Agreements.
B. Amphora has requested that Caliper agree to (i) a modification
of Amphora's obligation under the LabChip Solutions Agreement to make a minimum
payment of $4,000,000 in respect of Datapoints generated during the second
Production Year, (ii) a deferral of Amphora's obligation to purchase an
additional Instrument System prior to December 31, 2002 to December 31, 2003,
and (iii) a termination of the Sublease (as defined below) effective as of March
1, 2003, and Caliper is willing to agree to each such requested item on and
subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained in this Agreement, the parties agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms shall be defined as
follows:
1.1. "Amphora Financing" shall mean the issuance and sale by
Amphora of (i) not less than [*] of Preferred Stock on or
before December 31, 2002 (not including the Preferred Stock
issued to Caliper pursuant to Section 2.1 below) and (ii) not
less than an additional [*] of Preferred Stock on or before
December 31, 2003.
1.2. "Datapoint Rate" shall mean the price per Datapoint to be paid
by Amphora to Caliper pursuant to the terms of the LabChip
Solutions Agreement and this Agreement. The parties agree that
the Datapoint Rate for the second Production Year and third
Production Year shall be [*] per Datapoint, [*] The parties
shall negotiate in good faith
prior to the end of the third Production Year to determine the
Datapoint Rate that will be applicable for Datapoints
generated by Amphora after the end of the third Production
Year.
1.3. "Pilot Transaction" shall mean a trial transaction between
Amphora and a potential customer involving equal to or less
than [*] in revenue, as determined in accordance with GAAP.
1.4. "Preferred Stock" shall mean Amphora Series B Convertible
Redeemable Preferred Stock issued by Amphora in connection
with the Amphora Financing with rights, privileges and
preferences substantially in accordance with the Amended and
Restated Certificate of Incorporation of Amphora attached
hereto as Schedule 1.4.
1.5. "Revenue" shall mean, with respect to any period of time, the
amount of revenue recognized by Amphora for such period, as
determined in accordance with GAAP; provided that for purposes
of this Agreement, Revenue shall not include revenue
recognized by Amphora in connection with Pilot Transactions
until the total amount of revenue recognized by Amphora from
Pilot Transactions during any rolling four-quarter period
exceeds [*], in which event Revenue shall include all such
revenue in excess of [*].
1.6. "Sublease" shall mean that certain Sublease dated as of
September 1, 2001 between Amphora and Caliper pursuant to
which Amphora subleases from Caliper approximately 5,500
square feet of gross leasable area in the building commonly
known as Cypress Business Park located at 665 Clyde Avenue in
Mountain View, California.
2. MODIFICATION OF DATAPOINT PAYMENT OBLIGATION
2.1. MODIFICATION OF DATAPOINT OBLIGATION FOR THE SECOND PRODUCTION
YEAR. Pursuant to Section 4.2.2.2 of the LabChip Solutions
Agreement Amphora is obligated to pay to Caliper a one-time
minimum price of US$4,000,000, and a maximum total aggregate
price of US$6,000,000, for all Datapoints produced during the
second Production Year. Upon the effectiveness of this
Agreement pursuant to Section 8 below, Section 4.2.2.2 of the
LabChip Solutions Agreement shall be of no further force or
effect, and Amphora's rights and obligations with respect to
Datapoints produced during the second Production Year under
Section 4.2.2.2 of the LabChip Solutions Agreement shall be
converted into the following rights and obligations:
2.1.1 Amphora shall pay to Caliper US$1,800,000 in cash in
the second Production Year (which the parties agree
began on December 1, 2002), in four equal
installments of US$450,000, payable on each of
February 28, 2003, May 31, 2003, August 31, 2003, and
November 30, 2003. In consideration of such payments,
Amphora shall be entitled to produce [*] Datapoints
(either during or after the second Production Year)
without making any further payment to Caliper on
account of the generation of Datapoints. After
Amphora has produced such [*] Datapoints, subject to
Amphora's use of Datapoints credits as described in
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Section 2.1.5 below, Amphora shall pay Caliper
additional amounts, no later than the tenth (10th)
business day of each quarter, equal to the product of
(i) the Datapoint Rate multiplied by (ii) the number
of Datapoints generated by Amphora during the
immediately preceding quarter (excluding any such
Datapoints included in the initial [*] Datapoints)
(any such additional payments being referred to
herein as "Additional Datapoint Payments"). Any
payment required under this Section 2.1.1 that is not
paid when due shall bear interest until paid in full
in accordance with Section 4.5.1 of the LabChip
Solutions Agreement. Until the Deferred Contingent
Obligation (as defined below) is satisfied in full,
Amphora shall be entitled to satisfy any Additional
Datapoint Obligation for any quarter with Quarterly
Revenue Payments relating to such quarter or, to the
extent not already fully utilized, any previous
quarter.
2.1.2 Amphora shall make a cumulative total of US$2,200,000
of deferred contingent payments (the "Deferred
Contingent Obligation") to Caliper, which obligation
shall be satisfied and reduced by Amphora by any
combination of: (i) quarterly payments made by
Amphora to Caliper in an amount which shall not be
less than [*] of Amphora's Revenue for the
immediately preceding quarter (such payments being
referred to herein as "Quarterly Revenue Payments");
(ii) Sales Commission Credits received by Amphora
from Caliper pursuant to Section 5 below; and (iii)
Additional Datapoint Payments actually made by
Amphora to Caliper (excluding any Additional
Datapoint Payments satisfied pursuant to Section
2.1.5 below). Payments to Caliper in respect of the
Deferred Contingent Obligation shall be made by
Amphora on a quarterly basis (commencing with the
calendar quarter beginning on January 1, 2003), no
later than the tenth (10th) business day of the first
month of each calendar quarter. In determining at the
end of each quarter how much Amphora is obligated to
pay Caliper in respect of the Deferred Contingent
Obligation, satisfaction of the Deferred Contingent
Obligation pursuant to Sales Commission Credits shall
be considered first, satisfaction of the Deferred
Contingent Obligation pursuant to Quarterly Revenue
Payments shall be considered second, and satisfaction
of the Deferred Contingent Obligation pursuant to
Additional Datapoint Payments shall be considered
last. In the event that Amphora seeks bankruptcy or
any similar protection from its creditors, or
Amphora's creditors initiate an involuntary
bankruptcy proceeding against Amphora which is not
dismissed within thirty (30) days, the then remaining
unpaid balance of the Deferred Contingent Obligation
shall be immediately due and payable to Caliper.
2.1.3 In the event that the full amount of the Contingent
Deferred Payments has not been paid by Amphora to
Caliper upon the earliest to occur of (i) the closing
of Amphora's initial public offering, (ii) the
closing of a sale of Amphora or substantially all of
its stock or assets, or (iii) December 31, 2004,
Amphora shall become obligated to issue Caliper that
number of shares of Preferred Stock computed by
dividing (x) the then outstanding amount of the
Deferred Contingent Obligation by (y) [*] The
Preferred Stock issued to Caliper pursuant to this
Section 2.1.4 shall not constitute payment of the
outstanding amount of the
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Deferred Contingent Obligation, which shall remain
outstanding for satisfaction as set forth in Section
2.1.2 above. Notwithstanding the foregoing, if prior
to the date Amphora becomes obligated to issue
Preferred Stock to Caliper pursuant to this Section
2.1.3, Amphora elects to pay the then outstanding
amount of the Deferred Contingent Obligation to
Caliper in full, (1) Amphora shall have no obligation
to issue such Preferred Stock to Caliper and (2)
Amphora shall receive a credit for future Additional
Datapoint Payments equal to the then outstanding
amount of the Deferred Contingent Obligation so paid.
2.1.4 In the event that (i) Amphora fails to close a second
tranche of the Amphora Financing prior to December
31, 2003 (in which an aggregate $23,000,000 is
raised, including amounts raised in the first
tranche) and (ii) at such time the full amount of the
Contingent Deferred Payments has not been paid by
Amphora to Caliper, Amphora shall pay the then
outstanding amount of the Deferred Contingent
Obligation to Caliper no later than January 5, 2004.
Amphora shall receive a credit for future Additional
Datapoint Payments equal to the amount of the then
outstanding amount of the Deferred Contingent
Obligation so paid.
2.1.5 To the extent that the Deferred Contingent Obligation
is satisfied by Amphora through Quarterly Revenue
Payments and/or Sales Commission Credits, Amphora
will receive a credit that can be applied to satisfy,
to the extent of such credit, its obligation to make
Additional Datapoint Payments to Caliper pursuant to
Section 2.1.1 above. The amount of any such Datapoint
credit created with respect to any quarter shall be
equal to the quotient of (x) the total amount of
Quarterly Revenue Payments made, and Sales Commission
Credits received, by Amphora during such quarter,
divided by (y) the then applicable Datapoint Rate
being paid by Amphora. Any Datapoint credit created
pursuant to this Section 2.1.5 shall be carried over
to future quarters at no additional cost to Amphora
until fully consumed.
2.1.6 Amphora shall issue to Caliper 2,500,000 shares of
Preferred Stock contemporaneously with the closing of
the Amphora Financing.
2.1.7 Amphora shall provide Caliper with the marketing
support and assistance described in Section 4 below.
2.2. REVENUE INFORMATION REPORTING. Amphora shall deliver to
Caliper, for each calendar quarter for which a payment in
respect of the Deferred Contingent Obligation is potentially
payable, a report setting forth in reasonable detail the
Revenue of Amphora during such quarter and any revenue
recognized by Amphora during such quarter from Pilot
Transactions. Such report shall be delivered to Caliper at the
time any such payment is made, or would have been made if
Amphora had had Revenue during such quarter. Caliper shall
review each such Revenue report upon receipt, and the Revenue
set forth by Amphora therein shall be deemed correct for
purposes of determining Amphora's payment obligation to
Caliper unless Caliper provides Amphora with written notice
describing a disagreement, in reasonable detail, within thirty
(30) days after Caliper's receipt of such report. Amphora's
obligations with respect to delivering
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reports pursuant to this Section 2.2 shall be subject in all
respects to the provisions of Section 4.5.4 of the LabChip
Solutions Agreement.
2.3. DATAPOINT INFORMATION REPORTING. Amphora and Caliper are
presently working on developing a system for reporting the
number of Datapoints generated on each Instrument System
operated by Amphora. Caliper and Amphora shall each use all
commercially reasonable efforts to create and initiate a
mutually acceptable Datapoint reporting system as promptly as
practicable.
2.4. EXAMPLES. Attached hereto as Schedule 2.4 are illustrative
examples of the parties' intent as to the operation of the
modification of Section 4.2.2.2 of the LabChip Solutions
Agreement set forth in paragraph 2.1 above.
3. MODIFICATION OF INSTRUMENT SYSTEM PURCHASE OBLIGATION
Pursuant to Section 2.2.2 of the LabChip Solutions Agreement Amphora is
obligated, among other things, to purchase an additional eleven
Instrument Systems prior to December 31, 2002. Prior to the date of
this Agreement, Amphora has purchased ten of such Instrument Systems.
Upon the effectiveness of this Agreement pursuant to Section 8 below,
Amphora's obligation to purchase the one remaining Instrument System
shall be deferred to December 31, 2003, by which date Amphora shall be
required to issue a purchase order for, and take delivery of, such
Instrument System.
4. MARKETING OBLIGATIONS
Upon the effectiveness of this Agreement pursuant to Section 8 below,
Amphora shall provide Caliper with three to five "marketing stories"
for [*] screening with a focus of on-chip approaches. Each of these
marketing stories should have the following elements (as reasonably
determined mutually by Amphora and Caliper): (i) graphic depictions of
primary screening data that shows the general approach for assay
development, as well as graphic depictions of a data set that
demonstrates high data quality; (ii) a set of hit confirmation data
that shows IC50 curves for the good hits, and examples of data where
the IC50 curves show compounds not worth pursuing; and (iii) a
selection of confirmed hits that are subjected to a realistic
selectivity screen with specific and relevant [*] that demonstrate the
ability to identify good potential compound leads as well as compounds
that show enough cross reactivity to be eliminated from further work
(without disclosing any proprietary information of third parties).
Notwithstanding the foregoing, nothing herein in this Section 4 shall
require Amphora to provide information that it reasonably deems to be
confidential. In addition, Amphora shall agree to have representatives
make a total of five presentations at Caliper sponsored symposia during
the next 12 months. [*] will be made available (so long as he is an
Amphora employee or consultant) to make three of the presentations (to
the extent [*], other suitable Amphora employees or consultants
reasonably agreeable to Caliper may make such presentations). Amphora
shall also consult with Caliper, for up to 20 total hours, regarding
the selection of the most relevant [*] for selectivity screening.
-5-
5. SALES COMMISSIONS
Upon the effectiveness of this Agreement pursuant to Section 8 below,
until the Deferred Contingent Obligation has been paid in full to
Caliper, Caliper shall credit Amphora with a sales commission of
between [*] and [*] of actual revenue (excluding any revenue relating
to freight, insurance, duties, taxes, or other similar items) received
by Caliper with respect to sales of instruments in cases where Caliper
reasonably determines that Amphora provided substantial assistance in
making such sale (any such credit being referred to herein as a "Sales
Commission Credit"). The amount of any such Sales Commission Credit
shall vary between [*] and [*] depending on the amount of assistance
provided by Amphora in making a sale of an instrument, as determined by
Caliper in its reasonable discretion. Any Sales Commission Credit shall
not be paid in cash to Amphora, but shall offset the then outstanding
amount of the Deferred Contingent Obligation to the extent of the Sales
Commission Credit.
6. [*] SERVICES
Upon the effectiveness of this Agreement pursuant to Section 8 below,
at [*] written request, [*] agrees to provide [*] with [*] services
upon terms to be agreed upon in writing and which are mutually
acceptable to the parties. Nothing in this Section shall require [*] to
undertake any services that it [*].
7. TERMINATION OF SUBLEASE
Upon the effectiveness of this Agreement pursuant to Section 8 below,
Caliper agrees that the Sublease shall terminate upon the later of (i)
March 31, 2003 and (ii) the date that Amphora shall have surrendered
the Leased Premises (as defined in the Sublease) in compliance with
Section 12 of the Sublease; provided that on the effective date of any
such termination of the Sublease Amphora shall not then be in default
under any terms or provision of the Sublease.
8. CONDITIONS TO EFFECTIVENESS OF AGREEMENT
8.1. CONDITIONS PRECEDENT. The effectiveness of this Agreement, and
the modification of Amphora's obligations and rights under the
LabChip Solutions Agreement set forth in this Agreement, is
subject to the fulfillment of each of the following conditions
precedent:
(a) Amphora shall have closed the first tranche of the
Amphora Financing on or prior to December 31, 2002;
and
(b) Amphora shall have issued 2,500,000 shares of
Preferred Stock to Caliper contemporaneously with the
closing of the first tranche of the Amphora
Financing, which Preferred Stock shall have the same
rights, privileges and preferences as the Preferred
Stock issued to other investors pursuant to the
Amphora Financing.
8.2. CONDITION SUBSEQUENT. The continuing effectiveness of this
Agreement after the satisfaction of the conditions precedent
set forth in Section 8.1 above shall be subject to the
condition subsequent that Amphora shall have paid all
outstanding amounts owing to
-6-
Caliper as of the date of this Agreement (which the parties
estimate to be approximately US$1,800,000) within five (5)
business days after the closing of the first tranche of the
Amphora Financing. In the event such payment is not made
within such five (5) business day period, this Agreement shall
be terminated without any further action of the parties, and
be of no further force or effect, and Amphora's obligations
under Section 4.2.2.2 of the LabChip Solutions Agreement shall
be reinstated in full.
8.3. NON-COMPLIANCE WITH AND TERMINATION OF THIS AGREEMENT. Each of
Amphora and Caliper agrees to use its best efforts to bring
about the satisfaction of the conditions required to be
performed by it hereunder as promptly as practicable. This
Agreement may be terminated by Caliper at any time, upon
written notice to Amphora, if Caliper reasonably determines
that the first tranche of the Amphora Financing will not
occur, or if the first tranche of the Amphora Financing has
not closed on or prior to December 31, 2002.
9. TERMINATION OF EXCLUSIVITY
Notwithstanding anything to the contrary set forth in the Existing
Agreements, in the event that Amphora materially breaches its
obligation to make payments for Datapoints set forth in Section 2
above, and such breach has not been cured within thirty (30) days after
written notice of such default from Caliper to Amphora, Caliper may
terminate the exclusivity provisions of Sections 2.1.2 and Article 3 of
the Intellectual Property Agreement upon written notice to Amphora. In
the event the exclusivity provisions are terminated, Amphora's
obligations pursuant to the Minimum Aggregate Purchase Requirement
provision of Section 3.4 of the Intellectual Property Agreement shall
immediately terminate. Notwithstanding anything to the contrary
contained in this Agreement, the Intellectual Property Agreement or the
LabChip Solutions Agreement, all other rights and obligations of each
of Amphora and Caliper under the Existing Agreements shall survive the
termination of the exclusivity provisions set forth herein. Without
limiting the generality of the foregoing sentence, the termination of
the exclusivity provisions set forth herein shall not terminate the
Exclusivity Period, for purposes of the definition of the Term, as
defined in the LabChip Solutions Agreement.
10. EFFECT ON EXISTING AGREEMENTS
Except as specifically modified pursuant to this Agreement, after the
effectiveness of this Agreement pursuant to Section 8 above, each of
the Existing Agreements, and the rights and obligations of each of
Amphora and Caliper under the Existing Agreements, shall remain in full
force and effect, except as specifically modified pursuant to this
Agreement.
11. MISCELLANEOUS
11.1. SECTION HEADINGS, LANGUAGE AND CONSTRUCTION. The article and
section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement has been
negotiated by the parties and their respective counsel.
Accordingly, this Agreement will
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be interpreted fairly in accordance with its terms and without
any strict construction in favor of or against either party.
11.2. GOVERNING LAW. THIS AGREEMENT, AND ALL DISPUTES ARISING OUT OF
OR RELATING TO THIS AGREEMENT, SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES OF CALIFORNIA OR ANY OTHER JURISDICTION.
11.3. ASSIGNMENT. Neither party may assign or otherwise transfer
this Agreement or any of its rights or obligations hereunder
without the prior written consent of the other party hereto,
except to a party that succeeds to all or substantially all of
such party's business or assets, whether by sale of stock or
assets, merger, operation of law or otherwise; provided that
such assignee or transferee agrees in writing to be bound by
the terms and conditions of this Agreement. Any other attempt
by a party to assign or otherwise transfer this Agreement
shall be null and void without the prior written consent of
the other party. Subject to the foregoing, this Agreement will
be binding upon and inure to the benefit of the parties and
their successors and permitted assigns.
11.4. MODIFICATION. No amendment or modification of any provision of
this Agreement shall be effective unless in writing signed by
both parties. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of
dealing or performance or any other matter not set forth in an
agreement in writing and signed by both parties.
11.5. SEVERABILITY. If any provision hereof should be held invalid,
illegal or unenforceable in any jurisdiction, the parties
shall negotiate in good faith a valid, legal and enforceable
substitute provision that most nearly reflects the original
intent of the parties and all other provisions hereof shall
remain in full force and effect in such jurisdiction and shall
be liberally construed in order to carry out the intentions of
the parties hereto as nearly as may be possible. Such
invalidity, illegality or unenforceability shall not affect
the validity, legality or enforceability of such provision in
any other jurisdiction.
11.6. NOTICES. Any notice or other communication required by this
Agreement shall be made in accordance with the requirements of
the Existing Agreements.
11.7. ENTIRE AGREEMENT. The parties acknowledge that this Agreement,
the Existing Agreements, and the exhibits and schedules of
each such agreement, set forth the entire agreement and
understanding of the parties with respect to the subject
matter hereof, and supersede all prior and contemporaneous
discussions, agreements and writings in respect hereto.
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11.8. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but both of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed the Agreement as
of the date first set forth above.
CALIPER TECHNOLOGIES CORP. AMPHORA DISCOVERY CORP.
By: /s/ Dan Kisner By: /s/ Martin Haslanger
--------------------------- ----------------------------
Name: Daniel L. Kisner Name: Martin Haslanger
Title: Chairman of the Board Title: President & CEO
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
-9-
Schedule 1.4
Amended and Restated Certificate of Incorporation of Amphora
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
-10-
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
AMPHORA DISCOVERY CORP.
Amphora Discovery Corp., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
A. The name of the corporation is Amphora Discovery Corp. The
corporation was originally incorporated under the name of Amphora Discovery
Sciences, Inc. The date of filing the original Certificate of Incorporation of
this corporation with the Secretary of State of the State of Delaware is May 18,
2001.
B. Pursuant to sections 242 and 245 of the General Corporation
Law of the State of Delaware, this Amended and Restated Certificate of
Incorporation amends and restates the provisions of the Certificate of
Incorporation of this corporation.
C. The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
ONE. The name of the corporation is Amphora Discovery
Corp. (the "Corporation" or the "Company").
TWO. The address of the registered office of this
Corporation in the State of Delaware is the Corporation Trust Company, 1209
Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801
and the name of the registered agent at that address is The Corporation Trust
Company.
THREE. The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware.
FOUR. This Corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which the Corporation is authorized to issue is
777,345,000, of which 491,845,000 shares of which are designated Common Stock
(the "Common Stock") and 285,500,000 shares are designated Preferred Stock (the
"Preferred Stock"). Of the Preferred Stock, 36,000,000 shares are designated
Series A Convertible Redeemable Preferred Stock (the "Series A Preferred"),
36,000,000 shares are designated as Series A-1 Convertible Redeemable Preferred
Stock ("Series A-1 Preferred"), 36,000,000 shares are designated as Series A-2
Convertible Redeemable Preferred Stock (the "Series A-2 Preferred"), 88,750,000
shares are designated as Series B Convertible Redeemable Preferred Stock
("Series B Preferred") and 88,750,000 shares are designated as Series B-1
Convertible Redeemable Preferred Stock ("Series B-1 Preferred"). The Preferred
Stock shall have a par value of $0.001 per share, and the Common Stock shall
have a par value of $0.001 per share.
The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and the Preferred Stock are as follows:
A. Dividends.
1. The holders of the Series A-1 Preferred and Series B
Preferred shall be entitled to receive cumulative dividends, which shall accrue
whether or not declared, out of funds legally available therefor, at the annual
rate of $0.08 per share of Series A-1 Preferred and $0.032 per share of Series B
Preferred, held by them, as adjusted for stock splits, stock dividends,
recapitalizations, and similar events, prior and in preference to the
declaration or payment of any dividend or other distribution (payable other than
in Common Stock) with respect to the Common Stock, when, as and if declared by
the Board of Directors.
2. The holders of the Series A, Series A-2 and Series
B-1 Preferred shall be entitled to receive non-cumulative dividends, which may
be declared out of funds legally available therefor, at the annual rate of $0.08
per share of Series A Preferred, $0.08 per share of Series A-2 Preferred and
$0.032 per share of Series B-1 Preferred, held by them, as adjusted for stock
splits, stock dividends, recapitalizations, and similar events, prior and in
preference to the declaration or payment of any dividend or other distribution
(payable other than in Common Stock) with respect to the Common Stock, when, as
and if declared by the Board of Directors.
3. As long as any Shares of Series A, Series A-1, Series
A-2, Series B or Series B-1 Preferred shall be outstanding, no dividends or
other distributions shall be made with respect to the Common Stock, other than
dividends payable solely in Common Stock, without the approval of 66 2/3% of the
Series A, Series A-1, Series A-2, Series B and Series B-1 Preferred, voting
together as a single class.
4. Upon conversion of any shares of Preferred Stock
pursuant to the provisions of Section C, the holder of any converted shares of
Preferred Stock shall no longer be entitled to any and all dividends accrued up
to the date of such conversion pursuant to this Section A.
B. Liquidation Preference.
1. Preferred Stock Preference. In the event of any
liquidation, dissolution or winding up of the Corporation, either voluntary or
involuntary (each a "Liquidation Event"), the holders of Series A-1 and Series B
Preferred shall be entitled to receive, pari passu with each other but prior and
in preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of Series A Preferred, Series A-2 Preferred, Series
B-1 Preferred and Common Stock by reason of their ownership thereof: the amount
of $1.00 per share (as adjusted for Series A-1 Preferred stock splits, stock
dividends, recapitalizations and similar events) for each share of Series A-1
Preferred (the "Original Series A-1 Issue Price") then held; the amount of $0.40
per share (as adjusted for Series B Preferred stock splits, stock dividends,
recapitalizations and similar events) for each share of Series B Preferred (the
"Original Series B Issue Price") then held; and, in addition, an amount equal to
any unpaid dividends, whether accrued or declared, as applicable, on the Series
A-1 and Series B Preferred. If the assets and funds thus distributed among the
holders of the Series A-1 and Series B Preferred are insufficient to permit the
payment to such holders of their full preferential amount, then the assets and
funds of the Corporation legally available for distribution shall be distributed
among the holders of Series A-1 and Series B Preferred in proportion to the
number of shares of Series A-1 and Series B Preferred held by each such holder.
After payment to the holders of Series A-1 and Series B Preferred the
amounts set forth in the first sentence of this Section B(1), the holders of
Series A, Series A-2 and Series B-1 Preferred shall be entitled to receive, pari
passu with each other, but prior and in preference to any distribution of any of
the assets or surplus funds of the Corporation to the holders of Common Stock by
reason of their ownership thereof: the amount of $1.00 per share (as adjusted
for Series A Preferred stock splits, stock dividends, recapitalizations and
similar events) for each share of Series A Preferred (the "Original Series A
Issue Price") then held; the amount of $1.00 per share (as adjusted for Series
A-2 Preferred Stock splits, stock dividends, recapitalizations and similar
events) for each share of Series A-2 Preferred (the "Original Series A-2 Issue
Price") then held; the amount of $0.40 per share (as adjusted for Series B-1
Preferred stock splits, stock dividends, recapitalizations and similar events)
for each share of Series B-1 Preferred (the "Original Series B-1 Issue Price")
then held; and, in addition, an amount equal to any unpaid dividends declared,
as applicable, on the Series A, Series A-2 and Series B-1 Preferred. If the
assets and funds thus distributed among the holders of the Series A, Series A-2
and Series B-1 Preferred are insufficient to permit the payment to such holders
of their full preferential amount, then the assets and funds of the Corporation
remaining after the payment to the holders of Series A-1, Series A-2 and Series
B-1 Preferred the amounts they are entitled to receive under this Section B(1)
shall be distributed among the holders of Series A, Series A-2 and Series B-1
Preferred in proportion to the number of shares of Series A, Series A-2 and
Series B-1 Preferred held by each such holder.
Notwithstanding any other provision of this Section B(1), the holders
of Series A, Series A-1, Series A-2, Series B or Series B-1 Preferred shall not
receive pursuant to this Section B(1) more than an amount per share which, when
added to all dividends previously paid on each share of Series A, Series A-1,
Series A-2, Series B or Series B-1 Preferred, as applicable, is equal to 300% of
the Original Series A Issue Price, the Original Series A-1 Issue Price, the
Original Series A-2 Issue Price, the Original Series B Issue Price or the
Original Series B-1 Issue Price, as applicable. No payment shall be made with
respect to the Common Stock unless and until full payment has been made to the
holders of the Series A, Series A-1, Series A-2, Series B and Series B-1
Preferred of the amounts they are entitled to receive under this Subsection
B(1).
2. Remaining Assets. After payment to the holders of
Series A, Series A-1, Series A-2, Series B and Series B-1 Preferred the amounts
set forth in Section B(1) above, the remaining assets and funds of the
Corporation legally available for distribution, if any, to stockholders shall be
distributed among the holders of Series A-1 and Series B Preferred and holders
of Common Stock pro rata and based on the number of shares of Common Stock held
by each (assuming conversion of all such Series A-1 and Series B Preferred),
provided that the holders of Series A-1 and Series B Preferred shall not receive
pursuant to Sections B(1) and (2), combined, more than an amount per share
which, when added to all dividends previously paid on each share of Series A-1
and Series B Preferred, as applicable, is equal to 300% of the Original Series
A-1 Issue Price or the Original Series B Issue Price, as applicable, and all
remaining assets and funds after the maximum distribution to the holders of
Series A-1 and Series B Preferred shall be distributed to the holders of Common
Stock.
3. Reorganization or Merger. Except for bona fide
financings for capital raising purposes approved by the Board of Directors and
the holders of at least 66 2/3% of the then-issued and outstanding shares of
Preferred Stock, voting together as a single class, a reorganization, merger or
consolidation of the Corporation with or into any other corporation or entity,
in which transaction or Series of related transactions the Corporation's
stockholders immediately prior to such transaction own immediately after such
transaction less than 50% of the equity securities of the surviving corporation
or its parent, or a sale, conveyance or encumbrance of all or substantially all
of the assets of the Corporation, shall be deemed to be a Liquidation Event
within the meaning of this Section B.
4. Non-Cash Consideration. If any assets of the
Corporation distributed to stockholders in connection with any Liquidation Event
are other than cash, then the value of such assets shall be their fair market
value as determined in good faith by the Board of Directors, except that any
securities to be distributed to stockholders in a Liquidation Event shall be
valued as follows:
a. The method of valuation of securities not
subject to investment letter or other similar restrictions on free marketability
shall be as follows:
(i) if the securities are then traded
on a national securities exchange or the Nasdaq National Market (or a similar
quotation system), then the value shall be deemed to be the average of the
closing prices of the securities on such exchange or system over the 30-day
period ending three (3) days prior to the distribution; and
(ii) if actively traded
over-the-counter, then the value shall be deemed to be the average of the
closing bid prices over the 30-day period ending three (3) days prior to the
distribution; and
(iii) if there is no active public
market, then the value shall be the fair market value thereof, as determined in
good faith by the Board of Directors of the Corporation.
b. The method of valuation of securities
subject to investment letter or other restrictions on free marketability shall
be to make an appropriate discount from the market value determined as above in
subsections (a)(i), (ii) or (iii) of this Section B(4) to reflect the
approximate fair market value thereof, as determined in good faith by the Board
of Directors.
C. Conversion. The holders of Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
1. Right to Convert. Except as provided in Section
C(4)(d)(v) below, each share of Series A, Series A-1, Series A-2, Series B and
Series B-1 Preferred shall be convertible, at the option of and without the
payment of any additional consideration by the holder thereof, at any time into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Issuance Price (as defined below) by the Conversion
Price (as defined below) in effect at the time of conversion. The Issuance Price
for the Series A, Series A-1 and Series A-2 Preferred shall be $1.00. The
Issuance Price for the Series B and Series B-1 Preferred shall be $0.40. The
Conversion Price for the Series A Preferred shall initially be $1.00, subject to
adjustment as provided below. The Conversion Price for the Series A-1 Preferred
shall initially be $1.00, subject to adjustment as provided below. The
Conversion Price for the Series A-2 shall initially be $0.40, subject to
adjustment as provided below. The Conversion Price for the Series B and Series
B-1 Preferred shall initially be $0.40, subject to adjustment as provided below.
The number of shares of Common Stock into which a share of Series A, Series A-1,
Series A-2, Series B or Series B-1 Preferred is convertible is hereinafter
referred to as the "Conversion Rate" of the Series A, Series A-1, Series A-2,
Series B or Series B-1 Preferred, as appropriate.
2. Automatic Conversion. Each share of Series A, Series
A-1, Series A-2, Series B and Series B-1 Preferred shall automatically be
converted into shares of Common Stock at the then effective Conversion Rate (i)
immediately prior to the closing of a firm commitment underwritten public
offering pursuant to an effective registration statement on Form S-1 under the
Securities Act of 1933, as amended (the "Act"), covering the offer and sale of
Common Stock for the account of the Corporation to the public at a price per
share of not less than $1.20 (as adjusted for stock splits, stock dividends,
recapitalizations and similar events) with gross proceeds to the Corporation of
not less than $20,000,000; or (ii) upon the consent of holders of at least 66
2/3% of the Preferred Stock then outstanding, voting together as a single class.
3. Mechanics of Conversion. Before any holder of Series
A, Series A-1, Series A-2, Series B or Series B-1 Preferred shall be entitled to
convert the same into full shares of Common Stock and to receive certificates
therefor, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or of any transfer agent for the
Preferred Stock, and shall give written notice to the Corporation at such office
that such holder elects to convert the same; provided, however, that in the
event of a conversion pursuant to Sections C(2), C(4)(d) or C(4)(e), the
outstanding shares of Series A, Series A-1, Series A-2, Series B and Series B-1
Preferred shall be converted automatically without any further action by the
holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent, and, provided
further, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon
such automatic conversion unless the certificates evidencing such shares of
Preferred Stock are either delivered to the Corporation or its transfer agent,
as provided above, or the holder notifies the Corporation or the Corporation's
transfer agent that such certificates have been lost, stolen or destroyed and
executes an affidavit to such effect, in a form reasonably satisfactory to the
Corporation. The Corporation shall, as soon as practicable after such delivery,
or such affidavit in the case of a lost certificate, issue and deliver at such
office to such holder of Series A, Series A-1, Series A-2, Series B or Series
B-1 Preferred, a certificate or certificates for the number of shares of Common
Stock to which the holder shall be entitled and a check payable to the holder in
the amount of any cash amounts payable as the result of a conversion into
fractional shares of Common Stock. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Series A, Series A-1, Series A-2, Series B or Series B-1 Preferred
to be converted, in the case of automatic conversion in connection with an
underwritten public offering, immediately prior to the closing of the offering,
or in the case of conversion in connection with the consent of the holders of at
least 66 2/3% of the Preferred Stock then outstanding, immediately upon receipt
of such consent, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on such date.
4. Adjustments to Conversion Price of Preferred Stock
for Dilutive Issues:
a. Special Definitions. For purposes of this
Section C(4), the following definitions shall apply:
(i) "Options" shall mean rights,
options or warrants to subscribe for, purchase or otherwise acquire either
Common Stock or Convertible Securities.
(ii) "Convertible Securities" shall mean
any evidences of indebtedness, shares of capital stock (other than the Common
Stock) or other securities convertible into or exchangeable for Common Stock.
(iii) "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued (or, pursuant to Section C(4)(b),
deemed to be issued) by the Corporation, other than:
(A) shares of the
Corporation's capital stock issued upon any conversion of the Preferred Stock
(including, without limitation, any conversion pursuant to Sections C(4)(d) and
(e) below);
(B) shares of the
Corporation's capital stock issued pursuant to bona fide acquisitions, mergers,
technology licenses or purchases, corporate partnering, agreements or other
similar transactions, in each case unanimously approved by the Board of
Directors;
(C) 32,993,341 shares of the
Corporation's capital stock (or related Options) ("Incentive Shares") issued to
employees, officers, directors, consultants, or
other persons performing services for the Corporation (including, but not by way
of limitation, distributors and sales representatives) pursuant to any stock
offering, plan, or arrangement approved by the Board of Directors, provided
that, the number of Incentive Shares may be increased by the unanimous approval
of the Board of Directors;
(D) shares of the
Corporation's capital stock issued to financial institutions in connection with
the extension of credit to the Corporation, to lessors in connection with the
lease of equipment or real property or in similar transactions, in each case
approved unanimously by the Board of Directors;
(E) shares of the
Corporation's Common Stock issued in connection with any stock split, stock
dividend, or stock combination thereof by the Corporation;
(F) all shares of Common Stock
issued or issuable upon conversion of Convertible Securities issued and
outstanding on the date this document is filed with the Delaware Secretary of
State;
(G) shares of Common Stock
issued on or prior to the earlier of December 16, 2004 or the Milestone Closing,
as defined in Section C(4)(d)(v), in connection with the issuance and sale of
Series B Preferred.
(H) shares of capital stock
issued in a public offering in which all of the Preferred Stock will be
converted; or
(I) except as otherwise
provided in this Section C(4)(a)(iii), shares of capital stock of the
Corporation, or securities convertible into shares of capital stock of the
Corporation, the issuance of which is unanimously approved by the Board of
Directors.
b. Deemed Issue of Additional Shares of Common
Stock. In the event the Corporation at any time or from time to time after the
original issuance date for the Series A Preferred shall issue any Options or
Convertible Securities or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth in the
instrument relating thereto assuming the satisfaction of any conditions to
exercisability, including, without limitation, the passage of time and without
regard to any provisions contained therein for a subsequent adjustment of such
number) of Common Stock issuable upon the exercise of such Options or, in the
case of Convertible Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be Additional Shares of
Common Stock issued as of the time of such issue or, in case such a record date
shall have been fixed, as of the close of business on such record date, provided
that, Additional Shares of Common Stock shall not be deemed to have been issued
unless the consideration per share (determined pursuant to Section C(4)(f)
hereof) of such Additional Shares of Common Stock would be less than the
Conversion Price for the Series A-1 or Series B Preferred in effect on the date
of and
immediately prior to such issue, or such record date, as the case may be, and,
provided further, that in any such case in which Additional Shares of Common
Stock are deemed to be issued:
(i) no further adjustment in the
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(ii) if such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any increase or decrease in the consideration payable to the Corporation, or in
the number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities;
(iii) upon the expiration of any such
Options or any rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the Conversion Price computed
upon the original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall, upon such
expiration, be recomputed as if;
(A) in the case of Convertible
Securities or Options for Common Stock, the only Additional Shares of Common
Stock issued were the shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities and the consideration received therefor was the consideration
actually received by the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration actually received by the Corporation
upon such exercise, or for the issue of all such Convertible Securities which
were actually converted or exchanged, plus the additional consideration, if any,
actually received by the Corporation upon such conversion or exchange, and
(B) in the case of Options for
Convertible Securities, only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issue of such Options, and
the consideration received by the Corporation for the Additional Shares of
Common Stock deemed to have been then issued was the consideration actually
received by the Corporation for the issue of all such Options, whether or not
exercised, plus the consideration deemed to have been received by the
Corporation upon the issue of the Convertible Securities with respect to which
such Options were actually exercised;
(iv) no readjustment pursuant to clause
(ii) or (iii) above shall have the effect of increasing the Conversion Price to
an amount which exceeds the lower of (A) the Conversion Price on the original
adjustment date, or (B) the Conversion Price that would have resulted from any
issuance of Additional Shares of Common Stock between the original adjustment
date and such readjustment date; and
(v) in the case of any Options which
expire by their terms not more than 90 days after the date of issue thereof, no
adjustment of the Conversion Price shall be made until the expiration or
exercise of all such Options.
c. Adjustment of Conversion Price Upon Issuance
of Additional Shares of Common Stock. In the event this Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section C(4)(b)) after the original issuance
date for the Series A Preferred without consideration or for consideration per
share less than the Conversion Price for the Series A-1 or Series B Preferred in
effect on the date of and immediately prior to such issue (a "Dilutive
Issuance"), then, and in such event, the Conversion Price for the Series A-1 and
Series B Preferred shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) equal to the consideration per share for which
Additional Shares of Common Stock are issued. If such Additional Shares of
Common Stock are issued for no consideration then the consideration per share
shall be deemed to be $0.01.
d. Series B Offering Shadow Preferred. The
provision of this Section C(4)(d) shall remain in effect until the Re-Conversion
Date, as defined in Section C(4)(d)(v)below.
(i) Series A Preferred Definitions. For
purposes of Sections C(4)(d)(i), and (ii), the following terms shall have the
meanings set forth below:
(A) "Affiliate Group" shall
mean a group of Affiliated Entities holding Series A Preferred.
(B) "Affiliated Entity" shall
mean, only for purposes of Sections C(4)(d)(i) and (ii), as to any entity,
another entity that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with such specified
entity.
(ii) Series A Preferred Mechanics of
Issuance of Shadow Preferred.
(A) In the event the
Corporation proposes to undertake a Dilutive Issuance, it shall give each holder
of Series A Preferred a written notice of its intention, describing the type of
new securities, the price and number of shares of such Dilutive Issuance, at
least twenty-four (24) hours prior to the initial closing of such Dilutive
Issuance.
(B) Upon the purchase of
shares issued and sold in a Dilutive Issuance by a holder of Series A Preferred
or an Affiliate Group holding Series A Preferred, 2.0262 shares of Series A
Preferred held by such holder or Affiliated Group shall be automatically
converted into an equal number of shares of Series A-1 Preferred (rounded up to
the nearest whole share) for each $1.00 of Series B Preferred issued and sold in
such Dilutive Issuance purchased by such holder or Affiliate Group, up to a
maximum total number of shares of Series A Preferred held by such holder or
Affiliate Group. The number of shares of Series A
Preferred held by each member of an Affiliate Group shall be converted to Series
A-1 Preferred pro-rata, based on the proportion that the Series A Preferred held
by such member of the Affiliate Group bears to the Series A Preferred held by
all members of the Affiliate Group. A holder of Series A Preferred that has some
or all of the shares of Series A Preferred converted to Series A-1 Preferred
pursuant the terms of this Section C(4)(d)(ii) shall be referred to as a "Series
A Participating Investor."
(C) Upon the conversion of
Series A Preferred held by a holder of Series A Preferred into shares of Series
A-1 Preferred as set forth in this Section C(4)(d)(ii), such shares of Series A
Preferred shall no longer be outstanding on the books of the Corporation, and to
the extent of such Series A Participating Investor's holdings of Series A-1
Preferred, such Series A Participating Investor's shall be treated for all
purposes as the record holder of such shares of Series A-1 Preferred acquired
pursuant to the conversion of the Series A Preferred on the date of acquisition
by such Series A Participating Investor of shares issued and sold in the
Dilutive Issuance.
(iii) Series B Preferred Definitions. For
purposes of Sections C(4)d(iii), and (iv), the following terms shall have the
meanings set forth below:
(A) "Pro Rata B Share" with
respect to each holder of Series B Preferred shall mean that portion of the
total number of shares of the Dilutive Issuance equal to the number of shares of
the Dilutive Issuance actually offered to all holders of Series B Preferred by
the Board of Directors of the Corporation multiplied by a fraction, the
numerator of which is the number of shares of Series B Preferred held by such
holder as of the date of the B Issuance Notice, as defined below, and the
denominator of which is the total number of shares of Series B Preferred
outstanding as of such date.
(B) "Participating B Investor"
shall mean any holder of Series B Preferred that purchases at least its Pro Rata
B Share of a Dilutive Issuance, provided however, that if a holder is a member
of a group of Affiliated Entities holding Series B Preferred and the holders
making up such group in the aggregate purchase a number of shares of such
Dilutive Issuance at least equal to the aggregate Pro Rata B Share of all
holders making up such group of Affiliated Entities, then all such holders in
such group shall be deemed to be Participating B Investors.
(C) "Nonparticipating B
Investor" shall mean any holder of Series B Preferred that is not a
Participating B Investor.
(D) "Affiliated Entity" shall
mean, only for purposes of this Section C(4)(d)(iii) and (iv), as to any entity,
another entity that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with such specified
entity.
(iv) Series B Preferred Mechanics of
Issuance of Shadow Preferred.
(A) In the event the
Corporation proposes to undertake a Dilutive Issuance, it shall give each holder
of Series B Preferred a written notice (the "B Issuance Notice") of its
intention, describing the type of new securities, the price and number of shares
and the general terms upon which the Corporation proposes to issue such new
securities as well each Series B Preferred holder's Pro Rata B Share of such
Dilutive Issuance, at least fifteen (15) days prior to the date of such Dilutive
Issuance. Each holder of Series B Preferred may, within ten (10) days from the
date of receipt by the holder (by electronic mail, fax or overnight delivery) of
the Issuance Notice, provide written notice (by electronic mail, fax or
overnight delivery) to the Corporation that such holder agrees to become a
Participating B Investor for the price and upon the terms specified in the B
Issuance Notice. In the event that such holder fails to purchase at least its
Pro Rata B Share of the Dilutive Issuance (other than as a result of the
Corporation failing to offer such holder an opportunity to purchase its Pro Rata
B Share) on or prior to the Closing Date, as defined below, such holder shall be
deemed to be a Nonparticipating Investor.
(B) To the extent of the
percentage of the Pro Rata B Share not purchased (the "Refused Percentage") by
each Nonparticipating B Investor, that number of outstanding shares of Series B
Preferred held by such Nonparticipating B Investor equal to the product of (x)
the number of shares of Series B Preferred held by the Nonparticipating B
Investor, multiplied by (y) the Refused Percentage, shall be converted
automatically on the date (the "Closing Date") of the applicable Dilutive
Issuance (provided that the Corporation gave the Issuance Notice to such holder
of Series B Preferred) into an equal number of shares of Series B-1 Preferred.
(C) Upon the conversion of
Series B Preferred held by a Nonparticipating Investor into shares of Series B-1
Preferred as set forth herein, such shares of Series B Preferred shall no longer
be outstanding on the books of the Corporation, and may not be reissued, and to
the extent of such Nonparticipating B Investor's holdings of Series B-1
Preferred, such Nonparticipating B Investor shall be treated for all purposes as
the record holder of such shares of Series B-1 Preferred acquired pursuant to
the conversion of the Series B Preferred on the Closing Date.
(v) Series A-1 Preferred Clawback
Mechanics.
(A) For purposes of this
Section C(4)(d), "Re-Conversion Date" shall mean with respect to each of the
Prior Holders, as defined below, the earlier to occur of the following: (i) the
Milestone Closing, as defined in the Series B Preferred Stock Purchase
Agreement, dated as of December 13, 2002 (the "Milestone Closing"); (ii) the
time and date that is immediately prior to a Liquidation Event and the
conversion of any shares of Preferred Stock into Common Stock occurring in
connection with such Liquidation Event; (iii) the time and date immediately
prior to the conversion of shares of Series A-1 Preferred held by such Prior
Holder into shares of Common Stock; (iv) time and date immediately prior to the
initial closing date of a Dilutive Issuance; or (v) December 16, 2004.
(B) For the purposes of this
Section C(4)(d)(v), the "Re-Conversion Number" for any holder of Series A-1
Preferred Stock (each, a "Prior Holder") shall be a number equal to the total
number of shares of Series A-1 Preferred then held by such Prior
Holder multiplied by the quotient of: (i) the difference of (x) the number of
shares of Series A-1 Preferred then held by such Prior Holder multiplied by
0.80, less (y) the number of shares of Series B Preferred then held by such
Prior Holder multiplied by 0.40; divided by (ii) the number of shares of Series
A-1 Preferred then held by such Prior Holder multiplied by 0.80, provided that,
no Prior Holder shall be deemed to acquire any right to receive additional
shares of Series A-1 Preferred and none of the shares of Series A-1 Preferred
held by such Prior Holder shall re-convert to Series A Preferred if the
calculation set forth in this Section C(4)(d)(v) results in a negative
Re-Conversion Number.
(C) Notwithstanding anything
to the contrary in this Section C, upon the Re-Conversion Date a number of
shares of Series A-1 Preferred held by a Prior Holder equal to the Re-Conversion
Number such Prior Holder held by a Prior Holder shall convert into an equal
number of shares of Series A Preferred, provided that if the Re-Conversion Date
is triggered by the occurrence of the events set forth in Sections
C(4)(d)(v)(A)(ii) or (iv) the Corporation shall have provided notice of such
event to the Prior Holders at least five (5) days prior to the occurrence of
such event.
(D) Upon the conversion of
Series A-1 Preferred held by a Prior Holder into shares of Series A Preferred as
set forth herein, such shares of Series A-1 Preferred shall no longer be
outstanding on the books of the Corporation and to the extent of such Prior
Holder's holdings of Series A-1 Preferred, such Prior Holder shall be treated
for all purposes as the record holder of such shares of Series A Preferred
acquired pursuant to the conversion of the Series A-1 Preferred on the
Re-Conversion Date.
(E) The Corporation shall send
notice that the Re-Conversion Date will be triggered in accordance with Section
C(4)(d)(v)(A)(v) to the Prior Holders at least at least five (5) days prior to
December 16, 2004 if the Re-Conversion Date has not occurred by the date of
mailing of such notice.
e. Post- Series B Offering Shadow Preferred.
After the Re-Conversion Date, Section C(4)(d) shall no longer be in effect, and
the provisions of this Section C(4)(e) shall control any conversion of Series
A-1 or Series B Preferred into shares of Series A-2 or Series B-1 Preferred, as
applicable. Prior to such Re-Conversion Date the provisions of this Section
C(4)(e) shall not be in effect for any purpose.
(i) Definitions. For purposes of this
Section C(4)(e) the following terms shall have the meanings set forth below.
(A) "Pro Rata Share" with
respect to each holder of Series A-1 or Series B Preferred shall mean that
portion of the total number of shares of the Dilutive Issuance equal to the
number of shares of the Dilutive Issuance actually offered to all holders of
Series A-1 and Series B Preferred Stock by the Corporation multiplied by a
fraction, the numerator of which is the number of shares of Series A-1 and
Series B Preferred held by such holder as of the date of the Issuance Notice, as
defined below, and the denominator of which is the total number of shares of
Series A-1 and Series B Preferred outstanding as of such date.
(B) "Participating Investor"
shall mean any holder of Series A-1 or Series B Preferred, as applicable that
purchases at least its Pro Rata Share of a Dilutive Issuance, provided however,
that if a holder is a member of a group of Affiliated Entities holding Series
A-1 and Series B Preferred and the holders making up such group in the aggregate
purchase a dollar amount of such Dilutive Issuance equal to the aggregate
Pro-Rata Share of all holders making up such group of Affiliated Entities, then
all such holders in such group shall be deemed to be Participating Investors.
(C) "Nonparticipating
Investor" shall mean any holder of Preferred Stock that is not a Participating
Investor.
(D) "Affiliated Entity" shall
mean, only for purposes of this Section C(4)(e), as to any entity, another
entity that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with such specified
entity.
(ii) Mechanics of Issuance of Shadow
Preferred.
(A) In the event the
Corporation proposes to undertake a Dilutive Issuance, it shall give each holder
of Series A-1 and Series B Preferred Stock a written notice (the "Issuance
Notice") of its intention, describing the type of new securities, the price and
number of shares and the general terms upon which the Corporation proposes to
issue such new securities, at least twenty-one (21) days prior to the date of
such Dilutive Issuance. Each holder of Series A-1 and Series B Preferred may,
within ten (10) days from the time of receipt by the holder (by mail, fax or
overnight delivery) of the Issuance Notice, provide written notice to the
Corporation that such holder agrees to become a Participating Investor for the
price and upon the terms specified in the Issuance Notice. In the event that
such holder fails to give such notice within the ten (10) day period, or fails
to actually purchase its Pro Rata Share of the Dilutive Issuance (other than as
a result of the Corporation failing to offer such holder an opportunity to
purchase its Pro Rata Share) on or prior to the Closing Date, as defined below,
such holder shall be deemed to be a Nonparticipating Investor.
(B) To the extent of the
percentage of the Pro Rata Share not purchased (the "Refused Percentage") by
each Nonparticipating Investor, that number of outstanding shares of Series A-1
Preferred and that number of outstanding shares of Series B Preferred then held
by such Nonparticipating Investor, as applicable, equal to the product of (x)
the number of shares of Series A-1 Preferred or Series B Preferred, as
applicable, then held by the Nonparticipating Investor, times (y) the Refused
Percentage, shall each be converted automatically on the date (the "Closing
Date") of the applicable Dilutive Issuance (provided that the Corporation gave
the Issuance Notice to such holder of Preferred Stock) into an equal number of
shares of Series A-2 Preferred and Series B-1 Preferred, as applicable.
(C) Upon the conversion of
Series A-1 and Series B Preferred held by a Nonparticipating Investor as set
forth herein, such shares of Series A-1 and Series B Preferred shall no longer
be outstanding on the books of the Corporation, and may not be reissued, and the
Nonparticipating Investor shall be treated for all purposes as the record
holder of such shares of Series A-2 and Series B-1 Preferred, as applicable,
acquired pursuant to the conversion of the Series A-1 and Series B Preferred on
the Closing Date.
f. Determination of Consideration. For purposes
of this Section C(4), the consideration received by the Corporation for the
issue of any Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property: Such
consideration shall:
(A) insofar as it consists of
cash, be computed at the aggregate amount of cash received by the Corporation.
(B) insofar as it consists of
property other than cash, be computed at the fair value thereof at the time of
such issue, as determined in good faith by the Board of Directors irrespective
of any accounting treatment; and
(C) in the event Additional
Shares of Common Stock are issued together with other shares or securities or
other assets of the Corporation for consideration which covers both, be the
proportion of such consideration so received, computed as provided in clauses
(A) and (B) above, as determined in good faith by the Board of Directors.
(ii) Options and Convertible Securities.
The consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section C(4)(b), relating to
Options and Convertible Securities, shall be determined by dividing:
(A) the total amount, if any,
received or receivable by the Corporation as consideration for the issue of such
Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities; by
(B) the maximum number of
shares of Common Stock (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
5. Fractional Shares. In lieu of any fractional shares
to which the holder of Series A, Series A-1, Series A-2, Series B or Series B-1
Preferred would otherwise be entitled, the Corporation shall pay cash equal to
such fraction multiplied by the fair market value of one share of Series A,
Series A-1, Series A-2, Series B or Series B-1 Preferred, as applicable, as
determined in good faith by the Board of Directors of the Corporation. Whether
or not fractional shares are issuable upon such conversion shall be determined
on the basis of the total number of shares of Series A, Series A-1, Series A-2,
Series B or Series B-1 Preferred of each holder at the
time converting into Common Stock and the number of shares of Common Stock
issuable upon each such holder's aggregate conversion.
6. Adjustment of Conversion Price; Cash Dividends;
Merger Consideration.
a. The Conversion Price of each share of Series
A, Series A-1, Series A-2, Series B and Series B-1 Preferred shall be subject to
adjustment from time to time as follows: (i) if the number of shares of Common
Stock outstanding at any time after the date hereof is increased by a stock
dividend payable in shares of Common Stock or by a subdivision or split-up of
shares of Common Stock, then, on the date such payment is made or such change is
effective, the Conversion Price of the Series A, Series A-1, Series A-2, Series
B and Series B-1 Preferred shall be appropriately decreased so that the number
of shares of Common Stock issuable on conversion of any shares of Series A,
Series A-1, Series A-2, Series B or Series B-1 Preferred shall be increased in
proportion to such increase of outstanding shares; or (ii) if the number of
shares of Common Stock outstanding at any time after the date hereof is
decreased by a combination of the outstanding shares of Common Stock, then, on
the effective date of such combination, the Conversion Price of the Series A,
Series A-1, Series A-2, Series B and Series B-1 Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of any shares of Series A, Series A-1, Series A-2, Series B or Series
B-1 Preferred shall be decreased in proportion to such decrease in outstanding
shares.
b. In case the Corporation shall declare a cash
dividend upon its Common Stock payable otherwise than out of retained earnings
or shall distribute to holders of its Common Stock shares of its capital stock
(other than Common Stock), stock or other securities of other persons, evidences
of indebtedness issued by the Corporation or other persons, assets (excluding
cash dividends) or options or rights (excluding options to purchase and rights
to subscribe for Common Stock or other securities of the Corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
the Series A, Series A-1, Series A-2, Series B and Series B-1 Preferred shall,
concurrent with the distribution to holders of Common Stock, receive a like
distribution based upon the number of shares of Common Stock into which such
Series A, Series A-1, Series A-2, Series B or Series B-1 Preferred is then
convertible.
c. In case at any time after the date hereof,
there is any capital reorganization, or any reclassification of the stock of the
Corporation (other than as a result of a stock dividend or subdivision, split-up
or combination of shares), the shares of Series A, Series A-1, Series A-2,
Series B and Series B-1 Preferred shall, after such reorganization or
reclassification, be convertible into the kind and number of shares of stock or
other securities or property of the Corporation or otherwise to which such
holder would have been entitled if immediately prior to such reorganization or
reclassification such holder had converted its shares of Series A, Series A-1,
Series A-2, Series B or Series B-1 Preferred into Common Stock. The provisions
of this Section C(6)(d) shall similarly apply to successive reorganizations or
reclassifications.
d. All calculations under Section C(4) and this
Section C(6) shall be made to the nearest cent or to the nearest one hundredth
(1/100) of a share, as the case may be.
7. Minimal Adjustments. No adjustment in the Conversion
Price for the Series A, Series A-1, Series A-2, Series B or Series B-1 Preferred
need be made if such adjustment would result in a change in the Conversion Price
of less than $0.01. Any adjustment of less than $0.01 which is not made as a
result of the provisions of this Section C(7) shall be carried forward and shall
be made at the time of and together with any subsequent adjustment which, on a
cumulative basis, amounts to an adjustment of $0.01 or more in the Conversion
Price.
8. No Impairment. The Corporation will not, without the
consent of the holders of at least 66 2/3% of the outstanding Preferred Stock,
through any reorganization, recapitalization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section C
and in the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of Preferred Stock against
impairment. This provision shall not restrict the Corporation's right to amend
its Certificate of Incorporation with the requisite stockholder consent.
9. Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Rate pursuant to Sections
C(4), (6) or (7), the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series A, Series A-1, Series A-2, Series B and Series
B-1 Preferred, as applicable, a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon written request at any time
of any holder of Series A, Series A-1, Series A-2, Series B or Series B-1
Preferred, furnish or cause to be furnished to such holder a like certificate
setting forth (i) all such adjustments and readjustments; (ii) the Conversion
Rate at the time in effect; and (iii) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of such holder's shares of Series A, Series A-1, Series A-2
Series B or Series B-1 Preferred.
10. Notices of Record Date. In the event of any taking by
the Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property or to receive any other right, the Corporation
shall mail to each holder of Series A, Series A-1, Series A-2, Series B and
Series B-1 Preferred at least twenty (20) days prior to such record date, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend or distribution or right, and the amount and character
of such dividend, distribution or right.
11. Notices. Any notice required by the provisions of
this Section C to be given to any holder of Series A, Series A-1, Series A-2,
Series B or Series B-1 Preferred shall be
deemed given or received if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at such holder's address
appearing on the Corporation's books.
D. Voting Rights.
1. Generally. The holder of each share of Preferred
Stock shall be entitled to the number of votes equal to the number of shares of
Common Stock into which each share of such Preferred Stock could be converted on
the record date for the vote or written consent of stockholders and, except as
otherwise required by law, shall have voting rights and powers equal to the
voting rights and powers of the Common Stock. The holder of each share of
Preferred Stock shall be entitled to notice of any stockholders' meeting in
accordance with the bylaws of the Corporation and shall vote with holders of the
Common Stock upon all matters submitted to a vote of stockholders, except with
respect to those matters required pursuant to Section F or by law to be
submitted to a class or Series vote. Fractional votes shall not, however, be
permitted and any fractional voting rights resulting from the above formula
(after aggregating all shares of Common Stock into which shares of Preferred
Stock held by each holder could be converted) shall be disregarded. The holder
of each share of Common Stock shall have the right to one vote, and shall be
entitled to notice of any stockholders' meeting in accordance with the bylaws of
the Corporation, and shall be entitled to vote upon such matters and in such
manner as may be provided by law. Notwithstanding the provisions of Section
242(b)(2) of the General Corporation Law of the State of Delaware, the holders
of Common Stock shall vote together with the holders of Preferred Stock as a
single class with respect to any proposed amendment hereto that would increase
the authorized number of shares of Common Stock, with each such share being
entitled to such number of votes per share as is provided in this Article FOUR,
and the holders of Common Stock shall not be entitled to a separate class vote
with respect thereto unless otherwise required by law.
2. Directors.
a. Number of Directors. Except as reduced by
Section D(2)(c), there shall be seven (7) directors of the Corporation, provided
that, such number of directors may be increased with the affirmative vote or
written consent of the holders of a majority of Common Stock, voting as a
separate class and the holders of at least 66 2/3% of the outstanding Series A,
Series A-1, Series A-2, Series B and Series B-1 Preferred, voting together as a
single class.
b. Election by Class. The directors shall be
elected as follows:
(i) Two (2) directors (the "Preferred
Directors") shall be elected by the holders of a majority of the outstanding
shares of Preferred Stock, voting together as a single class.
(ii) One (1) director (the "Common
Director") shall be elected by the holders of a majority of the outstanding
shares of Common Stock, voting together as a single class.
(iii) Any remaining directors (the "Joint
Directors") shall be elected by the holders of a majority of the outstanding
Common Stock and Preferred Stock, voting separately as separate classes, on an
as-converted-to-Common-Stock basis.
c. Removal of Directors, Reduction of Number of
Directors.
(i) If at any time there are fewer than
100,000 shares (appropriately adjusted for stock splits, stock dividends,
recapitalizations and similar events) of Preferred Stock, combined, outstanding
(i) the right of the holders of the shares of Preferred Stock to elect the
Preferred Directors will terminate; (ii) a voting shift shall be effected and
the term of office of the Preferred Directors will automatically terminate; and
(iii) the authorized number of directors shall be reduced by two. In addition,
the Preferred Directors may be removed by vote or written consent of a majority
of the shares of Preferred Stock then outstanding, voting together as a single
class on an as-converted basis.
(ii) The Common Director may be removed
by vote or written consent of a majority of the shares of Common Stock then
outstanding, voting as a single class.
(iii) The Joint Directors may be removed
by vote or written consent of a majority of the shares of Common Stock and
Preferred Stock then outstanding, voting separately as separate classes, on an
as-converted basis.
d. Vacancies.
(i) In the event of a vacancy on the
Board of Directors created by the resignation, death, or removal of a Preferred
Director, such vacancy shall be filled: (i) by the Corporation's Board of
Directors upon receipt by the Board of Directors of, and in accordance with,
written consents specifying the new director to fill such vacancy and signed by
the holders of a majority of the shares of the Preferred Stock then outstanding,
voting together as a single class on an as-converted basis; or (ii) by vote or
written consent of the holders of a majority of the Preferred Stock then
outstanding, voting together as a single class.
(ii) In the event of a vacancy on the
Board of Directors created by the resignation, death, or removal of the Common
Director, such vacancy shall be filled: (i) by the Corporation's Board of
Directors upon receipt by the Board of Directors of, and in accordance with, a
written consent specifying the new director to fill such vacancy and signed by
the holders of a majority of the shares of Common Stock then outstanding; or
(ii) by vote or written consent of the holders of a majority of the Common Stock
then outstanding.
(iii) In the event of a vacancy on the
Board of Directors created by the resignation, death, or removal of a Joint
Director, such vacancy shall be filled: (i) by the Corporation's Board of
Directors upon receipt by the Board of Directors of, and in accordance with, a
written consent specifying the new director to fill such vacancy and signed by
the holders of a majority of the shares of Common Stock and Preferred Stock then
outstanding, voting separately as separate classes, on an as-converted basis; or
(ii) by vote or written consent of the
holders of a majority of the Common Stock and Preferred Stock then outstanding,
voting separately as separate classes, on an as-converted basis.
E. Redemption.
1. Redemption Right.
a. No Call by the Corporation. The Corporation
shall not have the right to call for redemption all or any part of the Preferred
Stock, but may, pursuant to the terms of this Section E have the obligation to
redeem the Series A, Series A-1, Series A-2, Series B and Series B-1 Preferred.
b. Redemption of Preferred Stock. Upon receipt
of written notice, delivered to the Corporation on or after September 30, 2008,
from the holders of at least a majority of the aggregate number of then
outstanding shares of Series A, Series A-1, Series A-2, Series B and Series B-1
Preferred (the "Redemption Call"), voting together as a single class, the
Corporation shall redeem such shares of Series A, Series A-1, Series A-2, Series
B and Series B-1 Preferred, as provided in this Section E, by paying in cash
therefor on the Redemption Date (as defined below) an amount per share of Series
A, Series A-1, Series A-2, Series B or Series B-1 Preferred, as applicable,
equal to the Original Series A, Series A-1, Series A-2, Series B or Series B-1
Issue Price, as applicable plus any unpaid dividends, whether accrued or
declared, as applicable, (the "Series A Redemption Price," "Series A-1
Redemption Price," "Series A-2 Redemption Price", "Series B Redemption Price" or
"Series B-1 Redemption Price," as applicable).
c. Redemption Payments and Redemption Dates.
The Corporation shall pay the Series A, Series A-1, Series A-2, Series B or
Series B-1 Redemption Price, as applicable, to the holders of Series A, Series
A-1, Series A-2, Series B and Series B-1 Preferred to be redeemed, and such
shares shall be redeemed in three installments (each, a "Redemption Payment")
with the first such Redemption Payment being paid no later than sixty (60) days
following the receipt by the Corporation of the Redemption Call, (the "First
Redemption Date"), and the remaining two Redemption Payments being paid no later
than the first and second anniversaries of the First Redemption Date,
respectively (the date on which each such Redemption Payment is made being
herein referred to as a "Redemption Date"). Subject to the foregoing, on the
first, second and third Redemption Dates the Corporation shall redeem 33%, 50%
and 100%, respectively, of the number of shares of each of the Series A, Series
A-1, Series A-2, Series B and Series B-1 Preferred outstanding as of the date of
each such Redemption Date.
2. Redemption Procedure.
a. Redemption Notice. At least thirty (30) but
no more than sixty (60) days prior to a Redemption Date, the Corporation shall
mail a written notice (the "Redemption Notice"), first class, postage prepaid,
to each holder of Series A, Series A-1, Series A-2, Series B and Series B-1
Preferred of record at the close of business on the business day preceding the
day on which such notice is given (at the address last shown on the records of
the Corporation for such holder or given by the holder to the Corporation for
the purpose of notice
or, if no such address appears or is given, at the place where the principal
executive office of the Corporation is located), notifying such holder of the
proposed redemption of the Series A, Series A-1, Series A-2, Series B and Series
B-1 Preferred. The first Redemption Notice shall specify (i) the aggregate
number of shares of Series A, Series A-1, Series A-2, Series B and Series B-1
Preferred that could be redeemed from such holder pursuant to Section E(1)(b),
as applicable; (ii) the number of shares of Series A, Series A-1, Series A-2,
Series B and Series B-1 Preferred that could be redeemed from such holder on the
first specific Redemption Date; (iii) the Series A, Series A-1, Series A-2,
Series B or Series B-1 Redemption Price, as applicable, to be paid on such
Redemption Date; and (iv) the manner and the place for surrendering to the
Corporation the certificate(s) representing any shares to be redeemed.
Subsequent Redemption Notices shall specify (i) the number of shares of Series
A, Series A-1, Series A-2, Series B and Series B-1 Preferred to be redeemed from
such holder on the Redemption Date for which such Redemption Notice was sent;
(ii) the Series A, Series A-1, Series A-2, Series B or Series B-1 Redemption
Price, as applicable, to be paid on said Redemption Date; and (iii) the manner
and the place for surrendering to the Corporation the certificates representing
the shares to be redeemed on such Redemption Date. Except as provided in Section
E(2)(b), on or after each Redemption Date, each holder of shares of Preferred
Stock to be redeemed shall surrender to the Corporation the certificate or
certificates representing the shares subject to redemption on such Redemption
Date, in the manner and at the place designated in the Redemption Notice, and
thereupon the Series A, Series A-1, Series A-2, Series B or Series B-1
Redemption Price, as applicable, in respect of each such share 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 on a particular Redemption Date, a new certificate
shall be issued to the holder representing the unredeemed shares.
b. Rights as Shareholder Terminate. From and
after each Redemption Date, unless there shall have been a default in payment of
the Series A, Series A-1, Series A-2, Series B or Series B-1 Redemption Price,
as applicable, all rights and preferences pertaining to those shares of
Preferred Stock designated for redemption on such Redemption Date (except the
right to receive the Series A, Series A-1, Series A-2, Series B or Series B-1
Redemption Price, as applicable, without interest, upon surrender of the
certificate or certificates therefor) shall cease with respect to such shares,
and such shares shall not thereafter be transferred on the books of the
Corporation or be deemed to be outstanding for any purpose whatsoever. If the
funds of the Corporation legally available for redemption of shares of Series A,
Series A-1, Series A-2, Series B or Series B-1 Preferred on any Redemption Date
are insufficient to redeem the total number of shares of Series A, Series A-1,
Series A-2, Series B and Series B-1 Preferred to be redeemed on such date, those
funds which are legally available will be used to redeem the maximum possible
aggregate number of shares of Series A, Series A-1, Series A-2, Series B and
Series B-1 Preferred ratably among the holders of such shares to be redeemed
based upon their aggregate holdings of the Series A, Series A-1, Series A-2,
Series B and Series B-1 Preferred. At any time thereafter when additional funds
of the Corporation are legally available for the redemption of shares of
Preferred Stock, such funds will immediately be used to redeem the balance of
the shares which the Corporation has become obligated to redeem on any
Redemption Date, but which it has not redeemed (a "Remainder Redemption"). In
any Remainder
Redemption the maximum possible aggregate number of unredeemed shares of Series
A, Series A-1, Series A-2, Series B and Series B-1 Preferred shall be redeemed
ratably among the holders of such Remainder Redemption shares based upon their
aggregate holdings of the Series A, Series A-1, Series A-2, Series B and Series
B-1 Preferred.
F. Protective Provisions. In addition to any other rights
provided by law, so long as 250,000 shares of Preferred Stock shall be
outstanding, this Corporation shall not, without first obtaining the affirmative
vote or written consent of the holders of at least 66 2/3% of the then
outstanding shares of Preferred Stock, voting together as a single class:
1. Amend the provisions of the Certificate of
Incorporation or the Bylaws of the Corporation so as to materially and adversely
change the rights, preferences, privileges or restrictions on the Preferred
Stock;
2. Increase the authorized number of directors on the
Corporation's Board of Directors;
3. authorize or create a new class of shares having
rights, preferences or privileges senior to, or pari passu with, the Preferred
Stock;
4. authorize (i) a merger or consolidation of the
Company with another entity after which the stockholders of the Company shall
own less than a majority of the outstanding voting stock of the surviving
corporation or (ii) a sale of all or substantially all of the assets of the
Company;
5. authorize a liquidation or dissolution of the
Company;
6. declare or pay any dividend or redeem or repurchase
any shares of capital stock of the Company (other than redemption or repurchase
from terminated employees or service providers, consultants or founders pursuant
to contractual rights of repurchase or redemption, or redemptions made pursuant
to the provisions of Section E herein); and
7. as otherwise provided by applicable law.
G. Status of Converted or Redeemed Stock.
1. In the event any shares of Preferred Stock shall be
redeemed pursuant to Section E by payment of the Series A, Series A-1, Series
A-2, Series B or Series B-1 Redemption Price, as applicable, on a Redemption
Date, the shares so redeemed shall be canceled and shall not be issuable by the
Corporation, and the Certificate of Incorporation of the Corporation shall be
appropriately amended to effect the corresponding reduction in the Corporation's
authorized capital stock.
2. In the event any shares of Preferred Stock shall be
converted pursuant to Section C, other than shares of Series A Preferred
converted to Series A-1 pursuant to the provisions of Section C(4)(d), the
shares so converted shall be canceled and shall not be issuable
by the Corporation, and the Certificate of Incorporation of the Corporation
shall be appropriately amended to effect the corresponding reduction in the
Corporation's authorized capital stock.
3. In the event any shares of Series A-1 Preferred Stock
shall be converted pursuant to Section C into shares of Series A Preferred, the
shares of Series A-1 Preferred so converted shall be canceled and shall not be
issuable by the Corporation, and the Certificate of Incorporation of the
Corporation shall be appropriately amended to effect the corresponding reduction
in the Corporation's authorized capital stock.
H. Reservation of Shares. The Corporation shall reserve and keep
available at all times, so long as any shares of Preferred Stock remain
outstanding, free from preemptive rights, out of its authorized but unissued
shares of Common Stock, Series A Preferred, Series A-1 Preferred, Series A-2
Preferred and Series B-1 Preferred, solely for the purpose of effecting the
conversion of the shares of Preferred Stock pursuant to any provision of this
Certificate of Incorporation, sufficient shares of Common Stock, Series A
Preferred, Series A-1 Preferred and Series B-1 Preferred to provide for the
conversion of all outstanding shares of the Preferred Stock. If at any time the
number of authorized but unissued shares of Common Stock, Series A Preferred,
Series A-1 Preferred, Series A-2 Preferred or Series B-1 Preferred shall not be
sufficient to effect the conversion of all then outstanding shares of the
Preferred Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock, Series A Preferred, Series A-1 Preferred, Series A-2
Preferred and Series B-1 Preferred to such number of shares as shall be
sufficient for such purpose.
I. Valid Issuance. All shares of Common Stock which may be issued
upon conversion of the shares of Preferred Stock will, upon issuance by the
Corporation, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issuance thereof.
J. Payment of Taxes. The Corporation will pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
with respect to the issue or delivery of shares of Common Stock upon conversion
of shares of the Preferred Stock, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Preferred Stock so
converted were registered.
K. Residual Rights. All rights accruing to the outstanding shares
of capital stock not expressly provided for to the contrary herein shall be
vested in the Common Stock.
FIVE. The Corporation is to have perpetual existence.
SIX. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
alter, amend or repeal the Bylaws of the Corporation.
SEVEN. The election of directors need not be by written
ballot unless the Bylaws of the Corporation shall so provide.
EIGHT. Meetings of stockholders may be held within or
without the State of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provisions contained in the statutes)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the Bylaws of the Corporation.
NINE. To the fullest extent permitted by the Delaware
General Corporation Law as the same exists or as may hereafter be amended, a
director of the Corporation shall not be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director. The Corporation may indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that such person or his or her testator or intestate is or was a director,
officer or employee of the Corporation, or any predecessor of the Corporation,
or serves or served at any other enterprise as a director, officer or employee
at the request of the Corporation or any predecessor to the Corporation. Neither
any amendment nor repeal of this Article, nor the adoption of any provision of
this Certificate of Incorporation inconsistent with this Article, shall
eliminate or reduce the effect of this Article in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
TEN. Advance notice of new business and stockholder
nomination for the election of directors shall be given in the manner and to the
extent provided in the Bylaws of the Corporation.
ELEVEN. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
A. This Amended and Restated Certificate of Incorporation has
been duly approved by the Board of Directors of this Corporation.
B. This Amended and Restated Certificate of Incorporation has
been duly adopted in accordance with the provisions of Sections 228, 242 and 245
of the General Corporation Law of the State of Delaware by the Board of
Directors.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
IN WITNESS WHEREOF, Amphora Discovery Corp. has caused this Amended and
Restated Certificate of Incorporation to be signed by the President on December
13, 2002.
Amphora Discovery Corp.
By: /s/ Martin Haslanger
-------------------------
President,
Martin Haslanger
ATTEST:
By: /s/ Michael J. O'Donnell
----------------------------
Secretary,
Michael J. O'Donnell
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.
Schedule 2.4
Illustrative Examples of Modified Obligation
1. In 2003, Amphora generates [*] datapoints, has 1 deal of [*] realized
in the year and gets credit for helping to sell 2 Caliper systems for a
total of [*]. The $1.8 million pays for [*] datapoints. Amphora
therefore owes and pays to Caliper [*] for the additional [*]
datapoints. This [*], paid by a combination of a [*] payment from the
[*] deal, [*] commission credit, and an additional cash payment of [*]
will reduce the $2.2 contingent deferred payments to [*].
2. Following the 2003 year described in 1 above, Amphora runs [*]
datapoints in 2004, has 1 pharma deal of [*] and one of [*]. In 2004
Amphora would pay Caliper [*] for the [*] generated datapoints, which
is more than what is required to satisfy the remaining [*] deferred
contingent obligation. Accordingly, depending on the timing of when the
revenue from the pharma deal is recognized by Amphora, the deferred
obligation will be entirely satisfied either by datapoints alone or by
a combination of [*] for the pharma deal plus a credit for Amphora's
payment to Caliper for datapoints.
3. Same as case 2 above, except Amphora runs only [*] datapoints in 2004.
In 2004 Amphora would pay Caliper $1.4 million for the [*] generated
datapoints, which payment would be credited against the remaining [*]
deferred contingent obligation, leaving [*] of such obligation
outstanding. [*] of such [*] would represent [*] of the revenue from
the [*] pharma deal. If not voluntarily paid by Amphora, at the end of
2004 Amphora would issue [*] of Series B preferred stock to Caliper,
and the $450,000 deferred contingent obligation would remain
outstanding.
4. Same as case 2 above, except Amphora runs only [*] datapoints in 2004.
In 2004 Amphora would pay Caliper [*] ([*] of the revenue from the
[*] pharma deal), [*] of which would be applied to satisfy
Amphora's current payment obligation for the [*] generated datapoints
and [*] of which would create a credit that could be applied to satisfy
Amphora's payment obligation to Caliper for future generated
datapoints. The [*] payment would be credited against the remaining [*]
deferred contingent obligation, leaving [*] of such obligation
outstanding. If not voluntarily paid by Amphora, at the end of 2004
Amphora would issue [*] of Series B preferred stock to Caliper, and the
[*] deferred contingent obligation would remain outstanding.
5. In the case of 2 above, Caliper signs a deal on January 1, 2004 with
[*] Therefore, the total cost for the [*] datapoints is [*]. Otherwise,
the analysis is the same as paragraph 2 above.
6. Following 2003 as described in 1 above, Amphora goes public raising [*]
in the first IPO of 2004 (January 1). If the [*] of deferred obligation
is not voluntarily paid by Amphora, Amphora owes Caliper [*] in Series
B preferred stock.
[ * ] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED.