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EXHIBIT 3.1
EXECUTION COPY
EXHIBIT A
TO SECURITIES
PURCHASE
AGREEMENT
CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
OF
VIROLOGIC, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
ViroLogic, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "CORPORATION"), hereby certifies that the Board of
Directors of the Corporation (the "BOARD OF DIRECTORS" or the "BOARD") pursuant
to authority of the Board of Directors as required by Section 151 of the
Delaware General Corporation Law, and in accordance with the provisions of its
Certificate of Incorporation and Bylaws, each as amended and restated through
the date hereof, has and hereby authorizes a series of the Corporation's
previously authorized Preferred Stock, par value $.001 per share (the "PREFERRED
STOCK"), and hereby states the designation and number of shares, and fixes the
relative rights, preferences, privileges, powers and restrictions thereof as
follows:
I. DESIGNATION AND AMOUNT
The designation of this series, which consists of 1,625 shares of
Preferred Stock, is the Series A Convertible Preferred Stock (the "SERIES A
PREFERRED STOCK") and the face amount shall be Ten Thousand U.S. Dollars
($10,000.00) per share (the "FACE AMOUNT").
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II. NO DIVIDENDS
The Series A Preferred Stock will bear no dividends, and the holders of
the Series A Preferred Stock shall not be entitled to receive dividends on the
Series A Preferred Stock.
III. CERTAIN DEFINITIONS
For purposes of this Certificate of Designation, the following terms
shall have the following meanings:
A. "CLOSING SALES PRICE" means, for any security as of any date, the last
sales price of such security on the Nasdaq National Market ("NNM") or other
trading market where such security is listed or traded as reported by Bloomberg
Financial Markets (or a comparable reporting service of national reputation
selected by the Corporation and reasonably acceptable to holders of a majority
of the then outstanding shares of Series A Preferred Stock ("MAJORITY HOLDERS")
if Bloomberg Financial Markets is not then reporting closing sales prices of
such security) (collectively, "BLOOMBERG"), or if the foregoing does not apply,
the last reported sales price of such security on a national exchange or in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no such price is reported for such security by
Bloomberg, the average of the bid prices of all market makers for such security
as reported in the "pink sheets" by the National Quotation Bureau, Inc., in each
case for such date or, if such date was not a trading day for such security, on
the next preceding date which was a trading day. If the Closing Sales Price
cannot be calculated for such security as of either of such dates on any of the
foregoing bases, the Closing Sales Price of such security on such date shall be
the fair market value as reasonably determined by an investment banking firm
selected by the Corporation and reasonably acceptable to the Majority Holders,
with the costs of such appraisal to be borne by the Corporation.
B. "COMMON STOCK DEEMED OUTSTANDING" shall mean the number of shares of
Common Stock actually outstanding (not including shares of Common Stock held in
the treasury of the Corporation), plus (x) in the case of any adjustment
required by Article XI.G(i) resulting from the issuance of any Options (as
defined herein), the maximum total number of shares of Common Stock issuable
upon the exercise of the Options for which the adjustment is required (including
any Common Stock issuable upon the conversion of Convertible Securities (as
defined herein) issuable upon the exercise of such Options), and (y) in the case
of any adjustment required by Article XI.G(i) resulting from the issuance of any
Convertible Securities, the maximum total number of shares of Common Stock
issuable upon the exercise, conversion or exchange of the Convertible Securities
for which the adjustment is required, as of the date of issuance of such
Convertible Securities, if any.
C. "CONVERSION DATE" means, for (i) any Optional Conversion (as defined
below), the date specified in the notice of conversion in the form attached
hereto (the "NOTICE OF CONVERSION"), so long as a copy of the Notice of
Conversion is faxed (or delivered by other means resulting in
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notice) to the Corporation before 11:59 p.m., New York City time, on the
Conversion Date indicated in the Notice of Conversion; provided, however, that
if the Notice of Conversion is not so faxed or otherwise delivered before such
time, then the Conversion Date shall be the date the holder faxes or otherwise
delivers the Notice of Conversion to the Corporation, and (ii) for any Mandatory
Conversion, that date specified in the notice delivered to the holders of the
Series A Preferred Stock being converted pursuant to Article IV.C in the event
that such Mandatory Conversion occurs.
D. "CONVERSION PRICE" means $2.55, and shall be subject to adjustment as
provided herein.
E. "ISSUANCE DATE" means, with respect to each share of Series A
Preferred Stock, the date of the closing under the Securities Purchase Agreement
by and among the Corporation and the purchasers named therein (the "SECURITIES
PURCHASE AGREEMENT") pursuant to which such share of Series A Preferred Stock
was issued.
F. "N" means the number of days from, but excluding, the Issuance Date or
the date that the last payment of the Premium was made in full, whichever is
less.
G. "PREMIUM" means initially an amount equal to (the
Rate)x(N/365)x(10,000). The "RATE" shall initially be equal to .06. Thereafter,
on the second anniversary of the initial Issuance Date under the Securities
Purchase Agreement, the Rate will increase by .02, and the Rate shall thereafter
continue to increase by .02 every six (6) months after the second anniversary of
the initial Issuance Date until the Series A Preferred Stock is converted or
redeemed in full; provided, however, that the Rate shall not exceed .14.
H. "MEASUREMENT DATE" means for purposes of any issuance of securities,
the date of issuance thereof.
I. "WARRANTS" shall mean the warrants issued by the Corporation to the
initial holders pursuant to the Securities Purchase Agreement.
IV. CONVERSION; PAYMENT OF PREMIUM
A. Premium; Conversion at the Option of the Holder.
(i) The Premium shall be payable as to outstanding shares of
Series A Preferred Stock, at the applicable Rate, every six (6) months after the
Issuance Date until the shares of Series A Preferred Stock are fully converted
or fully redeemed. Payment of the Premium shall be made in such number of shares
of Common Stock determined by dividing the amount of the Premium by the average
of the ten (10) trading day Closing Sales Prices ending on the day immediately
prior to the date of such payment.
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(ii) Subject to the limitations on conversions contained in
Paragraph D of this Article IV, each holder of shares of Series A Preferred
Stock may, at any time and from time to time, convert (an "OPTIONAL CONVERSION")
each of its shares of Series A Preferred Stock and any accrued and unpaid
Premium thereon into a number of fully paid and nonassessable shares of Common
Stock determined in accordance with the following formula:
10,000 + UNPAID PREMIUM
CONVERSION PRICE
B. Mechanics of Conversion. In order to effect an Optional Conversion, a
holder shall: (x) fax (or otherwise deliver) a copy of the fully executed Notice
of Conversion to the Corporation (Attention: Secretary) and (y) surrender or
cause to be surrendered the original certificates representing the Series A
Preferred Stock being converted (the "PREFERRED STOCK CERTIFICATES"), duly
endorsed, along with a copy of the Notice of Conversion as soon as practicable
thereafter to the Corporation. Upon receipt by the Corporation of a facsimile
copy of a Notice of Conversion from a holder, the Corporation shall promptly
send, via facsimile, a confirmation to such holder stating that the Notice of
Conversion has been received, the date upon which the Corporation expects to
deliver the Common Stock issuable upon such conversion and the name and
telephone number of a contact person at the Corporation regarding the
conversion. The Corporation shall not be obligated to issue shares of Common
Stock upon a conversion unless either the Preferred Stock Certificates are
delivered to the Corporation as provided above, or the holder notifies the
Corporation that such Preferred Stock Certificates have been lost, stolen or
destroyed and delivers the documentation to the Corporation required by Article
XIV.B hereof.
(i) Delivery of Common Stock Upon Conversion. Upon the surrender
of Preferred Stock Certificates accompanied by a Notice of Conversion, the
Corporation (itself, or through its transfer agent) shall, no later than the
later of (a) the second business day following the Conversion Date and (b) the
business day following the date of such surrender (or, in the case of lost,
stolen or destroyed certificates, after provision of indemnity pursuant to
Article XIV.B) (the "DELIVERY PERIOD"), issue and deliver (i.e., deposit with a
nationally recognized overnight courier service postage prepaid) to the holder
or its nominee (x) that number of shares of Common Stock issuable upon
conversion of such shares of Series A Preferred Stock being converted and (y) a
certificate representing the number of shares of Series A Preferred Stock not
being converted, if any. Notwithstanding the foregoing, if the Corporation's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, and so long as the certificates therefor
do not bear a legend (pursuant to the terms of the Securities Purchase
Agreement) and the holder thereof is not then required to return such
certificate for the placement of a legend thereon (pursuant to the terms of the
Securities Purchase Agreement), the Corporation shall cause its transfer agent
to promptly electronically transmit the Common Stock issuable upon conversion to
the holder by crediting the account of the holder or its nominee with DTC
through its Deposit Withdrawal Agent Commission system ("DTC TRANSFER"). If the
aforementioned conditions to a DTC Transfer
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are not satisfied, the Corporation shall deliver as provided above to the holder
physical certificates representing the Common Stock issuable upon conversion.
Further, a holder may instruct the Corporation to deliver to the holder physical
certificates representing the Common Stock issuable upon conversion in lieu of
delivering such shares by way of DTC Transfer.
(ii) Taxes. The Corporation shall pay any and all taxes that may
be imposed upon it with respect to the issuance and delivery of the shares of
Common Stock upon the conversion of the Series A Preferred Stock.
(iii) No Fractional Shares. If any conversion of Series A
Preferred Stock would result in the issuance of a fractional share of Common
Stock, such fractional share shall be payable in cash based upon the ten (10)
day average Closing Sales Price at such time, and the number of shares of Common
Stock issuable upon conversion of the Series A Preferred Stock shall be the next
lower whole number of shares.
(iv) Conversion Disputes. In the case of any dispute with respect
to a conversion, the Corporation shall promptly issue such number of shares of
Common Stock as are not disputed in accordance with subparagraph (i) above. If
such dispute involves the calculation of the Conversion Price, and such dispute
is not promptly resolved by discussion between the relevant holder and the
Corporation, the Corporation shall submit the disputed calculations to an
independent outside accountant via facsimile within three business days of
receipt of the Notice of Conversion. The accountant, at the Corporation's sole
expense, shall promptly audit the calculations and notify the Corporation and
the holder of the results no later than three business days from the date it
receives the disputed calculations. The accountant's calculation shall be deemed
conclusive, absent manifest error. The Corporation shall then issue the
appropriate number of shares of Common Stock in accordance with subparagraph (i)
above.
C. Mandatory Conversion. Subject to the limitations on conversion
contained in paragraph D of this Article VI, if at any time all of the Required
Conditions (as defined herein) are satisfied and (i) at any time after 270 days
after the Registration Statement Effective Date (as defined herein), the Closing
Sales Price of the Common Stock is greater than $5.10 (as adjusted to reflect
any stock dividends, distributions, combinations, reclassifications and other
similar transactions effected by the Corporation in respect to its Common Stock)
for at least twenty (20) consecutive trading days, (ii) upon the closing of an
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Corporation to the public (A) at an offering
price per share (prior to underwriter's commissions and discounts) of not less
than $5.10 per share (as adjusted to reflect any stock dividends, distributions,
combinations, reclassifications and other similar transactions effected by the
Corporation in respect to its Common Stock) and (B) with gross proceeds to the
Corporation of not less than $40,000,000, or (iii) the holders of the majority
of the then-outstanding shares of Series A Preferred Stock shall consent thereto
in writing, then, at the
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option of the Corporation exercisable by the delivery of written notice to the
holders of the Series A Preferred Shares, delivered no more than ten (10) days
prior to and no less than three (3) days prior to the Conversion Date stated in
such notice, convert all or any shares of Series A Preferred Shares, plus all
accrued and unpaid Premiums due thereon through the Conversion Date, into a
number of fully paid and nonassessable shares of Common Stock determined in
accordance with the formula set forth in Paragraph A of this Article IV (a
"MANDATORY CONVERSION"). Thereafter, the Corporation and the holders shall
follow the applicable conversion procedures set forth in Article IV.B (including
the requirement that the Holder deliver the Preferred Stock Certificates
representing the Series A Preferred Stock being converted to the Corporation);
provided, however, the Holder shall not be required to deliver a Notice of
Conversion to the Corporation. In the event the Corporation elects to convert
only a portion of the outstanding shares of Series A Preferred Stock pursuant to
this Article IV.C, the outstanding shares of Series A Preferred Stock shall be
converted pro rata among the holders based upon their aggregate relative
ownership of outstanding shares of Series A Preferred Stock as of the Conversion
Date.
(i) The "REQUIRED CONDITIONS" shall consist of the following:
(a) each Registration Statement required to be filed by the
Corporation pursuant to Section 2(a) of the Registration Rights Agreements,
dated as of each Issuance Date, by and among the Corporation and the initial
holders (the "REGISTRATION RIGHTS AGREEMENTS") shall have been declared
effective by the Securities and Exchange Commission (the date in which the
Registration Statement filed pursuant to the Second Registration Rights
Agreement (as defined in the Securities Purchase Agreement) is declared
effective is hereinafter referred to as the "REGISTRATION STATEMENT EFFECTIVE
DATE")(it being understood that the Corporation shall comply with its
obligations under Article 3 of the Registration Rights Agreements relating to
the effectiveness of the Registration Statements);
(b) all shares of Common Stock issuable upon conversion of
the Series A Preferred Stock and exercise of the Warrants are then (a)
authorized and reserved for issuance, (b) registered under the Securities Act
for resale by the holders and (c) eligible to be listed or traded on any of the
New York Stock Exchange ("NYSE"), the American Stock Exchange ("AMEX"), the NNM,
or the NASDAQ SmallCap Market ("SMALLCAP") (or the successor to any of them);
(c) no Redemption Event (as defined in Article VIII below)
shall have occurred without having been cured;
(d) all amounts, if any, then accrued or payable under this
Certificate of Designation (other than accrued Premium amounts that are
convertible pursuant to the terms hereof) or the Registration Rights Agreements
shall have been paid.
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D. Limitations on Premium Payments and Conversions. The conversion of
shares of Series A Preferred Stock and the payment of Premiums thereon shall be
subject to the following limitations (each of which limitations shall be applied
independently):
(i) Cap Amount. If, notwithstanding the representations and
warranties of the Corporation contained in Section 3(c) of the Securities
Purchase Agreement, the Corporation is prohibited by Rule 4350(i) of the
National Association of Securities Dealers, Inc. ("NASD"), or any successor or
similar rule, or the rules or regulations of any other securities exchange on
which the Common Stock is then listed or traded, from issuing a number of shares
of Common Stock upon conversion of Series A Preferred Stock or as payment of any
Premium (together with any shares of Common Stock, or securities convertible
into Common Stock, issued pursuant to the Securities Purchase Agreement or other
agreements entered in connection therewith) in excess of a prescribed amount
(the "CAP AMOUNT") (without stockholder approval or otherwise), then the
Corporation shall not issue shares upon conversion of Series A Preferred Stock
or as payment of any Premium in excess of the Cap Amount. Assuming solely for
purposes of this paragraph (D) that such Rule 4350(i) or similar rule is
applicable, the Cap Amount shall be 4,005,178 shares. The Cap Amount shall be
allocated pro rata to the holders of Series A Preferred Stock as provided in
Article XIV.C. In the event the Corporation is prohibited from issuing shares of
Common Stock as a result of the operation of this subparagraph (i), the
Corporation shall comply with Article VII.
(ii) No Five Percent Holders. In no event shall a holder of shares
of Series A Preferred Stock or the Corporation have the right to receive Common
Stock as payment of any Premium or convert shares of Series A Preferred Stock
into shares of Common Stock or to dispose of any shares of Series A Preferred
Stock to the extent that such right to effect such conversion or disposition
would result in the holder or any of its affiliates beneficially owning more
than 4.99% of the outstanding shares of Common Stock. For purposes of this
subparagraph, beneficial ownership shall be determined in accordance with
Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation
13D-G thereunder. The restriction contained in this subparagraph may not be
altered, amended, deleted or changed in any manner whatsoever unless the holders
of a majority of the outstanding shares of Common Stock and the Majority Holders
shall approve, in writing, such alteration, amendment, deletion or change.
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V. RESERVATION OF SHARES OF COMMON STOCK
A. Reserved Amount. On or prior to the initial Issuance Date, the
Corporation shall reserve 16,066,628 shares of its authorized but unissued
shares of Common Stock for issuance upon conversion of the Series A Preferred
Stock and thereafter the number of authorized but unissued shares of Common
Stock so reserved (the "RESERVED AMOUNT") shall at all times be sufficient to
provide for the conversion of all of the Series A Preferred Stock outstanding at
the then current Conversion Price thereof. The Reserved Amount shall be
allocated to the holders of Series A Preferred Stock as provided in Article
XIV.C.
B. Increases to Reserved Amount. If the Reserved Amount for any three
consecutive trading days (the last of such three trading days being the
"AUTHORIZATION TRIGGER DATE") shall be less than 135% of the number of shares of
Common Stock issuable upon conversion of the then outstanding shares of Series A
Preferred Stock and upon exercise of the then outstanding Warrants, the
Corporation shall immediately notify the holders of Series A Preferred Stock of
such occurrence and shall take immediate action (including, if necessary,
seeking stockholder approval to authorize the issuance of additional shares of
Common Stock) to increase the Reserved Amount to 200% of the number of shares of
Common Stock then issuable upon conversion of all of the outstanding Series A
Preferred Stock at the then current Conversion Price. In the event the
Corporation fails to so increase the Reserved Amount within 90 days after an
Authorization Trigger Date, each holder of Series A Preferred Stock shall
thereafter have the option, exercisable in whole or in part at any time and from
time to time by delivery of a Redemption Notice (as defined in Article VIII.D)
to the Corporation, to require the Corporation to purchase for cash, at an
amount per share equal to the Redemption Amount (as defined in Article VIII.B),
a portion of the holder's Series A Preferred Stock such that, after giving
effect to such purchase, the holder's allocated portion of the Reserved Amount
exceeds 135% of the total number of shares of Common Stock issuable to such
holder upon conversion of its Series A Preferred Stock. If the Corporation fails
to redeem any of such shares within five (5) business days after its receipt of
such Redemption Notice, then such holder shall be entitled to the remedies
provided in Article VIII.D.
C. Adjustment to Conversion Price. If the Corporation is prohibited, at
any time, from issuing shares of Common Stock upon conversion of Series A
Preferred Stock to any holder because the Corporation does not then have
available a sufficient number of authorized and reserved shares of Common Stock
(a "RESERVED AMOUNT TRIGGER EVENT"), then the Conversion Price in respect of any
shares of Series A Preferred Stock held by any holder (including shares of
Series A Preferred Stock submitted to the Corporation for conversion, but for
which shares of Common Stock have not been issued to any such holder) shall
thereafter be the lesser of (i) the Conversion Price on the date of the Reserved
Amount Trigger Event and (ii) the lowest Closing Sales Price in effect during
the period beginning on, and including the date of, the Reserved Amount Trigger
Event through and including the date on which the Corporation shall have taken
all action necessary to increase the number of authorized shares of Common Stock
and to increase the Reserved Amount to 200% of
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the number of shares of Common Stock then issuable upon conversion of the then
outstanding Series A Preferred Stock. Upon the occurrence of each reset of the
Conversion Price pursuant to this Paragraph C, the Corporation, at its expense,
shall promptly compute the new Conversion Price and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such new
Conversion Price and showing in detail each Conversion Price in effect during
such reset period.
VI. FAILURE TO SATISFY CONVERSIONS
A. Conversion Defaults; Adjustments to Conversion Price. If, at any time,
(x) a holder of shares of Series A Preferred Stock submits a Notice of
Conversion and the Corporation fails for any reason (other than because such
issuance would exceed such holder's allocated portion of the Reserved Amount or
Cap Amount, for which failures the holders shall have the remedies set forth in
Articles V and VII, respectively) to deliver, on or prior to the fifth business
day following the expiration of the Delivery Period for such conversion, such
number of freely tradable shares of Common Stock to which such holder is
entitled upon such conversion, or (y) the Corporation provides written notice to
any holder of Series A Preferred Stock (or makes a public announcement via press
release) at any time of its intention not to issue freely tradable shares of
Common Stock upon exercise by any holder of its conversion rights in accordance
with the terms of this Certificate of Designation (other than because such
issuance would exceed such holder's allocated portion of the Reserved Amount or
Cap Amount) (each of (x) and (y) being a "CONVERSION DEFAULT"), then, in the
case of a Conversion Default described in clause (x) above, the Conversion Price
in respect of any shares of Series A Preferred Stock held by such holder
(including shares of Series A Preferred Stock submitted to the Corporation for
conversion, but for which shares of Common Stock have not been issued to such
holder) shall thereafter be the lesser of (i) the Conversion Price on the
Conversion Date specified in the Notice of Conversion which resulted in the
Conversion Default and (ii) the lowest Closing Sales Price in effect during the
period beginning on, and including, such Conversion Date through and including
the earlier of (x) the day such shares of Common Stock are delivered to the
holder and (y) the day on which the holder regains its rights as a holder of
Series A Preferred Stock with respect to such unconverted shares of Series A
Preferred Stock pursuant to the provisions of Article XIV.F hereof, and, in the
case of a Conversion Default described in clause (y) above, the Conversion Price
with respect to any conversion thereafter shall be the lowest Closing Sales in
effect at any time during the period beginning on, and including, the date of
the occurrence of such Conversion Default through and including the Default Cure
Date. The Conversion Price shall thereafter be subject to further adjustment for
events as described in Article XI.
"DEFAULT CURE DATE" means, as applicable, (i) with respect to a
Conversion Default described in clause (x) of its definition, the date the
Corporation effects the conversion of the full number of shares of Series A
Preferred Stock, and (ii) with respect to a Conversion Default described in
clause (y) of its definition, the date the Corporation issues freely tradable
shares of Common Stock in satisfaction of all conversions of Series A Preferred
Stock in accordance with Article IV.A, or (iii)
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with respect to either type of a Conversion Default, the date on which the
Corporation redeems shares of Series A Preferred Stock held by such holder
pursuant to paragraph C of this Article VI.
B. Buy-In Cure. Unless the Corporation has notified the applicable holder
in writing prior to the delivery by such holder of a Notice of Conversion that
the Corporation is unable to honor conversions, if (i) (a) the Corporation fails
to promptly deliver during the Delivery Period shares of Common Stock to a
holder upon a conversion of shares of Series A Preferred Stock or (b) there
shall occur a Legend Removal Failure (as defined in Article VIII.A(iii) below)
and (ii) thereafter, such holder purchases (in an open market transaction or
otherwise) shares of Common Stock to make delivery in satisfaction of a sale by
such holder of the unlegended shares of Common Stock (the "SOLD SHARES") which
such holder anticipated receiving upon such conversion (a "BUY-IN"), the
Corporation shall pay such holder (in addition to any other remedies available
to the holder) the amount by which (x) such holder's total purchase price
(including brokerage commissions, if any) for the unlegended shares of Common
Stock so purchased exceeds (y) the net proceeds received by such holder from the
sale of the Sold Shares. For example, if a holder purchases unlegended shares of
Common Stock having a total purchase price of $11,000 to cover a Buy-In with
respect to shares of Common Stock it sold for $10,000, the Corporation will be
required to pay the holder $1,000. A holder shall provide the Corporation
written notification and supporting documentation indicating any amounts payable
to such holder pursuant to this Paragraph B. The Corporation shall make any
payments required pursuant to this Paragraph B in accordance with and subject to
the provisions of Article XIV.E.
C. Redemption Right. If the Corporation fails, and such failure continues
uncured for five (5) business days after the Corporation has been notified
thereof in writing by the holder, for any reason (other than because such
issuance would exceed such holder's allocated portion of the Reserved Amount or
Cap Amount, for which failures the holders shall have the remedies set forth in
Articles V and VII, respectively) to issue shares of Common Stock within 10
business days after the expiration of the Delivery Period with respect to any
conversion of Series A Preferred Stock, then the holder may elect at any time
and from time to time prior to the Default Cure Date for such Conversion
Default, by delivery of a Redemption Notice to the Corporation, to have all or
any portion of such holder's outstanding shares of Series A Preferred Stock
purchased by the Corporation for cash, at an amount per share equal to the
Redemption Amount (as defined in Article VIII.B). If the Corporation fails to
redeem any of such shares within five business days after its receipt of such
Redemption Notice, then such holder shall be entitled to the remedies provided
in Article VIII.B.
VII. INABILITY TO CONVERT DUE TO CAP AMOUNT
A. Obligation to Cure. If at any time after the date of the Shareholder
Approval (as defined in the Securities Purchase Agreement) the then unissued
portion of any holder's Cap Amount is less than 135% of the number of shares of
Common Stock then issuable upon conversion of such holder's shares of Series A
Preferred Stock plus and amount equal to the projected Premium thereon
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for the following five years (a "TRADING MARKET TRIGGER EVENT"), the Corporation
shall immediately notify the holders of Series A Preferred Stock of such
occurrence and shall take immediate action (including, if necessary, seeking the
approval of its stockholders to authorize the issuance of the full number of
shares of Common Stock which would be issuable upon the conversion of the then
outstanding shares of Series A Preferred Stock but for the Cap Amount) to
eliminate any prohibitions under applicable law or the rules or regulations of
any stock exchange, interdealer quotation system or other self-regulatory
organization with jurisdiction over the Corporation or any of its securities on
the Corporation's ability to issue shares of Common Stock in excess of the Cap
Amount ("TRADING MARKET PROHIBITIONS"). In the event the Corporation fails to
eliminate all such Trading Market Prohibitions within 90 days after the Trading
Market Trigger Event, then each holder of Series A Preferred Stock shall
thereafter have the option, exercisable in whole or in part at any time and from
time to time until such date that all such Trading Market Prohibitions are
eliminated, by delivery of a Redemption Notice (as defined in Article VIII.D) to
the Corporation, to require the Corporation to purchase for cash, at an amount
per share equal to the Redemption Amount (as defined in Article VIII.B), a
number of the holder's shares of Series A Preferred Stock such that, after
giving effect to such redemption, the then unissued portion of such holder's Cap
Amount exceeds 135% of the total number of shares of Common Stock issuable upon
conversion of such holder's shares of Series A Preferred Stock plus an amount
equal to the projected Premium thereon for the following five years. If the
Corporation fails to redeem any of such shares within five (5) business days
after its receipt of such Redemption Notice, then such holder shall be entitled
to the remedies provided in Articles VII.B and VIII.D.
B. Adjustment to Conversion Price. Following the expiration of the 90-day
period following a Trading Market Trigger Event as provided in Article VII.A
above, if the Corporation is prohibited, at any time, from issuing shares of
Common Stock upon conversion of Series A Preferred Stock to any holder because
such issuance would exceed the then unissued portion of such holder's Cap Amount
because of applicable law or the rules or regulations of any stock exchange,
interdealer quotation system or other self-regulatory organization with
jurisdiction over the Corporation or its securities (a "CAP AMOUNT TRIGGER
EVENT") then the Conversion Price in respect of any shares of Series A Preferred
Stock held by any holder (including shares of Series A Preferred Stock submitted
to the Corporation for conversion, but for which shares of Common Stock have not
been issued to any such holder) shall thereafter be the lesser of (i) the
Conversion Price on the date of the Cap Amount Trigger Event and (ii) the lowest
Conversion Price in effect during the period beginning on, and including, the
date of the Cap Amount Trigger Event through and including the date on which the
Corporation shall have eliminated all of the Trading Market Prohibitions. Upon
the occurrence of each reset of the Conversion Price pursuant to this Paragraph
B, the Corporation, at its expense, shall promptly compute the new Conversion
Price and prepare and furnish to each holder of Series A Preferred Stock a
certificate setting forth such new Conversion Price and showing in detail each
Conversion Price in effect during each reset period.
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VIII. REDEMPTION DUE TO CERTAIN EVENTS
A. Redemption by Holder. In the event (each of the events described in
clauses (i)-(ix) below after expiration of the applicable cure period (if any)
being a "REDEMPTION EVENT"):
(i) the Common Stock (including any of the shares of Common Stock
issuable upon conversion of the Series A Preferred Stock) is suspended from
trading on any of, or is not listed (and authorized) for trading on at least one
of, the NYSE, the AMEX, the NNM or SmallCap for an aggregate of 20 trading days
in any nine month period;
(ii) (A) the Registration Statement required to be filed by the
Corporation pursuant to Section 2(a) of the First Registration Rights Agreement
(as defined in the Securities Purchase Agreement) has not been declared
effective by the 120th day following the Filing Date (as defined in the First
Registration Rights Agreement) or such Registration Statement, after being
declared effective, cannot be utilized by the holders of Series A Preferred
Stock for the resale of all of their Registrable Securities (as defined in the
First Registration Rights Agreement) for an aggregate of more than 30 days
(other than as permitted under the First Registration Rights Agreement) or (B)
the Registration Statement required to be filed by the Corporation pursuant to
Section 2(a) of the Second Registration Rights Agreement (as defined in the
Securities Purchase Agreement) has not been declared effective by the 120th day
following the Filing Date (as defined in the Second Registration Rights
Agreement) or such Registration Statement, after being declared effective,
cannot be utilized by the holders of Series A Preferred Stock for the resale of
all of their Registrable Securities (as defined in the Second Registration
Rights Agreement) for an aggregate of more than 30 days (other than as permitted
under the Second Registration Rights Agreement);
(iii) the Corporation fails to remove any restrictive legend on
any certificate or any shares of Common Stock issued to the holders of Series A
Preferred Stock upon conversion of the Series A Preferred Stock as and when
required by this Certificate of Designation, the Securities Purchase Agreement
or the Registration Rights Agreements (a "LEGEND REMOVAL FAILURE"), and any such
failure continues uncured for five business days after the Corporation has been
notified thereof in writing by the holder that the holder has complied with the
terms of the Securities Purchase Agreement with respect to such legend removal;
(iv) the Corporation provides written notice (or otherwise
indicates) to any holder of Series A Preferred Stock, or states by way of public
announcement distributed via a press release, at any time, of its intention not
to issue, or otherwise refuses to issue, shares of Common Stock to any holder of
Series A Preferred Stock upon conversion in accordance with the terms of this
Certificate of Designation (other than due to the circumstances contemplated by
Articles V or VII for which the holders shall have the remedies set forth in
such Articles);
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(v) the Corporation or any subsidiary of the Corporation shall
make an assignment for the benefit of creditors, or apply for or consent to the
appointment of a receiver or trustee for it or for a substantial part of its
property or business, or such a receiver or trustee shall otherwise be
appointed;
(vi) bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for the relief of debtors shall be instituted
by or against the Corporation or any subsidiary of the Corporation and if
instituted against the Corporation by a third party, shall not be dismissed
within 60 days of their initiation;
(vii) the minimum vote specified in Rule 4350(i) of the NASD with
respect to the approval and ratification of the terms of the Securities Purchase
Agreement and the consummation of the transactions contemplated thereby by the
Corporation shall not have been obtained on or before September 27, 2001;
(viii) the Corporation shall:
(a) sell, convey or dispose of all or substantially all of
its assets (the presentation of any such transaction for stockholder approval
being conclusive evidence that such transaction involves the sale of all or
substantially all of the assets of the Corporation);
(b) merge, consolidate or engage in any other business
combination with any other entity (other than pursuant to a migratory merger
effected solely for the purpose of changing the jurisdiction of incorporation of
the Corporation and other than pursuant to a merger in which the Corporation is
the surviving or continuing entity and its capital stock is unchanged) provided
that such merger, consolidation or business combination is required to be
reported by the Company on a Current Report pursuant to Item 1 of Form 8-K, or
any successor form;
(c) either (i) fail to pay, when due, or within any
applicable grace period, any payment with respect to any indebtedness of the
Corporation in excess of $350,000 due to any third party, other than payments
contested by the Corporation in good faith, or otherwise is in breach or
violation of any agreement for monies owed or owing in an amount in excess of
$350,000 which breach or violation permits the other party thereto to declare a
default or otherwise accelerate amounts due thereunder, or (ii) suffer to exist
any other default or event of default under any agreement binding the
Corporation which default or event of default would or is likely to have a
material adverse effect on the business, operations, properties, prospects or
financial condition of the Corporation; or
(d) have thirty-five percent (35%) or more of the voting
power of its capital stock owned beneficially by one person, entity or "group"
(as such term is used under Section 13(d) of the Securities Exchange Act of
1934, as amended); or
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(ix) except with respect to matters covered by subparagraphs (1)
- -- (viii) above, as to which such applicable subparagraphs shall apply, the
Corporation otherwise shall breach any material term hereunder or under the
Securities Purchase Agreement, the Registration Rights Agreements or the
Warrants (as defined in the Securities Purchase Agreement), including, without
limitation, the representations and warranties contained therein (i.e., in the
event of a material breach as of the date such representation and warranty was
made) and if such breach is curable, shall fail to cure such breach within 10
business days after the Corporation has been notified thereof in writing by the
holder;
then, upon the occurrence of any such Redemption Event, each holder of shares of
Series A Preferred Stock shall thereafter have the option, exercisable in whole
or in part at any time and from time to time by delivery of a Redemption Notice
(as defined in Paragraph D below) to the Corporation while such Redemption Event
continues, to require the Corporation to purchase for cash any or all of the
then outstanding shares of Series A Preferred Stock held by such holder for an
amount per share equal to the Redemption Amount (as defined in Paragraph B
below) in effect at the time of the redemption hereunder. For the avoidance of
doubt, the occurrence of any event described in clauses (i), (ii), (iv) or (v)
above shall immediately constitute a Redemption Event and there shall be no cure
period. Upon the Corporation's receipt of any Redemption Notice hereunder (other
than during the three trading day period following the Corporation's delivery of
a Redemption Announcement (as defined below) to all of the holders in response
to the Corporation's initial receipt of a Redemption Notice from a holder of
Series A Preferred Stock), the Corporation shall immediately (and in any event
within one business day following such receipt) deliver a written notice (a
"REDEMPTION ANNOUNCEMENT") to all holders of Series A Preferred Stock stating
the date upon which the Corporation received such Redemption Notice and the
amount of Series A Preferred Stock covered thereby. The Corporation shall not
redeem any shares of Series A Preferred Stock during the three trading day
period following the delivery of a required Redemption Announcement hereunder.
At any time and from time to time during such three trading day period, each
holder of Series A Preferred Stock may request (either orally or in writing)
information from the Corporation with respect to the instant redemption
(including, but not limited to, the aggregate number of shares of Series A
Preferred Stock covered by Redemption Notices received by the Corporation) and
the Corporation shall furnish (either orally or in writing) as soon as
practicable such requested information to such requesting holder.
B. Definition of Redemption Amount. The "REDEMPTION AMOUNT" with respect
to a share of Series A Preferred Stock means an amount equal to the greater of:
(i) V X M
-------
C P
and (ii) V X R
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where:
"V" means the Face Amount thereof plus the accrued Premium thereon
through the date of payment of the Redemption Amount;
"CP" means the Conversion Price in effect on the date on which the
Corporation receives the Redemption Notice; and
"M" means (i) with respect to all redemptions other than
redemptions pursuant to Article VIII.A(viii) hereof, the highest Closing Sales
Price of the Corporation's Common Stock during the period beginning on the date
on which the Corporation receives the Redemption Notice and ending on the date
immediately preceding the date of payment of the Redemption Amount and (ii) with
respect to redemptions pursuant to Article VIII.A(viii) hereof, the greater of
(a) the amount determined pursuant to clause (i) of this definition or (b) the
fair market value, as of the date on which the Corporation receives the
Redemption Notice, of the consideration payable to the holder of a share of
Common Stock pursuant to the transaction which triggers the redemption. For
purposes of this definition, "fair market value" shall be determined by the
mutual agreement of the Corporation and holders of a majority-in-interest of the
shares of Series A Preferred Stock then outstanding, or if such agreement cannot
be reached within five business days prior to the date of redemption, by an
investment banking firm selected by the Corporation and reasonably acceptable to
holders of a majority-in-interest of the then outstanding shares of Series A
Preferred Stock, with the costs of such appraisal to be borne by the
Corporation.
"R" means 115%, except in the case of a redemption due to the
event specified in Article VIII(A)(viii) above, in which case "R" shall mean
105%.
C. Optional Redemption by Corporation.
(i) At any time after the second anniversary of the initial
Issuance Date if all of the Required Conditions are satisfied, at the option of
the Corporation exercised by the delivery of written notice (an "OPTIONAL
REDEMPTION NOTICE") to all holders of the shares of Series A Preferred Stock,
delivered no more than thirty (30) days before and no less than fifteen (15)
days prior to the date of redemption set forth therein (the "OPTIONAL REDEMPTION
DATE"), the Corporation shall redeem shares of the Series A Preferred Stock,
payable in cash, in an amount equal to the Redemption Amount. Notwithstanding
anything to the contrary contained herein, for purposes of this Article VIII.C,
the Redemption Amount for each share of Series A Preferred Stock being redeemed
shall equal "V" as defined in Article VIII.B.
(ii) The Corporation may not deliver to a holder an Optional
Redemption Notice unless on or prior to the date of delivery of such Optional
Redemption Notice, the Corporation shall
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have segregated on the books and records of the Corporation an amount of cash
sufficient to pay all amounts to which the holders of shares of Series A
Preferred Stock are entitled upon such redemption pursuant to subparagraph (i)
of this Paragraph C. Any Optional Redemption Notice delivered shall be
irrevocable and shall be accompanied by a statement executed by a duly
authorized officer of the Corporation.
(iii) The Redemption Amount shall be paid to the holders being
redeemed within five (5) business days of the Optional Redemption Date;
provided, however, that the Corporation shall not be obligated to deliver any
portion of the Redemption Amount until either the Preferred Stock Certificates
representing the shares of Series A Preferred Stock being redeemed are delivered
to the office of the Corporation or the escrow agent or the holder notifies the
Corporation or the transfer agent that such certificates have been lost, stolen
or destroyed and delivers the documentation in accordance with Article XIV.B
hereof. Notwithstanding anything herein to the contrary, in the event that the
Preferred Stock Certificates of the shares of Series A Preferred Stock being
redeemed are not delivered to the Corporation or the transfer agent prior to the
fifth business day following the Optional Redemption Date, the redemption of the
Series A Preferred Stock pursuant to this Article VIII.C shall still be deemed
effective as of the Optional Redemption Date and the Redemption Amount shall be
paid to the holder being redeemed within five (5) business days of the date the
Series A Preferred Stock being redeemed are actually delivered to the
Corporation or the transfer agent.
(iv) Notwithstanding the delivery of an Optional Redemption
Notice, a holder may convert some or all of its shares of Series A Preferred
Stock subject to such Optional Redemption Notice by the delivery prior to the
Optional Redemption Date of a Notice of Conversion to the Corporation pursuant
to the procedures set forth in Article IV.B. In the event a holder would be
precluded from converting any shares of Series A Preferred Stock subject to an
Optional Redemption Notice due to the limitation contained in Article IV.D(ii),
the Optional Redemption Date shall automatically be extended by sixty (60) days.
D. Redemption Defaults. If the Corporation fails to pay any holder the
Redemption Amount with respect to any share of Series A Preferred Stock within
five business days after its receipt of a notice requiring such redemption (a
"REDEMPTION NOTICE") or within five business days of the Optional Redemption
Date, as applicable, then the holder of Series A Preferred Stock entitled to
redemption (i) shall be entitled to interest on the Redemption Amount at a per
annum rate equal to the lower of eighteen percent (18%) and the highest interest
rate permitted by applicable law from the date on which the Corporation receives
the Redemption Notice or the Optional Redemption Date, as applicable, until the
date of payment of the Redemption Amount hereunder, and (ii) shall have the
right, at any time and from time to time, to require the Corporation, upon
written notice, to immediately convert (in accordance with the terms of
Paragraph A of Article IV) all or any portion of the Redemption Amount, plus
interest as aforesaid, into shares of Common Stock at the Conversion Price in
effect during the period beginning on the date on which the Corporation receives
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the Redemption Notice or the Optional Redemption Date, as applicable, and ending
on the Conversion Date with respect to the conversion of such Redemption Amount.
In the event the Corporation is not able to redeem all of the shares of Series A
Preferred Stock subject to Redemption Notices delivered prior to the date upon
which such redemption is to be effected, the Corporation shall redeem shares of
Series A Preferred Stock from each holder pro rata, based on the total number of
shares of Series A Preferred Stock outstanding at the time of redemption
included by such holder in all Redemption Notices delivered prior to the date
upon which such redemption is to be effected relative to the total number of
shares of Series A Preferred Stock outstanding at the time of redemption
included in all of the Redemption Notices delivered prior to the date upon which
such redemption is to be effected.
IX. RANK
All shares of the Series A Preferred Stock shall rank (i) prior to (a)
the Corporation's Common Stock; and (b) any class or series of capital stock of
the Corporation hereafter created (unless, with the consent of a majority the
holders of Series A Preferred Stock obtained in accordance with Article XIII
hereof, such class or series of capital stock specifically, by its terms, ranks
senior to or pari passu with the Series A Preferred Stock) (collectively with
the Common Stock, "JUNIOR SECURITIES"); (ii) pari passu with any class or series
of capital stock of the Corporation hereafter created (with the written consent
of a majority of the holders of Series A Preferred Stock obtained in accordance
with Article XIII hereof) specifically ranking, by its terms, on parity with the
Series A Preferred Stock (the "PARI PASSU SECURITIES"); and (iii) junior to any
class or series of capital stock of the Corporation hereafter created (with the
written consent of a majority of the holders of Series A Preferred Stock
obtained in accordance with Article XIII hereof) specifically ranking, by its
terms, senior to the Series A Preferred Stock (collectively, the "SENIOR
SECURITIES"), in each case as to distribution of assets upon liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary.
X. LIQUIDATION PREFERENCE
A. If the Corporation shall commence a voluntary case under the U.S.
Federal bankruptcy laws or any other applicable bankruptcy, insolvency or
similar law, or consent to the entry of an order for relief in an involuntary
case under any law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the U.S. Federal bankruptcy laws or any other
applicable bankruptcy, insolvency or similar law resulting in the appointment of
a receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and any such decree or
order shall
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be unstayed and in effect for a period of 60 consecutive days and, on account of
any such event, the Corporation shall liquidate, dissolve or wind up, or if the
Corporation shall otherwise liquidate, dissolve or wind up, including, but not
limited to, the sale or transfer of all or substantially all of the
Corporation's assets in one transaction or in a series of related transactions
(only in the event a holder does not elect its rights with respect to such sale
of transfer as set forth in Article XI.B. if applicable) (a "LIQUIDATION
EVENT"), no distribution shall be made to the holders of any shares of capital
stock of the Corporation (other than Senior Securities pursuant to the rights,
preferences and privileges thereof) upon liquidation, dissolution or winding up
unless prior thereto the holders of shares of Series A Preferred Stock shall
have received the Liquidation Preference with respect to each share. If, upon
the occurrence of a Liquidation Event, the assets and funds available for
distribution among the holders of the Series A Preferred Stock and holders of
Pari Passu Securities, if any, shall be insufficient to permit the payment to
such holders of the preferential amounts payable thereon, then the entire assets
and funds of the Corporation legally available for distribution to the Series A
Preferred Stock and the Pari Passu Securities, if any, shall be distributed
ratably among such shares in proportion to the ratio that the Liquidation
Preference payable on each such share bears to the aggregate Liquidation
Preference payable on all such shares.
B. The purchase or redemption by the Corporation of stock of any class,
in any manner permitted by law, shall not, for the purposes hereof, be regarded
as a liquidation, dissolution or winding up of the Corporation. Neither the
consolidation or merger of the Corporation with or into any other entity nor the
sale or transfer by the Corporation of less than substantially all of its assets
shall, for the purposes hereof, be deemed to be a liquidation, dissolution or
winding up of the Corporation.
C. The "LIQUIDATION PREFERENCE" with respect to a share of Series A
Preferred Stock means an amount equal to the Face Amount thereof plus the
accrued Premium thereon through the date of final distribution. The Liquidation
Preference with respect to any Pari Passu Securities, if any, shall be as set
forth in the Certificate of Designation filed in respect thereof.
XI. ADJUSTMENTS TO THE CONVERSION PRICE
The Conversion Price shall be subject to adjustment from time to time as
follows:
A. Stock Splits, Stock Dividends, Etc. If, at any time on or after the
Issuance Date, the number of outstanding shares of Common Stock is increased by
a stock split, stock dividend, combination, reclassification or other similar
event, the Conversion Price shall be proportionately reduced, or if the number
of outstanding shares of Common Stock is decreased by a reverse stock split,
combination or reclassification of shares, or other similar event, the
Conversion Price shall be proportionately increased. In such event, the
Corporation shall notify the Corporation's transfer agent of such change on or
before the effective date thereof.
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B. Adjustment Due to Merger, Consolidation, Etc. If, at any time after
the Issuance Date, there shall be (i) any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination), (ii) any consolidation or merger of the
Corporation with any other entity (other than a merger in which the Corporation
is the surviving or continuing entity and its capital stock is unchanged), (iii)
any sale or transfer of all or substantially all of the assets of the
Corporation or (iv) any share exchange pursuant to which all of the outstanding
shares of Common Stock are converted into other securities or property (each of
(i) - (iv) above being a "CORPORATE CHANGE"), then the holders of Series A
Preferred Stock shall thereafter have the right to receive upon conversion or
upon payment of Premium, in lieu of the shares of Common Stock otherwise
issuable, such shares of stock, securities and/or other property as would have
been issued or payable in such Corporate Change with respect to or in exchange
for the number of shares of Common Stock which would have been issuable upon
conversion had such Corporate Change not taken place, and in any such case,
appropriate provisions (in form and substance reasonably satisfactory to the
holders of a majority of the Series A Preferred Stock then outstanding) shall be
made with respect to the rights and interests of the holders of the Series A
Preferred Stock to the end that the economic value of the shares of Series A
Preferred Stock are in no way diminished by such Corporate Change and that the
provisions hereof (including, without limitation, in the case of any such
consolidation, merger or sale in which the successor entity or purchasing entity
is not the Corporation, an immediate adjustment of the Conversion Price so that
the Conversion Price immediately after the Corporate Change reflects the same
relative value as compared to the value of the surviving entity's common stock
that existed between the Conversion Price and the value of the Corporation's
Common Stock immediately prior to such Corporate Change shall thereafter be
applicable, as nearly as may be practicable in relation to any shares of stock
or securities thereafter deliverable upon the conversion thereof. The
Corporation shall not effect any Corporate Change unless (i) each holder of
Series A Preferred Stock has received written notice of such transaction at
least 45 days prior thereto, but in no event later than 15 days prior to the
record date for the determination of stockholders entitled to vote with respect
thereto, (ii) if required by Section 4(i) of the Securities Purchase Agreement,
the consent of the Purchasers (as defined in the Securities Purchase Agreement)
shall have been obtained in accordance with such Section 4(i), and (iii) the
resulting successor or acquiring entity (if not the Corporation) assumes by
written instrument (in form and substance reasonable satisfactory to the holders
of a majority of the Series A Preferred Stock) the obligations of this
Certificate of Designation. The above provisions shall apply regardless of
whether or not there would have been a sufficient number of shares of Common
Stock authorized and available for issuance upon conversion of the shares of
Series A Preferred Stock outstanding as of the date of such transaction, and
shall similarly apply to successive reclassifications, consolidations, mergers,
sales, transfers or share exchanges.
C. [Intentionally omitted].
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D. Adjustment Due to Distribution. If, at any time after the Issuance
Date, the Corporation shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise (including any
dividend or distribution to the Corporation's stockholders in cash or shares (or
rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off))
(a "DISTRIBUTION"), then the holders of Series A Preferred Stock shall be
entitled, upon any conversion of shares of Series A Preferred Stock after the
date of record for determining stockholders entitled to such Distribution, to
receive the amount of such assets which would have been payable to the holder
with respect to the shares of Common Stock issuable upon such conversion had
such holder been the holder of such shares of Common Stock on the record date
for the determination of stockholders entitled to such Distribution. If the
Distribution involves rights, warrants options or any other form of convertible
securities and the right to exercise or convert such securities would expire in
accordance with its terms prior to the conversion of the Series A Preferred
Stock, then the terms of such securities shall provide that such exercise or
convertibility right shall remain in effect until 30 days after the date the
holder of Series A Preferred Stock receives such securities pursuant to the
conversion hereof.
E. Issuance of Other Securities With Conversion Price. If, at any time
after the Issuance Date, the Corporation shall issue any securities which are
convertible into or exchangeable for Common Stock ("CONVERTIBLE SECURITIES") at
a conversion price or exchange rate which is more favorable to the holders of
such Convertible Securities than the Conversion Price mechanism provided for
herein, then, at the option of the holders of a majority of the then outstanding
Series A Preferred Stock such conversion price or exchange rate shall be
applicable hereto.
F. Purchase Rights. If, at any time after the Issuance Date, the
Corporation issues any Convertible Securities or rights to purchase stock,
warrants, securities or other property (the "PURCHASE RIGHTS") pro rata to the
record holders of any class of Common Stock, then the holders of Series A
Preferred Stock will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock acquirable
upon complete conversion of the Series A Preferred Stock (without giving effect
to the limitations contained in Article IV.D) immediately before the date on
which a record is taken for the grant, issuance or sale of such Purchase Rights,
or, if no such record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights.
G. Adjustment of Conversion Price.
(i) Except as otherwise provided in Paragraphs A and B of this
Article XI, if and whenever during the two-year period after the Issuance Date
the Corporation issues or sells, or in accordance with Article XI.G(ii) hereof
is deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share less than the Conversion Price on
the Measurement Date (a "DILUTIVE ISSUANCE"), then effective immediately upon
the Dilutive Issuance,
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the Conversion Price will be adjusted to equal the per share price at which such
shares were issued, sold or deemed to have been issued or sold in such Dilutive
Issuance.
Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Paragraph G if such adjustment would result in an increase in the Conversion
Price.
(ii) Effect on Conversion Price of Certain Events. For purposes of
determining the adjusted Conversion Price under Subsection (i), the following
will be applicable:
(a) Issuance of Rights or Options. If the Corporation in
any manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities exercisable, convertible into or exchangeable for Common Stock
("CONVERTIBLE SECURITIES") (such warrants, rights and options to purchase Common
Stock or Convertible Securities are hereinafter referred to as "OPTIONS") and
the price per share for which Common Stock is issuable upon the exercise of such
Options (and the price of any conversion of Convertible Securities, if
applicable) is less than the Conversion Price in effect on the Measurement Date
of such securities ("BELOW CONVERSION PRICE OPTIONS"), then the maximum total
number of shares of Common Stock issuable upon the exercise of all such Below
Conversion Price Options (assuming full exercise, conversion or exchange of
Convertible Securities, if applicable) will, as of the date of the issuance or
grant of such Below Conversion Price Options, be deemed to be outstanding and to
have been issued and sold by the Corporation for such price per share. For
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon the exercise of such Below Conversion Price Options" is
determined by dividing (i) the total amount, if any, received or receivable by
the Corporation as consideration for the issuance or granting of all such Below
Conversion Price Options, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the exercise of all such
Below Conversion Price Options, plus, in the case of Convertible Securities
issuable upon the exercise of such Below Conversion Price Options, the minimum
aggregate amount of additional consideration payable upon the exercise,
conversion or exchange thereof (determined in accordance with the calculation
method set forth in Article XI.G(ii)(b)(2) below) at the time such Convertible
Securities first become exercisable, convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Below Conversion Price Options (assuming full conversion of Convertible
Securities, if applicable). No further adjustment to the Conversion Price will
be made upon the actual issuance of such Common Stock upon the exercise of such
Below Conversion Price Options or upon the exercise, conversion or exchange of
Convertible Securities issuable upon exercise of such Below Conversion Price
Options.
(b) Issuance of Convertible Securities.
(1) If the Corporation in any manner issues or sells
any Convertible Securities, which Convertible Securities do not have a
fluctuating conversion or exercise
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price or exchange ratio, whether or not immediately convertible (other than
where the same are issuable upon the exercise of Options) and the price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange (as determined pursuant to Article XI.G(ii)(b)(2) if applicable) is
less than the Conversion Price in effect on the Measurement Date, then the
maximum total number of shares of Common Stock issuable upon the exercise,
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Corporation for such price per share. For
the purposes of the preceding sentence, the "price per share for which Common
Stock is issuable upon such exercise, conversion or exchange" is determined by
dividing (i) the total amount, if any, received or receivable by the Corporation
as consideration for the issuance or sale of all such Convertible Securities,
plus the minimum aggregate amount of additional consideration, if any, payable
to the Corporation upon the exercise, conversion or exchange thereof at the time
such Convertible Securities first become exercisable, convertible or
exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise, conversion or exchange of all such Convertible
Securities. No further adjustment to the Conversion Price will be made upon the
actual issuance of such Common Stock upon exercise, conversion or exchange of
such Convertible Securities.
(2) If the Corporation in any manner issues or sells
any Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "VARIABLE RATE CONVERTIBLE SECURITY"), then the "price per
share for which Common Stock is issuable upon such exercise, conversion or
exchange" for purposes of the calculation contemplated by Article XI.G(ii)(b)(1)
shall be deemed to be the lowest price per share which would be applicable
(assuming all holding period and other conditions to any discounts contained in
such Convertible Security have been satisfied) if the Conversion Price on the
Measurement Date of such Convertible Security was 75% of the Conversion Price on
such date (the "ASSUMED VARIABLE MARKET PRICE"). Further, if the Conversion
Price at any time or times thereafter is less than or equal to the Assumed
Variable Market Price last used for making any adjustment under this Article
XI.G with respect to any Variable Rate Convertible Security, the Conversion
Price in effect at such time shall be readjusted to equal the Conversion Price
which would have resulted if the Assumed Variable Market Price at the time of
issuance of the Variable Rate Convertible Security had been 75% of the Market
Price existing at the time of the adjustment required by this sentence.
(3) Change in Option Price or Conversion Rate. If
there is a change at any time in (a) the amount of additional consideration
payable to the Corporation upon the exercise of any Options; (b) the amount of
additional consideration, if any, payable to the Corporation upon the exercise,
conversion or exchange of any Convertible Securities; or (c) the rate at which
any Convertible Securities are convertible into or exchangeable for Common Stock
(in each such case, other than under or by reason of provisions designed to
protect against dilution and except when an adjustment is made pursuant to
Article XI.G.(ii)(b)(2) above), the Conversion Price in effect at the time of
such change will be readjusted to the Conversion Price which would have been in
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effect at such time had such Options or Convertible Securities still outstanding
provided for such changed additional consideration or changed conversion rate,
as the case may be, at the time initially granted, issued or sold.
(4) Calculation of Consideration Received. If any
Common Stock, Options or Convertible Securities are issued, granted or sold for
cash, the consideration received therefor will be the amount received by the
Corporation therefor, after deduction of all underwriting discounts or
allowances in connection with such issuance, grant or sale. In case any Common
Stock, Options or Convertible Securities are issued or sold for a consideration
part or all of which shall be other than cash, including in the case of a
strategic or similar arrangement in which the other entity will provide services
to the Corporation, purchase services from the Corporation or otherwise provide
intangible consideration to the Corporation, the amount of the consideration
other than cash received by the Corporation (including the net present value of
the consideration expected by the Corporation for the provided or purchased
services) will be the fair market value of such consideration, except where such
consideration consists of securities, in which case the amount of consideration
received by the Corporation will be the Market Price thereof as of the date of
receipt. In case any Common Stock, Options or Convertible Securities are issued
in connection with any merger or consolidation in which the Corporation is the
surviving corporation, the amount of consideration therefor will be deemed to be
the fair market value of such portion of the net assets and business of the
non-surviving corporation as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. Notwithstanding anything else herein
to the contrary, if Common Stock, Options or Convertible Securities are issued,
granted or sold in conjunction with each other as part of a single transaction
or in a series of related transactions, any holder of Series A Preferred Stock
may elect to determine the amount of consideration deemed to be received by the
Corporation therefor by deducting the fair value of any type of securities (the
"DISREGARDED SECURITIES") issued, granted or sold in such transaction or series
of transactions. If the holder makes an election pursuant to the immediately
preceding sentence, no adjustment to the Conversion Price shall be made pursuant
to this Article XI.G for the issuance of the Disregarded Securities or upon any
conversion or exercise thereof. For example, if the Corporation were to issue
convertible notes having a face value of $1,000,000 and warrants to purchase
shares of Common Stock at an exercise price equal to the market price of the
Common Stock on the date of issuance of such warrants in exchange for $1,000,000
of consideration, the fair value of the warrants would be subtracted from the
$1,000,000 of consideration received by the Corporation for the purposes of
determining whether the shares of Common Stock issuable upon conversion of the
convertible notes shall be deemed to be issued at a price per share below market
price and, if so, for purposes of determining any adjustment to the Conversion
Price hereunder as a result of the issuance of the Convertible Securities. The
Corporation shall calculate, using standard commercial valuation methods
appropriate for valuing such assets, the fair market value of any consideration
other than cash or securities; provided, however, that if the holder hereof does
not agree to such fair market value calculation within three business days after
receipt thereof from the Corporation, then such fair market value will be
determined in good faith by an investment banker or other appropriate expert
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of national reputation selected by the Corporation and reasonably acceptable to
the Majority Holders, with the costs of such appraisal to be borne by the
Corporation.
(5) Issuances Pursuant to Existing Securities. If
the Corporation, at any time, issues (or becomes obligated to issue) shares of
Common Stock pursuant to any antidilution or similar adjustments (other than as
a result of stock splits, stock dividends and the like) contained in a security
or instrument outstanding as of the date hereof but not included on Schedule
3(d) of the Securities Purchase Agreement, then all shares of Common Stock so
issued shall be deemed to have been issued for no consideration. If the
Corporation issues (or becomes obligated to issue) shares of Common Stock
pursuant to any antidilution or similar adjustments contained in a security or
instrument included on Schedule 3(d) of the Securities Purchase Agreement as a
result of the issuance of the Preferred Shares or Warrants and the number of
shares that the Corporation issues (or is obligated to issue) as a result of
such initial issuance exceeds the amount specified on Schedule 3(d) of the
Securities Purchase Agreement, such excess shares shall be deemed to have been
issued for no consideration.
H. Exceptions to Adjustment of Conversion Price. No adjustment to the
Conversion Price will be made (i) upon the exercise of any warrants, options or
convertible securities issued and outstanding on the Issue Date that are set
forth on Schedule 3(d) of the Securities Purchase Agreement in accordance with
the terms of such securities as of such date; (ii) upon the grant or exercise of
any stock or options to employees, directors or consultants of the Corporation
which may hereafter be granted to or exercised by any employee, director or
consultant under any stock option or similar benefit plan of the Corporation now
existing or to be implemented in the future, so long as the issuance of such
stock or options is approved by a majority of the Board of Directors of the
Corporation or a majority of the members of a committee of non-employee
directors established for such purpose; (iii) upon conversion of the Series A
Preferred Stock or exercise of the Warrants, (iv) the issuance of securities in
connection with strategic business partnerships or joint ventures (including,
without limitation, such transactions with major pharmaceutical lab or life
sciences companies), the primary purpose of which, in the reasonable judgment of
the Board of Directors, is not to raise additional capital, or (vi) the issuance
of securities pursuant to any equipment financing from a bank or similar
financial or lending institution approved by the Board of Directors.
I. Notice of Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Price pursuant to this Article XI amounting to a
more than 5% change in such Conversion Price, the Corporation, at its expense,
shall promptly compute such adjustment or readjustment and prepare and furnish
to each holder of Series A Preferred Stock 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 the written
request at any time of any holder of Series A Preferred Stock, furnish to such
holder a like certificate setting forth (i) such adjustment or readjustment,
(ii) the Conversion Price at the time in effect and (iii) the number of shares
of
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Common Stock and the amount, if any, of other securities or property which at
the time would be received upon conversion of a share of Series A Preferred
Stock.
J. Other Action Affecting Conversion Price. If the Corporation takes any
action affecting the Common Stock after the date hereof that would be covered by
Article XI.A through H, but for the manner in which such action is taken or
structured, which would in any way diminish the value of the Series A Preferred
Stock, then the Conversion Price shall be adjusted in such manner as the Board
of Directors of the Corporation shall in good faith determine to be equitable
under the circumstances.
XII. VOTING RIGHTS
The holders of the Series A Preferred Stock have no voting power
whatsoever, except as otherwise provided by the Delaware General Corporation Law
(the "BUSINESS CORPORATION Law"), in this Article XII and in Article XIII below.
Notwithstanding the above, the Corporation shall provide each holder of
Series A Preferred Stock with prior notification of any meeting of the
stockholders (and copies of proxy materials and other information sent to
stockholders). If the Corporation takes a record of its stockholders for the
purpose of determining stockholders entitled to (a) receive payment of any
dividend or other distribution, any right to subscribe for, purchase or
otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or (b) to vote in connection with any proposed sale,
lease or conveyance of all or substantially all of the assets of the
Corporation, or any proposed merger, consolidation, liquidation, dissolution or
winding up of the Corporation, the Corporation shall mail a notice to each
holder, at least 15 days prior to the record date specified therein (or 45 days
prior to the consummation of the transaction or event, whichever is earlier, but
in no event earlier than public announcement of such proposed transaction), of
the date on which any such record is to be taken for the purpose of such vote,
dividend, distribution, right or other event, and a brief statement regarding
the amount and character of such vote, dividend, distribution, right or other
event to the extent known at such time.
To the extent that under the Business Corporation Law the vote of the
holders of the Series A Preferred Stock, voting separately as a class or series,
as applicable, is required to authorize a given action of the Corporation, the
affirmative vote or consent of the holders of at least a majority of the then
outstanding shares of the Series A Preferred Stock represented at a duly held
meeting at which a quorum is present or by written consent of the holders of at
least a majority of the then outstanding shares of Series A Preferred Stock
(except as otherwise may be required under the Business Corporation Law) shall
constitute the approval of such action by the class. To the extent that under
the Business Corporation Law holders of the Series A Preferred Stock are
entitled to vote on a matter with holders of Common Stock, voting together as
one class, each share of Series A
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Preferred Stock shall be entitled to a number of votes equal to the number of
shares of Common Stock into which it is then convertible (subject to the
limitations contained in Article IV.D(ii)) using the record date for the taking
of such vote of stockholders as the date as of which the Conversion Price is
calculated.
XIII. PROTECTION PROVISIONS
So long as any shares of Series A Preferred Stock are outstanding, the
Corporation shall not without first obtaining the approval (by vote or written
consent, as provided by the Business Corporation Law) of the holders of a
majority of the then outstanding shares of Series A Preferred Stock:
(a) alter or change the rights, preferences or privileges
of the Series A Preferred Stock;
(b) alter or change the rights, preferences or privileges
of any capital stock of the Corporation so as to affect adversely the Series A
Preferred Stock;
(c) create any Senior Securities;
(d) create any Pari Passu Securities;
(e) increase the authorized number of shares of Series A
Preferred Stock;
(f) issue any shares of Senior Securities or Pari Passu
Securities;
(g) issue any shares of Series A Preferred Stock other than
pursuant to the Securities Purchase Agreement;
(h) redeem, or declare or pay any cash dividend or
distribution on, any Junior Securities;
(i) increase the par value of the Common Stock; or
(j) issue any debt securities that would have any
preferences over the Series A Preferred Shares upon liquidation of the
Corporation.
Notwithstanding the foregoing, no change pursuant to this Article XIII shall be
effective to the extent that, by its terms, it applies to less than all of the
holders of shares of Series A Preferred Stock then outstanding.
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XIV. MISCELLANEOUS
A. Cancellation of Series A Preferred Stock. If any shares of Series A
Preferred Stock are converted pursuant to Article IV, the shares so converted
shall be canceled, shall return to the status of authorized, but unissued
preferred stock of no designated series, and shall not be issuable by the
Corporation as Series A Preferred Stock.
B. Lost or Stolen Certificates. Upon receipt by the Corporation of (i)
evidence of the loss, theft, destruction or mutilation of any Preferred Stock
Certificate(s) and (ii) (y) in the case of loss, theft or destruction, of
indemnity (without any bond or other security) reasonably satisfactory to the
Corporation, or (z) in the case of mutilation, upon surrender and cancellation
of the Preferred Stock Certificate(s), the Corporation shall execute and deliver
new Preferred Stock Certificate(s) of like tenor and date. However, the
Corporation shall not be obligated to reissue such lost or stolen Preferred
Stock Certificate(s) if the holder contemporaneously requests the Corporation to
convert such Series A Preferred Stock.
C. Allocation of Cap Amount and Reserved Amount. The initial Cap Amount
and Reserved Amount shall be allocated pro rata among the holders of Series A
Preferred Stock based on the number of shares of Series A Preferred Stock issued
to each holder. Each increase to the Cap Amount and the Reserved Amount shall be
allocated pro rata among the holders of Series A Preferred Stock based on the
number of shares of Series A Preferred Stock held by each holder at the time of
the increase in the Cap Amount or Reserved Amount. In the event a holder shall
sell or otherwise transfer any of such holder's shares of Series A Preferred
Stock, each transferee shall be allocated a pro rata portion of such
transferor's Cap Amount and Reserved Amount. Any portion of the Cap Amount or
Reserved Amount which remains allocated to any person or entity which does not
hold any Series A Preferred Stock shall be allocated to the remaining holders of
shares of Series A Preferred Stock, pro rata based on the number of shares of
Series A Preferred Stock then held by such holders.
D. Quarterly Statements of Available Shares. For each calendar quarter
beginning in the quarter in which the initial registration statement required to
be filed pursuant to Section 2(a) of the Registration Rights Agreement is
declared effective and thereafter so long as any shares of Series A Preferred
Stock are outstanding, the Corporation shall deliver (or cause its transfer
agent to deliver) to each holder a written report notifying the holders of any
occurrence which prohibits the Corporation from issuing Common Stock upon any
such conversion. The report shall also specify (i) the total number of shares of
Series A Preferred Stock outstanding as of the end of such quarter, (ii) the
total number of shares of Common Stock issued upon all conversions of Series A
Preferred Stock prior to the end of such quarter, (iii) the total number of
shares of Common Stock which are reserved for issuance upon conversion of the
Series A Preferred Stock as of the end of such quarter and (iv) the total number
of shares of Common Stock which may thereafter be issued by the Corporation upon
conversion of the Series A Preferred Stock before the Corporation would exceed
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the Cap Amount and the Reserved Amount. The Corporation (or its transfer agent)
shall use its best efforts to deliver the report for each quarter to each holder
prior to the tenth day of the calendar month following the quarter to which such
report relates. In addition, the Corporation (or its transfer agent) shall
provide, as promptly as practicable delivery to the Corporation of a written
request by any holder, any of the information enumerated in clauses (i) - (iv)
of this Paragraph D as of the date of such request.
E. Payment of Cash; Defaults. Whenever the Corporation is required to
make any cash payment to a holder under this Certificate of Designation (upon
redemption or otherwise), such cash payment shall be made to the holder within
five business days after delivery by such holder of a notice specifying that the
holder elects to receive such payment in cash and the method (e.g., by check,
wire transfer) in which such payment should be made and any supporting
documentation reasonably requested by the Corporation to substantiate the
holder's claim to such cash payment or the amount thereof. If such payment is
not delivered within such five business day period, such holder shall thereafter
be entitled to interest on the unpaid amount at a per annum rate equal to the
lower of eighteen percent (18%) and the highest interest rate permitted by
applicable law until such amount is paid in full to the holder.
F. Status as Stockholder. Upon submission of a Notice of Conversion by a
holder of Series A Preferred Stock, (i) the shares covered thereby (other than
the shares, if any, which cannot be issued because their issuance would exceed
such holder's allocated portion of the Reserved Amount or Cap Amount) shall be
deemed converted into shares of Common Stock and (ii) the holder's rights as a
holder of such converted shares of Series A Preferred Stock shall cease and
terminate, excepting only the right to receive certificates for such shares of
Common Stock and to any remedies provided herein or otherwise available at law
or in equity to such holder because of a failure by the Corporation to comply
with the terms of this Certificate of Designation. In situations where Article
VI.B is applicable, the number of shares of Common Stock referred to in clauses
(i) and (ii) of the immediately preceding sentence shall be determined on the
date on which such shares of Common Stock are delivered to the holder.
Notwithstanding the foregoing, if a holder has not received certificates for all
shares of Common Stock prior to the sixth business day after the expiration of
the Delivery Period with respect to a conversion of Series A Preferred Stock for
any reason, then (unless the holder otherwise elects to retain its status as a
holder of Common Stock by so notifying the Corporation within five business days
after the expiration of such 6 business day period after expiration of the
Delivery Period) the holder shall regain the rights of a holder of Series A
Preferred Stock with respect to such unconverted shares of Series A Preferred
Stock and the Corporation shall, as soon as practicable, return such unconverted
shares to the holder. In all cases, the holder shall retain all of its rights
and remedies (including, without limitation, the right to have the Conversion
Price with respect to subsequent conversions determined in accordance with
Article VI.A) for the Corporation's failure to convert Series A Preferred Stock.
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G. Remedies Cumulative. The remedies provided in this Certificate of
Designation shall be cumulative and in addition to all other remedies available
under this Certificate of Designation, at law or in equity (including a decree
of specific performance and/or other injunctive relief), and nothing herein
shall limit a holder's right to pursue actual damages for any failure by the
Corporation to comply with the terms of this Certificate of Designation. The
Corporation acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the holders of Series A Preferred Stock and that the
remedy at law for any such breach may be inadequate. The Corporation therefore
agrees, in the event of any such breach or threatened breach, that the holders
of Series A Preferred Stock shall be entitled, in addition to all other
available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation this 29th day of June, 2001.
VIROLOGIC, INC.
By: /s/ WILLIAM D. YOUNG
-------------------------------------
Name: William D. Young
Title: Chief Executive Officer
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NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Series A Preferred Stock)
The undersigned hereby irrevocably elects to convert ____________ shares
of Series A Preferred Stock (the "CONVERSION"), represented by stock certificate
No(s). ___________ (the "PREFERRED STOCK CERTIFICATES"), into shares of common
stock ("COMMON STOCK") of ViroLogic, Inc. (the "CORPORATION") according to the
conditions of the Certificate of Designations, Preferences and Rights of Series
A Convertible Preferred Stock (the "CERTIFICATE OF DESIGNATION"), as of the date
written below. If securities are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto. No fee will be charged to the holder for any conversion, except
for transfer taxes, if any. A copy of each Preferred Stock Certificate is
attached hereto (or evidence of loss, theft or destruction thereof).
Except as may be provided below, the Corporation shall electronically
transmit the Common Stock issuable pursuant to this Notice of Conversion to the
account of the undersigned or its nominee (which is _________________) with DTC
through its Deposit Withdrawal Agent Commission System ("DTC TRANSFER").
The undersigned acknowledges and agrees that all offers and sales by the
undersigned of the securities issuable to the undersigned upon conversion of the
Series A Preferred Stock have been or will be made only pursuant to an effective
registration of the transfer of the Common Stock under the Securities Act of
1933, as amended (the "ACT"), or pursuant to an exemption from registration
under the Act.
[ ] In lieu of receiving the shares of Common Stock issuable pursuant to
this Notice of Conversion by way of DTC Transfer, the undersigned hereby
requests that the Corporation issue and deliver to the undersigned
physical certificates representing such shares of Common Stock.
Date of Conversion:
--------------------------
Accrued Premium for all
Shares Subject to Conversion:
----------------
Applicable Conversion Price:
-----------------
Number of Shares of Common
Stock to be Issued (assuming
conversion of Accrued Premium):
--------------
Signature:
-----------------------------------
Name:
----------------------------------------
Address:
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