EXHIBIT 3.1
PAGE 1
DELAWARE
THE FIRST STATE
I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED
CERTIFICATE OF "ALGORX PHARMACEUTICALS, INC.", FILED IN THIS OFFICE ON THE
SEVENTEENTH DAY OF FEBRUARY, A.D. 2004, AT 4:08 O'CLOCK P.M.
A FILED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS.
/s/ Harriet Smith Windsor
[SEAL] -----------------------------------------
Harriet Smith Windsor, Secretary of State
3365262 8100 AUTHENTICATION: 2934882
040109975 DATE: 02-17-04
State of Delaware
Secretary of State
Division of Corporations
Delivered 04:08 PM 02/17/2004
FILED 04:08 PM 02/17/2004
SRV 040109975 - 3365262 FILE
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ALGORX PHARMACEUTICALS, INC.
AlgoRx Pharmaceuticals, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that:
1. The original name of the Corporation is LupeRx Pharmaceuticals, Inc.
and the original Certificate of Incorporation was filed with the Secretary of
State of Delaware on March 6, 2001, was amended and restated on April 3, 2001
and was further amended and restated on March 20, 2002.
2. The Third Amended and Restated Certificate of Incorporation in the form
attached hereto as Exhibit A has been duly adopted in accordance with the
provisions of Sections 228, 242 and 245 of the Delaware General Corporation Law
by the directors and stockholders of the Corporation, and prompt written notice
was duly given pursuant to Section 228 to those stockholders who did not approve
the Third Amended and Restated Certificate of Incorporation by written consent.
3. The Third Amended and Restated Certificate of Incorporation so adopted
reads in full as set forth in Exhibit A attached hereto and is hereby
incorporated herein by this reference.
4. The terms and provisions of the Third and Amended and Restated
Certificate of Incorporation have been duly approved by written consent of the
required number of shares of outstanding stock of this Corporation in accordance
with to Section 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, AlgoRx Pharmaceuticals, Inc. has caused this
Certificate to be signed by the President this 17th day of February, 2004.
ALGORX PHARMACEUTICALS, INC.
By: /s/ Ronald Burch
-------------------------
Ronald Burch M.D., Ph.D.
President
EXHIBIT A
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF ALGORX PHARMACEUTICALS, INC.
I.
The name of this company is ALGORX PHARMACEUTICALS, INC. (the "Company").
II.
The address of the registered office of the Company in the State of
Delaware is:
Corporation Service Company
2711 Centerville Road, Suite 400
Wilmington, DE 19808
County of New Castle
III.
The purpose of the Company is to engage in any lawful act or activity for
which a corporation may be organized under the Delaware General Corporation Law
("DGCL").
IV.
A. The Company is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Company is authorized to issue is three hundred eleven
million two hundred forty six thousand twenty (311,246,020) shares, one hundred
seventy three million eight hundred forty thousand two hundred sixty six
(173,840,266) shares of which shall be Common Stock (the "Common Stock") and one
hundred thirty seven million four hundred five thousand seven hundred fifty four
(137,405,754) shares of which shall be Preferred Stock (the "Preferred Stock").
The Preferred Stock shall have a par value of one tenth of one cent ($0.001) per
share and the Common Stock shall have a par value of one tenth of one cent
($0.001) per share.
B. The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares of Common Stock then outstanding)
by the affirmative vote of the holders of a majority of the stock of the Company
(voting together on an as-if-converted basis).
C. Nine million one hundred fifty thousand (9,150,000) of the authorized
shares of Preferred Stock are hereby designated "Series A Preferred Stock" (the
"Series A Preferred").
D. Seventeen million eight hundred fifty eight thousand four hundred sixty
two (17,858,462) of the authorized shares of Preferred Stock are hereby
designated "Series B Preferred Stock" (the "Series B Preferred").
E. One hundred ten million three hundred ninety seven thousand two hundred
ninety two (110,397,292) of the authorized shares of Preferred Stock are hereby
designated "Series C Preferred Stock" (the "Series C Preferred").
F. The rights, preferences, privileges, restrictions and other matters
relating to the Common Stock, Series A Preferred, Series B Preferred and Series
C Preferred are as set forth below. As used in this Article Fourth, the term
"Preferred Stock," without designation, shall refer to the Series A Preferred,
Series B Preferred and Series C Preferred Stock collectively.
1. DIVIDEND RIGHTS.
(a) Holders of Series C Preferred, in preference to the
holders of Series A Preferred, holders of Series B Preferred and/or holders of
Common Stock, shall be entitled to receive, when and as declared by the
Company's Board of Directors (the "Board of Directors"), but only out of funds
that are legally available therefore, cash dividends at the rate of eight
percent (8%) of the Series C Original Issue Price (as defined below) per annum
on each outstanding share of Series C Preferred (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares). Such dividends shall be payable only when, as and if declared by
the Board of Directors and shall be non-cumulative, and no right shall accrue to
the holders of the Series C Preferred by reason of the fact that dividends on
the Series C Preferred are not declared or paid in any previous fiscal year of
the Company, whether or not the earnings of the Company in that previous fiscal
year were sufficient to pay such dividends in whole or in part. No dividends
shall be declared on the Series A Preferred or the Series B Preferred unless
dividends are declared on the Series C Preferred. In the event dividends are
paid to the holders of Series C Preferred that are less than the full amounts to
which such holders are entitled pursuant to this Section 1(a), such holders
shall share ratably in the total amount of dividends paid according to the
respective amounts due each such holder if such dividends were paid in full.
(b) Holders of Series A Preferred and holders of the Series B
Preferred, after the dividend has been distributed in full to the holders of the
Series C Preferred pursuant to Section 1(a) hereto and in preference to the
holders of Common Stock, shall be entitled to receive, when and as declared by
the Board of Directors, but only out of funds that are legally available
therefor, cash dividends at the rate of (i) eight percent (8%) of the Series A
Original Issue Price (as defined below) per annum on each outstanding share of
Series A Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), and (ii) eight
percent (8%) of the Series B Original Issue Price (as defined below) per annum
on each outstanding share of Series B Preferred (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares). Such dividends shall be payable only when, as and if declared by
the Board of Directors and shall be non-cumulative, and no right shall accrue to
the holders of the Series A Preferred Stock or the holders of the Series B
Preferred Stock by reason of the fact that dividends on the Series A Preferred
Stock or Series B Preferred Stock, as the case might be, are not declared or
paid in any
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previous fiscal year of the Company, whether or not the earnings of the Company
in that previous fiscal year were sufficient to pay such dividends in whole or
in part. No dividends shall be declared on the Series A Preferred unless
dividends are declared the Series B Preferred Stock. No dividends shall be
declared on the Series B Preferred unless dividends are declared the Series A
Preferred Stock. In the event dividends are paid to the holders of Series A
Preferred and/or Series B Preferred that are less than the full amounts to which
both such holders are entitled pursuant to this Section 1(b), such holders shall
share ratably in the total amount of dividends paid according to the respective
amounts due each such holder if such dividends were paid in full.
(c) The "Series A Original Issue Price" shall be one dollar
($1.00); the "Series B Original Issue Price" shall be one dollar and thirty
cents ($1.30) and the "Series C Original Issue Price" shall be fifty nine and
twenty five-tenths cents ($0.5925).
(d) So long as any shares of Preferred Stock are outstanding,
the Company shall not pay or declare any dividend, whether in cash or property,
or make any other distribution on the Common Stock, or purchase, redeem or
otherwise acquire for value any shares of Common Stock until all dividends (set
forth in Sections IV(F)(1)(a) and (1)(b) above) on the Preferred Stock shall
have been paid or declared and set apart, except for:
(i) acquisitions of Common Stock by the Company pursuant
to agreements which permit the Company to repurchase such shares at cost upon
termination of services to the Company, or
(ii) acquisitions of Common Stock in exercise of the
Company's right of first refusal to repurchase such shares.
(e) In the event dividends are paid on any share of Common
Stock, the Company shall pay an additional dividend on all outstanding shares of
Preferred Stock in an amount equal per share (on an as-if-converted to Common
Stock basis) to the amount paid or set aside for each share of Common Stock.
(f) The provisions of Sections IV(F)(1)(d) and (1)(e) shall
not apply to a dividend payable in Common Stock, or any repurchase of any
outstanding securities of the Company that is approved by the Board of
Directors.
2. VOTING RIGHTS.
(a) GENERAL RIGHTS. Each holder of shares of Preferred Stock
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such shares of Preferred Stock could be converted (pursuant to
Section IV(F)(4) hereof) immediately after the close of business on the record
date fixed for such meeting or the effective date of such written consent and
shall have voting rights and powers equal to the voting rights and powers of the
Common Stock and shall be entitled to notice of any stockholders' meeting in
accordance with the Bylaws of the Company. Except as otherwise provided herein
or as required by law, the Preferred Stock shall vote together with the Common
Stock at any annual or special meeting of the stockholders and not as a separate
class, and may act by written consent in the same manner as the Common Stock.
Fractional votes shall not, however, be permitted and any fractional
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voting rights available on an as-converted basis (after aggregating all shares
into which shares of such Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half or
greater being rounded upward).
(b) SEPARATE VOTE OF PREFERRED STOCK. For so long as at least
one million (1,000,000) shares of either Series A Preferred, Series B Preferred
or Series C Preferred (subject to adjustment for any stock split, reverse stock
split or other similar event affecting the Series A Preferred, Series B
Preferred or Series C Preferred after the filing date hereof) remain
outstanding, in addition to any other vote or consent required herein or by law,
the vote or written consent of the holders of at least sixty five percent (65%)
of the outstanding shares of Series A Preferred, Series B Preferred and Series C
Preferred, voting together as a single class, shall be necessary for effecting
or validating the following actions:
(i) Any amendment, alteration, or repeal of any
provision of this Third Amended and Restated Certificate of Incorporation or the
Bylaws of the Company (including any filing of a Certificate of Designation),
whether by merger, consolidation or otherwise, that alters or changes the voting
or other powers, preferences, or other special rights or privileges, or
restrictions of any class or series of Preferred Stock;
(ii) Any increase or decrease in the authorized number
of shares of Common Stock or Preferred Stock;
(iii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking on a parity
with or senior to the Series C Preferred or any increase in the authorized or
designated number of any such new class or series;
(iv) Any redemption, repurchase, payment of dividends or
other distributions with respect to Common Stock (except for acquisitions of
Common Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares at cost upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer);
(v) Any agreement by the Company or its stockholders
regarding an Asset Transfer or Acquisition (each as defined in Section
IV(F)(3));
(vi) Any action that results in the payment or
declaration of a dividend on any shares of Common Stock or Preferred Stock;
(vii) Any voluntary dissolution or liquidation of the
Company; or
(viii) Any increase or decrease in the authorized number
of members of the Board of Directors.
(c) SEPARATE VOTE OF SERIES C PREFERRED STOCK. For so long as
at least one million (1,000,000) shares of either Series C Preferred (subject to
adjustment for any stock
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split, reverse stock split or other similar event affecting Series C Preferred
after the filing date hereof) remain outstanding, in addition to any other vote
or consent required herein or by law, the vote or written consent of the holders
of at least a majority of the outstanding shares of Series C Preferred, voting
as a separate class, shall be necessary for effecting or validating the
following actions:
(i) Any amendment, alteration, or repeal of any
provision of the Certificate of Incorporation or the Bylaws of the Company
(including any filing of a Certificate of Designation), whether by merger,
consolidation or otherwise, that alters or changes the voting or other powers,
preferences, or other special rights or privileges, or restrictions of the
Series C Preferred; or
(ii) Any increase or decrease in the number of directors
elected by the holders of Series C Preferred pursuant to Section
IV(F)(2)(d)(iv).
(d) ELECTION OF BOARD OF DIRECTORS.
(i) The Board of Directors shall consist of up to seven
(7) members.
(ii) The holders of at least a majority of the
outstanding shares of Series A Preferred, voting as a separate class, shall be
entitled to elect three (3) members of the Board of Directors at each meeting or
pursuant to each consent of the Company's stockholders for the election of
directors, and to remove from office such directors and to fill any vacancy
caused by the resignation, death or removal of such directors.
(iii) The holders of at least a majority of the
outstanding shares of Series B Preferred, voting as a separate class, shall be
entitled to elect one (1) member of the Board of Directors at each meeting or
pursuant to each consent of the Company's stockholders for the election of
directors, and to remove from office such directors and to fill any vacancy
caused by the resignation, death or removal of such director.
(iv) The holders of at least a majority of the
outstanding shares of Series C Preferred, voting as a separate class, shall be
entitled to elect two (2) members of the Board of Directors at each meeting or
pursuant to each consent of the Company's stockholders for the election of
directors, and to remove from office such directors and to fill any vacancy
caused by the resignation, death or removal of such directors.
3. LIQUIDATION RIGHTS.
(a) In the event of any liquidation, dissolution, or winding
up of the Company, whether voluntary or involuntary, distributions to the
stockholders of the Company shall be made in the following manner:
(i) Unless the holders of at least a majority of the
outstanding shares of Series C Preferred, voting as a separate class agree
otherwise, each holder of Series C Preferred shall be entitled to receive, prior
and in preference to any distribution of any of the legally available assets
and/or surplus funds of the Company to the holders of the Series A
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Preferred, Series B Preferred and Common Stock, by reason of their ownership of
such stock, the amount per share of Series C Preferred equal to one and one-half
(1.5) times the Series C Original Issue Price (as adjusted for combinations,
consolidations, subdivisions, or stock splits with respect to such shares) plus
all declared but unpaid dividends on such shares of Series C Preferred for each
share of Series C Preferred then held by such holder (collectively, the "Series
C Preference"). If, upon any such liquidation, dissolution, or winding up, the
assets and funds legally available to be distributed among the holders of the
Series C Preferred shall be insufficient to permit the payment to such holders
of the full preferential amount, then the entire assets and funds of the Company
legally available for distribution to such holders shall be distributed ratably
based on the total preferential amount due each such holder under this Section
IV(F)(3)(a).
(ii) Unless the holders of at least a majority of the
outstanding shares of Series A Preferred and Series B Preferred, voting together
as a single class, agree otherwise, each holder of Series A Preferred Stock and
each holder of Series B Preferred Stock shall be entitled to receive, after all
payments of the Series C Preference are made or set aside for holders of the
Series C Preferred and prior and in preference to any distribution of any of the
legally available assets and/or surplus funds of the Company to the holders of
the Common Stock, by reason of their ownership of such stock, (x) the amount per
share of Series B Preferred equal to the Series B Original Issue Price (as
adjusted for combinations, consolidations, subdivisions, or stock splits with
respect to such shares) plus all declared but unpaid dividends on such shares of
Series B Preferred for each share of Series B Preferred then held by such holder
(collectively, the "Series B Preference") and (y) the amount per share of Series
A Preferred equal to the Series A Original Issue Price (as adjusted for
combinations, consolidations, subdivisions, or stock splits with respect to such
shares) plus all declared but unpaid dividends on such shares of Series A
Preferred for each share of Series A Preferred then held by such holder
(collectively, the "Series A Preference"). If, upon any such liquidation,
dissolution, or winding up, the assets and funds legally available to be
distributed among the holders of the Series A Preferred Stock and Series B
Preferred Stock shall be insufficient to permit the payment to such holders of
the full preferential amount, then the entire assets and funds of the Company
legally available for distribution to such holders shall be distributed ratably
based on the total preferential amount due each such holder under this Section
IV(F)(3)(b).
(iii) After payment has been made to the holders of
Preferred Stock of the full amounts to which they are entitled pursuant to
Sections IV(F)(3)(a)(i) and (a)(ii) above, the remaining assets of the Company
available for distribution to stockholders shall be distributed ratably among
the holders of Common Stock and Preferred Stock (assuming conversion of all
shares of Preferred Stock).
(b) The following events shall be considered a liquidation
under this Section:
(i) (A) any consolidation or merger of the Company with
or into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Company immediately prior to
such consolidation, merger or reorganization, own less than fifty percent (50%)
of the voting power of the surviving entity
6
immediately after such consolidation, merger or reorganization; or (B) any
transaction or series of related transactions to which the Company is a party in
which in excess of fifty percent (50%) of the Company's voting power is
transferred, excluding any consolidation or merger effected exclusively to
change the domicile of the Company (each, an "Acquisition"); provided, however,
no sale of the Series A Preferred, Series B Preferred or Series C Preferred
shall constitute a liquidation under this Section IV(F)(3)(b)(i), or
(ii) a sale, lease, exchange, conveyance or other
disposition of all or substantially all of the assets of the Company (an "Asset
Transfer").
(c) In the event an Acquisition or Asset Transfer as described
in Sections IV(F)(3)(b)(i) and (ii) above, if the consideration received by
Company is other than cash, its value will be deemed its fair market value as
determined in good faith by the Board of Directors. Any securities shall be
valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability covered by (ii) below:
(1) If the securities are traded on a securities
exchange or the Nasdaq Stock Market, the value shall be based on a formula
approved by the Board of Directors and derived from the closing prices of
securities on such exchange or the Nasdaq Stock Market over the time period for
calculating the value of such securities as of the closing specified in the
definitive agreements for the Acquisition or Asset Transfer or if no such time
period is specified, the thirty (30)-day period ending three (3) days prior to
such closing;
(2) If the securities are actively traded
over-the-counter, the value shall be based on a formula approved by the Board
of Directors and derived from the closing bid or sale prices (whichever is
applicable) of the securities on such exchange or market over the time period
for calculating the value of such securities as of the closing specified in the
definitive agreements for the Acquisition or Asset Transfer or if no such time
period is specified, the thirty (30)-day period ending three (3) days prior to
such closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as determined by the Board of Directors.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in Section IV(F)(c)(i) to reflect the approximate fair
market value thereof, as determined by the Board of Directors.
(d) The Company shall give each holder of record of Preferred
Stock written notice of such impending Acquisition or Asset Transfer not later
than ten (10) days prior to the stockholders' meeting called to approve such
Acquisition or Asset Transfer, or ten (10) days prior to the closing of such
Acquisition or Asset Transfer, whichever is earlier, and shall also notify such
holders in writing of the final approval of such Acquisition or Asset Transfer.
The first of such notices shall describe the material terms and conditions of
the impending Acquisition or Asset Transfer and the provisions of this Section
IV(F), and the Company shall
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thereafter give such holders prompt notice of any material changes. The
Acquisition or Asset Transfer shall in no event take place sooner than ten (10)
days after the Company has given notice of any material changes provided for
herein. Notwithstanding the other provisions of this Third Amended and Restated
Certificate of Incorporation, all notice periods or requirements in this Third
Amended and Restated Certificate of Incorporation may be shortened or waived,
either before or after the action for which notice is required, upon the written
consent of the holders of the outstanding shares of Preferred Stock that are
entitled to such notice rights; provided, however, that the Company shall
provide notice of such event or action promptly after it has occurred or has
been taken.
4. CONVERSION RIGHTS.
The holders of the Preferred Stock shall have the following rights
with respect to the conversion of the Preferred Stock into shares of Common
Stock (the "Conversion Rights"):
(a) OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section IV(F)(4), any shares of Preferred Stock may, at the
option of the holder, be converted at any time into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a holder
of Series A Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Preferred Conversion Rate" then in effect
(determined as provided in Section IV(F)(4)(b)) by the number of shares of
Series A Preferred being converted. The number of shares of Common Stock to
which a holder of Series B Preferred shall be entitled upon conversion shall be
the product obtained by multiplying the "Series B Preferred Conversion Rate"
then in effect (determined as provided in Section IV(F)(4)(b)) by the number of
shares of Series B Preferred being converted. The number of shares of Common
Stock to which a holder of Series C Preferred shall be entitled upon conversion
shall be the product obtained by multiplying the "Series C Preferred Conversion
Rate" then in effect (determined as provided in Section IV(F)(4)(b)) by the
number of shares of Series C Preferred being converted.
(b) PREFERRED STOCK CONVERSION RATES. The conversion rate in
effect at any time for conversion of the Series A Preferred (the "Series A
Preferred Conversion Rate") shall be the quotient obtained by dividing the
Series A Original Issue Price by the "Series A Preferred Conversion Price,"
calculated as provided in Section IV(F)(4)(c). The conversion rate in effect at
any time for conversion of the Series B Preferred (the "Series B Preferred
Conversion Rate") shall be the quotient obtained by dividing the Series B
Original Issue Price by the "Series B Preferred Conversion Price," calculated as
provided in Section IV(F)(4)(c). The conversion rate in effect at any time for
conversion of the Series C Preferred (the "Series C Preferred Conversion Rate")
shall be the quotient obtained by dividing the Series C Original Issue Price by
the "Series C Preferred Conversion Price," calculated as provided in Section
IV(F)(4)(c).
(c) PREFERRED STOCK CONVERSION PRICES. As of the date of this
Third Amended and Restated Certificate of Incorporation and after giving effect
to the issuance and sale of all of the shares of Series C Preferred pursuant to
the Series C Financing (as defined in Section 4(m) hereto), the conversion price
for the Series A Preferred shall be sixty nine cents ($0.69) (the "Series A
Preferred Conversion Price"). Such Series A Preferred Conversion Price
8
shall be adjusted from time to time in accordance with this Section IV(F)(4). As
of the date of this Third Amended and Restated Certificate of Incorporation and
after giving effect to the issuance and sale of all of the shares of Series C
Preferred pursuant to the Series C Financing, the conversion price for the
Series B Preferred shall be seventy seven cents ($0.77) (the "Series B Preferred
Conversion Price"). Such Series B Preferred Conversion Price shall be adjusted
from time to time in accordance with this Section IV(F)(4). The conversion price
for the Series C Preferred shall initially be the Series C Original Issue Price
(the "Series C Preferred Conversion Price"). Such initial Series C Preferred
Conversion Price shall be adjusted from time to time in accordance with this
Section IV(F)(4). All references to the Series A Preferred Conversion Price, the
Series B Preferred Conversion Price and the Series C Preferred Conversion Price
herein shall mean, respectively, the Series A Preferred Conversion Price as so
adjusted, the Series B Preferred Conversion Price as so adjusted and the Series
C Preferred Conversion Price as so adjusted.
(d) MECHANICS OF CONVERSION. Each holder of Preferred Stock
who desires to convert the same into shares of Common Stock pursuant to this
Section IV(F)(4) shall surrender the certificate or certificates therefor, duly
endorsed (or a reasonably acceptable affidavit and indemnity undertaking in the
case of a lost, stolen or destroyed certificate), at the office of the Company
or any transfer agent for the Preferred Stock, and shall give written notice to
the Company at such office that such holder elects to convert the same. Such
notice shall state the number of shares of Preferred Stock being converted.
Thereupon, the Company shall promptly issue and deliver at such office to such
holder a certificate or certificates for the number of shares of Common Stock to
which such holder is entitled and shall promptly pay (i) in cash or, to the
extent sufficient funds are not then legally available therefor, in Common Stock
(at the Common Stock's fair market value determined by the Board of Directors as
of the date of such conversion), any declared and unpaid dividends on the shares
of Preferred Stock being converted and (ii) in cash (at the Common Stock's fair
market value determined by the Board of Directors as of the date of conversion)
the value of any fractional share of Common Stock otherwise issuable to any
holder of Preferred Stock. Such conversion shall be deemed to have been made at
the close of business on the date of such surrender of the certificate(s)
representing the shares of Preferred Stock to be converted, and the person
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder of such shares of Common
Stock on such date. If the conversion is in connection with an underwritten
offering of securities registered pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), the conversion may, at the option of any holder
tendering such Preferred Stock for conversion, be conditioned upon the closing
with the underwriters of the sale of securities pursuant to such offering, in
which event the person(s) entitled to receive Common Stock upon conversion of
such Preferred Stock shall not be deemed to have converted such Preferred Stock
until immediately prior to the closing of such sale of securities.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If at any
time or from time to time after the filing date hereof the Company effects a
subdivision of the outstanding Common Stock without a corresponding subdivision
of the Preferred Stock, the Series A Preferred Conversion Price and the Series B
Preferred Conversion Price in effect immediately before such subdivision shall
be proportionately decreased. Conversely, if at any time or from time to time
after the filing date hereof the Company combines the outstanding shares of
Common Stock into a smaller number of shares without a corresponding combination
9
of the Preferred Stock, the Series A Preferred Conversion Price and the Series B
Preferred Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section IV(F)(4)(e) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(f) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS.
If at any time or from time to time after the filing date hereof the Company
pays a dividend or other distribution in additional shares of Common Stock, the
Series A Preferred Conversion Price, the Series B Preferred Conversion Price and
Series C Preferred Conversion Price that are then in effect shall be decreased
as of the time of such issuance, as provided below:
(i) Each of the Series A Preferred Conversion Price, the
Series B Preferred Conversion Price and Series C Preferred Conversion Price
shall be adjusted by multiplying each of the Series A Preferred Conversion
Price, the Series B Preferred Conversion Price and Series C Preferred Conversion
Price then in effect by a fraction equal to:
(A) the numerator of which is the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance, and
(B) the denominator of which is the total number
of shares of Common Stock issued and outstanding immediately prior to the time
of such issuance plus the number of shares of Common Stock issuable in payment
of such dividend or distribution;
(ii) If the Company fixes a record date to determine
which holders of Common Stock are entitled to receive such dividend or other
distribution, the Series A Preferred Conversion Price, the Series B Preferred
Conversion Price and Series C Preferred Conversion Price shall be fixed as of
the close of business on such record date and the number of shares of Common
Stock shall be calculated immediately prior to the close of business on such
record date; and
(iii) If such record date is fixed and such dividend is
not fully paid or if such distribution is not fully made on the date fixed
therefor, the Series A Preferred Conversion Price, the Series B Preferred
Conversion Price and Series C Preferred Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Series A Preferred Conversion Price, the Series B Preferred Conversion Price and
Series C Preferred Conversion Price shall be adjusted pursuant to this Section
4(f) to reflect the actual payment of such dividend or distribution.
(g) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the filing date hereof,
the Common Stock issuable upon the conversion of the Preferred Stock is changed
into the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than an
Acquisition or Asset Transfer as defined in Section IV(F)(3) or a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section
IV (F)(4)), in any such event each holder of Preferred Stock shall then have the
right to convert such stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change by holders of the
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maximum number of shares of Common Stock into which such shares of Preferred
Stock could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
(h) REORGANIZATIONS, MERGERS OR CONSOLIDATIONS. If at any time
or from time to time after the filing date hereof, there is a capital
reorganization of the Common Stock or the merger or consolidation of the Company
with or into another corporation or another entity or person (other than an
Acquisition or Asset Transfer as defined in Section IV(F)(3) or a
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section IV(F)(4)), as a
part of such capital reorganization, provision shall be made so that the holders
of the Preferred Stock shall thereafter be entitled to receive upon conversion
of the Preferred Stock the number of shares of stock or other securities or
property of the Company to which a holder of the number of shares of Common
Stock deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section IV(F)(4) with respect to the
rights of the holders of Preferred Stock after the capital reorganization to the
end that the provisions of this Section IV(F)(4) (including adjustment of the
Series A Preferred Conversion Price, the Series B Preferred Conversion Price and
Series C Preferred Conversion Price then in effect and the number of shares
issuable upon conversion of the Series A Preferred, Series B Preferred and
Series C Preferred, as the case may be, shall be applicable after that event and
be as nearly equivalent as practicable.
(i) SALE OF SHARES BELOW PREFERRED STOCK CONVERSION PRICES.
(i) If at any time or from time to time after the date
on which the first share of Series C Preferred is issued (the "Series C Original
Issue Date"), the Company issues or sells, or is deemed by the express
provisions of this Section IV(F)(4)(i) to have issued or sold, Additional Shares
of Common Stock (as defined below), other than as a dividend or other
distribution on any class of stock as provided in Section IV(F)(4)(f) above, and
other than a subdivision or combination of shares of Common Stock as provided in
Section IV(F)(4)(e) above, for an Effective Price (as defined below) less than
the then effective Series A Preferred Conversion Price, Series B Preferred
Conversion Price and/or Series C Preferred Conversion Price, as the case may be,
then and in each such case, the then existing Series A Preferred Conversion
Price, Series B Preferred Conversion Price and/or Series C Preferred Conversion
Price, as applicable, shall be reduced, as of the opening of business on the
date of such issue or sale, to a price determined by multiplying the Series A
Preferred Conversion Price, Series B Preferred Conversion Price and/or Series C
Preferred Conversion Price, as applicable, in effect immediately prior to such
issuance or sale by a fraction equal to:
(A) the numerator of which shall be (A) the number
of shares of Common Stock Deemed Outstanding (as defined below) immediately
prior to such issue or sale, plus (B) the number of shares of Common Stock which
the Aggregate Consideration received (as defined below) by the Company for the
total number of Additional Shares of Common Stock so issued would purchase at
such Series A Preferred Conversion Price,
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Series B Preferred Conversion Price or such Series C Preferred Conversion Price,
as applicable, and
(B) the denominator of which shall be the number
of shares of Common Stock Deemed Outstanding immediately prior to such issue or
sale plus the total number of Additional Shares of Common Stock so issued.
For the purposes of the preceding sentence, the number of shares of Common
Stock Deemed Outstanding as of a given date shall be the sum of (A) the number
of shares of Common Stock outstanding, (B) the number of shares of Common Stock
into which the then outstanding shares of Preferred Stock could be converted if
fully converted on the day immediately preceding the given date, and (C) the
number of shares of Common Stock which could be obtained through the exercise or
conversion of all other rights, options and convertible securities outstanding
on the day immediately preceding the given date.
(ii) No adjustment shall be made to the Series A
Preferred Conversion Price, Series B Preferred Conversion Price or the Series C
Preferred Conversion Price in an amount less than one cent ($0.01) per share.
Any adjustment otherwise required by this Section IV(F)(4)(i) that is not
required to be made due to the preceding sentence shall be included in any
subsequent adjustment to such Series A Preferred Conversion Price, Series B
Preferred Conversion Price or Series C Preferred Conversion Price, as
applicable.
(iii) For the purpose of making any adjustment required
under this Section IV(F)(4)(i), the aggregate consideration received by the
Company for any issue or sale of securities (the "Aggregate Consideration")
shall be defined as: (A) to the extent it consists of cash, be computed at the
net amount of cash received by the Company after deduction of any underwriting
or similar commissions, compensation or concessions paid or allowed by the
Company in connection with such issue or sale but without deduction of any
expenses payable by the Company, (B) to the extent it consists of property other
than cash, be computed at the fair value of that property as determined in good
faith by the Board of Directors, and (C) if Additional Shares of Common Stock,
Convertible Securities (as defined below) or rights or options to purchase
either Additional Shares of Common Stock or Convertible Securities are issued or
sold together with other stock or securities or other assets of the Company for
a consideration which covers both, be computed as the portion of the
consideration so received that may be reasonably determined in good faith by the
Board of Directors to be allocable to such. Additional Shares of Common Stock,
Convertible Securities or rights or options.
(iv) For the purpose of the adjustment required under
this Section IV(F)(4)(i), if the Company issues or sells (x) stock or other
securities convertible into, Additional Shares of Common Stock (such convertible
stock or securities being herein referred to as "Convertible Securities") or (y)
rights or options for the purchase of Additional Shares of Common Stock or
Convertible Securities and if the Effective Price of such Additional Shares of
Common Stock is less than the Series A Preferred Conversion Price, Series B
Preferred Conversion Price and/or Series C Preferred Conversion Price, in each
case the Company shall be deemed to have issued at the time of the issuance of
such rights or options or Convertible Securities the maximum number of
Additional Shares of Common Stock issuable upon exercise or conversion thereof
and to have received as consideration for the issuance of such shares an
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amount equal to the total amount of the consideration, if any, received by the
Company for the issuance of such rights or options or Convertible Securities
plus:
(A) in the case of such rights or options, the
minimum amounts of consideration, if any, payable to the Company upon the
exercise of such rights or options; and
(B) in the case of Convertible Securities, the
minimum amounts of consideration, if any, payable to the Company upon the
conversion thereof (other than by cancellation of liabilities or obligations
evidenced by such Convertible Securities); provided that if the minimum amounts
of such consideration cannot be ascertained, but are a function of antidilution
or similar protective clauses, the Company shall be deemed to have received the
minimum amounts of consideration without reference to such clauses.
(C) If the minimum amount of consideration payable
to the Company upon the exercise or conversion of rights, options or Convertible
Securities is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the Effective
Price shall be recalculated using the figure to which such minimum amount of
consideration is reduced; provided further, that if the minimum amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities is subsequently increased, the
Effective Price shall be again recalculated using the increased minimum amount
of consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities.
(D) No further adjustment of the Series A
Preferred Conversion Price, Series B Preferred Conversion Price or the Series C
Preferred Conversion Price, as adjusted upon the issuance of such rights,
options or Convertible Securities, shall be made as a result of the actual
issuance of Additional Shares of Common Stock or the exercise of any such rights
or options or the conversion of any such Convertible Securities. If any such
rights or options or the conversion privilege represented by any such
Convertible Securities shall expire without having been exercised, the Series A
Preferred Conversion Price, Series B Preferred Conversion Price and the Series C
Preferred Conversion Price as adjusted upon the issuance of such rights, options
or Convertible Securities shall be readjusted to the Series A Preferred
Conversion Price, Series B Preferred Conversion Price and the Series C Preferred
Conversion Price which would have been in effect had an adjustment been made on
the basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company upon such exercise,
plus the consideration, if any, actually received by the Company for the
granting of all such rights or options, whether or not exercised, plus the
consideration received for issuing or selling, the Convertible Securities
actually converted, plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion of such Convertible Securities,
provided that such readjustment shall not apply to prior conversions of
Preferred Stock.
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(v) For the purpose of making any adjustment to the
Series A Preferred Conversion Price, Series B Preferred Conversion Price and the
Series C Preferred Conversion Price required under this Section IV(F)(4)(i),
"Additional Shares of Common Stock" shall mean all shares of Common Stock issued
by the Company or deemed to be issued pursuant to this Section IV(F)(4)(i)
(including shares of Common Stock subsequently reacquired or retired by the
Company), other than:
(A) shares of Common Stock issued upon conversion
of the Preferred Stock;
(B) shares of Common Stock and/or options,
warrants or other Common Stock purchase rights and the Common Stock issued
pursuant to such options, warrants or other rights (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like after the filing
date hereof) after the Series C Original Issue Date to employees, officers or
directors of, or consultants or advisors to the Company or any subsidiary
pursuant to stock purchase or stock option plans or other arrangements that are
approved by the Board of Directors, including the affirmative vote of a majority
of the representatives of the Preferred Stock elected pursuant to Section
IV(F)(2)(d) hereto;
(C) shares of Common Stock issued pursuant to the
exercise of options, warrants or convertible securities outstanding as of the
Series C Original Issue Date;
(D) any Common Stock, Preferred Stock, or options,
warrants, or other securities convertible into Common Stock or Preferred Stock
("Equity Securities") issued for consideration other than cash pursuant to a
merger, consolidation, acquisition or similar business combination approved by
the Board of Directors;
(E) shares of Common Stock issued in connection
with any stock split, stock dividend or recapitalization by the Company;
(F) any Equity Securities that are issued by the
Company pursuant to a registration statement filed under the Securities Act;
(G) any Equity Securities issued in connection
with strategic alliances, joint ventures, manufacturing, marketing or
distribution arrangements or technology transfer or development arrangements;
provided that such strategic transaction and the issuance of shares therein, has
been approved by the Board of Directors, including the affirmative vote of a
majority of the representatives designated by the holders of the Preferred Stock
elected pursuant to Section IV(F)(2)(d) hereto; and provided further, that such
strategic transaction and the issuance of the shares therein, is not principally
for equity financing purposes;
(H) up to an aggregate of fifty thousand (50,000)
shares of stock of the Company issued to any charitable organization described
in Section 170(c) of the Internal Revenue Code provided that such donation has
been approved by the Board of Directors, including the affirmative vote of a
majority of the representatives designated by the holders of the Preferred Stock
elected pursuant to Section 2(d) hereto and
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(I) shares of Common Stock or Preferred stock
issued pursuant to any equipment loan or leasing arrangement, real property
leasing arrangement or debt financing from a bank or similar financial
institution approved by the Board of Directors, including the affirmative vote
of a majority of the representatives of the Preferred Stock elected pursuant to
Section IV(F)(2)(d) hereto.
References to Common Stock in the subsections of this clause (v) above
shall mean all shares of Common Stock issued by the Company or deemed to be
issued pursuant to this Section IV(E)(4)(i). The "Effective Price" of Additional
Shares of Common Stock shall mean the quotient determined by dividing the total
number of Additional Shares of Common Stock issued or sold, or deemed to have
been issued or sold by the Company under this Section IV(F)(4)(i), into the
Aggregate Consideration received, or deemed to have been received by the Company
for such issue under this Section IV(F)(4)(i), for such Additional Shares of
Common Stock.
(j) CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of the Series A Preferred Conversion Price, the
Series B Preferred Conversion Price and the Series C Preferred Conversion Price,
as the case may be, for the number of shares of Common Stock or other securities
issuable upon conversion of the Preferred Stock, if the Preferred Stock is then
convertible pursuant to this Section IV(F)(4), the Company, at its expense,
shall compute such adjustment or readjustment in accordance with the provisions
hereof and prepare a certificate showing such adjustment or readjustment, and
shall mail such certificate (i) to each registered holder of Preferred Stock who
is a resident of the United States, (A) by registered or certified mail, return
receipt requested, postage prepaid, or (B) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt; to such registered holder's address as shown in
the Company's books, or (ii) to each registered holder of Preferred Stock who is
a foreign resident, by a recognized international overnight courier, specifying
next day delivery, with verification of receipt, to such registered holder's
address as shown in the Company's books. The certificate shall set forth such
adjustment or readjustment, showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (1) the
consideration received or deemed to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (2) the Series A Preferred Conversion Price, the Series B Preferred
Conversion Price and the Series C Preferred Conversion Price at the time in
effect, (3) the number of Additional Shares of Common Stock and (4) the type and
amount, if any, of other property which at the time would be received upon
conversion of the Preferred Stock.
(k) NOTICES OF RECORD DATE. Upon (i) any taking by the
Company of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section IV(F)(3)) or
other capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other corporation, or any Asset
Transfer (as defined in Section IV(F)(3)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Company shall mail
(A) to each registered holder of Preferred Stock who is a resident of the United
States, by registered or certified mail, return receipt requested, postage
prepaid, to such holder's address as shown in the Company's books, and (B) to
each registered
15
holder of Preferred Stock who is a foreign resident, by a recognized
international overnight courier, specifying next day delivery, with verification
of receipt, to such registered holder's address as shown in the Company's books,
at least ten (10) days prior to the record date specified therein (or such
shorter period approved by the holders of at least sixty five percent (65%) of
the outstanding shares of Series A Preferred, Series B Preferred and Series C
Preferred, voting together as a single class) a notice specifying (1) the date
on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (2) the date on
which any such Acquisition, reorganization, reclassification, transfer,
consolidation, merger, Asset Transfer, dissolution, liquidation or winding up is
expected to become effective, and (3) the date, if any, that is to be fixed as
to when the holders of record of Common Stock (or other securities) shall be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up.
(l) AUTOMATIC CONVERSION.
(i) Each share of Preferred Stock shall automatically be
converted into shares of Common Stock, based on the then-effective Series A
Preferred Conversion Price, the Series B Preferred Conversion Price or Series C
Preferred Conversion Price, as applicable, immediately upon the closing of a
firmly underwritten public offering pursuant to an effective registration
statement under the Securities Act covering the offer and sale of Common Stock
for the account of the Company in which (x) the per share price is at least one
dollar and eighteen cents ($1.18) (as adjusted for stock splits, dividends,
recapitalizations and the like after the filing date hereof), and (y) the gross
cash proceeds to the Company (before underwriting discounts, commissions and
fees) are at least thirty million dollars ($30,000,000). Upon such automatic
conversion, any declared and unpaid dividends shall be paid in accordance with
the provisions of Section IV(F)(4)(d).
(ii) Upon the occurrence of the events specified in
Section IV(F)(4)(l)(i) above, the outstanding shares of Series A Preferred,
Series B Preferred and Series C Preferred shall be converted automatically
without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Company or its
transfer agent; provided, however, that the Company shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon such
conversion unless the certificates evidencing such shares of Series A Preferred,
Series B Preferred and/or Series C Preferred, as the case may be, are either
delivered to the Company or its transfer agent as provided below, or the holder
notifies the Company or its transfer agent that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the Company
to indemnify the Company from any loss incurred by it in connection with such
certificates. Upon the occurrence of such automatic conversion of the Series A
Preferred, Series B Preferred and the Series C Preferred, the holders of the
Series A Preferred, the Series B Preferred and/or the Series C Preferred, as the
case may be, shall surrender the certificates representing such shares at the
office of the Company or any transfer agent for the Preferred Stock. Thereupon,
there shall be issued and delivered to such holder promptly at such office and
in its name as shown on such surrendered certificate or certificates, a
certificate or certificates for the number of shares of Common Stock into which
such shares of Preferred Stock surrendered were convertible on the
16
date on which such automatic conversion occurred, and any declared and unpaid
dividends shall be paid in accordance with the provisions of Section
IV(F)(4)(d).
(m) SPECIAL MANDATORY CONVERSION OF SERIES A PREFERRED AND
SERIES B PREFERRED.
(i) Each Major Holder of any then outstanding shares of
Series A Preferred and/or Series B Preferred, as the case may be, that does not
purchase at least such holder's Pro Rata Share of the Insider Commitment (as
defined below) issued upon the consummation of the Series C Financing (as
defined below), shall have an amount equal to such Major Holder's Series A
Nonparticipating Share (as defined below) of then outstanding Series A Preferred
and such Major Holder's Series B Nonparticipating Share of the then outstanding
Series B Preferred, as applicable, automatically converted, on a one-to-one
basis, into fully paid and nonassessable shares of Common Stock effective upon
the consummation of the Series C Financing.
(ii) For purposes of this Section 4(m), the "Pro Rata
Share" of the Insider Commitment of any Major Holder of then outstanding Series
A Preferred and/or Series B Preferred, as the case may be, shall mean an amount
equal sixteen million eight hundred seventy seven thousand six hundred thirty
seven (16,877,637) multiplied by the quotient of (a) the number of shares of
then outstanding Common Stock held by such Major Holder (assuming full exercise
and/or conversion of all Series A Preferred and Series B Preferred Stock and all
other rights, options and convertible securities) and (b) all outstanding shares
of Common Stock (assuming full exercise and/or conversion of all Series A
Preferred and Series B Preferred Stock and all other rights, options and
convertible securities) held by all holders of Series A Preferred and Series B
Preferred.
(iii) For purposes of this Section 4(m), the "Series C
Financing" shall mean the issuance and sale of shares of Series C Preferred
pursuant to that certain Series C Preferred Stock Purchase Agreement dated as of
February 17, 2004 pursuant to which the Company shall issue and sell at least
one hundred nine million seven hundred four thousand six hundred thirty four
(109,704,634) shares of Series C Preferred.
(iv) For purposes of this Section 4(m), the "Series A
Nonparticipating Share" of any Major Holder of then outstanding shares of Series
A Preferred shall mean an amount equal to the number of shares of then
outstanding shares of Series A Preferred held by such holder multiplied by the
result of (a) one (1) minus (b) the quotient of (x) the number of shares of the
Series C Preferred issued in the Series C Financing and actually purchased by
such Major Holder and (y) the Pro Rata Share of the Insider Commitment of such
Major Holder; provided, however, that a Series A Nonparticipating Share shall
not be less than zero.
(v) For purposes of this Section 4(m), the "Series B
Nonparticipating Share" of any holder of then outstanding shares of Series B
Preferred shall mean an amount equal to the number of shares of then outstanding
shares of Series B Preferred held by such holder multiplied by the result of (a)
one (1) minus (b) the quotient of (x) the number of shares of the Series C
Preferred issued in the Series C Financing and actually
17
purchased by such Major Holder and (y) the Pro Rata Share of the Insider
Commitment of such Major Holder, provided, however, that a Series B
Nonparticipating Share shall not be less than zero.
(vi) For purposes of this Section 4(m), "Major Holder"
shall mean any stockholder of the Company owning, together with its affiliates,
at least one million shares of the Preferred Stock immediately prior to the
consummation of the Series C Financing.
(n) FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of Preferred Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series A Preferred, Series B Preferred and/or Series C Preferred, as the case
may be, by a holder thereof shall be aggregated for purposes of determining
whether the conversion would result in the issuance of any fractional share. If
after the aforementioned aggregation, the conversion would result in the
issuance of any fractional share, the Company shall, in lieu of issuing any
fractional share, pay cash equal to the product of such fraction multiplied by
the Common Stock's fair market value (as determined by the Board of Directors)
on the date of conversion.
(o) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Preferred Stock. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
(p) NOTICES. Any notice required by the provisions of this
Section IV(F)(4) shall be in writing and shall be deemed effectively given: (i)
upon personal delivery to the party to be notified, (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient, if not, then on the next business day, (iii) for stockholders who are
residents of the United States, (A) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (B)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt; or (iv) for
stockholders who are foreign residents, one (1) day after deposit with a
recognized international overnight courier, specifying next day delivery, with
verification of receipt. All notices shall be addressed to each holder of record
at the address of such holder appearing on the books of the Company.
(q) PAYMENT OF TAXES. The Company will pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
with respect to the issue or delivery of shares of Common Stock upon conversion
of shares of Preferred Stock, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Preferred Stock so
converted were registered.
18
(r) NO DILUTION OR IMPAIRMENT. Without the consent of the
holders of then outstanding Preferred Stock as required under Section
IV(F)(2)(b), the Company shall not amend its Third Amended and Restated
Certificate of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or take
any other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Preferred Stock
against dilution or other impairment.
(s) NO REISSUANCE OF PREFERRED STOCK. No share or shares of
Preferred Stock acquired by the Company by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares that the Company shall be
authorized to issue.
V.
A. The liability of the directors of the Company for monetary damages
shall be eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article V shall only be prospective
and shall not affect the rights under this Article V in effect at the time of
the alleged occurrence of any action or omission to act giving rise to
liability.
VI.
For the management of the business and for the conduct of the affairs of
the Company, and in further definition, limitation and regulation of the powers
of the Company, of its directors and of its stockholders or any class thereof,
as the case maybe, it is further provided that:
A. The management of the business and the conduct of the affairs of the
Company shall be vested in its Board of Directors. The number of directors which
shall constitute the whole Board of Directors shall be fixed by the Board of
Directors in the manner provided in the Bylaws, subject to any restrictions
which may be set forth in this Third Amended and Restated Certificate of
Incorporation.
B. The Board of Directors is expressly empowered to adopt, amend or repeal
the Bylaws of the Company. The stockholders shall also have the power to adopt,
amend or repeal the Bylaws of the Company; provided however, that in addition to
any role of the holders of any class or series of stock of the Company required
by law or by this Third Amended and Restated Certificate of Incorporation, the
affirmative vote of the holders of at least a majority of the voting power of
all of the then-outstanding shares of the capital stock of the Company entitled
to vote generally in the election of directors, voting together as a single
class shall be required to adopt, amend or repeal any provision of the Bylaws of
the Company.
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C. The directors of the Company need not be elected by written ballot
unless the Bylaws so provide.
VII
The Company shall, to the maximum extent permitted from time to time under
the laws of the State of Delaware, indemnify and upon request shall advance
expenses to any person who is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit, proceeding or claim,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was or has agreed to be a director or officer, of the Company or
while a director or officer is or was serving at the request of the Company as a
director, officer, partner, trustee, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, against any and all expenses (including
attorney's fees and expenses), judgments, fines, penalties and amounts paid in
settlement or incurred in connection with the investigation, preparation to
defend or defense of such action, suit, proceeding or claim; provided, however,
that the foregoing shall not require the Company to indemnify or advance
expenses to any person in connection with any action, suit, proceeding, claim or
counterclaim initiated by or on behalf of such person. Such indemnification
shall not be exclusive of other indemnification rights arising under any by-law,
agreement, vote of directors or stockholders or otherwise and shall inure to the
benefit of the heirs and legal representatives of such person. No amendment or
repeal of this Article VII shall apply to or adversely affect any right or
protection of a director or officer of the Company with respect to any act or
omission of such director occurring prior to such amendment or repeal.
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