EXHIBIT 4.3
CERTIFICATE OF DESIGNATION
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
ISOLAGEN, INC.
Pursuant to Section 151(g) of the General Corporation Law of the State
of Delaware ("DGCL"), Isolagen, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Company"), hereby certifies that the
following resolution was duly adopted by the Board of Directors of the Company
on May 7, 2003, pursuant to authority conferred upon the Board of Directors by
the Certificate of Incorporation of the Company, which authorizes the issuance
of up to 5,000,000 shares of preferred stock, par value $0.001 per share:
RESOLVED, that pursuant to authority expressly granted to and vested in
the Board of Directors of the Company and pursuant to the provisions of the
Certificate of Incorporation, the Board of Directors hereby creates a series of
preferred stock, herein designated and authorized as Series B Convertible
Preferred Stock, par value $0.001 per share ("Series B Preferred Stock"), which
shall consist of 200,000 of the 5,000,000 shares of preferred stock which the
Company now has authority to issue, and the Board of Directors hereby fixes the
powers, designations, preferences and relative, participating, optional and
other special rights of the shares of such series and the qualifications,
limitations and restrictions thereof as follows:
1. NUMBER AND RANK. The number of shares constituting the Series
B Preferred Stock shall be 200,000. The Series B Preferred Stock shall rank
senior to the Common Stock (as defined below) with respect to the payment of
dividends and distributions on Liquidation (as defined below). The Series B
Preferred Stock shall rank junior to the Series A Preferred Stock (as defined
below) with respect to the payment of dividends and distributions on
Liquidation.
2. DEFINITIONS. Unless the context otherwise requires, when used
herein the following terms shall have the meaning indicated.
"Board" means the Board of Directors of the Company.
"Business Combination" means (i) any consolidation or merger of the
Company with or into any Person; (ii) any Change of Control Stock Issuance; or
(iii) the sale, assignment conveyance, transfer, lease or other disposition by
the Company of all or substantially all of its assets followed by a liquidation
of the Company.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in Houston,
Texas generally are authorized or required by law or other governmental actions
to close.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated) of capital or capital stock of such Person and (ii) with
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Certificate" means the Certificate of Incorporation of the Company, as
amended (including any certificate of designation establishing a series of
preferred stock).
"Certificate of Designation" means this Certificate of Designation of
Series B Preferred Stock.
"Change of Control Stock Issuance" shall mean any issuance, in a single
transaction or series of related transactions, by the Company of shares of
Common Stock or Common Stock Equivalents in connection with the acquisition of
assets (including cash) or securities by the Company or a Subsidiary of the
Company (including by way of a merger of a Subsidiary of the Company with or
into a Person), except where (i) the shareholders of the Company immediately
prior to such issuance own (in substantially the same proportion relative to
each other as such
1
shareholders owned the Common Stock or Voting Stock of the Company, as the case
may be, immediately prior to such consummation) (x) more than 50% of the Voting
Stock of the Company immediately after such issuance, and (y) more than 50% of
the outstanding Common Stock immediately after such issuance; or (ii) the
members of the Board immediately prior to entering into the agreement relating
to such issuance (or if no such agreement is entered into, then immediately
prior to the consummation of such issuance) constitute at least a majority of
the Board immediately after such issuance, with no agreements or arrangements in
place immediately after such consummation that would result in the members of
the Board immediately prior to the entering into the agreement relating to such
issuance ceasing to constitute at least a majority of the Board. In calculating
the percentage of the Voting Stock of the Company owned by the shareholders of
the Company immediately prior to an issuance of Common Stock or Common Stock
Equivalents in which there is more than one class or series of Voting Stock, the
percentage of the Voting Stock shall be calculated based on the number of votes
eligible to be cast in the election of the directors of the Company generally.
In calculating the percentages of Voting Stock and Common Stock owned for
purposes of this definition, such calculation shall be calculated on a basis
assuming the exercise or conversion in full of all Common Stock Equivalents and
on a basis disregarding all Common Stock Equivalents, and the percentage which
results in the lower percentage owned by the shareholders of the Company shall
apply in the application of clause (i) above.
"Common Stock" means the Company's common stock, par value $0.001 per
share, and any Capital Stock for or into which such Common Stock hereafter is
exchanged, converted, reclassified or recapitalized by the Company or pursuant
to a Business Combination to which the Company is a party.
"Common Stock Equivalents" means (without duplication with any other
Common Stock or Common Stock Equivalents) rights, warrants, options, convertible
securities or exchangeable securities, exercisable for or convertible or
exchangeable into, directly or indirectly, Common Stock.
"Company" means Isolagen, Inc., a Delaware corporation.
"Conversion Date" is defined in Section 6(E).
"Conversion Price" means $3.50 per share of Series B Preferred Stock,
as adjusted from time to time in accordance with Section 7.
"Conversion Ratio" is defined in Section 6(D).
"DGCL" means the General Corporation Law of the State of Delaware, as
amended, or any successor statute or other legislation.
"Dividend Payment Date" is defined in Section 3(A).
"Dividend Period" is defined in Section 3(A).
"Excluded Stock" means (i) shares of Series B Preferred Stock issued by
the Company as a stock dividend payable in shares of Series B Preferred Stock in
accordance with Section 3 or upon conversion of shares of Capital Stock (but not
the issuance of such Capital Stock, which will be subject to the provisions of
Section 7(A)(iii))], (ii) shares of Common Stock to be issued to employees,
directors, consultants and advisors of the Company pursuant to the Stock Plans
in accordance with their respective terms; and (iii) shares of Series A
Preferred Stock issued by the Company as a stock dividend payable in shares of
Series A Preferred Stock in accordance the Series A Preferred Stock Certificate
of Designation or upon conversion of shares of Capital Stock (but not the
issuance of such Capital Stock, which will be subject to the provisions of
Section 7(A)(iii)).
"Final Mandatory Conversion Date" is defined in Section 6(C).
"Holder" means a holder of record of Series B Preferred Stock.
2
"Issue Date" means with respect to any shares of Series B Preferred
Stock the original date of issuance of such shares of Series B Preferred Stock.
"Junior Securities" means Capital Stock that, with respect to dividends
and distributions upon Liquidation, ranks junior to the Series B Preferred
Stock.
"Liquidation" means the voluntary or involuntary liquidation,
dissolution or winding up of the Company; provided, however, that a merger or
consolidation shall not be deemed a Liquidation nor shall the sale of assets not
requiring shareholder approval be deemed to be a Liquidation.
"Liquidation Preference" is defined in Section 5.
"Mandatory Trading Conversion Date" is defined in Section 6(B).
"Market Price" means, with respect to a particular security, on any
given day, the last reported sale price regular way or, in case no such reported
sale takes place on such day, the average of the last closing bid and asked
prices regular way, in either case on the principal national securities exchange
on which the applicable security is listed or admitted to trading, or if not
listed or admitted to trading on any national securities exchange, (i) the
closing sale price for such day reported by the Nasdaq Stock Market if such
security is traded over-the-counter and quoted in the Nasdaq Stock Market; or
(ii) if such security is so traded, but not so quoted, the average of the
closing reported bid and asked prices of such security as reported by the Nasdaq
Stock Market or any comparable system; or (iii) if such security is not listed
on the Nasdaq Stock Market or any comparable system but is actively traded, the
average of the closing bid and asked prices as furnished by two (2) members of
the National Association of Securities Dealers, Inc. selected from time to time
by the Company for that purpose. If such security is not listed and traded in a
manner that the quotations referred to above are available for the period
required hereunder, the Market Price shall be deemed to be the fair value per
share of such security as determined by a nationally recognized investment
banking firm selected by the Board and reasonably acceptable to the Holders of a
majority of the outstanding shares of Series B Preferred Stock.
"Offering" means the offering of shares of Series B Preferred Stock
pursuant to that certain private placement memorandum of the Company, dated
March 10, 2003, as amended or supplemented.
"Parity Securities" means Capital Stock that, with respect to dividends
or distributions upon Liquidation, is pari passu with the Series B Preferred
Stock.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, limited liability company, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"Record Date" is defined in Section 3(A).
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute, and the rules and regulations promulgated thereunder.
"Senior Securities" means Capital Stock that, with respect to dividends
or distributions upon Liquidation, ranks senior to the Series B Preferred Stock.
"Series A Preferred Stock" means the Series A Preferred Stock, par
value $0.001 per share, of the Company.
"Series B Preferred Stock" means the Series B Preferred Stock, par
value $0.001 per share, of the Company.
"Stated Value" is an amount equal to $28.00 per share of Series B
Preferred Stock.
3
"Stock Plans" means the Company's stock option, stock incentive,
restricted stock, employee stock purchase or other similar plans, in each case
that have been approved by the Company's shareholders.
"Subsidiary" of a Person means (i) a corporation, a majority of whose
stock with voting power, under ordinary circumstances, to elect directors is at
the time of determination, directly or indirectly, owned by such Person or by
one or more Subsidiaries of such Person; or (ii) any other entity (other than a
corporation) in which such Person or one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has a majority
ownership interest or, with respect to a limited partnership, is a general
partner of such limited partnership.
"Trading Day" means a day on which the principal market with respect to
the security in question is regularly scheduled to be open for trading, or if
there is not such principal market, then a day on which the New York Stock
Exchange is regularly scheduled to be open for trading.
"Voting Stock" of a Person means Capital Stock of such Person of the
class or classes pursuant to which the holders thereof have the general voting
power under ordinary circumstances to vote in the election of the board of
directors, managers or trustees of such Person.
The foregoing definitions will be equally applicable to both the
singular and plural forms of the defined terms.
3. DIVIDENDS AND DISTRIBUTIONS.
(A) The holders of Series B Preferred Stock shall be
entitled to receive, out of the assets of the Company legally available
for that purpose, cumulative preferential dividends in either shares of
Series B Preferred Stock at its Stated Value or cash, as determined by
the Board in its sole discretion, at a rate per annum of six percent
(6%) of the Stated Value (equivalent to $1.68 per share per annum) for
each share of Series B Preferred Stock, and, except as provided in
Section 3(B), no more, to be paid in accordance with the terms of this
Section 3. Such dividends shall be cumulative from the Issue Date and
shall be payable in arrears, when and as declared by the Board, on
December 31 of each year ("Dividend Payment Date"), commencing on the
first such Dividend Payment Date following the Issue Date; provided
that if any Dividend Payment Date shall not be a Business Day, then the
Dividend Payment Date shall be on the next succeeding day that is a
Business Day. The period from the Issue Date to the next Dividend
Payment Date and each annual period between consecutive Dividend
Payment Dates shall hereinafter be referred to as "Dividend Periods."
Dividends for the initial Dividend Period shall be pro rated on a daily
basis commencing on and including the Issue Date on the basis of a
365-day year. Each such dividend shall be paid to the holders of record
of the Series B Preferred Stock as their names appear on the share
register of the Company on the corresponding Record Date. As used
above, the term "Record Date" means, with respect to the dividend
payable on the Dividend Payment Date of each year, the preceding
December 15, or such other record date designated by the Board with
respect to the dividend payable on such respective Dividend Payment
Date not exceeding thirty (30) days preceding such Dividend Payment
Date. Dividends on account of arrears for any past Dividend Periods may
be declared and paid, together with any accrued but unpaid interest
thereon to and including the date of payment, at any time, without
reference to any Dividend Payment Date, to holders of record on a date
designated by the Board, not exceeding thirty (30) days preceding the
payment date thereof, as may be fixed by the Board.
(B) If, on any Dividend Payment Date, the Company fails
to pay dividends, then until the dividends that were scheduled to be
paid on such date are paid, such dividends shall cumulate. Dividends
for any period less than a full annual Dividend Period or for a period
commencing on a Dividend Payment Date and ending on a Conversion Date
shall cumulate on a day-to-day basis and shall be computed on the basis
of a 365-day year.
(C) So long as any shares of the Series B Preferred Stock
shall be outstanding, (i) the Company shall not declare or pay any
dividend whatsoever, whether in cash, property or otherwise, set aside
any cash or property for the payment of dividends, or make any other
distribution on any Junior Securities (except a dividend or
distribution payable solely in shares of Junior Securities); (ii) the
Company
4
shall not declare or pay any dividend whatsoever, whether in cash,
property or otherwise, set aside any cash or property for the payment
of dividends, or make any other distribution on any Parity Securities
ranking on parity with the Series B Preferred Stock with respect to
dividends or distributions (except a dividend or distribution payable
solely in shares of Junior Securities), unless declared and paid pro
rata with the Series B Preferred Stock in proportion to the full amount
to which they would otherwise be respectively entitled; and (iii) the
Company shall not and shall cause its Subsidiaries not to repurchase,
redeem or otherwise acquire or set aside any cash or property for the
repurchase or redemption of any Junior Securities or Parity Securities,
unless in each such case all dividends to which the holders of the
Series B Preferred Stock shall have been entitled for all previous
Dividend Periods shall have been paid or declared and a sum of money
sufficient for the payment thereof shall have been set aside.
4. VOTING RIGHTS. The Holders shall have the following voting
rights with respect to the Series B Preferred Stock:
(A) Subject to applicable law, the shares of Series B
Preferred Stock shall have no voting rights other than as set forth in
this Section 4.
(B) Holders of shares of the Series B Preferred Stock
shall be entitled to vote upon all matters upon which holders of Common
Stock and Series A Preferred Stock have the right to vote, and Holders
shall have that number of votes on all such matters as is equal to the
Conversion Ratio that would apply if such Holder's shares of Series B
Preferred Stock were to be converted pursuant to Section 6(A) as of the
record date for the determination of the shareholders entitled to vote
on such matters, or, if no such record date is established as of the
date such vote is taken or any written consent of shareholders is
solicited, such votes to be counted together with all other shares of
capital stock having general voting powers and not separately as a
class. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after
aggregating all shares into which shares of Series B Preferred Stock
held by each Holder could be converted) shall be rounded up to the
nearest whole number.
(C) The consent of the Holders of at least a majority of
the Series B Preferred Stock, voting separately as a single class with
one (1) vote per share, in person or by proxy, either in writing
without a meeting or at an annual or a special meeting of shareholders
called for the purpose, shall be necessary to:
(i) amend, alter or repeal, by way of merger or
otherwise, any of the provisions of the Certificate so as to
authorize, create or issue any shares of Parity Securities or
Senior Securities (or amend the provisions of any existing
class of Capital Stock to make such class of Capital Stock a
class of Parity Securities or Senior Securities);
(ii) issue any Parity Securities or Senior
Securities; or
(iii) amend, alter or repeal, by way of merger or
otherwise, any of the provisions of (x) the Certificate of
Designation or any certificate of designation of terms of any
Parity Securities; or (y) the Certificate so as to affect
adversely any of the rights, preferences or privileges of the
Holders.
5. LIQUIDATION PREFERENCE. In the event of any Liquidation, after
payment or provision for payment by the Company of the debts and other
liabilities of the Company and the liquidation preference of any Senior
Securities that rank senior to the Series B Preferred Stock with respect to
distributions on Liquidation, each Holder shall be entitled to receive an amount
in cash for each share of the then outstanding Series B Preferred Stock held by
such Holder equal to the Stated Value per share, plus an amount equal to all
accrued but unpaid dividends thereon, whether or not earnings are available in
respect of such dividends or such dividends have been declared, to and including
the date full payment is tendered to the Holders with respect to such
Liquidation, and no more (such amount being referred to herein as the
"Liquidation Preference"), before any distribution shall be made to the holders
of any Junior Securities upon the Liquidation of the Company. In case the assets
of the Company available for payment to the Holders upon a Liquidation are
insufficient to pay the full Liquidation Preference on all outstanding shares of
the Series B Preferred Stock and all outstanding Senior Securities or Parity
Securities, in each case ranking on parity with the Series B Preferred Stock as
to distributions on Liquidation, in the amounts to which
5
the holders of such shares are entitled, then the entire assets of the Company
available for payment to the Holders of Series B Preferred Stock and holders of
such Senior Securities or Parity Securities will be distributed ratably among
the Holders of the Series B Preferred Stock and the holders of such Senior
Securities or Parity Securities, based upon the aggregate amount due on such
shares upon Liquidation. Written notice of any Liquidation of the Company,
stating a payment date and the place where the distributable amounts shall be
payable, shall be given by mail, postage prepaid, not less than thirty (30) days
prior to the payment date stated therein, to the Holders of record of the Series
B Preferred Stock at their respective addresses as the same shall appear on the
books of the Company.
6. CONVERSION RIGHTS. The Series B Preferred Stock shall be
convertible as follows:
(A) Conversion at Holder's Option. The Holder of any
shares of Series B Preferred Stock shall have the right at such
Holder's option, at any time prior to either the Mandatory Trading
Conversion Date or the Final Mandatory Conversion Date and without the
payment of any additional consideration, to convert any or all of such
shares of Series B Preferred Stock into a number of fully paid and
nonassessable shares of Common Stock for each such share of Series B
Preferred Stock equal to the Conversion Ratio, upon the terms
hereinafter set forth.
(B) Mandatory Conversion in the Event of Certain Market
Price of Common Stock. If after June 1, 2004 the shares of Common Stock
are traded on a nationally recognized exchange, then at such time that
the Market Price of shares of Common Stock for a period of twenty (20)
consecutive Trading Days, as reported on such exchange, is equal to or
greater than $8.00 per share (the "Mandatory Trading Conversion Date"),
each outstanding share of Series B Preferred Stock shall, without any
action on the part of the Holder of such share or the Company, be
converted automatically into a number of full paid and nonassessable
shares of Common Stock equal to the Conversion Ratio in effect on the
Mandatory Trading Conversion Date.
(C) Mandatory Conversion on June 1, 2008. On June 1, 2008
(the "Final Mandatory Conversion Date"), each outstanding share of
Series B Preferred Stock shall, without any action on the part of the
Holder of such share or the Company, be converted automatically into a
number of full paid and nonassessable shares of Common Stock equal to
the Conversion Ratio in effect on the Final Mandatory Conversion Date.
(D) Conversion Ratio. In the event of a conversion
pursuant to Sections 6(A), (B) or (C), the "Conversion Ratio" shall be
a number of shares of Common Stock calculated by dividing (a) the
Stated Value plus any accrued and unpaid dividends to and including the
applicable Conversion Date by (b) the Conversion Price in effect on the
applicable Conversion Date.
(E) Mechanics of Conversion. The Holder of any shares of
Series B Preferred Stock may exercise the conversion right specified in
Section 6(A) by surrendering to the Company or any transfer agent of
the Company the certificate or certificates representing the shares of
Series B Preferred Stock to be converted, accompanied by written notice
specifying the number of such shares to be converted. Upon the
occurrence of the Mandatory Trading Conversion Date or the Final
Mandatory Conversion Date, all of the outstanding shares of Series B
Preferred Stock shall be converted automatically without any further
action by the Holders of such shares of the Company and whether or not
the certificates representing such shares are surrendered to the
Company or its transfer agent; provided that the Company shall not be
obligated to issue to any such Holder certificates evidencing the
shares of Common Stock issuable upon such conversion unless (i)
certificates evidencing the shares of Series B Preferred Stock are
either delivered to the Company or any transfer agent of the Company;
or (ii) the holder notifies the Company or any transfer agent of the
Company that the such certificates have been lost, stolen or destroyed
and executes an agreement reasonably satisfactory to the Company to
indemnify the Company from any loss incurred by it in connection
therewith. If the certificates representing shares of Common Stock
issuable upon conversion of shares of Series B Preferred Stock are to
be issued in a name other than the name on the face of the certificates
representing such shares of Series B Preferred Stock, such certificates
shall be accompanied by such evidence of the assignment and such
evidence of the signatory's authority with respect thereto as deemed
appropriate by the Company or its transfer agent. Conversion shall be
deemed to have been effected (i) on the date when the notice of an
election to convert pursuant to Section 6(A) and certificates
6
representing the shares being converted are actually received by the
Company or any transfer agent of the Company; (ii) on the Mandatory
Trading Conversion Date; or (iii) on the Final Mandatory Conversion
Date, as the case may be. Such dates that conversion shall be deemed to
be effective shall be referred to herein as the "Conversion Date."
Subject to the provisions of Section 7(E), as promptly as practicable
after the Conversion Date, the Company shall issue and deliver to or
upon the written order of such Holder a certificate or certificates for
the number of shares of Common Stock to which such Holder is entitled
upon such conversion and a check or cash with respect to any fractional
interest in a share of Common Stock, as provided in Section 6(F). The
person in whose name the certificate or certificates for shares of
Common Stock are to be issued shall be deemed to have become a holder
of record of such shares of Common Stock on the applicable Conversion
Date. Upon conversion of only a portion of the shares covered by a
certificate representing shares of Series B Preferred Stock surrendered
for conversion pursuant to Section 6(A), the Company shall issue and
deliver to or upon the written order of the Holder of the certificate
so surrendered for conversion, at the expense of the Company, a new
certificate representing the number of shares of Series B Preferred
Stock representing the unconverted portion of the certificate so
surrendered.
(F) Fractional Shares. No fractional shares of Common
Stock or scrip shall be issued upon conversion of shares of Series B
Preferred Stock. If more than one (1) share of Series B Preferred Stock
shall be surrendered for conversion at any one time by the same Holder,
the number of shares of Common Stock issuable upon conversion thereof
shall be computed on the basis of the aggregate number of shares of
Series B Preferred Stock so surrendered. Instead of any fractional
share of Common Stock which would otherwise be issuable upon conversion
of any shares of Series B Preferred Stock, the Company shall pay a cash
adjustment in respect of such fractional interest in an amount equal to
that fractional interest of the Market Price of the Common Stock on the
Conversion Date.
(G) Authorization and Issuance. The Company covenants and
agrees that:
(i) the shares of Common Stock issuable upon any
conversion of any shares of Series B Preferred Stock will be
deemed to have been issued (i) to the Person exercising such
conversion rights under Section 6(A) on the Conversion Date or
(ii) the record holder of the shares of Series B Preferred
Stock to be converted, as reflected on the books and records
of the Company or its transfer agent, on the Mandatory Trading
Conversion Date or the Final Mandatory Conversion Date, as the
case may be, and such Person will be deemed for all purposes
to have become the record holder of such shares of Common
Stock on the Conversion Date;
(ii) all shares of Common Stock which may be
issued upon any conversion of any Series B Preferred Stock
will, upon issuance, be fully paid and non-assessable and free
from all taxes, liens and charges with respect to the issue
thereof;
(iii) the Company will take all such action as may
be necessary to assure that all shares of Common Stock
issuable upon conversion of shares of Series B Preferred Stock
may be issued without violation of any applicable law or
regulation or of any requirements of any domestic securities
exchange upon which securities of the same class may be
listed;
(iv) the Company will not take any action which
would result in any adjustment of the Conversion Price if the
total number of shares of Common Stock issuable after such
action upon conversion of all shares of Series B Preferred
Stock, together with all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon
the exercise of all outstanding Common Stock Equivalents,
would exceed the total number of shares of Common Stock then
authorized by the Certificate;
(v) the Company will at all times reserve and
keep available, out of its authorized but unissued shares of
Common Stock or out of shares of Common Stock held in its
treasury, the full number of shares of Common Stock into which
all shares of the Series B Preferred Stock having conversion
privileges from time to time outstanding are convertible; and
7
(vi) the Company will at no time close its
transfer books against the transfer of the Series B Preferred
Stock or of any share of Common Stock issued or issuable upon
the conversion of the Series B Preferred Stock in any manner
which interferes with the timely conversion of the Series B
Preferred Stock.
7. CONVERSION PRICE ADJUSTMENTS. The Conversion Price shall be
subject to adjustment from time to time as follows:
(A) Common Stock Issued at Less than Conversion Price. If
the Company issues or sells any Common Stock, other than Excluded
Stock, without consideration or for a consideration per share less than
the Conversion Price in effect immediately prior to such issuance or
sale, the Conversion Price in effect immediately prior to each such
issuance or sale will immediately (except as provided below) be reduced
to the price determined by multiplying the Conversion Price in effect
immediately prior to such issuance or sale, by a fraction, (1) the
numerator of which shall be (i) the number of shares of Common Stock
outstanding immediately prior to such issuance or sale plus (ii) the
number of shares of Common Stock which the aggregate consideration
received by the Company for the total number of such additional shares
of Common Stock so issued or sold would purchase at the Conversion
Price in effect immediately prior to such issuance or sale and (2) the
denominator of which shall be the number of shares of Common Stock
outstanding immediately after such issue or sale. For the purposes of
any adjustment of the Conversion Price pursuant to this Section 7(A),
the following provisions shall be applicable:
(i) in the case of the issuance of Common Stock
for cash, the amount of the consideration received by the
Company shall be deemed to be the amount of the cash proceeds
received by the Company for such Common Stock before deducting
therefrom any discounts or commissions allowed, paid or
incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof;
(ii) in the case of the issuance of Common Stock
(otherwise than upon the conversion of shares of Capital Stock
or other securities of the Company) for a consideration in
whole or in part other than cash, including securities
acquired in exchange therefor (other than securities by their
terms so exchangeable), the consideration other than cash
shall be deemed to be the fair value thereof as reasonably
determined by the Board, irrespective of any accounting
treatment;
(iii) in the case of the issuance of (a) options,
warrants or other rights to purchase or acquire Common Stock,
(b) securities by their terms convertible into or exchangeable
for Common Stock or (c) options, warrants or rights to
purchase such convertible or exchangeable securities:
(1) the aggregate maximum number of
shares of Common Stock deliverable upon exercise of
such options, warrants or other rights to purchase or
acquire Common Stock shall be deemed to have been
issued at the time such options, warrants or rights
are issued and for a consideration equal to the
consideration (determined in the manner provided in
Section 7(A)(i) and (ii)), if any, received by the
Company upon the issuance of such options, warrants
or rights plus the minimum purchase price provided in
such options, warrants or rights for the Common Stock
covered thereby;
(2) the aggregate maximum number of
shares of Common Stock deliverable upon conversion of
or in exchange for any such convertible or
exchangeable securities, or upon the exercise of
options, warrants or other rights to purchase or
acquire such convertible or exchangeable securities
and the subsequent conversion or exchange thereof,
shall be deemed to have been issued at the time such
securities were issued or such options, warrants or
rights were issued and for a consideration equal to
the consideration, if any, received by the Company
for any such securities and related options, warrants
or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the
additional consideration (determined in the manner
provided
8
in Section 7(A)(i) and (ii)), if any, to be received
by the Company upon the conversion or exchange of
such securities, or upon the exercise of any related
options, warrants or rights to purchase or acquire
such convertible or exchangeable securities and the
subsequent conversion or exchange thereof;
(3) on any change in the number of
shares of Common Stock deliverable upon exercise of
any such options, warrants or rights or conversion or
exchange of such convertible or exchangeable
securities or any change in the consideration to be
received by the Company upon such exercise,
conversion or exchange, but excluding changes
resulting from the anti-dilution provisions thereof
(to the extent comparable to the anti-dilution
provisions contained herein), the Conversion Price as
then in effect shall forthwith be readjusted to such
Conversion Price as would have been obtained had an
adjustment been made upon the issuance of such
options, warrants or rights not exercised prior to
such change, or of such convertible or exchangeable
securities not converted or exchanged prior to such
change, upon the basis of such change;
(4) on the expiration or cancellation
of any such options, warrants or rights (without
exercise), or the termination of the right to convert
or exchange such convertible or exchangeable
securities (without exercise), if the Conversion
Price shall have been adjusted upon the issuance
thereof, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have
been obtained had an adjustment been made upon the
issuance of such options, warrants, rights or such
convertible or exchangeable securities on the basis
of the issuance of only the number of shares of
Common Stock actually issued upon the exercise of
such options, warrants or rights, or upon the
conversion or exchange of such convertible or
exchangeable securities; and
(5) if the Conversion Price shall have
been adjusted upon the issuance of any such options,
warrants, rights or convertible or exchangeable
securities, no further adjustment of the Conversion
Price shall be made for the actual issuance of Common
Stock upon the exercise, conversion or exchange
thereof;
provided, however, that no increase in the Conversion Price
shall be made pursuant to subclauses (1) or (2) of this
Section 7(A)(iii).
(B) Stock Splits, Subdivisions, Reclassifications or
Combinations. If the Company shall (1) declare a dividend or make a
distribution on its Common Stock in shares of Common Stock, (2)
subdivide or reclassify the outstanding shares of Common Stock into a
greater number of shares, or (3) combine or reclassify the outstanding
Common Stock into a smaller number of shares, the Conversion Price in
effect at the time of the record date for such dividend or distribution
or the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the Holder
of any shares of Series B Preferred Stock surrendered for conversion or
exchange after such date shall be entitled to receive the number of
shares of Common Stock which such holder would have owned or been
entitled to receive after such date had such Series B Preferred Stock
been converted or exchanged immediately prior to such date. Successive
adjustments in the Conversion Price shall be made whenever any event
specified above shall occur.
(C) Business Combinations. In case of any Business
Combination in which the holders of shares of Common Stock are entitled
to receive stock, securities or property by virtue of their ownership
of Common Stock or a reclassification of Common Stock (other than a
reclassification of Common Stock referred to in Section 7(B)), each
share of Series B Preferred Stock shall after the date of such Business
Combination or reclassification be convertible into the number of
shares of stock or other securities or property (including cash) to
which the Common Stock issuable upon conversion of such share of Series
B Preferred Stock immediately prior to such Business Combination or
reclassification would have been entitled upon such Business
Combination or reclassification; and in any such case, if necessary,
the provisions set forth herein with respect to the rights and
interests thereafter of the Holders of the shares of Series B Preferred
Stock shall be appropriately adjusted so as to be applicable, as nearly
as may reasonably
9
be, to any shares of stock or other securities or property thereafter
deliverable on the conversion of the shares of Series B Preferred
Stock. In determining the kind and amount of stock, securities or the
property receivable upon consummation of such Business Combination, if
the holders of Common Stock have the right to elect the kind or amount
of consideration receivable upon consummation of such Business
Combination, then the Holder of the Series B Preferred Stock shall have
the right to make a similar election as of the Conversion Date with
respect to the number of shares of stock or other securities or
property into which the Series B Preferred Stock shall be convertible.
(D) Rounding of Calculations; Minimum Adjustments. All
calculations under this Section 7 shall be made to the nearest one
tenth (1/10th) of a cent or to the nearest one hundredth (1/100th) of a
share, as the case may be. Any provision of this Section 7 to the
contrary notwithstanding, no adjustment in the Conversion Price shall
be made if the amount of such adjustment would be less than $0.01, but
any such amount shall be carried forward and an adjustment with respect
thereto shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other amount or
amounts so carried forward, shall aggregate $0.01 or more. In addition,
in no event shall be Conversion Price be adjusted to less than the
lesser of $0.01 per share or the par value of the Common Stock.
(E) Timing of Issuance of Additional Common Stock Upon
Certain Adjustments. In any case in which the provisions of this
Section 7 shall require that an adjustment to the Conversion Price
shall become effective immediately after a record date for an event,
the Company may defer the following until the occurrence of such event:
(1) issuing to the Holder of any share of Series B Preferred Stock
converted after such record date and before the occurrence of such
event the additional shares of Common Stock issuable upon such
conversion by reason of the adjustment required by such event over and
above the shares of Common Stock issuable upon such conversion before
giving effect to such adjustment; and (2) paying to such Holder any
amount of cash in lieu of a fractional share of such Common Stock;
provided, however, that the Company upon request shall deliver to such
Holder a due bill or other appropriate instrument evidencing such
Holder's right to receive such additional shares, and such cash, upon
the occurrence of the event requiring such adjustment.
(F) Statement Regarding Adjustments. Whenever the
Conversion Price shall be adjusted as provided in Section 7 the Company
shall forthwith file, at the office of any transfer agent for the
Series B Preferred Stock and at the principal office of the Company, a
statement showing in reasonable detail the facts requiring such
adjustment and the Conversion Price that shall be in effect after such
adjustment and the Company shall also cause a copy of such statement to
be sent by mail, first class postage prepaid, to each Holder at its
address appearing in the Company's records.
(G) Notices. In the event that the Company shall propose
to take any action of the type described in Section 7 (but only if the
action of the type described in Section 7 would result in an adjustment
in the Conversion Price or a change in the type of securities or
property to be delivered upon a conversion or exchange of Series B
Preferred Stock), the Company shall give notice to each Holder, in the
manner set forth in Section 7(F), which notice shall specify the record
date, if any, with respect to any such action and the approximate date
on which such action is to take place. Such notice shall also set forth
the facts with respect thereto as shall be reasonably necessary to
indicate the effect on the Conversion Price and the number, kind or
class of shares or other securities or property which shall be
deliverable upon conversion of shares of the Series B Preferred Stock.
In the case of any action which would require the fixing or a record
date, such notice shall be given at least ten (10) days prior to the
date so fixed, and in case of all other action, such notice shall be
given at least fifteen (15) days prior to the taking of such proposed
action. Failure to give such notice, or any defect therein, shall not
affect the legality or validity of any such action.
(H) No Impairment. The Company will not, by amendment of
the Certificate or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder
by the Company, but will at all times in good faith assist in the
carrying out of all the provisions of Sections 6 and 7 and in taking of
all such action as may be necessary or appropriate in order to protect
the conversion rights of the Holders of the Series B Preferred Stock
against impairment.
10
(I) No Duplication of Adjustments. If any action would
require adjustment of the Conversion Price pursuant to more than one of
the provisions of this Section 7, only one adjustment shall be made and
such adjustment shall be the adjustment that results in the lowest
Conversion Price after giving effect to such adjustment.
8. LIMITATIONS ON SERIES B PREFERRED STOCK. No share or shares of
Series B Preferred Stock the Company acquires through conversion, redemption,
option, exchange or otherwise will be reissued as Series B Preferred Stock, and
all such shares will be canceled, retired and eliminated from the shares of
Series B Preferred Stock which the Company will be authorized to issue, and will
be restored to the status of authorized but undesignated preferred stock of the
Company eligible for designation and reissuance subject to the terms hereof and
the Certificate.
9. WAIVERS. With the written consent of Holders of a majority of
the Series B Preferred Stock, the obligations of the Company and the rights of
the Holders under this Certificate of Designation may be waived (either
generally or in a particular instance, either retroactively or prospectively and
either for a specified period of time or indefinitely). Upon the effectuation of
each such waiver, the Company will promptly give written notice thereof to the
Holders who have not previously consented thereto in writing.
IN WITNESS WHEREOF, this Certificate of Designation has been signed on
behalf of the Company by its Chief Executive Officer and attested to by its
Chief Financial Officer and Secretary, all as of the 8th day of May, 2003.
ISOLAGEN, INC.
By: /s/ Michael Macaluso
-----------------------------------------
Michael Macaluso, Chief Executive Officer
ATTEST:
By: /s/ Jeffrey w. Tomz
-------------------------------------------------------
Jeffrey W. Tomz, Chief Financial Officer and Secretary
11