EXHIBIT 3.3
CERTIFICATE OF DESIGNATIONS, RIGHTS AND PREFERENCES
of
SERIES A CONVERTIBLE PREFERRED STOCK
of
SOMANTA PHARMACEUTICALS, INC.
SOMANTA PHARMACEUTICALS, INC., a Delaware corporation (the
"Corporation"), pursuant to Section 151 of the General Corporation Law of the
State of Delaware, does hereby make this Certificate of Designations, Rights and
Preferences and does hereby state and certify that pursuant to the authority
expressly vested in the Board of Directors of the Corporation (the "Board") by
the Certificate of Incorporation of the Corporation, as amended to date (the
"Certificate"), which authorizes the issuance of 20,000,000 shares of preferred
stock, $0.001 par value per share, in one or more series, the Board duly adopted
the following resolutions, which resolutions remain in full force and effect as
of the date hereof:
RESOLVED, that, pursuant to Article IV(B), of the Certificate, the
Board hereby authorizes the issuance of, and fixes the designation and
preferences and relative, participating, optional and other special rights, and
qualifications, limitations and restrictions, of a series of preferred stock of
the Corporation consisting of 2,000 shares, par value $0.001 per share, to be
designated "Series A Convertible Preferred Stock" (hereinafter, the "Preferred
Stock"); and be it
RESOLVED, that each share of Preferred Stock shall rank equally in all
respects and shall be subject to the following terms and provisions:
1. Dividends. The holders of the Preferred Stock shall be
entitled to receive, when, if and as declared by the Board, out of funds legally
available therefor, cumulative dividends payable as set forth in this Section 1.
(a) Dividends on the Preferred Stock shall accrue and
shall be cumulative from the date of issuance of the shares of Preferred Stock
(the "Date of Original Issue"), whether or not earned or declared by the Board.
Until paid, the right to receive dividends on the Preferred Stock shall
accumulate, and shall be payable semi-annually at the Corporation's option in
either cash or in shares of the Corporation's Common Stock (the "Common Stock"),
as set forth below, in arrears, on April 30 and October 31 of each year (each, a
"Dividend Payment Date"), commencing on April 30, 2006 (the "Initial Dividend
Payment Date") except that if such Dividend Payment Date is not a business day,
then the Dividend Payment Date will be the immediately preceding business day.
If the Corporation elects to pay the dividend in shares of Common Stock, the
Corporation shall set aside a sufficient number of shares of Common Stock for
the payment of such declared dividends and shall deliver certificates
representing such shares of Common Stock to the holders of shares of Preferred
Stock as of the record date for such dividend in payment of such declared
dividends within three business days after such Dividend Payment Date. Each such
dividend declared by the Board on the Preferred Stock shall be paid to the
holders of record of shares of the Preferred Stock as they appear on the stock
register of the Corporation on the record date which shall be the business day
next preceding a Dividend Payment Date (each, a "Record Date"). Dividends in
arrears for any past dividend period may be declared by the Board and paid on
shares of the Preferred Stock on any date fixed by the Board, whether or not a
regular Dividend Payment Date, to holders of record of shares of the Preferred
Stock as they appear on the Corporation's stock register on the Record Date. Any
dividend payment made on shares of the Preferred Stock shall first be credited
against the dividends accumulated with respect to the earliest dividend period
for which dividends have not been paid. If a dividend is to be paid in shares of
Common Stock, the Common Stock shall be valued at the Current Market Price (as
defined below) as of such Dividend Payment Date. In furtherance thereof, the
Corporation shall reserve out of the authorized but unissued shares of Common
Stock, solely for issuance in respect of the payment of dividends as herein
described, a sufficient number of shares of Common Stock to pay such dividends,
when, if and as declared by the Board of the Corporation.
(b) Dividend Periods; Dividend Rate; Calculation of
Dividends.
(i) Dividend Periods. The dividend periods
(each, a "Dividend Period") shall be as follows: The initial Dividend
Period shall begin on the Date of Original Issue and end on the Initial
Dividend Payment Date, and each Dividend Period thereafter shall
commence on the day following the last day of the preceding Dividend
Period and shall end on the next Dividend Payment Date.
(ii) Dividend Rate. The dividend rate on each
share of Preferred Stock (the "Dividend Rate"), to be paid per annum on
the Liquidation Preference (as defined below) shall be 8%.
(iii) Notwithstanding the foregoing, if at any
time, a Breach Event (as defined below) occurs, then the Dividend Rate
shall be 14% for each Dividend Period in which a Breach Event has
occurred or is outstanding.
(iv) Calculation of Dividends.
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(A) The amount of dividends per share
of Preferred Stock payable for each Dividend Period or part
thereof shall be computed by multiplying the Liquidation
Preference by the Dividend Factors (as defined below) for all
Dividend Rates in effect during the Dividend Period or part
thereof.
(B) The "Dividend Factor" for each
Dividend Rate in effect from time to time shall be that
Dividend Rate multiplied by a fraction, the numerator of which
is the number of days in the applicable Dividend Period or
part thereof on which both (1) the share of Preferred Stock
was outstanding and (2) the Dividend Rate was in effect, and
the denominator of which is 365.
"Current Market Price" means, in respect of any share of
Common Stock on any date herein specified:
(1) if there shall not then be a public market
for the Common Stock, the higher of (a) the book value per
share of Common Stock at such date, and (b) the Appraised
Value (as hereinafter defined) per share of Common Stock at
such date, or
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(2) if there shall then be a public market for
the Common Stock, the higher of (x) the book value per share
of Common Stock at such date, and (y) the average of the daily
market prices for the 30 consecutive trading days immediately
before such date. The daily market price for each such trading
day shall be (i) the closing bid price on such day on the
principal stock exchange (including Nasdaq) on which such
Common Stock is then listed or admitted to trading, or quoted,
as applicable, (ii) if no sale takes place on such day on any
such exchange, the last reported closing bid price on such day
as officially quoted on any such exchange (including Nasdaq),
(iii) if the Common Stock is not then listed or admitted to
trading on any stock exchange, the last reported closing bid
price on such day in the over-the-counter market, as furnished
by the National Association of Securities Dealers Automatic
Quotation System or the National Quotation Bureau, Inc., (iv)
if neither such corporation at the time is engaged in the
business of reporting such prices, as furnished by any similar
firm then engaged in such business, or (v) if there is no such
firm, as furnished by any member of the National Association
of Securities Dealers, Inc. (the "NASD") selected mutually by
holders of a majority of the Preferred Stock and the
Corporation or, if they cannot agree upon such selection, as
selected by two such members of the NASD, one of which shall
be selected by holders of a majority of the Preferred Stock
and one of which shall be selected by the Corporation (as
applicable, the "Daily Market Price").
"Appraised Value" means, in respect of any share of Common
Stock on any date herein specified, the fair saleable value of such share of
Common Stock (determined without giving effect to the discount for (i) a
minority interest or (ii) any lack of liquidity of the Common Stock or to the
fact that the Corporation may have no class of equity registered under the
Exchange Act of 1934, as amended (the "Exchange Act")) as of the last day of the
most recent fiscal month end prior to such date specified, based on the value of
the Corporation (assuming the conversion and exercise of all of the
Corporation's authorized and issued capital stock), as determined by a
nationally recognized investment banking firm selected by the Corporation's
Board and having no prior relationship with the Corporation, and reasonably
acceptable to not less than a majority in interest of the holders of the
Preferred Stock then outstanding.
"Breach Event" means either:
(i) Any breach of any material warranty or
representation of the Corporation as of the date made in the
Preferred Stock and Warrant Purchase Agreement (the "Purchase
Agreement") entered into among the Corporation and the
purchasers of the Preferred Stock on or about the date this
Certificate of Designation is filed with the Secretary of
State of the State of Delaware (the "Filing Date"), as such
warranties and representations are qualified by the Disclosure
Schedules provided with the Purchase Agreement, or any
agreement delivered therewith which breach, if capable of
being cured, has not been cured within ten (10) days after
notice of such breach has been given by the holders of a
majority of Preferred Stock to the Corporation (the "Breach
Cure Period"); or
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(ii) Any breach by the Corporation of any
material covenant or other provision of the Purchase Agreement
or any agreement delivered therewith which breach, if capable
of being cured, has not been cured within the Breach Cure
Period.
(c) No dividends shall be declared or paid or set apart
for payment on the shares of Common Stock or any other class or series of
capital stock of the Corporation for any dividend period unless full cumulative
dividends have been or contemporaneously are declared and paid on the Preferred
Stock through the most recent Dividend Payment Date. Without prejudice to the
foregoing, if full cumulative dividends have not been paid on shares of the
Preferred Stock, all dividends declared on shares of the Preferred Stock shall
be paid pro rata to the holders of outstanding shares of the Preferred Stock.
(d) Dividends on the Preferred Stock may be paid even if,
after giving effect thereto, the Corporation's total assets would be less than
the sum of its total liabilities, plus the amount that would be needed, if the
Corporation were to be dissolved at the time of such distribution, to satisfy
the preferential rights upon dissolution of stockholders, if any, whose
preferential rights are superior to those receiving the distribution.
(e) The holders of the Preferred Stock shall each be
entitled to receive any dividends or distributions, declared by the Board and
paid to the holders of Common Stock, out of any assets legally available
therefor, pari passu, with the amount of such dividends to be distributed to the
holders of Preferred Stock on an As-Converted Basis (as defined below)
immediately prior to the declaration of such dividend or distribution.
"As-Converted Basis" means, as of the time of determination, that number of
shares of Common Stock which a holder of Preferred Stock would hold if all
shares of Preferred Stock held by such holder were converted into shares of
Common Stock pursuant to Section 5 hereof at the then applicable Conversion
Value (as defined below).
2. Voting Rights. Except as otherwise provided herein or by law,
the holders of the Preferred Stock shall have full voting rights and powers,
subject to the Beneficial Ownership Cap as defined in Section 5(h), equal to the
voting rights and powers of holders of Common Stock and shall be entitled to
notice of any stockholders meeting in accordance with the Bylaws of the
Corporation, and shall be entitled to vote, with respect to any question upon
which holders of Common Stock are entitled to vote, including, without
limitation, the right to vote for the election of directors, voting together
with the holders of Common Stock as one class. Each holder of shares of
Preferred Stock shall be entitled to vote on an As-Converted Basis, determined
on the record date for the taking of a vote, subject to the Beneficial Ownership
Cap limitations set forth in Section 5(h), or, if no record date is established,
at the day prior to the date such vote is taken or any written consent of
stockholders is first executed. 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 Preferred Stock held by each
holder could be converted) shall be rounded to the nearest whole number (with
one-half being rounded upward).
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3. Rights on Liquidation.
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(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation (any such event being
hereinafter referred to as a "Liquidation"), before any distribution of assets
of the Corporation shall be made to or set apart for the holders of Common
Stock, the holders of Preferred Stock shall be entitled to receive payment out
of such assets of the Corporation in an amount equal to the greater of (i)
$10,000 per share of Preferred Stock (such applicable amount being referred to
as the "Liquidation Preference" for the Preferred Stock), plus any accumulated
and unpaid dividends (whether or not earned or declared) on the Preferred Stock
or (ii) the amount per share that would be distributed among the holders of the
Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each holder assuming conversion of all Preferred Stock. If
the assets of the Corporation available for distribution to the holders of
Preferred Stock shall not be sufficient to make in full the payment herein
required, such assets shall be distributed pro-rata among the holders of
Preferred Stock based on the aggregate Liquidation Preferences of the shares of
Preferred Stock held by each such holder.
(b) A Change of Control (as defined below) of the
Corporation shall not be deemed a Liquidation, but shall instead be governed by
the terms of Section 5(b)(ii) and Section 7 below.
4. Actions Requiring the Consent of Holders of Preferred Stock.
As long as any shares of Preferred Stock are outstanding, the consent of the
holders of at least a majority of the shares of Preferred Stock at the time
outstanding, given in accordance with the Certificate of Incorporation and
Bylaws of the Corporation, as amended, shall be necessary for effecting or
validating any of the following transactions or acts, whether by merger,
consolidation or otherwise:
(a) Any amendment, alteration or repeal of any of the
provisions of this Certificate of Designation;
(b) Any amendment, alteration or repeal of (i) the
Certificate of Incorporation of the Corporation or (ii) the Bylaws of the
Corporation, in each case in a manner that will adversely affect the rights of
the holders of the Preferred Stock;
(c) The authorization or creation by the Corporation of,
or the increase in the number of authorized shares of, any stock of any class,
or any security convertible into stock of any class, or the authorization or
creation of any new class of preferred stock (or any action which would result
in another series of preferred stock) ranking in terms of liquidation
preference, redemption rights or dividend rights, pari passu with or senior to,
the Preferred Stock in any manner;
(d) The redemption, purchase or other acquisition,
directly or indirectly, of any shares of capital stock of the Corporation or any
of its subsidiaries or any option, warrant or other right to purchase or acquire
any such shares, or any other security, other than (A) the redemption of
Preferred Stock pursuant to the terms hereof, (B) the repayment or prepayment of
any indebtedness outstanding as of the date hereof in the ordinary course of
business; or (C) pursuant to the repurchase rights of the Corporation under
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options or restricted stock grants to directors, employees or consultants of the
Corporation, in each case, granted under equity incentive plans approved by the
Board; and
(e) The declaration or payment of any dividend or other
distribution (whether in cash, stock or other property) with respect to the
capital stock of the Corporation or any subsidiary, other than a dividend or
other distribution pursuant to the terms of the Preferred Stock.
5. Conversion.
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(a) Right to Convert. Subject to the limitations set
forth in Section 5(h) hereof, the holder of any share or shares of Preferred
Stock shall have the right at any time, at such holder's option, to convert all
or any lesser portion of such holder's shares of Preferred Stock into such
number of fully paid and non-assessable shares of Common Stock as is determined
by dividing (i) the aggregate Liquidation Preference of the shares of Preferred
Stock to be converted plus accrued and unpaid dividends thereon by (ii) the
Conversion Value (as defined below) then in effect for such Preferred Stock. No
fractional shares or scrip representing fractional shares shall be issued upon
the conversion of any Preferred Stock. With respect to any fraction of a share
of Common Stock called for upon any conversion, the Corporation shall pay to the
holder an amount in cash equal to such fraction multiplied by the Current Market
Price per share of the Common Stock.
(b) Mandatory Conversion.
--------------------
(i) Conversion at the Corporation's Election. If
a Conversion Triggering Event (as defined below) shall occur and within
5 trading days following such occurrence, the Corporation shall deliver
a written notice to the holders of the Preferred Stock (the "Notice")
that the Corporation intends to convert all of the outstanding
Preferred Stock into Common Stock, then, subject to the limitations set
forth in Section 5(h) hereof, as of the date that is thirty days
following the date that such Notice is given (the "Mandatory Conversion
Date"), the Preferred Stock shall be converted into such number of
fully paid and non-assessable shares of Common Stock as is determined
by dividing (i) the aggregate Liquidation Preference of the shares of
Preferred Stock to be converted plus accrued and unpaid dividends
thereon by (ii) the applicable Conversion Value (as hereinafter
defined) then in effect for such Preferred Stock (the "Mandatory
Conversion").
"Conversion Triggering Event" shall mean, such time as:
---------------------------
(A) The Registration Statement (as hereinafter
defined) covering all of the shares of Common Stock into which the
Preferred Stock is convertible is effective and sales may be made
pursuant thereto (or all of the shares of Common Stock into which the
Preferred Stock is convertible may be sold without restriction pursuant
to Rule 144(k) promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"));
and
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(B) Either:
(1) The Daily Market Price (solely as
defined in clause (i) of the definition thereof) of the Common
Stock is $5.00 (subject to adjustment for stock splits,
reverse splits, stock dividends and the like) or more per
share and has been at or above such price per share for thirty
(30) of the immediately preceding sixty (60) consecutive
trading days and the volume of Common Stock traded on the
applicable stock exchange (including Nasdaq) on each such
trading day is not less than 100,000 shares; or
(2) the Corporation consummates a sale
of Common Stock in a firm-commitment underwritten public
offering in which:
(x) the offering price (before
deduction of underwriting discounts,
commissions or other selling or other
expenses of the offering) of the Common
Stock is greater than 200% of the Conversion
Value; and
(y) the aggregate gross
proceeds of the offering to the Corporation
are greater than $25,000,000 (without giving
effect to the possible conversion or
exercise of any warrant, convertible
security or other derivative security
included in such offering).
"Registration Statement" shall have the meaning established in
the Investor Rights Agreement dated on or about the Filing Date, by and
among the Corporation and the other parties signatory thereto.
(ii) Automatic Conversion. All the outstanding
Preferred Stock shall be automatically converted (an "Automatic
Conversion") upon the occurrence of a Qualified Change of Control (as
defined below), as of the time immediately prior to the effective time
of such Qualified Change of Control (the "Automatic Conversion Date"),
into such number of fully paid and non-assessable shares of Common
Stock as is determined by dividing (i) the aggregate Liquidation
Preference of the shares of Preferred Stock to be converted plus
accrued and unpaid dividends thereon by (ii) the Conversion Value (as
hereinafter defined) then in effect for such Preferred Stock; provided
that upon consummation of such Qualified Change of Control the holders
of the Conversion Shares issuable upon such automatic conversion shall
be entitled to receive the same per share consideration as the
Transaction Consideration (as defined below).
"Qualified Change of Control" shall mean a Change of
Control (as defined below) of the Corporation in which the per share
consideration (the "Transaction Consideration") received by the holders
of the Common Stock is an amount of not less than the sum of (A) 100%
of the Conversion Value plus (B) the quotient of (1) the amount of
accrued but unpaid dividends per share of Preferred Stock divided by
(2) the number of Conversion Shares into which one share of Preferred
Stock is then convertible.
(iii) Nothing in this Section 5(b) shall be
construed so as to limit the right of a holder of Preferred Stock to
convert pursuant to Section 5(a) at any time.
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(c) Mechanics of Conversion.
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(i) Such right of conversion (other than
mandatory or automatic conversion) shall be exercised by the holder of
shares of Preferred Stock by delivering to the Corporation a conversion
notice in the form attached hereto as Exhibit A (the "Conversion
Notice"), appropriately completed and duly signed and specifying the
number of shares of Preferred Stock that the holder elects to convert
(the "Converting Shares") into shares of Common Stock, and by surrender
not later than two (2) business days thereafter of the certificate or
certificates representing such Converting Shares. The Conversion Notice
shall also contain a statement of the name or names (with addresses and
tax identification or social security numbers) in which the certificate
or certificates for Common Stock shall be issued, if other than the
name in which the Converting Shares are registered. Promptly after the
receipt of the Conversion Notice, the Corporation shall issue and
deliver, or cause to be delivered, to the holder of the Converting
Shares or such holder's nominee, a certificate or certificates for the
number of shares of Common Stock issuable upon the conversion of such
Converting Shares. Such conversion shall be deemed to have been
effected as of the close of business on the date of receipt by the
Corporation of the Conversion Notice (the "Conversion Date"), and the
person or persons entitled to receive the shares of Common Stock
issuable upon conversion shall be treated for all purposes as the
holder or holders of record of such shares of Common Stock as of the
close of business on the Conversion Date.
(ii) The Corporation shall issue certificates
representing the shares of Common Stock to be received upon conversion
of the Preferred Stock (the "Conversion Shares") (and certificates for
unconverted Preferred Stock) within three (3) trading days of the
Conversion Date and shall transmit the certificates by messenger or
reputable overnight delivery service to reach the address designated by
such holder within three (3) trading days after the receipt by the
Corporation of such Conversion Notice. If certificates evidencing the
Conversion Shares are not received by the holder within five (5)
Trading Days of the Conversion Notice, then the holder will be entitled
to revoke and withdraw its Conversion Notice, in whole or in part, at
any time prior to its receipt of those certificates. In lieu of
delivering physical certificates representing the Conversion Shares or
in payment of dividends hereunder, provided the Corporation's transfer
agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer ("FAST") program, upon request of the
holder, the Corporation shall use its commercially reasonable best
efforts to cause its transfer agent to electronically transmit the
Common Stock issuable upon conversion or dividend payment to the
holder, by crediting the account of the holder's prime broker with DTC
through its Deposit Withdrawal Agent Commission ("DWAC") system. The
time periods for delivery described above, and for delivery of Common
Stock in payment of dividends hereunder, shall apply to the electronic
transmittals through the DWAC system. The parties agree to coordinate
with DTC to accomplish this objective. The person or persons entitled
to receive the Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such Common
Shares at the close of business on the Conversion Date. If the
conversion has not been rescinded in accordance with this paragraph and
the Corporation fails to deliver to the holder such certificate or
certificates (or shares through DTC) pursuant to this Section 5 (free
of any restrictions on transfer or legends, if such shares have been
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registered) in accordance herewith, prior to the seventh trading day
after the Conversion Date (assuming timely surrender of the Preferred
Stock certificates), the Corporation shall pay to such holder, in cash,
on a per diem basis, an amount equal to 2% of the Liquidation
Preference of all Preferred Stock held by such holder per month until
such delivery takes place.
(iii) The Corporation's obligation to issue Common
Stock upon conversion of Preferred Stock shall be absolute, is
independent of any covenant of any holder of Preferred Stock, and shall
not be subject to: (A) any offset or defense; or (B) any claims against
the holders of Preferred Stock whether pursuant to this Certificate of
Designation, the Purchase Agreement, the Investor Rights Agreement, the
Warrants or otherwise.
(iv) Subject to the provisions of Section 5(h),
in the event that a Conversion Triggering Event has occurred and the
Corporation has given the Notice as required by Section 5(b)(i), all
the shares of Preferred Stock shall be converted on the Mandatory
Conversion Date as if the holders thereof had delivered a Conversion
Notice with respect to such shares on such date. Promptly thereafter,
the holders of the Preferred Stock shall deliver their certificates
evidencing the Preferred Stock to the Corporation or its duly
authorized transfer agent, and upon receipt thereof, the Corporation
shall issue or cause its transfer agent to issue certificates
evidencing the Common Stock into which the shares Preferred Stock have
been converted.
(v) In the event that a Qualified Change of
Control has occurred and such event otherwise meets the requirements of
Section 5(b)(ii), all the shares of Preferred Stock shall be converted
on the Automatic Conversion Date as if the holders thereof had
delivered a Conversion Notice with respect to such shares on such date.
Promptly thereafter, the holders of the Preferred Stock shall deliver
their certificates evidencing the Preferred Stock to the Corporation or
its duly authorized transfer agent, and upon receipt thereof, the
Corporation shall promptly deliver to such holders the Transaction
Consideration with respect to each Conversion Share to which such
holder was entitled upon the Automatic Conversion.
(d) Beneficial Ownership Cap. To the extent that any
shares of Preferred Stock are not automatically converted upon the occurrence of
a Mandatory Conversion on account of the application of Section 5(h), such
shares of Preferred Stock shall be deemed converted automatically under this
Section 5 at the first moment thereafter when Section 5(h) would not prevent
such conversion. Notwithstanding the preceding sentence, upon the occurrence of
the Mandatory Conversion, the right to: (a) accrue dividends on Preferred Stock
(other than dividends pursuant to Section 1(e) hereof); (b) the Liquidation
Preference of the Preferred Stock, including, without limitation, the right to
be treated as holders of Preferred Stock in the event of a merger or
consolidation; (c) the veto rights described in Section 4 hereof; (d) the
participation rights provided in Section 10 hereof; and (e) the redemption
rights in Section 13 hereof shall cease immediately.
(e) Conversion Value. The initial conversion value for
the Preferred Stock shall be $0.60, such value to be subject to adjustment in
accordance with the provisions of this Section 5. Such conversion value in
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effect from time to time, as adjusted pursuant to this Section 5, is referred to
herein as a "Conversion Value." All of the remaining provisions of this Section
5 shall apply separately to each Conversion Value in effect from time to time
with respect to Preferred Stock.
(f) Stock Dividends, Subdivisions and Combinations. If at
any time while the Preferred Stock is outstanding, the Corporation shall:
(i) cause the holders of its Common Stock to be
entitled to receive a dividend payable in, or other distribution of,
additional shares of Common Stock,
(ii) subdivide its outstanding shares of Common
Stock into a larger number of shares of Common Stock, or
(iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock,
then in each such case the Conversion Value shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding
treasury shares, if any) outstanding immediately before such event and of which
the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
Paragraph 5(f) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution,
and any adjustment pursuant to clauses (ii) or (iii) of this Paragraph 5(f)
shall become effective immediately after the effective date of such subdivision
or combination. If any event requiring an adjustment under this paragraph occurs
during the period that a Conversion Value is calculated hereunder, then the
calculation of such Conversion Value shall be adjusted appropriately to reflect
such event.
(g) Certain Other Distributions. If at any time while the
Preferred Stock is outstanding the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive any
dividend or other distribution of:
(i) cash,
(ii) any evidences of its indebtedness, any
shares of stock of any class or any other securities or property or
assets of any nature whatsoever (other than cash or additional shares
of Common Stock as provided in Section 5(f) hereof), or
(iii) any warrants or other rights to subscribe
for or purchase any evidences of its indebtedness, any shares of stock
of any class or any other securities or property or assets of any
nature whatsoever (in each case set forth in subparagraphs 5(g)(i),
5(g)(ii) and 5(g)(iii) hereof, the "Distributed Property"),
then upon any conversion of Preferred Stock that occurs after such record date,
the holder of Preferred Stock shall be entitled to receive, in addition to the
Conversion Shares, the Distributed Property that such holder would have been
entitled to receive in respect of such number of Conversion Shares had the
holder been the record holder of such Conversion Shares as of such record date.
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Such distribution shall be made whenever any such conversion is made. In the
event that the Distributed Property consists of property other than cash, then
the fair value of such Distributed Property shall be as determined in good faith
by the Board and set forth in reasonable detail in a written valuation report
(the "Valuation Report") prepared by the Board. The Corporation shall give
written notice of such determination and a copy of the Valuation Report to all
holders of Preferred Stock, and if the holders of a majority of the outstanding
Preferred Stock object to such determination within twenty (20) business days
following the date such notice is given to all of the holders of Preferred
Stock, the Corporation shall submit such valuation to an investment banking firm
of recognized national standing selected by not less than a majority of the
holders of the Preferred Stock and acceptable to the Corporation in its
reasonable discretion, whose opinion shall be binding upon the Corporation and
the Preferred Stockholders. A reclassification of the Common Stock (other than a
change in par value, or from par value to no par value or from no par value to
par value) into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Corporation to the holders of its Common
Stock of such shares of such other class of stock within the meaning of this
Section 5(g) and, if the outstanding shares of Common Stock shall be changed
into a larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as
the case may be, of the outstanding shares of Common Stock within the meaning of
Section 5(f).
(h) Blocking Provision.
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(i) Except as provided otherwise in this Section
5(h)(i), the number of Conversion Shares that may be acquired by any
holder, and the number of shares of Preferred Stock that shall be
entitled to voting rights under Section 2 hereof, shall be limited to
the extent necessary to insure that, following such conversion (or
deemed conversion for voting purposes), the number of shares of Common
Stock then beneficially owned by such holder and its Affiliates and any
other persons or entities whose beneficial ownership of Common Stock
would be aggregated with the holder's for purposes of Section 13(d) of
the Exchange Act (including shares held by any "group" of which the
holder is a member, but excluding shares beneficially owned by virtue
of the ownership of securities or rights to acquire securities that
have limitations on the right to convert, exercise or purchase similar
to the limitation set forth herein) does not exceed 9.99% of the total
number of shares of Common Stock of the Corporation then issued and
outstanding (the "Beneficial Ownership Cap"). For purposes hereof,
"group" has the meaning set forth in Section 13(d) of the Exchange Act
and applicable regulations of the Securities and Exchange Commission,
and the percentage held by the holder shall be determined in a manner
consistent with the provisions of Section 13(d) of the Exchange Act. As
used herein, the term "Affiliate" means any person or entity that,
directly or indirectly through one or more intermediaries, controls or
is controlled by or is under common control with a person or entity, as
such terms are used in and construed under Rule 144 under the
Securities Act. With respect to a holder of Preferred Stock, any
investment fund or managed account that is managed on a discretionary
basis by the same investment manager as such holder will be deemed to
be an Affiliate of such holder. Each delivery of a Conversion Notice by
a holder of Preferred Stock will constitute a representation by such
Holder that it has evaluated the limitation set forth in this paragraph
and determined, subject to the accuracy of information filed under the
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Securities Act and the Exchange Act by the Corporation with respect to
the outstanding Common Stock of the Corporation, that the issuance of
the full number of shares of Common Stock requested in such Conversion
Notice is permitted under this paragraph. This paragraph shall be
construed and administered in such manner as shall be consistent with
the intent of the first sentence of this paragraph. Any provision
hereof which would require a result that is not consistent with such
intent shall be deemed severed herefrom and of no force or effect with
respect to the conversion contemplated by a particular Conversion
Notice.
(ii) In the event the Corporation is prohibited
from issuing shares of Common Stock as a result of any restrictions or
prohibitions under applicable law or the rules or regulations of any
stock exchange, interdealer quotation system or other self-regulatory
organization, the Corporation shall as soon as possible seek the
approval of its stockholders and take such other action to authorize
the issuance of the full number of shares of Common Stock issuable upon
the full conversion of the then outstanding shares of Preferred Stock.
(iii) Notwithstanding the foregoing provisions of
Section 5(h), any holder of Preferred Stock shall have the right prior
to the Date of Original Issue upon written notice to the Corporation,
or after the Date of Original Issue upon (x) 61 days prior written
notice to the Corporation or (y) upon a Change of Control the terms of
which require the conversion of the Preferred Stock into Common Stock,
to choose not to be governed by the Beneficial Ownership Cap provided
herein.
(i) Common Stock Reserved. The Corporation shall at all
times reserve and keep available out of its authorized but unissued Common
Stock, solely for issuance upon the conversion of shares of Preferred Stock as
herein provided, such number of shares of Common Stock as shall from time to
time be issuable upon the conversion of all the shares of Preferred Stock at the
time outstanding (without regard to any ownership limitations provided in
Section 5(h)).
(j) Adjustment Upon Issuance of Additional Shares of
Common Stock.
(i) Adjustment to Conversion Value. If at any
time while any Preferred Stock is outstanding the Corporation shall
issue or sell any additional shares of Common Stock ("Additional Common
Stock") in exchange for consideration in an amount per share of
Additional Common Stock less than the Conversion Value at the time the
shares of Additional Common Stock are issued or sold, then the
Conversion Value immediately prior to such issue or sale shall be
reduced to a price determined by dividing:
(1) an amount equal to the sum of (a)
the number of shares of Common Stock outstanding immediately
prior to such issue or sale multiplied by the then existing
Conversion Value, plus (b) the consideration, if any, received
by the Company upon such issue or sale; by
(2) the total number of shares of
Common Stock outstanding immediately after such issue or sale.
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(ii) Issuance of Common Stock Equivalents. If at
any time while the Preferred Stock is outstanding the Corporation shall
issue or sell any warrants or other rights to subscribe for or purchase
any additional shares of Common Stock or any securities convertible,
directly or indirectly, into shares of Common Stock (collectively,
"Common Stock Equivalents"), whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the effective price
per share for which Common Stock is issuable upon the exercise,
exchange or conversion of such Common Stock Equivalents shall be less
than the current Conversion Value in effect immediately prior to the
time of such issue or sale, then the current Conversion Value shall be
adjusted as provided in Section 5(j)(i) on the basis that the maximum
number of additional shares of Common Stock issuable pursuant to all
such Common Stock Equivalents shall be deemed to have been issued and
outstanding and the Corporation shall have received all of the
consideration payable therefor, if any, as of the date of the actual
issuance of such Common Stock Equivalents. No further adjustments to
the current Conversion Value shall be made under this Section 5(j) upon
the actual issue of such Common Stock upon the exercise, conversion or
exchange of such Common Stock Equivalents.
(iii) Certain Issues of Common Stock or Common
Stock Equivalents Excepted. The provisions of Paragraph 5(j) shall not
apply to any issuance of Additional Common Stock for which an
adjustment is provided under Paragraph 5(f). The Corporation shall not
be required to make any adjustment of the Conversion Value pursuant to
Paragraph 5(j) in the case of the issuance of (A) shares of Common
Stock upon the conversion of the Preferred Stock, the exercise of the
Warrants issued pursuant to the Purchase Agreement (the "Warrants") or
as payment of dividends on the Preferred Stock, (B) shares of Common
Stock upon the exercise of any warrants or options (collectively, the
"Existing Warrants") outstanding on the Filing Date, (C) shares of
Common Stock (at issuance or exercise prices at or above fair market
value), stock awards or options under, or the exercise of any options
granted pursuant to, any stock-based compensation plans of the
Corporation in existence as of the Date of Original Issue, (D) shares
of Common Stock pursuant to a stock split, combination or subdivision
of the outstanding shares of Common Stock, (E) securities issued as
consideration of the acquisition of all or substantially all of the
equity or assets of a third party, (F) securities issued to financial
institutions in connection with commercial credit arrangements,
equipment financings, service agreements or similar transactions
approved by the Board and the primary purpose of which is not equity
financing or (E) securities or rights to acquire securities issued in
connection with strategic collaborations, development agreements, joint
ventures or licensing transactions, the terms of which are approved by
the Board.
(iv) Superseding Adjustment. If, at any time
after any adjustment to the current Conversion Value shall have been
made pursuant to Section 5(j) as the result of any issuance of Common
Stock Equivalents, (x) the right to exercise, exchange or convert all
or a portion of the Common Stock Equivalents shall expire unexercised,
or (y) the conversion rate or consideration per share for which shares
of Common Stock are issuable pursuant to such Common Stock Equivalents
shall be increased solely by virtue of provisions therein contained for
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an automatic increase in such conversion rate or consideration per
share, as the case may be, upon the occurrence of a specified date or
event, then any such previous adjustments to the Conversion Value shall
be rescinded and annulled and the additional shares of Common Stock
which were deemed to have been issued by virtue of the computation made
in connection with the adjustment so rescinded and annulled shall no
longer be deemed to have been issued by virtue of such computation.
Upon the occurrence of an event set forth in this Section 5(j)(iv)
above, there shall be a recomputation made of the effect of such Common
Stock Equivalents on the basis of: (i) treating the number of
additional shares of Common Stock or other property, if any,
theretofore actually issued or issuable pursuant to the previous
exercise, exchange or conversion of any such Common Stock Equivalents,
as having been issued on the date or dates of any such exercise,
exchange or conversion and for the consideration actually received and
receivable therefor, and (ii) treating any such Common Stock
Equivalents which then remain outstanding as having been granted or
issued immediately after the time of such increase of the conversion
rate or consideration per share for which shares of Common Stock or
other property are issuable under such Common Stock Equivalents;
whereupon a new adjustment to the current Conversion Value shall be
made, which new adjustment shall supersede the previous adjustment so
rescinded and annulled.
6. Other Provisions Applicable to Adjustments. The following
provisions shall be applicable to the making of adjustments of the number of
shares of Common Stock into which the Preferred Stock is convertible and the
current Conversion Value provided for in Section 5:
(a) When Adjustments to Be Made. The adjustments required
by Section 5 shall be made whenever and as often as any specified event
requiring an adjustment shall occur, except that any adjustment to the
Conversion Value that would otherwise be required may be postponed (except in
the case of a subdivision or combination of shares of the Common Stock, as
provided for in Section 5(f)) up to, but not beyond the Conversion Date if such
adjustment either by itself or with other adjustments not previously made adds
or subtracts less than 1% of the shares of Common Stock into which the Preferred
Stock is convertible immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon as such
adjustment, together with other adjustments required by Section 5 and not
previously made, would result in a minimum adjustment or on the Conversion Date.
For the purpose of any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence.
(b) Fractional Interests. In computing adjustments under
Section 5, fractional interests in Common Stock shall be taken into account to
the nearest 1/100th of a share.
(c) When Adjustment Not Required. If the Corporation
undertakes a transaction contemplated under Section 5(g) and as a result takes a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution or subscription or purchase rights or other
benefits contemplated under Section 5(g) and shall, thereafter and before the
distribution to stockholders thereof, legally abandon its plan to pay or deliver
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such dividend, distribution, subscription or purchase rights or other benefits
contemplated under Section 5(g), then thereafter no adjustment shall be required
by reason of the taking of such record and any such adjustment previously made
in respect thereof shall be rescinded and annulled.
(d) Escrow of Stock. If after any property becomes
distributable pursuant to Section 5 by reason of the taking of any record of the
holders of Common Stock, but prior to the occurrence of the event for which such
record is taken, a holder of the Preferred Stock either converts the Preferred
Stock or there is a Mandatory Conversion or Automatic Conversion during such
period or such holder is unable to convert shares pursuant to Section 5(h), such
holder of Preferred Stock shall continue to be entitled to receive any shares of
Common Stock issuable upon conversion under Section 5 by reason of such
adjustment (as if such Preferred Stock were not yet converted) and such shares
or other property shall be held in escrow for the holder of the Preferred Stock
by the Corporation to be issued to holder of the Preferred Stock upon and to the
extent that the event actually takes place. Notwithstanding any other provision
to the contrary herein, if the event for which such record was taken fails to
occur or is rescinded, then such escrowed shares shall be canceled by the
Corporation and escrowed property returned to the Corporation.
7. Merger, Consolidation or Disposition of Assets.
----------------------------------------------
(a) If, after the Date of Original Issue and while any
share or shares of Preferred Stock are outstanding, there occurs: (i) an
acquisition by an individual or legal entity or group (as set forth in Section
13(d) of the Exchange Act) of more than 50% of the voting rights or equity
interests in the Corporation, whether in one transaction or in a series of
related transactions or (ii) a merger or consolidation of the Corporation or a
sale, transfer or other disposition of all or substantially all the
Corporation's property, assets or business to another corporation where the
holders of the Corporation's voting securities prior to such transaction fail to
continue to hold at least 50% of the voting power of the Corporation and such
transaction is approved by the Board (each, a "Change of Control"), and,
pursuant to the terms of such Change of Control, shares of common stock of the
successor or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or other
subscription or purchase rights) in addition to or in lieu of common stock of
the successor or acquiring corporation ("Other Property"), are to be received by
or distributed to the holders of Common Stock of the Corporation then the
successor or acquiring corporation (if other than the Corporation) shall assume
the Preferred Stock pursuant to Section 7(b) below.
(b) In case of any such Change of Control, the successor
or acquiring corporation (if other than the Corporation) shall expressly assume
the due and punctual observance and performance of each and every covenant and
condition of contained in this Certificate of Designation to be performed and
observed by the Corporation and all the obligations and liabilities hereunder,
subject to such modifications as may be deemed appropriate (as determined by
resolution of the Board) in order to provide for adjustments of shares of the
Common Stock into which the Preferred Stock is convertible which shall be as
nearly equivalent as practicable to the adjustments provided for in Section 5.
For purposes of Section 5, common stock of the successor or acquiring
corporation shall include stock of such corporation of any class which is not
preferred as to dividends or assets on liquidation over any other class of stock
15
of such corporation and which is not subject to redemption and shall also
include any evidences of indebtedness, shares of stock or other securities which
are convertible into or exchangeable for any such stock, either immediately or
upon the arrival of a specified date or the happening of a specified event and
any warrants or other rights to subscribe for or purchase any such stock.
(c) The foregoing provisions of this Section 7 shall
similarly apply to successive Change of Control transactions.
8. Other Action Affecting Common Stock. In case at any time or
from time to time the Corporation shall take any action in respect of its Common
Stock, other than the payment of dividends permitted by Section 5 or any other
action described in Section 5, then, unless such action will not have a
materially adverse effect upon the rights of the holder of Preferred Stock, the
number of shares of Common Stock or other stock into which the Preferred Stock
is convertible and/or the purchase price thereof shall be adjusted in such
manner as may be equitable in the circumstances.
9. Certain Limitations. Notwithstanding anything herein to the
contrary, the Corporation agrees not to enter into any transaction which, by
reason of any adjustment hereunder, would cause the current Conversion Value to
be less than the par value per share of Common Stock.
10. Participation Rights.
--------------------
(a) Subject to the terms and conditions specified in this
Section 10, at any time while the Preferred Stock is outstanding, the holders of
shares of Preferred Stock shall have a right to participate with respect to the
issuance or possible issuance by the Corporation of any future equity or
equity-linked securities or debt which is convertible into equity or in which
there is an equity component (as the case may be, "Additional Securities") on
the same terms and conditions as offered by the Corporation to the other
purchasers of such Additional Securities. Each time the Corporation proposes to
offer any Additional Securities, the Corporation shall make an offering of such
Additional Securities to each holder of shares of Preferred Stock in accordance
with the following provisions:
(i) The Corporation shall deliver a notice (the
"Issuance Notice") to the holders of shares of Preferred Stock stating
(a) its bona fide intention to offer such Additional Securities, (b)
the approximate number of such Additional Securities to be offered, (c)
the price (or pricing formula) and terms, if any, upon which it
proposes to offer such Additional Securities, and (d) the anticipated
closing date of the sale of such Additional Securities.
(ii) By written notification received by the
Corporation, within ten (10) days after giving of the Issuance Notice,
any holder of shares of Preferred Stock may elect to purchase or
obtain, at the price and on the terms specified in the Issuance Notice,
up to that number of such Additional Securities which equals such
holder's Pro Rata Amount (as defined below). The "Pro Rata Amount" for
any given holder of shares of Preferred Stock shall equal that portion
of the Additional Securities that the Corporation proposes to offer
which equals the proportion that the number of shares of Common Stock
16
that such holder owns or has the right to acquire (without giving
effect to the limitations contained in Section 5(h)) bears to the total
number of shares of Common Stock then outstanding (assuming in each
case the full conversion and exercise of all convertible and
exercisable securities then outstanding).
(iii) If all Additional Securities which the
holders of shares of Preferred Stock are entitled to obtain pursuant to
Section 10(a)(ii) are not elected to be obtained as provided in Section
10(a)(ii) hereof, the Corporation may, at its option, during the 75-day
period following the expiration of the period provided in Section
10(a)(ii) hereof, offer the remaining unsubscribed portion of such
Additional Securities to any person or persons at a price not less
than, and upon terms no more favorable to the offeree than, those
specified in the Issuance Notice. If the Corporation does not
consummate the sale of such Additional Securities within such period,
the right provided hereunder shall be deemed to be revived and such
Additional Securities shall not be offered or sold unless first
reoffered to the holders of shares of Preferred Stock in accordance
herewith.
(b) The rights of the holders of Preferred Stock under
this Section 10 shall not apply to: (A) the conversion of the Preferred Stock,
the exercise of the Warrants or the issuance of shares of Common Stock as
payment of dividends to holders of Preferred Stock, (B) the exercise of any
Existing Warrants outstanding on the Filing Date, (C) the issuance (at issuance
or exercise prices at or above fair market value) of Common Stock, stock awards
or options under, or the exercise of any options granted pursuant to, any
stock-based compensation plans of the Corporation in existence as of the Date of
Original Issue, (D) the issuance of shares of Common Stock pursuant to a stock
split, combination or subdivision of the outstanding shares of Common Stock, (E)
the issuance of securities as consideration of the acquisition of all or
substantially all of the equity or assets of a third party, (F) the issuance of
securities to financial institutions in connection with commercial credit
arrangements, equipment financings, service agreements or similar transactions
approved by the Board and the primary purpose of which is not equity financing
or (E) the issuance of securities or rights to acquire securities in connection
with strategic collaborations, development agreements, joint ventures or
licensing transactions, the terms of which are approved by the Board..
(c) The participation right set forth in this Section 10
may not be assigned or transferred, except in connection with an assignment or
transfer of the holder's shares of Preferred Stock and except that such right is
assignable by each holder of shares of Preferred Stock to any wholly-owned
subsidiary or parent of, or to any corporation or entity that is, within the
meaning of the Securities Act, controlling, controlled by or under common
control with, any such holder.
11. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Value, the Corporation, at its
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Preferred Stock
a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
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Corporation shall, upon the written request at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Value at the time in effect for the Preferred Stock and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversion of Preferred Stock owned by
such holder (without regard to the ownership limitations set forth in Section
5(h)).
12. Notices of Record Date. In the event of any fixing by the
Corporation of a record date for the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any shares of
Common Stock or other securities, or any right to subscribe for, purchase or
otherwise acquire, or any option for the purchase of, any shares of stock of any
class or any other securities or property, or to receive any other right, the
Corporation shall mail to each holder of Preferred Stock at least twenty (20)
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
rights, and the amount and character of such dividend, distribution or right.
13. Redemption.
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(a) Redemption at the Holders' Elections. If a Redemption
Triggering Event (as defined below) has occurred, and a holder has so elected,
the Corporation shall redeem the Preferred Stock of any holder who gives a
Demand for Redemption (as defined below). The Corporation shall, promptly
thereafter, redeem the shares of Preferred Stock as set forth in the Demand for
Redemption. The Corporation shall effect such redemption on the Redemption Date
by paying in cash for each such share to be redeemed an amount equal to the
greater of (i) the Redemption Price (as defined below) or (ii) the total number
of shares of Common Stock into which such Preferred Stock is convertible
multiplied by the Current Market Price at the time of the Redemption Triggering
Event. "Redemption Triggering Event" means the Corporation's failure or refusal
to convert any shares of Preferred Stock in accordance with the terms hereof, or
the providing of written notice to such effect. "Redemption Price" means (i) all
accrued but unpaid dividends as of the date of Demand for Redemption with
respect to each share to be redeemed, plus (ii) 100% of the Liquidation
Preference of each share to be redeemed.
(b) Demand for Redemption. A holder desiring to elect a
redemption as herein provided shall deliver a notice (the "Demand for
Redemption") to the Corporation while such Redemption Triggering Event continues
specifying the following:
(i) The approximate date and nature of the
Redemption Triggering Event;
(ii) The number of shares of Preferred Stock to
be redeemed; and
(iii) The address to which the payment of the
Redemption Price shall be delivered, or, at the election of the holder,
wire instructions with respect to the account to which payment of the
Redemption Price shall be required.
A holder may deliver the certificates evidencing the Preferred Stock to
be redeemed with the Demand for Redemption or under separate cover. Payment of
the Redemption Price shall be made not later than two (2) business days after
the date on which a holder has delivered a Demand for Redemption and the
certificates evidencing the shares of Preferred Stock to be redeemed.
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(c) Status of Redeemed or Purchased Shares. Any shares of
the Preferred Stock at any time purchased, redeemed or otherwise acquired by the
Corporation shall not be reissued and shall be retired.
(d) Status of Authorized, but Unissued Shares of
Preferred Stock. Shares of Preferred Stock shall be issued only at the Initial
Closing (as defined in the Purchase Agreement) or an Additional Closing (as
defined in the Purchase Agreement) pursuant to the terms of the Purchase
Agreement. Any attempt of the Corporation to issue shares of Preferred Stock
other than in accordance with the Purchase Agreement shall be null and void.
14. Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 5:00 p.m. (New York City
time) on a business day, (b) the next business day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a business day
or later than 5:00 p.m. (New York City time) on any business day, or (c) the
business day following the date of mailing, if sent by U.S. nationally
recognized overnight courier service such as Federal Express. The address for
such notices and communications shall be as follows: (i) if to the Corporation,
to Somanta Pharmaceuticals, Inc.,19200 Von Karman Avenue, Suite 400, Irvine, CA
92612, Chief Financial Officer, Fax: 949-706-3698, or (ii) if to a holder of
Preferred Stock, to the address or facsimile number appearing on the
Corporation's stockholder records or, in either case, to such other address or
facsimile number as the Corporation or a holder of Preferred Stock may provide
to the other in accordance with this Section.
15. Stock Transfer Taxes. The issue of stock certificates upon
conversion of the Preferred Stock shall be made without charge to the converting
holder for any tax in respect of such issue; provided, however, that the
Corporation shall be entitled to withhold any applicable withholding taxes with
respect to such issue, if any. The Corporation shall not, however, be required
to pay any tax which may be payable in respect of any transfer involved in the
issue and delivery of shares in any name other than that of the holder of any of
the Preferred Stock converted, and the Corporation shall not be required to
issue or deliver any such stock certificate unless and until the person or
persons requesting the issue thereof shall have paid to the Corporation the
amount of such tax or shall have established to the satisfaction of the
Corporation that such tax has been paid.
[signature page follows]
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IN WITNESS WHEREOF, the undersigned being a duly authorized officer of
the Corporation, does file this Certificate of Designations, Rights and
Preferences, hereby declaring and certifying that the facts stated herein are
true and accordingly has hereunto set his hand this 31 day of January, 2006.
SOMANTA PHARMACEUTICALS, INC.
By: /s/ TERRANCE J. BRUGGEMAN
--------------------------------------
Name: Terrance J. Bruggeman
Title: Executive Chairman
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EXHIBIT A
FORM OF CONVERSION NOTICE
(To be executed by the registered Holder in order to convert shares of Preferred
Stock)
The undersigned hereby irrevocably elects to convert the number of
shares of Series A Convertible Preferred Stock (the "Preferred Stock") indicated
below into shares of common stock, par value $0.001 per share (the "Common
Stock"), of Somanta Pharmaceuticals, Inc., a Delaware corporation (the
"Corporation"), according to the Certificate of Designation of the Preferred
Stock and the conditions hereof, as of the date written below. The undersigned
hereby requests that certificates for the shares of Common Stock to be issued to
the undersigned pursuant to this Conversion Notice be issued in the name of, and
delivered to, the undersigned or its designee as indicated below. If the shares
of Common Stock are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto. A copy of the certificate representing the Preferred Stock being
converted is attached hereto.
________________________________________________________________________________
Date of Conversion (Date of Notice)
________________________________________________________________________________
Number of shares of Preferred Stock owned prior to Conversion
________________________________________________________________________________
Number of shares of Preferred Stock to be Converted
________________________________________________________________________________
Stated Value of Preferred Stock to be Converted
________________________________________________________________________________
Amount of accumulated and unpaid dividends on shares of Preferred Stock to be
Converted
________________________________________________________________________________
Number of shares of Common Stock to be Issued (including conversion of accrued
but unpaid dividends on shares of Preferred Stock to be Converted)
________________________________________________________________________________
Applicable Conversion Value
________________________________________________________________________________
Number of shares of Preferred Stock owned subsequent to Conversion
Conversion Information:[NAME OF HOLDER]
___________________________________
Address of Holder:
___________________________________
___________________________________
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Issue Common Stock to (if different than above):
Name:_______________________________
Address:____________________________
____________________________________
Tax ID #:___________________________
The undersigned represents, subject to the accuracy of information
filed under the Securities Act and the Exchange Act by the Corporation with
respect to the outstanding Common Stock of the Corporation, as of the date
hereof that, after giving effect to the conversion of Preferred Shares pursuant
to this Conversion Notice, the undersigned will not exceed the "Beneficial
Ownership Cap" contained in Section 5(h) of the Certificate of Designation of
the Preferred Stock.
________________________________________________
Name of Holder
By:_____________________________________________
Name:
Title:
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