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EXHIBIT 4.2
CERTIFICATE OF DETERMINATION
OF RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS
OF SERIES A PREFERRED STOCK OF
NEOGENE TECHNOLOGIES, INC.
a California corporation
Alvin J. Glasky and Samuel Gulko hereby certify as follows:
1. We are the President and Secretary, respectively of NeoGene
Technologies, Inc., a California corporation (the "Corporation").
2. The number of shares of the Corporation's Series A
Preferred Stock is 150,000 shares, none of which has been issued.
3. Pursuant to authority given under the Articles of
Incorporation of the Corporation, and in accordance with the provisions of
Section 401 of the California Corporations Code, the Board of Directors of the
Corporation (the "Board") has duly adopted the following recitals and
resolutions which hereby create this Certificate of Determination of Rights,
Preferences, Privileges and Restrictions of Series A Preferred Stock of the
Corporation (this "Certificate of Determination"):
WHEREAS, Article Five of the Amended and Restated Articles of
Incorporation of the Corporation authorizes 5,000,000 shares of Preferred Stock;
WHEREAS, in accordance with the provisions of Section 401 of
the California Corporations Code, and pursuant to the Articles of Incorporation,
the Board of Directors is authorized and empowered to designate the rights,
preferences, privileges and restrictions of such Preferred Stock; and
WHEREAS, the initial series of Preferred Stock has been
designated the "Series A Preferred Stock."
NOW THEREFORE BE IT RESOLVED, that Series A of the class of
authorized Preferred Stock of the Corporation is hereby created, and that the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such Series
(the "Preferred Stock"), and the qualifications, limitations or restrictions
thereof are as follows:
I. DESIGNATION AND AMOUNT.
A. SERIES A PREFERRED STOCK. The shares of the initial series of
Preferred Stock of the Corporation is hereby designated "Series A Preferred
Stock" and the number of shares constituting such series is 150,000.
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B. RIGHTS PREFERENCES AND PRIVILEGES. The relative rights, preferences,
restrictions, and other matters relating to the Series A Preferred Stock or the
holders thereof are as follows:
1. Dividends Rights of Preferred. The holders of Series A
Preferred Stock shall be entitled to receive, when and as declared by the Board
out of funds legally available therefor, cumulative dividends at the rate per
share of Series A Preferred Stock of $2.25 per annum (as adjusted for any stock
split, combination, consolidation or stock distributions or stock dividends with
respect to such shares), payable, subject to the provisions of this Section 1,
semiannually on August 31 and February 28 of each year (each, a "Dividend
Payment Date). Such dividend shall accrue on each Dividend Payment Date, and
shall be paid to the holders of record of the Series A Preferred Stock on the
record date set for such dividend payment, or, if no such record date is set, to
the holders of record of the Series A Preferred Stock on the date such payment
is made. The Corporation, at its option, may make dividend payments in cash,
shares of Series A Preferred Stock, or both. The number of shares of Series A
Preferred Stock deliverable with respect to any such dividend shall equal the
quotient obtained by dividing the amount of such dividend payable in shares of
Series A Preferred Stock by the then applicable liquidation preference for one
share of Series A Preferred Stock, as set forth in Section 2(a) below, provided
that the Corporation shall be entitled to pay cash in lieu of delivering any
fractional shares hereunder. Unless all accrued but unpaid dividends on the
Series A Preferred shall have been paid or declared and a sum sufficient for the
payment thereof set apart, (i) no dividend shall be paid or declared on any
shares of the Corporation's common stock, no par value (the "Common Stock"), and
(ii) no shares of Common Stock shall be purchased, redeemed or acquired by the
Corporation and no monies shall be paid into or set aside or made available for
a sinking fund for the purchase, redemption or acquisition thereof.
Notwithstanding the foregoing, the Corporation shall not be prohibited from
repurchasing shares of Common Stock from the directors, officers or employees of
the Corporation or any Subsidiary pursuant to agreements under which the
Corporation has the option to repurchase such shares upon the termination of
employment or consulting relationship, where such repurchase has been duly
authorized by the Board.
2. Liquidation.
(a) Preference. In the event of any liquidation,
dissolution or winding up of the Corporation, either voluntary or involuntary,
subject to the rights of any other series of Preferred Stock that may from time
to time come into existence, the holders of the Series A Preferred Stock shall
be entitled to receive, prior and in preference to any distribution of any of
the assets of the Corporation to the holders of any securities of the
Corporation by reason of their ownership thereof, an amount equal to $45.00 (as
adjusted for any stock split, combination, consolidation or stock distributions
or stock dividends with respect to such shares) for each share of Series A
Preferred Stock then held by them. If, upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series A Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then, subject to the rights of any other series
of Preferred Stock that may from time to time come into existence, the entire
assets and funds of the Corporation legally available for distribution shall be
distributed among the holders of the Series A Preferred Stock on a pari passu
basis in proportion
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to the relationship that the number of shares held by each holder of Series A
Preferred Stock bears to the total number of shares of Series A Preferred Stock
outstanding.
(b) Remaining Assets. Upon the completion of the
distribution required by Section 2(a) above and any other distribution that may
be required with respect to any other series of Preferred Stock that may from
time to time come into existence, the remaining assets of the Corporation
available for distribution to stockholders shall be distributed among the
holders of the Common Stock pro rata based on the number of shares of Common
Stock held by each.
3. Voting Rights. Except as otherwise provided by the
California General Corporation Law ("California Law"), the holders of the Series
A Preferred Stock shall have no voting power whatsoever, and no holder of Series
A Preferred Stock shall vote or otherwise participate in any proceeding in which
actions shall be taken by the Corporation or the shareholders thereof or be
entitled to notification as to any meeting of the shareholders.
To the extent that under California Law the vote of the
holders of the Series A Preferred Stock, voting separately as a class, is
required to authorize a given action of the Corporation, the affirmative vote or
consent of the holders of at least a majority of the outstanding shares of the
Series A Preferred Stock at a duly held meeting at which a quorum is present or
by written consent of a majority of the shares of Series A Preferred Stock
(except as otherwise maybe required under California Law) shall constitute the
approval of such action by the class. To the extent that under California Law
the holders of the Series A Preferred Stock are entitled to vote on a matter
with holders of Common Stock, voting together as one class, each share of Series
A Preferred Stock shall be entitled to one vote for each share of Common Stock
into which such share of Series A Preferred Stock could be converted as of the
record date for the taking of such vote of shareholders. Holders of the Series A
Preferred Stock shall be entitled to notice of all shareholder meetings or
written consents with respect to which they would be entitled to vote, which
notice would be provided pursuant to the Corporation's Bylaws and applicable
statutes.
4. Conversion Rights. The holders of Series A Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Subject to Section 4(c), each
share of Series A Preferred Stock shall be convertible, at the option of the
holder thereof, at any time after the date of issuance of such share, at the
principal office of the Corporation or any transfer agent for such stock, into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing $45.00 by the Conversion Price applicable to such share,
determined as hereafter provided, in effect on the date the certificate is
surrendered for conversion. The initial Conversion Price per share of Series A
Preferred Stock shall be $45.00. Such initial Conversion Price shall be subject
to adjustment as set forth in Section 5.
(b) Automatic Conversion. Each share of Series A
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price at the time in effect for such share immediately upon the
earlier to occur of (i) the closing of the Corporation's sale of its Common
Stock in a firm commitment underwritten public offering pursuant to a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), which
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results in aggregate gross cash proceeds to the Corporation of $25,000,000,
based on a pre-money valuation of the Corporation of at least $80,000,000 and
(ii) the fifth anniversary of the date of issuance of such share.
(c) Mechanics of Conversion. Before any holder of
Series A Preferred Stock shall be entitled to convert the same into shares of
Common Stock pursuant to Section 4(a) above, such holder shall surrender the
certificate or certificates therefor, duly endorsed in blank or accompanied by
appropriate instruments of transfer, at the principal office of the Corporation
or of any transfer agent for Series A Preferred Stock, and shall give written
notice to the Corporation of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Corporation shall, no later than three (3)
Business Days following delivery of the Conversion notice, issue and deliver at
such office to such holder of Series A Preferred Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the close of
business on the date of such surrender of the shares of Series A Preferred Stock
to be converted, and the person or persons entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock as of such date. If
the conversion is in connection with an underwritten offering of securities
registered pursuant to the Securities Act the conversion may, at the option of
the Corporation, be conditioned upon the closing with the underwriters of the
sale of securities pursuant to such offering, in which event the person(s)
entitled to receive Common Stock upon conversion of the Series A Preferred Stock
shall not be deemed to have converted such Series A Preferred Stock until
immediately prior to the closing of such sale of securities. Notwithstanding the
foregoing, in the event of an automatic conversion of the Series A Preferred
Stock pursuant to Section 4(b) above, from and after the effective time of such
conversion, the outstanding certificates representing shares of Series A
Preferred Stock shall thereafter represent the right to receive a certificate or
certificates for the number of shares of Common Stock into which such shares of
Series A Preferred Stock have been converted, and the holders of the Series A
Common Stock as of the date of such conversion shall be treated for all purposes
as the record holders of the shares of Common Stock issuable upon such
conversion as of such date.
(d) No Fractional Shares. No fractional shares of
Common Stock shall be issued upon the conversion of any share or shares of the
Series A Preferred Stock, and all such fractional shares shall be disregarded.
In lieu thereof, the Corporation shall pay in cash the fair market value of such
fractional share as determined by the Board of Directors of the Corporation. The
number of shares issuable upon such conversion shall be determined on the basis
of the total number of shares of Series A Preferred Stock the holder is at that
time converting into Common Stock and the number of shares of Common Stock
issuable upon such aggregate conversion.
(e) Other Distributions. In the event the Corporation
at any time or from time to time makes any distribution payable in securities or
other property of the Corporation (other than Common Stock or Common Stock
Equivalents (as defined in Section 5(a)(1) below)), securities of other persons,
evidences of indebtedness issued by the Corporation or other persons or assets,
then and in each such event provision shall be made so that the holders of
Series A
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Preferred Stock shall receive upon conversion thereof the amount of securities
and other property of the Corporation which they would have received had their
shares of Series A Preferred Stock been converted into shares of Common Stock on
the date of such event and had they thereafter, during the period from the date
of such event to and including the date of conversion, retained such securities
and other property receivable by them as aforesaid during such period, subject
to all other adjustments called for during such period under Section 5 with
respect to the rights of the holders of Series A Preferred Stock.
(f) No Reissuance. Upon any conversion of Series A
Preferred Stock pursuant to this Section 4, the shares of Series A Preferred
Stock which are converted shall not be reissued. Upon conversion of all of the
then outstanding Series A Preferred Stock, shares of Series A Preferred Stock
shall not be deemed outstanding for any purpose whatsoever.
(g) Reservation of Common Stock. The Corporation
shall at all times reserve and keep available, out of its authorized but
unissued Common Stock, solely for the purpose of effecting the conversion of the
Series A Preferred Stock, the full number of shares of Common Stock deliverable
upon the conversion of all Series A Preferred Stock from time to time
outstanding. The Corporation shall from time to time (subject to obtaining
necessary director and shareholder action), in accordance with the laws of the
State of California, increase the authorized amount of its Common Stock if at
any time the authorized number of shares of Common Stock remaining unissued
shall not be sufficient to permit the conversion of all of the shares of
Preferred Stock at the time outstanding.
5. Adjustments to Conversion Price.
(a) Conversion Price Adjustments for Certain Splits
and Combinations. The Conversion Price of the Series A Preferred Stock shall be
subject to adjustment from time to time as follows:
(1) In the event the Corporation should at
any time or from time to time after the date upon which any shares of Series A
Preferred Stock were first issued (the "Purchase Date") fix a record date for
the effectuation of a split or subdivision of the outstanding shares of Common
Stock or the determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common Stock or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly, additional shares of Common Stock (hereinafter
referred to as "Common Stock Equivalents") without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon
conversion or exercise thereof), then, as of such record date (or the date of
such dividend distribution, split or subdivision if no record date is fixed),
the Conversion Price of the Series A Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of Series A Preferred Stock shall be increased in proportion to such
increase in the aggregate number of shares of Common Stock outstanding taking
into account those shares of Common Stock issuable with respect to any such
Common Stock Equivalents, with the number of shares issuable with respect to
Common Stock Equivalents determined from time to time as provided in Section
5(c)(1)(C).
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(2) If the number of shares of Common Stock
outstanding at any time after the Purchase Date is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of Series A Preferred Stock shall be decreased in
proportion to such decrease in the aggregate number of shares of Common Stock
outstanding.
(b) Recapitalizations. If at any time or from time to
time there shall be a recapitalization, reclassification, combination,
subdivision, merger, transfer, exchange, sale or other disposition of assets,
stock split, stock dividend, reverse stock split or other distribution in
respect of the Common Stock (other than as provided for elsewhere in this
Section 5 or in Section 2 or Section 4), provision shall be made so that the
holders of the Series A Preferred Stock shall thereafter be entitled to receive
upon conversion of the Series A Preferred Stock, the number of shares of stock
or other securities or property of the Corporation or otherwise, to which a
holder of Common Stock deliverable upon conversion would have been entitled on
such recapitalization. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 5 with respect to the rights
of the holders of the Series A Preferred Stock after the recapitalization to the
end that the provisions of this Section 5 (including adjustment of the
Conversion Prices then in effect and the number of shares purchasable upon
conversion of the Series A Preferred Stock) shall be applicable after that event
and be as nearly equivalent as practicable.
(c) Conversion Price Adjustments for Certain Dilutive
Issuances. The Conversion Price of the Series A Preferred Stock shall be subject
to adjustment from time to time as follows:
(1) Issuance of Additional Stock below
Conversion Price. If the Corporation shall issue, after the Purchase Date, any
Additional Stock (as defined below) in connection with a financing transaction
for a consideration per share less than the Conversion Price for such series in
effect immediately prior to the issuance of such Additional Stock, the
Conversion Price for such series in effect immediately prior to each such
issuance shall automatically be adjusted to equal the consideration per share
paid for such Additional Stock determined in accordance with Section 5(c)(1)(B),
unless otherwise provided in this Section 5(c)(1).
(A) Additional Stock. For
purposes of this Section 5, "Additional Stock" shall mean any shares of Common
Stock or capital stock, securities, options, warrants to purchase or other
instruments of similar effect convertible into or exchangeable for Common Stock
issued (or deemed to have been issued pursuant to Section 5(c)(1)(C)) by the
Corporation after the Purchase Date other than:
(i) Common Stock issued
pursuant to a transaction described in Section 5(b) hereof,
(ii) Common Stock (or
securities options, warrants or other rights convertible into or exchangeable
shares of Common Stock) issuable or issued to employees, consultants or
directors of the Corporation pursuant to a stock option plan, agreement or
arrangement or restricted stock plan,
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agreement or arrangement approved by the Board of Directors of the Corporation,
(iii) Capital stock, or
options or warrants to purchase capital stock, issued to financial institutions,
placement agents or lessors in connection with commercial credit arrangements,
capital financings, equipment financings or similar transactions,
(iv) Shares of Common
Stock or Series A Preferred Stock issuable upon exercise of warrants outstanding
as of the date of this Certificate of Determination,
(v) Capital stock or
warrants or options to purchase capital stock issued in connection with bona
fide acquisitions, mergers, strategic relationships or similar transactions, the
terms of which are approved by the Board of Directors of the Corporation, and
(vi) Shares of Common
Stock issued or issuable upon conversion of the Series A Preferred Stock.
(B) Determination of
Consideration. In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by the Corporation for any underwriting or otherwise in connection
with the issuance and sale thereof. In the case of the issuance of Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined by
the Board of Directors.
(C) Deemed Issuances of Common
Stock. In the case of the issuance (whether before, on or after the Purchase
Date) of options to purchase or rights to subscribe for Common Stock, securities
by their terms convertible into or exchangeable for Common Stock or options to
purchase or rights to subscribe for such convertible or exchangeable securities,
the following provisions shall apply for all purposes of this Section 5(c)(1):
(i) The aggregate maximum
number of shares of Common Stock deliverable upon exercise (assuming the
satisfaction of any conditions to exercisability, including without limitation,
the passage of time, but without taking into account potential antidilution
adjustments) of such options to purchase or rights to subscribe for Common Stock
shall be deemed to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration (determined in the
manner provided in Section 5(c)(1)(B)), if any, received by the Corporation upon
the issuance of such options or rights plus the minimum exercise price provided
in such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(ii) The aggregate maximum
number of shares of Common Stock deliverable upon conversion of or in exchange
(assuming the satisfaction of any conditions to convertibility or
exchangeability, including, without limitation, the passage of
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time, but without taking into account potential antidilution adjustments) for
any such convertible or exchangeable securities or upon the exercise of options
to purchase or rights to subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange thereof shall be deemed to have
been issued at the time such securities were issued or such options or rights
were issued and for a consideration equal to the consideration, if any, received
by the Corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be received by
the Corporation (without taking into account potential antidilution adjustments)
upon the conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be determined in
the manner provided in Section 5(c)(1)(B)).
(iii) In the event of any
change in the number of shares of Common Stock deliverable or in the
consideration payable to the Corporation upon exercise of such options or rights
or upon conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price of the Series A Preferred
Stock, to the extent in any way affected by or computed using such options,
rights or securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
(iv) Upon the expiration
of any such options or rights, the termination of any such rights to convert or
exchange or the expiration of any options or rights related to such convertible
or exchangeable securities, the Conversion Price of the Series A Preferred
Stock, to the extent in any way affected by or computed using such options,
rights or securities or options or rights related to such securities, shall be
recomputed, but only to the extent the Corporation did not pay any consideration
in connection with such expiration or termination, to reflect the issuance of
only the number of shares of Common Stock (and convertible or exchangeable
securities which remain in effect) actually issued upon the exercise of such
options or rights, upon the conversion or exchange of such securities or upon
the exercise of the options or rights related to such securities.
(v) The number of shares
of Common Stock deemed issued and the consideration deemed paid therefor
pursuant to Sections 5(c)(1)(C)(i) and 5(c)(1)(C)(ii) shall be appropriately
adjusted to reflect any change, termination or expiration of the type described
in either Section 5(c)(1)(C)(iii) or 5(c)(1)(C)(iv).
(D) Circumstances in Which
Conversion Price Not Adjusted. Notwithstanding any other provisions of this
Section 5(c)(1), except to the limited extent provided for in Sections
5(c)(1)(C)(iii) and 5(c)(1)(C)(iv), no adjustment of the Conversion Price
pursuant to this Section 5(c)(1) shall have the effect of increasing the
Conversion Price above (i) the Conversion Price in effect immediately prior to
such adjustment or (ii) the initial Conversion Price specified in Section 4(a).
No readjustment pursuant to Sections 5(c)(1)(C)(iii) and 5(c)(1)(C)(iv) above
shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (x) the Conversion Price on the
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original adjustment date and (y) the Conversion Price that would have resulted
from the issuance of Additional Stock between the original adjustment date and
such readjustment date.
(d) Notification of Adjustment. Upon the occurrence
of each adjustment or readjustment of the Conversion Price for the Series A
Preferred Stock pursuant to this Section 5, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of Series A Preferred Stock a
certificate setting forth such adjustment or readjustment showing in detail the
facts upon which such adjustment or readjustment is based. The Corporation
shall, upon the reasonable written request at any time of any holder of Series A
Preferred Stock, furnish or cause to be furnished to such holder, a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price then in effect and (iii) the number of shares of Common Stock
and the amount, if any, of other property which at the time would be received
upon the conversion of the Series A Preferred Stock. Any notices required by the
provisions of this Section 5 to be given to the holders of shares of Series A
Preferred Stock shall be deemed given if deposited in the United States mail,
first class, postage prepaid and addressed to each holder of record at its
address appearing on the books of the Corporation.
6. No Redemption. The Series A Preferred Stock is not
redeemable.
7. Protective Provisions. Notwithstanding the provisions of
Section 3, so long as any shares of Series A Preferred Stock are outstanding,
the Corporation shall not, without the affirmative vote of the holders of a
majority of the shares of the Series A Preferred Stock then outstanding, (i)
alter or change adversely the powers, preferences or rights given to the Series
A Preferred Stock, (ii) authorize or create any class of stock ranking as to
dividends or distribution of assets upon a liquidation senior to the Series A
Preferred Stock, (iii) amend its articles of incorporation or other charter
documents so as to affect adversely any rights of the holders of the Series A
Preferred Stock, (iv) increase the authorized number of shares of Series A
Preferred Stock, or (v) enter into any agreement with respect to the foregoing
which is not conditioned upon the Corporation obtaining the affirmative vote of
the holders of a majority of the shares of the Series A Preferred Stock then
outstanding as provided in clauses (i)-(iv).
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We further declare under penalty of perjury under the laws of
the State of California that the matters set forth in this Certificate of
Determination are true and correct of our own knowledge.
IN WITNESS WHEREOF, the undersigned have executed this
Certificate of Determination this 15th day of September, 2000.
/s/ Alvin J. Glasky
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Alvin J. Glasky, President
/s/ Samuel Gulko
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Samuel Gulko, Secretary