EXHIBIT 2.1
AGREEMENT OF MERGER
Pursuant to this Agreement of Merger, dated as of the 1st day of June,
2005, Xxxxx Respiratory Therapeutics, Inc., a Texas corporation, shall be merged
with and into Xxxxx Merger Sub, Inc., a Delaware corporation.
SECTION 1
DEFINITIONS
1.1 Effective Time. "Effective Time" shall mean the date and time on which
the Merger contemplated by this Agreement of Merger becomes effective pursuant
to the laws of the State of Delaware and the State of Texas, as determined in
accordance with Section 2.2 of this Agreement of Merger.
1.2 Surviving Corporation. "Surviving Corporation" shall refer to Xxxxx
Merger Sub, Inc., a Delaware corporation.
1.3 Merging Corporation. "Merging Corporation" shall refer to Xxxxx
Respiratory Therapeutics, Inc., a Texas corporation.
1.4 Merger. "Merger" shall refer to the merger of the Merging Corporation
with and into the Surviving Corporation as provided in Section 2.1 of this
Agreement of Merger.
SECTION 2
TERMS OF MERGER
2.1 Merger. Subject to the terms and conditions of this Agreement of
Merger, at the Effective Time, the Merging Corporation shall be merged with and
into the Surviving Corporation in accordance with applicable law. Xxxxx Merger
Sub, Inc., a Delaware corporation, shall be the Surviving Corporation resulting
from the Merger and shall continue to exist and to be governed by the laws of
the State of Delaware under the name "Xxxxx Respiratory Therapeutics, Inc." The
Merger shall be consummated pursuant to the terms of this Agreement of Merger,
which has been approved by the shareholders and Board of Directors of the
Merging Corporation and the sole stockholder and Board of Directors of the
Surviving Corporation.
2.2 Effective Time. The Merger contemplated by this Agreement of Merger
shall be effective when the Certificate of Ownership and Merger is filed with
the Secretary of State of the State of Delaware.
2.3 Certificate of Incorporation. The Certificate of Incorporation of the
Surviving Corporation, attached hereto as Exhibit A, shall remain in full force
and effect after the Effective Time and shall not be amended by virtue of the
Merger.
2.4 Bylaws. The Bylaws of the Surviving Corporation as they exist at the
Effective Time shall remain in full force and effect after the Effective Time
and shall not be amended by virtue of the Merger.
2.5 Board of Directors. The Board of Directors of the Surviving
Corporation immediately prior to the Merger shall remain the same from and after
the Effective Time and shall be unaffected by the Merger.
2.6 Officers. The officers of the Surviving Corporation immediately prior
to the Merger shall remain the same from and after the Effective Time and shall
be unaffected by the Merger.
SECTION 3
MANNER OF CONVERTING MEMBERSHIP INTERESTS AND SHARES
All of the shares of Common Stock of the Surviving Corporation issued and
outstanding at the Effective Time shall be cancelled and retired as of the
Effective Time, and no consideration shall be issued in exchange therefore. The
manner and basis of converting the shares of capital stock of the Merging
Corporation and issuance of capital stock of the Surviving Corporation therefor
upon consummation of the Merger shall be as follows:
3.1 Merging Corporation Common Stock. Each one share of common stock of
the Merging Corporation issued (including, without limitation, shares held by
the Merging Corporation) at the Effective Time shall, as of the Effective Time,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and exchanged for one share of the $0.01 par value
common stock ("Common Stock") of the Surviving Corporation (the "Common Stock
Exchange Ratio"). Any options, warrants or other equity rights to purchase or
convert into common stock of the Merging Corporation that are outstanding as of
the Effective Time shall be converted into options, warrants or other equity
rights to purchase or convert into shares of Common Stock of the Surviving
Corporation on identical terms and conditions as in effect immediately prior to
the Effective Time and in proportion to the Common Stock Exchange Ratio.
3.2 Merging Corporation Preferred Stock. Each one share of Series A
Convertible Preferred Stock of the Merging Corporation issued (including,
without limitation, shares held by the Merging Corporation) at the Effective
Time shall, as of the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and exchanged for
one share of the Series A Convertible Preferred Stock ("Series A Preferred
Stock") of the Surviving Corporation. Each one share of Series B Convertible
Preferred Stock of the Merging Corporation issued (including, without
limitation, shares held by the Merging Corporation) at the Effective Time shall,
as of the Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and exchanged for one share of the
Series B Convertible Preferred Stock ("Series B Preferred Stock") of the
Surviving Corporation (the "Series B Exchange Ratio"). Each one share of Series
C Convertible Preferred Stock of the Merging Corporation issued (including,
without limitation, shares held by the
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Merging Corporation) at the Effective Time shall, as of the Effective Time, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into and exchanged for one share of the Series C Convertible
Preferred Stock ("Series C Preferred Stock") of the Surviving Corporation. Any
warrants to purchase Series B Convertible Preferred Stock of the Merging
Corporation that are outstanding as of the Effective Time shall be converted
into warrants to purchase shares of Series B Preferred Stock of the Surviving
Corporation on identical terms and conditions as in effect immediately prior to
the Effective Time and in proportion to the Series B Exchange Ratio.
3.3 Anti-Dilution Provisions. In the event the Merging Corporation changes
the number of shares of its common stock issued and outstanding prior to the
Effective Time as a result of a split, dividend or similar recapitalization and
the record date therefor is prior to the Effective Time, the Common Stock
Exchange Ratio pursuant to Section 3.1 of this Agreement of Merger and the
number of shares issuable upon conversion of the Series A, Series B or Series C
Preferred Stock shall be proportionately adjusted.
SECTION 4
DELIVERY OF CONSIDERATION
After the Effective Time, each holder of stock of the Merging Corporation
issued and outstanding at the Effective Time shall surrender the certificate or
certificates representing such shares of stock (if applicable) to the Surviving
Corporation and shall promptly upon surrender receive in exchange therefor the
consideration provided in Section 3 of this Agreement of Merger. The certificate
or certificates representing shares of stock of the Merging Corporation so
surrendered shall be duly endorsed as the Surviving Corporation may require. In
the event any former holders of stock of the Merging Corporation were issued
certificates representing such shares of stock, the Surviving Corporation shall
not be obligated to deliver the consideration to which such former holder of
stock of the Merging Corporation is entitled as a result of the merger until
such holder surrenders his, her or its certificate or certificates representing
the shares of stock of the Merging Corporation for exchange as provided in this
Section 4. However, upon surrender of such certificate or certificates, the
stock certificate of the Surviving Corporation shall be delivered with respect
to each share represented by such certificate. After the Effective Time, each
outstanding certificate that represented shares of stock of the Merging
Corporation prior to the Effective Time shall be deemed for all corporate
purposes to evidence only the right of the holder thereof to receive the
consideration provided in Section 3 of this Agreement of Merger in exchange
therefor.
SECTION 5
FURTHER ASSURANCES
Each party to this Agreement of Merger agrees to do such things as may be
reasonably required by the other party in order more effectively to consummate
or document the transactions contemplated by this Agreement of Merger.
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SECTION 6
MISCELLANEOUS
6.1 Termination. This Agreement of Merger may be terminated at any time
prior to the Effective Time by the parties hereto.
6.2 Amendments. To the extent permitted by law, this Agreement of Merger
may be amended upon the approval of the Board of Directors of each of the
parties hereto; provided, however, that the provisions of Section 3 of this
Agreement of Merger relating to the manner or basis in which the stock of the
Merging Corporation will be exchanged for Common Stock of the Surviving
Corporation shall not be amended after approval of this Agreement of Merger by
the shareholders of the Merging Corporation and the sole stockholder of the
Surviving Corporation without the approval of the holders of at least a majority
of the issued and outstanding shares of the Merging Corporation and the sole
stockholder of the Surviving Corporation.
6.3 Payment of Fees and Franchise Taxes. The Surviving Corporation shall
be responsible for the payment of all fees and franchise taxes owed by the
Merging Corporation and shall be obligated to pay such fees and franchise taxes
if such fees and franchise taxes are not timely paid.
(Signatures on the Following Page)
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IN WITNESS WHEREOF, the undersigned business entities have caused this
Agreement of Merger to be executed by their duly authorized agents as of the
date first above written.
MERGING CORPORATION:
XXXXX RESPIRATORY THERAPEUTICS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
______________________________
Name: Xxxxxxx X. Xxxxxxxxx
_________________________
Title: President and CEO
________________________
SURVIVING CORPORATION:
XXXXX MERGER SUB, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
______________________________
Name: Xxxxxxx X. Xxxxxxxxx
_________________________
Title: President and CEO
________________________
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EXHIBIT A
CERTIFICATE OF INCORPORATION OF
XXXXX MERGER SUB, INC.
A DELAWARE CORPORATION
I, the undersigned, for the purposes of incorporating and organizing a
corporation under the General Corporation Law of the State of Delaware, do
execute this Certificate of Incorporation and do hereby certify as follows:
ARTICLE I
The name of the corporation is Xxxxx Merger Sub, Inc. (the
"Corporation").
ARTICLE II
The address of the corporation's registered office in the
State of Delaware is Corporation Trust Center, 0000 Xxxxxx Xxxxxx, xx xxx Xxxx
xx Xxxxxxxxxx, Xxxxxx of New Castle, 19801. The name of its registered agent at
such address is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the Delaware General Corporation Law.
ARTICLE IV
The Corporation is authorized to issue two classes of stock to
be designated common stock ("Common Stock") and preferred stock ("Preferred
Stock"). The number of shares of Common Stock authorized to be issued is one
hundred million (100,000,000), par value $0.01 per share, and the number of
shares of Preferred Stock authorized to be issued is fifty million (50,000,000),
par value $0.01 per share.
The Preferred Stock may be issued from time to time in one or
more series, without further stockholder approval. The Board of Directors is
hereby authorized, in the resolution or resolutions adopted by the Board of
Directors providing for the issue of any wholly unissued series of Preferred
Stock, within the limitations and restrictions stated in this Certificate of
Incorporation, to fix the designations, preferences and relative, participating,
optional, or other special rights, and qualifications, limitations or
restrictions thereof, including, without limitation, the authority to fix or
alter the dividend rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences of any wholly
unissued series of Preferred Stock, and the number of shares constituting any
such series and the designation thereof, or any of them, and to increase or
decrease the number of shares of any series subsequent to the issue of shares of
that series, but not below the number of shares of such series then outstanding.
In case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the
status that they had prior to the adoption of the resolution originally fixing
the number of shares of such series.
ARTICLE V
The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
A. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. In addition to the
powers and authority expressly conferred upon them by statute or by this
Certificate of Incorporation or the Bylaws of the Corporation, the directors are
hereby empowered to exercise all such powers and do all such acts and things as
may be exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by
written ballot unless the Bylaws so provide.
C. Following the effective date of the Corporation's
registration statement filed pursuant to the Securities Act of 1933, as amended,
and prepared in connection with the Corporation's initial public offering (the
"IPO Date"), any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
ARTICLE VI
The number of directors of the Corporation shall be fixed from
time to time by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board. For purposes of this Certificate of Incorporation,
the term "Whole Board" shall mean the total number of authorized directors
whether or not there exist any vacancies in previously authorized directorships.
Following the IPO Date, the Board of Directors shall be
divided into three classes: Class I, Class II and Class III. Such classes shall
be as nearly equal in number of directors as possible. Each director shall serve
for a term ending on the third annual meeting of stockholders following the
annual meeting of stockholders at which such director was elected; provided,
however, that the directors first elected to Class I shall serve for a term
ending on the Corporation's first annual meeting of stockholders following the
effectiveness of this Article, the directors first elected to Class II shall
serve for a term ending on the Corporation's second annual meeting of
stockholders following the effectiveness of this Article and the directors first
elected to Class III shall serve for a term ending on the Corporation's third
annual meeting of stockholders following the effectiveness of this Article. The
foregoing notwithstanding, each director shall serve until such director's
successor shall have been duly elected and qualified, or until such director's
prior death, resignation, retirement, disqualification or other removal.
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At each annual election, directors chosen to succeed those
whose terms then expire shall be of the same class as the directors they succeed
unless, by reason of any intervening changes in the authorized number of
directors, the Board of Directors shall designate one or more directorships
whose term then expires as directorships of another class in order more nearly
to achieve equality of number of directors among the classes.
Notwithstanding the rule that the three classes shall be as
nearly equal in number of directors as possible, in the event of any change in
the authorized number of directors, each director then continuing to serve as
such shall nevertheless continue as a director of the class of which such
director is a member until the expiration of such director's current term, or
such director's prior death, resignation, retirement, disqualification or other
removal. If any newly created directorship may, consistently with the rule that
the three classes shall be as nearly equal in number of directors as possible,
be allocated to more than one class, the Board of Directors shall allocate it to
that of the available class whose term of office is due to expire at the
earliest date following such allocation.
Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least a majority of the voting
power of all of the then-outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class.
ARTICLE VII
A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article VII to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Delaware General Corporation Law as so
amended.
Any repeal or modification of the foregoing provisions of this
Article VII by the stockholders of the Corporation shall not adversely affect
any right or protection of a director of the Corporation existing at the time
of, or increase the liability of any director of this Corporation with respect
to any acts or omissions of such director occurring prior to, such repeal or
modification.
ARTICLE VIII
The Board of Directors is expressly empowered to adopt, amend
or repeal any or all of the Bylaws of the Corporation. Any adoption, amendment
or repeal of the Bylaws of the Corporation by the Board of Directors shall
require the approval of a majority of the Whole Board. The stockholders shall
also have power to adopt, amend or repeal the Bylaws of the
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Corporation; provided, however, that, in addition to any vote of the holders of
any class or series of stock of the Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to adopt, amend or repeal any provision of the Bylaws of the
Corporation.
ARTICLE IX
In addition to any vote of the holders of any class or series
of the stock of this Corporation required by law or by this Certificate of
Incorporation, the affirmative vote of the holders of a majority of the voting
power of all of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required to amend or repeal the provisions of Article I,
Article II, Article III and Article IV of this Certificate of Incorporation.
Notwithstanding any other provision of this Certificate of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any vote of the holders of any class or series of the stock of this
Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to amend or
repeal any provision of this Certificate of Incorporation not specified in the
preceding sentence.
ARTICLE X
The incorporator of the corporation is J. Xxxx Xxx, whose mailing
address is Xxxxxx & Bird, LLP, 0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx
00000.
ARTICLE XI
The powers of the incorporator are to terminate upon the filing of this
Certificate of Incorporation with the Secretary of State of the State of
Delaware. The name and mailing address of the person who shall serve as the
initial director of the corporation until his successor is duly elected and
qualified is Xxxxxxx X. Xxxxxxxxx, Xxxxx Laboratories, Inc., 000 Xxxx Xxxxxx,
Xxxxxxx, Xxx Xxxxxx 00000.
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IN WITNESS WHEREOF, this Certificate of Incorporation has been
executed by the undersigned this 31st day of May, 2005.
/s/ J. Xxxx Xxx
________________________________________
J. Xxxx Xxx, Incorporator
CERTIFICATE OF DESIGNATIONS, RIGHTS AND PREFERENCES
OF THE
SERIES A CONVERTIBLE PREFERRED STOCK,
SERIES B CONVERTIBLE PREFERRED STOCK AND
SERIES C CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151 of the Delaware General Corporation Law (the
"DGCL"), Xxxxx Merger Sub, Inc., a corporation organized and existing under the
Delaware General Corporation Law (the "Corporation"), DOES HEREBY CERTIFY that
pursuant to the authority conferred upon the Board of Directors (the "Board") by
the Certificate of Incorporation of the Corporation, and pursuant to Section 151
of the DGCL, the Board, acting by written consent in accordance with Section
141(f) of the DGCL, on May 31, 2005 duly adopted a resolution providing for the
issuance of a series of 15,000,000 shares of Series A Convertible Preferred
Stock, 20,000,000 shares of Series B Convertible Preferred Stock and 15,000,000
shares of Series C Convertible Preferred Stock, which resolution is and reads as
follows:
RESOLVED, that, pursuant to the authority expressly granted to and
vested in the Board by the provisions of the Certificate of Incorporation, the
Board hereby authorizes the creation and issuance of: (i) a series of preferred
stock, hereby designated as Series A Convertible Preferred Stock (the "Series A
Preferred Stock"), to consist of 15,000,000 shares, $0.01 par value per share;
(ii) a series of preferred stock, hereby designated as Series B Convertible
Preferred Stock (the "Series B Preferred Stock"), to consist of 20,000,000
shares, $0.01 par value per share; and (iii) a series of preferred stock, hereby
designated as Series C Convertible Preferred Stock (the "Series C Preferred
Stock"), to consist of 15,000,000 shares, $0.01 par value per share. The Series
A Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock
shall together be referred to herein as the "Preferred Stock." All classes of
the Preferred Stock shall be, and hereby are, established, and the designations,
preferences and relative, participating, optional or other special rights of
such Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock and the relation to the Corporation's common stock, $0.01 par value per
share (the "Common Stock") and shall each have the rights, preferences and
privileges set forth in Annex A, subject to the restrictions, limitations and
qualifications set forth therein.
ANNEX A
DESIGNATIONS, RIGHTS AND PREFERENCES
OF THE
SERIES A CONVERTIBLE PREFERRED STOCK,
SERIES B CONVERTIBLE PREFERRED STOCK AND
SERIES C CONVERTIBLE PREFERRED STOCK
Section 1. Dividends.
1A. General Obligation. Except as otherwise provided herein, no
preferential dividends shall accrue on any Share.
1B. Participating Dividends. If the Corporation declares or pays any
dividends upon the Common Stock (whether payable in cash, securities or other
property) other than dividends payable solely in shares of Common Stock, the
Corporation shall also declare and pay to the holders of each series of
Preferred Stock, out of assets or funds of the Corporation legally available
therefor, at the same time that it declares and pays such dividends to the
holders of the Common Stock, together and pari passu with each other series of
Preferred Stock, the dividends which would have been declared and paid with
respect to the Common Stock issuable upon conversion of such Preferred Stock had
all of the outstanding Preferred Stock been converted immediately prior to the
record date for such dividend, or if no record date is fixed, the date as of
which the record holders of Common Stock entitled to such dividends are to be
determined. If the Corporation declares or pays any dividends upon any series of
Preferred Stock (whether payable in cash, securities or other property) other
than dividends payable solely in shares of such series of Preferred Stock, the
Corporation shall also declare and pay to the holders of each other series of
Preferred Stock at the same time that it declares and pays such dividends to the
holders of such Preferred Stock, the dividends which would have been declared
and paid with respect to the Common Stock issuable upon conversion of such
Preferred Stock had all of the outstanding Preferred Stock been converted
immediately prior to the record date for such dividend, or, if no record date is
fixed, the date as of which the record holders of such Preferred Stock entitled
to such dividends are to be determined.
Section 2. Liquidation.
2A. Preferred Liquidation Preference. Upon any liquidation, dissolution
or winding up of the Corporation (whether voluntary or involuntary), the holders
of Shares of Preferred Stock shall be entitled to be paid as follows:
(i) first, each holder of Series C Preferred shall be entitled
to be paid, before any distribution or payment is made upon any Junior
Securities, an amount in cash equal to the aggregate Series C
Liquidation Value of all Shares of Series C Preferred held by such
holder (plus all accrued but unpaid dividends pursuant to Section 1B);
then
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(ii) second, with respect to each holder of Series A Preferred
and Series B Preferred, unless the amounts to which such holder would
be entitled under Section 2A(iii) are greater than the amounts to which
such holder would be entitled under this Section 2A(ii) (in which case,
such holder shall receive the amounts described in and pursuant to
Section 2A(iii) in lieu of this Section 2A(ii)), each such holder
together and pari passu with each other such holder, shall be entitled
to be paid, before any distribution or payment is made upon any Junior
Securities, an amount in cash equal to the greater of (a) the aggregate
Liquidation Value of all Shares of Series A Preferred or Series B
Preferred, as applicable, held by such holder (plus all accrued but
unpaid dividends pursuant to Section 1B); and (b) the applicable IRR
Value, if any; and then
(iii) thereafter, the remaining assets of the Corporation
legally available for distribution, if any, shall be distributed
ratably to each holder of Series A Preferred, Series B Preferred,
Series C Preferred and Common Stock on a pari passu as-if-converted to
Common Stock basis; provided, however, that in the event that the
amounts to which any holder of Series A Preferred or Series B Preferred
would be entitled under Section 2A(ii) is greater than the amounts to
which such holder would be entitled to receive under this Section
2A(iii) (disregarding the application of Section 2A(ii), then such
holder shall not be entitled to receive any amounts under this Section
2A(iii) but rather shall receive the amounts described in and pursuant
to Section 2A(ii).
If upon any such liquidation, dissolution or winding up of the Corporation the
Corporation's assets to be distributed among the holders of the Series C
Preferred are insufficient to permit payment to such Series C Preferred holders
of the aggregate amount which they are entitled to be paid upon any liquidation,
dissolution or winding up of the Corporation, then the entire assets available
to be distributed to the Corporation's stockholders shall be distributed pro
rata among such holders based upon the full preferential amount each such holder
is otherwise entitled to receive. If upon any such liquidation, dissolution or
winding up of the Corporation the Corporation's assets to be distributed among
the holders of the Series A Preferred and Series B Preferred hereunder are
insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid upon any liquidation, dissolution or winding up of
the Corporation, then the entire assets available to be distributed to the
Corporation's stockholders shall be distributed pro rata among such holders
based upon the full preferential amount each such holder is otherwise entitled
to receive.
2B. Notice of Liquidation; Election by Holders of Preferred Stock. Not
less than 45 days prior to the payment date stated therein, the Corporation
shall mail written notice of the liquidation, dissolution or winding up to each
record holder of Preferred Stock, setting forth in reasonable detail the amount
of proceeds to be paid with respect to each Share of Preferred Stock and Common
Stock in connection with such liquidation, dissolution or winding up.
2C. Deemed Liquidation. Upon the election of the holders of not less
than sixty percent (60%) of the outstanding Shares of Series A Preferred, a
majority of the
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outstanding Shares of Series B Preferred or a majority of shares of Series C
Preferred, as applicable, delivered to the Corporation within thirty (30)
calendar days after receipt of the Corporation's notice to the holders of
Preferred Stock under this Section 2C of any Fundamental Change or any Change in
Control, such Fundamental Change or any Change in Control shall, with respect to
the holders of such series of Preferred Stock approving the same, be deemed to
be a liquidation, dissolution and winding up of the Corporation for purposes of
this Section 2, and the holders of such series of Preferred Stock approving the
same shall be entitled to receive payment from the Corporation of the amounts
payable with respect to the applicable series of Preferred Stock upon a
liquidation, dissolution or winding up of the Corporation under this Section 2
in cancellation of their Shares upon the consummation of any such transaction.
If the holders of a series of Preferred Stock elect to deem such Fundamental
Change or Change in Control to be a liquidation, dissolution and winding up of
the Corporation with respect to share of such series, then each holder of such
series of Preferred Stock shall have the right to elect the benefits of either
this Section 2C or Section 6E hereof in connection with any such transaction.
Notwithstanding the foregoing, in no event shall any of the transactions
contemplated by the Summary of Principal Terms attached as Annex A to the
Corporation's Proxy Statement for Special Meeting of Shareholders held on
September 18, 2000 (the "Exempt Transactions"), constitute or be deemed to
constitute a Fundamental Change or Change in Control.
Section 3. Priority of Preferred Stock on Dividends and Redemptions. So
long as any series of Preferred Stock remains outstanding, without the prior
written consent of each of (i) the holders of at least sixty percent (60%) of
the then outstanding Shares of Series A Preferred, (ii) the holders of at least
a majority of the then outstanding Shares of Series B Preferred, and (iii) the
holders of at least a majority of the then outstanding Shares of Series C
Preferred, the Corporation shall not, nor shall it permit any Subsidiary to,
redeem, purchase or otherwise acquire directly or indirectly any Junior
Securities, nor shall the Corporation directly or indirectly pay or declare any
dividend or make any distribution upon any Junior Securities (other than
dividends on the Common Stock payable in shares of Common Stock; provided that
the Corporation may repurchase shares of Common Stock and Common Stock options
from the employees of the Corporation and its Subsidiaries upon termination of
employment pursuant to arrangements approved by the Corporation's Board, so long
as no Event of Noncompliance is in existence at the time or immediately after
such repurchase or would be caused by such repurchase).
Section 4. Redemptions.
4A. Redemptions upon Request. At any time during the ninety (90)
calendar day period following June 1, 2006, and during the ninety (90) calendar
day period following June 1, 2007, and provided that a Qualified Public Offering
shall not have been consummated, each holder of Shares of Preferred Stock may
from time to time request redemption of all or a portion of such holder's Shares
by delivering written notice of such request to the Corporation. The Corporation
shall be required to redeem all Shares with respect to which redemption requests
have been made at a price per Share (the "Redemption Price") equal to: (i) with
respect to the Series A Preferred and the Series B
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Preferred, the Fair Market Value thereof (plus all accrued but unpaid dividends
pursuant to Section 1B; and (ii) with respect to the Series C Preferred, the
higher of (x) the Series C Liquidation Value (plus all accrued but unpaid
dividends pursuant to Section 1B) and (y) the Fair Market Value thereof (plus
all accrued but unpaid dividends pursuant to Section 1B). Notwithstanding
anything to the contrary in this Section 4A, so long as any shares of Series C
Preferred or any security convertible into Series C Preferred remain outstanding
or any portion of the Redemption Payment Amount (defined below) (and interest
and other amounts owing thereon) is owed by the Corporation in respect of Shares
of Series C Preferred, the Corporation shall not pay any portion of the
Redemption Payment Amount (defined below), including, without limitation, any
payments under a Redemption Note (defined below), in respect of the Shares of
Series A Preferred, Series B Preferred or other Junior Securities.
As soon as practicable following the final determination of Fair Market
Value, but in any event within thirty (30) calendar days thereafter, the
Corporation shall deliver to each holder who has submitted a redemption request
in accordance with this Section, cash in an amount equal to the product of the
applicable per share Redemption Price and the number of Shares being redeemed by
such holder (the "Redemption Payment Amount"). In the event that the Corporation
cannot reasonably pay all such Redemption Payment Amounts in cash, the
Corporation shall deliver to each redeeming holder (1) a promissory note in an
original principal amount equal to the Redemption Payment Amount, due on the
first anniversary of the date of the applicable holder's redemption notice (the
"Final Redemption Payment Date"), accruing interest at the prime rate of
interest as quoted in the national edition of the Wall Street Journal at the
date such note is issued (a "Redemption Note"), or (2) a combination of cash and
Redemption Note in an aggregate amount equal to the Redemption Payment Amount;
provided, however, that holders of Shares subject to redemption in connection
with the same notice shall receive payment in respect of Shares being redeemed
in identical proportions of cash and Redemption Notes. Upon final determination
of the Fair Market Value, the holders' redemption election shall, except as
otherwise provided below, be irrevocable, notwithstanding the final Fair Market
Value or payment of any portion of the Redemption Payment Amount in the form of
the Redemption Note; provided, however, that in the event of any revocation by
the holder previously requesting redemption prior to such final determination of
Fair Market Value, such holder shall be required to reimburse the Corporation
for all reasonable out-of-pocket expenses incurred prior to the date thereof in
obtaining a third-party valuation.
In the event that any portion of a holder's Redemption Payment Amount
is paid in the form of a Redemption Note, all Shares tendered by such holder
will be held in trust until full payment of principal and interest on the
Redemption Note has been made to or as otherwise directed by the holder,
whereupon the Redemption Note shall be cancelled and such Shares shall be
released from trust and delivered to the Corporation.
Until such time as the Redemption Payment Amount, plus any amounts
accrued under the Redemption Payment Note, have been paid in full, the holder of
the Redemption Payment Note shall be entitled, and the books and records of the
Corporation shall reflect that such holder is entitled, to all of the rights
such holder had as a holder of
- 5 -
the Shares held in trust (other than the right to receive any dividends thereon,
if any, which dividends shall likewise be held in trust) and under any
shareholder or Share purchase agreement, including the right to vote such Shares
and, in the event of any Fundamental Change or Change in Control prior to
discharge of the Redemption Note, to elect to exchange for the Shares held in
trust in such holder's name, the Redemption Note plus an amount in cash equal to
any cash already received in partial payment of the Redemption Payment Amount,
and to participate in such transaction in accordance with Section 2 above.
At any time prior to any redemption pursuant to this Section 4A, any
holder of Shares shall be entitled to convert all or any portion of the Shares
subject to such redemption (or any scheduled installment thereof) as provided in
Section 6 hereof.
Upon the occurrence of an Event of Noncompliance, the following shall
occur immediately, without the need for any further action by any Person other
than as provided below:
(i) the Conversion Price of the applicable series of Preferred
Stock shall be reduced immediately by fifty percent (50%) of the
Conversion Price in effect immediately prior to any such adjustment,
and in no event shall any Conversion Price adjustment be rescinded;
(ii) the interest rate under the Redemption Notes shall
immediately be increased to the lower of (a) two times the interest
rate previously in effect, and (b) the highest interest rate possible
that does not violate any applicable usury law, rule or regulation; and
(iii) each holder of the applicable series of Preferred Stock
shall also have any other rights which such holder is entitled to under
any contract or agreement at any time and any other rights which such
holder may have pursuant to applicable law.
Upon the occurrence of an Event of Noncompliance, the Corporation shall
promptly (1) issue to each holder of a Redemption Note in exchange therefor, a
new Redemption Note incorporating the revised interest rates as provided above,
and (2) take all other actions necessary to implement the terms of the preceding
Section. Upon the first anniversary of an Event of Noncompliance, if the
Redemption Payment Amounts (including all interest to date) have not been paid
in full with respect to any series of Preferred Stock, then the size of the
Board and each committee thereof shall immediately be increased by three members
(or such greater odd number as is necessary to assure that a majority of members
of the Board and each committee are designees of the holders of a majority of
the Shares of Preferred Stock), and such members shall be designated by the
holders of a majority of Shares of such series of Preferred Stock.
Notwithstanding the foregoing, however, if at such time (i) there shall also be
an Event of Noncompliance with respect to any other series of Preferred Stock,
(y) the Redemption Payment Amounts with respect to such other series of
Preferred Stock (including all interest to date) have not been paid in full, and
(z) at such time a majority of the members of the Board and
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each committee are not already designees of the holders of a majority of the
Shares of Preferred Stock (on an as-converted to Common Stock basis), then the
size of the Board and each committee thereof shall immediately be increased by
three members (or such greater odd number of members as is necessary to assure
that a majority of members of the Board and each committee are designees of the
holders of a majority of the Shares of Preferred Stock), and such members shall
be designated to the Board as follows: (1) one-third (1/3) of such members shall
be designated by a majority vote of the Series A Preferred, (2) one-third (1/3)
of such members shall be designated by a majority vote of the Series B Preferred
and (3) one-third (1/3) of such members shall be designated by a majority vote
of the Series C Preferred.
4B. Dividends After Redemption Date. No Share shall be entitled to any
dividends accruing after the date on which the Redemption Payment Amount in
respect of all Shares tendered for redemption pursuant hereto has been paid to
the holder of such Share in full in cash. On such date, all rights of the holder
of such Shares shall cease, and such Shares shall no longer be deemed to be
issued and outstanding.
4C. Redeemed or Otherwise Acquired Shares. Any Shares which are
redeemed or otherwise acquired by the Corporation shall, at the Corporation's
election, be held in treasury, canceled and retired to authorized but unissued
shares, or transferred to a new holder (provided that simultaneously with such
transfer all Redemption Payment Amounts (plus all interest to date) is paid in
full in cash).
4D. Other Redemptions or Acquisitions. The Corporation shall not, nor
shall it permit any Subsidiary to, redeem or otherwise acquire any Shares of
Preferred Stock, except as expressly authorized herein or pursuant to a purchase
offer made pro rata to all holders of such series of Preferred Stock on the
basis of the number of Shares owned by each such holder and in any such case,
such redemption or other acquisition shall be subject to the acceptance of the
applicable holder.
4E. Prohibitions on Redemptions. In the event of any prohibition on the
redemption (whether pursuant to this Section 4 or otherwise) of the Shares
pursuant to any agreement, instrument or other arrangement to which the
Corporation is a party or its assets are bound, the Corporation will use best
efforts to obtain waivers or other appropriate relief from such restrictions in
order to permit any redemptions required pursuant to this Certificate of
Incorporation and use commercially reasonable efforts to obtain replacement
financing for the Shares in order to permit any such required redemption. This
Section 4E shall not be interpreted as authorizing or otherwise empowering the
Corporation to enter into any such agreement, instrument or other arrangement.
4F. Additional Restrictions on Redemption. Without limiting anything
set forth herein to the contrary, the Corporation shall not redeem any other of
its capital stock unless it shall have offered, with respect to any capital
stock other than the Preferred Stock, to redeem all of the outstanding Preferred
Stock at a price per share equal to the greater of the redemption price of such
redemption and the redemption price under Section 4A, and with respect to any
series of Preferred Stock, has offered to redeem each
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other series of Preferred Stock in accordance with the terms set forth herein
ratably with such series of Preferred Stock in proportion to the aggregate
liquidation preferences of the outstanding shares of the respective series, and
ratably among the holders of that series in proportion to the amount of such
stock owned by each such holder so that each holder receives the same percentage
of the preferential amount each such holder is otherwise entitled to receive.
The foregoing shall not be interpreted as authorizing or otherwise empowering
the Corporation to redeem any of its capital stock. To the extent the
Corporation is empowered to redeem any series of Preferred Stock, the
Corporation shall give written notice to the holders of each other series of
Preferred Stock of the amount to be redeemed prior to the expiration of any
right (to the extent that any such right terminates) of any series of Preferred
Stock to participate in any such redemption.
Section 5. Voting Rights.
5A. General. The holders of each series of Preferred Stock shall be
entitled to notice of all stockholder meetings in accordance with the
Corporation's bylaws, and such holders shall be entitled to vote on all matters
submitted to the stockholders for a vote together with the holders of the Common
Stock and each other series of Preferred Stock and any other classes of capital
stock voting with the Common Stock all voting together as a single class, with
each Share of Preferred Stock (including any Shares held in trust pursuant to
Section 4) entitled to one vote for each share of Common Stock issuable upon
conversion of such Preferred Stock as of the record date for such vote or, if no
record date is specified, as of the date of such vote.
5B. Special. Holders of Shares of any series of Preferred Stock will
also be entitled to vote either together with each other series of Preferred
Stock separately as a class on any matters on which the Preferred Stock votes
separately as a class or separately as a series on any matters on which each
series of the Preferred Stock votes separately as a series (in each case as set
forth by the DGCL), with each Share of Preferred Stock (including any Shares
held in trust pursuant to Section 4) entitled to one vote for each share of
Common Stock issuable upon conversion of such Preferred Stock as of the record
date for such vote or, if no record date is specified, as of the date of such
vote. The Series C Preferred also shall be entitled to vote as a single series,
separately from the Common Stock, Series A Preferred and Series B Preferred, on
the following matters, with each Share of Series C Preferred (including any
Shares held in trust pursuant to Section 4) entitled to one vote for each share
of Common Stock issuable upon conversion of such Series C Preferred as of the
record date for such vote or, if no record date is specified, as of the date of
such vote:
(i) any amendment to the Certificate of Incorporation or
filing of any resolution with the Delaware Secretary of State
containing any provisions which would increase the number of authorized
shares of Series C Preferred or adversely affect or otherwise impair
the rights or relative preferences and priorities of the holders of
Series C Preferred;
(ii) any authorization, issuance or entering into any
agreement providing for the issuance (contingent or otherwise) of any
capital stock or other
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equity securities (including, without limitation, debt, hybrid,
derivative or other securities, convertible into or exchangeable or
exercisable for capital stock or other equity securities) of the
Corporation, which in any case are senior to or on a parity with the
Series C Preferred with respect to distributions upon any liquidation,
dissolution or winding up of the Corporation (whether voluntary or
involuntary) or redemptions; or
(iii) any Fundamental Change or Change of Control.
Section 6. Conversion.
6A. Conversion Procedure.
(i) At any time and from time to time, any holder of any
series of Preferred Stock may convert all or any portion of such
Preferred Stock held by such holder into a number of shares of
Conversion Stock computed by multiplying the number of Shares to be
converted by the actual purchase price paid to the Corporation or any
predecessor entity, including but not limited to Xxxxx Respiratory
Therapeutics, Inc., a Texas corporation formerly known as Xxxxx
Laboratories, Inc., upon the issuance of such Shares, and dividing the
result by the Conversion Price then in effect. In the event that a
holder of Shares holds Shares purchased at different prices, the price
deemed applicable to specific Shares converted shall, for purposes of
the preceding sentence, be as specified by the holder to the
Corporation in a written certificate, to the extent not inconsistent
with the Corporation's books and records.
(ii) Except as otherwise provided herein, each conversion of
Preferred Stock shall be deemed to have been effected as of the close
of business on the date on which the certificate or certificates
representing the Preferred Stock to be converted have been surrendered
for conversion at the principal office of the Corporation. At the time
any such conversion has been effected, the rights of the holder of the
Shares converted as a holder of Preferred Stock shall cease and the
Person or Persons in whose name or names any certificate or
certificates for shares of Conversion Stock are to be issued upon such
conversion shall be deemed to have become the holder or holders of
record of the shares of Conversion Stock represented thereby.
(iii) The conversion rights of any Share subject to redemption
hereunder shall terminate on the Redemption Date for such Share unless
the Corporation has failed to pay to the holder thereof the full amount
payable with respect to such Share.
(iv) Notwithstanding any other provision hereof, if a
conversion of Preferred Stock is to be made in connection with a Public
Offering or other transaction affecting the Corporation, the conversion
of any Shares may, at the election of the holder thereof, be
conditioned upon the consummation of such
- 9 -
transaction, in which case such conversion shall not be deemed to be
effective until such transaction has been consummated.
(v) As soon as possible after a conversion has been effected
(but in any event within five business days), the Corporation shall
deliver to the converting holder:
(a) a certificate or certificates representing the
number of shares of Conversion Stock issuable by reason of
such conversion in such name or names and such denomination or
denominations as the converting holder has specified;
(b) the amount of all dividends declared pursuant to
Section 1B remaining unpaid with respect to the Shares to be
converted, plus the amount payable under Section 6A(ix) below
with respect to such conversion; and
(c) a certificate representing any Shares which were
represented by the certificate or certificates delivered to
the Corporation in connection with such conversion but which
were not converted.
(vi) The issuance of certificates for shares of Conversion
Stock upon conversion of Preferred Stock shall be made without charge
to the holders of such Preferred Stock for any issuance tax in respect
thereof or other cost incurred by the Corporation in connection with
such conversion and the related issuance of shares of Conversion Stock.
Upon conversion of each Share of Preferred Stock, the Corporation shall
take all such actions as are necessary in order to insure that the
Conversion Stock issuable with respect to such conversion shall be
validly issued, fully paid and nonassessable, free and clear of all
taxes, liens, charges and encumbrances with respect to the issuance
thereof, and the Conversion Stock issuable with respect to such
conversion shall be validly issued, fully paid and nonassessable, free
and clear of all taxes, liens, charges and encumbrances with respect to
the issuance thereof.
(vii) The Corporation shall not close its books against the
transfer of Preferred Stock or of Conversion Stock issued or issuable
upon conversion of Preferred Stock in any manner which interferes with
the timely conversion of Preferred Stock. The Corporation shall assist
and cooperate with any holder of Shares required to make any
governmental filings or obtain any governmental approval prior to or in
connection with any conversion of Shares hereunder (including, without
limitation, making any filings required to be made by the Corporation).
(viii) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Conversion
Stock, solely for the purpose of issuance upon the conversion of
Preferred Stock, such number of shares of Conversion Stock issuable
upon the conversion of all outstanding Preferred Stock.
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All shares of Conversion Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges. The Corporation shall take all
such actions as may be necessary to assure that all such shares of
Conversion Stock may be so issued without violation of any applicable
law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Conversion Stock may be listed
(except for official notice of issuances which shall be immediately
delivered by the Corporation upon each such issuance). The Corporation
shall not take any action which would cause the number of authorized
but unissued shares of Conversion Stock to be less than the number of
such shares required to be reserved hereunder for issuance upon
conversion of the Preferred Stock.
(ix) If any fractional interest in a share of Conversion Stock
would, except for the provisions of this Section, be delivered upon any
conversion of the Preferred Stock, the Corporation, in lieu of
delivering the fractional share therefor, shall pay an amount to the
holder thereof equal to the Market Price of such fractional interest as
of the date of conversion.
6B. Conversion Price.
(i) The initial Conversion Price shall be as follows: (x) with
respect to the Series A Preferred, $1.45; (y) with respect to the
Series B Preferred, $1.60; and (z) with respect to the Series C
Preferred, $1.60. In order to prevent dilution of the conversion rights
granted under this Section 6B, the Conversion Price shall be subject to
adjustment from time to time pursuant to this Section 6B.
(ii) If and whenever the Corporation issues or sells, or in
accordance with Section 6C is deemed to have issued or sold, any shares
of its Common Stock (including issuances or sales, or in accordance
with Section 6C deemed issuances or sales, that have occurred prior to
the date hereof) for a consideration per share less than (a) the
Conversion Price in effect immediately prior to the time of such
issuance or sale or (b) the Market Price of the Common Stock determined
as of the date of such issue or sale, then immediately upon such issue
or sale or deemed issue or sale the Conversion Price shall be reduced
to whichever of the following Conversion Prices is lower:
(a) the Conversion Price determined by dividing (1)
the sum of (x) the product derived by multiplying the
Conversion Price in effect immediately prior to such issue or
sale by the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale, plus (y)
the consideration, if any, received by the Corporation upon
such issue or sale, by (2) the number of shares of Common
Stock Deemed Outstanding immediately after such issue or sale;
or
(b) the Conversion Price determined by multiplying
the Conversion Price in effect immediately prior to such issue
or sale by a fraction, the numerator of which shall be the sum
of (1) the number of
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shares of Common Stock Deemed Outstanding immediately prior to
such issue or sale multiplied by the Market Price of the
Common Stock determined as of the date of such issuance or
sale, plus (2) the consideration, if any, received by the
Corporation upon such issue or sale, and the denominator of
which shall be the product derived by multiplying the Market
Price of the Common Stock by the number of shares of Common
Stock Deemed Outstanding immediately after such issue or sale.
(iii) Notwithstanding the foregoing, there shall be no
adjustment in the Conversion Price as a result of any issue or sale (or
deemed issue or sale) of up to an aggregate of 4,500,000 shares (as
such number of shares is proportionately adjusted for subsequent stock
splits, combinations and dividends affecting the Common Stock and as
such number of shares includes all such stock options and other
purchase rights outstanding at the time of the initial issuance of the
applicable series of Preferred Stock) of Common Stock to employees,
directors or consultants of the Corporation and its Subsidiaries
pursuant to stock option plans and stock ownership plans approved by
the Corporation's Board, including at least one director designated by
holders of at least a majority of the Shares.
6C. Effect on Conversion Price of Certain Events. For purposes of
determining the adjusted Conversion Price under Section 6B, the following shall
be applicable:
(i) Issuance of Rights or Options. If the Corporation in any
manner grants or sells any Options and the price per share for which
Common Stock is issuable upon the exercise of such Options, or upon
conversion or exchange of any Convertible Securities issuable upon
exercise of such Options, is less than (a) the Conversion Price in
effect immediately prior to the time of the granting or sale of such
Options or (b) the Market Price of the Common Stock determined as of
such time, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such Convertible Securities
issuable upon the exercise of such Options shall be deemed to be
outstanding and to have been issued and sold by the Corporation at the
time of the granting or sale of such Options for such price per share.
For purposes of this Section, the "price per share for which Common
Stock is issuable" shall be determined by dividing (A) the total
amount, if any, received or receivable by the Corporation as
consideration for the granting or sale of such Options, plus the
minimum aggregate amount of additional consideration payable to the
Corporation upon exercise of all such Options, plus in the case of such
Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable to the Corporation
upon the issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or
upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options. No further adjustment of
the Conversion Price shall be made when Convertible Securities are
actually issued upon the exercise of such Options or when Common
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Stock is actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Corporation in
any manner issues or sells any Convertible Securities and the price per
share for which Common Stock is issuable upon conversion or exchange
thereof is less than (a) the Conversion Price in effect immediately
prior to the time of such issue or sale or (b) the Market Price of the
Common Stock determined as of such time, then the maximum number of
shares of Common Stock issuable upon conversion or exchange of such
Convertible Securities shall be deemed to be outstanding and to have
been issued and sold by the Corporation at the time of the issuance or
sale of such Convertible Securities for such price per share. For the
purposes of this Section, the "price per share for which Common Stock
is issuable" shall be determined by dividing (A) the total amount
received or receivable by the Corporation as consideration for the
issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (B) the total
maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities. No further adjustment
of the Conversion Price shall be made when Common Stock is actually
issued upon the conversion or exchange of such Convertible Securities,
and if any such issue or sale of such Convertible Securities is made
upon exercise of any Options for which adjustments of the Conversion
Price had been or are to be made pursuant to other provisions of this
Section 6, no further adjustment of the Conversion Price shall be made
by reason of such issue or sale.
(iii) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities or the rate at which any Convertible Securities
are convertible into or exchangeable for Common Stock changes at any
time, the Conversion Price in effect at the time of such change shall
be immediately adjusted to the Conversion Price which would have been
in effect at such time had such Options or Convertible Securities
provided for such changed purchase price, additional consideration or
conversion rate, as the case may be, at the time initially granted,
issued or sold. For purposes of Section 6C, if the terms of any Option
or Convertible Security which was outstanding as of the date of the
initial issuance of the applicable series of Preferred Stock are
changed in the manner described in the immediately preceding sentence,
then such Option or Convertible Security and the Common Stock deemed
issuable upon exercise, conversion or exchange thereof shall be deemed
to have been issued as of the date of such change; provided that no
such change shall at any time cause the Conversion Price hereunder to
be increased.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Security without the
exercise of any such Option or right, the Conversion Price then in
effect hereunder shall be adjusted
- 13 -
immediately to the Conversion Price which would have been in effect at
the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to
such expiration or termination, never been issued. For purposes of
Section 6C, the expiration or termination of any Option or Convertible
Security which was outstanding as of the date of the initial issuance
of the applicable series of Preferred Stock shall not cause the
Conversion Price hereunder to be adjusted unless, and only to the
extent that, a change in the terms of such Option or Convertible
Security caused it to be deemed to have been issued after the date of
issuance of the applicable series of Preferred Stock.
(v) Calculation of Consideration Received. If any Common
Stock, Option or Convertible Security is issued or sold or deemed to
have been issued or sold for cash, the consideration received therefor
shall be deemed to be the amount received by the Corporation therefor
(net of non-customary discounts, commissions and related expenses). If
any Common Stock, Option or Convertible Security is issued or sold for
a consideration other than cash, the amount of the consideration other
than cash received by the Corporation shall be the fair value of such
consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Corporation
shall be the Market Price thereof as of the date of receipt. If any
Common Stock, Option or Convertible Security is issued to the owners of
the non-surviving entity in connection with any merger in which the
Corporation is the surviving corporation, the amount of consideration
therefor shall be deemed to be the fair value of such portion of the
assets and business of the non-surviving entity as is attributable to
such Common Stock, Option or Convertible Security, as the case may be.
The fair value of any consideration other than cash and securities
shall be determined jointly by the Corporation, (ii) the designee of
holders of at least 60% of the then outstanding shares of Series A
Preferred, (iii) the designee of holders of at least a majority of the
then outstanding shares of Series B Preferred and (iv) the designee of
holders of at least a majority of the then outstanding shares of Series
C Preferred. If such parties are unable to reach agreement within a
reasonable period of time, the fair value of such consideration shall
be determined by an independent appraiser experienced in valuing such
type of consideration selected by the Corporation and approved by (x)
the designee of holders of at least 60% of the then outstanding Shares
of Series A Preferred, (y) the designee of holders of at least a
majority of the then outstanding Shares of Series B Preferred and (z)
the designee of holders of at least a majority of the then outstanding
Shares of Series C Preferred (such approval not to be unreasonably
withheld). The determination of such appraiser shall be final and
binding upon the parties, and the fees and expenses of such appraiser
shall be borne by the Corporation.
(vi) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the
Corporation, together comprising one integrated transaction in which no
specific consideration is allocated to such Option by the parties
thereto, the Option shall be deemed to
- 14 -
have been issued for the Fair Market Value thereof (taking into account
the securities issued in such integrated transaction).
(vii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by
or for the account of the Corporation or any Subsidiary, and the
disposition of any shares so owned or held shall be considered an issue
or sale of Common Stock
(viii) Record Date. If the Corporation takes a record of the
holders of Common Stock for the purpose of entitling them (a) to
receive a dividend or other distribution payable in Common Stock,
Options or in Convertible Securities or (b) to subscribe for or
purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or upon the making of such other
distribution or the date of the granting of such right of subscription
or purchase, as the case may be.
(ix) Exempt Transactions. Notwithstanding anything to the
contrary contained in Section 6B, this Section 6B or elsewhere herein,
no adjustment shall be made to the Conversion Price in respect of any
Exempt Transaction.
6D. Subdivision or Combination of Common Stock. If the Corporation at
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision shall be proportionately reduced, and if the Corporation at any
time combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
6E. Reorganization, Reclassification, Consolidation, Merger or Sale.
Prior to the consummation of any Organic Change, the Corporation shall make
appropriate provisions (in form and substance satisfactory to each of (i) the
holders of at least 60% of the then outstanding Shares of Series A Preferred,
(ii) the holders of at least a majority of the then outstanding Shares of Series
B Preferred and (iii) the holders of at least a majority of the then outstanding
Shares of Series C Preferred) to insure that each of the holders of each series
of Preferred Stock shall thereafter have the right to acquire and receive, in
lieu of or in addition to (as the case may be) the shares of Conversion Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's Preferred Stock, such shares of stock, securities or assets as such
holder would have received in connection with such Organic Change if such holder
had converted its Preferred Stock immediately prior to such Organic Change. In
each such case, the Corporation shall also make appropriate provisions (in form
and substance satisfactory to each of (x) the holders of at least a 60% of the
then outstanding Shares of Series A Preferred, (y) the holders of at least a
majority of the then outstanding Shares of Series B Preferred and (z) the
holders of at least a majority of the then outstanding Shares of Series C
Preferred) to insure that the provisions of this Section 6E shall thereafter be
- 15 -
applicable to each series of Preferred Stock (including, in the case of any such
consolidation, merger or sale in which the successor entity or purchasing entity
is other than the Corporation, an immediate adjustment of the Conversion Price
to the value for the Common Stock reflected by the terms of such consolidation,
merger or sale, and a corresponding immediate adjustment in the number of shares
of Conversion Stock acquirable and receivable upon conversion of Preferred
Stock, if the value so reflected is less than the Conversion Price in effect
immediately prior to such consolidation, merger or sale). The Corporation shall
not effect any such consolidation, merger or sale, unless prior to the
consummation thereof, the successor entity (if other than the Corporation)
resulting from consolidation or merger or the entity purchasing such assets
assumes by written instrument (in form and substance reasonably satisfactory to
each of (1) the holders of at least 60% of the then outstanding Shares of Series
A Preferred, (2) the holders of at least a majority of the then outstanding
Shares of Series B Preferred and (3) the holders of at least a majority of the
then outstanding Shares of Series C Preferred), the obligation to deliver to
each such holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to acquire.
Notwithstanding the foregoing, in no event shall any of the Exempt Transactions
constitute or be deemed to constitute an Organic Change.
6F. Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 6 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the
Corporation's Board shall make an appropriate adjustment in the Conversion Price
so as to protect the rights of the holders of each series of Preferred Stock;
provided that no such adjustment shall increase the Conversion Price as
otherwise determined pursuant to this Section 6 or decrease the number of shares
of Conversion Stock issuable upon conversion of each Share of Preferred Stock.
6G. Notices. Immediately upon any adjustment of the Conversion Price,
the Corporation shall give written notice thereof to all holders of the
applicable series of Preferred Stock, setting forth in reasonable detail and
certifying the calculation of such adjustment. The Corporation shall give
written notice to all holders of Preferred Stock at least twenty (20) calendar
days prior to the date on which the Corporation closes its books or takes a
record (a) with respect to any dividend or distribution upon Common Stock, (b)
with respect to any pro rata subscription offers to holders of Common Stock or
(c) for determining rights to vote with respect to any Organic Change,
dissolution or liquidation. The Corporation shall also give written notice to
all holders of Preferred Stock at least twenty (20) calendar days prior to the
date on which any Organic Change shall take place.
6H. Mandatory Conversions. Except with respect to any Shares for which
requests for redemptions have been delivered pursuant to Section 4A hereof (in
which event, (i) any such conversion shall be effected only upon the request of
any such holder previously requesting redemption and (ii) notwithstanding any
provision to the contrary contained in Section 4A hereof, any Shares which any
holder has not elected to convert pursuant to the foregoing clause (i) shall be
redeemed by the Corporation concurrently with the closing of such Qualified
Public Offering), the Corporation may at any time
- 16 -
require the conversion of all of the outstanding Preferred Stock if (x) the
Corporation is at such time effecting a firm commitment underwritten Public
Offering of shares of its Common Stock in which the per share price is at least
$4.00, (y) the aggregate price paid by the public for the shares shall be at
least $30 million (a "Qualified Public Offering") and (z) all of the Shares of
Preferred Stock have been converted. Any such mandatory conversion shall only be
effected at the time of and subject to the closing of the sale of such shares
pursuant to such Public Offering and upon written notice of such mandatory
conversion delivered to all holders of Preferred Stock at least ten (10)
calendar days prior to such closing.
In addition, the Corporation shall have the right (x) at any time after
obtaining the written approval of the holders of not less than 60% of the then
outstanding Shares of Series A Preferred to require the conversion of all
outstanding Series A Preferred, (y) at any time after obtaining the written
approval of the holders of not less than a majority of the then outstanding
Shares of Series B Preferred to require the conversion of all outstanding Series
B Preferred and (z) at any time after obtaining the written approval of the
holders of not less than a majority of the then outstanding Shares of Series C
Preferred to require the conversion of all outstanding Series C Preferred. Any
such mandatory conversion shall only be effected upon written notice of such
mandatory conversion delivered to all holders of all Preferred Stock by the
Corporation at least ten (10) calendar days prior to such mandatory conversion.
Section 7. Registration of Transfer. The Corporation shall keep at its
principal office a register for the registration of Preferred Stock. Upon the
surrender of any certificate representing Preferred Stock at such place, the
Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
Shares represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of Shares as is
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Preferred Stock represented by such new certificate from the
date to which dividends have been fully paid on such Preferred Stock represented
by the surrendered certificate.
Section 8. Replacement. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing Shares of Preferred Stock, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
Shares of such class represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate, and dividends shall accrue on the Preferred Stock
- 17 -
represented by such new certificate from the date to which dividends have been
fully paid on such lost, stolen, destroyed or mutilated certificate.
Section 9. Definitions.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular
Person, where "control" means the possession, directly or indirectly,
of the power to direct the management and policies of a Person whether
through the ownership of voting securities, contract or otherwise.
"Change in Control" means any sale, transfer or issuance or
series of sales, transfers and/or issuances of shares of the
Corporation's capital stock by the Corporation or the holders thereof
as a result of which the holders of the Corporation's outstanding
capital stock possessing the voting power (under ordinary
circumstances) to elect a majority of the Corporation's Board
immediately prior to such sale or issuance cease to own the
Corporation's outstanding capital stock possessing the voting power
(under ordinary circumstances) to elect a majority of the Corporation's
Board.
"Common Stock" means, collectively, the Corporation's Common
Stock and any capital stock of any class of the Corporation hereafter
authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to
participate in dividends or in the distribution of assets upon any
liquidation, dissolution or winding up of the Corporation.
"Common Stock Deemed Outstanding" means, at any given time,
without duplication, the number of shares of Common Stock actually
outstanding at such time, plus the number of shares of Common Stock
deemed to be outstanding pursuant to Sections 6C(i) and 6C(ii) hereof
whether or not the Options or Convertible Securities are actually
exercisable at such time, plus the number of shares of Common Stock
issuable upon conversion of the outstanding Preferred Stock, plus the
number of shares of Common Stock issuable upon exercise of outstanding
options and warrants to purchase Common Stock or Preferred Stock as
such number of shares is proportionately adjusted for stock splits,
stock dividends, stock combinations and other recapitalizations.
"Conversion Stock" means shares of the Corporation's Common
Stock; provided that if there is a change such that the securities
issuable upon conversion of any series of Preferred Stock are issued by
an entity other than the Corporation or there is a change in the type
or class of securities so issuable, then the term "Conversion Stock"
shall mean the security issuable upon conversion of each Share of the
Preferred Stock if such security is issuable in shares, or shall mean
the smallest unit in which such security is issuable if such security
is not issuable in shares.
- 18 -
"Convertible Securities" means any stock or securities
directly or indirectly convertible into or exchangeable for Common
Stock.
"Date of Issuance" means the date on which the Corporation
initially issues any Shares, regardless of the number of times transfer
of such Share is made on the stock records maintained by or for the
Corporation and regardless of the number of certificates which may be
issued to evidence such Share.
"Event of Noncompliance" means, with respect to any series of
Preferred Stock, a failure by the Corporation to have paid all
Redemption Payment Amounts (including all interest thereon) by the
Final Redemption Payment Date, except for any such failure caused
solely by the provisions of Section 4A which restrict the Corporation's
ability to pay any Redemption Payment Amount (other than in respect of
Shares of Series C Preferred) so long as any Shares of Series C
Preferred (or any security convertible into Series C Preferred) remain
outstanding or any portion of the Redemption Payment Amount (and
interest and other amounts owing thereon) is owned by the Corporation
in respect of Shares of Series C Preferred.
"Fair Market Value" means, with respect to shares of Series A
Preferred, Series B Preferred or Series C Preferred, as applicable, the
fair value thereof determined jointly by (i) the Corporation, (ii) the
designee of holders of at least a majority of the then outstanding
shares of Series A Preferred, (iii) the designee of holders of at least
a majority of the then outstanding shares of Series B Preferred and
(iv) the designee of holders of at least a majority of the then
outstanding shares of Series C Preferred, subject to a redemption
notice. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an
independent appraiser experienced in valuing securities and approved by
(i) the Corporation, (ii) the designee of holders of at least a
majority of the then outstanding shares of Series A Preferred, (iii)
the designee of holders of at least a majority of the then outstanding
shares of Series B Preferred and (iv) the designee of holders of at
least a majority of the then outstanding shares of Series C Preferred,
subject to a redemption notice. The determination of such appraiser
shall be final and binding upon the parties, and the Corporation shall
pay the fees and expenses of such appraiser.
"Favorable CellTech Resolution" shall mean, subject to the
next sentence, either (a) the entry of a final judgment not subject to
appeal or modification (the "Final Judgment") that adjudicates the
claims asserted by CellTech Pharmaceuticals, Inc. ("CellTech") in the
litigation entitled "Celltech Pharmaceuticals, Inc. vs. Xxxxx
Laboratories, Inc." (as amended or supplemented from time to time, the
"Litigation") in favor of the Corporation and dismisses the Litigation
with prejudice and without any award of damages or other relief to
CellTech or any of its Affiliates or (b) the consensual resolution
through settlement of the Litigation without payment, in any form
(except for up to $1,000,000 of amounts paid for or reimbursed by
proceeds of applicable insurance coverage), by the Corporation or any
of its Affiliates in which CellTech
- 19 -
(on behalf of itself and its Affiliates) unconditionally and forever
releases, discharges and waives any and all claims, whether known or
unknown, direct or indirect, matured or unmatured, which CellTech or
any of its Affiliates ever had, then has or thereafter can, shall or
may have against the Corporation or any of its Affiliates
(collectively, the "Released Parties"), arising from, and either that
were asserted, or could have been asserted in, the Litigation against
the Released Parties (the "Settlement and Release"). Notwithstanding
the foregoing, a Favorable CellTech Resolution shall not be deemed to
have occurred if (i) the Corporation sustains or incurs disbursements,
fees and expenses, including attorneys', accountants' investigators'
and experts' disbursements, fees and expenses, in excess of $1,000,000
in the aggregate (not including amounts paid for or reimbursed by
proceeds of applicable insurance coverage) in connection with or
otherwise related to the defense, investigation and/or settlement of
the Litigation and any and all claims related thereto and/or (ii) at
the time of either the Final Judgment or Settlement and Release the
Corporation is a defendant in any litigation that is related to, or
otherwise pertains to, the subject matter of the Litigation or the
asserted facts underlying the Litigation (or any such litigation has
been threatened in writing), in which event a Favorable CellTech
Resolution shall only be deemed to have occurred when any such
litigation or threatened litigation has been finally adjudicated in
favor of the Corporation or a settlement has been reached, in each
case, pursuant to the conditions set forth in the immediately preceding
sentence.
"Fundamental Change" means a consolidation or merger of the
Corporation with or into another entity or entities (whether or not the
Corporation is the surviving entity) or any sale or transfer by the
Corporation of all or substantially all of its assets (determined
either for the Corporation alone or with its Subsidiaries on a
consolidated basis).
"IRR Value" means, in the event of any liquidation,
dissolution or winding up of the Corporation which occurs prior to, or
pursuant to agreements entered into on or prior to June 1, 2004 and
constitutes a Fundamental Change or a Change in Control, the aggregate
Liquidation Value of all Shares of Series A Preferred and Series B
Preferred held by the applicable holder (plus all accrued but unpaid
dividends pursuant to Section 1B) plus such amount as would provide the
holder thereof a return accrued on a daily basis from the date of
issuance of such Series A Preferred or such Series B Preferred, as
applicable, through the earlier of (I) the date of payment in full with
respect to such Preferred Stock and (II) (1) solely with respect to
Series A Preferred, June 1, 2001, or (2) solely with respect to Series
B Preferred, July 9, 2002, at the rate of 30% per annum.
"Junior Securities" means, (i) with respect to the Series A
Preferred and the Series B Preferred, any capital stock or other equity
securities of the Corporation, except for the Series C Preferred, and
(ii) with respect to the Series C Preferred, any capital stock or other
equity securities of the Corporation, including, without limitation,
the Common Stock, Series A Preferred and the Series B Preferred.
- 20 -
"Liquidation Value" of any Share (i) of Series A Preferred or
Series B Preferred as of any particular date shall be equal to the
actual purchase price paid to the Corporation or any predecessor
entity, including but not limited to Xxxxx Respiratory Therapeutics,
Inc., a Texas corporation formerly known as Xxxxx Laboratories, Inc.,
upon the issuance of such Shares, as proportionately adjusted for stock
splits, stock dividends, stock combinations and other recapitalizations
affecting the applicable series of Preferred Stock, and (ii) of Series
C Preferred as of any particular date shall be equal to the Series C
Liquidation Value.
"Market Price" of any security means the average of the
closing prices of such security's sales on all securities exchanges on
which such security may at the time be listed, or, if there has been no
sales on such exchange on any day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such day, or,
if on any day such security is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of
4:00 P.M., New York time, or, if on any day such security is not quoted
in the NASDAQ System, the average of the highest bid and lowest asked
prices on such day in the domestic over-the-counter market as reported
by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21
trading days consisting of the days as of which "Market Price" is being
determined and the 20 consecutive business days prior to such day. If
at any time such security is not listed on any securities exchange or
quoted in the NASDAQ System or the over-the-counter market, the "Market
Price" shall be the fair value thereof determined jointly by (i) the
Corporation, (ii) the designee of holders of at least 60% of the then
outstanding shares of Series A Preferred, (iii) the designee of holders
of at least a majority of the then outstanding shares of Series B
Preferred and (iv) the designee of holders of at least a majority of
the then outstanding shares of Series C Preferred, subject to a
redemption notice. If such parties are unable to reach agreement within
a reasonable period of time, such fair value shall be determined by an
independent appraiser experienced in valuing securities selected by (i)
the Corporation, (ii) the designee of holders of at least 60% of the
then outstanding shares of Series A Preferred, (iii) the designee of
holders of at least a majority of the then outstanding shares of Series
B Preferred and (iv) the designee of holders of at least a majority of
the then outstanding shares of Series C Preferred, subject to a
redemption notice (such approval not to be unreasonably withheld). The
determination of such appraiser shall be final and binding upon the
parties, and the Corporation shall pay the fees and expenses of such
appraiser.
"Options" means any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities but excluding
rights explicitly granted pursuant to the Exempt Transactions.
"Organic Change" means any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially
all of the Corporation's assets or other transaction, in each case
which is effected in such a manner that the holders of Common Stock are
entitled to receive (either directly
- 21 -
or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for Common Stock.
"Participating Liquidation Amount" means the portion of all
liquidation proceeds payable to the holders of capital stock of the
Corporation, equal to a fraction, the numerator of which is the number
of shares of Common Stock issuable upon the conversion under Section 6
of all Shares of the applicable series of Preferred Stock outstanding
immediately prior to such event and the denominator of which is the
number of shares of Common Stock outstanding immediately prior to such
event plus all shares of Common Stock issuable upon conversion under
Section 6 of all Preferred Stock outstanding immediately prior to such
event.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization or a
governmental entity or any department, agency or political subdivision
thereof.
"Public Offering" means any offering by the Corporation of its
capital stock or equity securities to the public pursuant to an
effective registration statement under the Securities Act of 1933, as
then in effect, or any comparable statement under any similar federal
statute then in force; provided that for purposes of Section 6H hereof,
a Public Offering shall not include an offering made in connection with
a business acquisition or combination or an employee benefit plan.
"Redemption Date" as to any Share means the date specified in
the notice of any redemption or the applicable date specified herein in
the case of any other redemption; provided that no such date shall be a
Redemption Date unless the full amount payable with respect thereto is
actually paid in full in cash on such date, and if not so paid in full,
the Redemption Date shall be the date on which such amount is fully
paid.
"Series C Liquidation Value" shall mean (i) $3.20 per Share if
there has been no Favorable CellTech Resolution prior to May 15, 2004;
(ii) $2.56 per Share if there has been a Favorable CellTech Resolution
prior to November 15, 2003; and (iii) $2.80 per Share if there has not
been a Favorable CellTech Resolution prior to November 15, 2003, but
there has been a Favorable CellTech Resolution on or after November 15,
2003 and prior to May 15, 2004; in each case as proportionately
adjusted for stock splits, stock dividends, stock combinations and
other recapitalizations affecting the Series C Preferred.
"Share" shall mean any share of any series of Preferred Stock.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or
other business entity of which (i) if a corporation, a majority of the
total voting power of shares of stock entitled
- 22 -
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or
more of the other Subsidiaries of that Person or a combination thereof,
of (ii) if a limited liability company, partnership, association or
other business entity, a majority of the partnership or other similar
ownership interest thereof is at the time owned or controlled, directly
or indirectly, by any Person or one or more Subsidiaries of that person
or a combination thereof. For purposes hereof, a Person or Persons
shall be deemed to have a majority ownership interest in a limited
liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited
liability company, partnership, association or other business entity
gains or losses or shall be or control the managing general partner of
such limited liability company, partnership, association or other
business entity.
Section 10. Amendment and Waiver. No amendment, modification or waiver
shall be binding or effective with respect to any provision of this Certificate
of Designations, Rights and Preferences without the prior written consent of the
holders of (i) the designee of holders of at least 60% of the then outstanding
shares of Series A Preferred, (ii) the designee of holders of at least a
majority of the then outstanding shares of Series B Preferred and (iii) the
designee of holders of at least a majority of the then outstanding shares of
Series C Preferred, subject to a redemption notice; provided that no change in
the terms hereof may be accomplished by merger or consolidation of the
Corporation with another corporation or entity unless the Corporation has
obtained the prior written consent of (i) the designee of holders of at least
60% of the then outstanding shares of Series A Preferred, (ii) the designee of
holders of at least a majority of the then outstanding shares of Series B
Preferred and (iii) the designee of holders of at least a majority of the then
outstanding shares of Series C Preferred, subject to a redemption notice.
Section 11. Notices. Except as otherwise expressly provided hereunder,
all notices referred to herein shall be in writing and shall be delivered by
reputable overnight courier service, charges prepaid, and shall be deemed to
have been given when so sent (i) to the Corporation, at its principal executive
offices and (ii) to any stockholder, at such holder's address as it appears in
the stock records of the Corporation (unless otherwise indicated by any such
holder).
(Signatures on the Following Page)
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IN WITNESS WHEREOF, this Certificate of Designation has been signed by
an authorized officer of this Corporation on May 31, 2005.
XXXXX MERGER SUB, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxxx
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Its: President and Chief Executive Officer
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