Exhibit 10.6
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR SOME OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS IS
AVAILABLE WITH RESPECT THERETO.
PREFERRED STOCK PURCHASE WARRANT
Warrant No. _______________ Number of Shares: To be determined pursuant to
SECTION 2 below of Series F Convertible Preferred
Stock, $0.001 par value per share
NXSTAGE MEDICAL, INC.
Effective as of December 23, 2004
Void after December 23, 2011
1. ISSUANCE. This Preferred Stock Purchase Warrant (the "Warrant") is
issued to LIGHTHOUSE CAPITAL PARTNERS IV, L.P., or its registered assigns (the
"Holder"), by NXSTAGE MEDICAL, INC., a Delaware corporation (hereinafter with
its successors called the "Company").
2. PURCHASE PRICE; NUMBER OF SHARES. The Holder commencing on the date
hereof is entitled upon surrender of this Warrant with the subscription form
annexed hereto duly executed, at the principal office of the Company, to
purchase from the Company that number of fully paid and nonassessable shares
(the "Shares") of Series F Preferred Stock, $.0.001 par value, of the Company
(the "Preferred Stock") equal to $300,000 divided by the Purchase Price (as
defined below). As used in this Warrant, the "Purchase Price" shall equal the
lesser of (i) $7.28 (the per share price of the Preferred Stock), or (ii) the
price per share of securities issued in an Equity Infusion, if such Equity
Infusion occurs prior to the exercise of this Warrant, provided that:
(a) if the Equity Infusion is an initial Public Offering (as defined
below), the price per share of securities is the price to the public of the
shares of the Company's Common Stock, $0.01 par value per share (the "Common
Stock"), issued and sold in the offering, and
(b) if the Equity Infusion is a Next Round Financing (as defined
below), the price per share of equity securities is the price at which shares of
the Company's preferred stock are issued in such Next Round Financing,
(c) in the case of an Equity Infusion other than an initial Public
Offering or a Next Round Financing, the price per share of securities is the
fair market value (as determined by the Board of Directors of the Company) of
the consideration per share of Preferred Stock issued in the Equity Infusion.
Notwithstanding the foregoing, the Purchase Price shall in no event be less than
$5.97 per share.
In addition to other terms which may be defined herein, the following terms, as
used in this Warrant, shall have the following meanings:
(i) "Equity Infusion" shall mean the first to occur of the
Company's (a) Next Round Financing, (b) initial Public Offering, or (c)
acquisition by or merger into another company, or the sale of all or
substantially all assets to another company (other than a merger or
consolidation in which all or substantially all of the individuals and entities
who were beneficial owners of the capital stock immediately prior to such
transaction beneficially own, directly or indirectly, more than 50% of the
outstanding securities entitled to vote generally in the election of directors
of the resulting, surviving or acquiring corporation in such transaction).
(ii) "Next Round Financing" means the Company's next bona fide
round of preferred stock equity financing for the purpose of raising working
capital for the Company with gross aggregate proceeds to the Company of at least
$3,000,000.
Until such time as this Warrant is exercised in full or expires, the Purchase
Price and the securities issuable upon exercise of this Warrant are subject to
adjustment as hereinafter provided.
3. PAYMENT OF PURCHASE PRICE; EXERCISE DATE.
(a) Subject to SECTION 4 below, the Purchase Price may be paid (i)
in cash or by check, (ii) by the surrender by the Holder to the Company of any
promissory notes or other obligations issued by the Company, with all such notes
and obligations so surrendered being credited against the Purchase Price in an
amount equal to the principal amount thereof plus accrued interest to the date
of surrender, or (iii) by any combination of the foregoing.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which this
Warrant shall have been surrendered to the Company as provided in subsection
3(a) above or SECTION 4 below the ("Exercise Date."). At such time, the person
or persons in whose name or names any certificates for Shares shall be issuable
upon such exercise shall be deemed to have become the Holder or Holders of
record of the Shares represented by such certificates.
4. NET ISSUE ELECTION. The Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares of Preferred Stock
equal to the value of this Warrant or any portion hereof by the surrender of
this Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly executed, at the principal office of the Company. Thereupon,
the Company shall issue to the Holder such number of fully paid and
nonassessable shares of Preferred Stock as is computed using the following
formula:
Y(A-B)
X = ------
A
where: X = the number of shares of Preferred Stock to be issued to
the Holder pursuant to this SECTION 4.
Y = the number of shares of Preferred Stock covered by this
Warrant in respect of which the net issue election is
made pursuant to this SECTION 4.
A = the Fair Market Value (defined below) of one share of
Preferred Stock, as determined at the time the net
issue election is made pursuant to this SECTION 4.
B = the Purchase Price in effect under this Warrant at the
time the net issue election is made pursuant to this
SECTION 4.
"Fair Market Value" of a share of Preferred Stock (or fully paid and
nonassessable shares of the Company's Common Stock if the Preferred Stock has
been automatically converted into Common Stock) as of the date that the net
issue election is made (the "Determination Date") shall mean:
(i) If the net issue election is made in connection with and
contingent upon the closing of the initial sale of the Company's Common Stock to
the public in a public offering pursuant to a Registration Statement under the
1933 Act (a "Public Offering"), and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the Securities and Exchange Commission, then the initial "Price to
Public" specified in the final prospectus with respect to such offering
multiplied by the number of shares of Common Stock into which each share of
Preferred Stock is then convertible.
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(ii) If the net issue election is not made in connection with
and contingent upon a Public Offering, then as follows:
(a) If traded on a securities exchange, the NASDAQ
National Market or another nationally recognized trading system as of the
Exercise Date, the fair market value of the Common Stock shall be deemed to be
the average of the closing or last reported sale prices of the Common Stock on
such exchange or market over the five day period ending five trading days prior
to the Determination Date, and the fair market value of the Preferred Stock
shall be deemed to be such fair market value of the Common Stock multiplied by
the number of shares of Common Stock into which each share of Preferred Stock is
then convertible;
(b) If otherwise traded in an over-the-counter market,
the fair market value of the Common Stock shall be deemed to be the average of
the closing ask prices of the Common Stock over the five day period ending five
trading days prior to the Determination Date, and the fair market value of the
Preferred Stock shall be deemed to be such fair market value of the Common Stock
multiplied by the number of shares of Common Stock into which each share of
Preferred Stock is then convertible; and
(c) If there is no public market for the Common Stock,
then fair market value shall be determined in good faith by the Company's Board
of Directors.
5. PARTIAL EXERCISE. This Warrant may be exercised in part, and the Holder
shall be entitled to receive a new warrant, which shall be dated as of the date
of this Warrant, covering the number of shares in respect of which this Warrant
shall not have been exercised.
6. FRACTIONAL SHARES. In no event shall any fractional share of Preferred
Stock be issued upon any exercise of this Warrant. If, upon exercise of this
Warrant in its entirety, the Holder would, except as provided in this SECTION 6,
be entitled to receive a fractional share of Preferred Stock, then the Company
shall pay to the Holder the value thereof in cash on the basis of Fair Market
Value as determined in SECTION 4 above.
7. EXPIRATION DATE; AUTOMATIC EXERCISE. This Warrant shall expire at the
close of business on December 23, 2011 (the "Expiration Date") and shall be void
thereafter.
Notwithstanding the foregoing, this Warrant shall automatically be deemed
to be exercised in full pursuant to the provisions of SECTION 4 hereof, without
any further action on behalf of the Holder, immediately prior to the time this
Warrant would otherwise expire pursuant to this SECTION 7.
8. RESERVED SHARES; VALID ISSUANCE. The Company covenants that it will at
all times from and after the date hereof reserve and keep available such number
of its authorized shares of Preferred Stock and Common Stock free from all
preemptive or similar rights therein, as will be sufficient to permit,
respectively, the exercise of this Warrant in full and the conversion into
shares of Common Stock of all shares of Preferred Stock receivable upon such
exercise. The Company further covenants that such shares as may be issued
pursuant to such exercise and/or conversion will, upon issuance, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issuance thereof.
9. STOCK SPLITS AND DIVIDENDS. If after the date hereof the Company shall
subdivide the Preferred Stock, by split-up or otherwise, or combine the
Preferred Stock, or issue additional shares of Preferred Stock in payment of a
stock dividend on the Preferred Stock, the number of shares of Preferred Stock
issuable on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a subdivision or stock dividend, or proportionately
decreased in the case of a combination, and the Purchase Price shall forthwith
be proportionately decreased in the case of a subdivision or stock dividend, or
proportionately increased in the case of a combination. Any adjustment under
this SECTION 9 shall become effective at the close of business on the date the
dividend, subdivision or combination becomes effective.
10. ADJUSTMENTS FOR DILUTING ISSUANCES. The other antidilution rights
applicable to the Preferred Stock and the Common Stock of the Company, if any,
are set forth in the Amended and Restated Certificate of
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Incorporation, as amended from time to time (the "Certificate"), a true and
complete copy in its current form which is attached hereto as EXHIBIT A. The
Company shall promptly provide the Holder hereof with any restatement, amendment
or modification to the Certificate promptly after the same has been made.
11. MERGERS AND RECLASSIFICATIONS. If after the date hereof the Company
shall enter into any Reorganization (as hereinafter defined), then, following
such Reorganization, the Holder shall receive upon exercise hereof the kind and
amount of securities, cash or other property which the Holder would have been
entitled to receive pursuant to such Reorganization if such exercise had taken
place immediately prior to such Reorganization. In addition, as a condition of
such Reorganization, lawful provisions shall be made, and duly executed
documents evidencing the same from the Company or its successor shall be
delivered to the Holder, with respect to the rights and interest of the Holder
to the end that the provisions hereof (including without limitation, provisions
for the adjustment of the Purchase Price and the number of shares issuable
hereunder and the provisions relating to the net issue election) shall
thereafter be applicable in relation to any shares of stock or other securities
and property thereafter deliverable upon exercise hereof. For the purposes of
this SECTION 11, the term "Reorganization" shall include without limitation any
reclassification, capital reorganization or change of the Preferred Stock (other
than as a result of a subdivision, combination or stock dividend provided for in
SECTION 9 hereof), or any consolidation of the Company with, or merger of the
Company into, another corporation or other business organization (other than a
merger in which the Company is the surviving corporation and which does not
result in any reclassification or change of the outstanding Preferred Stock), or
any sale or conveyance to another corporation or other business organization of
all or substantially all of the assets of the Company in which the Preferred
Stock is converted or exchanged for securities, cash or other property.
12. CERTIFICATE OF ADJUSTMENT. Whenever the Purchase Price is adjusted, as
herein provided, the Company shall promptly deliver to the Holder a certificate
of the Company's chief financial officer setting forth the Purchase Price after
such adjustment and setting forth a brief statement of the facts requiring such
adjustment.
13. NOTICES OF RECORD DATE, ETC. In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, sell or otherwise acquire or dispose of any shares of
stock of any class or any other securities or property, or to receive any other
right;
(b) any reclassification of the capital stock of the Company,
capital reorganization of the Company, consolidation or merger involving the
Company, or sale or conveyance of all or substantially all of its assets (other
than a consolidation or merger in which the Company is the surviving company and
its capital stock is not converted or exchanged for any other securities or
property); or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then in each such event the Company will provide or cause to be provided to the
Holder a written notice thereof. Such notice shall be provided at least 10 days
prior to the date specified in such notice on which any such action is to be
taken.
14. REPRESENTATIONS, WARRANTIES AND COVENANTS. This Warrant is issued and
delivered by the Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by the Company:
(a) The Company has all necessary authority to issue, execute and
deliver this Warrant and to perform its obligations hereunder. This Warrant has
been duly authorized issued, executed and delivered by the Company and is the
valid and binding obligation of the Company, enforceable in accordance with its
terms.
(b) The shares of Preferred Stock issuable upon the exercise of this
Warrant as of the date of issuance of this Warrant have been duly authorized and
reserved for issuance by the Company and, when issued in
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accordance with the terms hereof, will be validly issued, fully paid and
nonassessable. If, as a result of an adjustment in the Purchase Price or other
adjustment herein, the number of shares of Preferred Stock issuable upon
exercise of this Warrant increases, then the Company will undertake to duly
authorize and reserve sufficient shares for issuance by the Company, and such
shares, when issued in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable.
(c) The issuance, execution and delivery of this Warrant do not, and
the issuance of the shares of Preferred Stock upon the exercise of this Warrant
in accordance with the terms hereof will not, (i) violate or contravene the
Company's Certificate or by-laws, or any law, statute, regulation, rule,
judgment or order applicable to the Company, (ii) violate, contravene or result
in a breach or default under any contract, agreement or instrument to which the
Company is a party or by which the Company or any of its assets are bound or
(iii) require the consent or approval of or the filing of any notice or
registration with any person or entity.
(d) So long as this Warrant has not terminated, Holder shall be
entitled to receive such financial and other information as the Holder would be
entitled to receive under the Stock Purchase Agreement applicable to the
Preferred Stock if Holder were a holder of that number of shares issuable upon
full exercise of this Warrant. In addition, upon exercise of this Warrant,
Holder shall be entitled to receive such financial and other information as the
Holder would be entitled to receive under the Stock Purchase Agreement
applicable to the Preferred Stock if such Holder purchased such number of shares
of Preferred Stock under such Stock Purchase Agreement.
(e) As of the date hereof, the authorized capital stock of the
Company consists of (i) 20,000,000 shares of Common Stock, of which 3,510,283
shares are issued and outstanding and 82,418 shares are reserved for issuance
upon the exercise of this Warrant with respect to Common Stock and the
conversion of the Preferred Stock into Common Stock if this Warrant is exercised
with respect to Preferred Stock, (ii) 1,875,000 shares of Series B Preferred
Stock, of which 1,875,000 are issued and outstanding shares, (iii) 1,155,169
shares of Series C Preferred Stock, of which 1,151,632 are issued and
outstanding shares, (iv) 5,011,173 shares of Series D Preferred Stock, of which
4,857,622 are issued and outstanding shares, (v) 2,690,846 shares of Series E
Preferred Stock, of which 2,690,846 are issued and outstanding shares, and (vi)
2,829,671 shares of Series F Preferred Stock, of which 2,747,253 are issued and
outstanding shares. Attached hereto as EXHIBIT B is a capitalization table
summarizing the capitalization of the Company. Once per calendar quarter, the
Company will provide Holder with a current capitalization table indicating
changes, if any, to the number of outstanding shares of common stock and
preferred stock.
15. REGISTRATION RIGHTS. The Company grants to the Holder all the rights
of a "Holder" and an "Investor" under the Company's Investors' Rights Agreement,
dated as of August 18, 2004 (the "Rights Agreement"), including, without
limitation, the registration rights contained therein, and agrees to amend the
Rights Agreement in such form as is approved by the Company and Lighthouse
Capital Partners V, L.P. so that (i) the shares of Common Stock issuable upon
conversion of the shares of Preferred Stock issuable upon exercise of this
Warrant shall be "Registrable Securities," as amended, and (ii) the Holder shall
be a "Holder" and an "Investor" for all purposes of such Rights Agreement.
16. AMENDMENT. The terms of this Warrant may be amended, modified or
waived only with the written consent of the Holder and the Company.
17. REPRESENTATIONS AND COVENANTS OF THE HOLDER. This Warrant has been
entered into by the Company in reliance upon the following representations and
covenants of the Holder, which by its execution hereof the Holder hereby
confirms:
(a) INVESTMENT PURPOSE. The Holder is acquiring the Warrant and (if
and when it exercises this Warrant), it will acquire Preferred Stock for
investment and not with a view to the sale or distribution of any part thereof,
and the Holder has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption, and the
Holder has no present or contemplated agreement, undertaking, arrangement,
obligation, indebtedness or commitment providing for the distribution thereof.
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(b) ACCREDITED INVESTOR. Holder is an "accredited investor" within
the meaning of the Securities and Exchange Rule 501 of Regulation D under the
1933 Act, as presently in effect.
(c) PRIVATE ISSUE. The Holder understands (i) that the Preferred
Stock issuable upon exercise of the Holder's rights contained herein is not
registered under the 1933 Act or qualified under applicable state securities
laws on the ground that the issuance contemplated by this Warrant will be exempt
from the registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this SECTION 17.
(d) FINANCIAL RISK. The Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment. The Holder has made such inquiry concerning the Company and its
business and personnel as it has deemed appropriate.
18. NOTICES, TRANSFERS, ETC.
(a) Any notice or written communication required or permitted to be
given to the Holder may be given by certified or registered mail, postage
prepaid, or sent via a reputable nationwide overnight courier service
guaranteeing next business day delivery, or delivered by hand to the Holder at
the address most recently provided by the Holder to the Company. All notices and
other communications from the Holder to the Company in connection herewith shall
be mailed by certified or registered mail, postage prepaid, or sent via a
reputable nationwide overnight courier service guaranteeing next business day
delivery, to the Company at its principal office set forth below. All such
notices and communications shall be deemed delivered (i) two business days after
being sent by certified or registered mail, return receipt requested, postage
prepaid, or (ii) one business day after being sent via a reputable nationwide
overnight courier service guaranteeing next business day delivery.
(b) Subject to compliance with applicable federal and state
securities laws, and to the extent requested by the Company, receipt by the
Company of an opinion of legal counsel, reasonably satisfactory to the Company,
to the effect that such transfer is exempt from the registration requirements of
the 1933 Act, this Warrant may be transferred by the Holder with respect to any
or all of the shares purchasable hereunder. Subject to the first sentence of
this SECTION 18, upon surrender of this Warrant to the principal offices of the
Company (or such other office or agency designated by the Company), together
with the assignment notice annexed hereto duly executed, for transfer of this
Warrant as an entirety by the Holder and upon payment by the Holder of any
applicable transfer taxes, the Company shall issue a new warrant of the same
denomination to the assignee. Subject to the first sentence of this SECTION 18,
upon surrender of this Warrant to the principal offices of the Company (or such
other office or agency designated by the Company), together with the assignment
hereof properly endorsed, by the Holder for transfer with respect to a portion
of the shares of Preferred Stock purchasable hereunder, and upon payment by the
Holder of any applicable transfer taxes, the Company shall issue a new warrant
to the assignee, in such denomination as shall be requested by the Holder
hereof, and shall issue to such Holder a new warrant covering the number of
shares in respect of which this Warrant shall not have been transferred.
(c) In case this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue a new warrant of like tenor and denomination
and deliver the same (i) in exchange and substitution for and upon surrender and
cancellation of any mutilated Warrant, or (ii) in lieu of any Warrant lost,
stolen or destroyed, upon receipt of an affidavit of the Holder or other
evidence reasonably satisfactory to the Company of the loss, theft or
destruction of such Warrant.
(d) Each certificate representing Shares shall bear a legend
substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not
be offered, sold or otherwise transferred, pledged or hypothecated
unless and until such securities are registered under
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such Act or an opinion of counsel satisfactory to the Company is
obtained to the effect that such registration is not required."
The foregoing legend shall be removed from the certificates representing
any Shares, at the request of the holder thereof, at such time as they become
eligible for resale pursuant to Rule 144(k) under the Securities Act of 1933.
(e) The Company will maintain a register containing the name and
address of the Holder of this Warrant. The Holder may change its address as
shown on the warrant register by written notice to the Company requesting such
change.
19. NO IMPAIRMENT. The Company will not, by amendment of its Certificate
or through any reclassification, capital reorganization, consolidation, merger,
sale or conveyance of assets, dissolution, liquidation, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
of performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder.
20. GOVERNING LAW. The provisions and terms of this Warrant shall be
governed by and construed in accordance with the internal laws of the State of
Delaware without giving effect to its principles regarding conflicts of laws.
21. SUCCESSORS AND ASSIGNS. This Warrant shall be binding upon the
Company's successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.
22. BUSINESS DAYS. If the last or appointed day for the taking of any
action required or the expiration of any rights granted herein shall be a
Saturday or Sunday or a legal holiday in California, then such action may be
taken or right may be exercised on the next succeeding day which is not a
Saturday or Sunday or such a legal holiday.
23. ADJUSTMENT FOR CONVERSION OF PREFERRED STOCK. If all of the
outstanding shares of Preferred Stock are converted into Common Stock of the
Company in accordance with the terms of the Certificate then, effective upon
such conversion, (i) this Warrant shall be exercisable for such number of shares
of Common Stock as is equal to the number of shares of Common Stock that each
share of Preferred Stock was converted into, multiplied by the number of shares
of Preferred Stock subject to this Warrant immediately prior to such conversion,
(ii) the Purchase Price shall be the Purchase Price in effect immediately prior
to such conversion divided by the number of shares of Common Stock into which
each share of Preferred Stock was converted, and (iii) all references in this
Warrant to "Preferred Stock" shall thereafter be deemed to refer to "Common
Stock."
24. VALUE. The Company and the Holder agree that the value of this Warrant
on the date of grant is $50.
NXSTAGE MEDICAL, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
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SUBSCRIPTION
To: ____________________________
Date: __________________________
The undersigned hereby subscribes for ____________ shares of Preferred Stock
covered by this Warrant. The certificate(s) for such shares shall be issued in
the name of the undersigned or as otherwise indicated below:
________________________________
Signature
________________________________
Name for Registration
________________________________
Mailing Address
1
NET ISSUE ELECTION NOTICE
To: _________________________ Date: ____________________
The undersigned hereby elects under Section 4 to surrender the right to purchase
shares of Preferred Stock pursuant to this Warrant. The certificate(s) for such
shares issuable upon such net issue election shall be issued in the name of the
undersigned or as otherwise indicated below:
_____________________________
Signature
_____________________________
Name for Registration
_____________________________
Mailing Address
1
ASSIGNMENT
For value received ____________________________________________________ hereby
sells, assigns and transfers unto ______________________________________________
________________________________________________________________________________
[Please print or typewrite name and address of Assignee]
________________________________________________________________________________
the within Warrant, and does hereby irrevocably constitute and appoint ______its
attorney to transfer the within Warrant on the books of the within named Company
with full power of substitution on the premises.
Dated: _____________________
____________________________
Signature
____________________________
Name for Registration
In the Presence of:
____________________________
1
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
SEE ATTACHED PAGES.
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