EXHIBIT A
to Exchange Agreement
Exhibit 3.1
CERTIFICATE
OF
DESIGNATIONS, PREFERENCES AND RIGHTS
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
VOXWARE, INC.
I. DESIGNATIONS AND AMOUNT
The Designations (this "Certificate of Designations") of this series, which
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consists of Three Thousand Six Hundred Thirty-five (3,635) shares of Preferred
Stock, par value $0.001 per share, of Voxware, Inc., a Delaware corporation (the
"Company"), is the Series B Convertible Preferred Stock (the "Series B Preferred
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Stock") and the stated value shall be One Thousand Dollars ($1,000.00) per share
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(the "Stated Value").
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II. CERTAIN DEFINITIONS
For purposes of this Certificate of Designations, the following terms shall
have the following meanings:
"Adjusted Conversion Price" means, the lesser of (i) one hundred
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percent (100%) of the average of the Closing Bid Prices for the shares of Common
Stock on any five (5) Business Days which constitute the lowest five (5)
Business Day average Closing Bid Price of the Company's Common Stock for any ten
(10) consecutive Business Days during the Adjustment Period or (ii) the Fixed
Conversion Price; provided, however, that for any Conversion Date that occurs on
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or after the first day of the Adjustment Period but before ten (10) Business
Days have elapsed during such period, the Adjusted Conversion Price shall mean
the lesser of (a) one hundred percent (100%) of the average of the Closing Bid
Prices for the shares of Common Stock on any five (5) Business Days which
constitute the lowest of the five (5) Business Day average Closing Bid Price of
the Company's Common Stock for the ten (10) consecutive Business Days
immediately prior to such Conversion Date or (b) the Fixed Conversion Price.
"Adjustment Period" means the forty-five (45) Business Day period
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commencing on the first Business Day after August 15, 2001. Any Business Days
beginning on an Announcement Date and ending on an Abandonment Date shall be
excluded from such forty-five (45) Business Day period and additional Business
Days after the Abandonment Date shall be included in the Adjustment Period in
order for the Adjustment Period to consist of forty-five (45) Business Days. For
this purpose, "Announcement Date" means the date that (1) the Company makes a
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public announcement that it intends to consolidate or merge with any other
entity (other than a merger in which the Company is the surviving or continuing
entity and its capital stock is
unchanged and there is no distribution thereof) or to sell or transfer all or
substantially all of the assets of the Company, or (2) any person, group or
entity (including the Company) publicly announces a tender offer in connection
with which such person, group or entity seeks to purchase 20% or more of the
Common Stock. For this purpose, "Abandonment Date" means with respect to any
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proposed transaction or tender offer for which a public announcement as
contemplated by the preceding sentence has been made, the date which is seven
(7) Business Days after the date upon which the Company (in the case of clause
(1) of the preceding sentence) or the person, group or entity (in the case of
clause (2) of the preceding sentence) publicly announces the termination or
abandonment of the proposed transaction or tender offer which causes the
preceding two sentences to become operative.
"Average Market Price" means as of any date, one hundred (100%) of the
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average of the Closing Bid Prices per share of Common Stock on the five (5)
Business Days immediately preceding, but not including such date.
"Bankruptcy Event" shall mean any one or more of the following: (i)
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the commencement of any voluntary proceeding by the Company seeking entry of an
order for relief under Title 11 of the United States Code or seeking any similar
or equivalent relief under any other applicable federal or state law concerning
bankruptcy, insolvency, creditors' rights or any similar law that is not
dismissed within 90 days of commencement; (ii) the making by the Company of a
general assignment for the benefit of its creditors or any portion of them;
(iii) the commencement of any involuntary proceeding respecting the Company
seeking entry of an order for relief against the Company in a case under Title
11 of the United States Code or seeking any similar or equivalent relief under
any other applicable federal or state law concerning bankruptcy, insolvency,
creditors' rights or any similar law; (iv) entry of a decree or order respecting
the Company by a court having competent jurisdiction, which decree or order (a)
results in the appointment of a receiver, liquidator, assignee, examiner,
custodian, trustee, sequestration (or other similar official) for the Company or
for any substantial part of its property or (b) orders the winding up,
liquidation, dissolution, reorganization, arrangement, adjustment, or
composition of the Company or any of its debts; (v) the appointment, whether or
not voluntarily by the Company, of a receiver, liquidator, assignee, examiner,
custodian, trustee, sequestration (or other similar official) for the Company or
for any substantial part of its property; (vi) the failure by the Company to
pay, or its admission in writing of its inability to pay, its debts generally as
they become due; (vii) the exercise by any creditor of any right in connection
with an interest of such creditor in any substantial part of the Company's
property, including, without limitation, foreclosure upon all or any such part
of the Company's property, repletion, or the exercise of any rights or remedies
provided under the Uniform Commercial Code with regard thereto; (viii) the
making of, or the sending of a notice of, a bulk transfer by the Company; (ix)
the calling by the Company of a general meeting of its creditors; (x) the
failure by the Company to file an answer or other pleading denying the material
allegations of any proceeding described herein that is filed against it; and
(xi) the consent by the Company to any of the actions, appointments, or
proceedings described herein or the failure of the Company to contest in good
faith any such actions, appointments, or proceedings. For purposes of this
paragraph, the "Company" shall also refer to any material subsidiary thereof.
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"Business Day" means any day on which the Principal Market is open.
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"Closing Bid Price" means, for any security as of any date, the
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closing bid price of such security on the Principal Market as reported by
Bloomberg Financial Markets or a comparable reporting service of national
reputation selected by Holders of a Supermajority of Series B Preferred Stock
and reasonably acceptable to the Company if Bloomberg Financial Markets is not
then reporting closing bid prices of such security (collectively, "Bloomberg"),
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or if the foregoing does not apply, the last reported sale price of such
security in the over-the-counter market on the electronic bulletin board of such
security as reported by Bloomberg, or, if no sale price is reported for such
security by Bloomberg, the average of the bid prices of any market makers for
such security as reported in the "pink sheets" by the National Quotation Bureau,
Inc.
"Common Stock" means the Company's Common Stock, per value $0.001 per
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share.
"Common Stock Warrant" means the Common Stock Warrant referred to in
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the Securities Purchase Agreement.
"Conversion Date" means, (i) for any Optional Conversion, the date
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specified in the notice of conversion attached hereto as Exhibit A (the "Notice
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of Conversion"), or if no date is specified therein, the date the Notice of
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Conversion is delivered (by fax or otherwise) to the Company; provided, however,
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that the Conversion Date shall not be prior to the date of delivery of the
Notice of Conversion and any Notice of Conversion delivered to the Company on a
day which is not a Business Day shall be deemed delivered as of the next
following Business Day; or (ii) for a Mandatory Conversion, the Effective Time
of the Mandatory Conversion.
"Conversion Price" means, (i) until the first day of the Adjustment
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Period, the Fixed Conversion Price and, (ii) on or after the first day of the
Adjustment Period, the Adjusted Conversion Price, in each case of clauses (i)
and (ii) as in effect as of the Conversion Date. The Conversion Price is
subject to adjustment as provided herein.
"Fixed Conversion Price" means $0.34.
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"Holder" means a holder of Series B Preferred Stock.
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"Holders of a Supermajority of Series B Preferred Stock" means, as of
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any date, the Holders of 66% of the aggregate Stated Value represented by the
then outstanding shares of Series B Preferred Stock.
"Investment Agreements" means the Investment Agreements as defined in
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the Securities Purchase Agreement.
"Market Price" as of any date, means the lesser of (i) one hundred
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percent (100%) of the average of the Closing Bid Prices per share of Common
Stock on any five (5) Business Days which constitute the lowest five (5)
Business Day average Closing Bid
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Price per share of Common Stock for the ten (10) Business Days immediately
preceding, but not including, such date; or (ii) the Closing Bid Price per share
of Common Stock on the Business Day immediately prior to the date of
determination.
"Material Adverse Change" means any material adverse effect on (a) the
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business, operations, properties, financial condition, or operating results of
the Company and its subsidiaries, taken as a whole on a consolidated basis, or
(b) the ability of the Company to perform its obligations under this Certificate
of Designations and the other Investment Agreements (as such term is defined in
the Securities Purchase Agreement).
"Principal Market" means the Nasdaq National Market, or if the
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applicable security, including the Common Stock is not traded on the Nasdaq
National Market at the relevant time, then the securities exchange which is the
principal trading market for such security at the relevant time.
"Purchaser" and "Purchasers" shall have the meanings set forth in the
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Securities Purchase Agreement.
"Registration Rights Agreement" means the Registration Rights
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Agreement as defined in the Securities Purchase Agreement.
"Securities Purchase Agreement" means the Securities Purchase
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Agreement dated as of August 10, 2000 between the Company and Castle Creek
Technology Partners, LLC.
III. DIVIDENDS
A. Seven (7%) Percent Rate.
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1. Each Holder of shares of Series B Preferred Stock shall be
entitled to receive cumulative, non-compounded dividends from August 15, 2000 on
the shares of Series B Preferred Stock so held at the annual rate per share of
seven percent (7%) of the Stated Value of such shares, computed on the basis of
a 360-day year of twelve 30-day months. Dividends shall be paid upon the sooner
to occur of the conversion or redemption of the shares of Series B Preferred
Stock or the liquidation of the Company. At the election of the Holder,
dividends shall be paid in shares of Common Stock (in accordance with Section
IV.A) or in cash. Payment of dividends (whether in cash or Common Stock) shall
be made on or prior to the expiration of the Delivery Period (as defined in
Section IV.C), with respect to shares of Series B Preferred Stock which are the
subject of a Notice of Conversion or on or prior to the Effective Time of
Mandatory Conversion (as defined in Section IV.H) with respect to shares of
Series B Preferred which are the subject of a Mandatory Conversion Notice (as
defined in Section IV.H). A Holder shall make the election to receive payment of
dividends in cash or Common Stock in the Notice of Conversion with respect to
the shares of Series B Preferred Stock which are the subject of such Notice of
Conversion or by delivery of a written notice to the Company (the "Dividend
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Election Notice") within five (5) Business Days of the Holder's receipt of a
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Mandatory Conversion Notice, provided, that if the Company has not received a
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Dividend Election Notice on or before the fifth (5th) Business Day after the
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date of the Mandatory Conversion Notice, dividends shall be paid in shares of
Common Stock with respect to the shares of Series B Preferred Stock which are
the subject of such Mandatory Conversion Notice. Upon the liquidation of the
Corporation or upon the redemption of the shares of Series B Preferred Stock,
any accrued but undeclared dividends shall be paid to the Holders of record of
outstanding shares of Series B Preferred Stock in cash.
2. Dividends paid in shares of Common Stock shall be paid in full
shares only, as provided in Section IV.E. Each dividend paid in cash shall be
mailed to the Holders of record of the Series B Preferred Stock as their names
and addresses appear on the share register of the Company or at the office of
the transfer agent on the corresponding dividend payment date. Holders of Series
B Preferred Stock will receive written notification from the Company or the
transfer agent if a dividend is paid in Common Stock, which notification will
specify the number of shares of Common Stock paid as a dividend and the
recipient's aggregate holdings of Common Stock as of that dividend payment date
and after giving effect to the dividend.
B. Preference and Accrual. Subject to Section VI hereof, Holders shall be
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entitled to payment of any accrued and unpaid dividends prior to any payment of
any dividends on any Junior Stock (as defined in Section VI). Dividends on the
Series B Preferred Stock shall accrue with respect to each share of the Series B
Preferred Stock from the date on which such share is issued and outstanding and
thereafter shall be deemed to accrue from day to day whether or not earned or
declared and whether or not there exists profits, surplus or other funds legally
available for the payment of dividends, and shall be cumulative so that if such
dividends on the Series B Preferred Stock shall not have been paid, or declared
and set apart for payment, subject to Section VI hereof, the deficiency shall be
fully paid or declared and set apart for payment before any dividend shall be
paid or declared or set apart for any Junior Securities and before any purchase,
redemption or acquisition of any Junior Securities is made by the Company. At
the earlier of: (1) the redemption or conversion of the Series B Preferred Stock
or (2) the liquidation of the Company, any accrued but undeclared dividends
shall be paid to the Holders of record of outstanding shares of the Series B
Preferred Stock in accordance with the provisions of this Certificate of
Designations.
C. Participation. Subject to the rights of the holders, if any, of any
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Pari Passu Securities (as defined in Section VI), in addition to any dividends
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to which they are entitled under Section III.A, Holders shall, as Holders, be
entitled to such dividends paid and distributions made to holders of Common
Stock to the same extent as if such Holders had converted their Series B
Preferred Stock into Common Stock (without regard to any limitations or
conversion herein or elsewhere) and held such shares of Common Stock on the
record date for such dividends and distributions. Payments under the preceding
sentence shall be made concurrently with the dividend or distribution to the
holders of Common Stock.
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IV. CONVERSION
A. Conversion at the Option of the Holder. Subject to the limitations on
conversions contained in Section IV.G, each Holder may, at any time and from
time to time thereafter convert (an "Optional Conversion") any or all of its
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shares of Series B Preferred Stock into a number of fully paid and non-
assessable shares of Common Stock determined, for each share of Series B
Preferred Stock so to be converted, in accordance with the following formula:
$1000 + accrued but unpaid dividends /
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Conversion Price
B. Mechanics of Conversion. In order to effect an Optional Conversion, a
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Holder (a "Converting Holder") shall deliver (by fax or otherwise) a copy of the
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fully executed Notice of Conversion to the Company which notice shall state
whether the Holder elects to have accrued but unpaid dividends paid in cash or
in shares of Common Stock. Upon receipt (by fax or otherwise) by the Company of
a Notice of Conversion from a Converting Holder, the Company shall immediately
send, via facsimile, a confirmation to the Converting Holder stating that the
Notice of Conversion has been received, the date upon which the Company expects
to deliver the Common Stock upon conversion and the name and telephone number of
a contact person at the Company regarding the conversion. Promptly following the
faxing (or other delivery) of the Notice of Conversion, the Holder shall
surrender or cause to be surrendered to the Company the certificates
representing the Series B Preferred Stock being converted (the "Series B
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Preferred Stock Certificates") and a copy of the Notice of Conversion (or, in
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lieu thereof, materials contemplated by Section XI.B, if applicable).
C. Delivery of Common Stock Upon Conversion. Subject to Section IV.F
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hereof, upon the delivery of a Notice of Conversion, the Company shall as soon
as practicable, but in any event no later than the later of (1) the day that is
three Business Days following the Conversion Date and (2) the day that is the
first Business Day following the date of surrender of the Series B Preferred
Stock Certificates (or satisfaction of the provisions of Section XI.B, if
applicable) (the "Delivery Period"), issue and deliver to the Converting Holder
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(or otherwise, at its direction) (a) that number of shares of Common Stock
issuable upon conversion of such shares of Series B Preferred Stock being
converted and (b) a certificate representing the number of shares of Series B
Preferred Stock not being converted, if any. Delivery under this Section IV.C
may be made personally or by reputable overnight courier or by electronic
transmission if the Company's transfer agent is participating in the Depository
Trust Company ("DTC") Fast Automated Securities Transfer program (the "Fast
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Program"). The person or persons entitled to receive shares of Common Stock
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issuable upon such conversion shall be treated for all purposes as the record
holder of such shares at the close of business on the Conversion Date and such
shares shall be issued and outstanding as of such date.
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/ If elected by the Holder as provided in Section III.A.
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D. Taxes. The Company shall pay any and all taxes (other than transfer
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or income taxes) which may be imposed with respect to the issuance and delivery
of the shares of Common Stock upon the conversion of the Series B Preferred
Stock, except for taxes payable as the result of transfers of shares.
E. No Fractional Shares. No fractional shares of Common Stock are to be
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issued upon the conversion of Series B Preferred Stock, but the Company shall
instead round up to the next whole number the number of shares of Common Stock
to be issued upon such conversion.
F. Conversion Disputes. In the case of any dispute with respect to a
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conversion, the Company shall promptly issue such number of shares of Common
Stock as are not disputed in accordance with Sections IV.A and IV.C hereof.
G. Limitations on Conversions. Notwithstanding anything to the contrary
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contained herein, the Series B Preferred Stock shall not be convertible by a
Holder to the extent (but only to the extent) that, if convertible by such
Holder, such Holder would be the beneficial owner of more than of 4.99% (9.99%
in the case of a mandatory conversion pursuant to Section IV.H. below) (the
"Applicable Percentage") of the shares of Common Stock. For the purposes of
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this paragraph, beneficial ownership and all determinations and calculations
related thereto shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and all applicable rules and
regulations. For clarification, it is expressly a term of this security that
the limitations contained in this paragraph shall apply to each successor
Holder.
H. Mandatory Conversion.
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1. Mandatory Conversion. Subject to the limitations set forth in
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Section IV.G and provided that (a) all of the Common Stock issuable upon
conversion of the Series B Preferred Stock was covered by an effective
Registration Statement for a period of at least sixty (60) consecutive Business
Days immediately prior to the date of delivery of the Mandatory Conversion
Notice and a period of sixty (60) consecutive Business Days immediately prior to
the Effective Time of the Mandatory Conversion, (b) the Closing Bid Price of
Common Stock was greater than Eleven Dollars ($11.00) per share (subject to
equitable adjustment for stock splits, stock dividends, reclassifications or
similar events) for a period of ten (10) consecutive Business Days immediately
prior to the date of delivery of the Mandatory Conversion Notice and for a
period of ten (10) consecutive Business Days immediately prior to the Effective
Time of the Mandatory Conversion, (c) the Common Stock is listed for trading on
the Nasdaq National Market or the New York Stock Exchange, and (d) provided the
Company is not as of the date of delivery of the Mandatory Conversion Notice or
as of the Effective Time of the Mandatory Conversion (and has not been for the
six (6) consecutive months immediately prior to the date of delivery of the
Mandatory Conversion Notice or the six (6) consecutive months immediately prior
to the Effective Time of the Mandatory Conversion) in violation of any of its
material obligations under the Investment Agreements, including this Certificate
of Designations, then the Company shall have the right pursuant to this Section
IV.H(1) to require the conversion of ("Mandatory Conversion at the Company's
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Election") of all, but not less than all of the then
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outstanding shares of Series B Preferred Stock, which right shall be exercisable
by delivery of a Mandatory Conversion Notice (as defined herein) in accordance
with the procedures set forth in Section IV.H(2).
2. Mechanics of Mandatory Conversion. The Company shall effect the
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Mandatory Conversion at Company's Election under Section IV.H(1) by delivering
an irrevocable written notice thereof (the "Mandatory Conversion Notice") on a
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Business Day (the "Mandatory Conversion Notice Date") that is no less than five
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(5) Business Days and more than ten (10) Business Days prior to the date on
which such mandatory conversion is to become effective (the "Effective Time of
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Mandatory Conversion") to each Holder at the facsimile number of each Holder
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appearing in the Company's register for the Series B Preferred Stock. The
Effective Time of Mandatory Conversion shall be specified in the Mandatory
Conversion Notice. The Mandatory Conversion Notice shall be deemed to have been
delivered to a Holder: (a) if such fax is received by such Holder on or prior
to 3:00 p.m. New York City time, on the date of transmission of the Company's
fax; and (b) if such fax is received by Holder after 3:00 p.m. New York City
time, on the next Business Day following the date of transmission provided that,
for any notice required under this subsection to be valid, a copy of such notice
must be sent to the Holders on the same day by overnight courier.
I. Electronic Transmission. In lieu of delivering physical certificates
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representing the Common Stock issuable upon conversion, provided the Company's
transfer agent is participating in the DTC FAST Program, upon request of a
Holder, the Company shall use its reasonable best efforts to cause its transfer
agent to electronically transmit the Common Stock issuable upon conversion to
the Holder by crediting the account of Holder's prime broker with DTC through
its Deposit Withdrawal Agent Commission system.
V. CONVERSION DEFAULTS; ADJUSTMENTS TO
CONVERSION PRICE UNDER CERTAIN CIRCUMSTANCES
A. Conversion Default Payments. If, at any time, (1) a Holder submits a
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Notice of Conversion (or is deemed to submit such notice pursuant to Section
IV.H) and the Company fails for any reason to deliver, on or prior to the
expiration of the Delivery Period for such conversion, such number of shares of
Common Stock to which such Holder is entitled upon such conversion, or (2) the
Company provides notice to any Holder at any time of its intention not to issue
shares of Common Stock upon exercise by (including by way of public
announcement) to such Holder in accordance with the terms of the Series B
Preferred Stock or (3) the Company fails to deliver certificates representing
Common Stock to the Holder free from any restrictive legend as required under
the Securities Purchase Agreement (each of (1), (2) and (3) being a "Conversion
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Default"), then the Company shall pay to such Holder damages in an amount equal
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to the product of (x) the Damages Amount times (y) Conversion Default Days times
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(2) 0.01, where:
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"Conversion Default Days" means the number of days beginning and
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including the date of the Conversion Default through and including the Cure Date
with respect to such Conversion Default;
"Damages Amount" means the Stated Value of the Series B Preferred
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Stock with respect to which such Conversion Default occurred plus (accrued and
unpaid and unpaid dividends) thereon as of the first day of the Conversion
Default.
"Cure Date" means (i) with respect to a Conversion Default described
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in subclause (1) or (2) of the definition Conversion Default above the date the
Company effects the conversion of the shares of Series B Preferred Stock
submitted for conversion (or such earlier date that the Holder voids the
conversion as provided herein) and (ii) with respect to a Conversion Default
described in subclause (3) of the definition Conversion Default above the date
the Company delivers certificates representing the shares of Common Stock as a
result of such conversion, free from any restrictive legend pursuant to the
terms of the Securities Purchase Agreement.
The payments to which a Holder shall be entitled pursuant to this
Section VII.A are referred to herein as "Conversion Default Payments." All
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Conversion Default Payments shall be paid in cash within ten (10) Business Days
of a Holder's demand therefore (which demand may be made at any time and from
time to time). Notwithstanding the foregoing, no Conversion Default Payment
shall be required if delivery of the applicable certificates is made within five
(5) Business Days after the end of the applicable Delivery Period. If such
delivery is not made by such date, the first Conversion Default Day shall be the
Business Day immediately after the end of the Delivery Period.
B. Adjustment to Conversion Price. If a Holder has (1) not received
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certificates for all shares of Common Stock within ten (10) Business Days
following the expiration of the Delivery Period with respect to a conversion of
Series B Preferred Stock for any reason, (2) not received certificates of shares
of Common Stock free of any restrictive legend if such Holder is then entitled
to unlegended shares under applicable law, or not received unlegended shares
upon submission for removal of such restrictive legend or (3) received notice
from the Company (including by way of public announcement) at any time of the
Company's intention not to issue shares of Common Stock upon exercise by any
Holder of its conversion rights in accordance with the terms of the Series B
Preferred Stock, then the Holder, upon written notice to the Company, may void
its Notice of Conversion with respect to, and retain or have returned, as the
case may be, any shares of Series B Preferred Stock that have not been converted
pursuant to such Holder's Notice of Conversion (provided that the voiding of a
Holder's Notice of Conversion shall not affect the Company's obligations to make
any payments which have accrued prior to the date of such notice pursuant to
Section V.A or otherwise) and the Conversion Price shall, with respect to such
conversion and thereafter, be the lesser of (a) the Conversion Price on the
Conversion Date specified in the Notice of Conversion which resulted in the
Conversion Default and (b) the lowest Conversion Price in effect during the
period beginning on, and including, such Conversion Date through and including
the earlier of the Cure Date and the date on which the Holder voids the
conversion pursuant hereto. The Conversion Price shall thereafter be subject to
further
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adjustment as provided herein (including by virtue of re-application of this
Section V.B), but shall not be subject to upward adjustment. In any event the
Conversion Price shall be reduced by at least one percent (1%) per day for each
day that a Conversion Default exists.
VI. RANK
All outstanding shares of the Series B Preferred Stock shall rank (1)
prior to the Common Stock and prior to any class or series of capital stock of
the Company hereafter created (unless, with the consent of the Holders obtained
in accordance with Article XIII hereof, such class or series of capital stock
specifically, by its terms, ranks senior to or pari passu with the Series B
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Preferred Stock) (collectively, with the Common Stock, "Junior Securities"); (2)
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pari passu with any class or series of capital stock of the Company hereafter
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created with the consent of the Holders obtained in accordance with Article X
hereof and specifically ranking, by its terms, on parity with the Series B
Preferred Stock (the "Pari Passu Securities"); and (3) junior to any class or
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series of capital stock of the Company hereafter created with the consent of the
Holders obtained in accordance with Article X hereof and specifically ranking,
by its terms, senior to the Series B Preferred Stock (the "Senior Securities");
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in each case as to dividends or as to distribution of assets upon liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary.
VII. LIQUIDATION PREFERENCE
A. Liquidation of the Company. If a Bankruptcy Event shall occur and, on
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account of any such event, the Company shall liquidate, dissolve or wind up, or
if the Company shall otherwise liquidate, dissolve or wind up (a "Liquidation
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Event"), no distribution shall be made to the holders of any shares of capital
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stock of the Company (other than Senior Securities) upon liquidation,
dissolution or winding up unless prior thereto the Holders shall have received
the Liquidation Preference (as herein defined) with respect to each share. If,
upon the occurrence of a Liquidation Event, the assets and funds available for
distribution among the Holders and holders of Pari Passu Securities shall be
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insufficient to permit the payment to such Holders of the preferential amounts
payable thereon, then the entire assets and funds of the Company legally
available for distribution to the Series B Preferred Stock and the Pari Passu
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Securities shall be distributed ratably among such shares in proportion to the
ratio that the Liquidation Preference payable on each such share bears to the
aggregate Liquidation Preference payable on all such shares.
B. Definition of Liquidation Preference. The "Liquidation Preference"
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with respect to a share of Series B Preferred Stock means an amount equal to the
Stated Value thereof plus the accrued but unpaid dividends and other amounts
unpaid hereunder, including without limitation, Redemption Payments, Conversion
Default Payments with respect thereto plus any other amounts that may be due
from the Company with respect thereto through the date of final distribution.
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C. Notice. The Company shall notify each Holder of Series B Preferred
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Stock at the facsimile number of such Holder appearing in the Company's register
for the Series B Preferred Stock (1) at least ten (10) Business Days prior to
any Liquidation Event (other than a Bankruptcy Event described in subclauses
(iii) or (vii) of the definition of Bankruptcy Event), provided that such
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information shall be made known to the public prior to or in conjunction with
such notice being provided to the Holders of Series B Preferred Stock; (2) not
more than three (3) days after a Bankruptcy Event described in subclauses (iii)
and (vii) of the definition of Bankruptcy Event, provided that such information
shall be known to the public in conjunction with such notice being provided to
the Holders of Series B Preferred Stock.
VIII. ADJUSTMENTS TO THE CONVERSION PRICE;
CERTAIN PROTECTIONS
The Conversion Price shall be subject to adjustment from time to time as
follows:
A. Stock Splits, Stock Dividends, Etc. If at any time on or after the
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date on which this Certificate of Designations is first filed with the Secretary
of State of the State of Delaware (the "Filing Date"), the number of outstanding
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shares of Common Stock is increased by a stock split, stock dividend,
combination, reclassification or other similar event, the Conversion Price shall
be proportionately adjusted, or if the number of outstanding shares of Common
Stock is decreased by a reverse stock split, combination or reclassification of
shares, or other similar event, the Conversion Price shall be proportionately
adjusted. In such event, the Company shall notify the Company's transfer agent
of such change on or before the effective date thereof.
B. [Intentionally Deleted]
C. Major Transactions. If the Company shall with the approval of its
------------------
Board of Directors consolidate or merge with any other corporation or entity
(other than a consolidation or merger in which the Company is the surviving or
continuing entity and its capital stock is unchanged in such transaction (except
for issuances which do not exceed twenty percent (20%) of the Common Stock)), or
there shall occur any share exchange pursuant to which all of the outstanding
shares of Common Stock are converted into other securities or property or any
other such reclassification or change of the outstanding shares of Common Stock
or the Company shall sell all or substantially all of its assets (each of the
foregoing being a "Major Transaction"), then each Holder shall thereafter be
-----------------
entitled to, at its option, either (1) in the event that the Common Stock
remains outstanding or holders of Common Stock receive any common stock or
substantially similar equity interest, in each of the foregoing cases which is
publicly traded, retain its Series B Preferred Stock and such Series B Preferred
Stock shall continue to apply to such Common Stock or shall apply, as nearly as
practicable, to such other common stock or equity interest, as the case may be,
provided, that, if any Holder exercises its option under this clause (1), the
Company shall have the right, to be exercised no later than the closing of the
Major Transaction, to redeem all, but not less than all, of such Holder's Series
B Preferred Stock for cash in an amount equal to one hundred fifteen percent
(115%) of the sum of the Stated Value of such shares plus all
11
accrued and unpaid dividends with respect to such shares, or (2) regardless of
whether (1) applies, receive consideration, in exchange for each share of Series
B Preferred Stock held by it, equal to the number of shares of stock or
securities or property of the Company, or of the entity resulting from such
Major Transaction (the "Major Transaction Consideration"), to which a holder of
-------------------------------
the number of shares of Common Stock delivered upon conversion of such shares of
Series B Preferred Stock would have been entitled upon such Major Transaction
had the Holder exercised its right of conversion (without regard to any
limitations on conversion herein or elsewhere contained) on the Business Day
immediately preceding the public announcement of the transaction resulting in
such Major Transaction and had such Common Stock been issued and outstanding and
had such Holder been the holder of record of such Common Stock at the time of
the consummation of such Major Transaction no sooner than ten (10) days nor
later than five (5) days prior to the consummation of the Major Transaction, but
not prior to the public announcement of such Major Transaction, the Company
shall deliver written notice ("Notice of Major Transaction") to each Holder,
---------------------------
which Notice of Major Transaction shall be deemed to have been delivered one (1)
Business Day after the Company's sending such notice by telecopy (provided that
the Company sends a confirming copy of such notice on the same day by overnight
courier) of such Notice of Major Transaction. Such Notice of Major Transaction
shall indicate the amount and type of the Major Transaction Consideration which
such Holder would receive under this Section. If the cash portion of Major
Transaction Consideration does not consist entirely of United States currency,
such Holder may elect to receive United States currency in an amount equal to
the value of the Major Transaction Consideration denominated in a foreign
currency in lieu thereof by delivering notice of such election to the Company
within five (5) days of the Holder's receipt of the Notice of Major Transaction.
D. Adjustment Due to Distribution. If the Company shall declare or make
------------------------------
any distribution of its assets (or rights to acquire its assets) to holders of
any class of Common Stock as a partial liquidating dividend, by way of return of
capital or otherwise (including any dividend or distribution to the Company's
shareholders in cash or shares (or rights to acquire shares) of capital stock of
a subsidiary) (a "Distribution") at any time after the date hereof, then the
------------
Holders will be entitled to receive, upon the terms applicable to such
Distribution, the amount of such assets (or rights) which each Holder could have
acquired if such Holder had held the number of shares of Common Stock acquirable
upon complete conversion of the Series B Preferred Stock (without regard to any
limitations on conversion or exercise herein or elsewhere contained) immediately
before the date on which a record is taken for determining shareholders entitled
to such Distribution, or if no such record is taken, the date as of which the
record holders of Common Stock are to be determined to be entitled to such
Distribution.
E. 1. Issuance of Common Stock at a Price below the Conversion Price.
--------------------------------------------------------------
Except as otherwise provided in Sections VIII.A and VIII.C, if, at any time
prior to April 19, 2002, the Company issues or sells, or in accordance with
Section VIII.E is deemed to have issued or sold, any shares of Common Stock for
no consideration or for a consideration per share less than the then current
Conversion Price, then effective immediately upon such issuance, the Conversion
Price will be adjusted to be equal to the consideration per share received, or
deemed to be received pursuant to this Section VIII.E, in such issuance.
12
2. Issuance of Common Stock at a Price below the Average Market
------------------------------------------------------------
Price. Except as otherwise provided in Sections VIII.A, VIII.C or VIII.E (1),
-----
if, at any time after the Filing Date, the Company issues or sells, or in
accordance with Section XI.E is deemed to have issued or sold any shares of
Common Stock for no consideration or for a consideration per share less than the
then current Average Market Price (a "Dilutive Issuance"), then effective
-----------------
immediately upon the Dilutive Issuance, the Conversion Price will be adjusted in
accordance with the following formula:
E' = (E) (O + P/M) / (CSDO)
where:
E' = the adjusted Conversion Price
E = the then current Conversion Price;
M = the then current Average Market Price;
O = the number of shares of Common Stock outstanding
immediately prior to the Dilutive Issuance;
P = the aggregate consideration, calculated as set
forth in Section E(2) hereof, received by the
Company upon such Dilutive Issuance; and
CSDO = the total number of shares of Common Stock
Deemed Outstanding (as herein defined)
immediately after the Dilutive Issuance.
3. Effect on Conversion Price of Certain Events. For purposes of
--------------------------------------------
determining the adjusted Conversion Price under Section VIII.E(1) or VIII.E(2)
hereof, the following will be applicable:
a. Issuance of Rights or Options. If the Company in any
-----------------------------
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities exercisable, convertible into or exchangeable for Common Stock
("Convertible Securities"), but not to include the grant or exercise of any
----------------------
stock or options which may hereafter be granted or exercised under any employee
or director benefit plan of the Company now existing or to be implemented in the
future (so long as the issuance of such stock or options is approved by a
committee of independent directors of the Company) (such warrants, rights and
options to purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options"), and the price per share for which Common Stock is
-------
issuable upon the exercise of such Options is less than the Average Market Price
on the date of issuance ("Below Market Options"), then the maximum total number
--------------------
of shares of Common Stock issuable upon the exercise of all such Below Market
Options (assuming full exercise, conversion or exchange of Convertible
Securities, if applicable) will, as of the date of the issuance or grant of such
Below Market Options, be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For purposes of the preceding
sentence, the price per share for which Common Stock is issuable upon the
exercise of such Below Market Options is determined by dividing (I) the total
amount, if any, received or receivable by the
13
Company as consideration for the issuance or granting of such Below Market
Options, plus the minimum aggregate amount of additional consideration, if any,
payable to the Company upon the exercise of all such Below Market Options, plus,
in the case of Convertible Securities issuable upon the exercise of such Below
Market Options, the minimum aggregate amount of additional consideration payable
upon the exercise, conversion or exchange thereof at the time such Convertible
Securities first become exercisable, convertible or exchangeable, by (ii) the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Below Market Options (assuming full conversion of Convertible Securities,
if applicable). No further adjustment to the Conversion Price will be made upon
the actual issuance of such Common Stock upon the exercise of such Below Market
Options or upon the exercise, conversion or exchange of Convertible Securities
issuable upon exercise of such Below Market Options.
b. Issuance of Convertible Securities.
----------------------------------
(I) If the Company in any manner issues or sells any
Convertible Securities, whether or not immediately convertible (other than where
the same are issuable upon the exercise of Options) and the price per share for
which Common Stock is issuable upon such exercise, conversion or exchange (as
determined pursuant to Section VIII.E(3)(b)(II) if applicable) is less than the
Average Market Price on the date of issuance, then the maximum total number of
shares of Common Stock issuable upon the exercise, conversion or exchange of all
such Convertible Securities will, as of the date of the issuance of such
Convertible Securities, be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. For the purposes of the preceding
sentence, the price per share for which Common Stock is issuable upon such
exercise, conversion or exchange is determined by dividing (x) the total amount,
if any, received or receivable by the Company as consideration for the issuance
or sale of all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise,
conversion or exchange thereof at the time such Convertible Securities first
become exercisable, convertible or exchangeable by (y) the maximum total number
of shares of Common Stock issuable upon the exercise, conversion or exchange of
all such Convertible Securities. No further adjustment to the Conversion Price
will be made upon the actual issuances of such Common Stock upon exercise,
conversion or exchange of such Convertible Securities.
(II) If the Company in any manner issues or sells any
Convertible Securities with a fluctuating conversion or exercise price or
exchange ratio (a "Variable Rate Convertible Security"), then the price per
----------------------------------
share for which Common Stock is issuable upon such exercise, conversion or
exchange for purposes of the calculation contemplated by Section VIII.E(3)(b)(I)
shall be deemed to be the lowest price per share which would be applicable
assuming that (x) all holding period and other conditions to any discounts
contained in such Convertible Security have been satisfied, and (y) the Average
Market Price on the date of issuance of such Convertible Security was seventy-
five percent (75%) of the Average Market Price on such date (the "Assumed
-------
Variable Market Price").
---------------------
14
c. Change in Option Price or Conversion Rate. Except for the
-----------------------------------------
grant or exercise of any stock or options which may hereafter be granted or
exercised under any employee or Director benefit plan of the Company now
existing or to be implemented in the future, so long as the issuance of such
stock or options is approved by a committee of independent directors of the
Company, if there is a change at any time in (I) the amount of additional
consideration payable to the Company upon the exercise of any Options; (II) the
amount of additional consideration, if any, payable to the Company upon the
exercise, conversion or exchange or any Convertible Securities; or (III) the
rate at which any Convertible Securities are convertible into or exchangeable
for Common Stock (other than under or by reason of provisions designed to
protect against dilution), the Conversion Price in effect at the time of such
change will be readjusted to the Conversion Price which would have been in
effect at such time had such Options or Convertible Securities still outstanding
provided for such changed additional consideration or changed conversion rate,
as the case may be, at the time initially granted, issued or sold.
d. Treatment of Expired Options and Unexercised Convertible
--------------------------------------------------------
Securities. If, in any case, the total number of shares of Common Stock
----------
issuable upon exercise of any Options or upon exercise, conversion or exchange
of any Convertible Securities is not, in fact, issued and the rights to exercise
such option or to exercise, convert or exchange such Convertible Securities
shall have expired or terminated, the Conversion Price then in effect will be
readjusted to the Conversion Price which would have been in effect at the time
of such expiration or termination had such Options or Convertible Securities, to
the extent outstanding immediately prior to such expiration or termination
(other than in respect of the actual number of shares of Common Stock issued
upon exercise or conversion thereof), never been issued.
e. Calculation of Consideration Received. If any Common Stock,
-------------------------------------
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Certificate of Designations
will be the amount received by the Company therefor, before deduction of
reasonable commissions, underwriting discounts or allowances or other reasonable
expenses paid or incurred by the Company in connection with such issuance, grant
or sale. In case any Common Stock, Options or Convertible Securities are issued
or sold for a consideration part or all of which shall be other than cash, the
amount of the consideration other than cash received by the Company will be the
fair market value of such consideration except where such consideration consists
of freely-tradable securities, in which case the amount of consideration
received by the Company will be the Average Market Price thereof as of the date
of receipt. In case any Common Stock, Options or Convertible Securities are
issued in connection with any merger or consolidation in which the Company is
the surviving corporation, the amount of consideration therefor will be deemed
to be the fair market value of such portion of the net assets and business of
the non-surviving corporation as is attributable to such Common Stock, Options
or Convertible Securities, as the case may be. The fair market value of any
consideration other than cash or securities will be determined in the good faith
reasonable business judgment of the Board of Directors. Notwithstanding anything
else herein to the contrary, if Common Stock, Options or Convertible Securities
are issued, granted or sold in conjunction with each other as part of a single
transaction, the amount of consideration deemed to be received
15
by the Company therefore will be reduced by the fair value of any such
Securities which were issued, granted or sold for no material consideration.
f. Exceptions to Adjustment of Conversion Price. No adjustment
--------------------------------------------
to the Conversion Price will be made (I) upon the exercise of any warrants,
options or convertible securities issued and outstanding on the date hereof in
accordance with the terms of such securities as of such date; (II) upon the
grant or exercise of any stock or options which may hereafter be granted or
exercised under any employee or Director benefit plan of the Company now
existing or to be implemented in the future, so long as the issuance of such
stock or options is approved by a committee of independent directors of the
Company; (III) upon the issuance of the Conversion Shares (as defined in the
Securities Purchase Agreement) or the Warrant Shares in accordance with terms of
the Securities Purchase Agreement; (IV) upon the exercise of the Common Stock
Warrant and conversion of the Series B Preferred Stock; (V) upon the issuance of
securities to strategic investors for consideration other than cash, publicly-
traded securities or securities convertible into or exchangeable or exercisable
for publicly-traded securities; or (VI) upon the issuance of securities in
connection with the acquisition of a business pursuant to an asset purchase,
securities purchase, merger or similar transaction.
F. Issuance of Other Securities. If, at any time after the Filing
----------------------------
Date, the Company shall issue any securities which are convertible into or
exchangeable for Common Stock ("Convertible Securities") either (1) at a
----------------------
conversion or exchange rate based on a discount from the Average Market Price of
the Common Stock at the time of conversion or exercise or (2) with a fixed
conversion or exercise price less than the Conversion Price, then, at the
Holder's option: (a) in the case of clause (1), the Conversion Price shall be
calculated utilizing the greatest discount applicable to any such Convertible
Securities; and (b) in the case of clause (2), the Conversion Price shall be
reduced to such lesser conversion or exercise price. If the Company shall issue
any Convertible Securities that are convertible into or exchangeable for shares
of Common Stock on a basis different from that of the Series B Preferred Stock,
the Holder may elect that the provisions of this Certificate of Designations be
revised to incorporate such different provisions with respect to conversion or
exchange, subject to the limitations of Section IV.G hereof; provided, however,
-------- -------
such Holder may not select provisions on a non-integrated basis which would have
an inequitable result on the intent of this provision.
G. Purchase Rights. If the Company issues any Convertible
---------------
Securities or rights to purchase stock, warrants, securities or other property
(the "Purchase Rights") pro rata to the record holders of any class of Common
---------------
Stock, then the Holders will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which each Holder could
have acquired if such Holder had held the number of shares of Common Stock
acquirable upon complete conversion of its Series B Preferred Stock (without
regard to any limitations on conversion or exercise herein or elsewhere
contained) immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken, the
date as of which the record holders of Common Stock are to be determined for the
grants, issue or sale of such Purchase Rights.
16
H. Special Adjustment. If the Company takes any actions (including under
------------------
or by virtue of this Article VIII) which would have a dilutive effect on the
Holder (including by virtue of the issuance of securities at less than fair
market value) or which would materially and adversely affect the Holder with
respect to its investment in the Series B Preferred Stock, and if the provisions
of this Article VIII are not strictly applicable to such actions or, if
applicable to such actions, would not operate to equitably protect the Holder
against such actions, then the Company shall promptly upon notice from a Holder
appoint its independent certified public accountants to determine as promptly as
practicable an appropriate adjustment to the terms hereof, including without
limitation adjustments to the Conversion Price, or another appropriate action to
so equitably protect such Holder and prevent any such dilution and any such
material adverse effect, as the case may be. Following such determination, the
Company shall forthwith make the adjustments or take the other actions described
therein.
I. Notices of Adjustment. Upon the occurrence of each adjustment or
---------------------
readjustment pursuant to this Article VIII, the Company, at its expense, shall
promptly compute such adjustment or readjustment and prepare and furnish to each
Holder a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based. The
Company shall, upon the written request at any time of any Holder, furnish to
such Holder a like certificate setting forth (1) such adjustment or
readjustment, (2) the Conversion Price at the time in effect and (3) the number
of shares of Common Stock and the amount, if any, of other securities or
property which at the time would be received upon conversion of Series B
Preferred Stock.
IX. REDEMPTION
A. Redemption at Maturity. The Company shall redeem all shares of Series
----------------------
B Preferred Stock outstanding on the day that is thirty (30) months after August
10, 2000 (the "Maturity Date") for an amount per share equal to the Stated
-------------
Amount plus any accrued and unpaid dividends thereon and, if applicable, any
accrued and unpaid Conversion Default Payments (the "Redemption Payment").
------------------
B. Insufficient Funds. If the funds of the Company legally available for
------------------
the redemption of shares of Series B Preferred Stock pursuant to this Section IX
are insufficient to redeem all of shares of Series B Preferred Stock on the
Maturity Date as provided in Section IX.A, then those funds legally available
for such purpose shall be used to redeem the number of shares of Series B
Preferred Stock which may be redeemed. The Holders shall participate in any
such partial redemption pro rata according to the number of such shares held by
--- ----
them.
C. Failure to Redeem. In the event that the limitations set forth above
-----------------
in Section IX.B prevent the redemption of all of the Series B Preferred Stock on
the Maturity Date, any unredeemed Series B Preferred Stock shall be redeemed as
set forth in Section IX.A as soon as additional funds become legally available
for redemption of Series B Preferred Stock. Until the Redemption Price for a
share of Series B Preferred
17
Stock has been paid to the registered Holder thereof in full, such share of
Series B Preferred shall continue to be outstanding and governed by all of the
terms of this Certificate of Designations and such share shall continue to
accrue dividends at the rate provided in Section III.A and shall remain fully
convertible in accordance with this Certificate of Designations.
D. Redemption Notice. Ten (10) days prior to the Maturity Date (for this
-----------------
purpose, Maturity Date shall include the date that shares of previously
unredeemed Series B Preferred Stock can be redeemed in accordance with Section
IX.C), the Company shall deliver (by fax or otherwise) written notice (the
"Redemption Notice"), to each Holder; provided, however, that the Company's
------------------ -------------------
failure to give such Redemption Notice shall in no way affects its obligation to
redeem the Series B Preferred Stock as provided in Section IX.A hereof. The
Redemption Notice shall contain the following information: (i) the number of
shares of Preferred Stock held by the Holder that shall be redeemed by the
Company on the Maturity Date pursuant to the provisions of Section IX.A or IX.C;
(ii) the Maturity Date; and (iii) the address at which the Holder shall
surrender to the Company its certificate or certificates representing shares of
Series B Preferred Stock to be redeemed.
Each Holder of shares of Series B Preferred Stock to be redeemed shall
surrender the certificate or certificates representing such shares to the
Company at the place specified in the Redemption Notice no later than two (2)
Business Days after the Maturity Date (provided that failure to surrender a
--------
stock certificate shall not prevent the redemption of the underlying stock); and
thereupon the applicable Redemption Price for such shares as set forth in this
Section IX.A shall be paid to the order of the person whose name appears on such
certificates. Each surrendered certificate shall be cancelled and retired.
X. VOTING RIGHTS
A. The holders of Series B Preferred Stock shall have no voting power
except as otherwise provided by applicable law including but not limited to the
Delaware General Corporation Law and as expressly provided in this Certificate
of Designations.
B. The Company shall provide each Holder with prior notification of any
meeting of the stockholders (and copies of proxy materials and all other
information sent to stockholders). If the Company takes a record of its
stockholders for the purpose of determining stockholders entitled to (1) receive
payment of any dividend or other distribution, any right to subscribe for,
purchase or otherwise acquire (including by way of merger, consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or (2) to vote in connection with any proposed sale,
lease or conveyance of all or substantially all of the assets of the Company, or
any proposed merger, consolidation, liquidation, dissolution or winding up of
the Company, the Company shall fax a notice to each Holder, at least ten (10)
days prior to the record date specified therein (or ten (10) days prior to the
consummation of the transaction or event, whichever is earlier, but in no event
earlier than public announcement of such proposed transaction), of the date on
which any such record is to be taken for the purpose
18
of such vote, dividend, distribution, right or other event, and a brief
statement regarding the amount and character of such vote, dividend,
distribution, right or other event to the extent known at such time.
C. To the extent that under applicable law the vote of the Holders,
voting separately as a class or series, as applicable, is required to authorize
a given action of the Company, the affirmative vote or consent of the Holders of
a Supermajority of the then outstanding shares of the Series B Preferred Stock
represented at a duly held meeting at which a quorum is present or by written
consent of the Holders of a Supermajority of the then outstanding shares of the
Series B Preferred Stock (except as otherwise may be required by applicable law)
shall constitute the approval of such action by the class or series. To the
extent that under applicable law Holders are required to vote on a matter with
holders of Common Stock, voting together as one class, each share of Series B
Preferred Stock shall be entitled to a number of votes equal to the number of
shares of Common Stock into which it is then convertible (without giving effect
to any limitation on conversion with respect thereto) using the record date for
the taking of such vote of stockholders as the date as of which the Conversion
Price is calculated.
XI. PROTECTION PROVISIONS
The Company shall not, without first obtaining the approval of Holders of a
Supermajority of the then outstanding Series B Preferred Stock: (1) alter or
change the terms of the Series B Preferred Stock; (2) alter or change the terms
of any capital stock of the Company so as to affect adversely the Series B
Preferred Stock; (3) create or issue any Senior Securities; (4) create or issue
any Pari Passu Securities; (5) increase the authorized number of shares of
---- -----
Series B Preferred Stock; (6) redeem, or declare or pay any dividend or
distribution on any Junior Securities; (7) redeem any capital stock of the
Company other than Series B Preferred Stock as permitted or required by this
Certificate of Designations; (8) do any act or thing not authorized or
contemplated by this Certificate of Designations which would result in any
taxation with respect to the Series B Preferred Stock under Section 305 of the
Internal Revenue Code of 1986, as amended, or any comparable provision of the
Internal Revenue Code as hereafter from time to time amended (or otherwise
suffer to exist any taxation as a result of such section or provision); (9) sell
or otherwise transfer all or substantially all of the assets of the Company
(other than in the ordinary course of business); or (10) issue any shares of
Series A Convertible Preferred Stock. The Company shall not issue additional
shares of Series B Preferred Stock except to effect the purchase and sale to the
Purchasers in accordance with the Securities Purchase Agreement.
XII. MISCELLANEOUS
A. Cancellation of Series B Preferred Stock. If any shares of Series B
----------------------------------------
Preferred Stock are converted pursuant to Article IV, the shares so converted
shall be canceled, shall return to the status of authorized but unissued
preferred stock of no designated series, and shall not be issuable by the
Company as Series B Preferred Stock.
19
B. Lost or Stolen Certificates. Upon receipt by the Company of (1)
---------------------------
evidence of the loss, theft, destruction or mutilation of any Series B Preferred
Stock Certificate(s) and (2) (a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Company, or (b) in the case of
mutilation, upon surrender and cancellation of the Series B Preferred Stock
Certificate(s), the Company shall execute and deliver new Series B Preferred
Stock Certificate(s) of like tenor and date. However, the Company shall not be
obligated to reissue such lost or stolen Series B Preferred Stock Certificate(s)
if the Holder contemporaneously requests the Company to convert all of such
Series B Preferred Stock.
C. Reservation of Shares. The Company shall at all times reserve and
---------------------
keep available out of its authorized but unissued shares of Common Stock a
sufficient number of shares of Common Stock to provide for the full conversion
of all shares of Preferred Stock and payment in shares of Common Stock of all
accrued and unpaid dividends on shares of Preferred Stock.
D. INTENTIONALLY DELETED.
---------------------
E. Payment of Cash; Defaults. Whenever the Company is required to make
-------------------------
any cash payment to a Holder under this Certificate of Designations (as a
dividend, Conversion Default Payment or otherwise), such cash payment shall be
made to the Holder by the method ( by certified or cashier's check or wire
transfer of immediately available funds) elected by such Holder. If such payment
is not delivered when due (any such amount not paid when due being a "Default
-------
Amount") such Holder shall thereafter be entitled to interest on the unpaid
------
amount at a per annum rate equal to the lower of twelve percent (12%) and the
highest interest rate permitted by applicable law until such amount is paid in
full to the Holder.
F. Status as Stockholder. Upon submission of a Notice of Conversion by a
---------------------
Holder and the occurrence of the Conversion Date with respect thereto, or upon
the Effective Time of the Mandatory Conversion, the shares covered thereby shall
be deemed converted into shares of Common Stock and the Holder's rights as a
Holder of such converted shares of Series B Preferred Stock shall cease and
terminate, excepting only the right to receive certificates for such shares of
Common Stock and to any remedies provided herein or otherwise available at law
or in equity to such Holder because of a failure by the Company to comply with
the terms of this Certificate of Designations. Notwithstanding the foregoing, if
a Holder has not received certificates for all shares of Common Stock prior to
the second (2nd) Business Day after the expiration of the Delivery Period with
respect to a Notice of Conversion of Series B Preferred Stock for any reason, or
prior to the second (2nd) Business Day after the Effective Time of the Mandatory
Conversion Notice in the case of a Mandatory Conversion at the Company's
Election or on or prior to the second (2nd) Business Day after the Maturity
Date, then (unless the Holder otherwise elects to retain its status as a holder
of Common Stock) the Holder shall regain the rights of a holder of Series B
Preferred Stock with respect to such unconverted shares of Series B Preferred
Stock and in the case of a Holder's Notice of Conversion the Company shall, as
soon as practicable, return such unconverted shares to the Holder. In all cases,
the Holder shall retain all of its rights and remedies (including, without
limitation, (1) the right to receive Conversion Default Payments pursuant to
20
Section V.A to the extent required thereby for such Conversion Default and any
subsequent Conversion Default and (2) the right with respect to conversions in
accordance with Section XII.F, to the extent applicable) for the Company's
failure to convert Series B Preferred Stock. Upon receipt of the aggregate
Redemption Payment for the shares of Series B Preferred Stock covered by a
Redemption Notice, the shares covered thereby shall be redeemed and the Holder's
rights as a Holder of such redeemed shares shall cease and terminate.
G. Remedies, Characterizations, Other Obligations, Breaches and
------------------------------------------------------------
Injunctive Relief. The remedies provided in this Certificate of Designations
-----------------
shall be cumulative and in addition to all other remedies available under this
Certificate of Designations, at law or in equity (including a decree of specific
performance and/or other injunctive relief), no remedy contained herein shall be
deemed a waiver of compliance with the provisions giving rise to such remedy and
nothing herein shall limit a Holder's right to actual damages for any failure by
the Company to comply with the terms of this Certificate of Designations
(including, without limitation, damages incurred to effect "cover" of shares of
Common Stock anticipated to be received upon a conversion hereunder but not
received in accordance with the terms hereof). The Company covenants to each
Holder that there shall be no characterization concerning this instrument other
than as fully consistent with the express terms hereof. Amounts set forth or
provided for herein with respect to payments, conversion and the like (and the
computation thereof) shall be the amounts to be received by the Holder hereof
and shall not, except as expressly provided herein, be subject to any other
obligation of the Company (or the performance thereof). The Company acknowledges
that a breach by it of its obligations hereunder will cause irreparable harm to
the holders of Series B Preferred Stock and that the remedy at law for any such
breach may be inadequate. The Company therefore agrees that, in the event of any
such breach or threatened breach, the Holders shall be entitled, in addition to
all other available remedies, to an injunction restraining any breach, without
the necessity of showing economic loss and without any bond or other security
being required.
H. Specific Shall Not Limit General; Construction. No specific provision
----------------------------------------------
contained in this Certificate of Designations shall limit or modify any more
general provision contained herein. As used herein, the word "including" shall
be deemed to mean "including, without limitation." This Certificate of
Designations shall be deemed to be jointly drafted by the Company and the
Purchaser(s) and shall not be construed against any person as the drafter
hereof.
I. Failure or Indulgence Not Waiver. No failure or delay on the part of
--------------------------------
a Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
J. Ratable Payments. All payments and prepayments made by the Company
----------------
with respect to the Series B Preferred Stock shall be made ratably among all
Holders of Series B Preferred Stock in accordance with the Stated Value of such
Series B Preferred Stock.
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[REMAINDER OF PAGE INTENTIONALLY BLANK]
22
IN WITNESS WHEREOF, the undersigned authorized officer has executed this
Certificate the 29th day of August, 2001.
VOXWARE, INC.
By: /s/ ββββββββ ββββββ
-----------------------------
ββββββββ ββββββ
Senior Vice President and CFO
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EXHIBIT A
---------
to Certificate of Designations Preferred and Rights of Series B Convertible
Preferred Stock
To: Voxware Inc.
βββββββββββββ ββββββ ββββ
β.β. βββ ββββ
βββββββββ, ββ βββββ
βββ ββββββββ ββββββ ββββ
βββββ β
βββββββββββββ, ββ βββββ
Tel. No.: βββ-βββ-ββββ
Fax No.: βββ-βββ-ββββ
NOTICE OF CONVERSION
The undersigned hereby elects to convert (the "Conversion") the Stated Value of
----------
the Series B Preferred Stock (the "Series B Preferred Stock") set forth below,
------------------------
[plus all accrued and unpaid dividends relating thereto and/or all Conversion
Defaults with respect thereto] (each defined term used but not defined in this
notice shall have the meaning assigned to it in the Designations, Preferences
and Rights of Series B Convertible Preferred Stock of VOXWARE, INC. (the
"Certificate of Designations")), into shares of common stock ("Common Stock") of
---------------------------- ------------
VOXWARE, INC. (the "Company") according to the conditions of the Certificate of
-------
Designations, as of the date written below. If securities are to be issued in
the name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto. No fee will be charged to the
Holder for any conversion except as provided herein. The undersigned hereby
elects to have all accrued and unpaid dividends on the Shares of Series B
Preferred Stock to which this notice relates paid in _________ [Insert cash or
Common Stock; in the absence of a specification, dividends shall be paid in
Common Stock]
The undersigned covenants that all offers and sales by the undersigned of the
securities issuable to the undersigned upon conversion of this Series B
Preferred Stock shall be made pursuant to registration of the Common Stock under
the Securities Act of 1933, as amended (the "Act"), or pursuant to an exemption
---
from registration under the Act.
In the event of partial exercise, please reissue an appropriate certificate for
the balance of shares of Series B Preferred Stock which shall not have been
converted.
Date of Conversion:_____________________________________
Applicable Conversion Price:____________________________
Stated Value of Series B Preferred Stock $1,000
----------------
Number of Shares of Common Stock
to be issued upon conversion:___________________________
Signature:______________________________________________
Name:___________________________________________________
Address:________________________________________________
Fax Number (for confirmation):__________________________
24