Exhibit
3.1
CERTIFICATE
OF DETERMINATION
OF
SERIES
B MANDATORILY CONVERTIBLE CUMULATIVE PERPETUAL
PREFERRED
STOCK
AND
SERIES
B-1 MANDATORILY CONVERTIBLE CUMULATIVE PERPETUAL
PREFERRED
STOCK
OF
BRIDGE
CAPITAL HOLDINGS
a
California corporation
Pursuant
to Section 401(a) of the
California
General Corporation Law
We Daniel
P. Myers, President and Chief Executive Officer, and Thomas A. Sa, Executive
Vice President and Chief Financial Officer, of Bridge Capital Holdings, a
corporation organized and existing under the laws of California (hereinafter
called the “Company”), do hereby
certify as follows:
1. On December 12, 2008 the
Board of Directors of the Company adopted a resolution designating 131,901
shares of Preferred Stock as Series B Mandatorily Convertible Cumulative
Perpetual Preferred Stock and 168,099 shares of Preferred Stock as Series B-1
Mandatorily Convertible Cumulative Perpetual Preferred Stock.
2. No
shares of Series B Mandatorily Convertible Cumulative Perpetual Preferred Stock
and no shares of Series B-1 Mandatorily Convertible Cumulative Perpetual
Preferred Stock have been issued.
3.
Pursuant to the authority conferred upon the Board of Directors by the Articles
of Incorporation of the Company, the following resolution was duly adopted by
the Board of Directors on December 12, 2008 creating two series of Preferred
Stock, one designated as the Series B Mandatorily Convertible Cumulative
Perpetual Preferred Stock and the second designated as the Series B-1
Mandatorily Convertible Cumulative Perpetual Preferred Stock:
“NOW,
THEREFORE, BE IT RESOLVED, that the Board of Directors of the Company hereby
establishes two series of Preferred Stock designated as (1) the “Series B
Mandatorily Convertible Cumulative Perpetual Preferred Stock,” consisting of
131,901 shares and (2) the “Series B-1 Mandatorily Convertible Cumulative
Perpetual Preferred Stock,” consisting of 168,099 shares, each series of which
have following rights, preferences, privileges and restrictions:
SERIES
B AND SERIES B-1 PREFERRED STOCK:
Section
1. Designation. There are hereby
created out of the authorized and unissued shares of preferred stock of the
Company two series of preferred stock, one designated as the “Series B
Mandatorily Convertible Cumulative Perpetual Preferred Stock” (the “Series B Preferred
Stock”) and the second designated as the “Series B-1 Mandatorily
Convertible Cumulative Perpetual Preferred Stock” (the “Series B-1 Preferred
Stock”) (together, the Series B Preferred Stock and the Series B-1
Preferred Stock are referred to as the “Combined Preferred
Stock”). The number of shares constituting the Series B
Preferred Stock shall be 131,901, no par value per share. The number
of shares constituting the Series B-1 Preferred Stock shall be 168,099, no par
value per share.
Section
2. Ranking. The Combined
Preferred Stock will, with respect to dividend rights and rights on liquidation,
winding-up and dissolution, rank (i) junior to any Series C Fixed Rate
Cumulative Perpetual Preferred Stock (the “Series C Preferred
Stock”), (ii) on a parity with each other and with each other class
or series of preferred stock established after the Effective Date by the Company
the terms of which expressly provide that such class or series will rank on a
parity with the Combined Preferred Stock as to dividend rights and rights on
liquidation, winding-up and dissolution of the Company (collectively referred to
as “Parity
Securities”) and (iii) senior to the Company’s common stock (the
“Common
Stock”), the Series A Junior Preferred Stock and each other class or
series of capital stock outstanding or established after the Effective Date by
the Company the terms of which do not expressly provide that it ranks on a
parity with or senior to the Combined Preferred Stock as to dividend rights and
rights on liquidation, winding-up and dissolution of the Company (collectively
referred to as “Junior
Securities”).
The
Company has the right to authorize or issue additional shares or classes or
series of Junior Securities or Parity Securities without the consent of the
Holders; provided however, that, until such time as all of the Series B
Preferred Stock have been converted into shares of Common Stock, the Company
shall not, without the prior written consent of the Series B Holders owning at
least 50.1% of the then outstanding Series B Preferred Stock, create,
authorize or designate any preferred stock of any class or series having any
designations, preferences, relative, participating, optional or other rights
ranking senior to or on parity with those of the Series B Preferred Stock.
except for the Series C Preferred Stock; provided further, that, until such time
as all of the Series B-1 Preferred Stock have been converted into shares of
Common Stock, the Company shall not, without the prior written consent of the
Series B-1 Holders owning at least 50.1% of the then outstanding Series B-1
Preferred Stock create, authorize or designate any preferred stock of any class
or series having any designations, preferences, relative, participating,
optional or other rights ranking senior to or on parity with those of the Series
B-1 Preferred Stock, except for the Series C Preferred Stock.
Section
3. Definitions. The
following terms shall have the meanings set forth below or in the section
cross-referenced below, as applicable, whether used in the singular or the
plural:
“Affiliate” has the
meaning set forth in Rule 12b-2 under the Exchange Act.
“Applicable Conversion
Price” means the Conversion Price in effect at any given
time.
“Articles of
Incorporation” means the Articles of Incorporation of the Company, as
amended, and as supplemented by this Certificate of Determination, and as it may
be further amended or supplemented.
“Beneficially Own” and
its correlatives have the meaning set forth in Rule 13d-3 under the
Exchange Act.
“Board of Directors”
means the board of directors of the Company.
“Business Day” means
any day other than a Saturday, Sunday or any other day on which banks in
California are generally required or authorized by law to be
closed.
“Certificate of
Determination” means this Certificate of Determination of the Series B
Mandatorily Convertible Cumulative Perpetual Preferred Stock and the Series B-1
Mandatorily Convertible Cumulative Perpetual Preferred Stock.
“Closing Price” of the
Common Stock on any date of determination means the closing sale price or, if no
closing sale price is reported, the last reported sale price of the shares of
the Common Stock on the Nasdaq Global Select Market on such date. If
the Common Stock is not traded on the Nasdaq Global Select Market on any date of
determination, the Closing Price of the Common Stock on such date of
determination means the closing sale price as reported in the composite
transactions for the principal U.S. national or regional securities exchange on
which the Common Stock is so listed or quoted, or, if no closing sale price is
reported, the last reported sale price on the principal U.S. national or
regional securities exchange on which the Common Stock is so listed or quoted,
or if the Common Stock is not so listed or quoted on a U.S. national or regional
securities exchange, the last quoted bid price for the Common Stock in the
over-the-counter market as reported by Pink Sheets LLC or similar organization,
or, if that bid price is not available, the market price of the Common Stock on
that date as determined by a nationally recognized independent investment
banking firm retained by the Company for this purpose.
For
purposes of this Certificate of Determination, all references herein to the
“Closing Price” and “last reported sale price” of the Common Stock on the Nasdaq
Global Select Market shall be such closing sale price and last reported sale
price as reflected on the website of the Nasdaq Global Select Market
(http://www.nasdaq.com) and as reported by Bloomberg Professional Service;
provided that in the event that there is a discrepancy between the closing sale
price or last reported sale price as reflected on the website of the Nasdaq
Global Select Market and as reported by Bloomberg Professional Service, the
closing sale price and last reported sale price on the website of the Nasdaq
Global Select Market shall govern.
“Combined Preferred
Stock” has the meaning set forth in Section 1.
“Common Stock” has the
meaning set forth in Section 2.
“Common Stock
Equivalent” means any security that directly or indirectly is convertible
into, or exercisable for, shares of Common Stock.
“Company” means Bridge
Capital Holdings, a corporation organized and existing under the laws of the
state of California.
“Conversion Approvals”
means the collective reference to the Shareholder Approval and the Regulatory
Approvals.
“Conversion Cap
Condition” means that if a Shareholder Approval Date has not occurred,
shares of Series B Preferred Stock may not directly or indirectly convert into
shares of Common Stock of the Company if such conversion would result in (a) the
aggregate voting power of all Series B Preferred Stock outstanding plus Common
Stock issued pursuant to the direct or indirect conversion of shares of Series B
Preferred Stock exceeding (b) the voting power of 19.99% of the Common Stock
outstanding as of the Effective Date.
“Conversion Price”
means for each of the Series B Preferred Stock and the Series B-1 Preferred
Stock, the Stated Price Per Share, as adjusted pursuant to the terms set forth
herein.
“Current Market Price
Condition” means if, on any applicable date, including any conversion
date of Combined Preferred Stock into Common Stock or any Dividend Payment Date
of the Combined Preferred Stock, the Twenty Day Trailing Closing Price Per Share
is such that each share of Series B and Series B-1 Preferred Stock, if
converted, would convert into the number of shares of Common Stock that, in the
aggregate and based on such Twenty Day Trailing Closing Price Per Share, would
have a value equal to or greater than the Purchase Price Per Share.
“Dividend Payment
Date” has the meaning set forth in Section 4(a).
“Dividend Period”
means each period from, and including, a Dividend Payment Date (or with respect
to the first Dividend Period for each respective share of Combined Preferred
Stock, the original issuance date) to, but excluding, the following Dividend
Payment Date.
“Effective Date” means
the date on which shares of the Series B Preferred Stock and Series B-1
Preferred Stock are first issued.
“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
“Exchange Property”
has the meaning set forth in Section 11(a).
“First Dividend Payment
Date” has the meaning set forth in Section 4(a).
“First Full Conversion
Date” has the meaning set forth in Section 8(c).
“Full Conversion Date”
means, with respect to the Combined Preferred Stock of any Holder, the date the
Company and such Holder, as applicable, have received all Conversion Approvals
necessary to permit such Holder to convert such shares of Combined Preferred
Stock into authorized Common Stock without such conversion resulting in a
Violation.
“Fundamental Change”
means the occurrence, after the Effective Date and prior to the Mandatory
Conversion Date, of the events set forth in any one of the following
paragraphs:
(i) any
Person is or becomes the Beneficial Owner, directly or indirectly, of securities
of the Company (not including in the securities beneficially owned by such
Person any securities acquired directly from the Company or its Affiliates)
representing 20% or more of the combined voting power of the Company’s then
outstanding securities, excluding any Person who becomes such a Beneficial Owner
in connection with a transaction described in clauses (a), (b) or (c) of
paragraph (iii) below;
(ii) within
any twenty-four (24) month period, the following individuals cease for any
reason to constitute a majority of the number of directors then serving on the
Board of Directors: individuals who, on the Effective Date,
constitute the Board of Directors and any new director (other than a director
whose initial assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation, relating
to the election of directors of the Company) whose appointment or election by
the Board of Directors or nomination for election by the Company’s shareholders
was approved or recommended by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on the Effective Date
hereof or whose appointment, election or nomination for election was previously
so approved or recommended;
(iii) there
is consummated a merger, consolidation of the Company, or any direct or indirect
subsidiary of the Company with any other corporation or any recapitalization of
the Company (for purposes of this paragraph (iii), a “Business Event”)
unless, immediately following such Business Event (a) the directors of the
Company immediately prior to such Business Event continue to constitute at least
a majority of the Board of Directors of the Company, the surviving entity, or
any parent thereof, (b) the voting securities of the Company outstanding
immediately prior to such Business Event continue to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof), in combination with the ownership of
any trustee or other fiduciary holding securities under an employee benefit plan
of the Company or any subsidiary of the Company, at least 60% of the combined
voting power of the securities of the Company or such surviving entity or any
parent thereof outstanding immediately after such Business Event, and
(c) in the event of a recapitalization, no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of the Company or such
surviving entity or any parent thereof (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its Affiliates) representing 20% or more of the combined voting power
of the then outstanding securities of the Company or such surviving entity or
any parent thereof (except to the extent such ownership existed prior to the
Business Event);
(iv) the
shareholders of the Company approve a plan of complete liquidation or
dissolution of the Company;
(v) there
is consummated an agreement for the sale, disposition, or long-term lease by the
Company of substantially all of the Company’s assets, other than (a) such a
sale, disposition or lease to an entity, at least 50% of the combined voting
power of the voting securities of which are owned by shareholders of the Company
in substantially the same proportions as their ownership of the Company
immediately prior to such sale or disposition or
(vi) the
distribution directly to the Company’s shareholders (in one distribution or a
series of related distributions) of all of the stock of one or more subsidiaries
of the Company that represent substantially all of the Company’s assets;
or
(vii) any
other event that the Board of Directors, in its sole discretion, determines to
be a Fundamental Change.
Notwithstanding
the foregoing, a “Fundamental Change”
under clauses (i) through (v) above shall not be deemed to have occurred by
virtue of the consummation of any transaction or series of integrated
transactions immediately following which the record holders of the Common Stock
of the Company immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in one or more
entities which, singly or together, immediately following such transaction or
series of transactions, own all or substantially all of the assets of the
Company as constituted immediately prior to such transaction or series of
transactions.
“Holder” means a
Series B Holder or Series B-1 Holder.
“Junior Securities”
has the meaning set forth in Section 2.
“Liquidation
Preference” means, as to the Series B and Series B-1 Preferred
Stock, the sum of (i) the Purchase Price Per Share (subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or
similar recapitalization), plus (ii) the amount of all accrued but unpaid
dividends thereon, whether or not declared, together with any other dividends
declared but unpaid in respect of such share to the date fixed for
distribution.
“Parity Securities”
has the meaning set forth in Section 2.
“Per Share Price”
means, with respect to any issuance of any class or series of Common Stock
Equivalent, (A) the aggregate purchase price, including any exercise price
(net of any brokerage, transaction, acquisition, advisory, due diligence,
origination or similar fees, but excluding expense reimbursements and
underwriting discounts, fees or commissions), paid or payable for such Common
Stock Equivalents in such issuance, divided by (B) the number of shares of
Common Stock into which all such Common Stock Equivalents would be converted if
they were so converted immediately following such issuance.
“Person” means a legal
person, including any individual, corporation, estate, partnership, joint
venture, association, joint-stock company, limited liability company or
trust.
“Preferred
Certificate” has the meaning set forth in Section 17(a).
“Purchase Price Per
Share” means One Hundred Dollars ($100.00).
“Quarterly Dividends”
has the meaning set forth in Section 4(a).
“Record Date” has the
meaning set forth in Section 4(b).
“Regulatory Approvals”
means, with respect to any Holder, the receipt of approvals and authorizations
of, filings and registrations with or notifications to, each only to the extent
applicable and required, permit such Holder to acquire such Holder’s shares of
Combined Preferred Stock, including the situation when the springing voting
rights of the Combined Preferred Stock described in Section 12 are effective and
to own the Combined Preferred Stock at that time without such Holder being in
violation of applicable law, and to convert such Holder’s shares of Combined
Preferred Stock into Common Stock and to own such Common Stock without such
Holder being in violation of applicable law, including, without limitation,
certification as a bank holding company by the United States Federal Reserve
System, appropriate regulatory approvals by the Office of the Comptroller of the
Currency and any other appropriate regulatory approvals.
“Reorganization Event”
has the meaning set forth in Section 11(a).
“Rights Agreement”
means that certain Rights Agreement dated as of August 21, 2008, by and between
the Company and American Stock Transfer &Trust Company, LLC.
“Series A Junior Preferred
Stock” means the shares of the Company’s Series A Junior
Participating Preferred Stock, no par value, reserved for issuance pursuant to
the Rights Agreement.
“Series B Holder”
means the record holder of shares of the Series B Preferred Stock, which
record holder may be treated by the Company as the absolute owner of the shares
of Series B Preferred Stock for the purpose of making payment and settling
the related conversions and for all other purposes.
“Series B Preferred
Stock” has the meaning set forth in Section 1.
“Series B Quarterly
Dividends” has the meaning set forth in Section 4(a).
“Series B-1 Holder”
means the record holder of shares of the Series B-1 Preferred Stock, which
record holder may be treated by the Company as the absolute owner of the shares
of Series B-1 Preferred Stock for the purpose of making payment and for all
other purposes.
“Series B-1 Preferred
Stock” has the meaning set forth in Section 1.
“Series B-1 Quarterly
Dividends” has the meaning set forth in Section 4(a).
“Series C Preferred
Stock” has the meaning set forth in Section 2.
“Shareholder Approval”
means the affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote, as required by Rule 4350 of the Nasdaq Marketplace
Rules, to approve the issuance of the Common Stock, issuable upon conversion of
the Combined Preferred Stock issued in connection with the Stock Purchase
Agreement and to approve the springing voting rights of the Combined Preferred
Stock described in Section 12.
“Shareholder Approval
Date” means the date on which the Shareholder Approval is obtained by the
Company, provided the Shareholder Approval Date can never occur and be valid
pursuant to the terms of this Certificate of Determination after a Shareholder
Disapproval Date has occurred.
“Shareholder
Disapproval” means the Company has held one shareholder meeting to obtain
Shareholder Approval, and at that meeting, the Company failed to obtain
Shareholder Approval and has not adjourned such meeting to solicit additional
proxies. For the avoidance of doubt, the Company has the authority to
adjourn the meeting, if necessary, to permit further solicitation of proxies if
there are not sufficient votes at the meeting to obtain the Shareholder
Approval, and when the meeting is re-adjourned and finally held, then the
Company will be deemed to have held one shareholder meeting; provided, however, that the
maximum amount of time between the date of the first scheduled shareholder
meeting, any successive adjournments and the final meeting may be no longer than
45 calendar days and if the time period is longer than that, then the Company
will be deemed to have held one shareholder meeting..
“Shareholder Disapproval
Date” means the date, if any, on which the Shareholder Disapproval
occurs.
“Spin-Off” means a
transaction in which the Company makes a distribution to all holders of shares
of Common Stock consisting of capital stock of any class or series, or similar
equity interests of, or relating to, a subsidiary or other business unit of the
Company.
“Stated Price Per
Share” means Ten Dollars ($10.00) per share of Series B Preferred
Stock and Series B-1 Preferred Stock as adjusted pursuant to the terms set forth
herein.
“Stock Purchase
Agreement” means that certain Stock Purchase Agreement dated as of
December 4, 2008, as amended, by and among the Company, Carpenter Community
BancFund, LP, Carpenter Community BancFund-A, LP and Carpenter Community
BancFund-CA, LP.
“Trading Day” means a
day on which the shares of Common Stock:
(i) are
not suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business;
and
(ii) have
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the Common Stock.
“Triple Liquidation
Preference” means, as to the Series B and Series B-1 Preferred
Stock, an amount equal to three times the Liquidation Preference (as defined
above).
“Twenty Day Trailing Closing
Price Per Share” means the average of the daily Closing Price per share
of the Common Stock of each of the twenty consecutive Trading Days preceding the
date in question.
“Violation” means any
of the following circumstances resulting from any conversion of Combined
Preferred Stock: a violation of the shareholder approval requirements
of Rule 4350 of the Nasdaq Marketplace Rules, or a violation of any rules or
regulations of the United States Federal Reserve System or the Office of the
Comptroller of the Currency.
Section
4. Dividends
and Repurchases.
(a) Quarterly
Dividend. Holders of Series B Preferred Stock shall be
entitled to receive cumulative cash dividends, payable when and as declared by
the Board of Directors, but only out of assets legally available therefore, at
an annual rate of 10% on the Purchase Price Per Share (subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or
similar recapitalization or the like) (the “Series B Quarterly
Dividends”). Holders of Series B-1 Preferred Stock shall be
entitled to receive cumulative cash dividends payable when and as declared by
the Board of Directors, but only out of assets legally available therefore, at
an annual rate of 10% on the Purchase Price Per Share (subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or
similar recapitalization or the like) (the “Series B-1 Quarterly
Dividends” and, together with the Series B Quarterly Dividends, the
“Quarterly
Dividends”). Quarterly Dividends are cumulative and shall
accrue on each share of Combined Preferred Stock (and the amount of any accrued
and unpaid cash dividends for any prior Dividend Period on such share of
Combined Preferred Stock, if any) during each Dividend Period, whether or not
declared and shall compound on each subsequent Dividend Payment Date (i.e. no
dividends shall accrue on other dividends unless and until the first Dividend
Payment Date for such other dividends has passed without such other dividends
having been paid on such date). Subject to the foregoing, Quarterly
Dividends shall be payable in arrears on January 15, April 15, July 15 and
October 15 of each year (each, a “Dividend Payment
Date”), commencing as of April 15, 2009 (the “First Dividend Payment
Date”). If a Dividend Payment Date falls on a day that is not
a Business Day, the Quarterly Dividends shall be paid on the next Business Day
as if it were paid on the Dividend Payment Date, and no interest or other amount
shall accrue on the dividend so payable for the period from and after that
Dividend Payment Date to the date the dividend is paid. If (i) the
Shareholder Approval Date has occurred, and (ii) accrued Quarterly Dividends
(including, if applicable dividends on such amount) on each share of Combined
Preferred Stock are not declared and paid by the Board of Directors for four or
more consecutive Dividend Payment Dates, then each Holder has the right to elect
that such accrued and unpaid dividends be payable in shares of Common Stock
equivalent in number to the amount of shares the accrued and unpaid cash
dividends could purchase on the applicable Dividend Payment Date based on the
Closing Price; provided, however, that cash
may be issued solely in lieu of fractional shares. Notwithstanding
the foregoing, at any date on or after January 15, 2010 through June 30, 2010,
if (i) all accrued Quarterly Dividends (including, if applicable, dividends on
such amount) on the Combined Preferred Stock are paid in full as of such date,
(ii) the Current Market Price Condition has been satisfied as of such date, and
(iii) the Conversion Approvals have been received, then the Company has the
option to declare and fully pay Quarterly Dividends on the Combined Preferred
Stock that would otherwise accrue on the Combined Preferred Stock through June
30, 2010 (the “Prepaid
Dividends”), and if the Company declares and pays in full the Prepaid
Dividends, then Quarterly Dividends shall cease to accrue on the Combined
Preferred Stock from the payment date of the Prepaid Dividends through June 30,
2010.
(b) Record
Date. Quarterly Dividends declared by the Board of Directors
shall be payable to the Holders of record, as applicable, as they appear on the
Company’s stock register at the close of business on the first day of the month
in which the relevant Dividend Payment Date occurs (the “Record
Date”). The Record Date shall apply regardless of whether any
particular Record Date is a Business Day.
(c) Computation. Quarterly
Dividends shall be computed on a 360/360 basis.
(d) Cumulative
Dividends. Subject to Section 4(g) and the last sentence of
Section 4(a), dividends on the Combined Preferred Stock shall be cumulative; in
the event and to the extent that the Company fail to pay the Quarterly Dividends
on the Combined Preferred Stock (and regardless whether the Board of Directors
shall have declared such dividends), the amount of the unpaid dividends shall
cumulate in successive periods, until paid in full.
(e) Actions
Allowed. If Quarterly Dividends on all outstanding shares of
the Combined Preferred Stock for all past Dividend Periods, including the latest
completed Dividend Period (including, if applicable as provided in Section 4(a)
dividends on such amount) have not been authorized, declared, and paid or set
aside for payment or, if applicable, pre-paid through June 30, 2010 as described
in Section 4(a), the Company shall not declare or pay dividends with respect to,
or redeem purchase or acquire any Parity Securities or Junior Securities during
the next succeeding Dividend Period, other than:
(i) any
declaration of a dividend in connection with any shareholders’ rights plan,
including with respect to the Series A Junior Preferred Stock or any
successor shareholders’ rights plan, or the issuance of rights, stock or other
property under any shareholders’ rights plan,
(ii) redemptions,
purchases or other acquisitions of Junior Securities or Parity Securities in
connection with any benefit plan or other similar arrangement with or for the
benefit of any one or more employees, officers, directors or consultants or in
connection with a dividend reinvestment or shareholder stock purchase plan,
or
(iii) conversions
into or exchanges for other Junior Securities or Parity Securities and cash
solely in lieu of fractional shares of the Junior Securities or Parity
Securities.
If
accrued Quarterly Dividends (including, if applicable as provided in Section
4(a) dividends on such amount) for any Dividend Payment Date are not paid in
full on the outstanding shares of the Combined Preferred Stock and there are
issued and outstanding shares of Parity Securities then all dividends declared
on shares of the Combined Preferred Stock and such Parity Securities shall be
declared pro rata so that the respective amounts of such dividends shall bear
the same ratio to each other as all accrued and unpaid dividends per share on
the shares of the Combined Preferred Stock (including, if applicable as provided
in Section 4(a) above, dividends on such amount) and on all such Parity
Securities otherwise payable (subject to their having been authorized by the
Board of Directors out of legally available funds and including, in the case of
any such Parity Securities that bear cumulative dividends, all accrued but
unpaid dividends) bear to each other.
(f) Dividend
Preference. If all accrued Quarterly Dividends (including, if
applicable, dividends on such amount) on the Combined Preferred Stock are paid
in full as of such date, then the Board of Directors may declare and pay a cash
dividend in respect of any shares of Common Stock, as long as the Board of
Directors shall declare and pay to the Holders of the Combined Preferred Stock a
cash dividend in an amount per share of Combined Preferred Stock equal to the
product of (i) the per share dividend declared and paid in respect of each
share of Common Stock and (ii) the number of shares of Common Stock into
which a share of Combined Preferred Stock would then be convertible, assuming
receipt of Conversion Approvals. Dividends payable to the Holders
pursuant to this Section 4(f) shall be payable on the same date that
dividends are payable to holders of shares of Common Stock, and no dividends
shall be payable to holders of shares of Common Stock unless the full dividends
contemplated by this Section 4(f) are paid at the same time in respect of the
Combined Preferred Stock.
(g) Dividend
Cessation. If, by June 30, 2010, any Holder has not received from
the Federal Reserve System any required approvals for conversion of the Combined
Preferred Stock to Common Stock and all other conditions for the conversion of
the Combined Preferred Stock into Common Stock have been met, then additional
Quarterly Dividends shall cease to accrue on the Combined Preferred Stock;
provided, however, that the Combined Preferred Stock would otherwise continue to
be convertible under the terms of this Certificate of
Determination.
Section
5. Liquidation.
(a) Liquidation
Preference. In the event the Company voluntarily or
involuntarily liquidates, dissolves or winds up, subject to the rights of the
Series C Preferred Stock, the Holders at the time shall be entitled to receive
liquidating distributions in the amount of the Triple Liquidation Preference per
share of Combined Preferred Stock, out of assets legally available for
distribution to the Company’s shareholders, before any distribution of assets is
made to the holders of the Common Stock or any other Junior
Securities. Subject to the California General Corporation Law and
other applicable law, after payment of the full amount of such liquidating
distributions, Holders of the Combined Preferred Stock shall be entitled to
participate in any further distribution of the remaining assets of the Company
as if each share of Combined Preferred Stock had been converted, immediately
prior to such liquidating distributions, into the number of shares of Common
Stock equal to the Liquidation Preference divided by the Applicable Conversion
Price.
(b) Insufficient Assets or
Proceeds to Pay the Liquidation Preference. In the event the
assets of the Company, or proceeds thereof, available for distribution to
shareholders upon any liquidation, dissolution or winding-up of the affairs of
the Company, whether voluntary or involuntary, shall be insufficient to pay in
full the amounts payable with respect to all outstanding shares of the Combined
Preferred Stock and the corresponding amounts payable on any Parity Securities,
Holders of Combined Preferred Stock and the holders of such Parity Securities
shall share ratably in any distribution of assets of the Company in proportion
to the full respective liquidating distributions to which they would otherwise
be respectively entitled.
(c) Transactions not Deemed a
Liquidation. The Company’s consolidation or merger with or
into any other entity, the consolidation or merger of any other entity with or
into the Company, or the sale of all or substantially all of the Company’s
property or business will not constitute its liquidation, dissolution or winding
up.
Section
6. Maturity. The
Combined Preferred Stock shall be perpetual unless converted in accordance with
this Certificate of Determination.
Section
7. Redemptions. The
Combined Preferred Stock shall not be redeemable either at the Company’s option
or at the option of the Holders at any time.
Section
8. Conversion.
(a) General. The
Series B Preferred Stock partially or fully converts into Common Stock as
described in this Section 8. The Series B-1 Preferred Stock shall
either partially or fully convert into Common Stock as described in this Section
8.
The
number of shares of Common Stock into which a share of Combined Preferred Stock
shall potentially be convertible (subject to any limitations set forth in this
Section 8) shall be determined by dividing (a) the Liquidation Preference by (b)
the Applicable Conversion Price, plus any cash paid in lieu of fractional shares
in accordance with Section 13.
The
conversion procedures are set forth in Section 9.
(b) Holder Optional
Conversion. After the first to occur of a Shareholder Approval
Date or a Shareholder Disapproval Date, then as of the first Business Day
following such date, each Series B Holder has the sole discretion, at any time
and from time to time, to elect to convert any of its shares of Series B
Preferred Stock into shares of Common Stock at the conversion rate set forth in
Section 8(a), provided that the maximum number of shares of Series B Preferred
Stock that the Holder may elect to convert at any time pursuant to this Section
8(b) is limited to the maximum number of such shares that may be converted
without violating the Conversion Cap Condition or causing a Violation to occur
and the remaining shares of Series B Preferred Stock will remain
outstanding. After a Full Conversion Date occurs, then as of the
first Business Day following such date, each Series B-1 Holder has the sole
discretion, at any time and from time to time, to elect to convert any of its
shares of Series B-1 Preferred Stock into shares of Common Stock at the
conversion rate set forth in Section 8(a). Notwithstanding anything
to the contrary, the elections described in this Section 8(b) expire upon the
full mandatory conversion of the Combined Preferred Stock under Sections 8(c) or
8(d).
(c) Full
Conversion. Notwithstanding any other provision of this
Section 8, if the Full Conversion Date occurs, then as of the first Business Day
following the later of the (i) Full Conversion Date or (ii) June 30, 2010 (such
later date described in subparagraphs (i) and (ii) hereof is referred to as the
“First Full Conversion
Date”), each share of Series B Preferred Stock and Series B-1 Preferred
Stock shall automatically convert into shares of Common Stock at the conversion
rate set forth in Section 8(a); provided, however, that if the
Current Market Price Condition has not been satisfied as of the First Full
Conversion Date, then each share of Series B Preferred Stock and Series B-1
Preferred Stock shall remain outstanding and a new full conversion date shall be
scheduled to the date that is 6 months thereafter, and will continue to be
scheduled in 6-month intervals until the Current Market Price Condition is
satisfied as of the earliest succeeding 6-month date, at which date, each share
of Series B Preferred Stock and Series B-1 Preferred Stock shall automatically
convert into shares of Common Stock at the conversion rate set forth in Section
8(a). Notwithstanding anything to the contrary in this Section 8, in
the event of Shareholder Disapproval, there shall be no conversion of shares of
Combined Preferred Stock into shares Common Stock unless so elected by the
Holder thereof pursuant to Section 8(b).
(d) Company Optional Full
Conversion. During any 6-month conversion period subsequent to
the First Full Conversion Date as described in Section 8(c), if the Current
Market Price Condition is satisfied on any date during such period, then the
Company has the option to convert each share of Series B Preferred Stock and
Series B-1 Preferred Stock into shares of Common Stock at the conversion rate
set forth in Section 8(a) as long as all accrued Quarterly Dividends (including,
if applicable as provided in Section 4(a) above, dividends on such amount) are
paid prior to conversion and the Board of Directors declares and fully pays
Quarterly Dividends that would have accrued though the date of
conversion. In addition, at any date on or after January 15, 2010
through June 30, 2010, if (i) the Full Conversion Date has occurred, (ii) all
accrued Quarterly Dividends (including, if applicable as provided in Section
4(a) above, dividends on such amount) have been paid in full on the Combined
Preferred Stock, (iii) the Current Market Price Condition has been satisfied as
of such date, and (iv) the Company declares and fully pays Quarterly Dividends
that would have accrued through the date of conversion, then the Company has the
option to convert each share of Series B Preferred Stock and Series B-1
Preferred Stock into shares of Common Stock at the conversion rate set forth in
Section 8(a).
Section
9. Conversion
Procedures.
(a) Conversion
Notice. Upon occurrence of a Shareholder Disapproval Date, a
Shareholder Approval Date, a Full Conversion Date or another conversion date
described in Section 8 with respect to shares of any Holder, the Company shall
provide notice of conversion election rights or full conversion to such
Holder. In addition to any information required by applicable law or
regulation, such notice with respect to such Holder shall state, as
appropriate:
(i) the
conversion date applicable to such Holder;
(ii) the
number of shares of Common Stock to be issued upon conversion of each share of
Combined Preferred Stock held of record by such Holder and subject to such
mandatory conversion;
(iii) if
the Holder has the election right described in Section 8(b), information about
how the Holder shall give written notice to the Company about electing to
convert the shares of Combined Preferred Stock into Common Stock;
and
(iv) the
place or places where certificates for shares of Combined Preferred Stock held
of record by such Holder are to be surrendered for issuance of certificates
representing shares of Common Stock.
(b) Optional
Conversion. If a Holder has the election right described in
Section 8(b), at any time and from time to time, such Holder may give written
notice to the Company that such Holder elects to convert any of its shares of
the Combined Preferred Stock into Common Stock and, after receiving any
applicable information required by applicable law or regulation, the Company
shall as soon as practicable thereafter issue and deliver a certificate for such
shares of Common Stock as the Holder is entitled.
(c) Pro Rata
Conversion. In the event that a Full Conversion Date occurs
and some, but not all, of the Conversion Approvals applicable to a particular
Holder are obtained, such that the Full Conversion Date shall have occurred with
respect to some, but not all, of the shares of Combined Preferred Stock held by
such Holder, such Holder shall be entitled to select the shares to be
surrendered pursuant to this Section 9 such that, after such surrender, the
Holder no longer holds shares of Combined Preferred Stock as to which the Full
Conversion Date shall have occurred. In the event that such Holder
fails to surrender the required number of shares pursuant to this Section 9
within 30 days after delivery of the conversion notice, the Company shall, by
written notice to such Holder, indicate which shares have been converted
pursuant to Section 8.
(d) Effect of Conversion on
Combined Preferred Stock. Effective immediately prior to the
close of business on a conversion date with respect any share of Combined
Preferred Stock into Common Stock, dividends shall no longer be declared on any
such converted share of Combined Preferred Stock and such share of Combined
Preferred Stock shall cease to be outstanding, in each case, subject to the
right of the Holder to receive any declared and unpaid dividends on such share
and any other payments to which such Holder is otherwise entitled pursuant to
Section 8, Section 11 or Section 13, as
applicable. Prior to the close of business on any conversion date
with respect to any share of Combined Preferred Stock, shares of Common Stock
issuable upon conversion thereof, or other securities issuable upon conversion
of such share of Combined Preferred Stock, shall not be deemed outstanding for
any purpose, and the Holder thereof shall have no rights with respect to the
Common Stock or other securities issuable upon conversion (including voting
rights, rights to respond to tender offers for the Common Stock or other
securities issuable upon conversion and rights to receive any dividends or other
distributions on the Common Stock or other securities issuable upon conversion)
by virtue of holding such share of Combined Preferred Stock except as otherwise
provided herein.
(e) Status of Converted
Stock. Shares of Combined Preferred Stock duly converted in
accordance with this Certificate of Determination, or otherwise reacquired by
the Company, will resume the status of authorized and unissued Combined
Preferred Stock, undesignated and, after all shares of Combined Preferred Stock
have been converted in full into Common Stock, available for future
issuance. The Company may from time-to-time take such appropriate
action as may be necessary to reduce the authorized number of shares of Combined
Preferred Stock.
(f) Treatment of Record
Holder. The Person or Persons entitled to receive the Common
Stock and/or cash, securities or other property issuable upon conversion of
Combined Preferred Stock shall be treated for all purposes as the record holders
of such shares of Common Stock and/or securities as of the close of business on
the applicable conversion date with respect thereto. In the event
that a Holder shall not by written notice designate the name in which shares of
Common Stock and/or cash, securities or other property (including payments of
cash in lieu of fractional shares) to be issued or paid upon conversion of
shares of Combined Preferred Stock should be registered or paid or the manner in
which such shares should be delivered, the Company shall be entitled to register
and deliver such shares, and make such payment, in the name of the Holder and in
the manner shown on the records of the Company.
(g) Surrender of
Certificates. On any Combined Preferred Stock conversion date,
certificates representing shares of Common Stock shall be issued and delivered,
or evidence of book-entry record ownership of the Common Stock delivered, to the
Holder thereof or such Holder’s designee upon presentation and surrender of the
certificate evidencing the Combined Preferred Stock to the Company and, if
required, the furnishing of appropriate endorsements and transfer documents and
the payment of all transfer and similar taxes.
Section
10. Adjustments
to Conversion Price for Dilutive Issuances.
(a) Except
as provided in Section 10(c), the Conversion Price is subject to the following
adjustments.
(i) Common Stock Dividends and
Distributions. In the event the Company at any time or from
time to time after the Effective Date issues, or fixes a record date for
determination of holders of Common Stock entitled to receive, a dividend or
other distribution payable in additional shares of Common Stock, then in each
such event the Conversion Price will be reduced, concurrently with such issuance
or, in the event such record date is fixed, as of the close of business on such
record date, to a price equal to such Conversion Price in effect immediately
prior to such reduction multiplying by a fraction:
(A) the
numerator of which equals the number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date; and
(B) the
denominator of which equals (1) the number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus (2) the number of shares of Common Stock
issuable in payment of such dividend or distribution.
In the event that such dividend or
distribution described in this clause (i) is not paid in full or made in full,
the Conversion Price shall be readjusted, effective as of the close of business
on such record date and thereafter the Conversion Price shall be adjusted
pursuant to this clause (i) to reflect the actual payment of such dividend or
distribution.
(ii) Subdivisions, Combinations
or Consolidations of the Common Stock. In the event the
Company at any time or from time to time after the Effective Date subdivides,
splits or combines the shares of Common Stock, then in each such event the
Conversion Price will be adjusted, concurrently with such subdivision, split or
combination, to a price equal to such Conversion Price in effect immediately
prior to such subdivision, split or combination multiplied by a
fraction:
(A) the
numerator of which equals the number of shares of Common Stock issued and
outstanding immediately prior to the effective date of such subdivision, split
or combination; and
(B) the
denominator of which equals the number of shares of Common Stock issued and
outstanding immediately after the opening of business on the effective date of
such subdivision, split or combination.
For the purposes of this clause (ii),
the number of shares of Common Stock at the time outstanding shall not include
shares acquired by the Company. If any subdivision, split or
combination described in this clause (ii) is announced but the outstanding
shares of Common Stock are not subdivided, split or combined, the Conversion
Price shall be readjusted, effective as of the date the Board of Directors
publicly announces its decision not to subdivide, split or combine the
outstanding shares of Common Stock, to such Conversion Price that would be in
effect if such subdivision, split or combination had not been
announced.
(iii) Issuance of Common Stock and
Common Stock Equivalents. In the event the Company at any time
or from time to time after the Effective Date issues any share of Common Stock
or any Common Stock Equivalent for no consideration or at a Per Share Price less
than the Conversion Price in effect immediately prior to such issuance (a “Dilutive Issuance”),
then in each such event the Conversion Price will be reduced, concurrently with
such Dilutive Issuance, to a price equal to such Conversion Price in effect
immediately prior to such Dilutive Issuance multiplied by a
fraction:
(A) the
numerator of which is equal to (1) the number of shares of Common Stock
outstanding immediately prior to such Dilutive Issuance plus (2) the number of
shares of Common Stock that the aggregate consideration received by the Company
in connection with such Dilutive Issuance would purchase at the Conversion Price
in effect immediately prior to such Dilutive Issuance; and
(B) the
denominator of which is equal to (1) the number of shares of Common Stock
outstanding immediately prior to such Dilutive Issuance plus (2) the number of
shares of Common Stock issued in connection with such Dilutive Issuance, if any,
plus (3) the number of shares of Common Stock issuable upon full exercise or
conversion of the Common Stock Equivalents (as set forth in the instrument
relating thereto, assuming the satisfaction of any conditions to exercisability,
convertibility or exchangeability but without regard to any provision contained
therein for a subsequent adjustment of such number) issued in connection with
such Dilutive Issuance, if any.
(iv) Debt or Asset
Distributions. In the event the Company at any time or from
time to time after the Effective Date distributes to holders of its Common Stock
shares of its capital stock (other than shares of Common Stock and other than as
otherwise subject to adjustment pursuant to this Section 10), stock or other
securities of other persons, evidences of indebtedness issued by the Company or
other persons, assets (excluding cash dividends) or options or rights (excluding
Common Stock Equivalents), or shall fix a record date for determination of
holders of Common Stock entitled to receive such a distribution, in exchange for
consideration in an amount less than the fair market value of the property so
distributed, then in each such event the Conversion Price in effect immediately
prior to such distribution will be reduced, concurrently with such distribution,
to a price equal to such Conversion Price in effect immediately prior to such
distribution multiplied by a fraction:
(A) the
numerator of which is equal to (1) the fair market value per share of Common
Stock on such date minus (2) the fair market value of the portion of the
distribution applicable to one share of Common Stock on such date as reasonably
determined by the Board of Directors; and
(B) the
denominator of which is equal to the fair market value per share of Common Stock
on such date.
In the event that such distribution
described in this clause (iv) is not so paid or made, the Conversion Price shall
be readjusted, effective as of the date the Board of Directors publicly
announces its decision not to pay or make such distribution, to the Conversion
Price that would then be in effect if such distribution had not been
declared.
(v) Cash
Distributions. In the event the Company at any time or from
time to time after the Effective Date makes a distribution consisting
exclusively of cash to all holders of the Common Stock, excluding (1) any cash
dividend on the Common Stock to the extent a corresponding cash dividend is paid
on the Combined Preferred Stock pursuant to Section 4(f), (2) any cash that is
distributed in a Reorganization Event or as part of a Spin-Off, (3) any dividend
or distribution in connection with the Company’s liquidation, dissolution or
winding up, and (4) any consideration payable in connection with a tender or
exchange offer made by the Company or any of its subsidiaries, then in each such
event the Conversion Price in effect immediately prior to such distribution will
be reduced, concurrently with such distribution, to a price equal to such
Conversion Price in effect immediately prior to such distribution multiplied by
a fraction:
(A) the
numerator of which is equal to (1) the Closing Price per share of Common Stock
on the Trading Day immediately preceding such distribution minus (2) the amount
per share of Common Stock of the distribution; and
(B) the
denominator of which is equal to the Closing Price per share of Common Stock on
the Trading Day immediately preceding such distribution.
In the event that such distribution
described in this clause (v) is not so paid or made, the Conversion Price shall
be readjusted, effective as of the date the Board of Directors publicly
announces its decision not to pay or make such distribution, to the Conversion
Price that would then be in effect if such distribution had not been
declared.
(vi) Self Tender Offers and
Exchange Offers. In the event that at any time or from time to
time the Company or any of its subsidiaries successfully completes a tender or
exchange offer for Common Stock, but only where the cash and the value of any
other consideration included in the payment per share of the Common Stock
exceeds the Closing Price per share of the Common Stock on the Trading Day
immediately succeeding the expiration of the tender or exchange offer, then the
Conversion Price in effect at the close of business on such immediately
succeeding Trading Day will be multiplied by the following
fraction:
(A) the
numerator of which is equal to (1) the Closing Price per share of Common Stock
on the Trading Day immediately succeeding the expiration of the tender or
exchange offer multiplied by (2) the number of shares of Common Stock
outstanding immediately prior to the expiration of the tender or exchange offer
(including any shares validly tendered and not withdrawn); and
(B) the
denominator of which is equal to (1) the aggregate cash and fair market value of
the other consideration payable in the tender or exchange offer, as determined
by the Board of Directors, plus (2) the product of that number which is equal to
(i) the Closing Price per share of Common Stock on the Trading Day immediately
succeeding the expiration of the tender or exchange offer multiplied by (ii) the
number of shares of Common Stock outstanding immediately after the expiration of
the tender or exchange offer.
If the
Company, or one of its subsidiaries, is obligated to purchase shares of Common
Stock pursuant to any such tender offer or exchange offer, but the Company, or
such subsidiary, is permanently prevented by applicable law from effecting any
such purchases, or all such purchases are rescinded, then the Conversion Price
shall be readjusted to be such Conversion Price that would then be in effect if
such tender offer or exchange offer had not been made.
(vii) Rights
Plans. To the extent that the Company has a rights plan in
effect with respect to the Common Stock upon any conversion date with respect to
the conversion of Combined Preferred Stock into Common Stock described in
Section 8, then upon any such conversion of shares of the Combined Preferred
Stock into Common Stock, the Holders will receive, in addition to the shares of
Common Stock, the rights under the rights plan; provided, however, that if the
rights have separated from the shares of Common Stock before the applicable
conversion date, then the Conversion Price will be adjusted at the time of
separation as if the Company had made a distribution to all holders of the
Common Stock as described in clause (iii) above, subject to readjustment in
the event of the expiration, termination or redemption of such
rights.
(b) The
Company may make such decreases in the Conversion Price, in addition to any
other decreases required by this Section 10, if the Board of Directors deems it
advisable to avoid or diminish any income tax to holders of the Common Stock
resulting from any dividend or distribution of shares of Common Stock (or
issuance of rights or warrants to acquire shares of Common Stock) or from any
event treated as such for income tax purposes or for any other
reason.
(c) (i) All
adjustments to the Conversion Price shall be calculated to the nearest 1/10 of a
cent. No adjustment in the Conversion Price shall be required if such
adjustment would be less than $0.01; provided, that any adjustments which by
reason of this subparagraph are not required to be made shall be carried forward
and taken into account in any subsequent adjustment; provided further that upon
any conversion of Combined Preferred Stock to Common Stock pursuant to Section
8(b), 8(c) or 8(e), adjustments to the Conversion Price will be made with
respect to any such adjustment carried forward and which has not been taken into
account before such date.
(ii) The
Applicable Conversion Price shall not be adjusted:
(A) upon
the issuance of any Series C Preferred Stock and related warrants to the U.S.
Treasury or its designee pursuant to the Emergency Economic Stabilization Act or
any shares of Common Stock issued upon exercise of such warrants;
(B) upon
the issuance of any shares of Common Stock pursuant to any present or future
plan providing for the reinvestment of dividends or interest payable on the
Company’s securities and the investment of additional optional amounts in shares
of Common Stock under any plan;
(C) upon
the issuance of up to 426,984 shares of Common Stock or rights or warrants to
purchase those shares pursuant to any present or future employee, director or
consultant benefit plan or program of or assumed by the Company or any of its
subsidiaries;
(D) upon
the issuance of any shares of Common Stock pursuant to any option, warrant,
right or exercisable, exchangeable or convertible security outstanding as of the
Effective Date;
(E) for
a change in the par value or no par value of Common Stock;
(F) for
accrued and unpaid dividends on the Combined Preferred Stock;
(G) upon
the payment of any dividend on the Combined Preferred Stock, whether in the form
of cash or shares of Common Stock;
(H) upon
the issuance of Common Stock upon the conversion of any of the Combined
Preferred Stock into Common Stock; or
(I) upon
the issuance of securities pursuant to the Stock Purchase
Agreement.
(d) Whenever
the Conversion Price is to be adjusted in accordance with Section 10(a) or
Section 10(b), the Company shall: (i) compute the Conversion Price in
accordance with Section 10(a) or Section 10(b), taking into account the one cent
threshold set forth in Section 10(c)(i); (ii) as soon as practicable following
the occurrence of an event that requires an adjustment to the Conversion Price
pursuant to Section 10(a) or Section 10(b), taking into account the one cent
threshold set forth in Section 10(c) (or if the Company is not aware of such
occurrence, as soon as practicable after becoming so aware), provide, or cause
to be provided, a written notice to the Holders of the occurrence of such event;
and (iii) as soon as practicable following the determination of the revised
Conversion Price in accordance with Section 10(a) or Section 10(b), provide, or
cause to be provided, a written notice to the Holders setting forth in
reasonable detail the method by which the adjustment to the Conversion Price was
determined and setting forth the revised Conversion Price.
Section
11. Reorganization
Events.
(a) Reorganization
Events. In the event of:
(i) any
consolidation or merger of the Company with or into another Person, in each case
pursuant to which the Common Stock will be converted into cash, securities or
other property of the Company or another Person;
(ii) any
sale, transfer, lease or conveyance to another Person of all or substantially
all of the property and assets of the Company, in each case pursuant to which
the Common Stock will be converted into cash, securities or other property of
the Company or another Person;
(iii) any
reclassification of the Common Stock into securities including securities other
than the Common Stock; or
(iv) any
statutory exchange of the outstanding shares of Common Stock for securities of
another Person (other than in connection with a merger or
acquisition);
(any such
event specified in this Section 11(a), a “Reorganization
Event”); each share of Combined Preferred Stock outstanding immediately
prior to such Reorganization Event shall, without the consent of Holders, remain
outstanding but shall become convertible, at the option of the Holders, into the
kind of securities, cash and other property receivable in such Reorganization
Event by the holder (excluding the counterparty to the Reorganization Event or
an affiliate of such counterparty) of that number of shares of Common Stock into
which the share of Combined Preferred Stock would then be convertible (and
assuming for purposes of this calculation, the receipt on the date such option
is exercised of all Conversion Approvals) (such securities, cash and other
property, the “Exchange Property”);
provided, however, that if the
Reorganization Event provides that each share of Common Stock shall receive
Exchange Consideration in an amount such that each share of Combined Preferred
Stock would convert into, or receive consideration, that in the aggregate would
be less than the Purchase Price Per Share, then notwithstanding the foregoing
sentence, each share of Combined Preferred Stock shall be entitled to receive
that amount of securities, cash and other property receivable in such
Reorganization Event by the holder (excluding the counterparty to the
Reorganization Event or an affiliate of such counterparty) of that number of
shares of Common Stock that will receive consideration equivalent to the
Liquidation Preference.
(b) Reorganization Event
Consideration. In the event that holders of the shares of
Common Stock have the opportunity to elect the form of consideration to be
received in such transaction, the consideration that the Holders are entitled to
receive shall be deemed to be the types and amounts of consideration received by
the majority of the holders of the shares of Common Stock that affirmatively
make an election. The amount of Exchange Property receivable upon
conversion of any Combined Preferred Stock shall be determined in accordance
with the terms of Section 8 based on the Applicable Conversion Price in effect
on the date immediately prior to such Reorganization Event; provided, however, that if the
Reorganization Event provides that each share of Common Stock shall receive
consideration in an amount such that each share of Combined Preferred Stock,
would convert into, or receive consideration, that in the aggregate would be
less than the Purchase Price Per Share, then notwithstanding the foregoing
sentence, each share of Combined Preferred Stock shall be entitled to receive
that amount of securities, cash and other property receivable in such
Reorganization Event by the holder (excluding the counterparty to the
Reorganization Event or an affiliate of such counterparty) of that number of
shares of Common Stock that will receive consideration equivalent to the
Liquidation Preference.
(c) Successive Reorganization
Events. The above provisions of this Section 11 shall
similarly apply to successive Reorganization Events and the provisions of
Section 10 shall apply to any shares of capital stock of the Company (or
any successor) received by the holders of the Common Stock in any such
Reorganization Event.
(d) Reorganization
Notice. The Company (or any successor) shall, within 20 days
of the occurrence of any Reorganization Event, provide written notice to the
Holders of such occurrence of such event and of the kind and amount of the cash,
securities or other property that constitutes the Exchange
Property. Failure to deliver such notice shall not affect the
operation of this Section 11.
(e) Fundamental
Change. Notwithstanding anything to the contrary in this
Section 11 or otherwise in this Certificate of Determination, in the event
of any Fundamental Change that results from or in an agreement with any Person
that constitutes a Fundamental Change and pursuant to which the Common Stock
will be converted into or becomes entitled to receive cash, securities or other
property or rights, such agreement must provide that either (i) the Series
B Holders and the Series B-1 Holders shall receive, on an as-converted basis,
effective immediately prior to the event constituting consummation of such
Fundamental Change so as to be entitled to participate therein, the securities,
cash and other property or rights receivable in such transaction by a holder of
shares of Common Stock that was not the counterparty to such transaction or an
affiliate of such other party or (ii) that each share of Series B and
Series B-1 Preferred Stock shall be converted into the number of shares of
Common Stock equal to the Liquidation Preference divided by the Applicable
Conversion Price.
Section
12. Voting
Rights.
(a) Series B Preferred
Stock. Series B Holders will not have any voting rights,
including the right to elect any directors, except (i) voting rights, if
any, required by law, and (ii) voting rights, if any, described in
Section 2 and this Section 12; provided, however, that each
Series B Holder will be entitled to voting rights as described in this Section
12(a). Upon the first to occur of a Shareholder Disapproval Date or a
Shareholder Approval Date, (i) if all Regulatory Approvals have not been
received, then as of the first Business Day following such date, each Series B
Holder will thereafter be entitled to 2 and 1/2 votes for each share of Series B
Preferred Stock held as of the applicable date, or (ii) if all Regulatory
Approvals have been received, then as of the first Business Day following such
date (or if the Regulatory Approvals are received after the Shareholder
Disapproval Date or Shareholder Approval Date, then on the first Business Day
following the date such Regulatory Approvals are received), each Series B Holder
will thereafter be entitled to 10 votes for each share of Series B Preferred
Stock held as of the applicable date, on any matter that is submitted to a vote
or for the consent of the shareholders of the Company, and, except as otherwise
required by law or as set forth herein, shall have voting rights and powers
equal to the voting rights and powers of the Common Stock, shall be entitled to
notice of any shareholders’ meeting in accordance with the Bylaws of the Company
and shall be entitled to vote with the holders of Common Stock with respect to
any matter upon which holders of Common Stock have the right to vote, except as
otherwise provided herein or those matters required by law to be submitted to a
class vote.
(b) Series B-1 Preferred
Stock. Series B-1 Holders will not have any voting rights,
including the right to elect any directors, except (i) voting rights, if
any, required by law, and (ii) voting rights, if any, described in
Section 2 and this Section 12; provided, however, that upon
the Full Conversion Date, then as of the first Business Day following such date,
each Series B-1 Holder will thereafter be entitled to ten votes for each share
of Series B-1 Preferred Stock held as of the applicable date on any matter that
is submitted to a vote or for the consent of the shareholders of the Company,
and, except as otherwise required by law or as set forth herein, shall have
voting rights and powers equal to the voting rights and powers of the Common
Stock, shall be entitled to notice of any shareholders’ meeting in accordance
with the Bylaws of the Company and shall be entitled to vote with the holders of
Common Stock with respect to any matter upon which holders of Common Stock have
the right to vote, except as otherwise provided herein or those matters required
by law to be submitted to a class vote.
(c) Protective
Provisions. So long as any shares of Combined Preferred Stock
are outstanding, the vote or consent of the holders of a majority of the voting
power represented by the then outstanding shares of Series B Preferred Stock and
Series B-1 Preferred Stock, voting as a single class with all other classes and
series of Parity Securities having similar voting rights then outstanding and
with each series or class having a number of votes proportionate to the
aggregate Liquidation Preference of the outstanding shares of such class or
series, given in person or by proxy, either in writing without a meeting or by
vote at any meeting called for the purpose, will be necessary for effecting or
validating any amendment, alteration or repeal of any provision of the Articles
of Incorporation (including this Certificate of Determination) that would
increase or decrease the aggregate authorized shares of Series B or Series B-1
Preferred Stock or any Parity Security, increase or decrease the par value of
the Series B or Series B-1 Preferred Stock or any Parity Security or alter
or change the powers, preferences or special rights of the Series B or
Series B-1 Preferred Stock or any Parity Security so as to affect them
adversely. If an amendment, alteration or repeal described above
would adversely affect one or more but not all series of Combined Preferred
Stock with like voting rights (including the Series B or Series B-1
Preferred Stock for this purpose), then only the series affected and entitled to
vote shall vote as a class in lieu of all such series of preferred stock unless
the vote of the other series of preferred stock is required by law.
(d) Combined Preferred Stock
Conversion. Notwithstanding the foregoing, Holders shall not
have any voting rights if, at or prior to the effective time of the act with
respect to which such vote would otherwise be required, all outstanding shares
of Combined Preferred Stock shall have been converted into shares of Common
Stock.
Section
13. Fractional
Shares.
(a) No
fractional shares of Common Stock will be issued as a result of any conversion
of shares of Combined Preferred Stock.
(b) In
lieu of any fractional share of Common Stock otherwise issuable in respect of
any mandatory conversion pursuant to Section 8, the Company shall pay an
amount in cash (computed to the nearest cent) upon conversion to Common Stock
equal to the same fraction of the Closing Price of the Common Stock determined
as of the second Trading Day immediately preceding the conversion
date.
(c) If
more than one share of Combined Preferred Stock is surrendered for conversion at
one time by or for the same Holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of the aggregate
number of shares of the Combined Preferred Stock so surrendered.
Section
14. Reservation
of Common Stock.
(a) Common Stock Issuable on
Conversion of Combined Preferred Stock. The Company shall at all times
reserve and keep available out of its authorized and unissued Common Stock,
solely for issuance upon the conversion of shares of the Series B Preferred
Stock as provided in this Certificate of Determination, free from any preemptive
or other similar rights, such number of shares of Common Stock as shall from
time to time be issuable upon the conversion of all the shares of Series B
Preferred Stock then outstanding, assuming that the Applicable Conversion Price
equaled the Stated Price Per Share. The Company shall at all times
reserve and keep available out of its authorized and unissued Common Stock
solely for issuance upon the conversion of shares of Series B-1 Preferred
Stock as provided in this Certificate of Determination, free from any preemptive
or other similar rights, such number of shares of Common Stock as shall from
time to time be issuable upon the conversion of all the shares of
Series B-1 Preferred Stock then outstanding, assuming that the Applicable
Conversion Price equaled the Stated Price Per Share. For purposes of
this Section 14(b), the number of shares of Common Stock that shall be
deliverable upon the conversion of all outstanding shares of Combined Preferred
Stock shall be computed as if at the time of computation all such outstanding
shares were held by a single Holder. The Company shall not issue
capital stock at a price that would require the Conversion Price of the Combined
Preferred Stock to be reduced (pursuant to the provisions of Section 10
hereof) to a price that would require the Company to issue shares of Common
Stock upon the conversion of the Combined Preferred Stock in excess of the then
authorized but unissued shares of Common Stock.
(b) Authorization. All
shares of Common Stock delivered upon conversion of the Combined Preferred Stock
shall be duly authorized, validly issued, fully paid and non-assessable, free
and clear of all liens, claims, security interests and other encumbrances (other
than liens, charges, security interests and other encumbrances created by the
Holders).
(c) Compliance with
Law. Prior to the delivery of any securities that the Company
shall be obligated to deliver upon conversion of the Combined Preferred Stock,
the Company shall use its reasonable best efforts to comply with all federal and
state laws and regulations with respect to each Holder thereunder requiring the
registration of such securities with, or any approval of or consent to the
delivery thereof by, any governmental authority.
Section
15. Replacement
Certificates.
(a) The
Company shall replace any mutilated stock certificate at the Holder’s expense
upon surrender of that stock certificate to the Company. The Company
shall replace stock certificates that become destroyed, stolen or lost at the
Holder’s expense upon delivery to the Company of satisfactory evidence that the
stock certificate has been destroyed, stolen or lost, together with any
indemnity that may be required by the Company.
(b) The
Company shall not be required to issue any stock certificates representing the
Combined Preferred Stock one business days following the full conversion of the
Combined Preferred Stock into Common Stock as provided in Section 8(c) or
8(d). In place of the delivery of a replacement certificate following
such date, the Company, upon delivery of the evidence and indemnity described in
clause (a) above, shall deliver the shares of Common Stock (or evidence of
book-entry record ownership of such Common Stock) pursuant to the terms of the
Combined Preferred Stock formerly evidenced by the certificate.
Section
16. No
Impairment. The Company shall not amend its Articles of
Incorporation or participate in any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action for the purpose of avoiding or seeking to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but shall at all times in good faith assist in carrying out all such
action as may be reasonably necessary or appropriate in order to protect the
conversion rights of the holders of the Combined Preferred Stock against
dilution or other impairment as provided herein.
Section
17. Form and Transfer
Restrictions.
(a) Form. Certificates
representing the Series B and Series B-1 Preferred Stock (each a “Preferred
Certificate”), shall be issued to Holders at their
request. Each Preferred Certificate shall include a reference
incorporating the terms of this Certificate of Determination. In addition, the
Preferred Certificates may have notations, legends or endorsements required by
law, stock exchange rules, agreements to which the Company is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company).
(b) Transfer
Restriction. The Combined Preferred Stock may only be
transferred (i) to an affiliate of the initial investor or an affiliate of the
Company, (ii) in a widespread public distribution, (ii) in transfers in which no
transferee would receive 2% or more of the class or (iv) to a transferee that
would control more than 50% of the voting securities of the Company without any
transfer from the original investor. The Series B Preferred Stock
will be subject to these transfer restrictions until the first to occur of a
Shareholder Approval Date or a Shareholder Disapproval Date. The
Series B-1 Preferred Stock will be subject to these transfer restrictions until
a Full Conversion Date.
Section
18. Miscellaneous.
(a) All
notices referred to herein shall be in writing, and, unless otherwise specified
herein, all notices hereunder shall be deemed to have been given upon the
earlier of receipt thereof or three Business Days after the mailing thereof if
sent by registered or certified mail (unless first-class mail shall be
specifically permitted for such notice under the terms of this Certificate of
Determination) with postage prepaid, addressed: (i) if to the Company, to its
office at 55 Almaden Boulevard, Suite 200, San Jose, California, Attention:
Chief Financial Officer, or (ii) if to a Holder, to the address or facsimile
number appearing on the Company’s shareholder records or such other address or
facsimile number as such Holder may provide to the Company in accordance with
this Section 18.
(b) The
Company shall pay any and all stock transfer and documentary stamp taxes that
may be payable in respect of any issuance or delivery of shares of Combined
Preferred Stock or shares of Common Stock or other securities issued on account
of Combined Preferred Stock pursuant hereto or certificates representing such
shares or securities. The Company shall not, however, be required to
pay any such tax that may be payable in respect of any transfer involved in the
issuance or delivery of shares of Series B Preferred Stock, Series B-1
Preferred Stock or Common Stock or other securities in a name other than that in
which the shares of Combined Preferred Stock with respect to which such shares
or other securities are issued or delivered were registered, or in respect of
any payment to any Person other than a payment to the registered holder thereof,
and shall not be required to make any such issuance, delivery or payment unless
and until the Person otherwise entitled to such issuance, delivery or payment
has paid to the Company the amount of any such tax or has established, to the
satisfaction of the Company, that such tax has been paid or is not
payable.
4. We
further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
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/s/Daniel P Myers
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Name:
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Daniel
P. Myers
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Its:
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Chief
Executive Officer
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Date: December
15. 2008
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/s/ Thomas A. Sa
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Name:
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Thomas
A. Sa
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Its:
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Chief
Financial Officer
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