Attached files
Exhibit 3.1
CERTIFICATE
OF THE DESIGNATIONS, POWERS, PREFERENCES AND RIGHTS
OF
SERIES
B CONVERTIBLE PREFERRED STOCK
OF
AZURRX
BIOPHARMA, INC.
(Pursuant
to Section 151 of the
Delaware
General Corporation Law)
AzurRx
BioPharma, Inc., a corporation organized and existing under the
laws of the State of Delaware (the “Company”), hereby
certifies that, pursuant to authority vested in the Board of
Directors of the Company (the “Board of Directors”) by
Article FOURTH of the Amended and Restated Certificate of
Incorporation, as amended (the “Certificate of
Incorporation”), of the Company, the following resolutions
were adopted on July 16, 2020 by the Board of Directors pursuant to
Section 151 of the Delaware General Corporation Law (the
“DGCL”), and in accordance
with the provisions of Section 103 of the DGCL, does hereby submit
the following:
WHEREAS, the
Company’s Certificate of Incorporation authorizes the
issuance of 10,000,000 shares of preferred stock, par value $0.0001
per share (the “Preferred Stock”), from
time to time in one or more classes or series;
WHEREAS, the Board
of Directors is authorized to divide the Preferred Stock into any
number of shares and to fix the designations, relative rights,
preferences and limitations of any wholly unissued series of
preferred stock; and
WHEREAS, it is the
desire of the Board of Directors, pursuant to its authority as
aforesaid, to fix the designation and number of, and determine the
designation, relative rights, preferences, and limitations relating
to a series of the Preferred Stock, which shall consist of
5,194.805195 shares of the Preferred Stock which the Company has
the authority to issue, as follows:
“RESOLVED
that, pursuant to authority vested in the Board of Directors of the
Company by ARTICLE FOURTH of the Company’s Certificate of
Incorporation, out of the total authorized number of 10,000,000
shares of Preferred Stock, there shall be designated a series of
5,194.805195 shares which shall be issued in and constitute a
single series to be known as “Series B Convertible Preferred
Stock” (hereinafter called the “Series B Preferred
Stock”). The Board of Directors hereby resolves that
the shares of Series B Preferred Stock shall have the designations,
relative rights, preferences and the limitations thereof, set forth
below:
1. Certain
Definitions.
As used
in this Certificate of the Designations, Powers, Preferences and
Rights of the Series B Convertible Preferred Stock of AzurRx
BioPharma, Inc. (this “Certificate”), the
following terms shall have the respective meanings set forth
below:
“Affiliate”, as applied to
any Person, means any other Person directly or indirectly
controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, “control”
(including, with correlative meanings, the terms
“controlling”, “controlled by” and
“under common control with”), as applied to any Person,
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities or
by contract or otherwise.
“Appraiser FMV” means the
fair market value of a share of Common Stock as determined by an
independent appraiser selected by the Board of Directors, whose
determination shall be final and binding. Appraiser FMV shall be
the fair market value determined without regard to any discounts
for minority interest, illiquidity or other discounts. The cost of
any independent appraisal shall be borne by the
Company.
“Board of Directors” means
the board of directors of the Company.
“Change of Control” means
(a) any sale, lease, or transfer or series of sales, leases or
transfers of all or substantially all of the consolidated assets of
the Company and its Subsidiaries; (b) any sale, transfer, or
issuance (or series of sales, transfers, or issuances) of capital
stock by the Company or the holders of Common Stock (or other
voting stock of the Company) that results in the inability of the
holders of Common Stock (or other voting stock of the Company)
immediately prior to such sale, transfer, or issuance to designate
or elect a majority of the board of directors (or its equivalent)
of the Company; or (c) any merger, consolidation, recapitalization,
or reorganization of the Company with or into another Person
(whether or not the Company is the surviving corporation) that
results in the inability of the holders of Common Stock (or other
voting stock of the Company) immediately prior to such merger,
consolidation, recapitalization, or reorganization to designate or
elect a majority of the board of directors (or its equivalent) of
the resulting entity or its parent company.
“Commission” means the
Securities and Exchange Commission.
“Common Stock” means the
common stock, par value $0.0001 per share, of the Company,
including the stock into which shares of the Series B Preferred
Stock are convertible, and any securities into which the Common
Stock may be reclassified.
“Common Stock Equivalents”
means any securities of the Company which would entitle the holder
thereof to acquire at any time Common Stock, including, without
limitation, any debt, preferred stock, rights, options, warrants or
other instrument that is at any time convertible into or
exercisable or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
“Conversion Price” means a
per share amount equal to the Initial Conversion Price, as adjusted
pursuant to Sections
4E, 4F and
4G of this
Certificate.
“Conversion Shares” means
the shares of Common Stock into which the Series B Preferred Stock
is convertible.
“Effectiveness Deadline”
means the date that is thirty (30) days after the date of the
Stockholder Approval (or sixty (60) days after the date of the
Stockholder Approval if the SEC conducts a full review of the
Registration Statement).
“Exchange Warrants” means
those certain Exchange Warrants issued by the Company pursuant to
the Purchase Agreement.
“Exempt Issuance” means
the issuance of shares of Common Stock or Common Stock Equivalents
(a) to employees, officers, directors or consultants of the
Company, for bona fide services rendered to the Company, pursuant
to any equity incentive plan approved by a majority of the members
of the Board of Directors of the Company or a majority of the
members of a committee of directors established for such purpose
(“Board
Approval”) and by the stockholders of the Company, (b)
to consultants or advisors, or to their designees, for bona fide
services provided in connection with the offer or sale of
securities in a capital-raising transaction, or directly or
indirectly promoting or maintaining a market for the
Company’s securities, (c) upon the exercise or exchange of or
conversion of any securities issued in connection with the issuance
of the Series B Preferred Stock issuable hereunder, and/or other
securities issued and outstanding as of the date of first issuance
of such shares of Series B Preferred Stock, provided that such
securities have not been amended since the date of such first
issuance of shares of Series B Preferred Stock to increase the
number or to decrease the exercise price, exchange price or
conversion price (other than in connection with stock splits or
combinations) or to extend the term thereof, (d) pursuant to the
Purchase Agreement, dated November 13, 2019, by and between the
Company and Lincoln Park Capital Fund, LLC, as may be amended from
time to time, (e) to banks, equipment lessors or other financial
institutions, or to real property lessors, pursuant to a debt
financing, equipment lease financing, credit agreement, real
property lease or other commercial transaction, provided that the
primary purpose thereof is not to raise equity capital, and subject
to Board Approval, (f) pursuant to acquisitions or other strategic
transactions, provided that any such issuance shall only be to a
person (or to the equity holders of a person) which is, itself or
through its subsidiaries, an operating company or an owner of an
asset in a business synergistic with the business of the Company
and shall provide to the Company additional benefits in addition to
the investment of funds, and subject to Board Approval, and (i)
with the prior written consent of the holders of at least a
majority of the Series B Preferred Stock then outstanding, up to an
amount of Common Stock or Common Stock Equivalents as agreed upon
by such holders of at least a majority of the Series B Preferred
Stock then outstanding and the Company.
“Final Closing” means the
final closing date of the sale of the Series B Preferred Stock by
the Company.
“Initial Conversion Price”
means $0.77 per share, subject to adjustment pursuant to
Section 4D of this
Certificate.
“Market Price” means as of
a particular date (the “Valuation Date”) shall
mean the following: (a) if the Common Stock is then listed on a
national stock exchange registered with the Commission pursuant to
Section 6 of the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”), the closing sale price of one share of Common
Stock on such exchange on the last trading day prior to the
Valuation Date; (b) if the Common Stock is then quoted on the
Financial Industry Regulatory Authority OTC Bulletin Board (the
“Bulletin
Board”) or such similar quotation system or
association, the closing sale price of one share of Common Stock on
the Bulletin Board or such other quotation system or association on
the last trading day prior to the Valuation Date or, if no such
closing sale price is available, the average of the high bid and
the low asked price quoted thereon on the last trading day prior to
the Valuation Date; or (c) if the Common Stock is not then listed
on a national stock exchange or quoted on the Bulletin Board or
such other quotation system or association, the fair market value
of one share of Common Stock as of the Valuation Date, equal to the
Appraiser FMV. If the Common Stock is not then listed on a national
securities exchange, the Bulletin Board or such other quotation
system or association, the Board of Directors shall respond
promptly, in writing, to an inquiry by a holder of Series B
Preferred Stock prior to the conversion of Series B Preferred Stock
hereunder as to the fair market value of a share of Common Stock as
determined by the Board of Directors.
“Person” shall be
construed in the broadest sense and means and includes any natural
person, a partnership, a corporation, an association, a joint stock
company, a limited liability company, a trust, a joint venture, an
unincorporated organization and other entity or governmental or
quasi-governmental entity.
“Purchase Agreement” means
that certain Convertible Preferred Stock and Warrant Purchase
Agreement, dated July 16, 2020, among the Company and the
purchasers signatory thereto.
“Registration Rights
Agreement” means that certain Registration Rights
Agreement, dated July 16, 2020, entered into among the Company and
the initial holders of the Series B Preferred Stock.
“Registration Statement”
means one or more registration statements of the Company pursuant
to the Registration Rights Agreement.
“Series B Stated Value”
means $7,700.00.
“Series B Warrants” means
those certain Series B Warrants issued by the Company pursuant to
the Purchase Agreement.
“Stockholder Approval”
means the approval of the Company’s stockholders for the
issuance of all Conversion Shares upon full conversion of the
Series B Preferred Stock, and for the issuance of all shares of
Common Stock issuable upon full exercise of the Series B Warrants
and the Exchange Warrants, and the Subsequent Financing exchange
rights pursuant to Section 8 herein, each in accordance with
applicable law, the Company’s Certificate of Incorporation
and Bylaws, and the applicable requirements of the Trading
Market.
“Subsidiary” means any
corporation, association or other business entity (i) at least 50%
of the outstanding voting securities of which are at the time owned
or controlled, directly or indirectly, by the Company; or (ii) with
respect to which the Company possesses, directly or indirectly, the
power to direct or cause the direction of the affairs or management
of such Person.
“Trading Market” means
whichever of the following markets or exchanges on which the Common
Stock is listed or quoted for trading on the date in question: the
New York Stock Exchange, the NYSE American, the NASDAQ Global
Select Market, the NASDAQ Global Market, the NASDAQ Capital Market,
the OTC Bulletin Board or any tier of the OTC Markets Group, Inc.
(or any successors to any of the foregoing).
“Transfer” means any
direct or indirect sale, merger, consolidation, amalgamation,
reorganization or other similar plan or scheme, or operation of
law, assignment, conveyance, transfer, sale or other disposition,
in each case, whether directly, or directly or indirectly of a
parent, holding company, equity holder or Subsidiary or
otherwise.
2. Dividends.
(a) Each
holder of Series B Preferred Stock in preference and priority to
the holders of all other classes or series of stock, shall be
entitled to receive, with respect to each share of Series B
Preferred Stock then outstanding and held by such holder,
dividends, commencing from the date of issuance of such share of
Series B Preferred Stock at the rate of nine percent (9%) per annum
(the “Series B
Dividend Rate”) of the Series B Stated Value (the
“Series B Preferred
Dividends”). The Series B Preferred Dividends shall be
cumulative from the date of original issuance, whether or not
earned or declared and shall accrue during such period on a daily
basis computed on the basis of a 365-day year whether or not the
Company shall have assets legally available therefore. The Series B
Preferred Dividends shall be paid only when, as and if declared by
the Board, out of assets legally available therefore, semiannually
in arrears on the last day of June and December in each year,
commencing December 31, 2020 (the “Series B Dividend Payment
Terms”). The Series B Preferred Dividends shall be
payable at the sole option of the Company either in cash or in kind
in additional shares of Series B Preferred Stock (rounded down to
six decimal places) (the “PIK Shares”), provided
the Company shall pay in cash the fair value of any such fractional
share beyond six decimal places that is in excess of $100.00, which
fair value shall be equal to (x) the fraction of a share of Series
B Preferred Stock represented by such fractional amount, multiplied
by (y) the Series B Stated Value, divided by (z) the Conversion
Price (such result, the “Fractional Share
Amount”). Any payment of Series B Preferred Dividends
in PIK Shares shall be based on the Series B Stated
Value.
(b) If
the Registration Statement has not been declared effective on or
prior to the Effectiveness Deadline, commencing on the
Effectiveness Deadline and until (and not including) the date upon
which the Registration Statement has been declared effective (the
“Registration
Default Period”), (a) the Series B Dividend Rate shall
be adjusted to equal a fixed rate of one and one half percent
(1.5%) per calendar month (the “Adjusted Series B Dividend
Rate”) and (b) the Series B Dividend Payment Terms
shall be adjusted such that the Series B Preferred Dividends shall
be paid, whether or not declared by the Board, out of assets
legally available therefore, monthly in arrears on the last day of
each calendar month (the “Adjusted Series B Payment
Terms”). Prior to, and from and after the Registration
Default Period, the Adjusted Series B Dividend Rate and the
Adjusted Series B Payment Terms shall not apply, and the Series B
Preferred shall accrue dividends at the Series B Dividend Rate,
payable in accordance with the Series B Dividend Payment Terms,
pursuant to Section
2(a).
(c) No
dividends shall be paid on any Common Stock of the Company or any
other class or series of capital stock of the Company unless and
until all outstanding dividends due to be paid to the holders of
the shares of all Series B Preferred Dividends shall have been paid
or declared and set apart for payment to the holders of the shares
of Series B Preferred Stock.
3. Liquidation.
(a) Upon
any liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, the holders of the shares of Series B
Preferred Stock shall be entitled before any distributions shall be
made to the holders of the Common Stock, or any other class or
series of capital stock of the Company, to be paid an amount per
share equal to the Series B Stated Value plus any accrued and
unpaid Series B Preferred Dividends (the “Liquidation Preference”).
If upon such liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the assets to be distributed
among the holders of the shares of Series B Preferred Stock shall
be insufficient to permit payment to the holders of the shares of
Series B Preferred Stock of their liquidation amount, then the
entire assets of the Company to be distributed shall be distributed
pro rata to the holders of Series B Preferred Stock.
(b) In
the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company or any Corporate Transaction, after
the payment of all preferential amounts required to be paid to the
holders of Series B Preferred Stock, the remaining assets of the
Company available for distribution to its stockholders shall be
distributed among the holders of the shares of Common Stock, pro
rata based on the number of shares held by each such
holder.
4. Conversion.
4A. Right
to Convert; Automatic Conversion.
(a) Subject
to the terms and conditions of this subsection 4A, Section 7(a) and Section 7(b), the holder of any
share or shares of Series B Preferred Stock shall have the right,
at its option at any time, to convert any such shares of Series B
Preferred Stock into such number of fully paid and nonassessable
whole shares of Common Stock as is obtained by multiplying the
number of shares of Series B Preferred Stock to be so converted by
the Series B Stated Value per share and dividing the result by the
Conversion Price in effect at the date any share or shares of
Series B Preferred Stock are surrendered for conversion. Such
rights of conversion shall be exercised by the holder thereof by
surrender of a certificate or certificates for the shares to be
converted to the Company at its principal office (or such other
office or agency of the Company as the Company may designate by
notice in writing to the holder or holders of the Series B
Preferred Stock), together with a properly completed notice of
conversion in the form attached to the Series B Preferred Stock
certificate with a statement of (i) the number of shares of Series
B Preferred Stock to be converted by such holder, and (ii) the name
or names (with address), subject to compliance with applicable laws
to the extent such designation shall involve a transfer, in which
the certificate or certificates for shares of Common Stock, shall
be issued, at any time during its usual business hours on the date
set forth in such notice. Such conversion shall be deemed to have
been effected and the Conversion Price shall be determined as of
the close of business on the date on which such written notice
shall have been received by the Company and the certificate or
certificates for such shares shall have been surrendered as
aforesaid.
(b) Subject
to the terms and conditions of this subsection 4A, Section 7(a) (except to the
extent the Company makes reasonable provision for the issuance of a
prefunded warrant (or similar instrument) with a similar Beneficial
Ownership Limitation, as those specified in Section 7(a) (a
“Prefunded Warrant”) in lieu of Common Stock in
connection with any such exercise) and Section 7(b), and in no event
prior to six months following the Final Closing, if the Market
Price per share of Common Stock exceeds 250% of the Initial
Conversion Price for 20 consecutive trading days (trading day
immediately following such 20th trading day, the
“Automatic
Conversion Date”), then all of the outstanding shares
of Series B Preferred Stock shall automatically convert into such
number of fully paid and nonassessable whole shares of Common Stock
as is obtained by multiplying the number of shares of Series B
Preferred Stock to be so converted by the Series B Stated Value per
share and dividing the result by the then applicable Conversion
Price. As of the Automatic Conversion Date all outstanding shares
of Series B Preferred Stock shall be converted to the number of
shares of Common Stock calculated pursuant to this Section 4A.(b) without any
further action by the relevant holder of such shares of Series B
Preferred Stock or the Company. As promptly as practicable
following the Automatic Conversion Date, the Company shall send
each holder of shares of Series B Preferred Stock written notice of
such event. Promptly after receipt of such notice, each holder
shall surrender a certificate or certificates for the shares to be
converted to the Company at its principal office (or such other
office or agency of the Company as the Company may designate by
notice in writing to the holder or holders of the Series B
Preferred Stock), together with a properly completed statement of
the name or names (with address), subject to compliance with
applicable laws to the extent such designation shall involve a
transfer, in which the certificate or certificates for shares of
Common Stock, shall be issued, at any time during its usual
business hours on the date set forth in such notice.
4B. Issuance
of Certificates; Time Conversion Effected. Promptly after
(a)(i) in the case of a conversion pursuant to Section 4A.(a), receipt by the
Company of a written notice of the conversion of the Series B
Preferred Stock or (ii) in the case of a conversion pursuant to
Section 4A.(b),
receipt by the holder of a written notice of the conversion of the
Series B Preferred Stock, and (b) surrender of the certificate or
certificates for the share or shares of the Series B Preferred
Stock being converted, the Company shall issue and deliver, or
cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, subject to compliance with
applicable laws to the extent such designation shall involve a
transfer, a certificate or certificates (or, in the case of
book-entry only securities, other evidence of ownership) for the
number of whole shares of Common Stock issuable upon the conversion
of such share or shares of Series B Preferred Stock. Upon the
effective date of any such conversion, the rights of the holder of
the shares of Series B Preferred Stock being converted shall cease,
and the person or persons in whose name or names any certificate or
certificates for shares of Common Stock shall be issuable upon such
conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby.
4C. Fractional
Shares; Dividends; Partial Conversion. No fractional shares
shall be issued upon conversion of the Series B Preferred Stock
into Common Stock, and the number of shares of Common Stock to be
issued shall be rounded down to the nearest whole share provided
the Company shall pay in cash the fair value of any such fractional
share that is in excess of $100.00, which fair value shall be equal
to (x) the fraction of a share of Common Stock represented by such
fractional amount, multiplied by (y) the Conversion Price. Subject
to subsection 4G,
upon any conversion of the Series B Preferred Stock, the Company
shall pay to the holder all accrued and unpaid Series B Preferred
Dividends to the date of conversion, at the sole option of the
Company, in cash or in PIK Shares; provided, that, on the date of
conversion, Series B Preferred Dividends shall cease to accrue on
the shares of Series B Preferred Stock so converted. In case the
number of shares of Series B Preferred Stock represented by the
certificate or certificates surrendered pursuant to subsection 4A(a) exceeds the
number of shares converted, the Company shall upon such conversion,
execute and deliver to the holder thereof at the expense of the
Company, a new certificate for the number of shares of Series B
Preferred Stock represented by the certificate or certificates
surrendered which are not to be converted.
4D Stock
Splits and Dividends. If the Company shall, at any time or
from time to time while the Series B Preferred Stock is
outstanding, pay a dividend or make a distribution on its Common
Stock in shares of Common Stock, subdivide its outstanding shares
of Common Stock into a greater number of shares or combine its
outstanding shares of Common Stock into a smaller number of shares
or issue by reclassification of its outstanding shares of Common
Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in
which the Company is the continuing corporation), then the
Conversion Price in effect immediately prior to the date upon which
such change shall become effective shall be adjusted by multiplying
such Conversion Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately
prior to such change and the denominator of which shall be the
number of shares of Common Stock outstanding immediately after
giving effect to such change. Such adjustment shall be made
successively whenever any event listed above shall
occur.
4E. Reorganization
or Reclassification. If any capital reorganization or
reclassification of the capital stock of the Company, consolidation
or merger of the Company with another corporation in which the
Company is not the survivor, or sale, transfer or other disposition
of all or substantially all of the Company’s assets to
another corporation (each, a “Reorganization”) shall be
effected, then, as a condition of such Reorganization, lawful and
adequate provision shall be made whereby each holder of a share or
shares of Series B Preferred Stock shall thereafter have the right
to receive, in the holder’s sole discretion, either (x) an
amount in cash equal to the Liquidation Preference, provided that
this clause (x) shall not apply to any Reorganization that is not
required to be approved by the holders of Common Stock, or (y) upon
the basis and upon the terms and conditions specified herein and in
lieu of the Conversion Shares immediately theretofore receivable
upon the conversion of such share or shares of the Series B
Preferred Stock, such shares of stock, securities or assets as
would have been issuable or payable with respect to or in exchange
for a number of Conversion Shares equal to the number of Conversion
Shares immediately theretofore issuable upon conversion of the
Series B Preferred Stock, had such Reorganization not taken place,
and in any such case appropriate provision shall be made with
respect to the rights and interests of such holder to the end that
the provisions hereof (including without limitation provisions for
adjustment of the Conversion Price) shall thereafter be applicable,
as nearly equivalent as may be practicable in relation to any
shares of stock, securities or assets thereafter deliverable upon
the exercise of such conversion rights. The Company shall not
effect any such Reorganization unless prior to or simultaneously
with the consummation thereof the successor corporation (if other
than the Company) resulting from such Reorganization, or the
corporation purchasing or otherwise acquiring such assets (or other
appropriate corporation or entity), shall assume the obligation to
deliver to the holders of the Series B Preferred Stock, at the last
addresses of such holders appearing on the books of the Company,
such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holders may be entitled to receive,
and the other obligations hereunder. The provisions of this
subsection 4E shall
similarly apply to successive Reorganizations.
4F. Distributions.
Subject to Section
2(b), in case the Company shall fix a payment date for the
making of a distribution to all holders of Common Stock (including
any such distribution made in connection with a consolidation or
merger in which the Company is the continuing corporation) of
evidences of indebtedness or assets (other than cash dividends or
cash distributions payable out of consolidated earnings or earned
surplus or dividends or distributions referred to in Section 4D), or subscription
rights or warrants, the Conversion Price to be in effect after such
payment date shall be determined by multiplying the Conversion
Price in effect immediately prior to such payment date by a
fraction, the numerator of which shall be the total number of
shares of Common Stock outstanding multiplied by the Market Price
per share of Common Stock immediately prior to such payment date,
less the fair market value (as determined by the Board of Directors
in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, and the
denominator of which shall be the total number of shares of Common
Stock outstanding multiplied by such Market Price per share of
Common Stock immediately prior to such payment date.
4G. Adjustment
for Unissued Shares. To the extent that applicable law or
any existing contractual restrictions of the Company prohibit any
required issuance pursuant to this Certificate of (x) PIK Shares or
(y) additional shares of Series B Preferred Stock ((x) and (y),
collectively, “Additional Shares”), then
appropriate adjustment to the Conversion Price shall be made, in
connection with any conversion of shares of Series B Preferred
Stock, or any calculation of the number of shares of Common Stock
into which shares of Series B Preferred Stock would be convertible,
such that the number of shares of Common Stock into which such
shares of Series B Preferred Stock are, or would be, convertible
equals the aggregate number of shares of Common Stock into which
such shares, plus any Additional Shares in respect of such shares
of Series B Preferred Stock, would be convertible but for the
effects of such prohibition. On the date of a conversion in
connection with which an adjustment under this subsection 4G is being made,
all Series B Preferred Dividends which were previously accrued and
unpaid on the shares of Series B Preferred Stock being converted
shall be deemed paid in full.
4H. Effective
Date of Adjustment. An adjustment to the Conversion Price
shall become effective immediately after the payment date in the
case of each dividend or distribution and immediately after the
effective date of each other event which requires an adjustment;
provided that any adjustment pursuant to subsection 4G shall be made
solely in the circumstances required by such
subsection.
4I. Subsequent
Adjustments. In the event that, as a result of an adjustment
made pursuant to this Section 4, holders of Series B
Preferred Stock shall become entitled to receive any shares of
capital stock of the Company other than shares of Common Stock, the
number of such other shares so receivable upon the conversion of
the Series B Preferred Stock shall be subject thereafter to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the
Conversion Shares contained herein.
4J. Notice
of Adjustment. Upon any adjustment of the Conversion Price,
then, and in each such case the Company shall give written notice
thereof by first class mail, postage prepaid, addressed to each
holder of shares of Series B Preferred Stock at the address of such
holder as shown on the books of the Company, which notice shall
state the Conversion Price resulting from such adjustment, setting
forth in reasonable detail the method of calculation and the facts
upon which such calculation is based.
4K. Other
Notices. In case at any time:
(1) the
Company shall declare any dividend upon its Common Stock payable in
cash or stock or make any other distribution to the holders of its
Common Stock;
(2) the
Company shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of such stock of any class or
other rights;
(3) there
shall be any capital reorganization or reclassification of the
capital stock of the Company, or a consolidation or merger of the
Company with, or a sale of all or substantially all its assets to,
another corporation; or
(4) there
shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then,
in any one or more of said cases, the Company shall give, by first
class mail, postage prepaid, addressed to each holder of any shares
of Series B Preferred Stock at the address of such holder as shown
on the books of the Company, (a) at least 15 days prior written
notice of the date on which the books of the Company shall close or
a record shall be taken for such dividend, distribution or
subscription rights or for determining rights to vote in respect of
any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, and (b) in the case
of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, at least 15
days prior written notice of the date when the same shall take
place and a form of election pursuant to Section 4E. Such notice in
accordance with the foregoing clause (a) shall also specify, in the
case of any such dividend, distribution or subscription rights, the
date on which the holders of Common Stock shall be entitled
thereto, and such notice in accordance with the foregoing clause
(b) shall also specify the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.
4L. Stock
to be Reserved.
(1) The
Company will at all times reserve and keep available out of its
authorized but unissued Common Stock solely for the purpose of
issuance upon the conversion of the Series B Preferred Stock as
herein provided, such number of shares of Common Stock as shall
then be issuable upon the conversion of all outstanding shares of
Series B Preferred Stock. All shares of Common Stock which shall be
so issued shall be duly and validly issued and fully paid and
nonassessable and free from all liens, duties and charges arising
out of or by reason of the issue thereof (including, without
limitation, in respect of taxes) and, without limiting the
generality of the foregoing, the Company covenants that it will
from time to time take all such action as may be requisite to
assure that the par value per share of the Common Stock is at all
times equal to or less than the effective Conversion Price. The
Company will take all such action within its control as may be
necessary on its part to assure that all such shares of Common
Stock may be so issued without violation of any applicable law or
regulation, or of any requirements of any national securities
exchange upon which the Common Stock of the Company may be listed.
In the event the Company takes any action which results in, or
would result in, any adjustment of the Conversion Price after such
action the total number of shares of Common Stock issued and
outstanding and thereafter issuable upon exercise of all options
and conversion of convertible or exchangeable stock or securities,
including upon conversion of the Series B Preferred Stock, would
exceed the total number of shares of such class of Common Stock
then authorized by the Company’s Certificate of
Incorporation, then prior to and as a condition of effecting such
action the Company shall take all actions necessary to amend the
Company’s Certificate of Incorporation to increase the
authorized shares of Common Stock to at least such amount necessary
to permit the exercise of all options and conversions of
convertible or exchangeable stock or securities, including upon
conversion of the Series B Preferred Stock, following such
action.
(2) The
Company will at all times reserve and keep available out of its
authorized Series B Preferred Stock such number of shares of Series
B Preferred Stock as is equal to or greater than the number of
shares of Series B Preferred Stock then outstanding. All shares of
Series B Preferred Stock which shall be so issued shall be duly and
validly issued and fully paid and nonassessable and free from all
liens, duties and charges arising out of or by reason of the issue
thereof (including, without limitation, in respect of
taxes).
4M. No
Reissuance of Series B Preferred Stock. Shares of Series B
Preferred Stock that are converted into shares of Common Stock as
provided herein shall be retired and may not be reissued as Series
B Preferred Stock but may be reissued as all or part of another
series of Preferred Stock.
4N. Issue
Tax. The issuance of certificates for shares of Common Stock
upon conversion of the Series B Preferred Stock shall be made
without charge to the holders thereof for any issuance tax, stamp
tax, transfer tax, duty or charge in respect thereof, provided that
the Company shall not be required to pay any tax, duty or charge
which may be payable in respect of any transfer involved in the
issuance and delivery of any certificate in a name other than that
of the holder of the Series B Preferred Stock which is being
converted.
4O. Closing
of Books. The Company will at no time close its transfer
books against the transfer of any Series B Preferred Stock or of
any shares of Common Stock issued or issuable upon the conversion
of any shares of Series B Preferred Stock in any manner which
interferes with the timely conversion of such Series B Preferred
Stock; provided,
however, nothing
herein shall be construed to prevent the Company from setting
record dates for the holders of its securities.
5. Voting.
Except as required by applicable law or provided in Section 6 below, the Series B
Preferred Stock shall not be entitled to vote on any matters. To
the extent the Series B Preferred Stock is entitled to vote on any
matters, each holder of outstanding Shares of Series B Preferred
Stock shall be entitled to notice of all stockholder meetings (or
requests for written consent) in accordance with the
Company’s bylaws.
6. Certain
Restrictions. So long as at least 130 aggregate shares of
Series B Preferred Stock are outstanding, in addition to any other
vote of the holders of Series B Preferred Stock required by
applicable law or by the Company’s Certificate of
Incorporation, without the prior consent of the holders of at least
a majority of the Series B Preferred Stock then outstanding given
in person or by proxy, either in writing or at a special meeting
called for that purpose, at which meeting the holders of the shares
of such Series B Preferred Stock shall vote together as a class,
the Company will not:
(a) authorize,
create, designate, establish, issue or sell (whether by merger or
otherwise) (i) an increased number of shares of Series B Preferred
Stock (other than the PIK Shares), or (ii) any other class or
series of capital stock ranking senior to or on parity with the
Series B Preferred Stock as to dividends or upon
liquidation;
(b) reclassify
any shares of Common Stock or any other class or series of capital
stock into shares having any preference or priority as to dividends
or upon liquidation superior to or on parity with any such
preference or priority of Series B Preferred Stock;
(c) amend,
alter or repeal, whether by merger, consolidation or otherwise, the
Certificate of Incorporation or Bylaws of the Company or the
resolutions contained in this Certificate and the powers,
preferences, privileges, relative, participating, optional and
other special rights and qualifications, limitations and
restrictions thereof, which would adversely affect any right,
preference, privilege or voting power of the Series B Preferred
Stock;
(d) issue,
or cause any Subsidiary of the Company to issue, any indebtedness
or debt security, other than trade accounts payable, insurance
premium financings and/or letters of credit, performance bonds or
other similar credit support incurred in the ordinary course of
business, or amend, renew, increase, or otherwise alter in any
material respect the terms of any such indebtedness existing as of
the date of first issuance of shares of Series B Preferred Stock
hereunder or previously approved or required to be approved by the
holders of the Series B Preferred Stock; provided that no such
consent shall be required with respect to indebtedness incurred
solely to fund (x) the payment of accrued and unpaid dividends on
the Series B Preferred Stock, (y) the redemption of the Series B
Preferred Stock pursuant to Section 9 or (z) the refinancing of any
of the Company’s convertible promissory notes issued between
December 20, 2019 and January 9, 2020 that are outstanding as of
the date of first issuance of shares of Series B Preferred Stock
hereunder;
(e) redeem,
purchase, or otherwise acquire or pay or declare any dividend or
other distribution on (or pay into or set aside for a sinking fund
for any such purpose) any capital stock of the Company; provided,
that this restriction shall not apply to the redemption or
repurchase of or the payment of dividends on Shares of Series B
Preferred Stock pursuant hereto;
(f) declare
bankruptcy, dissolve, liquidate, or wind up the affairs of the
Company or any Subsidiary of the Company;
(g) effect,
or enter into any agreement to effect, a Change of
Control;
(h) materially
modify or change the nature of the Company’s business;
or
(i) agree
to do any of the foregoing.
7. Limitations
on Conversion.
(a) The
Company shall not effect any conversion of shares of Series B
Preferred Stock, and a holder of Series B Preferred Stock shall not
have the right to convert any shares of Series B Preferred Stock,
pursuant to Section
4 or otherwise, to the extent that after giving effect to
such issuance after conversion, the holder of Series B Preferred
Stock (together with the Affiliates of such holder of Series B
Preferred Stock, and any other Persons acting as a group within the
meaning of Rule 13D-5 promulgated under the Exchange Act together
with such holder of Series B Preferred Stock or any Affiliates of
such holder of Series B Preferred Stock) (such Persons,
“Attribution
Parties”), would beneficially own in excess of the
Beneficial Ownership Limitation (as defined below). For purposes of
the foregoing sentence, the number of shares of Common Stock
beneficially owned by a holder of Series B Preferred Stock and its
Affiliates and Attribution Parties shall include the number of
shares of Common Stock issuable upon conversion of the Series B
Preferred Stock held with respect to which such determination is
being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (i) conversion of the remaining,
nonconverted portion of the Series B Preferred Stock beneficially
owned by such holder of Series B Preferred Stock or any of its
Affiliates (or Attribution Parties) and (ii) exercise or conversion
of the unexercised or nonconverted portion of any other securities
of the Company (including, without limitation, any other common
stock equivalents) subject to a limitation on conversion or
exercise analogous to the limitation contained herein beneficially
owned by such holder of Series B Preferred Stock or any of its
Affiliates or Attribution Parties. Except as set forth in the
preceding sentence, for purposes of this Section 7(a), beneficial
ownership shall be calculated in accordance with Section 13(d) of
the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by such holder of Series B
Preferred Stock that the Company is not representing to such holder
of Series B Preferred Stock that such calculation is in compliance
with Section 13(d) of the Exchange Act and such holder of Series B
Preferred Stock is solely responsible for any schedules required to
be filed in accordance therewith. To the extent that the limitation
contained in this Section
7(a) applies, the determination of whether the shares of
Series B Preferred Stock are convertible (in relation to other
securities owned by such holder of Series B Preferred Stock
together with any Affiliates and Attribution Parties) and of which
portion of such Series B Preferred Stock is convertible shall be in
the sole discretion of such holder of Series B Preferred Stock, and
the submission of a Notice of Conversion shall be deemed to be the
determination of such holder of Series B Preferred Stock of whether
such shares of Series B Preferred Stock are exercisable (in
relation to other securities owned by such holder of Series B
Preferred Stock together with any Affiliates and Attribution
Parties) and of which portion of such shares of Series B Preferred
Stock are exercisable, in each case subject to the Beneficial
Ownership Limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall
be determined in accordance with Section 13(d) of the Exchange Act
and the rules and regulations promulgated thereunder. For purposes
of this Section
7(a), in determining the number of outstanding shares of
Common Stock, such holder of Series B Preferred Stock may rely on
the number of outstanding shares of Common Stock as reflected in
(A) the Company’s most recent periodic or annual report filed
with the Commission, as the case may be, (B) a more recent public
announcement by the Company or (C) a more recent written notice by
the Company or the Company’s transfer agent setting forth the
number of shares of Common Stock outstanding. Upon the written or
oral request of a holder of Series B Preferred Stock, the Company
shall within two trading days confirm orally and in writing to such
holder of Series B Preferred Stock the number of shares of Common
Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to
the conversion or exercise of securities of the Company, including
any shares of Series B Preferred Stock, by such holder of Series B
Preferred Stock or its Affiliates or Attribution Parties since the
date as of which such number of outstanding shares of Common Stock
was reported. The “Beneficial Ownership
Limitation” shall be 9.99% of the number of shares of
the Common Stock outstanding immediately after giving effect to the
issuance of shares of Common Stock issuable upon conversion of the
Series B Preferred Stock. Such holder of Series B Preferred Stock,
upon notice to the Company, may increase or decrease the Beneficial
Ownership Limitation provisions of this Section 7(a), provided that the
Beneficial Ownership Limitation in no event exceeds 19.99% of the
number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of shares of Common Stock upon
conversion of such shares of Series B Preferred Stock held by such
holder and the provisions of this Section 7(a) shall continue to
apply. Any such increase in the Beneficial Ownership Limitation
will not be effective until the 61st day after such notice is
delivered to the Company. The provisions of this paragraph shall be
construed and implemented in a manner otherwise than in strict
conformity with the terms of this Section 7(a) to correct this
paragraph (or any portion hereof) which may be defective or
inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or
desirable to properly give effect to such limitation.
(b) The
Company shall not effect any conversion of shares of Series B
Preferred Stock, and a holder of Series B Preferred Stock shall not
have the right to convert any shares of Series B Preferred Stock,
pursuant to Section
4 or otherwise, prior to the Company obtaining the
Stockholder Approval.
8. Subsequent
Financing Exchange Right. From the date hereof and after the
Stockholder Approval, if the Company effects any issuance by the
Company or any of its subsidiaries of Common Stock or Common Stock
Equivalents for cash consideration, or a combination of units
thereof (a “Subsequent Financing”),
the holder of any share or shares of Series B Preferred Stock shall
have the right, at its option, to exchange (in lieu of cash
subscription payments) all or some of the Series B Preferred Stock
then held (with a value per share of Series B Preferred Stock equal
to the Liquidation Preference) for any securities or units issued
in a Subsequent Financing on dollar-for-dollar basis; provided,
however, that this Section
8 shall not apply with respect to an Exempt
Issuance.
9. Redemption.
(a) The
Company shall have no right to redeem the Series B Preferred Stock
except as set forth in this Section 9.
(b) In
the event Stockholder Approval is not received on or prior to the
ninetieth (90th) day following the
Final Closing, subject to extension upon the prior written approval
of the holders of at least a majority of the Series B Preferred
Stock then outstanding (the “Stockholder Approval
Deadline”), the Company shall repurchase all of the
then outstanding shares of Series B Preferred Stock at a price
equal to 150% times the then applicable Liquidation Preference (the
“Redemption
Price”), in cash (“Mandatory Cash
Redemption”).
(c) No
greater than ten (10) days subsequent to the Stockholder Approval
Deadline, notice by first class mail, postage prepaid, shall be
given to the registered holders of the Series B Preferred
Stock to be redeemed, addressed to
such holders at their last addresses as shown on the stock transfer
books of the Company. Each such notice shall specify the
date fixed for redemption (the “Redemption
Date”), which date shall
be the Stockholder Approval Deadline, the Redemption Price, and the
place or places for surrender of the certificates
representing the shares of Series B Preferred Stock. Any notice which is mailed by the Company as
herein provided shall be conclusively presumed to have been duly
given by the Company on the date deposited in the mail, whether or
not the holder of the Series B Preferred Stock receives such
notice; and failure to properly give such notice by mail, or any
defect in such notice, to the holders of the shares of Series B
Preferred Stock to be redeemed shall not affect the validity of the
proceedings for the redemption of any other shares of Series B
Preferred Stock. On or after the Redemption Date, each holder of
shares Series B Preferred Stock shall surrender the
certificates representing such shares of Series B Preferred Stock
to the Company at the place designated
in the notice of such redemption.
(d) The
Company shall pay the applicable Redemption Price upon the receipt
of surrender of the certificates representing the shares of Series
B Preferred Stock to be redeemed (properly endorsed or assigned for
transfer, if the Company shall so reasonably require, and letters
of transmittal and instructions therefor on reasonable terms as are
included in the notice sent by the Company); provided, that if such
certificates are lost, stolen or destroyed, the Company may require
such holder to execute an agreement reasonably satisfactory to the
Company to indemnify the Company from any loss incurred by it in
connection therewith, prior to paying such Redemption
Price.
(e) Shares
of Series B Preferred Stock to be redeemed on the Redemption Date,
as the case may be, will from and after the Redemption Date, no
longer be deemed to be outstanding; and all powers, designations,
preferences and other rights of the holder thereof as a holder of
shares of Series B Preferred Stock (except the right to receive
from the Company the applicable Redemption Price) shall cease and
terminate with respect to such shares; provided, that in the event
that a share of Series B Preferred Stock is not redeemed due to a
default in payment by the Company or because the Company is
otherwise unable to pay the applicable Redemption Price in cash in
full, such share of Series B Preferred Stock will remain
outstanding and will be entitled to all of the powers,
designations, preferences and other rights as provided
herein.
(f) Any
Mandatory Cash Redemption pursuant to this Section 9 shall be payable out
of any cash legally available therefor. At the time of the
Mandatory Cash Redemption, the Company shall take all actions
required or permitted under Delaware law to permit the Mandatory
Cash Redemption and to make funds legally available for such
Mandatory Cash Redemption. To the extent that the Company has
insufficient funds to redeem all of the shares of Series B
Preferred Stock upon the Mandatory Cash Redemption, the Company
shall use available funds to redeem a pro rata portion of such
shares of Series B Preferred Stock, to the extent permissible under
Delaware law.
10. Transfer
Restrictions. Notwithstanding anything in the Certificate of
Incorporation or this Certificate to the contrary, no holder of
Series B Preferred Shares may Transfer any of such holder’s
shares of Series B Preferred Stock without the prior written
consent of the Company, which consent shall not be unreasonably
withheld; provided, however, that any holder may at any time
Transfer any of such holder’s shares of Series B Preferred
Stock (a) to one or more of such holder’s Affiliates, (b) in
the case of an individual, by virtue of laws of descent and
distribution upon death of the individual, and (c) in the case of
an individual, pursuant to a qualified domestic relations order.
Each holder agrees that in connection with any Transfer consented
to by the Company, such holder shall, if requested by the Company,
deliver to the Company an opinion of counsel in form and substance
reasonably satisfactory to the Company and counsel for the Company,
to the effect that the Transfer is not in violation of the
Company’s Certificate of Incorporation, this Certificate, the
Securities Act of 1933, as amended, or the securities laws of any
state. Any purported Transfer in violation of the provisions of
this Section 10
shall be null and void and shall have no force or
effect.
11. No
Waiver. Except as otherwise modified or provided for herein,
the holders of Series B Preferred Stock shall also be entitled to,
and shall not be deemed to have waived, any other applicable rights
granted to such holders under the DGCL.
12. No
Impairment. The Company will not, through any
reorganization, transfer of assets, consolidation, merger scheme or
arrangement, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed
hereunder by the Company but will at all time in good faith assist
in the carrying out of all the provisions herein and in the taking
of all such action as may be necessary or appropriate in order to
protect the conversion rights and liquidation preferences granted
hereunder of the holders of the Series B Preferred Stock against
impairment. Without limiting the generality of the foregoing, the
Company shall not increase the par value of any shares of Common
Stock receivable upon conversion of the Series B Preferred Stock
above the Conversion Price then in effect and shall take all such
actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable
shares of Common Stock upon conversion of the Series B Preferred
Stock.
13. Amendment;
Waiver. Any term of the Series B Preferred Stock may be
amended or waived upon the written consent of the Company and the
holders of at least a majority of the Series B Preferred Stock then
outstanding; provided, however, that the number of Conversion
Shares issuable hereunder and the Conversion Price may not be
amended (except for adjustments made pursuant to Section 4 herein), and the
right to convert the Series B Preferred Stock may not be altered or
waived, without the written consent of the holders of all of the
Series B Preferred Stock then outstanding.
14. Action
By Holders. Any action or consent to be taken or given by
the holders of the Series B Preferred Stock may be given either at
a meeting of the holders of the Series B Preferred Stock called and
held for such purpose or by written consent.
15. Fractional
Shares. Series B Preferred Stock may not be issued in
fractions of a share of more than six decimal places, and the
number of shares of Series B Preferred Stock to be issued pursuant
to any provision hereof shall be rounded down to the nearest six
decimal places, provided the Company shall pay in cash the fair
value of any such fractional share beyond six decimal places that
is in excess of $100.00, which fair value shall be equal to the
Fractional Share Amount.
[Execution Page
Follows]
IN
WITNESS WHEREOF, the undersigned has executed this Certificate of
the Designations, Powers, Preferences and Rights of Series B
Convertible Preferred Stock this 16th day of July,
2020.
AZURRX
BIOPHARMA, INC.
By:
/s/ James Sapirstein_________
Name:
James Sapirstein
Title:
Chief Executive Officer
[Signature Page to Certificate of the
Designations, Powers, Preferences and Rightsof Series B Convertible
Preferred Stock]