CERTIFICATE OF DESIGNATION, VOTING POWERS,
PREFERENCES AND RIGHTS
OF
SERIES H PREFERRED STOCK
Pursuant to Section 151(g) of the Delaware General Corporation Law, I,
Emmett Clemente, President of Ascent Pediatrics, Inc., a Delaware corporation
(the "Corporation"), hereby certify that the following is a true and correct
copy of a resolution duly adopted by the Corporation's Board of Directors at a
meeting held on December 29, 2000, at which a quorum was present and acting
throughout, and that said resolution has not been rescinded or amended and is in
full force and effect at the date hereof:
RESOLVED, that pursuant to the authority expressly granted to and vested in the
Corporation's Board of Directors by the Certificate of Incorporation of the
Corporation, as amended to date, the Board of Directors hereby creates a series
of Preferred Stock of the Corporation, par value $.01 per share, to be
designated "Series H Preferred Stock" (hereinafter referred to as the "Series H
Preferred Stock") and to consist of four thousand (4,000) shares, and hereby
fixes the voting powers, designations, preferences and relative, participating,
optional or other rights, and the qualifications, limitations or restrictions
thereof, of the Series H Preferred Stock, as follows:
1. Definitions.
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1.1 "Common Stock" shall mean the shares of the Common Stock of the
Corporation, par value $.00004 per share, and any stock into which such Common
Stock may hereafter be changed.
1.2 "Date of Issuance" shall mean the date upon which the shares of Series H
Preferred Stock were issued and sold by the Corporation.
1.3 "Dividend Date" shall mean December 31, 2001; provided, however, that
the holders of Series H Preferred Stock by action of the holders of at least 80%
of the shares of Series H Preferred Stock then outstanding may extend such date
one or more times, but in no event to a date later than June 30, 2002.
1.4 "Fifth Amendment" shall mean the Fifth Amendment dated December 29, 2000
to the Purchase Agreement.
1.5 "Junior Stock" shall mean the Common Stock or any other class or series
of capital stock of the Corporation which at the time of issuance is not
declared to be senior to or on a parity with the Series H Preferred Stock as to
dividends or rights upon liquidation.
1.6 "Legal Holiday" shall mean a Saturday, Sunday or day on which banks or
trust companies in the State of New York are not required to be open.
1.7 "Loan Agreement" shall mean that certain Loan Agreement, dated as of
December 29, 2000, between the Corporation and the Lender (as defined therein).
1.8 "Purchase Agreement" shall mean the Securities Purchase Agreement dated
as of May 23, 1998, as amended, by and among the Corporation and the Purchasers
(as defined therein).
2. Dividends.
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2.1 Amount of Dividends.
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(a) The holders of shares of Series H Preferred Stock shall be entitled
to receive, in preference to the holders of Common Stock or any other Junior
Stock, cumulative annual dividends at the rate of seven and one-half percent
(7.5%) of the Liquidation Preference (as defined) per annum (such rate, as
increased or decreased in accordance with this Section 2.1, being the "Dividend
Rate") in cash for each share of Series H Preferred Stock then held. Dividends
payable to holders of shares of Series H Preferred Stock, as aforesaid, whether
or not declared by the Board of Directors, shall be fully cumulative and shall
accrue without interest, except as provided herein, from and after the Date of
Issuance. Accumulated dividends shall be paid at the Dividend Date (as defined
in the Loan Agreement) out of the assets of the Corporation legally available
therefor (except that if such date is a Legal Holiday then such dividend shall
be payable on the next day that is not a Legal Holiday) (the, a "Dividend
Date"). Dividends will be payable to holders of record of the shares of Series
H Preferred Stock as they appear on the stock books of the Corporation on the
date that is ten (10) days preceding the Dividend Date.
(b) If the Corporation fails to timely pay a dividend to a holder of a share
of Series H Preferred Stock within five (5) days of the Dividend Date, then,
commencing with the Dividend Date, the Dividend Rate shall increase to nine and
one-half percent (9.5%) of the Liquidation Preference per annum and dividends
shall accrue at the Dividend Rate so increased until all accrued dividends have
been paid in full. However, the Dividend Rate shall never exceed nine and
one-half percent (9.5%) of the Liquidation Preference per annum.
2.2 Payment of Dividends on Other Capital Stock.
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(a) No dividends or other distributions shall be declared, paid or set
apart for payment on, and no purchase, redemption or other acquisition shall be
made by the Corporation of, any shares of Common Stock or other Junior Stock
unless and until all accumulated dividends on the Series H Preferred Stock have
been, or contemporaneously are, paid in full or declared and funds set apart for
payment thereof in full, and in the case of any redemption pursuant to Section 5
hereof, the aggregate Redemption Price (as defined in Section 5 hereof) for all
shares of Series H Preferred Stock to be so redeemed have been, or
contemporaneously are, paid in full.
(b) Any reference to "distribution" contained in this Section 2 shall not be
deemed to include any distribution made in connection with any liquidation,
dissolution or winding-up of the Corporation, whether voluntary or involuntary.
3. Liquidation or Dissolution. Subject to the prior rights of the
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Corporation's creditors in respect of distributions upon liquidation,
dissolution or winding-up of the Corporation, and the rights of any class or
series of stock that ranks on liquidation prior and in preference to the Series
H Preferred Stock, in the event of the voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the holders of shares of Series H
Preferred Stock then outstanding shall be entitled to receive one thousand
dollars ($1,000) per share (subject to appropriate adjustment in the event of
any stock dividend, stock split, combination or other similar recapitalization
affecting such shares) (the "Liquidation Preference"), together with accumulated
and unpaid dividends payable thereon to the date fixed for payment of such
distribution, if any, and the Return (as hereinafter defined), before any
distribution is made to holders of any Junior Stock. If, upon any such
liquidation, dissolution or winding-up of the Corporation, the assets
distributable among the holders of shares of Series H Preferred Stock (and any
class or series of stock ranking in parity with the Series H Preferred Stock in
respect of distributions upon liquidation, dissolution or winding-up of the
Corporation) shall be insufficient to permit the payment in full to such holders
of the preferential amount payable to such holders, then the holders of shares
of Series H Preferred Stock will share ratably, together with any class or
series of stock ranking in liquidation preference on parity with the Series H
Preferred Stock, in any distribution of the Corporation's assets in proportion
to the respective preferential amounts that would have been payable if such
assets were sufficient to permit payment in full of all such amounts. After
payment of the full amount of the liquidating distribution to which they are
entitled, the holders of Series H Preferred Stock will not be entitled to any
further participation in any distribution of assets by the Corporation. Under
this Section 3, a distribution of assets in any dissolution, winding-up or
liquidation shall not include (a) any consolidation or merger of the Corporation
with or into any other corporation, (b) any dissolution, liquidation, winding-up
or reorganization of the Corporation immediately followed by reincorporation of
a successor corporation or (c) a sale or other disposition of all or
substantially all of the Corporation's assets in consideration for the issuance
of equity securities of another corporation, provided that the consolidation,
merger, dissolution, liquidation, winding-up, reorganization, sale or other
disposition does not amend, alter, or change the preferences or rights of the
Series H Preferred Stock or the qualifications, limitations or restrictions
thereof in a manner that adversely affects the Series H Preferred Stock.
4. Voting Rights.
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(a) General. Except as provided by law or by Section 4(b) below, no
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holder of shares of Series H Preferred Stock shall have the right to vote such
shares on any matter presented to the stockholders for their action or
consideration.
(b) Class Voting Rights. So long as shares of the Series H Preferred Stock
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are outstanding, the Corporation shall not, without the affirmative vote or
consent of the holders of at least eighty percent (80%) of all then outstanding
shares of Series H Preferred Stock, voting separately as a class, amend, alter
or repeal (by merger or otherwise) any provision of the Certificate of
Incorporation of the Corporation, as amended, so as to adversely affect the
relative rights, preferences, qualifications, limitations or restrictions of the
Series H Preferred Stock.
5. Redemption.
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5.1 Redemption at the Option of the Corporation.
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(a) At any time after the Date of Issuance, the Corporation may, at its
option, redeem the Series H Preferred Stock at a price per share (the
"Redemption Price") equal to the sum of (i) the Liquidation Preference plus
accumulated and unpaid dividends thereon to the date fixed for redemption and
(ii) an amount equal to $10,000,000 divided by the number of shares of Series H
Preferred Stock outstanding on the redemption date (the "Return"). If the
Corporation redeems any shares of Series H Preferred Stock pursuant to this
Section 5.1, it must redeem all of the shares of Series H Preferred Stock
outstanding.
(b) The Corporation shall give notice of redemption, signed on behalf of the
Corporation by its President and by its Treasurer or an Assistant Treasurer, to
the holders of the shares of Series H Preferred Stock not less than five (5)
days prior to the date upon which the redemption is to be made pursuant to
Section 5.1 (the "Corporation Redemption Notice"), specifying (i) the accrued
and unpaid dividends on each share of Series H Preferred Stock (to and including
the date upon which the redemption is to be made), (ii) the Return and (iii) the
date of such redemption. The Corporation Redemption Notice having been so
given, the aggregate Redemption Price for the shares of Series H Preferred Stock
shall become due and payable on the specified redemption date.
5.2 Redemption at the Option of the Holders of Series H Preferred
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Stock.
(a) At any time after the Demand Date (as defined in the Loan
Agreement) or the occurrence of a Change of Control or Sale (as defined in the
Loan Agreement), the holders of Series H Preferred Stock may, by action of the
holders of at least 80% of the shares of Series H Preferred Stock then
outstanding, cause the Corporation to redeem all of the shares of Series H
Preferred Stock outstanding at the Redemption Price.
(b) The holders of shares of Series H Preferred Stock shall give notice of
redemption, signed on behalf of the holders by the holders of at least 80% of
the shares of Series H Preferred Stock then outstanding, to the Corporation not
less than thirty (30) days prior to the date upon which redemption is to be made
pursuant to this Section 5.2 (which notice may be provided prior to the Demand
Date or the occurrence of a Change of Control or Sale (the "Holders Redemption
Notice")), specifying the date of such redemption. The Holders Redemption
Notice having been so given, the aggregate Redemption Price for the shares of
Series H Preferred Stock shall become due and payable on the specified
redemption date.
(c) If the Corporation does not have sufficient funds legally available to
redeem the Series H Preferred Stock on any redemption date, the Corporation
shall redeem a pro rata portion of each holder's shares of Series H Preferred
Stock out of funds legally available therefor and shall redeem the remaining
shares to have been redeemed as soon as practicable after the Corporation has
funds legally available therefor.
5.3 Redemption Date. On or prior to the redemption date, each holder
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of shares of Series H Preferred Stock to be redeemed shall surrender such shares
of Series H Preferred Stock to the Corporation, in the manner and at the place
designated in the Redemption Notice, and thereupon the Redemption Price per
share plus all accumulated and unpaid dividends thereon through the redemption
date shall be payable to the order of such holder. From and after the
redemption date, unless there shall have been a default in the payment of the
Redemption Price, all rights of such holder of Series H Preferred Stock
designated for redemption shall cease with respect to such shares of Series H
Preferred Stock, and such shares of Series H Preferred Stock shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever.
5.4 Return. Notwithstanding anything in this Certificate to the contrary,
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from and after a Company Sale Rejection (as defined in the Fifth Amendment)
shall have occurred, the holders of the Series H Preferred Stock shall not be
entitled to the Return under Section 3 or 5 or otherwise.
5.5 Redeemed or Otherwise Acquired Shares. Any shares of Series H Preferred
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Stock which are redeemed or otherwise acquired by the Corporation or any of its
subsidiaries shall be automatically and immediately canceled and shall not be
reissued, sold or transferred. Neither the Corporation nor any of its
subsidiaries may exercise any voting or other rights granted to the holders of
Series H Preferred Stock.
6. No Preemptive Rights. Except as described in the Purchase Agreement, no
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holder of shares of Series H Preferred Stock shall have any preemptive or
preferential right of subscription to any shares of stock of the Corporation, or
to options, warrants or other interests therein or therefor, or to any
obligations convertible into stock of the Corporation, issued or sold, or any
right of subscription to any thereof other than such, if any, as the Board of
Directors, in its discretion, from time to time may determine and at such price
or prices as the Board of Directors from time to time may fix.
7. Amendments to Certificate of Designation. The terms of this Certificate
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of Designation may be amended or waived, with the consent of holders of at least
eighty percent (80%) of the shares of Series H Preferred Stock then outstanding,
which consent will not be unreasonably withheld. The Corporation shall not be
charged a fee for providing such consent.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 29th day
of December, 2000.
By: /s/ Emmett Clemente
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Emmett Clemente
President
