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EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
ADOLOR CORPORATION
FIRST: The name of the corporation is Adolor Corporation.
SECOND: The registered office of the Corporation in the State of Delaware
is to be located at 1013 Centre Road, City of Wilmington, County of New Castle,
Delaware, 19805. The name of the registered agent of the corporation at such
address is The Prentice Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware, as amended from time to time.
FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is 216,088,570 shares, consisting
of 121,987,903 shares of Common Stock with a par value of $.0001 per share (the
"Common Stock") and 94,100,667 shares of Preferred Stock with a par value of
$.01 per share (the "Preferred Stock").
Each five (5) shares of the Corporation's Common Stock issued and
outstanding as of the date this Amended and Restated Certificate of
Incorporation is filed shall be converted and reclassified into one (1) share of
the Corporation's Common Stock, so that each share of the Corporation's Common
Stock issued and outstanding is hereby converted and reclassified. No
fractional interests resulting from such conversion shall be issued.
A description of the respective classes of stock and a statement of
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions of the Preferred Stock and Common Stock are as
follows:
A. COMMON STOCK
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1. General. All shares of Common Stock will be identical and will entitle
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the holders thereof to the same rights, powers and privileges. The rights,
powers and privileges of the holders of the Common Stock are subject to and
qualified by the rights of holders of the Preferred Stock.
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2. Dividends. Dividends may be declared and paid on the Common Stock from
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funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
3. Dissolution, Liquidation or Winding Up. In the event of any
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dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, each issued and outstanding share of Common
Stock shall entitle the holder thereof to receive an equal portion of the net
assets of the Corporation available for distribution to the holders of Common
Stock, subject to any preferential rights of any then outstanding Preferred
Stock.
4. Voting Rights. Except as otherwise required by law or this Amended and
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Restated Certificate of Incorporation, each holder of Common Stock shall have
one vote in respect of each share of stock held of record by such holder on the
books of the Corporation for the election of directors and on all matters
submitted to a vote of stockholders of the Corporation. Except as otherwise
required by law or provided herein, holders of Common Stock shall vote together
with holders of the Preferred Stock as a single class, subject to any special or
preferential voting rights of any then outstanding Preferred Stock. There shall
be no cumulative voting.
B. PREFERRED STOCK
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The Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the Board of Directors of
the Corporation may determine. Each series shall be so designated as to
distinguish the shares thereof from the shares of all other series and classes.
Except as otherwise provided in this Amended and Restated Certificate of
Incorporation or under applicable law, different series of Preferred Stock shall
not be construed to constitute different classes of shares for the purpose of
voting by classes.
The Board of Directors is expressly authorized to provide for the issuance
of all or any shares of the undesignated Preferred Stock in one or more series,
each with such designations, preferences, voting powers (or special,
preferential or no voting powers), relative participating, optional or other
special rights and privileges and such qualifications, limitations or
restrictions thereof as shall be stated in the resolution or resolutions adopted
by the Board of Directors to create such series, and a certificate of said
resolution or resolutions (a "Certificate of Designation") shall be filed in
accordance with the General Corporation Law of the State of Delaware. The
authority of the Board of Directors with respect to each such series shall
include, without limitation of the foregoing, the right to provide that the
shares of each such series may be: (i) subject to redemption at such time or
times and at such price or prices; (ii) entitled to receive dividends (which may
be cumulative or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series; (iii) entitled to
such rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; (iv) convertible into, or exchangeable for, shares of any other
class or classes of stock, or of any other series of the same or any other class
or classes of stock of the Corporation at such price or prices or at such rates
of exchange and with such adjustments, if any; (v) entitled to the benefit of
such limitations, if any,
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on the issuance of additional shares of such series or shares of any other
series of Preferred Stock; or (vi) entitled to such other preferences, powers,
qualifications, rights and privileges, all as the Board of Directors may deem
advisable and as are not inconsistent with law and the provisions of this
Amended and Restated Certificate of Incorporation.
C. CONVERTIBLE PREFERRED STOCK
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1. Number of Shares. The series of Preferred Stock designated and known
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as "Series A Convertible Preferred Stock" shall consist of 6,000,000 shares.
The Series of Preferred Stock designated and known as "Series B Convertible
Preferred Stock" shall consist of 23,107,145 shares. The series of Preferred
Stock designated and known as "Series C Convertible Preferred Stock" shall
consist of 13,814,286 shares. The series of Preferred Stock designated and
known as "Series D Convertible Preferred Stock" shall consist of 960,000 shares.
The series of Preferred Stock designated and known as "Series E Convertible
Preferred Stock" shall consist of 11,366,667 shares. The series of Preferred
Stock designated and known as "Series F Convertible Preferred Stock" shall
consist of 2,625,000 shares. The series of Preferred Stock designated and known
as "Series G Convertible Preferred Stock" shall consist of 12,306,000 shares.
The series of Preferred Stock designated and known as "Series H Convertible
Preferred Stock" shall consist of 23,921,569 shares. Except as the context
otherwise requires, the Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock, Series C Convertible Preferred Stock, Series D
Convertible Preferred Stock, Series E Convertible Preferred Stock, Series F
Convertible Preferred Stock, Series G Convertible Preferred Stock and Series H
Convertible Preferred Stock are sometimes hereinafter referred to collectively
as the "Convertible Preferred Stock."
2. Voting.
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2A. General. Except as may be otherwise provided in the terms of the
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Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock, Series D Convertible Preferred Stock,
Series E Convertible Preferred Stock, Series F Convertible Preferred Stock,
Series G Convertible Preferred Stock and Series H Convertible Preferred Stock or
by law, the Convertible Preferred Stock shall vote together with all other
classes and series of stock of the Corporation as a single class on all actions
to be taken by the stockholders of the Corporation. Each share of Convertible
Preferred Stock shall entitle the holder thereof to such number of votes per
share on each such action as shall equal the number of shares of Common Stock
(including fractions of a share) into which each share of Convertible Preferred
Stock is then convertible.
2B. Board Size. The Corporation shall not, without the written
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consent or affirmative vote of the holders of at least two-thirds of the then
outstanding shares of Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock, Series C Convertible Preferred Stock, Series E Convertible
Preferred Stock, Series G Convertible Preferred Stock and Series H Convertible
Preferred Stock, each voting as a separate series, given in writing or by vote
at a meeting, consenting or voting (as the case may be) separately as a series,
increase the
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maximum number of directors constituting the Board of Directors to a number in
excess of eight (8).
2C. Board Seats. The holders of the Series A Convertible Preferred Stock,
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voting as a separate series, shall be entitled to elect three (3) directors of
the Corporation. A vacancy in any directorship elected by the holders of the
Series A Convertible Preferred Stock shall be filled only by vote or written
consent of the holders of the Series A Convertible Preferred Stock.
Notwithstanding the foregoing, so long as ARCH Venture Fund, II, L.P. (or any
successor thereto) ("ARCH") continues to hold 10% of the outstanding Series A
Convertible Preferred Stock, ARCH shall be entitled to appoint a representative
to the Corporation's Board of Directors and so long as Weiss, Peck & Greer
Venture Associates III, L.P. and WPG Enterprise Fund II, L.P., (together,
"WP&G") together continue to hold 10% of the outstanding Series A Convertible
Preferred Stock, WP&G shall be entitled to appoint a representative to the
Corporation's Board of Directors. The holders of Series B Convertible Preferred
Stock, voting as a separate series, shall be entitled to elect one (1) director
of the Corporation. A vacancy in the directorship elected by the holders of the
Series B Convertible Preferred Stock shall be filled only by vote or written
consent of the holders of the Series B Convertible Preferred Stock.
Notwithstanding the foregoing, so long as Technology Leaders, II L.P. (or any
successor thereto) ("Tech Leaders") continues to hold (together with any
affiliate of Tech Leaders) in the aggregate 10% of the outstanding Series B
Convertible Preferred Stock, Tech Leaders shall be entitled to appoint a
representative to the Corporation's Board of Directors. So long as MPM Capital
(or any successor thereto) ("MPM") (or entities affiliated with MPM) continues
to hold Series H Convertible Preferred Stock, MPM shall be entitled to designate
one (1) individual with relevant industry experience who is mutually acceptable
to MPM and to the Corporation's Board of Directors to serve as a director of the
Corporation. Notwithstanding the foregoing or anything else to the contrary
provided in the Certificate of Incorporation, if the Corporation fails or
refuses, for any reason or for no reason, to redeem on the Redemption Date (as
defined in paragraph 7) all of the then outstanding shares of the Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series E Convertible Preferred Stock, Series G
Convertible Preferred Stock and Series H Convertible Preferred Stock in
accordance with the terms and provisions of paragraph 7, the holders of the
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock, Series E Convertible Preferred Stock,
Series G Convertible Preferred Stock and Series H Convertible Preferred Stock,
voting as a separate class shall be entitled to elect all of the directors of
the Corporation. At any meeting (or in a written consent in lieu thereof) held
for the purpose of electing directors, the presence in person or by proxy (or
the written consent) of the holders of sixty percent (60%) of the shares of
Series A Convertible Preferred Stock or Series B Convertible Preferred Stock
then outstanding, as the case may be, shall constitute a quorum of the Series A
Convertible Preferred Stock or Series B Convertible Preferred Stock, as the case
may be, for the election of directors to be elected solely by the holders of the
Series A Convertible Preferred Stock or Series B Convertible Preferred Stock,
and the presence in person or by proxy (or written consent) of the holders of
sixty percent (60%) of the shares of Series A Convertible Preferred Stock,
Series B Convertible Preferred Stock, Series C Convertible Preferred Stock,
Series E Convertible Preferred Stock, Series G Convertible Preferred Stock and
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Series H Convertible Preferred Stock then outstanding shall constitute a quorum
of the Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock, Series C Convertible Preferred Stock, Series E Convertible Preferred
Stock, Series G Convertible Preferred Stock and Series H Convertible Preferred
Stock for the election of directors to be elected solely by the holders of the
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock, Series E Convertible Preferred Stock,
Series G Convertible Preferred Stock and Series H Convertible Preferred Stock.
3. Dividends. The holders of Convertible Preferred Stock shall be
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entitled to receive, out of funds legally available therefor, when and if
declared by the Board of Directors, quarterly dividends at the rate per annum of
$.02 per share, with respect to the Series A Convertible Preferred Stock, $.0336
per share, with respect to the Series B Convertible Preferred Stock, $.056 per
share, with respect to the Series C Convertible Preferred Stock, $.06 per share,
with respect to the Series E Convertible Preferred Stock, $.08 per share, with
respect to the Series F Convertible Preferred Stock, $.08 per share, with
respect to the Series G Convertible Preferred Stock, and $.1224 per share, with
respect to the Series H Convertible Preferred Stock, and, at the same rate and
at the same time as dividends are declared and paid on the Common Stock, with
respect to the Series D Convertible Preferred Stock (the "Accruing Dividends").
The holders of the Series H Convertible Preferred Stock shall also be entitled
to participate pro rata in any dividends paid on the Common Stock based on the
number of shares of Common Stock (including fractions of a share) into which
each share of Series H Convertible Preferred Stock is then convertible.
Accruing Dividends with respect to the Series A Convertible Preferred Stock, the
Series B Convertible Preferred Stock, the Series C Convertible Preferred Stock,
the Series D Convertible Preferred Stock, the Series E Convertible Preferred
Stock, the Series F Convertible Preferred Stock and the Series G Convertible
Preferred Stock shall accrue from day to day and shall be cumulative. Accruing
Dividends with respect to the Series H Convertible Preferred Stock shall accrue
from day to day and shall be noncumulative. No dividends shall be paid on any
series of stock of the Corporation unless all applicable dividends have been
paid on the Series H Convertible Preferred Stock on or prior to the date of
payment of such dividends on any such series of stock.
4. Liquidation. Upon any liquidation, dissolution or winding up of the
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Corporation, whether voluntary or involuntary, the holders of the shares of
Convertible Preferred Stock shall be entitled, before any distribution or
payment is made upon any stock ranking on liquidation junior to the Convertible
Preferred Stock, to be paid an amount equal to the greater of (i) $.25 per
share, with respect to the Series A Convertible Preferred Stock, $.42 per share
with respect to the Series B Convertible Preferred Stock, $.70 per share with
respect to the Series C Convertible Preferred Stock, $1.25 per share with
respect to the Series D Convertible Preferred Stock, $.75 per share with respect
to the Series E Convertible Preferred Stock, $1.00 per share with respect to the
Series F Convertible Preferred Stock, $1.00 per share with respect to the Series
G Convertible Preferred Stock and $1.53 per share with respect to the Series H
Convertible Preferred Stock, plus, (a) in the case of each share of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series E Convertible Preferred Stock, Series F
Convertible Preferred Stock, Series G Convertible
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Preferred Stock and Series H Convertible Preferred Stock, an amount equal to all
Accruing Dividends unpaid thereon and any other dividends declared but unpaid
thereon, computed to the date payment thereof is made available, and (b) in the
case of each share of Series D Convertible Preferred Stock, an amount equal to
all dividends declared but unpaid thereon, computed to the date payment thereof
is made available, or (ii) such amount per share as would have been payable had
each such share been converted to Common Stock pursuant to paragraph 6
immediately prior to such liquidation, dissolution or winding up, such amount
payable with respect to one share of Convertible Preferred Stock being sometimes
referred to as the "Liquidation Payment" and with respect to all shares of
Convertible Preferred Stock being sometimes referred to as the "Liquidation
Payments." If upon such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets to be distributed
among the holders of Convertible Preferred Stock shall be insufficient to permit
payment to the holders of Convertible Preferred Stock of the amount
distributable as aforesaid, then the entire assets of the Corporation to be so
distributed shall be distributed ratably among the holders of Convertible
Preferred Stock. Upon any such liquidation, dissolution or winding up of the
Corporation, after the holders of Convertible Preferred Stock shall have been
paid in full the amounts to which they shall be entitled, the remaining net
assets of the Corporation shall be distributed ratably among the holders of
Convertible Preferred Stock and the holders of stock ranking on liquidation
junior to the Convertible Preferred Stock based on the number of shares of
Common Stock then outstanding and the number of shares of Common Stock into
which the outstanding shares of Convertible Preferred Stock are then
convertible.
Written notice of such liquidation, dissolution or winding up, stating a
payment date, the amount of the Liquidation Payments and the place where said
Liquidation Payments shall be payable, shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, not less than 20 days prior to the payment date stated therein, to the
holders of record of Convertible Preferred Stock, such notice to be addressed to
each such holder at its address as shown by the records of the Corporation. The
consolidation or merger of the Corporation with or into another entity or
entities which results in the exchange of outstanding shares of the Corporation
for securities or other consideration issued or paid or caused to be issued or
paid by any such entity or affiliate thereof (other than a merger to
reincorporate the Corporation in a different jurisdiction), and the sale, lease,
abandonment, transfer or other disposition by the Corporation of all or
substantially all its assets, shall be deemed to be a liquidation, dissolution
or winding up of the Corporation within the meaning of the provisions of this
paragraph 4.
5. Restrictions. At any time when shares of Series A Convertible
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Preferred Stock, Series B Convertible Preferred Stock, the Series C Convertible
Preferred Stock, the Series E Convertible Preferred Stock, the Series F
Convertible Preferred Stock, the Series G Convertible Preferred Stock or the
Series H Convertible Preferred Stock are outstanding, except where the vote or
written consent of the holders of a greater number of shares of the Corporation
is required by law or by the Certificate of Incorporation, and in addition to
any other vote required by law or the Certificate of Incorporation, without
approval of the holders of at least sixty percent (60%) of the then outstanding
shares of each of the Series A Convertible Preferred
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Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred
Stock, Series E Convertible Preferred Stock, Series F Convertible Preferred
Stock and/or Series G Convertible Preferred Stock and at least fifty percent
(50%) of the then outstanding shares of Series H Convertible Preferred Stock, as
the case may be, given in writing or by vote at a meeting, each consenting or
voting (as the case may be) separately as a series, the Corporation will not:
5A. Create or authorize the creation of any additional class or series of
shares of stock unless the same ranks junior to the Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock, Series E Convertible Preferred Stock, Series F Convertible
Preferred Stock, Series G Convertible Preferred Stock or Series H Convertible
Preferred Stock, as the case may be, or increase the authorized amount of any
additional class or series of shares of stock unless the same ranks junior to
the Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock, Series E Convertible Preferred Stock,
Series F Convertible Preferred Stock, Series G Convertible Preferred Stock or
Series H Convertible Preferred Stock, as the case may be, as to the distribution
of assets on the liquidation, dissolution or winding up of the Corporation, or
increase the authorized amount of the Series A Convertible Preferred Stock,
Series B Convertible Preferred Stock, Series C Convertible Preferred Stock,
Series E Convertible Preferred Stock, Series F Convertible Preferred Stock,
Series G Convertible Preferred Stock or Series H Convertible Preferred Stock, as
the case may be, as to the distribution of assets on the liquidation,
dissolution or winding up of the Corporation, or create or authorize any
obligation or security convertible into shares of Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock, Series C Convertible Preferred
Stock, Series E Convertible Preferred Stock, Series F Convertible Preferred
Stock, Series G Convertible Preferred Stock or Series H Convertible Preferred
Stock, as the case may be, or into shares of any other class or series of stock
unless the same ranks junior to the Series A Convertible Preferred Stock, Series
B Convertible Preferred Stock, Series C Convertible Preferred Stock, Series E
Convertible Preferred Stock, Series F Convertible Preferred Stock, Series G
Convertible Preferred Stock or Series H Convertible Preferred Stock, as the case
may be, as to the distribution of assets on the liquidation, dissolution or
winding up of the Corporation, whether any such creation, authorization or
increase shall be by means of amendment to the Certificate of Incorporation or
by merger, consolidation or otherwise;
5B. Consent to any liquidation, dissolution or winding up of the
Corporation or consolidate or merge into or with any other entity or entities or
sell, lease, abandon, transfer or otherwise dispose of all or substantially all
its assets;
5C. Amend, alter or repeal its Certificate of Incorporation or amend,
alter or repeal its By-laws if such amendment, alteration or repeal, directly or
indirectly, impacts any rights and preferences of the holders of the Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series E Convertible Preferred Stock, Series F
Convertible Preferred Stock, Series G Convertible Preferred Stock or Series H
Convertible Preferred Stock, as the case may be;
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5D. Purchase or set aside any sums for the purchase of, or pay any
dividend or make any distribution on, any shares of stock other than the Series
A Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series E Convertible Preferred Stock, Series F
Convertible Preferred Stock, Series G Convertible Preferred Stock or Series H
Convertible Preferred Stock, as the case may be, except for (i) dividends or
other distributions described in this Section C of Article Fourth, (ii)
dividends payable on the Common Stock solely in the form of additional shares of
Common Stock and (iii) the purchase of shares of Common Stock from former
employees of the Corporation who acquired such shares directly from the
Corporation, if each such purchase is made pursuant to contractual rights held
by the Corporation relating to the termination of employment of such former
employee and the purchase price does not exceed the original issue price paid by
such former employee to the Corporation for such shares; or
5E. Redeem or otherwise acquire any shares of Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock, Series C Convertible
Preferred Stock, Series E Convertible Preferred Stock, Series F Convertible
Preferred Stock, Series G Convertible Preferred Stock or Series H Convertible
Preferred Stock, as the case may be, except pursuant to a purchase offer made
pro rata to all holders of the shares of Series A Convertible Preferred Stock,
Series B Convertible Preferred Stock, Series C Convertible Preferred Stock,
Series E Convertible Preferred Stock, Series F Convertible Preferred Stock,
Series G Convertible Preferred Stock or Series H Convertible Preferred Stock, as
the case may be, on the basis of the aggregate number of outstanding shares of
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
Series C Convertible Preferred Stock, Series E Convertible Preferred Stock,
Series F Convertible Preferred Stock, Series G Convertible Preferred Stock or
Series H Convertible Preferred Stock, as the case may be, then held by each such
holder.
6. Conversions. The holders of shares of Convertible Preferred Stock
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shall have the following conversion rights:
6A. Right to Convert. Subject to the terms and conditions of this
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paragraph 6, the holder of any share or shares of Convertible Preferred Stock
shall have the right, at its option at any time, to convert any such shares of
Convertible Preferred Stock (except that upon any liquidation of the Corporation
the right of conversion shall terminate at the close of business on the business
day fixed for payment of the amount distributable on the convertible Preferred
Stock) into such number of fully paid and nonassessable shares of Common Stock
as is obtained by (a) with respect to the Series A Convertible Preferred Stock,
(i) multiplying the number of shares of Series A Convertible Preferred Stock to
be converted by $0.25 and (ii) dividing the result by the conversion price of
$0.25 per share or, in case an adjustment of such price has taken place pursuant
to the further provisions of this paragraph 6, then by the conversion price as
last adjusted and in effect at the date any share or shares of Series A
Convertible Preferred Stock are surrendered for conversion (such price, or such
price as last adjusted, being referred to as the "Series A Conversion Price"),
(b) with respect to the Series B Convertible Preferred Stock, (i) multiplying
the number of shares of Series B Convertible Preferred Stock to be converted by
$.42 and (ii) dividing the result by the conversion price of
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$.42 per share, or, in case an adjustment of such price has taken place pursuant
to the further provisions of this paragraph 6, then by the conversion price as
last adjusted and in effect at the date any share or shares of Series B
Convertible Preferred Stock are surrendered for conversion (such price, or such
price as adjusted, being referred to as the "Series B Conversion Price"), (c)
with respect to the Series C Convertible Preferred Stock, (i) multiplying the
number of shares of Series C Convertible Preferred Stock to be converted by $.70
and (ii) dividing the result by the conversion price of $.70 per share or, in
case an adjustment of such price has taken place pursuant to the further
provisions of this paragraph 6, then by the conversion price as last adjusted
and in effect at the date any share or shares of Series C Convertible Preferred
Stock are surrendered for conversion (such price, or such price as last
adjusted, being referred to as the "Series C Conversion Price"), (d) with
respect to the Series D Convertible Preferred Stock, (i) multiplying the number
of shares of Series D Convertible Preferred Stock to be converted by $1.25 and
(ii) dividing the result by the conversion price of $1.25 per share or, in case
an adjustment of such price has taken place pursuant to the further provisions
of subparagraph 6F, then by the conversion price as last adjusted and in effect
at the date any share or shares of Series D Convertible Preferred Stock are
surrendered for conversion (such price, or such price as last adjusted, being
referred to as the "Series D Conversion Price"), (e) with respect to the Series
E Convertible Preferred Stock, (i) multiplying the number of shares of Series E
Convertible Preferred Stock to be converted by $.75 and (ii) dividing the result
by the conversion price of $.75 per share or, in case an adjustment of such
price has taken place pursuant to the further provisions of this paragraph 6,
then by the conversion price as last adjusted and in effect at the date any
share or shares of Series E Convertible Preferred Stock are surrendered for
conversion (such price, or such price as last adjusted, being referred to as the
"Series E Conversion Price"), (f) with respect to the Series F Convertible
Preferred Stock, (i) multiplying the number of shares of Series F Convertible
Preferred Stock to be converted by $1.00 and (ii) dividing the result by the
conversion price of $1.00 per share or, in case an adjustment of such price has
taken place pursuant to the further provisions of this paragraph 6, then by the
conversion price as last adjusted and in effect at the date any share or shares
of Series F Convertible Preferred Stock are surrendered for conversion (such
price, or such price as last adjusted, being referred to as the "Series F
Conversion Price"), (g) with respect to the Series G Convertible Preferred
Stock, (i) multiplying the number of shares of Series G Convertible Preferred
Stock to be converted by $1.00 and (ii) dividing the result by the conversion
price of $1.00 per share or, in case an adjustment of such price has taken place
pursuant to the further provisions of this paragraph 6, then by the conversion
price as last adjusted and in effect at the date any share or shares of Series G
Convertible Preferred Stock are surrendered for conversion (such price, or such
price as last adjusted, being referred to as the "Series G Conversion Price")
and (h) with respect to the Series H Convertible Preferred Stock, (i)
multiplying the number of shares of Series H Convertible Preferred Stock to be
converted by $1.53 and (ii) dividing the result by the conversion price of $1.53
per share, or in case an adjustment of such price has taken place pursuant to
the further provisions of this paragraph 6, then by the conversion price as last
adjusted and in effect at the date any share or shares of Series H Convertible
Preferred Stock are surrendered for conversion (such price, or such price as
last adjusted, being referred to as the "Series H Conversion Price"). Such
rights of conversion shall be exercised by the holder thereof by giving written
notice that the holder elects to convert a stated number of shares of
Convertible Preferred Stock into
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Common Stock and by surrender of a certificate or certificates for the shares so
to be converted to the Corporation at its principal office (or such other office
or agency of the Corporation as the Corporation may designate by notice in
writing to the holders of the Convertible Preferred Stock) at any time during
its usual business hours on the date set forth in such notice, together with a
statement of the name or names (with address) in which the certificate or
certificates for shares of Common Stock shall be issued.
6B. Issuance of Certificates: Time Conversion Effected. Promptly after
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the receipt of the written notice referred to in subparagraph 6A and surrender
of the certificate or certificates for the share or shares of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Preferred Stock, Series D Convertible Preferred Stock, Series E
Convertible Preferred Stock, Series F Convertible Preferred Stock, Series G
Convertible Preferred Stock or Series H Convertible Preferred Stock to be
converted, the Corporation 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, a certificate or certificates for the number of whole shares of Common
Stock issuable upon the conversion of such share or shares of Convertible
Preferred Stock. To the extent permitted by law, such conversion shall be
deemed to have been effected and the Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price, Series E
Conversion Price, Series F Conversion Price, Series G Conversion Price or Series
H Conversion Price, as the case may be, shall be determined as of the close of
business on the date on which such written notice shall have been received by
the Corporation and the certificate or certificates for such share or shares
shall have been surrendered as aforesaid, and at such time the rights of the
holder of such share or shares of Convertible Preferred Stock 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.
6C. Fractional Shares; Dividends: Partial Conversion. No fractional
------------------------------------------------
shares shall be issued upon conversion of Convertible Preferred Stock into
Common Stock and no payment or adjustment shall be made upon any conversion on
account of any cash dividends on the Common Stock issued upon such conversion.
At the time of each conversion, the Corporation shall pay in cash an amount
equal to all dividends, excluding Accruing Dividends, accrued and unpaid on the
shares of Convertible Preferred Stock surrendered for conversion to the date
upon which such conversion is deemed to take place as provided in subparagraph
6B. In case the number of shares of Convertible Preferred Stock represented by
the certificate or certificates surrendered pursuant to subparagraph 6A exceeds
the number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder, at the expense of the Corporation, a new
certificate or certificates for the number of shares of Convertible Preferred
Stock represented by the certificate or certificates surrendered which are not
to be converted. If any fractional share of Common Stock would, except for the
provisions of the first sentence of this subparagraph 6C, be delivered upon such
conversion, the Corporation, in lieu of delivering such fractional share, shall
pay to the holder surrendering the Convertible Preferred
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<PAGE>
Stock for conversion an amount in cash equal to the current market price of such
fractional share as determined in good faith by the Board of Directors of the
Corporation.
6D. Adjustment of Price Upon Issuance of Common Stock. So long as
-------------------------------------------------
the Company has not consummated a Qualified Public Offering (as defined in
paragraph 6O), except as provided in subparagraph 6E, if and whenever the
Corporation shall issue or sell, or is, in accordance with subparagraphs 6D(1)
through 6D(7), deemed to have issued or sold, any shares of Common Stock for a
consideration per share less than the Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series E Conversion Price, Series F
Conversion Price, Series G Conversion Price and/or Series H Conversion Price in
effect immediately prior to the time of such issue or sale, then, forthwith upon
such issue or sale, the Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price, Series E Conversion Price, Series F Conversion Price,
Series G Conversion Price and/or Series H Conversion Price, as the case may be,
shall be reduced to the price determined by dividing (i) an amount equal to the
sum of (a) the number of shares of Common Stock outstanding immediately prior to
such issue or sale multiplied by the then existing Series A Conversion Price,
Series B Conversion Price, Series C Conversion Price, Series E Conversion Price,
Series F Conversion Price, Series G Conversion Price and/or Series H Conversion
Price, as the case may be, and (b) the consideration, if any, received by the
Corporation upon such issue or sale, by (ii) the total number of shares of
Common Stock outstanding immediately after such issue or sale.
For purposes of this subparagraph 6D, the following subparagraphs 6D(1) to
6D(7) shall also be applicable:
6D(1) Issuance of Rights or Options. In case at any time the
-----------------------------
Corporation shall in any manner grant (whether directly or by assumption in a
merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants,
rights or options being called "Options" and such convertible or exchangeable
stock or securities being called "Convertible Securities") whether or not such
Options or the right to convert or exchange any such Convertible Securities are
immediately exerciseable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon the conversion or exchange of
such Convertible Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Corporation as consideration for the granting
of such Options, plus the minimum aggregate amount of additional consideration
payable to the Corporation upon the exercise of all such Options, plus, in the
case of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange thereof,
by (ii) the total maximum number of shares or Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options) shall be less
than the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series E Conversion Price, Series F Conversion Price, Series G
Conversion Price and/or Series H Conversion Price in effect immediately prior to
the time of the granting of such Options, then the total maximum number of
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<PAGE>
shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to have
been issued for such price per share as of the date of granting of such Options
or the issuance of such Convertible Securities and thereafter shall be deemed to
be outstanding. Except as otherwise provided in subparagraph 6D(3), no
adjustment of the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series E Conversion Price, Series F Conversion Price, Series G
Conversion Price and/or Series H Conversion Price, as the case may be, shall be
made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such Options or upon the actual issue of such Common
Stock upon conversion or exchange of such Convertible Securities.
6D(2) Issuance of Convertible Securities. In case the Corporation shall
----------------------------------
in any manner issue (whether directly or by assumption in a merger or otherwise)
or sell any Convertible Securities, whether or not the rights to exchange or
convert any such Convertible Securities are immediately exercisable, and the
price per share for which Common Stock is issuable upon such conversion or
exchange (determined by dividing (i) the total amount received or receivable by
the Corporation as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Corporation upon the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of all such Convertible Securities) shall be less than the Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price, Series E
Conversion Price, Series F Conversion Price, Series G Conversion Price and/or
Series H Conversion Price in effect immediately prior to the time of such issue
or sale, as the case may be, then the total maximum number of shares of Common
Stock issuable upon conversion or exchange of all such Convertible Securities
shall be deemed to have been issued for such price per share as of the date of
the issue or sale of such Convertible Securities and thereafter shall be deemed
to be outstanding, provided that (a) except as otherwise provided in
subparagraph 6D(3), no adjustment of the Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series E Conversion Price, Series F
Conversion Price, Series G Conversion Price and/or Series H Conversion Price, as
the case may be, shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and (b) if any such issue
or sale of such Convertible Securities is made upon exercise of any Options to
purchase any such Convertible Securities for which adjustments of the Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price, Series E
Conversion Price, Series F Conversion Price, Series G Conversion Price and/or
Series H Conversion Price have been or are to be made pursuant to other
provisions of this subparagraph 6D, no further adjustment of the Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price, Series E
Conversion Price, Series F Conversion Price, Series G Conversion Price and/or
Series H Conversion Price, as the case may be, shall be made by reason of such
issue or sale.
6D(3) Change in Option Price or Conversion Rate. Upon the happening of
-----------------------------------------
any of the following events, namely, if the purchase price provided for in any
Option referred to in subparagraph 6D(1), the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities referred
to in subparagraph 6D(1) or 6D(2), or the rate at
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<PAGE>
which Convertible Securities referred to in subparagraph 6D(1) or 6D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series E Conversion Price, Series F
Conversion Price, Series G Conversion Price and/or Series H Conversion Price, as
the case may be, in effect at the time of such event shall forthwith be
readjusted to the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series E Conversion Price, Series F Conversion Price, Series G
Conversion Price and/or Series H Conversion Price, as the case may be, which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold, but only if as a result of such adjustment
the Series A Conversion Price, Series B Conversion Price, Series C Conversion
Price, Series E Conversion Price, Series F Conversion Price, Series G Conversion
Price and/or Series H Conversion Price, as the case may be, then in effect
hereunder is thereby reduced; and on the termination of any such Option or any
such right to convert or exchange such Convertible Securities, the Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price, Series E
Conversion Price, Series F Conversion Price, Series G Conversion Price and/or
Series H Conversion Price, as the case may be, then in effect hereunder shall
forthwith be increased to the Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price, Series E Conversion Price, Series F Conversion
Price, Series G Conversion Price and/or Series H Conversion Price, as the case
may be, which would have been in effect at the time of such termination had such
Option or Convertible Securities, to the extent outstanding immediately prior to
such termination, never been issued.
6D(4) Stock Dividends. In case the Corporation shall declare a dividend
---------------
or make any other distribution upon any stock of the Corporation payable in
Common Stock (except for dividends or distributions upon the Common Stock),
Options or Convertible Securities, any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold.
6D(5) Consideration for Stock. In case any shares of Common Stock,
-----------------------
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor, without deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
any Options shall be issued in connection with the issue and sale of other
securities of the Corporation, together comprising one integral transaction in
which no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been
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<PAGE>
issued for such consideration as determined in good faith by the Board of
Directors of the Corporation.
6D(6) Record Date. In case the Corporation shall take a record of
-----------
the holders of its Common Stock for the purpose of entitling them (i) to receive
a dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
6D(7) Treasury Shares. The number of shares of Common Stock
---------------
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purpose of this subparagraph
6D.
6E. Certain Issues of Common Stock Excepted. Anything herein to
---------------------------------------
the contrary notwithstanding, the Corporation shall not be required to make any
adjustment of the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series E Conversion Price, Series F Conversion Price, Series G
Conversion Price and/or Series H Conversion Price in the case of (a) the
issuance of up to any aggregate of 17,750,000 shares (appropriately adjusted to
reflect the occurrence of any event described in subparagraph 6F) of Common
Stock to directors, officers, employees or consultants of the Corporation in
connection with their service as directors of the Corporation, their employment
by the Corporation or their retention as consultants by the Corporation, or to
licensors or transferors of technology to the Corporation, in each case pursuant
to such arrangements, contracts or plans as are approved by the Board of
Directors, plus such number of shares of Common Stock which are repurchased by
the Corporation from such persons after such date pursuant to contractual rights
held by the Corporation and at repurchase prices not exceeding the respective
original purchase prices paid by such persons to the Corporation therefor, (b)
the issuance of Common Stock in connection with a Qualified Public Offering (as
defined in paragraph 6O hereof) or (c) upon the issuance of Common Stock upon
conversion of any Convertible Preferred Stock.
6F. Subdivision or Combination of Common Stock. In case the
------------------------------------------
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price, Series D Conversion Price, Series E Conversion Price, Series F
Conversion Price, Series G Conversion Price and Series H Conversion Price in
effect immediately prior to such subdivision shall be proportionately reduced,
and, conversely, in case the outstanding shares of Common Stock shall be
combined into a smaller number of shares, the Series A Conversion Price, Series
B Conversion Price, Series C Conversion Price, Series D Conversion Price, Series
E Conversion Price, Series F Conversion Price, Series G Conversion Price and
Series H Conversion Price in effect immediately prior to such combination shall
be proportionately increased. In the case of any
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<PAGE>
such subdivision, no further adjustment shall be made pursuant to subparagraph
6D(4) by reason thereof.
6G. Reorganization or Reclassification. If any capital reorganization or
----------------------------------
reclassification of the capital stock of the Corporation shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization or reclassification, lawful and adequate
provisions shall be made whereby each holder of share or shares of Convertible
Preferred Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the conversion of such
share or shares Convertible Preferred Stock, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of such
Common Stock immediately theretofore receivable upon such conversion had such
reorganization or reclassification not taken place, and in any such case
appropriate provisions 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 adjustments of the Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion
Price, Series F Conversion Price, Series G Conversion Price and Series H
Conversion Price) shall thereafter be applicable, as nearly as may be, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise of such conversion rights.
6H. Notice of Adjustment. Upon any adjustment of the Conversion Price,
--------------------
then and in each such case the Corporation shall give written notice thereof, by
delivery in person, certified or registered mail, return receipt requested,
telecopier or telex, addressed to each holder of shares of Convertible Preferred
Stock at the address of such holder as shown on the books of the Corporation,
which notice shall state the Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price, Series D Conversion Price, Series E Conversion
Price, Series F Conversion Price, Series G Conversion Price and/or Series H
Conversion Price resulting from such adjustment, setting forth in reasonable
detail the method upon which such calculation is based.
6I. Other Notices. In case at any time:
-------------
(1) the Corporation 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 Corporation shall offer for subscription pro rata to the holders
--- ----
of its Common Stock any additional shares of stock of any class or other rights;
(3) there shall be any capital reorganization or reclassification of the
capital stock of the Corporation, or a consolidation or merger of the
Corporation with or into another entity or entities, or a sale, lease,
abandonment, transfer or other disposition of all or substantially all its
assets; or
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<PAGE>
(4) there shall be a voluntary or involuntary dissolution, liquidation or
winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested, telecopier or
telex, addressed to each holder of any shares of Convertible Preferred Stock at
the address of such holder as shown the books of the Corporation, (a) at least
20 days' prior written notice of the date on which the books of the Corporation
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, disposition,
dissolution, liquidation or winding up and (b) in the case of any such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding up, at least 20 days' prior written notice
of the date when at the same shall take place. 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, disposition, dissolution, liquidation or winding up, as the case may be.
6J. Stock to be Reserved. The Corporation will at all times reserve and
--------------------
keep available out of its authorized Common Stock, solely for the purpose of
issuance upon the conversion of Convertible 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 Convertible Preferred Stock. The
Corporation covenants that 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 taxes, liens and charges with respect to the issue thereof, and, without
limiting the generality of the foregoing, the Corporation 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 Series A Conversion Price, Series B Conversion Price, Series C Conversion
Price, Series D Conversion Price, Series E Conversion Price, Series F Conversion
Price, Series G Conversion Price and Series H Conversion Price in effect at the
time. The Corporation will take all such action as may be necessary to assure
that all such shares of Common Stock may be so issued without violation of any
applicable law or regulation, or of any requirement of any national securities
exchange upon which the Common Stock may be listed. The Corporation will not
take any action which results in any adjustment of the Series A Conversion
Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion
Price, Series E Conversion Price, Series F Conversion Price, Series G Conversion
Price or Series H Conversion Price if the total number of shares of Common Stock
issued and issuable after such action upon conversion of the Convertible
Preferred Stock would exceed the total number of shares of Common Stock then
authorized by the Certificate of Incorporation.
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<PAGE>
6K. No Reissuance of Convertible Preferred Stock. Shares of Convertible
--------------------------------------------
Preferred Stock which are converted into shares of Common Stock as provided
herein shall not be reissued.
6L. Issue Tax. The issuance of certificates for shares of Common Stock
---------
upon conversion of Convertible Preferred Stock shall be made without charge to
the holders thereof for any issuance tax in respect thereof, provided that the
Corporation shall not be required to pay any tax 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 Convertible Preferred Stock which is
being converted.
6M. Closing of Books. The Corporation will at no time close its transfer
----------------
books against the transfer of any Convertible Preferred Stock or of any shares
of Common Stock issued or issuable upon the conversion of any shares of
Convertible Preferred Stock in any manner which interferes with the timely
conversion of such Convertible Preferred Stock, except as may otherwise be
required to comply with applicable securities laws.
6N. Definition of Common Stock. As used in this paragraph 6, the term
--------------------------
"Common Stock" shall mean and include the Corporation's authorized Common Stock,
par value $.0001 per share, as constituted on the date of filing of these terms
of the Convertible Preferred Stock, and shall also include any capital stock of
any class of the Corporation thereafter authorized which shall not be limited to
a fixed sum or percentage in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation; provided
that the shares of Common Stock receivable upon conversion of shares of
Convertible Preferred Stock shall include only shares designated as Common Stock
of the Corporation on the date of filing of this instrument, or in case of any
reorganization or reclassification of the outstanding shares thereof, the stock,
securities or assets provided for in subparagraph 6G.
6O. Mandatory Conversion. If at any time the Corporation shall effect a
--------------------
firm commitment underwritten public offering of shares of Common Stock in which
the aggregate price paid for such shares by the public shall be at least
$7,000,000, then effective upon the closing of the sale of such shares by the
Corporation pursuant to such public offering, all outstanding shares of Series D
Convertible Preferred Stock shall automatically convert to shares of Common
Stock on the basis set forth in this paragraph 6. If at any time the
Corporation shall effect a firm commitment underwritten public offering of
shares of Common Stock in which the aggregate price paid for such shares by the
public shall be at least $25,000,000 and the public offering price per share
shall be at least $1.50 (as adjusted for any combination, division, subdivision,
stock split, reverse stock splits or similar event relating to the Common Stock)
(a "Qualified Public Offering"), then effective upon the closing of the sale of
such shares by the Corporation pursuant to such public offering, all outstanding
shares of Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock, Series C Convertible Preferred Stock, Series D Convertible Preferred
Stock, Series E Convertible Preferred Stock, Series F Convertible Preferred
Stock and Series G Convertible Preferred Stock shall automatically convert to
shares
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<PAGE>
of Common Stock on the basis set forth in this paragraph 6. If at any time the
Corporation shall effect a firm commitment underwritten public offering of
shares of Common Stock in which the aggregate price paid for such shares by the
public shall be at least $25,000,000 and the public offering price per share
shall be at least $2.85 (as adjusted for any combination, division, subdivision,
stock split, reverse stock split or similar event relating to the Common Stock)
(a "Series H Qualified Public Offering"), then effective upon the closing of the
sale of such shares by the Corporation pursuant to such public offering, all
outstanding shares of Series H Convertible Preferred Stock shall automatically
convert to shares of Common Stock on the basis set forth in this paragraph 6. In
the event that the holders of 66 2/3% of shares of Series H Convertible
Preferred Stock so consent, all outstanding shares of Series H Convertible
Preferred Stock shall automatically convert to shares of Common Stock on the
basis set forth in this paragraph 6. Holders of shares of Series D Convertible
Preferred Stock or any other Convertible Preferred Stock so converted may
deliver to the Corporation at its principal office (or such other office or
agency of the Corporation as the Corporation may designate by notice in writing
to such holders) during its usual business hours, the certificate or
certificates for the shares so converted. As promptly as practicable thereafter,
the Corporation shall issue and deliver to such holder a certificate or
certificates for the number of whole shares of Common Stock to which such holder
is entitled, together with any cash dividends and payment in lieu of fractional
shares to which such holder may be entitled pursuant to subparagraph 6C. Until
such time as a holder of shares of Series D Convertible Preferred Stock or any
other Convertible Preferred Stock shall surrender his or its certificates
therefor as provided above, such certificates shall be deemed to represent the
shares of Common Stock to which such holder shall be entitled upon the surrender
thereof.
7. Redemption. The shares of Convertible Preferred Stock shall be redeemed as
----------
follows:
7A. Optional Redemption. On or after March 1, 2003, the holders of sixty
-------------------
percent (60%) of the Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock then outstanding, taken
as a whole, may require the Corporation to redeem from each such holder of
shares of Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock and/or Series C Convertible Preferred Stock, all or any portion of the
shares of Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock and/or Series C Convertible Preferred Stock then held by such holders by
delivering a notice to the Corporation thereof. The Corporation shall give
prompt written notice of any such election to all other holders of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock who are entitled to require redemption hereunder at
the time of such notice within five (5) business days after receipt of notice
thereof, and each such holder shall have until ten (10) business days after
receipt of such second notice, to request redemption (by giving written notice
to the Corporation) of all or any portion of such Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock and/or Series C Convertible
Preferred Stock owned by such holder.
On or after March 1, 2005, the holders of sixty percent (60%) of the Series
D Convertible Preferred Stock then outstanding may require the Corporation to
redeem from
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<PAGE>
each such holder of shares of Series D Convertible Preferred Stock, all or any
portion of the shares of Series D Convertible Preferred Stock then held by such
holders by delivering a notice to the Corporation thereof. The Corporation shall
give prompt written notice of any such election to all other holders of Series D
Convertible Preferred Stock who are entitled to require redemption hereunder at
the time of such notice within five (5) business days after receipt of notice
thereof, and each such holder shall have until ten (10) business days after
receipt of such second notice, to request redemption (by giving written notice
to the Corporation) of all or any portion of such Series D Convertible Preferred
Stock owned by such holder.
On or after March 1, 2003, the holders of sixty percent (60%) of the Series
E Convertible Preferred Stock then outstanding may require the Corporation to
redeem from each such holder of shares of Series E Convertible Preferred Stock,
all or any portion of the shares of Series E Convertible Preferred Stock then
held by such holders by delivering a notice to the Corporation thereof. The
Corporation shall give prompt written notice of any such election to all other
holders of Series E Convertible Preferred Stock who are entitled to require
redemption hereunder at the time of such notice within five (5) business days
after receipt of notice thereof, and each such holder shall have until ten (10)
business days after receipt of such second notice, to request redemption (by
giving written notice to the Corporation) of all or any portion of such Series E
Convertible Preferred Stock owned by such holder.
On or after March 1, 2003, the holders of sixty percent (60%) of the Series
F Convertible Preferred Stock then outstanding may require the Corporation to
redeem from each such holder of shares of Series F Convertible Preferred Stock,
all or any portion of the shares of Series F Convertible Preferred Stock then
held by such holders by delivering a notice to the Corporation thereof. The
Corporation shall give prompt written notice of any such election to all other
holders of Series F Convertible Preferred Stock who are entitled to require
redemption hereunder at the time of such notice within five (5) business days
after receipt of notice thereof, and each such holder shall have until ten (10)
business days after receipt of such second notice, to request redemption (by
giving written notice to the Corporation) of all or any portion of such Series F
Convertible Preferred Stock owned by such holder.
On or after March 1, 2003, the holders of sixty percent (60%) of the Series
G Convertible Preferred Stock then outstanding may require the Corporation to
redeem from each such holder of shares of Series G Convertible Preferred Stock,
all or any portion of the shares of Series G Convertible Preferred Stock then
held by such holders by delivering a notice to the Corporation thereof. The
Corporation shall give prompt written notice of any such election to all other
holders of Series G Convertible Preferred Stock who are entitled to require
redemption hereunder at the time of such notice thereof, and each such holder
shall have until ten (10) business days after receipt of such second notice, to
request redemption (by giving written notice to the Corporation) of all or any
portion of such Series G Convertible Preferred Stock owned by such holder.
On or after March 1, 2003, the holders of sixty percent (60%) of the Series
H Convertible Preferred Stock then outstanding may require the Corporation to
redeem from
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<PAGE>
each such holder of shares of Series H Convertible Preferred Stock, all or any
portion of the shares of Series H Convertible Preferred Stock then held by such
holders by delivering a notice to the Corporation thereof. The Corporation shall
give prompt written notice of any such election to all other holders of Series H
Convertible Preferred Stock who are entitled to require redemption hereunder at
the time of such notice thereof, and each such holder shall have until ten (10)
business days after receipt of such second notice, to request redemption (by
giving written notice to the Corporation) of all or any portion of such Series H
Convertible Preferred Stock owned by such holder.
Upon receipt of such election(s), the Corporation shall be obligated to
redeem the aggregate number of shares specified therein within 30 days after the
Corporation's receipt of such election(s) (the "Redemption Date") and according
to the Redemption Mechanics specified in paragraph 7C below.
7B. Redemption Price and Payment. The Convertible Preferred Stock to be
----------------------------
redeemed on the Redemption Date shall be redeemed by paying for each share in
cash an amount equal to, with respect to a share of Series A Convertible
Preferred Stock, $.25 per share, with respect to a share of Series B Convertible
Preferred Stock, $.42 per share, with respect to a share of Series C Convertible
Preferred Stock, $.70 per share, with respect to a share of Series D Convertible
Preferred Stock, $1.25 per share, with respect to a share of Series E
Convertible Preferred Stock, $.75 per share, with respect to a share of Series F
Convertible Preferred Stock, $1.00 per share, with respect to a share of Series
G Convertible Preferred Stock, $1.00 per share and with respect to a share of
Series H Convertible Preferred Stock, $1.53 per share, plus in the case of each
share, an amount equal to all dividends, excluding Accruing Dividends, declared
but unpaid thereon, computed to the Redemption Date, such amount being referred
to as the "Redemption Price." Such payment shall be made in full on the
Redemption Date to the holders entitled thereto.
7C. Redemption Mechanics. At least 20 but not more than 30 days prior to
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the Redemption Date, written notice (the "Redemption Notice") shall be given by
the Corporation by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, to each holder (at the close of business
on the business day next preceding the day on which the Redemption Notice is
given) of shares of Convertible Preferred Stock requesting redemption, notifying
such holder of the Redemption and specifying the Redemption Price, the
Redemption Date and the place where said Redemption Price shall be payable. The
Redemption Notice shall be addressed to each redeeming holder at his address as
shown by the records of the Corporation. From and after the close of business
on the Redemption Date, unless there shall have been a default in the payment of
the Redemption Price, all rights of redeeming holders of shares of Convertible
Preferred Stock (except the right to receive the Redemption Price) shall cease
with respect to such shares, and such shares shall not thereafter be transferred
on the books of the Corporation or be deemed to be outstanding for any purpose
whatsoever. If the funds of the Corporation legally available for redemption of
shares of Convertible Preferred Stock on the Redemption Date are insufficient to
redeem the total number of all of the shares of Convertible Preferred Stock to
be redeemed, the holders of such shares of Convertible Preferred
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Stock shall share ratably in any funds legally available for redemption of such
shares according to the respective amounts which would be payable with respect
to the full number of shares owned by them if all such outstanding shares were
redeemed in full. The shares of Convertible Preferred Stock not redeemed shall
remain outstanding and entitled to all rights and preferences provided herein.
At any time thereafter when additional funds of the Corporation are legally
available for the redemption of such shares of Convertible Preferred Stock, such
funds will be used, at the end of the next succeeding fiscal quarter, to redeem
the balance of such shares, or such portion thereof for which funds are then
legally available, on the basis set forth above.
7D. Redeemed or Otherwise Acquired Shares to be Retired. Any shares
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of Convertible Preferred Stock redeemed pursuant to this paragraph 7 or
otherwise acquired by the Corporation in any manner whatsoever shall be canceled
and shall not under any circumstances be reissued; and the Corporation may from
time to time take such appropriate corporate action as may be necessary to
reduce accordingly the number of authorized shares of Convertible Preferred
Stock.
8. Amendments. No provision of the terms of a series of Convertible
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Preferred Stock (other than the Series E Convertible Preferred Stock) may be
amended, modified or waived without the written consent or affirmative vote of
the holders of at least two-thirds of the then outstanding shares of such series
of Convertible Preferred Stock. No provision of the terms of the Series E
Convertible Preferred Stock may be amended, modified or waived without the
written consent or affirmative vote of the holders of at least seventy percent
(70%) of the then outstanding shares of Series E Convertible Preferred Stock.
D. QUALIFIED PUBLIC OFFERING
-------------------------
In the event of a Series H Qualified Public Offering, then, effective upon
the closing of the sales of shares of Common Stock of the Corporation pursuant
to such Series H Qualified Public Offering, (i) the first paragraph of this
FOURTH Article of this Amended and Restated Certificate of Incorporation of
Adolor Corporation shall be replaced in its entirety with the following:
FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is 100,000,000 shares,
consisting of 99,000,000 shares of Common Stock with a par value of $.0001
per share (the "Common Stock") and 1,000,000 shares of Preferred Stock with
a par value of $.01 per share (the "Preferred Stock").
and (ii) Sections B and C of this FOURTH Article of this Amended and Restated
Certificate of Incorporation of Adolor Corporation shall be replaced in their
entirety with the following:
B. PREFERRED STOCK
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1. Issue in Series. Preferred Stock may be issued from time to time in one or
---------------
more series, each such series to have the terms stated herein and in the
resolution of the board of directors of the Corporation providing for its issue.
All shares of any one series of Preferred Stock will be identical, but shares of
different series of Preferred Stock need not be identical or rank equally except
insofar as provided by law or herein.
2. Creation of Series. The board of directors will have authority by
------------------
resolution to cause to be created one or more series of Preferred Stock, and to
determine and fix with respect to each series prior to the issuance of any
shares of the series to which such resolution relates:
2A. The distinctive designation of the series and the number of shares
which will constitute the series, which number may be increased or decreased
(but not below the number of shares then outstanding) from time to time by
action of the board of directors;
2B. The dividend rate and the times of payment of dividends on the shares
of the series, whether dividends will be cumulative, and if so, from what date
or dates;
2C. The price or prices at which, and the terms and conditions on which,
the shares of the series may be redeemed at the option of the Corporation;
2D. Whether or not the shares of the series will be entitled to the
benefit of a retirement or sinking fund to be applied to the purchase or
redemption of such shares and, if so entitled, the amount of such fund and the
terms and provisions relative to the operation thereof;
2E. Whether or not the shares of the series will be convertible into, or
exchangeable for, any other shares of stock of the Corporation or other
securities, and if so convertible or exchangeable, the conversion price or
prices, or the rates of exchange, and any adjustments thereof, at which such
conversion or exchange may be made, and any other terms and conditions of such
conversion or exchange;
2F. The rights of the shares of the series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation;
2G. Whether or not the shares of the series will have priority over or be
on a parity with or be junior to the shares of any other series or class in any
respect or will be entitled to the benefit of limitations restricting the
issuance of shares of any other series or class having priority over or being on
a parity with the shares of such series in any respect, or restricting the
payment of dividends on or the making of other distributions in respect of
shares of any other series or class ranking junior to the shares of the series
as to dividends or assets, or restricting the purchase or redemption of the
shares of any such junior series or class, and the terms of any such
restriction;
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2H. Whether the series will have voting rights, in addition to any voting
rights provided by law, and, if so, the terms of such voting rights; and
2I. Any other preferences, qualifications, privileges, options and other
relative or special rights and limitations of that series.
3. Dividends. Holders of Preferred Stock shall be entitled to receive, when
---------
and as declared by the board of directors, out of funds legally available for
the payment thereof, dividends at the rates fixed by the board of directors for
the respective series, and no more, before any dividends shall be declared and
paid, or set apart for payment, on Common Stock with respect to the same
dividend period.
4. Preference on Liquidation. In the event of the voluntary or involuntary
-------------------------
liquidation, dissolution or winding up of the Corporation, holders of each
series of Preferred Stock will be entitled to receive the amount fixed for such
series plus, in the case of any series on which dividends will have been
determined by the board of directors to be cumulative, an amount equal to all
dividends accumulated and unpaid thereon to the date of final distribution
whether or not earned or declared before any distribution shall be paid, or set
aside for payment, to holders of Common Stock. If the assets of the Corporation
are not sufficient to pay such amounts in full, holders of all shares of
Preferred Stock will participate in the distribution of assets ratably in
proportion to the full amounts to which they are entitled or in such order or
priority, if any, as will have been fixed in the resolution or resolutions
providing for the issue of the series of Preferred Stock. Neither the merger
nor consolidation of the Corporation into or with any other corporation, nor a
sale, transfer or lease of all or part of its assets, will be deemed a
liquidation, dissolution or winding up of the corporation within the meaning of
this paragraph except to the extent specifically provided for herein.
5. Redemption. The Corporation, at the option of the board of directors, may
----------
redeem all or part of the shares of any series of Preferred Stock on the terms
and conditions fixed for such series.
6. Voting Rights. Except as otherwise required by law, or as otherwise
-------------
determined by the board of directors as to the shares of any series of Preferred
Stock prior to the issuance of any such shares, the holders of Preferred Stock
shall have no voting rights and shall not be entitled to any notice of any
meeting of stockholders.
FIFTH: The Corporation shall have perpetual existence.
SIXTH: The number of directors of the Corporation shall be such as from
time to time shall be fixed by, or in the manner provided, in the by-laws of the
corporation. No election of directors need be ballot unless the by-laws so
provide.
SEVENTH: To the fullest extent that the general corporate law of the State
of Delaware, as it exists on the date hereof or as it may hereafter be amended,
permits the limitation
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or elimination of the liability of the directors, no director of the Corporation
shall be liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director. No amendment to or repeal of this
Article shall apply to or have any effect on liability or alleged liability of
any director of the Corporation for or with respect to any acts or omissions of
such director occurring prior to such amendment or repeal.
EIGHTH: The Corporation shall, to the fullest extent permitted by
subsection 145 of the General Corporation Law of the State of Delaware, as the
same may be amended and supplemented, indemnify any and all persons whom it
shall have power to indemnify under said section from and against any and all of
the expenses, liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, vote of stockholders, or disinterested directors or
otherwise, both as to action in their official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
NINTH: The Board of Directors shall have power without the assent or
vote of the stockholders to make, alter, amend, change, add to or repeal the by-
laws of the Corporation.
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