<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
BIOS LABORATORIES, INC.
*****
1. The name of the corporation is BIOS Laboratories, Inc.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted
by the corporation is to engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the corporation shall
have authority to issue is seventy-five thousand (75,000) shares of common stock
having a par value of $.001 per share.
5. The name and mailing address of the incorporator is as follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
---- ---------------
<S> <C>
Jack S. Kennedy Robinson & Cole
One Commercial Plaza
Hartford, CT 06103-3597
</TABLE>
6. The corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by
statute, the board of directors is expressly authorized to make, alter or repeal
the bylaws of the corporation.
8. Elections of directors need not be by written ballot unless the
bylaws of the corporation shall so provide.
<PAGE>
9. Meetings of stockholders may be held within or without the State
of Delaware, as the bylaws may provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
board of directors or in the bylaws of the corporation.
10. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all of the stockholders or class of
stockholders, of this corporation, as the case may be, and also on this
corporation.
11. No director shall be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that this provision shall
2
<PAGE>
not limit or eliminate the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or it stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. If there is any amendment or revocation of this
provision, the liability of any director for any action taken prior to the
amendment or revocation will not be affected thereby.
I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 20th day of February, 1992.
/s/ JACK S. KENNEDY
----------------------------------
Jack S. Kennedy
Incorporator
3
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
BIOS Laboratories, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, does hereby
certify:
FIRST: That the Board of Directors of BIOS Laboratories, Inc., by
the unanimous written consent of its members, filed with
the minutes of the board, duly adopted resolutions setting
forth an amendment to the Certificate of Incorporation of
said corporation, declaring said amendment to be advisable
and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolution
setting forth the proposed amendment is as follows:
RESOLVED: That the Certificate of Incorporation of the
Corporation be amended by changing the Fourth
Article thereof so that, as amended said
Article shall be and read as follows:
"The total number of shares of
<PAGE>
stock which the corporation shall have
authority to issue is Seven Hundred
Fifty Thousand (750,000) shares of
common stock having a par value of
$.001 per share."
SECOND: That thereafter, pursuant to a resolution of its Board of
Directors, the annual meeting of the stockholders of said
corporation was duly called and held, upon notice in
accordance with Section 222 of the General Corporation Law
of the State of Delaware at which meeting the necessary
number of shares as required by statute were voted in favor
of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, said BIOS Laboratories, Inc. has caused this
Certificate to be signed by Richard E. Kouri, its President, and attested by
Kevin L. Rakin, its Secretary, this 29 day of August, 1994.
BIOS LABORATORIES, INC.
By /s/ RICHARD E. KOURI
-------------------------
Richard E. Kouri
President
ATTEST:
By /s/ KEVIN L. RAKIN
-------------------------
Kevin L. Rakin, Secretary
-2-
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
BIOS LABORATORIES, INC.
BIOS Laboratories, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said Corporation, adopted the
following resolution proposing and declaring advisable the
following amendment to the Certificate of Incorporation of
said Corporation.
RESOLVED: That the Certificate of Incorporation of the Corporation be
amended by changing the First Article thereof so that, as
amended, said Article shall be and read as follows:
"The name of the corporation is Genaissance Pharmaceuticals,
Inc."
SECOND: That pursuant to a resolution of the Board of Directors, a
special meeting of the stockholders of said corporation was
duly called and held, at which meeting the necessary number of
shares as required by statute were voted in favor of the
amendment.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Section 242(b) of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, BIOS Laboratories, Inc. has caused this Certificate
to be signed by Kevin L. Rakin, its Secretary and Treasurer, to be effective as
of the 20th day of February, 1997.
BIOS LABORATORIES, INC.
BY: /s/ KEVIN L. RAKIN
----------------------------
Name: Kevin L. Rakin
Title: Secretary & Treasurer
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Genaissance Pharmaceuticals, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), does hereby certify:
FIRST: That the Board of Directors of Genaissance Pharmaceuticals,
Inc., by unanimous written consent, duly adopted resolutions,
which were filed with the minutes of the board, setting forth
an amendment to the Certificate of Incorporation of said
corporation, declaring said amendment to be advisable and
directing the shareholders to adopt a resolution for
consideration thereof. The resolution setting forth the
proposed amendment is as follows:
RESOLVED: That the provisions of Article 4 of the Certificate
of Incorporation be amended to read as follows:
"The total number of shares of stock which
the corporation shall have authority to
issue is seven million five hundred thousand
(7,500,000) shares of common stock with
$.001 par value."
SECOND: That thereafter, in lieu of a meeting and vote of the
shareholders, the shareholders of the Corporation have given
their written consent to the amendment by adopting a
resolution in accordance with Section 228 of the General
Corporation Law of the State of Delaware and as a result of
such, the required number of outstanding shares as required by
statute, acted to adopt the amendment, and further, that a
written notice of the consent to
<PAGE>
the amendment has been given as required by Section 228 of the
General Corporation Law of the State of Delaware to every
shareholder entitled to such notice.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, said Genaissance Pharmaceuticals, Inc. has caused
this Certificate to be signed by Gualberto Ruano, its President, and
attested by Kevin L. Rakin, its Secretary, this 11 day of August, 1997.
GENAISSANCE PHARMACEUTICALS, INC.
By /s/ GUALBERTO RUANO
--------------------------------
Gualberto Ruano
President
ATTEST:
By /s/ KEVIN L. RAKIN
--------------------------------
Kevin L. Rakin, Secretary
- 2 -
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
1. This Certificate of Amendment amends the Certificate of
Incorporation of the Corporation, as amended (the "Certificate of
Incorporation"), by amending Article 4 to effect changes in the capital
structure of the Corporation.
2. The text of Article 4 of the Certificate of Incorporation is
amended hereby to read as set forth in Exhibit A attached hereto and hereby made
a part hereof.
3. This Amendment to the Certificate of Incorporation was duly
adopted by vote of the stockholders in accordance with the provisions of Section
242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Gualberto Ruano, its President, and attested to by Kevin L. Rakin, its
Secretary, this 22 day of December, 1997
GENAISSANCE PHARMACEUTICALS, INC.
By: /s/ GUALBERTO RUANO
--------------------------------
Gualberto Ruano
President
Attest:
By: /s/ KEVIN L. RAKIN
--------------------------------
Kevin L. Rakin
Secretary
<PAGE>
EXHIBIT A
Amendment to
Certificate of Incorporation
of
Genaissance Pharmaceuticals, Inc.
pursuant to
Section 242 of the
Delaware General Corporation Law
The Certificate of Incorporation of Genaissance Pharmaceuticals, Inc., a
Delaware corporation, has been amended by striking out the whole of Article 4
thereof as it now exists and substituting new Article 4 to read as follows:
4. The total authorized capital stock of the corporation consists of
17,500,000 shares, of which 7,500,000 are shares of Common Stock, $.001
par value (the "Common Stock"), and 10,000,000 are shares of Preferred
Stock, $.001 par value ("Preferred Stock"). The designations and the
powers, preferences and relative, participating, optional or other
special rights, and the qualifications, limitations or restrictions
thereof, of the Preferred Stock and the Common Stock shall be as follows:
A. The Preferred Stock may be issued, from time to time, in one or more
series, with such designations, voting powers, if any, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be stated
and expressed in the resolution or resolutions providing for the issue of
such series adopted by the Board of Directors. The Board of Directors, in
such resolution or resolutions (a copy of which shall be filed and
recorded as required by law), is also expressly authorized to fix:
(i) the distinctive serial designations and the division of such shares
into series and the number of shares of a particular series, which may be
increased or decreased, but not below the number of shares thereof then
outstanding, by a certificate made, signed, filed and recorded as
required by law;
(ii) the annual dividend rate (or method of determining such rate) for
the particular series, the date or dates upon which such dividends shall
be payable, and the date or dates or method of determining the date or
dates shall be cumulative, if dividends on stock of the particular series
shall be cumulative;
(iii) the price or prices at which, the period or periods within which
and the terms and conditions upon which the shares of such series may be
redeemed, in whole or in part, at the option, if any, of the corporation;
<PAGE>
(iv) the right, if any, of the holders of a particular series or the
corporation to convert such stock into other classes or series of stock
or to exchange such stock for shares of any other class of stock or
series thereof, and the terms and conditions, if any, including the price
or prices or the rate or rates of conversion and the terms and conditions
of any adjustments thereof, of such conversion and the terms and
conditions of any adjustments thereof, of such conversion;
(v) the obligation, if any, of the corporation to purchase and retire and
redeem, in whole or in part, shares of a particular series as a sinking
fund or redemption or purchase account, the terms thereof and the
redemption price or prices per share for such series redeemed pursuant to
the sinking fund or redemption account;
(vi) the voting rights, if any, of the shares of such series in addition
to those required by law, including the number of votes per share and any
requirement for the approval by the holders of up to two thirds of all
Preferred Stock, or of the shares of one or more series, or of both, as a
condition to specified corporate action or amendments to the certificate
of incorporation;
(vii) the ranking of the shares of the series as compared with shares of
other series of the Preferred Stock in respect of the right to receive
payments out of the assets of the corporation upon voluntary or
involuntary liquidation, dissolution or winding up of the corporation;
and
(viii) any other rights, obligations, or provisions which may be so
determined to the fullest extent permitted by Delaware law.
All shares of any one series of Preferred Stock shall be alike in every
particular and all series shall rank equally and be identical in all
respects except in so far as they may vary with respect to the matters
which the Board of Directors is hereby expressly authorized to determine
in the resolution or resolutions providing for the issue of any series of
the Preferred Stock.
B. Except as specified otherwise in any Certificate of Designation, all
shares of Preferred Stock shall rank senior to the Common Stock in
respect of the right to receive dividends and the right to receive
payments out of the assets of the corporation upon voluntary or
involuntary liquidation, dissolution or winding up of the corporation.
The shares of any one series of Preferred Stock shall be identical with
each other in all respects except as to the dates from and after which
dividends thereon shall be cumulative. All shares of Preferred Stock
redeemed, purchased or otherwise acquired by the corporation (including
shares surrendered for conversion) shall be canceled and thereupon
restored to the status of authorized but unissued Preferred Stock
undesignated as to series.
C. All shares of Common Stock shall be alike in every particular and
shall rank equally and be identical in all respects.
- 2 -
<PAGE>
GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
OTHER SPECIAL RIGHTS AND QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS OF PREFERRED STOCK
Pursuant to Sections 151 and 242 of the
General Corporation Law of the State of Delaware
Genaissance Pharmaceuticals, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), hereby certifies
that the following resolution was duly adopted by the Board of Directors of the
Corporation pursuant to authority conferred upon the Board of Directors by the
provisions of Article 4 of the Amended Certificate of Incorporation of the
Corporation (referred to in the following designations as the "CERTIFICATE OF
INCORPORATION"), which authorize the issuance of 10,000,000 shares of a class of
capital stock designated as preferred stock, $.001 par value (the "PREFERRED
STOCK"), by action of the Board of Directors by unanimous written consent dated
December 20, 1997.
RESOLVED, that:
there is hereby designated a series of the Preferred Stock (as that term is
defined in Article 4 of the Amended Certificate of Incorporation of the
Corporation), consisting of 187,500 shares, which will be issued in a
series entitled "SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK" (referred
to as the "SERIES A PREFERRED STOCK"), and that the preferences and
privileges, relative, participating, optional and other special rights, and
qualifications, limitations and restrictions of all shares of such series,
in addition to those set forth in the Amended Certificate of Incorporation
of the Corporation, are affixed to such Series A Preferred Stock as set
forth in the attached EXHIBIT I:
<PAGE>
-2-
EXHIBIT I
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
1. DEFINITIONS. As used in this Certificate of Designations, the following
terms have the meanings specified below:
"BOARD" shall mean the Corporation's Board of Directors.
"BUSINESS DAY" shall mean any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of Connecticut) on which banks are
authorized to be open for business in Hartford, Connecticut.
"COMMON STOCK" shall mean the Common Stock, $.001 par value, of the
Corporation.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"EXCLUDED STOCK" shall mean shares of Common Stock issued by the
Corporation:
(i) as a stock dividend or upon any stock split or other subdivision
or combination of the outstanding shares of Common Stock;
(ii) up to an aggregate 857,000 shares of Common Stock issued or
issuable to employees pursuant to an employee stock option plan
approved by the Board of Directors of the Corporation;
(iii) upon conversion of the Series A Preferred Stock; or
(iv) as approved in writing as "EXCLUDED STOCK" by the holders of not
less than 66 2/3% in voting power of the Series A Preferred Stock at
the time outstanding.
"FAIR MARKET VALUE" at any date of one share of Common Stock shall be
deemed to be the average of the daily closing prices for the 30 consecutive
business days ending no more than five days before the day in question (as
adjusted for any stock dividend, split-up, combination or reclassification
that took effect during such 30 business day period). The closing price for
each day shall be the last reported sales price regular way or, in case no
such reported sales took place on such day, the average of the last
reported bid and asked prices regular way, in either case on the principal
national securities exchange on which the Common Stock is listed or
admitted to trading (or if the Common Stock is not at the time listed or
admitted for trading on any such exchange, then such price as shall be
equal to the average of the last reported bid and asked prices, as reported
by the Nasdaq on such day, or if, on any day in question, the security
shall not be quoted on the Nasdaq, then such price shall be equal to the
last reported bid and asked prices on such day as reported by
<PAGE>
-3-
the National Quotation Bureau, Inc. or any similar reputable quotation and
reporting service, if such quotation is not reported by the National
Quotation Bureau, Inc.); PROVIDED, HOWEVER, that if the Common Stock is not
traded in such manner that the quotations referred to in this clause are
available for the period required hereunder, the Fair Market Value shall be
determined by a nationally recognized independent investment banking firm
selected mutually by the holders of more than 50% of the voting power of
the Series A Preferred Stock then outstanding and the Corporation (or if
such selection cannot be made, by a nationally recognized independent
banking firm selected by the American Arbitration Association in accordance
with its rules).
"HOLDER" shall mean a holder of shares of Series A Preferred Stock, as
applicable, as reflected in the stock records of the Corporation; and each
Holder's address shall be as it appears in the stock records of the
Corporation.
"JUNIOR SECURITIES" shall mean, as to the Series A Preferred Stock, each
other class or series of capital stock (including, without limitation, each
class of common stock of the Corporation and each other series of Preferred
Stock) or other equity interests (including, without limitation, warrants,
rights, calls or options exercisable for or convertible into such capital
stock or equity interests) in the Corporation.
"LIQUIDATION EVENT" shall mean, a merger, consolidation, liquidation,
dissolution, winding up of the affairs of the Corporation or sale of all or
substantially all of the assets of the Corporation as an entirety to a
third party or parties, whether voluntary or involuntary; provided,
however, that a merger or consolidation shall not be considered a
Liquidation Event if the Corporation is the survivor or continuing
corporation of such merger or consolidation and as a result thereof there
is no change in the Common Stock or Series A Preferred Stock and that none
of the above events shall be considered to be a Liquidation Event if the
holders of at least seventy-five percent (75%) of the voting power of the
Series A Preferred Stock then outstanding elect, by vote or written
consent, that such event shall not be a Liquidation Event.
"NEW SECURITIES" shall mean any capital stock (including, without
limitation, each class of common stock of the Corporation, any additional
shares of Series A Preferred Stock and each other series of Preferred
Stock) or other equity interests (including, without limitation, warrants,
rights, calls or options exercisable for or convertible into such capital
stock or equity interests) in the Corporation issued after the Series A
Initial Issue Date; provided, however, that such term shall not include (i)
securities offered to the public pursuant to a registration statement filed
in accordance with the provisions of the Securities Act; (ii) securities
issued (x) pursuant to the approval of a majority of the members of the
Board of Directors, (y) in connection with the acquisition of another
corporation by the Company by merger, purchase of substantially all assets
or other reorganization whereby the Company owns, upon consummation of such
acquisition, greater than fifty percent (50%) of the voting power to elect
the directors of such corporation or (z) in connection with joint ventures
or corporate collaborations; (iii)
<PAGE>
-4-
securities issued to consultants, vendors, lenders, equipment lessors,
landlords and independent directors as consideration to such persons in
such capacities; (iv) any securities issued pursuant to any stock option
plan, stock purchase or stock bonus agreement existing on the Series A
Initial Issuance Date; (v) securities issued pursuant to any other stock
option plan, stock purchase or stock bonus arrangement, or grant, which are
approved by the holders of at least sixty-six and two-thirds percent
(66 2/3%) of the voting power of the Series A Preferred Stock; and (v)
securities issued in connection with research agreements to which the
Company is a party, including, but not limited to, collaboration and
licensing agreements.
"QUALIFIED IPO" shall mean the consummation of a firm commitment
underwritten public offering of shares of Common Stock registered under the
Securities Act which results in aggregate gross cash proceeds to the
Corporation of not less than TEN MILLION DOLLARS ($10,000,000) and pursuant
to which the offering price per share is equal to or greater than two and
one half times the Series A Original Purchase Price (adjusted for any
Recapitalization Event).
"RECAPITALIZATION EVENT" shall mean any stock splits, stock dividends,
recapitalizations, reclassifications and similar events.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES A ACCRUED DIVIDENDS" shall mean Series A Full Cumulative Dividends
to the date of determination, less the amount of all dividends paid
pursuant to Section 3 upon the relevant shares of Series A Preferred Stock.
"SERIES A CONVERSION PRICE" shall initially mean $4.00; PROVIDED, HOWEVER,
that the Series A Conversion Price shall be subject to adjustment as set
forth in Section 7(a)(iv).
"SERIES A EVENT OF CONVERSION" shall mean the consummation of a Qualified
IPO.
"SERIES A FULL CUMULATIVE DIVIDENDS" shall mean, as to any share of Series
A Preferred Stock (whether or not in respect of which such term is used
there shall have been net profits or net assets of the Corporation legally
available for the payment of such dividends), that amount which shall be
equal to dividends at the full rate fixed for the Series A Preferred Stock
as provided herein for the period of time elapsed from the Series A Initial
Issuance Date to the date as of which Series A Full Cumulative Dividends
are to be computed.
"SERIES A HOLDER" shall mean a holder of shares of Series A Preferred
Stock.
"SERIES A INITIAL ISSUANCE DATE" shall mean December 22nd, 1997.
<PAGE>
-5-
"SERIES A LIQUIDATION AMOUNT" shall mean an amount in cash or property
(valued at its Fair Market Value), or a combination thereof, equal to $4.00
per share of Series A Preferred Stock held by a Holder (which per-share
amount shall be subject to equitable adjustment whenever there shall occur
a stock split, combination, reclassification or other similar event
involving the Series A Preferred Stock or the Common Stock) plus all Series
A Accrued Dividends.
"SERIES A ORIGINAL PURCHASE PRICE" shall mean $4.00 per share of Series A
Preferred Stock.
"SERIES A REDEMPTION DATE" shall have the meaning set forth in Section 4
hereof.
"SERIES A REDEMPTION PRICE" shall have the meaning set forth in Section 4
hereof.
2. NUMBER OF SHARES. The designation of the series of Preferred Stock
provided for herein shall be the Series A Redeemable Convertible Preferred Stock
(hereinafter referred to as the "SERIES A PREFERRED STOCK"), and the number of
authorized shares constituting Series A Preferred Stock is 187,500.
3. DIVIDENDS. The holder of each share of Series A Preferred Stock shall be
entitled to receive, before any dividends shall be declared and paid upon or set
aside for the Junior Securities, when and as declared by the Board of Directors
of the Corporation, out of funds legally available for that purpose, dividends
in cash at the rate per annum per share (the "SERIES A PREFERRED DIVIDEND RATE")
equal to 8% of the Series A Original Purchase Price, adjusted, as applicable,
for any Recapitalization Event, payable upon the earliest of (a) liquidation,
dissolution or winding-up of the Corporation in accordance with Section 4
hereof, (b) upon redemption in accordance with Section 3 hereof or (c) upon the
Series A Event of Conversion. Until December 31, 2000, the Corporation shall
have the option to make any such payment in shares of Common Stock, and in the
event such dividends are paid in Common Stock, for purposes of computing the
number of shares of Common Stock to be issued, the price of the Common Stock
paid to any holder of Series A Preferred Stock shall be valued at the then
Series A Conversion Price. Dividends on shares of Series A Preferred Stock shall
be cumulative from the Series A Initial Issuance Date (whether or not there
shall be net profits or net assets of the Corporation legally available for the
payment of such dividends), so that, if at any time Series A Full Cumulative
Dividends upon the Series A Preferred Stock shall not have been paid or declared
and a sum sufficient for payment thereof set apart, the amount of the deficiency
in such dividends shall be fully paid or dividends in such amount shall be
declared on the shares of the Series A Preferred Stock and a sum sufficient for
the payment thereof shall be set apart for such payment, before any dividend
shall be declared or paid or any other distribution ordered or made upon any
Junior Securities and before any sum or sums shall be set aside for or applied
to the purchase or redemption of Junior Securities. With respect to rights to
dividends, the Series A Preferred Stock shall rank prior to the Common Stock.
All dividends declared upon the Series A Preferred Stock shall be declared pro
rata per share. All payments due under this Section to any holder of shares of
Series A Preferred Stock shall be made to the nearest cent.
<PAGE>
-6-
4. REDEMPTION.
(a) REDEMPTION UPON A LIQUIDATION EVENT. (i) In connection and
concurrently with a Liquidation Event the Corporation shall (to the extent
allowed by law) redeem, at the option of the holders of at least seventy-five
percent (75%) of the voting power of the Series A Preferred Stock then
outstanding, exercised by delivery of written notice to the Corporation by such
holders at least 15 days prior to the date of the consummation of the
Liquidation Event (any date upon which Series A Preferred Stock is to be
redeemed pursuant to this Section 4 being hereinafter referred to in this
context as a "SERIES A REDEMPTION DATE"), all the shares of Series A Preferred
Stock then outstanding, out of funds legally available therefor. The amount per
share payable upon any redemption of shares of Series A Preferred Stock pursuant
to this subsection shall be equal to the Series A Redemption Price, as
determined below. The Corporation shall deliver to each holder of Series A
Preferred Stock, not later than 30 days prior to the consummation of a
Liquidation Event, notice of such proposed Liquidation Event, including the date
on which such Liquidation Event is expected to be consummated. To the extent
that one or more redemptions and/or a liquidation are occurring concurrently and
the Corporation is legally prohibited from effecting all such redemptions and/or
liquidation, any redemption of the Series A Preferred Stock shall be deemed to
occur simultaneously and prior to any other redemptions and/or liquidations.
(ii) The amount per share payable upon any redemption of shares of
Series A Preferred Stock pursuant to this subsection shall be an amount equal to
the Series A Original Purchase Price plus all Series A Accrued Dividends (the
"LIQUIDATION REDEMPTION PRICE").
(b) SERIES A ANNUAL REDEMPTION. The Corporation shall (to the extent
allowed by law) redeem, at the option of the holders of at least seventy-five
percent (75%) of the voting power of the Series A Preferred Stock then
outstanding, exercised by delivery of written notice to the Corporation by such
holders at least 60 days prior to the applicable redemption date, the following
shares of Series A Preferred Stock on the following dates, out of funds legally
available therefor:
(i) at any time on or after December ___, 2002, one-third of the
shares of the Series A Preferred Stock then outstanding.
(ii) at any time on or after December ___, 2003, an additional number
of shares of Series A Preferred Stock equal to one-third of the shares of the
Series A Preferred Stock outstanding as of December ___, 2002.
(iii) at any time on or after December ___, 2004, all outstanding
shares of Series A Preferred Stock.
The amount per share payable upon any redemption of shares of Series A Preferred
Stock pursuant to this subsection shall be an amount equal to the Series A
Original Purchase Price plus (a) all Series A Accrued Dividends AND (b) an
amount equal to a 12% cumulative, annual return on (1) the Series A Original
Purchase Price from the Series A Initial Issuance Date to the date of
<PAGE>
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payment and (2) all Series A Accrued Dividends from the date of accrual under
Section 3 to the date of payment (the "SCHEDULED REDEMPTION PRICE" and
collectively with the Liquidation Redemption Price, the "SERIES A REDEMPTION
PRICE").
(c) PRO RATA. If, on any Series A Redemption Date, fewer than all shares
of Series A Preferred Stock then outstanding are to be redeemed in accordance
with this Section, the shares to be redeemed shall be allocated pro rata among
the Holders of Series A Preferred Stock and the Redemption Notice mailed to each
Holder shall specify the number of shares to be redeemed from such Holder.
Notwithstanding the delivery of a Redemption Notice, Series A Holders subject to
redemption may convert such shares pursuant to Section 7 on or before the
Redemption Date by delivering written notice thereof to the Corporation not
later than ten days prior to the Redemption Date.
(d) PAYMENT OF SERIES A REDEMPTION PRICE; TERMINATION OF RIGHTS. On any
Series A Redemption Date, the applicable Series A Redemption Price in respect of
the shares represented by the certificate or certificates surrendered to the
Corporation by the Holder thereof pursuant to the Redemption Notice shall be
paid to the order of the person whose name appears on such certificate or
certificates. Each surrendered certificate shall be canceled and retired and a
new certificate, representing the remaining, unredeemed shares of Series A
Preferred Stock, if any, shall be issued to the Holder of such shares. On any
Series A Redemption Date, the rights of a Holder with respect to shares redeemed
shall cease, other than such Holder's right to payment of the Series A
Redemption Price as of the Series A Redemption Date, upon surrender of the
certificate or certificates.
5. LIQUIDATION. Upon a Liquidation Event, the Series A Holders shall be
entitled, before any assets of the Corporation shall be distributed among or
paid over to the holders of Junior Securities, but after distribution of such
assets among, or payment thereof over to, creditors of the Corporation, to
receive from the assets of the Corporation available for distribution to
stockholders, the Series A Liquidation Amount. If the assets of the Corporation
legally available for distribution shall be insufficient to permit the payment
in full of the Series A Liquidation Amount to the Series A Holders, then the
entire assets of the Corporation legally available for distribution shall be
distributed ratably among the Series A Holders in proportion to the respective
amounts which would have been payable upon such Liquidation Event on such shares
of Series A Preferred Stock if all amounts payable thereon had been paid in
full. In the event that such distribution of assets is other than in cash, such
distribution of cash and other assets (including securities) shall be made
ratably among the holders of the shares of Series A Preferred Stock based upon
the fair market value of any such assets as determined by a nationally
recognized valuation consultant selected mutually by the holders of a majority
in voting power of the Series A Preferred Stock then outstanding and the
Corporation (or if such selection cannot be made, by a nationally recognized
independent valuation consultant selected by the American Arbitration
Association in accordance with its rules). In the event of any liquidation,
dissolution or winding-up of the Corporation, after payment shall have been made
to the holders of shares of Series A Preferred Stock of the full amount to which
they shall be entitled as aforesaid, the holders of any Junior Stock and the
holders of the Series A Preferred Stock shall be entitled to
<PAGE>
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participate equally, on an as-converted basis in the case of the Series A
Preferred Stock and any Junior Stock convertible into Common Stock, in all
remaining assets of the Corporation available for distribution to its
stockholders. The provisions of this Section 5 shall not be applicable to the
Series A Preferred Stock if the holders thereof have exercised their rights to
cause the Series A Preferred Stock to be redeemed pursuant to Section 4(a)
hereof in connection with such Liquidation Event, and such shares have been so
redeemed.
6. VOTING.
(a) VOTES GENERALLY WITH COMMON STOCK. In addition to the rights specified
in Sections 6(b) and (c) below and any other rights provided in the
Corporation's By-Laws, the shares of Series A Preferred Stock shall entitle each
Holder thereof to such number of votes as shall equal the number of shares of
Common Stock (rounded to the nearest whole number) into which the shares of
Series A Preferred Stock held by such Holder are then convertible pursuant to
Section 7 and shall entitle each such Holder to vote on all matters as to which
holders of Common Stock shall be entitled to vote, in the same manner and with
the same effect as such holders of Common Stock, voting together with the
holders of Common Stock as one class.
(b) DIRECTOR ELECTION RIGHT.
(i) Until the Series A Event of Conversion, the holders of a majority
of the outstanding shares of Series A Preferred Stock, voting as a
separate class, shall be entitled to elect one director of the
Corporation (the "SERIES A DIRECTOR"). At any annual or special
meeting of the Corporation (or in a written consent in lieu thereof)
held for the purpose of electing directors, the presence in person or
by proxy (or by written consent) of the holders of a majority of the
outstanding shares of Series A Preferred Stock shall constitute a
quorum for the election of the Series A Director. The holders of a
majority of the shares of Series A Preferred Stock present in person
or by proxy at any meeting relating to the election of directors
(calculated after the determination of a quorum) shall then be
entitled to elect the Series A Director.
(ii) The Series A Director may be removed with or without cause during
his or her term of office by the affirmative vote or written consent
of the holders of a majority of the outstanding shares of Series A
Preferred Stock. A vacancy in the seat held by the Series A Director
shall be filled by a vote or written consent of the holders of a
majority of the outstanding shares of Series A Preferred Stock present
in person at any meeting (calculated after the determination of a
quorum as provided above) or by written consent.
(iii) In lieu of their right to elect the Series A Director, the
holders of a majority of the outstanding shares of Series A Preferred
Stock shall have the right to send one representative (without voting
rights) to each meeting of the Board of Directors of the Corporation
and all committees of such Board. The Corporation shall give each
holder of shares of Series A Preferred Stock notice of each such
meeting in the form and manner such notice is given to the
Corporation's directors. The Corporation shall
<PAGE>
-9-
not permit its directors or shareholders to conduct any material
business by written consent without giving as much written notice
thereof (including the matters to be acted upon) to such holders as is
reasonably practicable.
(iv) As long as the holders of Series A Preferred Stock have the right
to elect any directors under this subsection, the Board of Directors
of the Corporation shall have up to seven members, unless the holders
of a majority of the outstanding shares of Series A Preferred Stock
shall consent to a different number.
(c) SEPARATE CLASS VOTE. So long as any shares of the Series A Preferred
Stock are outstanding, the consent of the holders of a majority of all of the
outstanding shares of Series A Preferred Stock, voting as a single and separate
class in person or by proxy, at a special or annual meeting called for the
purpose, or by written consent in lieu of a meeting, shall be required before
the Corporation may:
(i) authorize or issue any class or series of capital stock, ranking
prior to the Series A Preferred Stock with respect to rights to
receive dividends, redemption payments or distributions upon
liquidation or winding up of the Corporation or with respect to
antidilution provisions;
(ii) authorize, declare or distribute any dividend, whether in cash or
in kind, payable to any class or series of the Corporation's common or
preferred stock (except payment of dividends on Series A Preferred
Stock) or to any other equity security of the Corporation;
(iii) approve any merger, combination, liquidation, dissolution or
sale of all or substantially all of the assets of the Corporation
requiring a vote of the Corporation's stockholders; or
(iv) cancel, repeal or change any of the provisions of this
Certificate of Designations or of any amendment hereto, or of the
Certificate of Incorporation of the Corporation in such a way as to
have a material adverse effect on the powers, preferences or special
rights of shares of the Series A Preferred Stock, except that the
Corporation may issue additional shares of Series A Preferred Stock
and other Preferred Stock, subject to clause (i) above, and make
appropriate changes to this Certificate of Designation and its
Certificate of Incorporation.
<PAGE>
-10-
7. CONVERSION.
(a) OPTIONAL CONVERSION.
(i) The holder of any shares of Series A Preferred Stock shall have
the right, at such holder's option, at any time or from time to time
to convert any or all such holder's shares of Series A Preferred Stock
into such whole number of fully paid and nonassessable shares of
Common Stock as equals (I) the product of (x) the Series A Original
Purchase Price, multiplied by (y) the number of shares of Series A
Preferred Stock being converted, divided by (II) the Series A
Conversion Price (as last adjusted and then in effect) for the shares
of the Series A Preferred Stock being converted, by surrender of the
certificates representing the shares of Series A Preferred Stock so to
be converted in the manner provided Section 7(a)(ii) below. The Series
A Conversion Price shall initially be equal to the Series A Original
Purchase Price; PROVIDED, HOWEVER, that such Series A Conversion Price
shall be subject to adjustment as set forth in Section 7(a)(iv) below.
The holder of any shares of Series A Preferred Stock exercising the
aforesaid right to convert such shares into shares of Common Stock
shall not be entitled to payment of Series A Accrued Dividends with
respect to the shares of Series A Preferred Stock so converted, and
shall be deemed to have waived any such Series A Accrued Dividends
upon such conversion.
(ii) The holder of any shares of Series A Preferred Stock may exercise
such holder's conversion right pursuant to this Section by delivering
to the Corporation during regular business hours at the office of any
transfer agent of the Corporation for the Series A Preferred Stock or
at such other place as may be designated by the Corporation, the
certificate or certificates for the shares to be converted, duly
endorsed or assigned in blank or to the Corporation (if required by
it) accompanied by written notice stating that such holder elects to
convert such shares and stating the name or names (with address) in
which the certificate or certificates for the shares of Common Stock
are to be issued. Conversion shall be deemed to have been effected
with respect to conversion under (a) Section 7(a)(i) above, on the
date when the aforesaid delivery is made and (b) Section 7(b) on the
date of occurrence of a Series A Event of Conversion, as the case may
be, and any such date is referred to herein as the "SERIES A
CONVERSION DATE." As promptly as practicable thereafter the
Corporation shall issue and deliver to or upon the written order of
such holder, to the place designated by such holder, a certificate or
certificates for the number of full shares of Common Stock to which
the such holder is entitled and a check or cash in respect of any
fractional interest in a share of Common Stock, as provided in Section
7(a)(iii) below, payable with respect to the shares of Series A
Preferred Stock so converted up to and including the Series A
Conversion Date. The person in whose names the certificate or
certificates for Common Stock are to be issued shall be deemed to have
become a holder of Common Stock on the applicable Series A Conversion
Date unless the transfer books of the Corporation are closed on that
date, in which event such holder shall be deemed to have become a
holder of Common Stock on the next succeeding date on which the
transfer books are open, but the Series
<PAGE>
-11-
A Preferred Conversion Price shall be that in effect on the Series A
Conversion Date. Upon conversion of only a portion of the number of
shares covered by a certificate representing shares of Series A
Preferred Stock surrendered for conversion, the Corporation shall
issue and deliver to or upon the written order of the holder of the
certificate so surrendered for conversion, at the expense of the
Corporation, a new certificate covering the number of shares of Series
A Preferred Stock representing the unconverted portion of the
certificate so surrendered, which new certificate shall entitle the
holder thereof to dividends on the shares of Series A Preferred Stock
represented thereby to the same extent as if the certificate
theretofore covering such unconverted shares had not been surrendered
for conversion.
(iii) No fractional shares of Common Stock or scrip shall be issued
upon conversion of shares of Series A Preferred Stock. If more than
one share of Series A Preferred Stock shall be surrendered for
conversion at any one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series A
Preferred Stock so surrendered. Instead of any fractional shares of
Common Stock which would otherwise be issuable upon conversion of any
shares of Series A Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fractional interest in an amount equal
to the then current Fair Market Value of a share of Common Stock
multiplied by such fractional interest. Fractional interests shall not
be entitled to dividends, and the holders of a fractional interest
shall not be entitled to any rights as stockholders of the Corporation
in respect of such fractional interest.
(iv) The Series A Conversion Price shall be subject to adjustment from
time to time as follows:
(A) ADJUSTMENTS FOR CERTAIN ISSUANCES. If the Corporation shall
at any time or from time to time after the Series A Initial
Issuance Date issue or be deemed (by virtue of any of the
provisions of Section 7(a)(iv)), to have issued any capital stock
(including, without limitation, each class of common stock of the
Corporation) or other equity interests (including, without
limitation, warrants, rights, calls or options exercisable for or
convertible into such capital stock or equity interests) in the
Corporation, other than Excluded Stock, , without consideration
or for a consideration per share (the "LAST PREFERRED PRICE")
less than the Series A Conversion Price in effect immediately
prior to each such issuance , the Series A Conversion Price in
effect immediately prior thereto shall forthwith be adjusted, as
of the opening of business on the date of such issuance, (I) if
the date of such issuance is on or before the date which is 120
days after the Series A Initial Issuance Date, to a price per
share equal to such Last Preferred Price or (II) if the date of
such issuance is after the date which is 120 days after the
Series A Initial Issuance Date but prior to the date which is 240
days after the Series A Initial Issuance Date, to a price per
share equal to eighty percent (80%) of such Last Preferred Price.
For the purposes of any
<PAGE>
-12-
adjustment of the Series A Conversion Price pursuant to this
clause (A), the provisions of 7(iv)(B)(1) and (2) shall be
applicable:
(B) ADJUSTMENTS FOR DILUTING ISSUANCES UPON CONTINUED
PARTICIPATION. If the Corporation shall at any time or from time
to time after the date which is 240 days after the Series A
Initial Issuance Date issue or be deemed (by virtue of any of the
provisions of Section 7(a)(iv)), to have issued any capital stock
(including, without limitation, each class of common stock of the
Corporation) or other equity interests (including, without
limitation, warrants, rights, calls or options exercisable for or
convertible into such capital stock or equity interests) in the
Corporation, other than Excluded Stock, without consideration or
for a consideration per share (the "LAST ISSUE PRICE") less than
the Series A Conversion Price in effect immediately prior to each
such issuance or deemed issuance, the Series A Conversion Price
in effect immediately prior thereto shall forthwith be adjusted,
as of the opening of business on the date of such issuance or
deemed issuance, to such Last Issue Price.
Notwithstanding the immediately preceding paragraph of this
subsection (B), in the event that a holder of Series A Preferred
Stock has been given written notice pursuant to Section 8 hereof
and the opportunity to purchase the pro rata share (as defined in
Section 8(a) hereof) of stock to be issued without consideration
or for a consideration per share less than the Series A
Conversion Price in effect immediately prior to such issuance or
deemed issuance and does not purchase its entire pro rata share
(as defined in Section 8(a) hereof) of the stock to be issued,
the Series A Conversion Price shall not be reduced for said
issuance pursuant to this subsection. This paragraph shall not
apply to any issuance occurring on or before 240 days from the
Series A Initial Issuance Date.
For the purposes of any adjustment of the Series A Conversion
Price pursuant to this subsection (B), the following provisions
shall be applicable:
(1) In the case of the issuance of stock for cash, the
consideration shall be deemed to be the amount of cash paid
therefor.
(2) In the case of the issuance of stock for a consideration
in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value
thereof as determined in good faith by the Board of
Directors of the Corporation, irrespective of any accounting
treatment; PROVIDED, HOWEVER, that the aggregate fair market
value of such non-cash and cash consideration shall not
exceed the current Fair Market Value of the shares of stock
being issued.
<PAGE>
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(3) In case of the issuance of (i) options to purchase or
rights to subscribe for Common Stock; (ii) securities by
their terms convertible into or exchangeable for Common
Stock; or (iii) options to purchase or rights to subscribe
for such convertible or exchangeable securities:
(a) the aggregate number of shares of Common Stock
deliverable upon exercise of such options to purchase
or rights to subscribe for Common Stock shall be deemed
to have been issued at the time such options or rights
were issued and for a consideration equal to the
consideration (determined in the manner provided in
subdivisions (1) and (2) above), if any, received by
the Corporation upon the issuance of such options or
rights plus the purchase price provided in such options
or rights for the Common Stock covered thereby;
(b) the aggregate number of shares of Common Stock
deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities
were issued or such options or rights were issued and
for a consideration equal to the consideration received
by the Corporation for any such securities and related
options or rights (excluding any cash received on
accounts of accrued interest or accrued dividends),
plus the additional consideration, if any, to be
received by the Corporation upon the conversion or
exchange of such securities or the exercise of any
related options or rights (the consideration in each
case to be determined in the manner provided in
subdivisions (1) and (2) above, with the proviso to
subdivision (2) being applied to the number of shares
of Common Stock deliverable upon such exercise);
<PAGE>
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(c) on any change in the number of shares or exercise
price of Common Stock deliverable upon the exercise of
any such options or rights or conversions of or
exchange for such convertible or exchangeable
securities, other than a change resulting from the
antidilution provisions thereof, the Series A
Conversion Price shall forthwith be readjusted to such
Series A Conversion Price as would have obtained had
the adjustment made upon the issuance of such options,
rights or securities not converted prior to such change
or options or rights related to such securities not
converted prior to such change been made upon the basis
of such change; and
(d) on the expiration of any such options or rights,
the termination of any such rights to convert or
exchange or the expiration of any options or rights
related to such convertible or exchangeable securities,
the Series A Conversion Price shall forthwith be
readjusted to such Series A Conversion Price as would
have obtained had such options, rights, securities or
options or rights related to such securities not been
issued.
(C) ADJUSTMENTS FOR CERTAIN DIVIDENDS, SUBDIVISIONS OR SPLIT-UPS.
If, at any time after the Series A Initial Issuance Date, the
number of shares of Common Stock outstanding is increased by a
stock dividend payable in shares of Common Stock or by a
subdivision or split-up of shares of Common Stock, then, upon the
record date fixed for the determination of holders of Common
Stock entitled to receive such stock dividend, subdivision or
split-up, the Series A Conversion Price shall be appropriately
decreased so that the number of shares of Common Stock issuable
on conversion of each share of Series A Preferred Stock shall be
increased in proportion to such increase in outstanding shares.
(D) ADJUSTMENTS FOR COMBINATIONS. If, at any time after the
Series A Initial Issuance Date, the number of shares of Common
Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, upon the record date
for such combination, the Series A Conversion Price shall be
appropriately increased so that the number of shares of Common
Stock issuable on conversion of each share of Series A Preferred
Stock shall be decreased in proportion to such decrease in
outstanding shares.
<PAGE>
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(E) ADJUSTMENTS FOR REORGANIZATIONS, MERGERS, CONSOLIDATIONS,
ETC. In case, at any time after the Series A Initial Issuance
Date, of any capital reorganization, or any reclassification of
the stock of the Corporation (other than a change in par value or
from par value to no par value or from no par value to par value
or as a result of a stock dividend or subdivision, split-up or
combination of shares), or the consolidation or merger of the
Corporation with or into another person (other than a
consolidation or merger in which the Corporation is the
continuing corporation and which does not result in any change in
the Common Stock or Series A Preferred Stock) or of the sale or
other disposition of all or substantially all the properties and
assets of the Corporation as an entirety to any other person,
each share of Series A Preferred Stock shall, after such
reorganization, reclassification, consolidation, merger, sale or
other disposition, be convertible into the kind and number of
shares of stock or other securities or property of the
Corporation or of the corporation resulting from such
consolidation or surviving such merger or to which such
properties and assets shall have been sold or otherwise disposed
to which the holder of the number of shares of Common Stock
deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation, merger, sale or
other disposition) upon conversion of such share would have been
entitled upon such reorganization, reclassification,
consolidation, merger, sale or other disposition. The provisions
of this subsection shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers,
sales or other dispositions.
(F) All calculations under this subsection (iv) shall be made to
the nearest one cent ($.01) or to the nearest one-tenth (1/10) of
a share, as the case may be.
(G) In any case in which the provisions of this subsection (iv)
shall require that an adjustment shall become effective
immediately after a record date for an event, the Corporation may
defer until the occurrence of such event (i) issuing to the
holder of any share of Series A Preferred Stock converted after
such record date and before the occurrence of such event the
additional shares of capital stock issuable upon such conversion
by reason of the adjustment required by such event over and above
the shares of capital stock issuable upon such conversion before
giving effect to such adjustment and (ii) paying to such holder
any amount in cash in lieu of a fractional share of capital stock
pursuant to Section 7(a)(iii) above; PROVIDED, HOWEVER, that the
Corporation shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive
such additional shares, and such cash, upon the occurrence of the
event requiring such adjustment.
<PAGE>
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(v) Whenever the Series A Conversion Price shall be adjusted as
provided in Section 7(a)(iv), the Corporation shall forthwith file, at
the office of the transfer agent for the Series A Preferred Stock or
at such other place as may be designated by the Corporation, a
statement, signed by its independent certified public accountants,
showing in detail the facts requiring such adjustment and the Series A
Conversion Price that shall be in effect after such adjustment. The
Corporation shall also cause a copy of such statement to be sent by
first class, certified mail, return receipt requested, postage
prepaid, to each holder of shares of Series A Preferred Stock at such
holder's address appearing on the Corporation's records. Where
appropriate, such copy may be given in advance and may be included as
part of a notice required to be mailed under the provisions of Section
7(a)(vi) below.
(vi) In the event the Corporation shall propose to take any action of
the types described in clauses (A), (B), (C), (D) or (E) of Section
7(a)(iv) above, the Corporation shall give notice to each holder of
shares of Series A Preferred Stock, in the manner set forth in Section
7(a)(v) above, which notice shall specify the record date, if any,
with respect to any such action and the date on which such action is
to take place. Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the
effect of such action (to the extent such effect may be known at the
date of such notice) on the Series A Conversion Price and the number,
kind or class of shares or other securities or property which shall be
deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of shares of Series A Preferred Stock. In
the case of any action which would require the fixing of a record
date, such notice shall be given at least 20 days prior to the date so
fixed, and in case of all other action, shall notice shall be given at
least 30 days prior to the taking of such proposed action. Failure to
give such notice, or any defect therein, shall not affect the legality
or validity of any such action.
(vii) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares
of capital stock of the Corporation upon conversion of any shares of
Series A Preferred Stock; PROVIDED, HOWEVER, that the Corporation
shall not be required to pay any taxes which may be payable in respect
of any transfer involved in the issuance or delivery of any
certificate for such shares in a name other than that of the holder of
the shares of Series A Preferred Stock in respect of which such shares
are being issued.
(viii) The Corporation shall reserve, free from preemptive rights, out
of its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of Series A
Preferred Stock, sufficient shares to provide for the conversion of
all outstanding shares of Series A Preferred Stock.
(ix) All shares of Common Stock which may be issued in connection with
the conversion provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable, with no
personal liability attaching to the ownership thereof, and free from
all taxes, liens or charges with respect thereto.
<PAGE>
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(b) AUTOMATIC CONVERSION. Upon the occurrence of a Series A Event of
Conversion, all shares of Series A Preferred Stock then outstanding shall,
by virtue of, and simultaneously with, the occurrence of the Series A Event
of Conversion and without any action on the part of the holders thereof, be
deemed automatically converted into such whole number of fully paid and
nonassessable shares of Common Stock as equals (I) the product of (x) the
Series A Original Purchase Price multiplied by (y) the number of shares of
Series A Preferred Stock being converted divided by (II) the Series A
Conversion Price as last adjusted pursuant to Section 7(a)(iv) and then in
effect.
8. PRE-EMPTIVE RIGHTS. (a) RIGHT TO PURCHASE. Until the Series A Event of
Conversion, the Series A Holders shall have the pre-emptive right to purchase,
on a pro rata basis, all or any part of any New Securities which the Corporation
may, from time to time, propose to issue and sell, at any time while any Series
A Preferred Stock is outstanding and subject to the terms and conditions set
forth below. The pro rata share of each Series A Holder, for purposes of this
pre-emptive right to purchase, shall be determined by dividing (x) the total
number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock owned by such Holder plus the total number of shares of Common
Stock then owned by such Holder, by (y) the total number of shares of Common
Stock (Common Stock not being deemed for purposes of this paragraph to include
warrants, options or other convertible instruments (other than the Series A
Preferred Stock) which have not then been exercised or converted, as applicable)
then outstanding, plus the total number of shares of Common Stock issuable upon
conversion of the then outstanding Series A Preferred Stock.
(b) PROCEDURE. In the event the Corporation shall determine to offer, sell
or exchange New Securities, it shall give each Series A Holder written notice of
such intention, describing the price of such New Securities and the general
terms upon which the Corporation proposes to effect such issuance. Each such
Holder shall have forty-five(45) business days from the date of any such notice
to agree to purchase all or part of its pro rata share of such New Securities,
for the purchase price and upon the general terms and conditions specified in
the Corporation's notice, by giving written notice to the Corporation stating
the quantity of New Securities to be so purchased. Each such Holder shall have a
right of over-allotment such that if any Holder fails to exercise its right
hereunder to purchase its total pro rata portion of New Securities, the other
Series A Holders may purchase such portion on a pro rata basis, by giving
written notice to the Corporation within ten (10) business days from the date
that the Corporation provides written notice to the other Series A Holders of
the amount of New Securities with respect to which such nonpurchasing Holder has
failed to exercise its rights hereunder.
<PAGE>
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(c) RIGHT OF CORPORATION. In the event any Series A Holder or Holders fail
to exercise the foregoing pre-emptive right to purchase with respect to any New
Securities within such forty-five (45) business day period (or the additional 10
business day period provided for overallotment), the Corporation may within one
hundred twenty (120) business days thereafter sell any or all of such New
Securities not agreed to be purchased by such Holders, at a price and upon
general terms no more favorable to the purchasers thereof than specified in the
notice given to each Holder pursuant to Section 8(b). In the event the
Corporation has not sold such New Securities within such one hundred twenty
(120) business day period, the Corporation shall not thereafter issue or sell
any New Securities without first offering such New Securities to the Series A
Holders in the manner provided above.
<PAGE>
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IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be signed by its President and attested by its Secretary this
22nd day of December, 1997.
By: /s/ GUALBERTO RUANO
-------------------------------
Name: Gualberto Ruano
Title: President
ATTEST:
/s/ KEVIN L. RAKIN
------------------------------
Kevin L. Rakin
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
1. This Certificate of Amendment amends the Certificate of
Incorporation of the Corporation, as amended (the "Certificate of
Incorporation"), by amending Article 4 to effect changes in the capital
structure of the Corporation.
2. The text of Article 4 of the Certificate of Incorporation is
amended hereby to read as set forth in EXHIBIT A attached hereto and hereby made
a part hereof.
3. The foregoing amendment to the Certificate of Incorporation was
duly adopted by written consent of the stockholders in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware.
4. This Amendment to the Certificate of Incorporation was duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Gualberto Ruano, its President, and attested to by Kevin L. Rakin, its
Secretary, this 24th day of August, 1998.
GENAISSANCE PHARMACEUTICALS, INC.
By: /s/ GUALBERTO RUANO
-------------------------------
Gualberto Ruano
President
Attest:
By: /s/ KEVIN L. RAKIN
-------------------------------
Kevin L. Rakin
Secretary
<PAGE>
EXHIBIT A
Amendment to
Certificate of Incorporation
of
Genaissance Pharmaceuticals, Inc.
pursuant to
Section 242 of the
Delaware General Corporation Law
The Certificate of Incorporation of Genaissance Pharmaceuticals, Inc., a
Delaware corporation, has been amended by striking out the whole of Article 4
thereof as it now exists and substituting new Article 4 to read as follows:
4. The total authorized capital stock of the corporation consists of
20,000,000 shares, of which 9,500,000 are shares of Common Stock, $.001 par
value (the "Common Stock"), 500,000 are shares of Nonvoting Common Stock, $.001
par value, (the "Nonvoting Common Stock"), and 10,000,000 are shares of
Preferred Stock, $.001 par value ("Preferred Stock"). The designations and the
powers, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof, of the
Preferred Stock and the Common Stock shall be as follows:
A. The Preferred Stock may be issued, from time to time, in one or
more series, with such designations, voting powers, if any, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors. The Board of Directors, in such resolution or resolutions (a
copy of which shall be filed and recorded as required by law), is also expressly
authorized to fix:
(i) the distinctive serial designations and the division of such
shares into series and the number of shares of a particular series, which may be
increased or decreased, but not below the number of shares thereof then
outstanding, by a certificate made, signed, filed and recorded as required by
law;
(ii) the annual dividend rate (or method of determining such rate) for
the particular series, the date or dates upon which such dividends shall be
payable, and the date or dates or method of determining the date or dates and if
dividends on stock of the particular series shall be cumulative;
(iii) the price or prices at which, the period or periods within which
and the terms and conditions upon which the shares of such series may be
redeemed, in whole or in part, at the option, if any, of the corporation;
(iv) the right, if any, of the holders of a particular series or the
corporation to convert such stock into other classes or series of stock or to
exchange such stock for shares of any other
<PAGE>
class of stock or series thereof, and the terms and conditions, if any,
including the price or prices or the rates of conversion and the terms and
conditions of any adjustments of such conversion prices or rates;
(v) the obligation, if any, of the corporation to purchase and retire
and redeem, in whole or in part, shares of a particular series as a sinking fund
or redemption or purchase account, the terms thereof and the redemption price or
prices per share for such series redeemed pursuant to the sinking fund or
redemption account;
(vi) the voting rights, if any, of the shares of such series in
addition to those required by law, including the number of votes per share
and any requirement for the approval by the holders of Preferred Stock, or of
the shares of one or more series, or of both, as a condition to specified
corporate action or amendments to the certificate of incorporation;
(vii)
(viii) any other rights, obligations, or provisions which may be so
determined to the fullest extent by Delaware law.
All shares of any one series of Preferred Stock shall be alike in every
particular and all series shall rank equally and be identical in all respects
except in so far as they may vary with respect to the matters which the Board of
Directors is hereby expressly authorized to determine in the resolution or
resolutions providing for the issue of any series of the Preferred Stock.
B. Except as specified otherwise in any Certificate of
Designation, all shares of Preferred Stock shall rank senior to the Common
Stock in respect of the right to receive dividends and the right to receive
payments out of the assets of the corporation upon voluntary or involuntary
liquidation, dissolution or winding up of the corporation. The shares of any
one series of Preferred Stock shall be identical with each other in all
respects except as to the dates from and after which dividends thereon shall
be cumulative. All shares of Preferred Stock redeemed, purchased or otherwise
acquired by the corporation (including shares surrendered for conversion)
shall be canceled and thereupon restored to the status of authorized but
unissued Preferred Stock undesignated as to series.
C. All shares of Common Stock and Nonvoting Common Stock shall be
alike in every particular and shall rank equally and be identical in all
respects, except as follows:
(i) Holders of Nonvoting Common Stock shall not be entitled to vote at
any time or under any circumstances except as otherwise required by law or by
this Certificate of Incorporation.
(ii) Each outstanding share of Nonvoting Common Stock shall
automatically be converted into fully paid and nonassessable shares of Common
Stock at the rate (subject to equitable adjustment as may be necessary to
account for stock splits, stock dividends or any
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<PAGE>
reorganization, recapitalization, combination of shares or similar capital
adjustment) of one share of Common Stock for each share of Nonvoting Common
Stock surrendered for conversion, without any act by the corporation or the
holders of Nonvoting Common Stock, concurrently with the closing of (i) a
public offering by the corporation of shares of Common Stock of the
corporation registered under the Securities Act of 1933, as amended; (ii) any
recapitalization, reorganization, spin-off, sale of all or substantially all
of the corporation's assets, liquidation, dissolution, merger or
consolidation with or into another company, tender offer or any transaction
or series of transactions which has been approved by the Board of Directors
of the corporation and in which more than fifty percent (50%) of the
Company's voting power is transferred, provided that the conversion of the
Nonvoting Common Stock into Common Stock is deemed necessary by the Board of
Directors to allow for the PARI PASSU treatment of the Nonvoting Common Stock
with the Common Stock in such event; or (iii) the sale of the Nonvoting
Common Stock by the original purchaser thereof to a party or parties
unaffiliated with such original purchaser in amounts which would not exceed
two percent (2%) of the shares of Common Stock then outstanding. Promptly
following a conversion pursuant to the terms of this paragraph, the holders
of Nonvoting Common Stock shall surrender the certificates representing their
shares of Nonvoting Common Stock to the corporation. Upon receipt of such
certificates, the corporation shall promptly issue and deliver to such holder
or such holder's nominee or nominees a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid.
(iii) subject to applicable banking regulations, the holders of
record of Nonvoting Common Stock may at any time or from time to time, in
such holders sole discretion and at such holders option, convert any whole
number or all of such holder's Nonvoting Common Stock into fully paid and
nonassessable shares of Common Stock at the rate (subject to equitable
adjustment as may be necessary to account for stock splits, stock dividends
or any reorganization, recapitalization, combination of shares or similar
capital adjustments) of one share of Common Stock for each share of Nonvoting
Common Stock surrendered for conversion. Any such conversion may be effected
by any holder of Nonvoting Common Stock surrendering such holder's
certificate or certificates for the Nonvoting Common Stock to be converted,
duly endorsed, at the office of the corporation, together with a written
notice to the corporation at such office that such holder elects to convert
all or a specified number of shares of Nonvoting Common Stock and stating the
names or names in which such holder desires the certificate or certificates
for such shares of Common Stock to be issued. Promptly thereafter, the
corporation shall issue and deliver to such holder or such holder's nominee
or nominees a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion
shall be deemed to have been made at the close of business on the date of
such surrender and the person or persons entitled to receive the shares of
Common Stock issued on such conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on that date.
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<PAGE>
GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
PREFERRED STOCK
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), DOES HEREBY
CERTIFY:
1. The following resolution was duly adopted by action of the Board
of Directors of the Corporation at a special meeting duly held August 22, 1998
pursuant to authority conferred upon the Board of Directors by the provisions of
Article 4 of the Certificate of Incorporation of the Corporation, as amended,
(referred to in the following designations as the "CERTIFICATE OF
INCORPORATION"), which authorize the issuance of 10,000,000 shares of a class of
capital stock designated as preferred stock, $.001 par value (the "PREFERRED
STOCK").
RESOLVED: That the provisions of the Certificate of Designations,
Preferences and Other Special Rights and Qualifications, Limitations and
Restrictions of Preferred Stock of the Corporation (the "CERTIFICATE OF
DESIGNATIONS"), approved by the Directors on December 20, 1997, shall be
amended by deleting its text in its entirety and substituting therefor
the text set forth in EXHIBIT I attached hereto. Said Certificate of
Designations, as amended hereby, shall apply to 2,437,500 shares
constituting Series A Redeemable Convertible Preferred Stock and
2,437,500 shares of Series A1 Redeemable Convertible Preferred Stock.
2. Such resolution also was duly approved by written consent of the
holder of the outstanding shares of Preferred Stock issued pursuant to the
Certificate of Designations.
3. This amendment to the Certificate of Designations was duly adopted
in accordance with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Gualberto Ruano, its President, and attested to by
Kevin L. Rakin, its Secretary, this 24th day of August, 1998.
GENAISSANCE PHARMACEUTICALS, INC.
By: /s/ GUALBERTO RUANO
-----------------------------
Gualberto Ruano
President
Attest:
By: /s/ KEVIN L. RAKIN
-----------------------------
Kevin L. Rakin
Secretary
<PAGE>
EXHIBIT I
There is hereby designated two (2) series of the Preferred Stock (as that
term is defined in Article 4 of the Amended Certificate of Incorporation of the
Corporation), consisting of 4,875,000 shares, which will be issuable, equally,
in series entitled "SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK" (referred
to as the "SERIES A PREFERRED STOCK") and "SERIES A1 REDEEMABLE CONVERTIBLE
PREFERRED STOCK" (referred to as the ("SERIES A1 PREFERRED STOCK"), and that the
preferences and privileges, relative, participating, optional and other special
rights, and qualifications, limitations and restrictions of all shares of such
series, in addition to those set forth in the Certificate of Incorporation of
the Corporation, as amended, are as set forth hereafter.
1. DEFINITIONS. As used in this Certificate of Designations, the
following terms have the meanings specified below:
"AFFILIATE" shall mean a person (other than a subsidiary):
(i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Corporation;
(ii) which beneficially owns or holds 5% or more of any class of
the voting stock of the Corporation; or
(iii) 5% or more of the voting stock (or in the case of a person
which is not a corporation, 5% or more of the equity interest) of
which is beneficially owned or held by the Corporation or one of
its subsidiaries.
The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting
securities, by contract or otherwise.
"BOARD" shall mean the Corporation's Board of Directors.
"BUSINESS DAY" shall mean any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of Connecticut) on which banks are
authorized to be open for business in Hartford, Connecticut.
"COMMON STOCK" shall mean the Common Stock, $.001 par value, of the
Corporation.
"DILUTED STOCK" shall have the meaning ascribed to it in Section
7(a)(iv)(A) hereof.
"DILUTING ISSUANCE" shall mean an issuance of capital stock described in
Section 7(a)(iv)(A) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
<PAGE>
"EXCLUDED STOCK" shall mean shares of Common Stock issued by the
Corporation:
(i) as a stock dividend or upon any stock split or other subdivision or
combination of the outstanding shares of Common Stock (including, without
limitation, any stock issued pursuant to Section 3 hereof);
(ii) up to an aggregate 1,297,000 shares of Common Stock issued or
issuable to employees pursuant to an employee stock option plan approved
by the Board;
(iii) upon conversion of any of the Series A Stock; or
(iv) as approved in writing as "EXCLUDED STOCK" by the holders of not
less than 66-2/3% in voting power of the Series A Stock at the time
outstanding.
"FAIR MARKET VALUE" at any date of one share of Common Stock shall be
deemed to be the average of the daily closing prices for the 30 consecutive
business days ending no more than five days before the day in question (as
adjusted for any stock dividend, split-up, combination or reclassification that
took effect during such 30 business day period). The closing price for each day
shall be the last reported sales price regular way or, in case no such reported
sales took place on such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (or if the Common
Stock is not at the time listed or admitted for trading on any such exchange,
then such price as shall be equal to the average of the last reported bid and
asked prices, as reported by the Nasdaq on such day, or if, on any day in
question, the security shall not be quoted on the Nasdaq, then such price shall
be equal to the last reported bid and asked prices on such day as reported by
the National Quotation Bureau, Inc. or any similar reputable quotation and
reporting service, if such quotation is not reported by the National Quotation
Bureau, Inc.); PROVIDED, HOWEVER, that if the Common Stock is traded in such
manner that the quotations referred to in this clause are not available for the
period required hereunder, the Fair Market Value shall be determined by a
nationally recognized independent investment banking firm selected mutually by
the holders of more than 50% of the voting power of the Series A Stock then
outstanding and the Corporation (or if such selection cannot be made, by a
nationally recognized independent banking firm selected by the American
Arbitration Association in accordance with its rules).
"HOLDER" shall mean a holder of shares of Series A Stock, as applicable,
as reflected in the stock records of the Corporation; and each Holder's address
shall be as it appears in the stock records of the Corporation.
"JUNIOR SECURITIES" shall mean, as to the Series A Stock, each other
class or series of capital stock (including, without limitation, each class of
common stock of the Corporation and each other series of Preferred Stock) or
other equity interests (including, without limitation, warrants, rights, calls
or options exercisable for or convertible into such capital stock or equity
interests) in the Corporation.
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"LIQUIDATION EVENT" shall mean, a merger, consolidation, liquidation,
dissolution, winding up of the affairs of the Corporation or sale of all or
substantially all of the assets of the Corporation as an entirety to a third
party or parties, whether voluntary or involuntary; provided, however, that a
merger or consolidation shall not be considered a Liquidation Event if the
Corporation is the survivor or continuing corporation of such merger or
consolidation and as a result thereof there is no change in the Common Stock or
Series A Stock.
"LISTED RIGHTS" shall mean all patents, patent applications, patent
rights, trademarks, trademark applications, trademark rights, trade names, trade
name rights, service marks and copyrights (whether registered or not) owned or
possessed by the Corporation and any improvements thereon.
"NEW SECURITIES" shall mean any capital stock (including, without
limitation, each class of common stock of the Corporation, any additional shares
of Series A Stock, each other series of Preferred Stock and any shares of
capital stock held by the Corporation in its treasury upon the disposition
thereof) or other equity interests (including, without limitation, warrants,
rights, calls or options exercisable for or convertible into such capital stock
or equity interests) in the Corporation issued after the Series A Initial Issue
Date; PROVIDED, HOWEVER, that such term shall not include (i) securities offered
to the public pursuant to a registration statement filed in accordance with the
provisions of the Securities Act; (ii) securities issued (x) pursuant to the
approval of a majority of the members of the Board, (y) in connection with the
acquisition of another corporation by the Corporation by merger, purchase of
substantially all assets or other reorganization whereby the Corporation owns,
upon consummation of such acquisition, greater than fifty percent (50%) of the
voting power to elect the directors of such corporation or (z) in connection
with joint ventures or corporate collaborations; (iii) securities issued to
consultants, vendors, lenders, equipment lessors, landlords and independent
directors as consideration to such persons in such capacities; (iv) securities
issued pursuant to any stock option plan, stock purchase or stock bonus
agreement up to a maximum of 2,000,000 shares; (v) securities issued pursuant to
any other stock option plan, stock purchase or stock bonus arrangement, or
grant, which are approved by the holders of at least sixty-six and two-thirds
percent (66 2/3%) of the voting power of the Series A Stock; and (vi) securities
issued in connection with research agreements to which the Corporation is a
party, including, but not limited to, collaboration and licensing agreements.
"NON-PARTICIPATING PERCENTAGE" shall have the meaning ascribed to it in
Section 7(a)(iv)(A) hereof.
"PERSON" shall mean and include an individual, a corporation, a
partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.
"PREEMPTIVE SHARE" shall mean, immediately prior to any issue of shares
of New Securities, and as to each Series A Holder, the percentage which
expresses the ratio between (i) the total number of shares of New Securities
issuable upon conversion of the Series A Stock owned by such Series A Holder
plus the total number of shares of Common Stock then owned by
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such Series A Holder, and (ii) the total number of shares of Common Stock then
outstanding (Common Stock not being deemed for such purposes to include
warrants, options or other convertible instruments, which have not then been
exercised or converted, as applicable), plus the total number of shares of
Common Stock issuable upon conversion of the then outstanding Series A Stock.
"QUALIFIED IPO" shall mean the consummation of a firm commitment
underwritten public offering of shares of Common Stock registered under the
Securities Act which results in aggregate gross cash proceeds to the Corporation
of not less than TWENTY MILLION DOLLARS ($20,000,000) and pursuant to which the
offering price per share is equal to or greater than two and one half times the
Series A Original Purchase Price (adjusted for any Recapitalization Event).
"RECAPITALIZATION EVENT" shall mean any stock splits, stock dividends,
recapitalizations, reclassifications, and similar events.
"RELATED PARTY" shall mean any officer, director, significant employee or
consultant of the Corporation or any holder (other than any Series A Holder) of
5% or more of any class of capital stock of the Corporation or any member of the
immediate family of any such officer, director, employee, consultant or
shareholder or any entity controlled by any such officer, director, employee,
consultant or shareholder or a member of the immediate family of any such
officer, director, employee, consultant or shareholder.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES A ACCRUED DIVIDENDS" shall mean Series A Full Cumulative
Dividends to the date of determination, less the amount of all dividends paid
pursuant to Section 3, upon the relevant shares of Series A Stock.
"SERIES A CONVERSION PRICE" shall initially mean $4.00; PROVIDED,
HOWEVER, that the Series A Conversion Price shall be subject to adjustment as
set forth in Section 7(a)(iv).
"SERIES A EVENT OF CONVERSION" shall mean the consummation of a Qualified
IPO.
"SERIES A FULL CUMULATIVE DIVIDENDS" shall mean, as to any share of
Series A Stock (whether or not in respect of which such term is used there shall
have been net profits or net assets of the Corporation legally available for the
payment of such dividends), that amount which shall be equal to dividends at the
full rate fixed for the Series A Stock as provided herein for the period of time
elapsed from the Series A Initial Issuance Date to the date as of which Series A
Full Cumulative Dividends are to be computed.
"SERIES A HOLDER" shall mean a holder of shares of Series A Stock.
"SERIES A INITIAL ISSUANCE DATE" shall mean August 24th, 1998.
"SERIES A LIQUIDATION AMOUNT" shall mean an amount in cash or property
(valued at its Fair Market Value), or a combination thereof, equal to $4.00
per share of Series A Stock held by a Holder (which per share amount shall be
subject to equitable adjustment whenever there shall
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<PAGE>
occur a stock split, combination, reclassification or other similar event
involving the Series A Stock or the Common Stock) plus all Series A Accrued
Dividends.
"SERIES A ORIGINAL PURCHASE PRICE" shall mean $4.00 per share of Series A
Stock.
"SERIES A REDEMPTION DATE" shall have the meaning set forth in Section 4
hereof.
"SERIES A REDEMPTION PRICE" shall have the meaning set forth in Section 4
hereof.
"SERIES A STOCK" shall mean all of the outstanding shares of the Series A
Preferred Stock and the Series A1 Preferred Stock, together, at the time in
question, which shares shall be PARI PASSU for all purposes except conversion
price.
"SUBSIDIARY" shall mean an entity a majority of the capital stock or
other ownership interest in which is owned directly or indirectly by the
Corporation, except that 100% "SUBSIDIARY" shall mean a subsidiary that is 100%
owned by the Corporation.
2. NUMBER OF SHARES. The designation of the series of Preferred Stock
provided for herein shall be the Series A Redeemable Convertible Preferred Stock
(hereinafter referred to as the "SERIES A PREFERRED STOCK"), and the number of
authorized shares constituting Series A Preferred Stock is 2,437,500 and Series
A1 Redeemable Convertible Preferred Stock (hereinafter referred to as the
"SERIES A1 PREFERRED STOCK"), and the number of authorized shares constituting
Series A1 Preferred Stock is 2,437,500.
3. DIVIDENDS. The holder of each share of Series A Stock shall be
entitled to receive, before any dividends shall be declared and paid upon or
set aside for the Junior Securities, when and as declared by the Board, out
of funds legally available for that purpose, dividends in cash at the rate
per annum per share (the "SERIES A DIVIDEND RATE") equal to 8% of the Series
A Original Purchase Price, adjusted, as applicable, for any Recapitalization
Event, payable upon the earliest of (a) liquidation, dissolution or
winding-up of the Corporation in accordance with Section 4 hereof, (b) upon
redemption in accordance with Section 4 hereof or (c) upon the Series A Event
of Conversion. Until the third anniversary of the Series A Initial Issuance
Date, the Corporation shall have the option to make any such payment in
shares of Common Stock, and in the event such dividends are paid in Common
Stock, for purposes of computing the number of shares of Common Stock to be
issued and the amount of the dividend paid, the value of the Common Stock
paid to any holder of shares of Series A Stock shall be valued at the then
Series A Conversion Price. Each Series A Holder shall have the right to elect
to receive any such dividends in shares of nonvoting common stock of the
Corporation by giving notice in writing to the Corporation of such election.
Dividends on shares of Series A Stock shall be cumulative from the Series A
Initial Issuance Date (whether or not there shall be net profits or net
assets of the Corporation legally available for the payment of such
dividends), so that, if at any time Series A Full Cumulative Dividends upon
the Series A Stock shall not have been paid or declared and a sum sufficient
for payment thereof set apart, the amount of the deficiency in such dividends
shall be fully paid or dividends in such amount shall be declared on the
shares of the Series A Stock and a sum sufficient for the payment thereof
shall be set apart for such payment, before any dividend shall be declared or
paid or any other distribution ordered or made upon any Junior Securities and
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before any sum or sums shall be set aside for or applied to the purchase or
redemption of Junior Securities. With respect to rights to dividends, the
Series A Stock shall rank prior to the Common Stock. All dividends declared
upon the Series A Stock shall be declared pro rata per share. All payments
due under this Section to any holder of shares of Series A Stock shall be
made to the nearest cent.
4. REDEMPTION.
(a) REDEMPTION UPON A LIQUIDATION EVENT. (i) In connection and
concurrently with a Liquidation Event, the Corporation shall (to the extent
allowed by law) redeem, except as set forth hereafter, all the shares of Series
A Stock then outstanding, out of funds legally available therefor. The amount
per share payable upon any redemption of shares of Series A Stock pursuant to
this subsection shall be an amount in cash equal to the Series A Redemption
Price, as determined below. The Corporation shall deliver to each holder of
shares of Series A Stock, not later than 30 days prior to the consummation of a
Liquidation Event, notice of such proposed Liquidation Event, including the date
on which such Liquidation Event is expected to be consummated. To the extent
that one or more redemptions and/or a liquidation are occurring concurrently and
the Corporation is legally prohibited from effecting all such redemptions and/or
liquidation, any redemption of the shares of Series A Stock shall be deemed to
occur simultaneously and prior to any other redemptions and/or liquidations.
Notwithstanding the foregoing, any Series A Holder may elect to retain its
outstanding shares of Series A Stock and not to subject such shares to
redemption by delivery of written notice to the Corporation at least 15 days
prior to the date of the consummation of the Liquidation Event.
(ii) The amount per share payable upon any redemption of shares of
Series A pursuant to this subsection shall be an amount equal to the Series A
Original Purchase Price plus all Series A Accrued Dividends (the "LIQUIDATION
REDEMPTION PRICE").
(iii) Any date upon which Series A Stock is to be redeemed
pursuant to this Section 4 being hereinafter referred to in this context as a
"SERIES A REDEMPTION DATE".
(b) SERIES A ANNUAL REDEMPTION. Except as set forth hereafter, the
Corporation shall (to the extent allowed by law) redeem the following shares of
Series A Stock on the following dates, out of funds legally available therefor:
(i) at any time on or after August 24, 2003, one-third of the
shares of the Series A Stock then outstanding.
(ii) at any time on or after August 24, 2004, an additional number
of shares of Series A Stock equal to one-third of the shares, of the Series A
Stock outstanding as of August 24, 2003.
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<PAGE>
(iii) at any time on or after August 24, 2005, all outstanding
shares of Series A Stock.
The amount per share payable upon any redemption of shares of Series A Stock
pursuant to this subsection shall be an amount in cash equal to the Series A
Original Purchase Price plus (a) all Series A Accrued Dividends AND (b) an
amount equal to a 12% cumulative, annual return on (1) the Series A Original
Purchase Price from the Series A Initial Issuance Date to the date of payment
and (2) all Series A Accrued Dividends from the date of accrual under Section 3
to the date of payment (the "SCHEDULED REDEMPTION PRICE" and collectively with
the Liquidation Redemption Price, the "SERIES A REDEMPTION PRICE").
Notwithstanding the foregoing, any Series A Holder may elect to retain
its outstanding shares of Series A Stock and not to subject such shares to
redemption by delivery of written notice to the Corporation at least 15 days
prior to the applicable redemption date set forth above.
(c) PRO RATA. If, on any Series A Redemption Date, fewer than all
shares of Series A Stock then outstanding are to be redeemed in accordance with
this Section, the shares to be redeemed shall be allocated pro rata among the
Series A Holders and the Redemption Notice mailed to each Holder shall specify
the number of shares to be redeemed from such Holder. Notwithstanding the
delivery of a Redemption Notice, Series A Holders subject to redemption may
convert such shares pursuant to Section 7 on or before the Redemption Date by
delivering written notice thereof to the Corporation not later than 10 days
prior to the Redemption Date.
(d) PAYMENT OF SERIES A REDEMPTION PRICE; TERMINATION OF RIGHTS. On
any Series A Redemption Date, the applicable Series A Redemption Price in
respect of the shares represented by the certificate or certificates surrendered
to the Corporation by the Holder thereof pursuant to the Redemption Notice shall
be paid to the order of the person whose name appears on such certificate or
certificates. Each surrendered certificate shall be canceled and retired and a
new certificate, representing the remaining, unredeemed shares of Series A
Stock, if any, shall be issued to the Holder of such shares. On any Series A
Redemption Date, the rights of a Holder with respect to shares redeemed shall
cease, other than such Holder's right to payment of the Series A Redemption
Price as of the Series A Redemption Date, upon surrender of the certificate or
certificates.
5. LIQUIDATION. Upon a Liquidation Event, the Series A Holders shall
be entitled, before any assets of the Corporation shall be distributed among or
paid over to the holders of Junior Securities, but after distribution of such
assets among, or payment thereof over to, creditors of the Corporation, to
receive from the assets of the Corporation available for distribution to
stockholders in cash, the Series A Liquidation Amount. If the assets of the
Corporation legally available for distribution shall be insufficient to permit
the payment in full of the Series A Liquidation Amount to the Series A Holders,
then the entire assets of the Corporation legally available for distribution
shall be distributed ratably among the Series A Holders in proportion to the
respective amounts which would have been payable upon such Liquidation Event on
such shares of Series A Stock if all amounts payable thereon had been paid in
full. In the event that such distribution of assets is other than in cash, such
distribution of cash
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and other assets (including securities) shall be made ratably among the holders
of the shares of Series A Stock based upon the fair market value of any such
assets as determined by a nationally recognized valuation consultant selected
mutually by the holders of a majority in voting power of the Series A Stock then
outstanding and the Corporation (or if such selection cannot be made, by a
nationally recognized independent valuation consultant selected by the American
Arbitration Association in accordance with its rules). In the event of any
liquidation, dissolution or winding-up of the Corporation, after payment shall
have been made to the holders of shares of Series A Stock of the full amount to
which they shall be entitled as aforesaid, the holders of any Junior Securities
and the Series A Holders shall be entitled to participate equally, on an
as-converted basis in the case of the Series A Stock and any Junior Securities
convertible into Common Stock, in all remaining assets of the Corporation
available for distribution to its stockholders. The provisions of this Section 5
shall not be applicable to any shares of Series A Stock that have been redeemed
pursuant to Section 4(a) hereof in connection with such Liquidation Event.
6. VOTING.
(a) VOTES GENERALLY WITH COMMON STOCK. In addition to the rights
specified in Section 6(b) below and any other rights provided in the
Corporation's By-Laws, the shares of Series A Stock shall entitle each Holder
thereof to such number of votes as shall equal the number of shares of Common
Stock (rounded to the nearest whole number) into which the shares of Series A
Stock held by such Holder are then convertible pursuant to Section 7 and shall
entitle each such Holder to vote on all matters as to which holders of Common
Stock shall be entitled to vote, in the same manner and with the same effect as
such holders of Common Stock, voting together with the holders of Common Stock
as one class.
(b) SEPARATE CLASS VOTE. So long as any shares of Series A Stock are
outstanding, the consent of the holders of a majority of all of the outstanding
shares of Series A Stock, voting as a single and separate class in person or by
proxy, at a special or annual meeting called for the purpose, or by written
consent in lieu of a meeting, shall be required before the Corporation may:
(i) authorize or issue any class or series of capital stock
ranking prior to the Series A Stock with respect to rights to
receive dividends, redemption payments or distributions upon
liquidation or winding up of the Corporation or with respect to
antidilution provisions;
(ii) authorize, declare or distribute any dividend, whether in
cash or in kind, payable to any class or series of the
Corporation's common or preferred stock (except payment of
dividends on Series A Stock) or to any other equity security of
the Corporation;
(iii) approve any merger, combination, liquidation, dissolution,
sale, lease or license of all or substantially all of the assets
or business, or of the assets or business of any subsidiary, of
the Corporation;
(iv) cancel, repeal or change any of the provisions of this
Certificate of Designations or of any amendment hereto, or of the
Certificate of Incorporation of
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<PAGE>
the Corporation in such a way as to have a material adverse effect
on the powers, preferences or special rights of shares of the
Series A Stock, except that the Corporation may issue additional
shares of Series A Stock and other Preferred Stock, subject to
clause (i) above, and make appropriate changes to this Certificate
of Designations and its Certificate of Incorporation;
(v) permit to lapse any of the following: its corporate
existence, rights, government approvals or franchises or all
licenses, Listed Rights (which the Board deems useful in the
Corporation's business) and other rights to use patents,
processes, licenses, trademarks, trade names or copyrights owned
or possessed by it (which the Board deems useful in the
Corporation's business);
(vi) transfer, assign or license (except end-user licenses
granted in the ordinary course of business) any of the
Corporation's Listed Rights or know-how, technology or trade
secrets now owned or hereafter acquired by the Corporation;
(vii) voluntarily dissolve, liquidate or wind-up or carry out any
partial liquidation or distribution or transaction in the nature
of a partial liquidation or distribution;
(viii) purchase, lease or otherwise acquire capital stock in any
corporation or equity interest in any other entity or lend money
to any person or entity or purchase a substantial part of the
operating assets of any person or entity;
(ix) consolidate with or merge into or with any other person or
entity or permit any other person or entity to consolidate with or
merge into it (except that a 100% subsidiary may consolidate with
or merge into the Corporation or another 100% subsidiary);
provided that the foregoing restriction does not apply to the
merger of another corporation into the Corporation if:
(A) The Corporation is the surviving entity and more than
50% of the outstanding common stock of the surviving entity
is owned by persons who prior to such merger owned Common
Stock of the Corporation; and
(B) After giving effect to the proposed merger or
consolidation the surviving entity will be engaged in
substantially the same lines of business as are engaged in
by the Corporation immediately prior thereto.
(x) permit any subsidiary (except a 100% subsidiary) to make
any (i) direct or indirect redemption, retirement, purchase or
other acquisition of any of the Corporation's capital stock (or
any warrant, option or other right with respect to such stock), or
(ii) repayment of the Corporation's debt held by any Related Party
or by any Affiliate or subsidiary debt held by any Related Party
or by any Affiliate except that any such subsidiary may pay the
Corporation's outstanding obligations under loans extended to it
by Connecticut Innovations, Incorporated; or
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<PAGE>
(xi) issue (which term shall include without limitation the
issuance of any shares of, or the grant of any warrants, options
or other rights to purchase any shares of, or any commitment to
issue) any shares of its capital stock (which term shall include
without limitation, securities convertible into capital stock, or
rights to acquire capital stock) to employees or officers or
directors of the Corporation or any subsidiary thereof, except the
number of shares of Common Stock (as adjusted for stock dividends,
stock splits and similar corporate events) issued or reserved for
issuance pursuant to any stock option plan approved by the Board
and then only at prices equal to no less than 50% of the Fair
Market Value of such stock at the time of the grant of the
applicable option.
7. CONVERSION.
(a) OPTIONAL CONVERSION.
(i) The holder of any shares of Series A Stock shall have the
right, at such holder's option, at any time or from time to time
to convert any or all such holder's shares of Series A Stock into
such whole number of fully paid and nonassessable shares of Common
Stock as equals (I) the product of (x) the Series A Original
Purchase Price, multiplied by (y) the number of shares of Series A
Stock being converted, divided by (II) the Series A Conversion
Price (as last adjusted and then in effect) for the shares of the
Series A Stock being converted, by surrender of the certificates
representing the shares of Series A Stock so to be converted in
the manner provided Section 7(a)(ii) below. The Series A
Conversion Price shall initially be equal to the Series A Original
Purchase Price; PROVIDED, HOWEVER, that such Series A Conversion
Price shall be subject to adjustment as set forth in Section
7(a)(iv) below. The holder of any shares of Series A Stock
exercising the aforesaid right to convert such shares into shares
of Common Stock shall not be entitled to payment of Series A
Accrued Dividends with respect to the shares of Series A Stock so
converted, and shall be deemed to have waived any such Series A
Accrued Dividends upon such conversion.
(ii) The holder of any shares of Series A Stock may exercise
such holder's conversion right pursuant to this Section by
delivering to the Corporation during regular business hours at the
office of any transfer agent of the Corporation for the Series A
Stock or at such other place as may be designated by the
Corporation, the certificate or certificates for the shares to be
converted, duly endorsed or assigned in blank or to the
Corporation (if required by it) accompanied by written notice
stating that such holder elects to convert such shares and stating
the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued.
Conversion shall be deemed to have been effected with respect to
conversion under (a) Section 7(a)(i) above, on the date when the
aforesaid delivery is made and (b) Section 7(b) on the date of
occurrence of a Series A Event of Conversion, as the case may be,
and any such date is referred to herein as the "SERIES A
CONVERSION DATE". As promptly as practicable
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thereafter the Corporation shall issue and deliver to or upon the
written order of such holder, to the place designated by such
holder, a certificate or certificates for the number of full
shares of Common Stock to which the such holder is entitled and a
check or cash in respect of any fractional interest in a share of
Common Stock, as provided in Section 7(a)(iii) below, payable with
respect to the shares of Series A Stock so converted up to and
including the Series A Conversion Date. The person in whose names
the certificate or certificates for Common Stock are to be issued
shall be deemed to have become a holder of Common Stock on the
applicable Series A Conversion Date unless the transfer books of
the Corporation are closed on that date, in which event such
holder shall be deemed to have become a holder of Common Stock on
the next succeeding date on which the transfer books are open, but
the Series A Conversion Price shall be that in effect on the
Series A Conversion Date. Upon conversion of only a portion of the
number of shares covered by a certificate representing shares of
Series A Stock surrendered for conversion, the Corporation shall
issue and deliver to or upon the written order of the holder of
the certificate so surrendered for conversion, at the expense of
the Corporation, a new certificate covering the number of shares
of Series A Stock representing the unconverted portion of the
certificate so surrendered, which new certificate shall entitle
the holder thereof to dividends on the shares of Series A Stock
represented thereby to the same extent as if the certificate
theretofore covering such unconverted shares had not been
surrendered for conversion.
(iii) No fractional shares of Common Stock or scrip shall be
issued upon conversion of shares of Series A Stock. If more than
one share of Series A Stock shall be surrendered for conversion at
any one time by the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of Series A Stock so
surrendered. Instead of any fractional shares of Common Stock
which would otherwise be issuable upon conversion of any shares of
Series A Stock, the Corporation shall pay a cash adjustment in
respect of such fractional interest in an amount equal to the then
current Fair Market Value of a share of Common Stock multiplied by
such fractional interest. Fractional interests shall not be
entitled to dividends, and the holders of a fractional interest
shall not be entitled to any rights as stockholders of the
Corporation in respect of such fractional interest.
(iv) The Series A Conversion Price shall be subject to
adjustment from time to time as follows:
(A) ADJUSTMENTS FOR DILUTING ISSUANCES UPON CONTINUED
PARTICIPATION. If the Corporation shall at any time or from
time to time after the Series A Initial Issuance Date issue
or be deemed (by virtue of any of the provisions of Section
7(a)(iv)), to have issued any capital stock (including,
without limitation, each class of common stock of the
Corporation) or other equity interests (including, without
limitation, warrants,
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<PAGE>
rights, calls or options exercisable for or convertible
into such capital stock or equity interests) in the
Corporation, other than Excluded Stock, without
consideration or for a consideration per share (the "LAST
ISSUE PRICE") less than the Series A Conversion Price in
effect immediately prior to each such issuance or deemed
issuance (a "DILUTING ISSUANCE"), the Series A Conversion
Price in effect immediately prior thereto shall forthwith
be adjusted, as of the opening of business on the date of
such issuance or deemed issuance, to such Last Issue Price.
Notwithstanding the immediately preceding paragraph of this
subsection (A), if a Series A Holder has been given written
notice pursuant to Section 8 hereof and the opportunity to
purchase its Preemptive Share of such Diluting Issuance and
does not purchase its entire Preemptive Share of such
Diluting Issuance, but purchases a lesser share of such
Diluting Issuance or none, the Series A Conversion Price
for that portion of the shares of Series A Stock of said
Series A Holder equal to the Non-Participating Percentage
(as hereinafter defined) (the "Diluted Stock") shall not be
reduced for said issuance pursuant to this subsection but
each share of the Diluted Stock which each such Series A
Holder holds shall be automatically converted immediately
prior to the closing of the applicable Diluting Issuance
into one (1) share of Series A1 Preferred Stock which shall
be convertible into Common Stock at the same price per
share that applied to the Diluted Stock immediately prior
to such Diluting Issuance, subject, however, to further
adjustment as herein provided. As used herein, the term
"NON-PARTICIPATING PERCENTAGE" means a percentage equal to
one hundred percent (100%) minus the percentage determined
by dividing the number of shares of the Diluting Issuance
which such Holder actually purchased by the maximum number
of shares of the Diluting Issuance which such Holder was
entitled to purchase on the basis of such Holder's
Preemptive Shares and expressing the resulting quotient as
a percentage.
Upon the conversion of Diluted Stock held by a Series A
Holder as set forth herein, such shares of Diluted Stock
shall no longer be outstanding on the books of the
Corporation and the Series A Holder shall be treated, to
the extent that said holder held such Diluted Stock, as the
record holder of such shares of Series A1 Preferred Stock
on the date of closing of the applicable Diluting Issuance.
For the purposes of any adjustment of the Series A
Conversion Price pursuant to this subsection (A), the
following provisions shall be applicable:
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<PAGE>
(1) In the case of the issuance of stock for
cash, the consideration shall be deemed to be the
amount of cash paid therefor.
(2) In the case of the issuance of stock for a
consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to
be the fair market value thereof as determined in
good faith by the Board, irrespective of any
accounting treatment; PROVIDED, HOWEVER, that the
aggregate fair market value of such non-cash and
cash consideration shall not exceed the current Fair
Market Value of the shares of stock being issued.
(3) In case of the issuance of (i) options to
purchase or rights to subscribe for Common Stock;
(ii) securities by their terms convertible into or
exchangeable for Common Stock; or (iii) options to
purchase or rights to subscribe for such convertible
or exchangeable securities:
(a) the aggregate number of shares of
Common Stock deliverable upon exercise of
such options to purchase or rights to
subscribe for Common Stock shall be deemed to
have been issued at the time such options or
rights were issued and for a consideration
equal to the consideration (determined in the
manner provided in subdivisions (1) and (2)
above), if any, received by the Corporation
upon the issuance of such options or rights
plus the purchase price provided in such
options or rights for the Common Stock
covered thereby;
(b) the aggregate number of shares of
Common Stock deliverable upon conversion of
or in exchange for any such convertible or
exchangeable securities or upon the exercise
of options to purchase or rights to subscribe
for such convertible or exchangeable
securities and subsequent conversion or
exchange thereof shall be deemed to have been
issued at the time such securities were
issued or such options or rights were issued
and for a consideration equal to the
consideration received by the Corporation for
any such securities and related options or
rights (excluding any cash received on
accounts of accrued interest or accrued
dividends), plus the additional
consideration, if any, to be received by the
Corporation upon the conversion or exchange
of such securities or the exercise of any
related options or rights (the consideration
in each case to be determined in the manner
provided in subdivisions (1) and
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<PAGE>
(2) above, with the proviso to subdivision
(2) being applied to the number of shares of
Common Stock deliverable upon such exercise);
(c) on any change in the number of shares
or exercise price of Common Stock deliverable
upon the exercise of any such options or
rights or conversions of or exchange for such
convertible or exchangeable securities, other
than a change resulting from the antidilution
provisions thereof, the Series A Conversion
Price, if previously adjusted, shall
forthwith be readjusted to such Series A
Conversion Price as would have obtained had
the adjustment made upon the issuance of such
options, rights or securities not converted
prior to such change or options or rights
related to such securities not converted
prior to such change having been made upon
the basis of such change; and
(d) on the expiration of any such options
or rights, the termination of any such rights
to convert or exchange or the expiration of
any options or rights related to such
convertible or exchangeable securities, the
Series A Conversion Price, if previously
adjusted, shall forthwith be readjusted to
such Series A Conversion Price as would have
obtained had such options, rights, securities
or options or rights related to such
securities not been issued.
(B) ADJUSTMENTS FOR CERTAIN DIVIDENDS, SUBDIVISIONS OR
SPLIT-UPS. If, at any time after the Series A Initial
Issuance Date, the number of shares of Common Stock
outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of
shares of Common Stock, then, upon the record date fixed
for the determination of holders of Common Stock entitled
to receive such stock dividend, subdivision or split-up,
the Series A Conversion Price shall be appropriately
decreased so that the number of shares of Common Stock
issuable on conversion of each share of Series A Stock
shall be increased in proportion to such increase in
outstanding shares.
(C) ADJUSTMENTS FOR COMBINATIONS. If, at any time after
the Series A Initial Issuance Date, the number of shares of
Common Stock outstanding is decreased by a combination of
the outstanding shares of Common Stock, then, upon the
record date for such combination, the Series A Conversion
Price shall be appropriately increased so that the number
of shares of Common Stock issuable on conversion of each
share of Series A Stock shall be decreased in proportion to
such decrease in outstanding shares.
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<PAGE>
(D) ADJUSTMENTS FOR REORGANIZATIONS, MERGERS,
CONSOLIDATIONS, ETC. In case, at any time after the Series
A Initial Issuance Date, of any capital reorganization, or
any reclassification of the stock of the Corporation (other
than a change in par value or from par value to no par
value or from no par value to par value or as a result of a
stock dividend or subdivision, split-up or combination of
shares), or the consolidation or merger of the Corporation
with or into another person (other than a consolidation or
merger in which the Corporation is the continuing
corporation and which does not result in any change in the
Common Stock or Series A Stock) or of the sale or other
disposition of all or substantially all of the properties
and assets of the Corporation as an entirety to any other
person, each share of Series A Stock shall, after such
reorganization, reclassification, consolidation, merger,
sale or other disposition, be convertible into the kind and
number of shares of stock or other securities or property
of the Corporation or of the corporation resulting from
such consolidation or surviving such merger or to which
such properties and assets shall have been sold or
otherwise disposed to which the holder of the number of
shares of Common Stock deliverable (immediately prior to
the time of such reorganization, reclassification,
consolidation, merger, sale or other disposition) upon
conversion of such share would have been entitled upon such
reorganization, reclassification, consolidation, merger,
sale or other disposition. The provisions of this
subsection shall similarly apply to successive
reorganizations, reclassifications, consolidations,
mergers, sales or other dispositions.
(E) All calculations under this subsection (iv) shall be
made to the nearest one cent ($.01) or to the nearest
one-tenth (1/10) of a share, as the case maybe.
(F) In any case in which the provisions of this
subsection (iv) shall require that an adjustment shall
become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of
such event (i) issuing to the holder of any share of Series
A Stock converted after such record date and before the
occurrence of such event the additional shares of capital
stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares
of capital stock issuable upon such conversion before
giving effect to such adjustment and (ii) paying to such
holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section 7(a)(iii) above,
PROVIDED, HOWEVER, that the Corporation shall deliver to
such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional
shares, and such cash, upon the occurrence of the event
requiring such adjustment.
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<PAGE>
(v) Whenever the Series A Conversion Price shall be adjusted as
provided in Section 7(a)(iv), the Corporation shall forthwith
file, at the office of the transfer agent for the Series A Stock
or at such other place as may be designated by the Corporation, a
statement, signed by its independent certified public accountants,
showing in detail the facts requiring such adjustment and the
Series A Conversion Price that shall be in effect after such
adjustment. The Corporation shall also cause a copy of such
statement to be sent by first class, certified mail, return
receipt requested, postage prepaid, to each Series A Holder at
such holder's address appearing on the Corporation's records.
Where appropriate, such copy may be given in advance and may be
included as part of a notice required to be mailed under the
provisions of Section 7(a)(vi) below.
(vi) In the event the Corporation shall propose to take any
action of the types described in clauses (A), (B), (C), or (D) of
Section 7(a)(iv) above, the Corporation shall give notice to each
holder of shares of Series A Stock, in the manner set forth in
Section 7(a)(v) above, which notice shall specify the record date,
if any, with respect to, any such action and the date on which
such action is to take place. Such notice shall also set forth
such facts with respect thereto as shall be reasonably necessary
to indicate the effect of such action (to the extent such effect
may be known at the date of such notice) on the Series A
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable
upon the occurrence of such action or deliverable upon conversion
of shares of Series A Stock. In the case of any action which would
require the fixing of a record date, such notice shall be given at
least 20 days prior to the date so fixed, and in case of all other
action, notice shall be given at least 30 days prior to the taking
of such proposed action. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of any
such action.
(vii) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of
shares of capital stock of the Corporation upon conversion of any
shares of Series A Stock; PROVIDED, HOWEVER, that the Corporation
shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of
any certificate for such shares in a name other than that of the
holder of the shares of Series A Stock in respect of which such
shares are being issued.
(viii) The Corporation shall reserve, free from preemptive rights,
out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of the shares of
Series A Stock, sufficient shares to provide for the conversion of
all outstanding shares of Series A Stock.
(ix) All shares of Common Stock which may be issued in
connection with the conversion provisions set forth herein will,
upon issuance by the Corporation, be validly issued, fully paid
and nonassessable, with no personal liability attaching to
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the ownership thereof, and free from all taxes, liens or charges
with respect thereto.
(b) AUTOMATIC CONVERSION. Upon the occurrence of a Series A Event of
Conversion, all shares of Series A Stock then outstanding shall, by virtue of,
and simultaneously with, the occurrence of the Series A Event of Conversion and
without any action on the part of the holders thereof, be deemed automatically
converted into such whole number of fully paid and nonassessable shares of
Common Stock as equals (1) the product of (x) the Series A Original Purchase
Price multiplied by (y) the number of shares of Series A Stock being converted
divided by (2) the Series A Conversion Price as last adjusted pursuant to
Section 7(a)(iv) and then in effect.
8. PRE-EMPTIVE RIGHTS. (a) RIGHT TO PURCHASE. Until the occurrence of
a Series A Event of Conversion, the Series A Holders shall be entitled to
subscribe for their respective Preemptive Share of any New Securities which the
Corporation may, from time to time, propose to issue and sell, at any time while
any Series A Stock is outstanding and subject to the terms, conditions and
procedures set forth below.
(b) The Corporation shall first deliver to each Series A Holder a
written Notice of Intention to Sell offering to each Series A Holder the right
to purchase up to the Preemptive Share of such of such Series A Holder of such
shares of New Securities at the purchase price and on the terms specified
therein. Each Series A Holder shall have the right and option, for a period of
twenty (20) days after delivery to said Series A Holder of such Notice of
Intention to Sell, to purchase all or any part of the Preemptive Share of such
Series A Holder of the shares of New Securities so offered at the purchase price
and on the terms stated therein. Such acceptance shall be made by delivering a
written Notice of Acceptance to the Corporation within the aforesaid twenty (20)
day period.
The closing of any sales of shares of New Securities under the terms of
Section 8 shall be made at the offices of the Corporation on a mutually
satisfactory business day within five (5) business days after the expiration of
the aforesaid period. Delivery of certificates or other instruments evidencing
such shares of New Securities duly endorsed for transfer to the appropriate
Series A Holder shall be made on such date against payment of the purchase price
therefor.
(c) The Corporation may issue and sell all or any part of the
remaining shares of New Securities so offered for sale but not purchased
pursuant to Section 8 hereof at a price not less than the price offered, and
on terms not more favorable, to the purchaser thereof than the terms stated
in the original Notice of Intention to Sell, at any time within one hundred
twenty (120) days after the expiration of the offer required by Section 8. In
the event the remaining shares of New Securities are not sold by the
Corporation during such one hundred twenty (120) day period, the right of the
Corporation to sell such remaining shares of New Securities shall expire and
the obligations of this Section 8 shall be reinstated; PROVIDED, HOWEVER,
that in the event the Corporation determines, at any time during such one
hundred twenty (120) day period, that the sale of all or any part of the
remaining shares of New Securities on the terms set forth in the Notice of
Intention to Sell is impractical, the Corporation can terminate the offer and
reinstate the procedure provided in this Section 8 without waiting for the
expiration of such one hundred twenty (120) day period.
9. FURTHER DILUTING ISSUANCES. The Corporation shall not permit or
cause to occur more than one Diluting Issuance unless the Corporation (I) has
taken all necessary action to create a new subseries of the Series A Preferred
Stock, which shall be PARI PASSU with the Series A Preferred Stock and the
Series A1 Preferred Stock for all purposes except conversion price, and (II)
shall have amended this Certificate to provide that the shares of Series A Stock
held by any Holder thereof who fails to purchase its full Preemptive Share of
such additional Diluting Issuance shall be converted automatically into such new
subseries. The shares of such subseries shall be convertible into Common Stock
immediately after such Diluting Issuance at the same price per share that
applied to the shares which were so converted immediately prior to such Diluting
Issuance. The consent of the Holders of the Series A Stock shall not be required
in order to effect such new subseries.
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GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES KBL NONVOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND SERIES KBL1 NONVOTING REDEEMABLE CONVERTIBLE
PREFERRED STOCK
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
Genaissance Pharmaceuticals, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), hereby certifies
that, pursuant to authority conferred upon the Board of Directors by the
provisions of Article 4 of the Certificate of Incorporation of the Corporation,
as amended, (referred to in the following designations as the "CERTIFICATE OF
INCORPORATION"), which authorize the issuance of 10,000,000 shares of a class of
capital stock designated as preferred stock, $.001 par value (the "PREFERRED
STOCK"), the following resolution was duly adopted by the Board of Directors of
the Corporation by action of the Board of Directors at a special meeting duly
held on August __, 1998.
RESOLVED: That there is hereby designated a series of the Preferred Stock
(as that term is defined in Article 4 of the Certificate of Incorporation of the
Corporation, as amended), consisting of 330,500 shares, which will be issued in
a series entitled "SERIES KBL NONVOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK"
(referred to as the "SERIES KBL PREFERRED STOCK") and 330,500 shares, which will
be issued in a series entitled "SERIES KBL1 NONVOTING REDEEMABLE CONVERTIBLE
PREFERRED STOCK" (referred to as the "SERIES KBL1 PREFERRED STOCK") and that the
preferences and privileges, relative, participating, optional and other special
rights, and qualifications, limitations and restrictions of all shares of such
series, in addition to those set forth in the Certificate of Incorporation of
the Corporation, as amended, are as set forth in the attached EXHIBIT II.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be signed by Gualberto Ruano, its President and attested to by
Kevin L. Rakin, its Secretary this 24th of August, 1998.
By /s/ GUALBERTO RUANO
---------------------------
Name: Gualberto Ruano
Title: President
ATTEST:
/s/ KEVIN RAKIN
---------------------------
Kevin Rakin
Secretary
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EXHIBIT II
1. DEFINITIONS. As used in this Certificate of Designations, the
following terms have the meanings specified below:
"AFFILIATE" shall mean a person (other than a subsidiary):
(i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under
common control with, the Corporation;
(ii) which beneficially owns or holds 5% or more of any class of
the voting stock of the Corporation; or
(iii) 5% or more of the voting stock (or in the case of a person
which is not a corporation, 5% or more of the equity interest) of
which is beneficially owned or held by the Corporation or one of
its subsidiaries.
The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting
securities, by contract or otherwise.
"BOARD" shall mean the Corporation's Board of Directors.
"BUSINESS DAY" shall mean any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of Connecticut) on which banks are
authorized to be open for business in Hartford, Connecticut.
"COMMON STOCK" shall mean the Voting Common Stock, $.001 par value, and
the Nonvoting Common Stock, $.001 par value, of the Corporation.
"DILUTED STOCK" shall have the meaning ascribed to it in Section
7(a)(iv)(A) hereof.
"DILUTING ISSUANCE" shall mean an issuance of capital stock described in
Section 7(a)(iv)(A) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXCLUDED STOCK" shall mean shares of Common Stock issued by the
Corporation:
(i) as a stock dividend or upon any stock split or other
subdivision or combination of the outstanding shares of Common
Stock (including, without limitation, any stock issued pursuant to
Section 3 hereof);
(ii) up to an aggregate 1,297,000 shares of Common Stock issued
or issuable to employees pursuant to an employee stock option plan
approved by the Board;
(iii) upon conversion of any of the Series KBL Stock; or
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(iv) as approved in writing as "EXCLUDED STOCK" by the holders
of not less than 66-2/3% in voting power of the Series KBL Stock
at the time outstanding.
"FAIR MARKET VALUE" at any date of one share of Common Stock shall be
deemed to be the average of the daily closing prices for the 30 consecutive
business days ending no more than five days before the day in question (as
adjusted for any stock dividend, split-up, combination or reclassification that
took effect during such 30 business day period). The closing price for each day
shall be the last reported sales price regular way or, in case no such reported
sales took place on such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (or if the Common
Stock is not at the time listed or admitted for trading on any such exchange,
then such price as shall be equal to the average of the last reported bid and
asked prices, as reported by the Nasdaq on such day, or if, on any day in
question, the security shall not be quoted on the Nasdaq, then such price shall
be equal to the last reported bid and asked prices on such day as reported by
the National Quotation Bureau, Inc. or any similar reputable quotation and
reporting service, if such quotation is not reported by the National Quotation
Bureau, Inc.); PROVIDED, HOWEVER, that if the Common Stock is traded in such
manner that the quotations referred to in this clause are not available for the
period required hereunder, the Fair Market Value shall be determined by a
nationally recognized independent investment banking firm selected mutually by
the holders of more than 50% of the voting power of the Series KBL Stock then
outstanding and the Corporation (or if such selection cannot be made, by a
nationally recognized independent banking firm selected by the American
Arbitration Association in accordance with its rules).
"HOLDER" shall mean a holder of shares of Series KBL Stock, as
applicable, as reflected in the stock records of the Corporation; and each
Holder's address shall be as it appears in the stock records of the Corporation.
"JUNIOR SECURITIES" shall mean, as to the Series KBL Stock, each other
class or series of capital stock (including, without limitation, each class of
common stock of the Corporation and each other series of Preferred Stock) or
other equity interests (including, without limitation, warrants, rights, calls
or options exercisable for or convertible into such capital stock or equity
interests) in the Corporation.
"LIQUIDATION EVENT" shall mean, a merger, consolidation, liquidation,
dissolution, winding up of the affairs of the Corporation or sale of all or
substantially all of the assets of the Corporation as an entirety to a third
party or parties, whether voluntary or involuntary; provided, however, that a
merger or consolidation shall not be considered a Liquidation Event if the
Corporation is the survivor or continuing corporation of such merger or
consolidation and as a result thereof there is no change in the Common Stock or
Series KBL Stock.
"LISTED RIGHTS" shall mean all patents, patent applications, patent
rights, trademarks, trademark applications, trademark rights, trade names, trade
name rights, service marks and copyrights (whether registered or not) owned or
possessed by the Corporation and any improvements thereon.
"NEW SECURITIES" shall mean any capital stock (including, without
limitation, each class of common stock of the Corporation, any additional shares
of Series KBL Stock, each other
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series of Preferred Stock and any shares of capital stock held by the
Corporation in its treasury upon the disposition thereof) or other equity
interests (including, without limitation, warrants, rights, calls or options
exercisable for or convertible into such capital stock or equity interests) in
the Corporation issued after the Series KBL Initial Issue Date; PROVIDED,
HOWEVER, that such term shall not include (i) securities offered to the public
pursuant to a registration statement filed in accordance with the provisions of
the Securities Act; (ii) securities issued (x) pursuant to the approval of a
majority of the members of the Board, (y) in connection with the acquisition of
another corporation by the Corporation by merger, purchase of substantially all
assets or other reorganization whereby the Corporation owns, upon consummation
of such acquisition, greater than fifty percent (50%) of the voting power to
elect the directors of such corporation or (z) in connection with joint ventures
or corporate collaborations; (iii) securities issued to consultants, vendors,
lenders, equipment lessors, landlords and independent directors as consideration
to such persons in such capacities; (iv) securities issued pursuant to any stock
option plan, stock purchase or stock bonus agreement up to a maximum of
2,000,000 shares; (v) securities issued pursuant to any other stock option plan,
stock purchase or stock bonus arrangement, or grant, which are approved by the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of the Series KBL Stock; and (vi) securities issued in connection with
research agreements to which the Corporation is a party, including, but not
limited to, collaboration and licensing agreements.
"NON-PARTICIPATING PERCENTAGE" shall have the meaning ascribed to it in
Section 7(a)(iv)(A) hereof.
"NONVOTING COMMON STOCK" shall mean the common stock, $.001 par value, of
the Corporation, which has no right to vote, except as set forth in the
Certificate of Incorporation.
"PERSON" shall mean and include an individual, a corporation, a
partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.
"PREEMPTIVE SHARE" shall mean, immediately prior to any issue of shares
of New Securities, and as to each Series KBL Holder, the percentage which
expresses the ratio between (i) the total number of shares of New Securities
issuable upon conversion of the Series KBL Stock owned by such Series KBL Holder
plus the total number of shares of Common Stock then owned by such Series KBL
Holder, and (ii) the total number of shares of Common Stock then outstanding
(Common Stock not being deemed for such purposes to include warrants, options or
other convertible instruments, which have not then been exercised or converted,
as applicable), plus the total number of shares of Common Stock issuable upon
conversion of the then outstanding Series KBL Stock.
"QUALIFIED IPO" shall mean the consummation of a firm commitment
underwritten public offering of shares of Common Stock registered under the
Securities Act which results in aggregate gross cash proceeds to the Corporation
of not less than TWENTY MILLION DOLLARS ($20,000,000) and pursuant to which the
offering price per share is equal to or greater than two and one half times the
Series KBL Original Purchase Price (adjusted for any Recapitalization Event).
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"RECAPITALIZATION EVENT" shall mean any stock splits, stock dividends,
recapitalizations, reclassifications, and similar events.
"RELATED PARTY" shall mean any officer, director, significant employee or
consultant of the Corporation or any holder (other than any Series KBL Holder)
of 5% or more of any class of capital stock of the Corporation or any member of
the immediate family of any such officer, director, employee, consultant or
shareholder or any entity controlled by any such officer, director, employee,
consultant or shareholder or a member of the immediate family of any such
officer, director, employee, consultant or shareholder.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES KBL ACCRUED DIVIDENDS" shall mean Series KBL Full Cumulative
Dividends to the date of determination, less the amount of all dividends paid
pursuant to Section 3, upon the relevant shares of Series KBL Stock.
"SERIES KBL CONVERSION PRICE" shall initially mean $4.00; PROVIDED,
HOWEVER, that the Series KBL Conversion Price shall be subject to adjustment as
set forth in Section 7(a)(iv).
"SERIES KBL EVENT OF CONVERSION" shall mean the consummation of a
Qualified IPO.
"SERIES KBL FULL CUMULATIVE DIVIDENDS" shall mean, as to any share of
Series KBL Stock (whether or not in respect of which such term is used there
shall have been net profits or net assets of the Corporation legally available
for the payment of such dividends), that amount which shall be equal to
dividends at the full rate fixed for the Series KBL Stock as provided herein for
the period of time elapsed from the Series KBL Initial Issuance Date to the date
as of which Series KBL Full Cumulative Dividends are to be computed.
"SERIES KBL HOLDER" shall mean a holder of shares of Series KBL Stock.
"SERIES KBL INITIAL ISSUANCE DATE" shall mean August __, 1998.
"SERIES KBL LIQUIDATION AMOUNT" shall mean an amount in cash or property
(valued at its Fair Market Value), or a combination thereof, equal to $4.00 per
share of Series KBL Stock held by a Holder (which per share amount shall be
subject to equitable adjustment whenever there shall occur a stock split,
combination, reclassification or other similar event involving the Series KBL
Stock or the Common Stock) plus all Series KBL Accrued Dividends.
"SERIES KBL ORIGINAL PURCHASE PRICE" shall mean $4.00 per share of Series
KBL Stock.
"SERIES KBL REDEMPTION DATE" shall have the meaning set forth in Section
4 hereof.
"SERIES KBL REDEMPTION PRICE" shall have the meaning set forth in Section
4 hereof.
"SERIES KBL STOCK" shall mean all of the outstanding shares of the Series
KBL Preferred Stock and the Series KBL1 Preferred Stock, together, at the time
in question, which shares shall be PARI PASSU for all purposes except conversion
price.
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"SUBSIDIARY" shall mean an entity a majority of the capital stock or
other ownership interest in which is owned directly or indirectly by the
Corporation, except that 100% "SUBSIDIARY" shall mean a subsidiary that is 100%
owned by the Corporation.
"VOTING COMMON STOCK" shall mean the common stock, $.001 par value, of
the Corporation, which has the right to vote as set forth in the Certificate of
Incorporation.
2. NUMBER OF SHARES. The designation of the series of Preferred Stock
provided for herein shall be the Series KBL Redeemable Convertible Preferred
Stock (hereinafter referred to as the "SERIES KBL PREFERRED STOCK"), and the
number of authorized shares constituting Series KBL Preferred Stock is 330,500
and Series KBL1 Redeemable Convertible Preferred Stock (hereinafter referred to
as the "SERIES KBL1 PREFERRED STOCK"), and the number of authorized shares
constituting Series KBL1 Preferred Stock is 330,500.
3. DIVIDENDS. The holder of each share of Series KBL Stock shall be
entitled to receive, before any dividends shall be declared and paid upon or set
aside for the Junior Securities, when and as declared by the Board, out of funds
legally available for that purpose, dividends in cash at the rate per annum per
share (the "SERIES KBL DIVIDEND RATE") equal to 8% of the Series KBL Original
Purchase Price, adjusted, as applicable, for any Recapitalization Event, payable
upon the earliest of (a) liquidation, dissolution or winding-up of the
Corporation in accordance with Section 4 hereof, (b) upon redemption in
accordance with Section 4 hereof or (c) upon the Series KBL Event of Conversion.
Until the third anniversary of the Series KBL Initial Issuance Date, the
Corporation shall have the option to make any such payment in shares of
Nonvoting Common Stock, and in the event such dividends are paid in Nonvoting
Common Stock, for purposes of computing the number of shares of Nonvoting Common
Stock to be issued and the amount of the dividend paid, the value of the
Nonvoting Common Stock paid to any holder of shares of Series KBL Stock shall be
valued at the then Series KBL Conversion Price. Dividends on shares of Series
KBL Stock shall be cumulative from the Series KBL Initial Issuance Date (whether
or not there shall be net profits or net assets of the Corporation legally
available for the payment of such dividends), so that, if at any time Series KBL
Full Cumulative Dividends upon the Series KBL Stock shall not have been paid or
declared and a sum sufficient for payment thereof set apart, the amount of the
deficiency in such dividends shall be fully paid or dividends in such amount
shall be declared on the shares of the Series KBL Stock and a sum sufficient for
the payment thereof shall be set apart for such payment, before any dividend
shall be declared or paid or any other distribution ordered or made upon any
Junior Securities and before any sum or sums shall be set aside for or applied
to the purchase or redemption of Junior Securities. With respect to rights to
dividends, the Series KBL Stock shall rank prior to the Common Stock. All
dividends declared upon the Series KBL Stock shall be declared pro rata per
share. All payments due under this Section to any holder of shares of Series KBL
Stock shall be made to the nearest cent.
4. REDEMPTION.
(a) REDEMPTION UPON A LIQUIDATION EVENT. (i) In connection and
concurrently with a Liquidation Event, the Corporation shall (to the extent
allowed by law) redeem, except as set forth hereafter, all the shares of Series
KBL Stock then outstanding, out of funds legally available therefor. The amount
per share payable upon any redemption of shares of Series KBL Stock pursuant to
this subsection shall be an amount in cash equal to the Series KBL
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Redemption Price, as determined below. The Corporation shall deliver to each
holder of shares of Series KBL Stock, not later than 30 days prior to the
consummation of a Liquidation Event, notice of such proposed Liquidation Event,
including the date on which such Liquidation Event is expected to be
consummated. To the extent that one or more redemptions and/or a liquidation are
occurring concurrently and the Corporation is legally prohibited from effecting
all such redemptions and/or liquidation, any redemption of the shares of Series
KBL Stock shall be deemed to occur simultaneously and prior to any other
redemptions and/or liquidations. Notwithstanding the foregoing, any Series KBL
Holder may elect to retain its outstanding shares of Series KBL Stock and not to
subject such shares to redemption by delivery of written notice to the
Corporation at least 15 days prior to the date of the consummation of the
Liquidation Event.
(ii) The amount per share payable upon any redemption of shares
of Series KBL pursuant to this subsection shall be an amount equal
to the Series KBL Original Purchase Price plus all Series KBL
Accrued Dividends (the "LIQUIDATION REDEMPTION PRICE").
(iii) Any date upon which Series KBL Stock is to be redeemed
pursuant to this Section 4 being hereinafter referred to in this
context as a "SERIES KBL REDEMPTION DATE".
(b) SERIES KBL ANNUAL REDEMPTION. Except as set forth hereafter, the
Corporation shall (to the extent allowed by law) redeem the following shares of
Series KBL Stock on the following dates, out of funds legally available
therefor:
(i) at any time on or after August __, 2003, one-third of the
shares of the Series KBL Stock then outstanding.
(ii) at any time on or after August __, 2004, an additional
number of shares of Series KBL Stock equal to one-third of the shares, of
the Series KBL Stock outstanding as of August __, 2003.
(iii) at any time on or after August __, 2005, all outstanding
shares of Series KBL Stock.
The amount per share payable upon any redemption of shares of Series KBL Stock
pursuant to this subsection shall be an amount in cash equal to the Series KBL
Original Purchase Price plus (a) all Series KBL Accrued Dividends AND (b) an
amount equal to a 12% cumulative, annual return on (1) the Series KBL Original
Purchase Price from the Series KBL Initial Issuance Date to the date of payment
and (2) all Series KBL Accrued Dividends from the date of accrual under Section
3 to the date of payment (the "SCHEDULED REDEMPTION PRICE" and collectively with
the Liquidation Redemption Price, the "SERIES KBL REDEMPTION PRICE").
Notwithstanding the foregoing, any Series KBL Holder may elect to retain
its outstanding shares of Series KBL Stock and not to subject such shares to
redemption by delivery of written notice to the Corporation at least 15 days
prior to the applicable redemption date set forth above.
(c) PRO RATA. If, on any Series KBL Redemption Date, fewer than all
shares of Series KBL Stock then outstanding are to be redeemed in accordance
with this Section, the shares to be redeemed shall be allocated pro rata among
the Series KBL Holders and the Redemption Notice mailed to each Holder shall
specify the number of shares to be redeemed from such Holder. Notwithstanding
the delivery of a Redemption Notice, Series KBL Holders
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subject to redemption may convert such shares pursuant to Section 7 on or before
the Redemption Date by delivering written notice thereof to the Corporation not
later than 10 days prior to the Redemption Date.
(d) PAYMENT OF SERIES KBL REDEMPTION PRICE; TERMINATION OF RIGHTS. On
any Series KBL Redemption Date, the applicable Series KBL Redemption Price in
respect of the shares represented by the certificate or certificates surrendered
to the Corporation by the Holder thereof pursuant to the Redemption Notice shall
be paid to the order of the person whose name appears on such certificate or
certificates. Each surrendered certificate shall be canceled and retired and a
new certificate, representing the remaining, unredeemed shares of Series KBL
Stock, if any, shall be issued to the Holder of such shares. On any Series KBL
Redemption Date, the rights of a Holder with respect to shares redeemed shall
cease, other than such Holder's right to payment of the Series KBL Redemption
Price as of the Series KBL Redemption Date, upon surrender of the certificate or
certificates.
5. LIQUIDATION. Upon a Liquidation Event, the Series KBL Holders
shall be entitled, before any assets of the Corporation shall be distributed
among or paid over to the holders of Junior Securities, but after distribution
of such assets among, or payment thereof over to, creditors of the Corporation,
to receive from the assets of the Corporation available for distribution to
stockholders in cash, the Series KBL Liquidation Amount. If the assets of the
Corporation legally available for distribution shall be insufficient to permit
the payment in full of the Series KBL Liquidation Amount to the Series KBL
Holders, then the entire assets of the Corporation legally available for
distribution shall be distributed ratably among the Series KBL Holders in
proportion to the respective amounts which would have been payable upon such
Liquidation Event on such shares of Series KBL Stock if all amounts payable
thereon had been paid in full. In the event that such distribution of assets is
other than in cash, such distribution of cash and other assets (including
securities) shall be made ratably among the holders of the shares of Series KBL
Stock based upon the fair market value of any such assets as determined by a
nationally recognized valuation consultant selected mutually by the holders of a
majority in voting power of the Series KBL Stock then outstanding and the
Corporation (or if such selection cannot be made, by a nationally recognized
independent valuation consultant selected by the American Arbitration
Association in accordance with its rules). In the event of any liquidation,
dissolution or winding-up of the Corporation, after payment shall have been made
to the holders of shares of Series KBL Stock of the full amount to which they
shall be entitled as aforesaid, the holders of any Junior Securities and the
Series KBL Holders shall be entitled to participate equally, on an as-converted
basis in the case of the Series KBL Stock and any Junior Securities convertible
into Common Stock, in all remaining assets of the Corporation available for
distribution to its stockholders. The provisions of this Section 5 shall not be
applicable to any shares of Series KBL Stock that have been redeemed pursuant to
Section 4(a) hereof in connection with such Liquidation Event.
6. VOTING. Except as set forth in the Certificate of Incorporation,
the shares of Series KBL Stock shall not entitle any Holder thereof to vote on
matters as to which holders of Common Stock shall be entitled to vote.
7. CONVERSION.
(a) OPTIONAL CONVERSION.
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(i) The holder of any shares of Series KBL Stock shall have the
right, at such holder's option, at any time or from time to time
to convert any or all such holder's shares of Series KBL Stock
into such whole number of fully paid and nonassessable shares of
Nonvoting Common Stock as equals (I) the product of (x) the Series
KBL Original Purchase Price, multiplied by (y) the number of
shares of Series KBL Stock being converted, divided by (II) the
Series KBL Conversion Price (as last adjusted and then in effect)
for the shares of the Series KBL Stock being converted, by
surrender of the certificates representing the shares of Series
KBL Stock so to be converted in the manner provided Section
7(a)(ii) below. The Series KBL Conversion Price shall initially be
equal to the Series KBL Original Purchase Price; PROVIDED,
HOWEVER, that such Series KBL Conversion Price shall be subject to
adjustment as set forth in Section 7(a)(iv) below. The holder of
any shares of Series KBL Stock exercising the aforesaid right to
convert such shares into shares of Nonvoting Common Stock shall
not be entitled to payment of Series KBL Accrued Dividends with
respect to the shares of Series KBL Stock so converted, and shall
be deemed to have waived any such Series KBL Accrued Dividends
upon such conversion.
(ii) The holder of any shares of Series KBL Stock may exercise
such holder's conversion right pursuant to this Section by
delivering to the Corporation during regular business hours at the
office of any transfer agent of the Corporation for the Series KBL
Stock or at such other place as may be designated by the
Corporation, the certificate or certificates for the shares to be
converted, duly endorsed or assigned in blank or to the
Corporation (if required by it) accompanied by written notice
stating that such holder elects to convert such shares and stating
the name or names (with address) in which the certificate or
certificates for the shares of Nonvoting Common Stock are to be
issued. Conversion shall be deemed to have been effected with
respect to conversion under (a) Section 7(a)(i) above, on the date
when the aforesaid delivery is made and (b) Section 7(b) on the
date of occurrence of a Series KBL Event of Conversion, as the
case may be, and any such date is referred to herein as the
"SERIES KBL CONVERSION DATE". As promptly as practicable
thereafter the Corporation shall issue and deliver to or upon
the written order of such holder, to the place designated by such
holder, a certificate or certificates for the number of full
shares of Nonvoting Common Stock to which the such holder is
entitled and a check or cash in respect of any fractional
interest in a share of Nonvoting Common Stock, as provided in
Section 7(a)(iii) below, payable with respect to the shares of
Series KBL Stock so converted up to and including the Series KBL
Conversion Date. The person in whose names the certificate or
certificates for Nonvoting Common Stock are to be issued shall be
deemed to have become a holder of Nonvoting Common Stock on the
applicable Series KBL Conversion Date unless the transfer books
of the Corporation are closed on that date, in which event such
holder shall be deemed to have become a holder of Nonvoting Common
Stock on the next succeeding date on which the transfer books are
open, but the Series KBL Conversion Price shall be that in effect
on the Series KBL Conversion Date. Upon conversion of only a
portion of the number of shares covered by a certificate
representing shares of Series KBL Stock surrendered for
conversion, the Corporation shall issue and
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deliver to or upon the written order of the holder of the
certificate so surrendered for conversion, at the expense of the
Corporation, a new certificate covering the number of shares of
Series KBL Stock representing the unconverted portion of the
certificate so surrendered, which new certificate shall entitle
the holder thereof to dividends on the shares of Series KBL Stock
represented thereby to the same extent as if the certificate
theretofore covering such unconverted shares had not been
surrendered for conversion.
(iii) No fractional shares of Nonvoting Common Stock or scrip
shall be issued upon conversion of shares of Series KBL Stock. If
more than one share of Series KBL Stock shall be surrendered for
conversion at any one time by the same holder, the number of full
shares of Nonvoting Common Stock issuable upon conversion thereof
shall be computed on the basis of the aggregate number of shares
of Series KBL Stock so surrendered. Instead of any fractional
shares of Nonvoting Common Stock which would otherwise be issuable
upon conversion of any shares of Series KBL Stock, the Corporation
shall pay a cash adjustment in respect of such fractional interest
in an amount equal to the then current Fair Market Value of a
share of Nonvoting Common Stock multiplied by such fractional
interest. Fractional interests shall not be entitled to dividends,
and the holders of a fractional interest shall not be entitled to
any rights as stockholders of the Corporation in respect of such
fractional interest.
(iv) The Series KBL Conversion Price shall be subject to
adjustment from time to time as follows:
(A) ADJUSTMENTS FOR DILUTING ISSUANCES UPON CONTINUED
PARTICIPATION. If the Corporation shall at any time or from
time to time after the Series KBL Initial Issuance Date
issue or be deemed (by virtue of any of the provisions of
Section 7(a)(iv)), to have issued any capital stock
(including, without limitation, each class of common stock
of the Corporation) or other equity interests (including,
without limitation, war-rants, rights, calls or options
exercisable for or convertible into such capital stock or
equity interests) in the Corporation, other than Excluded
Stock, without consideration or for a consideration per
share (the "LAST ISSUE PRICE") less than the Series KBL
Conversion Price in effect immediately prior to each such
issuance or deemed issuance (a "DILUTING ISSUANCE"), the
Series KBL Conversion Price in effect immediately prior
thereto shall forthwith be adjusted, as of the opening of
business on the date of such issuance or deemed issuance,
to such Last Issue Price.
Notwithstanding the immediately preceding paragraph of this
subsection (A), if a Series KBL Holder has been given
written notice pursuant to Section 8 hereof and the
opportunity to purchase its Preemptive Share of such
Diluting Issuance and does not purchase its entire
Preemptive Share of such Diluting Issuance, but purchases a
lesser share of such Diluting Issuance or none, the Series
KBL Conversion Price for that portion of the shares of
Series KBL Stock of said Series KBL Holder equal to the
Non-Participating Percentage (as hereinafter defined) (the
"Diluted Stock")
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shall not be reduced for said issuance pursuant to this
subsection but each share of the Diluted Stock which each
such Series KBL Holder holds shall be automatically
converted immediately prior to the closing of the
applicable Diluting Issuance into one (1) share of Series
KBL1 Preferred Stock which shall be convertible into
Nonvoting Common Stock at the same price per share that
applied to the Diluted Stock immediately prior to such
Diluting Issuance, subject, however, to further adjustment
as herein provided. As used herein, the term
"NON-PARTICIPATING PERCENTAGE" means a percentage equal to
one hundred percent (100%) minus the percentage determined
by dividing the number of shares of the Diluting Issuance
which such Holder actually purchased by the maximum number
of shares of the Diluting Issuance which such Holder was
entitled to purchase on the basis of such Holder's
Preemptive Share and expressing the resulting quotient as a
percentage.
Upon the conversion of Diluted Stock held by a Series KBL
Holder as set forth herein, such shares of Diluted Stock
shall no longer be outstanding on the books of the
Corporation and the Series KBL Holder shall be treated, to
the extent that said holder held such Diluted Stock, as the
record holder of such shares of Series KBL1 Preferred Stock
on the date of closing of the applicable Diluting Issuance.
For the purposes of any adjustment of the Series KBL
Conversion Price pursuant to this subsection (A), the
following provisions shall be applicable:
(1) In the case of the issuance of stock for
cash, the consideration shall be deemed to be the
amount of cash paid therefor.
(2) In the case of the issuance of stock for a
consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to
be the fair market value thereof as determined in
good faith by the Board, irrespective of any
accounting treatment; PROVIDED, HOWEVER, that the
aggregate fair market value of such non-cash and
cash consideration shall not exceed the current Fair
Market Value of the shares of stock being issued.
(3) In case of the issuance of (i) options to
purchase or rights to subscribe for Common Stock;
(ii) securities by their terms convertible into or
exchangeable for Common Stock; or (iii) options to
purchase or rights to subscribe for such convertible
or exchangeable securities:
(a) the aggregate number of shares of
Common Stock deliverable upon exercise of
such options to purchase or rights to
subscribe for Common Stock shall be deemed to
have been issued at the time such options or
rights were
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<PAGE>
issued and for a consideration equal to the
consideration (determined in the manner
provided in subdivisions (1) and (2) above),
if any, received by the Corporation upon the
issuance of such options or rights plus the
purchase price provided in such options or
rights for the Common Stock covered thereby;
(b) the aggregate number of shares of
Common Stock deliverable upon conversion of
or in exchange for any such convertible or
exchangeable securities or upon the exercise
of options to purchase or rights to subscribe
for such convertible or exchangeable
securities and subsequent conversion or
exchange thereof shall be deemed to have been
issued at the time such securities were
issued or such options or rights were issued
and for a consideration equal to the
consideration received by the Corporation for
any such securities and related options or
rights (excluding any cash received on
accounts of accrued interest or accrued
dividends), plus the additional
consideration, if any, to be received by the
Corporation upon the conversion or exchange
of such securities or the exercise of any
related options or rights (the consideration
in each case to be determined in the manner
provided in subdivisions (1) and (2) above,
with the proviso to subdivision (2) being
applied to the number of shares of Common
Stock deliverable upon such exercise);
(c) on any change in the number of shares
or exercise price of Common Stock deliverable
upon the exercise of any such options or
rights or conversions of or exchange for such
convertible or exchangeable securities, other
than a change resulting from the antidilution
provisions thereof, the Series KBL Conversion
Price, if previously adjusted, shall
forthwith be readjusted to such Series KBL
Conversion Price as would have obtained had
the adjustment made upon the issuance of such
options, rights or securities not converted
prior to such change or options or rights
related to such securities not converted
prior to such change having been made upon
the basis of such change; and
(d) on the expiration of any such options
or rights, the termination of any such rights
to convert or exchange or the expiration of
any options or rights related to such
convertible or exchangeable securities, the
Series KBL Conversion Price, if previously
adjusted, shall forthwith be readjusted to
such Series KBL Conversion Price as would
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<PAGE>
have obtained had such options, rights,
securities or options or rights related to
such securities not been issued.
(B) ADJUSTMENTS FOR CERTAIN DIVIDENDS, SUBDIVISIONS OR
SPLIT-UPS. If, at any time after the Series KBL Initial
Issuance Date, the number of shares of Common Stock
outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of
shares of Common Stock, then, upon the record date fixed
for the determination of holders of Common Stock entitled
to receive such stock dividend, subdivision or split-up,
the Series KBL Conversion Price shall be appropriately
decreased so that the number of shares of Nonvoting Common
Stock issuable on conversion of each share of Series KBL
Stock shall be increased in proportion to such increase in
outstanding shares.
(C) ADJUSTMENTS FOR COMBINATIONS. If, at any time after
the Series KBL Initial Issuance Date, the number of shares
of Common Stock outstanding is decreased by a combination
of the outstanding shares of Common Stock, then, upon the
record date for such combination, the Series KBL Conversion
Price shall be appropriately increased so that the number
of shares of Nonvoting Common Stock issuable on conversion
of each share of Series KBL Stock shall be decreased in
proportion to such decrease in outstanding shares.
(D) ADJUSTMENTS FOR REORGANIZATIONS, MERGERS,
CONSOLIDATIONS, ETC. In case, at any time after the Series
KBL Initial Issuance Date, of any capital reorganization,
or any reclassification of the stock of the Corporation
(other than a change in par value or from par value to no
par value or from no par value to par value or as a result
of a stock dividend or subdivision, split-up or combination
of shares), or the consolidation or merger of the
Corporation with or into another person (other than a
consolidation or merger in which the Corporation is the
continuing corporation and which does not result in any
change in the Common Stock or Series KBL Stock) or of the
sale or other disposition of all or substantially all of
the properties and assets of the Corporation as an entirety
to any other person, each share of Series KBL Stock shall,
after such reorganization, reclassification, consolidation,
merger, sale or other disposition, be convertible into the
kind and number of shares of stock or other securities or
property of the Corporation or of the corporation resulting
from such consolidation or surviving such merger or to
which such properties and assets shall have been sold or
otherwise disposed to which the holder of the number of
shares of Common Stock deliverable (immediately prior to
the time of such reorganization, reclassification,
consolidation, merger, sale or other disposition) upon
conversion of such share would have been entitled upon such
reorganization, reclassification, consolidation, merger,
sale or other disposition. The provisions of this
subsection shall similarly apply to successive
reorganizations, reclassifications, consolidations,
mergers, sales or other dispositions.
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<PAGE>
(E) All calculations under this subsection (iv) shall be
made to the nearest one cent ($.01) or to the nearest
one-tenth (1/10) of a share, as the case maybe.
(F) In any case in which the provisions of this
subsection (iv) shall require that an adjustment shall
become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of
such event (i) issuing to the holder of any share of Series
KBL Stock converted after such record date and before the
occurrence of such event the additional shares of capital
stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares
of capital stock issuable upon such conversion before
giving effect to such adjustment and (ii) paying to such
holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section 7(a)(iii) above,
PROVIDED, HOWEVER, that the Corporation shall deliver to
such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional
shares, and such cash, upon the occurrence of the event
requiring such adjustment.
(v) Whenever the Series KBL Conversion Price shall be adjusted
as provided in Section 7(a)(iv), the Corporation shall forthwith
file, at the office of the transfer agent for the Series KBL Stock
or at such other place as may be designated by the Corporation, a
statement, signed by its independent certified public accountants,
showing in detail the facts requiring such adjustment and the
Series KBL Conversion Price that shall be in effect after such
adjustment. The Corporation shall also cause a copy of such
statement to be sent by first class, certified mail, return
receipt requested, postage prepaid, to each Series KBL Holder at
such holder's address appearing on the Corporation's records.
Where appropriate, such copy may be given in advance and may be
included as part of a notice required to be mailed under the
provisions of Section 7(a)(vi) below.
(vi) In the event the Corporation shall propose to take any
action of the types described in clauses (A), (B), (C), or (D) of
Section 7(a)(iv) above, the Corporation shall give notice to each
holder of shares of Series KBL Stock, in the manner set forth in
Section 7(a)(v) above, which notice shall specify the record date,
if any, with respect to, any such action and the date on which
such action is to take place. Such notice shall also set forth
such facts with respect thereto as shall be reasonably necessary
to indicate the effect of such action (to the extent such effect
may be known at the date of such notice) on the Series KBL
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable
upon the occurrence of such action or deliverable upon conversion
of shares of Series KBL Stock. In the case of any action which
would require the fixing of a record date, such notice shall be
given at least 20 days prior to the date so fixed, and in case of
all other action, notice shall be given at least 30 days prior to
the taking of such proposed action. Failure to give such notice,
or any defect therein, shall not affect the legality or validity
of any such action.
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<PAGE>
(vii) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of
shares of capital stock of the Corporation upon conversion of any
shares of Series KBL Stock; PROVIDED, HOWEVER, that the
Corporation shall not be required to pay any taxes which may be
payable in respect of any transfer involved in the issuance or
delivery of any certificate for such shares in a name other than
that of the holder of the shares of Series KBL Stock in respect of
which such shares are being issued.
(viii) The Corporation shall reserve, free from preemptive rights,
out of its authorized but unissued shares of Nonvoting Common
Stock, solely for the purpose of effecting the conversion of the
shares of Series KBL Stock, sufficient shares to provide for the
conversion of all outstanding shares of Series KBL Stock.
(ix) All shares of Common Stock which may be issued in
connection with the conversion provisions set forth herein will,
upon issuance by the Corporation, be validly issued, fully paid
and nonassessable, with no personal liability attaching to the
ownership thereof, and free from all taxes, liens or charges with
respect thereto.
(b) AUTOMATIC CONVERSION. Upon the occurrence of a Series KBL Event of
Conversion, all shares of Series KBL Stock then outstanding shall, by virtue of,
and simultaneously with, the occurrence of the Series KBL Event of Conversion
and without any action on the part of the holders thereof, be deemed
automatically converted into such whole number of fully paid and nonassessable
shares of Nonvoting Common Stock as equals (1) the product of (x) the Series KBL
Original Purchase Price multiplied by (y) the number of shares of Series KBL
Stock being converted divided by (2) the Series KBL Conversion Price as last
adjusted pursuant to Section 7(a)(iv) and then in effect.
8. PRE-EMPTIVE RIGHTS. (a) RIGHT TO PURCHASE. Until the occurrence of
a Series KBL Event of Conversion, the Series KBL Holders shall be entitled to
subscribe for their respective Preemptive Share of any New Securities which the
Corporation may, from time to time, propose to issue and sell, at any time while
any Series KBL Stock is outstanding and subject to the terms, conditions and
procedures set forth below.
(b) The Corporation shall first deliver to each Series KBL Holder a
written Notice of Intention to Sell offering to each Series KBL Holder the right
to purchase up to the Preemptive Share of such of such Series KBL Holder of such
shares of New Securities at the purchase price and on the terms specified
therein. Each Series KBL Holder shall have the right and option, for a period of
twenty (20) days after delivery to said Series KBL Holder of such Notice of
Intention to Sell, to purchase all or any part of the Preemptive Share of such
Series KBL Holder of the shares of New Securities so offered at the purchase
price and on the terms stated therein. Such acceptance shall be made by
delivering a written Notice of Acceptance to the Corporation within the
aforesaid twenty (20) day period.
The closing of any sales of shares of New Securities under the terms of
Section 8 shall be made at the offices of the Corporation on a mutually
satisfactory business day within five (5) business days after the expiration of
the aforesaid period. Delivery of certificates or other
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<PAGE>
instruments evidencing such shares of New Securities duly endorsed for transfer
to the appropriate Series KBL Holder shall be made on such date against payment
of the purchase price therefor.
(c) The Corporation may issue and sell all or any part of the
remaining shares of New Securities so offered for sale but not purchased
pursuant to Section 8 hereof at a price not less than the price offered, and on
terms not more favorable, to the purchaser thereof than the terms stated in the
original Notice of Intention to Sell, at any time within one hundred twenty
(120) days after the expiration of the offer required by Section 8. In the event
the remaining shares of New Securities are not sold by the Corporation during
such one hundred twenty (120) day period, the right of the Corporation to sell
such remaining shares of New Securities shall expire and the obligations of this
Section 8 shall be reinstated; PROVIDED, HOWEVER, that in the event the
Corporation determines, at any time during such one hundred twenty (120) day
period, that the sale of all or any part of the remaining shares of New
Securities on the terms set forth in the Notice of Intention to Sell is
impractical, the Corporation can terminate the offer and reinstate the procedure
provided in this Section 8 without waiting for the expiration of such one
hundred twenty (120) day period.
9. FURTHER DILUTING ISSUANCES. The Corporation shall not permit or
cause to occur more than one Diluting Issuance unless the Corporation (I) has
taken all necessary action to create a new subseries of the Series KBL Preferred
Stock, which shall be PARI PASSU with the Series KBL Preferred Stock and the
Series KBL1 Preferred Stock for all purposes except conversion price, and (II)
shall have amended this Certificate to provide that the shares of Series KBL
Stock held by any Holder thereof who fails to purchase its full Preemptive Share
of such additional Diluting Issuance shall be converted automatically into such
new subseries. The shares of such subseries shall be convertible into Nonvoting
Common Stock immediately after such Diluting Issuance at the same price per
share that applied to the shares which were so converted immediately prior to
such Diluting Issuance. The consent of the Holders of the Series KBL Stock shall
not be required in order to effect such new subseries.
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<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GENAISSANCE PHARMACEUTICALS, INC.
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
1. This Certificate of Amendment amends the Certificate of
Incorporation of the Corporation, as amended (the "Certificate of
Incorporation"), by amending Article 4 to effect changes in the capital
structure of the Corporation.
2. The first sentence of Article 4 of the Certificate of
Incorporation, as amended, is amended hereby to read as follows:
"The total authorized capital stock of the corporation consists of
44,500,000 shares, of which 17,500,000 are shares of Common Stock,
$.001 par value (the "Common Stock"), 2,000,000 are shares of
Nonvoting Common Stock, $.001 par value (the "Nonvoting Common
Stock"), and 25,000,000 are shares of Preferred Stock, $.001 par
value ("Preferred Stock")."
3. The foregoing amendment to the Certificate of Incorporation was
duly adopted by written consent of the stockholders in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware.
4. This Amendment to the Certificate of Incorporation was duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Gualberto Ruano, its President, and attested to by Kevin L. Rakin, its
Secretary, this 17th day of February, 2000.
GENAISSANCE PHARMACEUTICALS, INC.
By: /s/ GUALBERTO RUANO
-------------------------------
Gualberto Ruano
President
Attest:
By: /s/ KEVIN L. RAKIN
-------------------------------
Kevin L. Rakin, Secretary
<PAGE>
GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATES OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES A1 REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES KBL NONVOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES KBL1 NONVOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), DOES HEREBY
CERTIFY:
1. The following resolution was duly adopted by action of the Board
of Directors of the Corporation at a special meeting duly held on February 12,
2000, pursuant to authority conferred upon the Board of Directors by the
provisions of Article 4 of the Certificate of Incorporation of the Corporation,
as amended, (referred to in the following designations as the "CERTIFICATE OF
INCORPORATION"), which authorize the issuance of 25,000,000 shares of a class of
capital stock designated as preferred stock, $.001 par value (the "PREFERRED
STOCK").
RESOLVED: That the provisions of the two Certificates of Designations,
Preferences and Other Special Rights and Qualifications, Limitations and
Restrictions of Preferred Stock of the Corporation (the first such
certificate relating to the Series A and Series A1 Redeemable Convertible
Preferred Stock, and the second such certificate relating to the Series
KBL and Series KBL1 Nonvoting Redeemable Convertible Preferred Stock)
(the "CERTIFICATES OF DESIGNATIONS"), both approved by the Board of
Directors on August 22, 1998, shall be amended by deleting the text of
each in its entirety and substituting therefor the text set forth in
EXHIBIT I attached hereto. Said Certificates of Designations, as amended
hereby, shall apply to 2,437,500 shares Series A Redeemable Convertible
Preferred Stock, 2,437,500 shares of Series A1 Redeemable Convertible
Preferred Stock, 330,500 shares Series KBL Nonvoting Redeemable
Convertible Preferred Stock, and 330,500 shares of Series KBL1 Nonvoting
Redeemable Convertible Preferred Stock.
2. Such resolution also was duly approved by the written consent of
the holders of the requisite number of shares of the Series A and Series A1
Preferred Stock and the Series KBL and Series KBL1 Preferred Stock.
<PAGE>
3. This amendment to the Certificates of Designations was duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Gualberto Ruano, its President, and attested to by
Kevin L. Rakin, its Secretary, as of this 17th day of February, 2000.
GENAISSANCE PHARMACEUTICALS, INC.
By: /s/ GUALBERTO RUANO
-------------------------------
Gualberto Ruano
President
Attest:
By: /s/ KEVIN L. RAKIN
-------------------------------
Kevin L. Rakin
Secretary
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<PAGE>
EXHIBIT I
There are hereby designated four series of preferred stock of the
Corporation, the first consisting of 2,437,500 shares, as issued in a series
entitled "SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK" (referred to as the
"SERIES A PREFERRED STOCK"); the second consisting of 2,437,500 shares, as
issued in a series entitled "SERIES A1 REDEEMABLE CONVERTIBLE PREFERRED STOCK"
(referred to as the "SERIES A1 PREFERRED STOCK"); the third consisting of
330,500 shares, as issued in a series entitled "SERIES KBL NONVOTING REDEEMABLE
CONVERTIBLE PREFERRED STOCK" (referred to as the "SERIES KBL PREFERRED Stock");
and the fourth consisting of 330,500 shares, as issued in a series entitled
"SERIES KBL1 NONVOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK" (referred to as
the "SERIES KBL1 PREFERRED STOCK"); and that the preferences and privileges,
relative, participating, optional and other special rights, and qualifications,
limitations and restrictions of the shares of each such series, in addition to
those set forth in the Certificate of Incorporation of the Corporation, as
amended, are as set forth below:
1. DEFINITIONS. As used in this Certificate of Designations, the
following terms have the meanings specified below: "AFFILIATE" shall mean a
person (other than a subsidiary):
(i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Corporation;
(ii) which beneficially owns or holds 10% or more of any class
of the voting stock of the Corporation; or
(iii) 10% or more of the voting stock (or in the case of a person
which is not a corporation, 10% or more of the equity interest) of
which is beneficially owned or held by the Corporation or one of
its subsidiaries.
The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting
securities, by contract or otherwise.
"BOARD" shall mean the Corporation's Board of Directors.
"BUSINESS DAY" shall mean any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of Connecticut) on which banks are
authorized to be open for business in Hartford, Connecticut.
"COMMISSION" shall mean the United States Securities and Exchange
Commission.
"COMMON STOCK" shall mean the Common Stock, $.001 par value, of the
Corporation.
"DILUTED STOCK" shall have the meaning ascribed to it in Section
7(a)(iv)(A) hereof.
<PAGE>
"DILUTING ISSUANCE" shall mean an issuance of capital stock described in
Section 7(a)(iv)(A) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXCLUDED STOCK" shall mean shares of Common Stock issued by the
Corporation:
(i) as a stock dividend or upon any stock split or other
subdivision or combination of the outstanding shares of Common
Stock;
(ii) up to an aggregate of 1,557,375 shares of Common Stock
issued or issuable to employees pursuant to an employee stock
option plan approved by the Board; or
(iii) upon conversion of any Preferred Stock, warrants or other
convertible securities and set forth on Schedule 3.4 to the Series
B/KBH Stock Purchase Agreement.
"FAIR MARKET VALUE" at any date of one share of Common Stock shall be
deemed to be the average of the daily closing prices for the 30 consecutive
business days ending no more than five days before the day in question (as
adjusted for any stock dividend, split-up, combination or reclassification that
took effect during such 30 business day period). The closing price for each day
shall be the last reported sales price regular way or, in case no such reported
sales took place on such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (or if the Common
Stock is not at the time listed or admitted for trading on any such exchange,
then such price as shall be equal to the average of the last reported bid and
asked prices, as reported by the Nasdaq on such day, or if, on any day in
question, the security shall not be quoted on the Nasdaq, then such price shall
be equal to the last reported bid and asked prices on such day as reported by
the National Quotation Bureau, Inc. or any similar reputable quotation and
reporting service, if such quotation is not reported by the National Quotation
Bureau, Inc.); PROVIDED, HOWEVER, that if the Common Stock is traded in such
manner that the quotations referred to in this clause are not available for the
period required hereunder, the Fair Market Value shall be determined by a
nationally recognized independent investment banking firm selected mutually by
the holders of more than 50% of the voting power of the Series A/KBL Stock then
outstanding and the Corporation (or if such selection cannot be made, by a
nationally recognized independent banking firm selected by the American
Arbitration Association in accordance with its rules). With respect to the
Series A/KBL Stock, Fair Market Value shall be determined by a nationally
recognized independent investment banking firm selected mutually by the holders
of more than 50% of the voting power of the Series A/KBL Stock then outstanding
and the Corporation (or if such selection cannot be made, by a nationally
recognized independent banking firm selected by the American Arbitration
Association in accordance with its rules).
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<PAGE>
"HOLDER" shall mean a holder of shares of Series A/KBL Stock, as
applicable, as reflected in the stock records of the Corporation; and each
Holder's address shall be as it appears in the stock records of the Corporation.
"JUNIOR SECURITIES" shall mean, as to the Series A/KBL Stock, each other
class or series of capital stock (including, without limitation, each class of
common stock of the Corporation and each other series of preferred stock) or
other equity interests (including, without limitation, warrants, rights, calls
or options exercisable for or convertible into such capital stock or equity
interests) in the Corporation, except Junior Securities shall not include the
Series B/KBH Stock.
"LIQUIDATION EVENT" shall mean, a merger, consolidation, liquidation,
dissolution, winding up of the affairs of the Corporation or sale of all or
substantially all of the assets of the Corporation as an entirety to a third
party or parties, whether voluntary or involuntary, or the sale by the
stockholders of the Corporation of a majority of the voting capital stock of the
Corporation; PROVIDED, HOWEVER, that a merger or consolidation shall not be
considered a Liquidation Event if the Corporation is the survivor or continuing
corporation of such merger or consolidation and as a result thereof there is no
change in the Common Stock or Preferred Stock or the ownership thereof.
"LIQUIDATION REDEMPTION PRICE" shall have the meaning ascribed to it in
Section 4(a).
"LISTED RIGHTS" shall mean all patents, patent applications, patent
rights, trademarks, trademark applications, trademark rights, trade names, trade
name rights, service marks and copyrights (whether registered or not) owned or
possessed by the Corporation and any improvements thereon.
"NEW SECURITIES" shall mean any capital stock (including, without
limitation, each class of common stock of the Corporation, any additional shares
of Preferred Stock, each other series of preferred stock of the Corporation and
any shares of capital stock held by the Corporation in its treasury upon the
disposition thereof) or other equity interests (including, without limitation,
warrants, rights, calls or options exercisable for or convertible into such
capital stock or equity interests) in the Corporation issued after the Series
A/KBL Initial Issue Date; PROVIDED, HOWEVER, that such term shall not include
Excluded Stock and shall not include Series B/KBH Stock.
"NON-PARTICIPATING PERCENTAGE" shall have the meaning ascribed to it in
Section 7(a)(iv)(A) hereof.
"NON-VOTING COMMON STOCK" shall mean the Non-voting Common Stock, $.001
par value, of the Corporation.
"ORIGINAL CERTIFICATES OF DESIGNATION" shall mean the original
Certificate of Designations, Preferences and Other Special Rights and
Qualifications, Limitations and Restrictions of the Series A and Series A1
Redeemable Convertible Preferred Stock of the Corporation, dated August 24,
1998, and the original Certificate of Designations, Preferences and Other
Special Rights and Qualifications, Limitations and Restrictions of the Series
KBL and
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<PAGE>
Series KBL1 Non-voting Redeemable Convertible Preferred Stock of the
Corporation, dated August 24, 1998.
"PERSON" shall mean and include an individual, a corporation, a
partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.
"PREEMPTIVE SHARE" shall mean, immediately prior to any issue of shares
of New Securities, and as to each Series A/KBL Holder, the percentage which
expresses the ratio between (i) the total number of shares of Common Stock
(and/or Non-voting Common Stock, in the case of the Series KBL Stock) issuable
upon conversion of the Series A/KBL Stock owned by such Series A/KBL Holder,
plus the total number of shares of Common Stock (and Non-voting Common Stock, if
any) then owned by such Series A/KBL Holder that was received upon conversion of
Series A/KBL Stock, and (ii) the total number of shares of Common Stock and
Non-voting Common Stock then outstanding, plus the total number of shares of
Common Stock and Non-voting Common Stock issuable upon conversion of the then
outstanding Preferred Stock.
"PREFERRED STOCK" shall mean all of the outstanding shares of the Series
A Stock, Series KBL Stock, Series B Stock and Series KBH Stock, together, at the
time in question.
"QUALIFIED IPO" shall mean the consummation of a firm commitment
underwritten public offering of shares of Common Stock registered under the
Securities Act which results in aggregate gross cash proceeds to the Corporation
of not less than forty million dollars ($40,000,000) and pursuant to which the
offering price per share is equal to or greater than $16.50 ($11.00 per share in
the event that the registration statement with respect to such offering shall be
filed with the Commission on or before February 11, 2001), equitably adjusted
for any Recapitalization Event.
"QUALIFIED LIQUIDATION EVENT" shall have the meaning ascribed to it in
Section 3(b).
"RECAPITALIZATION EVENT" shall mean any stock splits, stock dividends,
recapitalizations, reclassifications, and similar events.
"RELATED PARTY" shall mean any officer, director, significant employee or
consultant of the Corporation or any holder (other than any Series A/KBL Holder
or Series B/KBH Holder) of 10% or more of any class of capital stock of the
Corporation or any member of the immediate family of any such officer, director,
employee, consultant or shareholder or any entity controlled by any such
officer, director, employee, consultant or shareholder or a member of the
immediate family of any such officer, director, employee, consultant or
shareholder.
"SCHEDULED REDEMPTION PRICE" shall have the meaning ascribed to it in
Section 4(b).
"SECOND ROUND SERIES B/KBH STOCK" shall mean those shares of Series B/KBH
Stock that may be issued by the Corporation to certain investors (the "SECOND
ROUND INVESTORS") in the Second Closing as such term is defined in the Series
B/KBH Stock Purchase Agreement.
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<PAGE>
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES A PREFERRED STOCK" shall mean the Series A Redeemable Convertible
Preferred Stock of the Corporation, par value $.001 per share.
"SERIES A1 PREFERRED STOCK" shall mean the Series A1 Redeemable
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES A STOCK" shall mean all of the outstanding shares of the Series A
Preferred Stock and the Series A1 Preferred Stock, together, at the time in
question, and any new subseries of the Series A Preferred Stock created pursuant
to Section 9 hereof.
"SERIES A/KBL ACCRUED DIVIDENDS" shall mean Series A/KBL Full Cumulative
Dividends to the date of determination, less the amount of all dividends paid
pursuant to Section 3, upon the relevant shares of Series A/KBL Stock.
"SERIES A/KBL AMENDMENT DATE" shall mean the date that this Amendment to
the Certificate of Certificates of Designations, Preferences and Other Special
Rights and Qualifications, Limitations and Restrictions of the Series A and
Series A1 Redeemable Convertible Preferred Stock of the Corporation, and the
Series KBL and Series KBL1 Nonvoting Redeemable Convertible Preferred Stock of
the Corporation, is filed with the Delaware Secretary of State.
"SERIES A/KBL CONVERSION DATE" shall have the meaning set forth in
Section 7(a)(ii).
"SERIES A/KBL CONVERSION PRICE" shall initially mean $4.00; PROVIDED,
HOWEVER, that the Series A/KBL Conversion Price shall be subject to adjustment
as set forth in Section 7(a)(iv).
"SERIES A/KBL EVENT OF CONVERSION" shall mean the consummation of a
Qualified IPO.
"SERIES A/KBL FULL CUMULATIVE DIVIDENDS" shall mean, as to any share of
Series A/KBL Stock (whether or not in respect of which such term is used there
shall have been net profits or net assets of the Corporation legally available
for the payment of such dividends), that amount which shall be equal to
dividends at the full rate fixed for the Series A/KBL Stock as provided herein
for the period of time elapsed from the Series A/KBL Initial Issuance Date to
the date as of which Series A/KBL Full Cumulative Dividends are to be computed.
"SERIES A/KBL HOLDER" shall mean a holder of shares of Series A Stock or
Series KBL Stock.
"SERIES A/KBL INITIAL ISSUANCE DATE" shall mean August 24, 1998.
"SERIES A/KBL LIQUIDATION AMOUNT" shall mean an amount in cash or
property (valued at its Fair Market Value), or a combination thereof, equal to
$4.00 per share of Series A/KBL Stock held by a Holder (which per share amount
shall be subject to equitable adjustment whenever there shall occur a stock
split, combination, reclassification or other similar event involving the Series
A/KBL Stock) plus all Series A/KBL Accrued Dividends.
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"SERIES A/KBL ORIGINAL PURCHASE PRICE" shall mean $4.00 per share of
Series A/KBL Stock.
"SERIES A/KBL REDEMPTION DATE" shall have the meaning set forth in
Section 4 hereof.
"SERIES A/KBL REDEMPTION PRICE" shall have the meaning set forth in
Section 4 hereof.
"SERIES A/KBL STOCK" shall mean all of the outstanding shares of the
Series A Stock and Series KBL Stock, together, at the time in question, which
shares are PARI PASSU for all purposes except voting (the Series KBL Stock being
non-voting) and conversion (the Series KBL Stock being convertible into
Non-voting Common Stock rather than voting Common Stock).
"SERIES B PREFERRED STOCK" shall mean the Series B Convertible Preferred
Stock of the Corporation, par value $.001 per share.
"SERIES B1 PREFERRED STOCK" shall mean the Series B1 Convertible
Preferred Stock of the Corporation, par value $.001 per share.
"SERIES B STOCK" shall mean all of the outstanding shares of the Series B
Preferred Stock and the Series B1 Preferred Stock, together, at the time in
question, which shares shall be PARI PASSU for all purposes except conversion
price, and any new subseries of the Series B Preferred Stock created pursuant to
Section 9 of the Series B/KBH Certificate of Designations.
"SERIES B/KBH CERTIFICATE OF DESIGNATIONS" shall mean the Certificate of
Designations, Preferences and Other Special Rights and Qualifications,
Limitations and Restrictions of Series B and Series B1 Convertible Preferred
Stock of the Corporation, and Series KBH and Series KBH1 Non-voting Convertible
Preferred Stock of the Corporation, dated as of February 17, 2000.
"SERIES B/KBH HOLDER" shall mean a holder of shares of Series B Stock or
Series KBH Stock.
"SERIES B/KBH LIQUIDATION AMOUNT" shall mean the amount due to the Series
B/KBH Holders upon a Liquidation of the Company pursuant to the Series B/KBH
Certificate of Designations.
"SERIES B/KBH STOCK" shall mean all of the outstanding shares of the
Series B Stock and Series KBH Stock, together, at the time in question, which
shares shall be PARI PASSU for all purposes except voting (the Series KBH Stock
being non-voting) and conversion (the Series KBH Stock being convertible into
Non-voting Common Stock rather than voting Common Stock).
"SERIES B/KBH STOCK PURCHASE AGREEMENT" shall mean that certain Stock
Purchase Agreement, dated as of February 17, 2000, by and among the Corporation
and the Purchasers (as defined therein).
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"SERIES KBH PREFERRED STOCK" shall mean the Series KBH Nonvoting
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES KBH1 PREFERRED STOCK" shall mean the Series KBH1 Nonvoting
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES KBH STOCK" shall mean all of the outstanding shares of the Series
KBH Preferred Stock and the Series KBH1 Preferred Stock, together, at the time
in question, and any new subseries of the Series KBH Preferred Stock created
pursuant to Section 9 of the Series B/KBH Certificate of Designations.
"SERIES KBL PREFERRED STOCK" shall mean the Series KBL Nonvoting
Redeemable Convertible Preferred Stock of the Corporation, par value $.001 per
share.
"SERIES KBL1 PREFERRED STOCK" shall mean the Series KBL1 Nonvoting
Redeemable Convertible Preferred Stock of the Corporation, par value $.001 per
share.
"SERIES KBL STOCK" shall mean all of the outstanding shares of the Series
KBL Preferred Stock and the Series KBL1 Preferred Stock, together, at the time
in question, and any new subseries of the Series KBL Preferred Stock created
pursuant to Section 9 hereof.
"SUBSIDIARY" shall mean an entity a majority of the capital stock or
other ownership interest in which is owned directly or indirectly by the
Corporation, except that 100% "SUBSIDIARY" shall mean a subsidiary that is 100%
owned by the Corporation and/or its 100% subsidiaries.
2. NUMBER OF SHARES. The designation of the four series of preferred
stock provided for herein shall be as follows: Series A Preferred Stock, of
which 2,437,500 shares shall be authorized; Series A1 Preferred Stock, of which
2,437,500 shares shall be authorized; Series KBL Preferred Stock, of which
330,500 shares shall be authorized; Series KBL1 Preferred Stock, of which
330,500 shares shall be authorized.
3. DIVIDENDS.
(a) For the period beginning on the Series A/KBL Initial Issuance Date
and ending on the Series A/KBL Amendment Date, the holders of each share of
Series A/KBL Stock shall be entitled to receive dividends as provided under the
Original Certificate of Designations; PROVIDED, HOWEVER, that no such dividends
shall be paid in cash, rather than stock, without the prior approval of a
majority of the holders of the Series B Stock, voting as a separate class.
(b) From and after the Series A/KBL Amendment Date, the holder of each
share of Series A/KBL Stock shall be entitled to receive, before any dividends
shall be declared and paid upon or set aside for the Junior Securities, but
after any dividends shall be declared and paid upon or set aside for the Series
B/KBH Stock, out of funds legally available for that purpose, dividends in cash
at the rate per annum per share (the "SERIES A DIVIDEND RATE") equal to 8% of
the Series A/KBL Original Purchase Price, adjusted, as applicable, for any
Recapitalization
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Event, payable, when and as declared by the Board, upon the earliest of (a) a
Liquidation Event in accordance with Section 5 hereof, (b) upon redemption in
accordance with Section 4 hereof or (c) upon the Series A/KBL Event of
Conversion; PROVIDED, HOWEVER, that so long as any shares of Series B/KBH Stock
shall remain outstanding, no such dividends shall be paid on the Series A/KBL
Stock unless approved by a majority of the holders of the Series B Stock, voting
as a separate class. Until the third anniversary of the Series A/KBL Amendment
Date, the Corporation shall have the option to make any such payment in shares
of Common Stock (Non-voting Common Stock in the case of the Series KBL). After
the third anniversary of the Series A/KBL Amendment Date, the Holder shall have
the option to receive any such payment in shares of Common Stock (Non-voting
Common Stock in the case of the Series KBL). In the event such dividends are
paid in Common Stock (Non-voting Common Stock in the case of the Series KBL),
for purposes of computing the number of shares of Common Stock (Non-voting
Common Stock in the case of the Series KBL) to be issued and the amount of the
dividend paid, the value of the Common Stock (Non-voting Common Stock in the
case of the Series KBL) paid to any holder of shares of Series A/KBL Stock shall
be valued at the then Series A/KBL Conversion Price. Dividends on shares of
Series A/KBL Stock shall be cumulative from the Series A/KBL Amendment Date
(whether or not there shall be net profits or net assets of the Corporation
legally available for the payment of such dividends), so that, if at any time
Series A/KBL Full Cumulative Dividends upon the Series A/KBL Stock shall not
have been paid or declared and a sum sufficient for payment thereof set apart,
the amount of the deficiency in such dividends shall be fully paid or dividends
in such amount shall be declared on the shares of the Series A/KBL Stock and a
sum sufficient for the payment thereof shall be set apart for such payment,
before any dividend shall be declared or paid or any other distribution ordered
or made upon any Junior Securities (but after any dividends shall be declared
and paid upon or set aside for the Series B/KBH) or applied to the purchase or
redemption of Junior Securities. With respect to rights to dividends, the Series
A/KBL Stock shall rank prior to the Common Stock and all other Junior
Securities, but shall rank junior to the Series B/KBH Stock. All dividends
declared upon the Series A/KBL Stock shall be declared pro rata per share. All
payments due under this Section to any holder of shares of Series A/KBL Stock
shall be made to the nearest cent. Notwithstanding the foregoing, the holders of
the Series A/KBL Stock shall not be entitled to dividends on the Series A/KBL
Stock pursuant to this Section 3(b) in the event that on or before August 11,
2001 (i) there shall be filed with the Commission a registration statement with
respect to a Qualified Public Offering (which registration statement shall have
become effective within three months of filing); or (ii) there shall occur a
Qualified Liquidation Event. The term "QUALIFIED LIQUIDATION EVENT" shall mean a
Liquidation Event in which the holders of the Series A/KBL Stock receive (per
share) cash or other property with a fair market value equal to at least 200% of
the Series A/KBL Original Purchase Price (as adjusted for any stock split,
combination, reclassification or other similar event involving the Series A/KBL
Stock) if the Qualified Liquidation Event occurs within one year after the
Series A/KBL Amendment Date, and 300% of the Series A/KBL Original Purchase
Price (as adjusted for any stock split, combination, reclassification or other
similar event involving the Series A/KBL Stock) if the Qualified Liquidation
Event occurs more than one year after the Series A/KBL Amendment Date (but
before August 12, 2001).
(c) From and after the Series A/KBL Amendment Date, in the event the
Corporation shall make or issue, or shall fix a record date for the
determination of holders of Common Stock
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(or Non-voting Common Stock) entitled to receive a dividend or other
distribution (other than a distribution in liquidation or other distribution
otherwise provided for herein) with respect to the Common Stock (or Non-voting
Common Stock) or any other Junior Securities (based on "as if converted"
amounts) payable in (i) securities of the Corporation other than shares of
Common Stock (or Non-voting Common Stock), or (ii) cash, then, and in each such
event, provision shall be made so that the holders of the Series A/KBL Stock
shall receive, subject to the prior payment in full of any amounts due to the
holders of the Series B/KBH Stock in connection with such event, the number of
securities or such other assets of the Corporation which they would have
received had their Series A/KBL Stock been converted into Common Stock (or
Non-voting Common Stock in the case of the Series KBL) on the date of such
event.
4. REDEMPTION.
(a) REDEMPTION UPON A LIQUIDATION EVENT. (i) In connection and
concurrently with a Liquidation Event, the Corporation shall (to the extent
allowed by law) redeem, except as set forth hereafter, all the shares of Series
A/KBL Stock then outstanding, out of funds legally available therefor. The
amount per share payable upon any redemption of shares of Series A/KBL Stock
pursuant to this subsection shall be an amount in cash equal to the Liquidation
Redemption Price, as determined below. The Corporation shall deliver to each
holder of shares of Series A/KBL Stock, not later than 45 days prior to the
consummation of a Liquidation Event, notice of such proposed Liquidation Event,
including the date on which such Liquidation Event is expected to be
consummated. To the extent that one or more redemptions and/or a liquidation are
occurring concurrently, any redemption of the shares of Series A/KBL Stock shall
be deemed to occur and shall be paid after any redemption of shares of the
Series B/KBH Stock, and prior to any other redemptions and/or liquidations.
Notwithstanding the foregoing, any Series A/KBL Holder may elect to retain its
outstanding shares of Series A/KBL Stock and not to subject such shares to
redemption by delivery of written notice to the Corporation at least 15 days
prior to the date of the consummation of the Liquidation Event.
(ii) The amount per share payable upon any redemption of shares
of Series A/KBL pursuant to this subsection shall be an amount
equal to the greater of (a) the Series A/KBL Original Purchase
Price (subject to equitable adjustment for any stock split,
combination, reclassification or other similar event involving the
Series A/KBL Stock) plus all Series A/KBL Accrued Dividends, or
(b) the Fair Market Value of such share (the "LIQUIDATION
REDEMPTION PRICE").
(iii) Any date upon which Series A/KBL Stock is to be redeemed
pursuant to this Section 4 shall be referred to in this context as
a "SERIES A/KBL REDEMPTION DATE".
(b) SERIES A/KBL ANNUAL REDEMPTION. Except as set forth hereafter, the
Corporation shall (to the extent allowed by law) redeem the following shares of
Series A Stock and Series KBL Stock on the following dates, out of funds legally
available therefor:
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(i) at any time on or after February 11, 2005, one-third of the
shares of each of the Series A Stock and Series KBL Stock then
outstanding;
(ii) at any time on or after February 11, 2006, an additional
number of shares of each of the Series A Stock and Series KBL
Stock equal to one-third of the shares of the Series A Stock and
Series KBL Stock, respectively, outstanding as of February 11,
2005;
(iii) at any time on or after February 11, 2007, all outstanding
shares of Series A Stock and Series KBL Stock;
PROVIDED, HOWEVER, that no such redemption provided for in Sections 4(b)(i),
(ii) or (iii) shall occur in the event that any shares of Series B/KBH Stock
shall remain outstanding.
The amount per share payable upon any redemption of shares of Series A
Stock and Series KBL Stock pursuant to this subsection shall be an amount in
cash equal to the greater of (a) the Series A/KBL Original Purchase Price
(subject to equitable adjustment for any stock split, combination,
reclassification or other similar event involving the Series A/KBL Stock) plus
all Series A/KBL Accrued Dividends, or (b) the Fair Market Value of such share
(the "SCHEDULED REDEMPTION PRICE" and collectively with the Liquidation
Redemption Price, the "SERIES A/KBL REDEMPTION PRICE").
To the extent that one or more annual or other redemptions are occurring
concurrently, any redemption of the shares of Series A/KBL Stock shall be deemed
to occur and shall be paid after any redemption of shares of the Series B/KBH
Stock, but prior to any other redemptions.
Notwithstanding the foregoing, any Series A/KBL Holder may elect to
retain its outstanding shares of Series A/KBL Stock and not to subject such
shares to redemption by delivery of written notice to the Corporation at least
15 days prior to the applicable redemption date set forth above.
(c) PRO RATA. If, on any Series A/KBL Redemption Date, fewer than all
shares of Series A/KBL Stock then outstanding are to be redeemed in accordance
with this Section, the shares to be redeemed shall be allocated pro rata among
the Series A/KBL Holders and the Redemption Notice mailed to each Holder shall
specify the number of shares to be redeemed from such Holder. Notwithstanding
the delivery of a Redemption Notice, Series A/KBL Holders subject to redemption
may convert such shares pursuant to Section 7 on or before the Series A/KBL
Redemption Date by delivering written notice thereof to the Corporation not
later than 10 days prior to the Series A/KBL Redemption Date.
(d) PAYMENT OF SERIES A/KBL REDEMPTION PRICE; TERMINATION OF RIGHTS.
On any Series A/KBL Redemption Date, the applicable Series A/KBL Redemption
Price in respect of the shares represented by the certificate or certificates
surrendered to the Corporation by the Holder thereof pursuant to the Redemption
Notice shall be paid to the order of the person whose name appears on such
certificate or certificates. Each surrendered certificate shall be canceled and
retired and a new certificate, representing the remaining, unredeemed shares of
Series
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A/KBL Stock, if any, shall be issued to the Holder of such shares. On any Series
A/KBL Redemption Date, the rights of a Holder with respect to shares redeemed
shall cease, other than such Holder's right to payment of the Series A/KBL
Redemption Price as of the Series A/KBL Redemption Date, upon surrender of the
certificate or certificates.
5. LIQUIDATION. In the event of any liquidation, dissolution or
winding-up of the Corporation, the Series A/KBL Holders shall be entitled,
before any assets of the Corporation shall be distributed among or paid over to
the holders of Junior Securities, but after distribution of such assets among,
or payment thereof over to, creditors of the Corporation and the holders of the
Series B/KBH Stock, to receive from the assets of the Corporation available for
distribution to stockholders in cash, the Series A/KBL Liquidation Amount. If
the assets of the Corporation legally available for distribution shall be
insufficient to permit the payment in full of the Series A/KBL Liquidation
Amount to the Series A/KBL Holders, then the assets of the Corporation legally
available for distribution shall be distributed ratably among the Series A/KBL
Holders in proportion to the respective amounts which would have been payable
upon such Liquidation Event on such shares of Series A/KBL Stock if all amounts
payable thereon had been paid in full. In the event that such distribution of
assets is other than in cash, such distribution of cash and other assets
(including securities) shall be made ratably among the holders of the shares of
Series A/KBL Stock based upon the fair market value of any such assets as
determined by a nationally recognized valuation consultant selected mutually by
the holders of a majority in voting power of the Series A/KBL Stock then
outstanding and the Corporation (or if such selection cannot be made, by a
nationally recognized independent valuation consultant selected by the American
Arbitration Association in accordance with its rules). In the event of any
liquidation, dissolution or winding-up of the Corporation, after payment shall
have been made to the holders of shares of Series A/KBL Stock of the full amount
to which they shall be entitled as aforesaid, the holders of any Junior
Securities, the Series A/KBL Holders and the Series B/KBH Holders shall be
entitled to participate equally, on an as-converted basis in the case of the
Series A/KBL Stock, the Series B/KBH Stock and any Junior Securities convertible
into Common Stock, in all remaining assets of the Corporation available for
distribution to its stockholders. The provisions of this Section 5 shall not be
applicable to any shares of Series A/KBL Stock that have been redeemed pursuant
to Section 4(a) hereof in connection with such Liquidation Event. The holders of
the Series A/KBL Stock shall have the right to treat any merger, consolidation,
sale of all or substantially all of the assets of the Corporation, or sale of a
majority of the voting capital stock of the Corporation, as a liquidation of the
Corporation and, in connection therewith, and subject to the prior payment in
full of any amounts due to the holders of the Series B/KBH Stock in connection
with such event, to receive payment under this Section 5 upon surrender of their
shares to the Corporation; PROVIDED, HOWEVER, that the holders of the Series
A/KBL Stock shall not have the right to treat any merger or consolidation as a
Liquidation Event if the Corporation is the survivor or continuing corporation
of such merger or consolidation and as a result thereof there is no change in
the Common Stock or Preferred Stock or the ownership thereof.
6. VOTING.
(a) VOTES GENERALLY WITH COMMON STOCK. In addition to the rights
specified in Section 6(b) below and any other rights provided in the
Corporation's By-Laws, the shares of
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Series A Stock shall entitle each Holder thereof to such number of votes as
shall equal the number of shares of Common Stock (rounded to the nearest whole
number) into which the shares of Series A Stock held by such Holder are then
convertible pursuant to Section 7 and shall entitle each such Holder to vote on
all matters as to which holders of Common Stock shall be entitled to vote, in
the same manner and with the same effect as such holders of Common Stock, voting
together with the holders of Common Stock as one class.
(b) SEPARATE CLASS VOTE. So long as any shares of Series A Stock are
outstanding, the consent of the holders of a majority of all of the outstanding
shares of Series A Stock and Series B Stock, voting as a single and separate
class in person or by proxy, at a special or annual meeting called for the
purpose, or by written consent in lieu of a meeting, shall be required before
the Corporation may:
(i) authorize or issue any class or series of capital stock
ranking senior or pari passu to the Series B/KBH Stock or the
Series A/KBL Stock with respect to rights to receive dividends,
redemption payments or distributions upon liquidation or winding
up of the Corporation or with respect to voting, antidilution
provisions or preemptive rights; PROVIDED, HOWEVER, that this
provision shall not apply to the issuance of the Second Round
Series B/KBH Stock (which itself shall be Series B/KBH Stock);
(ii) authorize, declare or distribute any dividend, whether in
cash or in kind, payable to any class or series of the
Corporation's common or preferred stock (except payment of
dividends on the Series B/KBH Stock as contemplated by the Series
B/KBH Certificate of Designations or payment of dividends on the
Series A/KBL Stock as contemplated (and only to the extent
permitted) herein) or to any other equity security of the
Corporation;
(iii) approve any liquidation, dissolution, sale, lease or
license of all or substantially all of the assets or business, or
of the assets or business of any subsidiary, of the Corporation;
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(iv) cancel, repeal or change any of the provisions of this
Certificate of Designations (or of any amendment hereto), any
other certificate of designations of the Corporation (or any
amendment thereto), the Certificate of Incorporation of the
Corporation, or the By-laws of the Corporation;
(v) permit to lapse any of the following: its corporate
existence, essential rights, government approvals or franchises or
any licenses or Listed Rights (which the Board deems essential to
the Corporation's business) or other rights to use patents,
processes, licenses, trademarks, trade names or copyrights owned
or possessed by it (which the Board deems essential to the
Corporation's business);
(vi) transfer, assign or license (except end-user licenses
granted in the ordinary course of business) any of the
Corporation's Listed Rights or know-how, technology or trade
secrets now owned or hereafter acquired by the Corporation;
(vii) voluntarily dissolve, liquidate or wind-up or carry out any
partial liquidation or distribution or transaction in the nature
of a partial liquidation or distribution;
(viii) purchase, lease or otherwise acquire capital stock in any
corporation or equity interest in any other entity or lend money
to any person or entity (other than loans to any one person that,
individually or in the aggregate, shall not exceed $100,000 or
loans to any one employee that, individually or in the aggregate,
shall not exceed $200,000) or purchase a substantial part of the
operating assets of any person or entity;
(ix) consolidate with or merge into or with any other person or
entity or permit any other person or entity to consolidate with or
merge into it (except that a 100% subsidiary may consolidate with
or merge into the Corporation or another 100% subsidiary);
(x) permit any subsidiary (except a 100% subsidiary) to make
any (i) direct or indirect redemption, retirement, purchase or
other acquisition of any of the Corporation's capital stock (or
any warrant, option or other right with respect to such stock),
(ii) repayment of the Corporation's debt held by any Related Party
or by any Affiliate or subsidiary debt held by any Related Party
or by any Affiliate, or (iii) sale of any capital stock of the
Corporation to any third party;
(xi) issue (which term shall include without limitation the
issuance of any shares of, or the grant of any warrants, options
or other rights to purchase any shares of, or any commitment to
issue) any shares of its capital stock (which term shall include
without limitation, securities convertible into capital stock, or
rights to acquire capital stock), other than Excluded Stock, at a
price per share less than $5.50;
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(xii) redeem any shares of any capital stock of the Corporation
(except redemptions of Series B/KBH Stock as contemplated in the
Series B/KBH Certificate of Designations or redemptions of Series
A/KBL Stock as contemplated (and only to the extent permitted)
herein); or
(xiii) increase the size of the Board of Directors of the Company
above eight (8) members.
7. CONVERSION.
(a) OPTIONAL CONVERSION.
(i) The holder of any shares of Series A/KBL Stock shall have
the right, at such holder's option, at any time or from time to
time to convert any or all such holder's shares of Series A/KBL
Stock into such whole number of fully paid and nonassessable
shares of Common Stock (or Non-voting Common Stock, in the case of
Series KBL Stock) as equals (I) the product of (x) the Series
A/KBL Original Purchase Price plus, after the third anniversary of
the Series A/KBL Amendment Date at the option of any Holder, any
unpaid Series A/KBL Accrued Dividends with respect to the shares
being converted, multiplied by (y) the number of shares of Series
A/KBL Stock being converted, divided by (II) the Series A/KBL
Conversion Price (as last adjusted and then in effect) for the
shares of the Series A/KBL Stock being converted, by surrender of
the certificates representing the shares of Series A/KBL Stock so
to be converted in the manner provided Section 7(a)(ii) below. The
Series A/KBL Conversion Price shall initially be equal to the
Series A/KBL Original Purchase Price; PROVIDED, HOWEVER, that such
Series A/KBL Conversion Price shall be subject to adjustment as
set forth in Section 7(a)(iv) below.
(ii) The holder of any shares of Series A/KBL Stock may exercise
such holder's conversion right pursuant to this Section by
delivering to the Corporation during regular business hours at the
office of any transfer agent of the Corporation for the Series
A/KBL Stock or at such other place as may be designated by the
Corporation, the certificate or certificates for the shares to be
converted, duly endorsed or assigned in blank or to the
Corporation (if required by it) accompanied by written notice
stating that such holder elects to convert such shares and stating
the name or names (with address) in which the certificate or
certificates for the shares of Common Stock (or Non-voting Common
Stock, in the case of Series KBL Stock) are to be issued.
Conversion shall be deemed to have been effected with respect to
conversion under (a) Section 7(a)(i) above, on the date when the
aforesaid delivery is made and (b) Section 7(b) on the date of
occurrence of a Series A/KBL Event of Conversion, as the case may
be, and any such date is referred to herein as the "SERIES A/KBL
CONVERSION DATE". As promptly as practicable thereafter the
Corporation shall issue and deliver to or upon the written order
of such holder, to the place designated by such holder, a
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certificate or certificates for the number of full shares of
Common Stock (or Non-voting Common Stock, in the case of Series
KBL Stock) to which such holder is entitled and a check or cash in
respect of any fractional interest in a share of Common Stock (or
Non-voting Common Stock, in the case of Series KBL Stock), as
provided in Section 7(a)(iii) below, payable with respect to the
shares of Series A/KBL Stock so converted up to and including the
Series A/KBL Conversion Date. The person in whose names the
certificate or certificates for Common Stock (or Non-voting Common
Stock, in the case of Series KBL Stock) are to be issued shall be
deemed to have become a holder of Common Stock (or Non-voting
Common Stock, in the case of Series KBL Stock) on the applicable
Series A/KBL Conversion Date unless the transfer books of the
Corporation are closed on that date, in which event such holder
shall be deemed to have become a holder of Common Stock (or
Non-voting Common Stock, in the case of Series KBL Stock) on the
next succeeding date on which the transfer books are open, but the
Series A/KBL Conversion Price shall be that in effect on the
Series A/KBL Conversion Date. Upon conversion of only a portion of
the number of shares covered by a certificate representing shares
of Series A/KBL Stock surrendered for conversion, the Corporation
shall issue and deliver to or upon the written order of the holder
of the certificate so surrendered for conversion, at the expense
of the Corporation, a new certificate covering the number of
shares of Series A/KBL Stock representing the unconverted portion
of the certificate so surrendered.
(iii) No fractional shares of Common Stock (or Non-voting Common
Stock, in the case of Series KBL Stock) or scrip shall be issued
upon conversion of shares of Series A/KBL Stock. If more than one
share of Series A/KBL Stock shall be surrendered for conversion at
any one time by the same holder, the number of full shares of
Common Stock (or Non-voting Common Stock, in the case of Series
KBL Stock) issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of Series A/KBL Stock
so surrendered. Instead of any fractional shares of Common Stock
(or Non-voting Common Stock, in the case of Series KBL Stock)
which would otherwise be issuable upon conversion of any shares of
Series A/KBL Stock, the Corporation shall pay a cash adjustment in
respect of such fractional interest in an amount equal to the then
current Fair Market Value of a share of Common Stock multiplied by
such fractional interest.
(iv) The Series A/KBL Conversion Price shall be subject to
adjustment from time to time as follows:
(A) ADJUSTMENTS FOR DILUTING ISSUANCES UPON CONTINUED
PARTICIPATION. Unless the Corporation has requested and received a
waiver from the holders of a majority of the Series A Stock and
the Series B Stock, voting together as a single class, if the
Corporation shall at any time or from time to time after the
Series A/KBL Initial Issuance Date issue or be deemed (by virtue
of any of the provisions of Section 7(a)(iv)), to have issued any
capital stock (including, without limitation, each class of common
stock of the Corporation) or other equity
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interests (including, without limitation, warrants, rights, calls
or options exercisable for or convertible into such capital stock
or equity interests) in the Corporation, other than Excluded Stock
or Second Round Series B/KBH Stock, without consideration or for a
consideration per share (the "LAST ISSUE PRICE") less than the
Series A/KBL Conversion Price in effect immediately prior to each
such issuance or deemed issuance (a "DILUTING ISSUANCE"), the
Series A/KBL Conversion Price in effect immediately prior thereto
shall forthwith be adjusted, as of the opening of business on the
date of such issuance or deemed issuance, to such Last Issue
Price.
Notwithstanding the immediately preceding paragraph of this
subsection (A), if a Series A/KBL Holder has been given written
notice pursuant to Section 8 hereof and the opportunity to
purchase its Preemptive Share of such Diluting Issuance and does
not purchase its entire Preemptive Share of such Diluting
Issuance, but purchases a lesser share of such Diluting Issuance
or none, the Series A/KBL Conversion Price for that portion of the
shares of Series A/KBL Stock of said Series A/KBL Holder equal to
the Non-Participating Percentage (as hereinafter defined) (the
"DILUTED STOCK") shall not be reduced for said issuance pursuant
to this subsection but each share of the Diluted Stock which each
such Series A/KBL Holder holds shall be automatically converted
immediately prior to the closing of the applicable Diluting
Issuance into one (1) share of Series A1 Preferred Stock (or
Series KBL1 Preferred Stock, in the case of Series KBL Stock)
which shall be convertible into Common Stock (or Non-voting Common
Stock, in the case of Series KBL1 Stock) at the same price per
share that applied to the Diluted Stock immediately prior to such
Diluting Issuance, subject, however, to further adjustment as
herein provided. As used herein, the term "NON-PARTICIPATING
PERCENTAGE" means a percentage equal to one hundred percent (100%)
minus the percentage determined by dividing the number of shares
of the Diluting Issuance which such Holder actually purchased by
the maximum number of shares of the Diluting Issuance which such
Holder was entitled to purchase on the basis of such Holder's
Preemptive Shares and expressing the resulting quotient as a
percentage.
Upon the conversion of Diluted Stock held by a Series A/KBL Holder
as set forth herein, such shares of Diluted Stock shall no longer
be outstanding on the books of the Corporation and the Series
A/KBL Holder shall be treated, to the extent that said holder held
such Diluted Stock, as the record holder of such shares of Series
A1 Preferred Stock (or Series KBL1 Stock, in the case of Series
KBL Stock) on the date of closing of the applicable Diluting
Issuance.
For the purposes of any adjustment of the Series A/KBL Conversion
Price pursuant to this subsection (A), the following provisions
shall be applicable:
(1) In the case of the issuance of stock for cash, the
consideration shall be deemed to be the amount of cash paid
therefor.
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(2) In the case of the issuance of stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the
fair market value thereof as determined in good faith by
the Board, irrespective of any accounting treatment;
PROVIDED, HOWEVER, that the aggregate fair market value of
such non-cash and cash consideration shall not exceed the
current Fair Market Value of the shares of stock being
issued.
(3) In case of the issuance of (i) options to purchase
or rights to subscribe for Common Stock (or Non-voting
Common Stock, in the case of Series KBL Stock); (ii)
securities by their terms convertible into or exchangeable
for Common Stock (or Non-voting Common Stock, in the case
of Series KBL Stock); or (iii) options to purchase or
rights to subscribe for such convertible or exchangeable
securities:
(a) the aggregate number of shares of Common
Stock (or Non-voting Common Stock, in the case of
Series KBL Stock) deliverable upon exercise of such
options to purchase or rights to subscribe for
Common Stock (or Non-voting Common Stock, in the
case of Series KBL Stock) shall be deemed to have
been issued at the time such options or rights were
issued and for a consideration equal to the
consideration (determined in the manner provided in
subdivisions (1) and (2) above), if any, received by
the Corporation upon the issuance of such options or
rights plus the purchase price provided in such
options or rights for the Common Stock (or
Non-voting Common Stock, in the case of Series KBL
Stock) covered thereby;
(b) the aggregate number of shares of Common
Stock (or Non-voting Common Stock, in the case of
Series KBL Stock) deliverable upon conversion of or
in exchange for any such convertible or exchangeable
securities or upon the exercise of options to
purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversion
or exchange thereof shall be deemed to have been
issued at the time such securities were issued or
such options or rights were issued and for a
consideration equal to the consideration received by
the Corporation for any such securities and related
options or rights (excluding any cash received on
accounts of accrued interest or accrued dividends),
plus the additional consideration, if any, to be
received by the Corporation upon the conversion or
exchange of such securities or the exercise of any
related options or rights (the consideration in each
case to be determined in the manner provided in
subdivisions (1) and (2) above, with the proviso to
subdivision (2) being applied to the number of
shares of Common Stock (or
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<PAGE>
Non-voting Common Stock, in the case of Series KBL
Stock) deliverable upon such exercise);
(c) on any change in the number of shares or
exercise price of Common Stock (or Non-voting Common
Stock, in the case of Series KBL Stock) deliverable
upon the exercise of any such options or rights or
conversions of or exchange for such convertible or
exchangeable securities, other than a change
resulting from the antidilution provisions thereof,
the Series A/KBL Conversion Price, if previously
adjusted, shall forthwith be readjusted to such
Series A/KBL Conversion Price as would have obtained
had the adjustment made upon the issuance of such
options, rights or securities not converted prior to
such change or options or rights related to such
securities not converted prior to such change having
been made upon the basis of such change; and
(d) on the expiration of any such options or
rights, the termination of any such rights to
convert or exchange or the expiration of any options
or rights related to such convertible or
exchangeable securities, the Series A/KBL Conversion
Price, if previously adjusted, shall forthwith be
readjusted to such Series A/KBL Conversion Price as
would have obtained had such options, rights,
securities or options or rights related to such
securities not been issued.
(B) ADJUSTMENTS FOR CERTAIN DIVIDENDS, SUBDIVISIONS OR
SPLIT-UPS. If, at any time after the Series A/KBL Initial Issuance
Date, the number of shares of Common Stock (or Non-voting Common
Stock, in the case of Series KBL Stock) outstanding is increased
by a stock dividend payable in shares of Common Stock (or
Non-voting Common Stock, in the case of Series KBL Stock) or by a
subdivision or split-up of shares of Common Stock (or Non-voting
Common Stock, in the case of Series KBL Stock), then, upon the
record date fixed for the determination of holders of Common Stock
(or Non-voting Common Stock, in the case of Series KBL Stock)
entitled to receive such stock dividend, subdivision or split-up,
the Series A/KBL Conversion Price shall be appropriately decreased
so that the number of shares of Common Stock (or Non-voting Common
Stock, in the case of Series KBL Stock) issuable on conversion of
each share of Series A/KBL Stock shall be increased in proportion
to such increase in outstanding shares.
(C) ADJUSTMENTS FOR COMBINATIONS. If, at any time after the
Series A/KBL Initial Issuance Date, the number of shares of Common
Stock (or Non-voting Common Stock, in the case of Series KBL
Stock) outstanding is decreased by a combination of the
outstanding shares of Common Stock (or Non-voting Common Stock, in
the case of Series KBL Stock), then, upon the record date for
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such combination, the Series A/KBL Conversion Price shall be
appropriately increased so that the number of shares of Common
Stock (or Non-voting Common Stock, in the case of Series KBL
Stock) issuable on conversion of each share of Series A/KBL Stock
shall be decreased in proportion to such decrease in outstanding
shares.
(D) ADJUSTMENTS FOR REORGANIZATIONS, MERGERS, CONSOLIDATIONS,
ETC. In case, at any time after the Series A/KBL Initial Issuance
Date, of any capital reorganization, or any reclassification of
the stock of the Corporation (other than a change in par value or
from par value to no par value or from no par value to par value
or as a result of a stock dividend or subdivision, split-up or
combination of shares), or the consolidation or merger of the
Corporation with or into another person (other than a
consolidation or merger in which the Corporation is the continuing
corporation and which does not result in any change in the Common
Stock or Preferred Stock or the ownership thereof or of the sale
or other disposition of all or substantially all of the properties
and assets of the Corporation as an entirety to any other person),
each share of Series A/KBL Stock shall, after such reorganization,
reclassification, consolidation, merger, sale or other
disposition, be convertible into the kind and number of shares of
stock or other securities or property of the Corporation or of the
corporation resulting from such consolidation or surviving such
merger or to which such properties and assets shall have been sold
or otherwise disposed to which the holder of the number of shares
of Common Stock (or Non-voting Common Stock, in the case of Series
KBL Stock) deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation, merger, sale or
other disposition) upon conversion of such share would have been
entitled upon such reorganization, reclassification,
consolidation, merger, sale or other disposition. The provisions
of this subsection shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales
or other dispositions.
(E) All calculations under this subsection (iv) shall be made
to the nearest one cent ($.01) or to the nearest one-tenth (1/10)
of a share, as the case maybe.
(F) In any case in which the provisions of this subsection (iv)
shall require that an adjustment shall become effective
immediately after a record date for an event, the Corporation may
defer until the occurrence of such event (i) issuing to the holder
of any share of Series A/KBL Stock converted after such record
date and before the occurrence of such event the additional shares
of capital stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares of
capital stock issuable upon such conversion before giving effect
to such adjustment and (ii) paying to such holder any amount in
cash in lieu of a fractional share of capital stock pursuant to
Section 7(a)(iii) above, PROVIDED, HOWEVER, that the Corporation
shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such
additional shares, and such cash, upon the occurrence of the event
requiring such adjustment.
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<PAGE>
(v) Whenever the Series A/KBL Conversion Price shall be
adjusted as provided in Section 7(a)(iv), the Corporation shall
forthwith file, at the office of the transfer agent for the Series
A/KBL Stock or at such other place as may be designated by the
Corporation, a statement, signed by its independent certified
public accountants, showing in detail the facts requiring such
adjustment and the Series A/KBL Conversion Price that shall be in
effect after such adjustment. The Corporation shall also cause a
copy of such statement to be sent by first class, certified mail,
return receipt requested, postage prepaid, to each Series A/KBL
Holder at such holder's address appearing on the Corporation's
records. Where appropriate, such copy may be given in advance and
may be included as part of a notice required to be mailed under
the provisions of Section 7(a)(vi) below.
(vi) In the event the Corporation shall propose to take any
action of the types described in clauses (A), (B), (C), or (D) of
Section 7(a)(iv) above, the Corporation shall give notice to each
holder of shares of Series A/KBL Stock, in the manner set forth in
Section 7(a)(v) above, which notice shall specify the record date,
if any, with respect to, any such action and the date on which
such action is to take place. Such notice shall also set forth
such facts with respect thereto as shall be reasonably necessary
to indicate the effect of such action (to the extent such effect
may be known at the date of such notice) on the Series A/KBL
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable
upon the occurrence of such action or deliverable upon conversion
of shares of Series A/KBL Stock. In the case of any action which
would require the fixing of a record date, such notice shall be
given at least 20 days prior to the date so fixed, and in case of
all other action, notice shall be given at least 30 days prior to
the taking of such proposed action. Failure to give such notice,
or any defect therein, shall not affect the legality or validity
of any such action.
(vii) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of
shares of capital stock of the Corporation upon conversion of any
shares of Series A/KBL Stock; PROVIDED, HOWEVER, that the
Corporation shall not be required to pay any taxes which may be
payable in respect of any transfer involved in the issuance or
delivery of any certificate for such shares in a name other than
that of the holder of the shares of Series A/KBL Stock in respect
of which such shares are being issued.
(viii) The Corporation shall reserve, free from preemptive rights,
out of its authorized but unissued shares of Common Stock (or
Non-voting Common Stock, in the case of Series KBL Stock), solely
for the purpose of effecting the conversion of the shares of
Series A/KBL Stock, sufficient shares to provide for the
conversion of all outstanding shares of Series A/KBL Stock.
(ix) All shares of Common Stock (or Non-voting Common Stock, in
the case of Series KBL Stock) which may be issued in connection
with the conversion
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<PAGE>
provisions set forth herein will, upon issuance by the
Corporation, be validly issued, fully paid and nonassessable, with
no personal liability attaching to the ownership thereof, and free
from all taxes, liens or charges with respect thereto.
(b) AUTOMATIC CONVERSION. Upon the occurrence of a Series A/KBL Event
of Conversion, all shares of Series A/KBL Stock then outstanding shall, by
virtue of, and simultaneously with, the occurrence of the Series A/KBL Event of
Conversion and without any action on the part of the holders thereof, be deemed
automatically converted into such whole number of fully paid and nonassessable
shares of Common Stock (or Non-voting Common Stock, in the case of Series KBL
Stock) as equals (1) the product of (x) the Series A/KBL Original Purchase Price
plus, after the third anniversary of the Series A/KBL Amendment Date at the
option of any Holder, any unpaid Series A/KBL Accrued Dividends with respect to
the shares being converted, multiplied by (y) the number of shares of Series
A/KL Stock being converted divided by (2) the Series A/KBL Conversion Price as
last adjusted pursuant to Section 7(a)(iv) and then in effect.
8. PRE-EMPTIVE RIGHTS. (a) RIGHT TO PURCHASE. Until the occurrence of
a Series A/KBL Event of Conversion, the Series A/KBL Holders shall be entitled
to subscribe for their respective Preemptive Share of any New Securities which
the Corporation may, from time to time, propose to issue and sell, at any time
while any Series A/KBL Stock is outstanding and subject to the terms, conditions
and procedures set forth below.
(b) The Corporation shall first deliver to each Series A/KBL Holder a
written Notice of Intention to Sell offering to each Series A/KBL Holder the
right to purchase up to the Preemptive Share of such Series A/KBL Holder of such
shares of New Securities at the purchase price and on the terms specified
therein. Each Series A/KBL Holder shall have the right and option, for a period
of twenty (20) days after delivery to said Series A/KBL Holder of such Notice of
Intention to Sell, to purchase all or any part of the Preemptive Share of such
Series A/KBL Holder of the shares of New Securities so offered at the purchase
price and on the terms stated therein. Such acceptance shall be made by
delivering a written Notice of Acceptance to the Corporation within the
aforesaid twenty (20) day period.
The closing of any sales of shares of New Securities under the terms of
Section 8 shall be made at the offices of the Corporation on a mutually
satisfactory business day within five (5) business days after the expiration of
the aforesaid period. Delivery of certificates or other instruments evidencing
such shares of New Securities duly endorsed for transfer to the appropriate
Series A/KBL Holder shall be made on such date against payment of the purchase
price therefor.
(c) The Corporation may issue and sell all or any part of the
remaining shares of New Securities so offered for sale but not purchased
pursuant to Section 8 hereof at a price not less than the price offered, and on
terms not more favorable, to the purchaser thereof than the terms stated in the
original Notice of Intention to Sell, at any time within ninety (90) days after
the expiration of the offer required by Section 8. In the event the remaining
shares of New Securities are not sold by the Corporation during such ninety (90)
day period, the right of the Corporation
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to sell such remaining shares of New Securities shall expire and the obligations
of this Section 8 shall be reinstated; PROVIDED, HOWEVER, that in the event the
Corporation determines, at any time during such ninety (90) day period, that the
sale of all or any part of the remaining shares of New Securities on the terms
set forth in the Notice of Intention to Sell is impractical, the Corporation can
terminate the offer and reinstate the procedure provided in this Section 8
without waiting for the expiration of such ninety (90) day period.
9. FURTHER DILUTING ISSUANCES. The Corporation shall not permit or
cause to occur more than one Diluting Issuance unless the Corporation (I) has
taken all necessary action to create a new subseries of the Series A Preferred
Stock, which shall be PARI PASSU with the Series A Preferred Stock and the
Series A1 Preferred Stock for all purposes except conversion price, (II) has
taken all necessary action to create a new subseries of the Series KBL Preferred
Stock, which shall be PARI PASSU with the Series KBL Preferred Stock and the
Series KBL1 Preferred Stock for all purposes except conversion price, (III)
shall have amended this Certificate to provide that the shares of Series A Stock
held by any Holder thereof who fails to purchase its full Preemptive Share of
such additional Diluting Issuance shall be converted automatically into such new
subseries of Series A Stock, and (IV) shall have amended this Certificate to
provide that the shares of Series KBL Stock held by any Holder thereof who fails
to purchase its full Preemptive Share of such additional Diluting Issuance shall
be converted automatically into such new subseries of Series KBL Stock. The
shares of such subseries shall be convertible into Common Stock (or Non-voting
Common Stock, in the case of the Series KBL Stock) immediately after such
Diluting Issuance at the same price per share that applied to the shares which
were so converted immediately prior to such Diluting Issuance. The consent of
the Holders of the Preferred Stock shall not be required in order to effect such
new subseries.
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GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES B CONVERTIBLE PREFERRED STOCK,
SERIES B1 CONVERTIBLE PREFERRED STOCK,
SERIES KBH CONVERTIBLE PREFERRED STOCK,
SERIES KBH1 CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
Genaissance Pharmaceuticals, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), hereby certifies
that, pursuant to authority conferred upon the Board of Directors by the
provisions of Article 4 of the Certificate of Incorporation of the Corporation,
as amended, (referred to in the following designations as the "CERTIFICATE OF
INCORPORATION"), which authorize the issuance of 25,000,000 shares of a class of
capital stock designated as preferred stock, $.001 par value, the following
resolution was duly adopted by the Board of Directors of the Corporation by
action at a special meeting duly held on February 12, 2000.
RESOLVED: That there is hereby designated a series of the Preferred Stock
(as that term is defined in Article 4 of the Certificate of Incorporation of the
Corporation, as amended), consisting of 8,200,000 shares, which will be issued
in a series entitled "SERIES B CONVERTIBLE PREFERRED STOCK" (referred to as the
"SERIES B PREFERRED STOCK"), and 8,200,000 shares, which will be issued in a
series entitled "SERIES B1 CONVERTIBLE PREFERRED STOCK" (referred to as the
"SERIES B1 PREFERRED STOCK"), and 550,000 shares, which will be issued in a
series entitled "SERIES KBH CONVERTIBLE PREFERRED STOCK" (referred to as the
"SERIES KBH PREFERRED STOCK"), and 550,000 shares, which will be issued in a
series entitled "SERIES KBH1 CONVERTIBLE PREFERRED STOCK" (referred to as THE
"SERIES KBH1 PREFERRED STOCK") and that the preferences and privileges,
relative, participating, optional and other special rights, and qualifications,
limitations and restrictions of all shares of each such series, in addition to
those set forth in the Certificate of Incorporation of the Corporation, as
amended, are as set forth in the attached EXHIBIT I.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be signed by Gualberto Ruano, its President, and attested to by
Kevin L. Rakin, its Secretary, as of this 17th day of February, 2000.
GENAISSANCE PHARMACEUTICALS, INC.
By: /s/ GUALBERTO RUANO
-------------------------------
Gualberto Ruano
President
Attest:
By: /s/ KEVIN L. RAKIN
-------------------------------
Kevin L. Rakin
Secretary
<PAGE>
EXHIBIT I
1. DEFINITIONS. As used in this Certificate of Designations, the
following terms have the meanings specified below:
"AFFILIATE" shall mean a person (other than a subsidiary):
(i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Corporation;
(ii) which beneficially owns or holds 10% or more of any class
of the voting stock of the Corporation; or
(iii) 10% or more of the voting stock (or in the case of a person
which is not a corporation, 10% or more of the equity interest) of
which is beneficially owned or held by the Corporation or one of
its subsidiaries.
The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting
securities, by contract or otherwise.
"BOARD" shall mean the Corporation's Board of Directors.
"BUSINESS DAY" shall mean any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of Connecticut) on which banks are
authorized to be open for business in Hartford, Connecticut.
"COMMISSION" shall mean the United States Securities and Exchange
Commission.
"COMMON STOCK" shall mean the Common Stock, $.001 par value, of the
Corporation.
"DILUTED STOCK" shall have the meaning ascribed to it in Section
7(a)(iv)(A) hereof.
"DILUTING ISSUANCE" shall mean an issuance of capital stock described in
Section 7(a)(iv)(A) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXCLUDED STOCK" shall mean shares of Common Stock issued by the
Corporation:
(i) as a stock dividend or upon any stock split or other
subdivision or combination of the outstanding shares of Common
Stock;
(ii) up to an aggregate of 1,557,375 shares of Common Stock
issued or issuable to employees pursuant to an employee stock
option plan approved by the Board; or
<PAGE>
(iii) upon conversion of any Preferred Stock, warrants or other
convertible securities outstanding as of the Series B/KBH Initial
Issuance Date and set forth on Schedule 3.4 to the Series B/KBH
Stock Purchase Agreement.
"FAIR MARKET VALUE" at any date of one share of Common Stock shall be
deemed to be the average of the daily closing prices for the 30 consecutive
business days ending no more than five days before the day in question (as
adjusted for any stock dividend, split-up, combination or reclassification that
took effect during such 30 business day period). The closing price for each day
shall be the last reported sales price regular way or, in case no such reported
sales took place on such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (or if the Common
Stock is not at the time listed or admitted for trading on any such exchange,
then such price as shall be equal to the average of the last reported bid and
asked prices, as reported by the Nasdaq on such day, or if, on any day in
question, the security shall not be quoted on the Nasdaq, then such price shall
be equal to the last reported bid and asked prices on such day as reported by
the National Quotation Bureau, Inc. or any similar reputable quotation and
reporting service, if such quotation is not reported by the National Quotation
Bureau, Inc.); PROVIDED, HOWEVER, that if the Common Stock is traded in such
manner that the quotations referred to in this clause are not available for the
period required hereunder, the Fair Market Value shall be determined by a
nationally recognized independent investment banking firm selected mutually by
the holders of more than 50% of the voting power of the Series B/KBH Stock then
outstanding and the Corporation (or if such selection cannot be made, by a
nationally recognized independent banking firm selected by the American
Arbitration Association in accordance with its rules). With respect to the
Series B/KBH Stock, Fair Market Value shall be determined by a nationally
recognized independent investment banking firm selected mutually by the holders
of more than 50% of the voting power of the Series B/KBH Stock then outstanding
and the Corporation (or if such selection cannot be made, by a nationally
recognized independent banking firm selected by the American Arbitration
Association in accordance with its rules).
"HOLDER" shall mean a holder of shares of Series B/KBH Stock, as
applicable, as reflected in the stock records of the Corporation; and each
Holder's address shall be as it appears in the stock records of the Corporation.
"JUNIOR SECURITIES" shall mean, as to the Series B/KBH Stock, each other
class or series of capital stock (including, without limitation, each class of
common stock of the Corporation and each other series of preferred stock of the
Corporation including the Series A/KBL Stock) or other equity interests
(including, without limitation, warrants, rights, calls or options exercisable
for or convertible into such capital stock or equity interests) in the
Corporation.
"LIQUIDATION EVENT" shall mean, a merger, consolidation, liquidation,
dissolution, winding up of the affairs of the Corporation or sale of all or
substantially all of the assets of the Corporation as an entirety to a third
party or parties, whether voluntary or involuntary, or the sale by the
stockholders of the Corporation of a majority of the voting capital stock of the
Corporation; PROVIDED, HOWEVER, that a merger or consolidation shall not be
considered a
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Liquidation Event if the Corporation is the survivor or continuing corporation
of such merger or consolidation and as a result thereof there is no change in
the Common Stock or Preferred Stock or the ownership thereof.
"LIQUIDATION REDEMPTION PRICE" shall have the meaning assigned to such
term in Section 4(a).
"LISTED RIGHTS" shall mean all patents, patent applications, patent
rights, trademarks, trademark applications, trademark rights, trade names, trade
name rights, service marks and copyrights (whether registered or not) owned or
possessed by the Corporation and any improvements thereon.
"NEW SECURITIES" shall mean any capital stock (including, without
limitation, each class of common stock of the Corporation, any additional shares
of Preferred Stock, each other series of preferred stock of the Corporation and
any shares of capital stock held by the Corporation in its treasury upon the
disposition thereof) or other equity interests (including, without limitation,
warrants, rights, calls or options exercisable for or convertible into such
capital stock or equity interests) in the Corporation issued after the Series
B/KBH Initial Issue Date; PROVIDED, HOWEVER, that such term shall not include
(i) Excluded Stock or (ii) Second Round Series B/KBH Stock.
"NON-PARTICIPATING PERCENTAGE" shall have the meaning ascribed to it in
Section 7(a)(iv)(A) hereof.
"NON-VOTING COMMON STOCK" shall mean the Non-voting Common Stock, $.001
par value, of the Corporation.
"PERSON" shall mean and include an individual, a corporation, a
partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.
"PREEMPTIVE SHARE" shall mean, immediately prior to any issue of shares
of New Securities, and as to each Series B/KBH Holder, the percentage which
expresses the ratio between (i) the total number of shares of Common Stock (or
Non-voting Common Stock, in the case of the Series KBH Stock) issuable upon
conversion of the Series B/KBH Stock owned by such Series B/KBH Holder, plus the
total number of shares of Common Stock (and Non-voting Common Stock, if any)
then owned by such Series B/KBH Holder that was received upon conversion of
Series B/KBH Stock, and (ii) the total number of shares of Common Stock and
Non-voting Common Stock then outstanding, plus the total number of shares of
Common Stock and Non-voting Common Stock issuable upon conversion of the then
outstanding Preferred Stock.
"PREFERRED STOCK" shall mean all of the outstanding shares of the Series
A Stock, Series KBL Stock, Series B Stock and Series KBH Stock, together, at the
time in question.
"QUALIFIED IPO" shall mean the consummation of a firm commitment
underwritten public offering of shares of Common Stock registered under the
Securities Act which results in
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aggregate gross cash proceeds to the Corporation of not less than forty million
dollars ($40,000,000) and pursuant to which the offering price per share is
equal to or greater than $16.50 ($11.00 per share in the event that the
registration statement with respect to such offering shall be filed with the
Commission on or before February 11, 2001), equitably adjusted for any
Recapitalization Event.
"QUALIFIED LIQUIDATION EVENT" shall have the meaning assigned to such
term in Section 3(a).
"RECAPITALIZATION EVENT" shall mean any stock splits, stock dividends,
recapitalizations, reclassifications, and similar events.
"RELATED PARTY" shall mean any officer, director, significant employee or
consultant of the Corporation or any holder (other than any Series A/KBL Holder
or Series B/KBH Holder) of 10% or more of any class of capital stock of the
Corporation or any member of the immediate family of any such officer, director,
employee, consultant or shareholder or any entity controlled by any such
officer, director, employee, consultant or shareholder or a member of the
immediate family of any such officer, director, employee, consultant or
shareholder.
"SCHEDULED REDEMPTION PRICE" shall have the meaning ascribed to it in
Section 4(b).
"SECOND ROUND SERIES B/KBH ISSUANCE DATE" shall mean the issuance date of
the Second Round Series B/KBH Stock.
"SECOND ROUND SERIES B/KBH STOCK" shall mean those shares of Series B/KBH
Stock that may be issued by the Corporation to certain investors (the "SECOND
ROUND INVESTORS") in the Second Closing as such term is defined in the Series
B/KBH Stock Purchase Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES A PREFERRED STOCK" shall mean the Series A Redeemable Convertible
Preferred Stock of the Corporation, par value $.001 per share.
"SERIES A1 PREFERRED STOCK" shall mean the Series A1 Redeemable
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES A STOCK" shall mean all of the outstanding shares of the Series A
Preferred Stock and the Series A1 Preferred Stock, together, at the time in
question, and any new subseries of the Series A Preferred Stock created pursuant
to Section 9 of the Series A/KBL Certificate of Designations.
"SERIES A/KBL CERTIFICATE OF DESIGNATIONS" shall mean the Certificate of
Designations, Preferences and Other Special Rights and Qualifications,
Limitations and Restrictions of Series A and Series A1 Redeemable Convertible
Preferred Stock of the Corporation, dated as of August 24, 1998, and amended as
of February 17, 2000, and the Certificate of Designations, Preferences and Other
Special Rights and Qualifications, Limitations and Restrictions of Series KBL
and the
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Series KBL1 Non-voting Redeemable Convertible Preferred Stock of the
Corporation, dated as of August 24, 1998, and amended as of February 17, 2000.
"SERIES A/KBL HOLDER" shall mean a holder of shares of Series A Stock or
Series KBL Stock.
"SERIES A/KBL LIQUIDATION AMOUNT" shall mean the amount due to the Series
A/KBL Holders upon a Liquidation of the Company pursuant to the Series A/KBL
Certificate of Designations.
"SERIES A/KBL STOCK" shall mean all of the outstanding shares of the
Series A Stock and Series KBL Stock, together, at the time in question, which
shares are PARI PASSU for all purposes except voting (the Series KBL Stock being
non-voting) and conversion (the Series KBL Stock being convertible into
Non-voting Common Stock rather than voting Common Stock).
"SERIES B PREFERRED STOCK" shall mean the Series B Convertible Preferred
Stock of the Corporation, par value $.001 per share.
"SERIES B1 PREFERRED STOCK" shall mean the Series B1 Convertible
Preferred Stock of the Corporation, par value $.001 per share.
"SERIES B STOCK" shall mean all of the outstanding shares of the Series B
Preferred Stock and the Series B1 Preferred Stock, together, at the time in
question, which shares shall be PARI PASSU for all purposes except conversion
price, and any new subseries of the Series B Preferred Stock created pursuant to
Section 9 hereof.
"SERIES B/KBH ACCRUED DIVIDENDS" shall mean Series B/KBH Full Cumulative
Dividends to the date of determination, less the amount of all dividends paid
pursuant to Section 3, upon the relevant shares of Series B/KBH Stock.
"SERIES B/KBH CONVERSION DATE" shall have the meaning set forth in
Section 7(a)(ii).
"SERIES B/KBH CONVERSION PRICE" shall initially mean $5.50; PROVIDED,
HOWEVER, that the Series B/KBH Conversion Price shall be subject to adjustment
as set forth in Section 7(a)(iv).
"SERIES B/KBH EVENT OF CONVERSION" shall mean the consummation of a
Qualified IPO.
"SERIES B/KBH FULL CUMULATIVE DIVIDENDS" shall mean, as to any share of
Series B/KBH Stock (whether or not in respect of which such term is used there
shall have been net profits or net assets of the Corporation legally available
for the payment of such dividends), that amount which shall be equal to
dividends at the full rate fixed for the Series B/KBH Stock as provided herein
for the period of time elapsed from the Series B/KBH Initial Issuance Date (the
Second Round Series B/KBH Issuance Date in the case of the Second Round Series
B/KBH Stock) to the date as of which Series B/KBH Full Cumulative Dividends are
to be computed.
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"SERIES B/KBH HOLDER" shall mean a holder of shares of Series B Stock or
Series KBH Stock.
"SERIES B/KBH INITIAL ISSUANCE DATE" shall mean February 17, 2000.
"SERIES B/KBH LIQUIDATION AMOUNT" shall mean an amount in cash or
property (valued at its Fair Market Value), or a combination thereof, equal to
$5.50 per share of Series B/KBH Stock held by a Holder (which per share amount
shall be subject to equitable adjustment whenever there shall occur a stock
split, combination, reclassification or other similar event involving the Series
B/KBH Stock) plus all Series B/KBH Accrued Dividends.
"SERIES B/KBH ORIGINAL PURCHASE PRICE" shall mean $5.50 per share of
Series B/KBH Stock.
"SERIES B/KBH REDEMPTION DATE" shall have the meaning set forth in
Section 4 hereof.
"SERIES B/KBH REDEMPTION PRICE" shall have the meaning set forth in
Section 4 hereof.
"SERIES B/KBH STOCK" shall mean all of the outstanding shares of the
Series B Stock and Series KBH Stock, together, at the time in question, which
shares shall be PARI PASSU for all purposes except voting (the Series KBH Stock
being non-voting) and conversion (the Series KBH Stock being convertible into
Non-voting Common Stock rather than voting Common Stock).
"SERIES B/KBH STOCK PURCHASE AGREEMENT" shall mean that certain Stock
Purchase Agreement, dated as of February 17, 2000, by and among the Corporation
and the Purchasers (as defined therein).
"SERIES KBH PREFERRED STOCK" shall mean the Series KBH Nonvoting
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES KBH1 PREFERRED STOCK" shall mean the Series KBH1 Nonvoting
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES KBH STOCK" shall mean all of the outstanding shares of the
Series KBH Preferred Stock and the Series KBH1 Preferred Stock, together, at the
time in question, and any new subseries of the Series KBH Preferred Stock
created pursuant to Section 9 hereof.
"SERIES KBL PREFERRED STOCK" shall mean the Series KBL Nonvoting
Redeemable Convertible Preferred Stock of the Corporation, par value $.001 per
share.
"SERIES KBL1 PREFERRED STOCK" shall mean the Series KBL1 Nonvoting
Redeemable Convertible Preferred Stock of the Corporation, par value $.001 per
share.
"SERIES KBL STOCK" shall mean all of the outstanding shares of the Series
KBL Preferred Stock and the Series KBL1 Preferred Stock, together, at the time
in question, and any new
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subseries of the Series KBL Preferred Stock created pursuant to Section 9 of the
Series A/KBL Certificate of Designations.
"SUBSIDIARY" shall mean an entity a majority of the capital stock or
other ownership interest in which is owned directly or indirectly by the
Corporation, except that 100% "SUBSIDIARY" shall mean a subsidiary that is 100%
owned by the Corporation and/or its 100% subsidiaries.
2. NUMBER OF SHARES. The designation of the four series of preferred
stock provided for herein shall be as follows: Series B Preferred Stock, of
which 8,200,000 shares shall be authorized; Series B1 Preferred Stock, of which
8,200,000 shares shall be authorized; Series KBH Preferred Stock, of which
550,000 shares shall be authorized; and Series KBH1 Preferred Stock, of which
550,000 shares shall be authorized.
3. DIVIDENDS.
(a) The holder of each share of Series B/KBH Stock shall be entitled
to receive, before any dividends shall be declared and paid upon or set aside
for the Junior Securities, out of funds legally available for that purpose,
dividends in cash at the rate per annum per share (the "SERIES B DIVIDEND RATE")
equal to 8% of the Series B/KBH Original Purchase Price, adjusted, as
applicable, for any Recapitalization Event, payable, when and as declared by the
Board and, in any event, upon the earliest of (a) a Liquidation Event in
accordance with Section 5 hereof, (b) upon redemption in accordance with Section
4 hereof or (c) upon the Series B/KBH Event of Conversion. Until the third
anniversary of the Series B/KBH Initial Issuance Date, the Corporation shall
have the option to make any such payment in shares of Common Stock (Non-voting
Common Stock in the case of the Series KBH). After the third anniversary of the
Series B/KBH Initial Issuance Date, the Holder shall have the option to receive
any such payment in shares of Common Stock (Non-voting Common Stock in the case
of the Series KBH). In the event such dividends are paid in Common Stock
(Non-voting Common Stock in the case of the Series KBH), for purposes of
computing the number of shares of Common Stock (Non-voting Common Stock in the
case of the Series KBH) to be issued and the amount of the dividend paid, the
value of the Common Stock (Non-voting Common Stock in the case of the Series
KBH) paid to any holder of shares of Series B/KBH Stock shall be valued at the
then Series B/KBH Conversion Price. Dividends on shares of Series B/KBH Stock
shall be cumulative from the Series B/KBH Initial Issuance Date (Second Round
Series B/KBH Issuance Date in the case of the Second Round Series B/KBH Stock),
whether or not there shall be net profits or net assets of the Corporation
legally available for the payment of such dividends, so that, if at any time
Series B/KBH Full Cumulative Dividends upon the Series B/KBH Stock shall not
have been paid or declared and a sum sufficient for payment thereof set apart,
the amount of the deficiency in such dividends shall be fully paid or dividends
in such amount shall be declared on the shares of the Series B/KBH Stock and a
sum sufficient for the payment thereof shall be set apart for such payment,
before any dividend shall be declared or paid or any other distribution ordered
or made upon any Junior Securities and before any sum or sums shall be set aside
for or applied to the purchase or redemption of Junior Securities. With respect
to rights to dividends, the Series B/KBH Stock shall rank prior to the Common
Stock and all other Junior Securities. All
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dividends declared upon the Series B/KBH Stock shall be declared pro rata per
share. All payments due under this Section to any holder of shares of Series
B/KBH Stock shall be made to the nearest cent. Notwithstanding the foregoing,
the holders of the Series B/KBH Stock shall not be entitled to dividends on the
Series B/KBH Stock pursuant to this Section 3(a) in the event that on or before
August 11, 2001(i) there shall be filed with the Commission a registration
statement with respect to a Qualified Public Offering (which registration
statement shall have become effective within three months of filing); or (ii)
there shall occur a Qualified Liquidation Event. The term "QUALIFIED LIQUIDATION
EVENT" shall mean a Liquidation Event in which the holders of the Series B/KBH
Stock receive (per share) cash or other property with a fair market value equal
to at least 200% of the Series B/KBH Original Purchase Price (as adjusted for
any stock split, combination, reclassification or other similar event involving
the Series B/KBH Stock) if the Qualified Liquidation Event occurs within one
year after the Series B/KBH Initial Issuance Date, and 300% of the Series B/KBH
Original Purchase Price (as adjusted for any stock split, combination,
reclassification or other similar event involving the Series B/KBH Stock) if the
Qualified Liquidation Event occurs more than one year after the Series B/KBH
Initial Issuance Date (but before August 12, 2001).
(b) In the event the Corporation shall make or issue, or shall fix a
record date for the determination of holders of Common Stock (or Non-voting
Common Stock) entitled to receive a dividend or other distribution (other than a
distribution in liquidation or other distribution otherwise provided for herein)
with respect to the Common Stock (or Non-voting Common Stock) or any other
Junior Securities (based on "as if converted amounts") other than the Series
A/KBL Stock payable in (i) securities of the Corporation other than shares of
Common Stock (or Non-voting Common Stock), or (ii) cash, then, and in each such
event, provision shall be made so that the holders of the Series B/KBH Stock
shall receive the number of securities or such other assets of the Corporation
which they would have received had their Series B/KBH Stock been converted into
Common Stock (or Non-voting Common Stock in the case of the Series KBH) on the
date of such event.
4. REDEMPTION.
(a) REDEMPTION UPON A LIQUIDATION EVENT. (i) In connection and
concurrently with a Liquidation Event, the Corporation shall (to the extent
allowed by law) redeem, except as set forth hereafter, all the shares of Series
B/KBH Stock then outstanding, out of funds legally available therefor. The
amount per share payable upon any redemption of shares of Series B/KBH Stock
pursuant to this subsection shall be an amount in cash equal to the Liquidation
Redemption Price, as determined below. The Corporation shall deliver to each
holder of shares of Series B/KBH Stock, not later than 45 days prior to the
consummation of a Liquidation Event, notice of such proposed Liquidation Event,
including the date on which such Liquidation Event is expected to be
consummated. To the extent that one or more redemptions and/or a liquidation are
occurring concurrently, any redemption of the shares of Series B/KBH Stock shall
be deemed to occur and shall be paid in full prior to any other redemptions
and/or liquidations, including any other redemption of shares of the Series
A/KBL Stock. Notwithstanding the foregoing, any Series B/KBH Holder may elect to
retain its outstanding shares of Series B/KBH Stock and not to subject such
shares to redemption by delivery of
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written notice to the Corporation at least 15 days prior to the date of the
consummation of the Liquidation Event.
(ii) The amount per share payable upon any redemption of shares
of Series B/KBH pursuant to this subsection shall be an amount
equal to the greater of (a) the Series B/KBH Original Purchase
Price (subject to equitable adjustment for any stock split,
combination, reclassification or other similar event involving the
Series B/KBH Stock) plus all Series B/KBH Accrued Dividends, or
(b) the Fair Market Value of such share (the "LIQUIDATION
REDEMPTION PRICE").
(iii) Any date upon which Series B/KBH Stock is to be redeemed
pursuant to this Section 4 shall be referred to in this context as
a "SERIES B/KBH REDEMPTION DATE".
(b) SERIES B ANNUAL REDEMPTION. Except as set forth hereafter, the
Corporation shall (to the extent allowed by law) redeem the following shares of
Series B Stock and Series KBH Stock on the following dates, out of funds legally
available therefor:
(i) at any time on or after February 11, 2005, one-third of the
shares of each of the Series B Stock and Series KBH Stock then
outstanding.
(ii) at any time on or after February 11, 2006, an additional
number of shares of each of the Series B Stock and Series KBH
Stock equal to one-third of the shares of the Series B Stock and
Series KBH Stock, respectively, outstanding as of February 11,
2005.
(iii) at any time on or after February 11, 2007, all outstanding
shares of Series B Stock and Series KBH Stock.
The amount per share payable upon any redemption of shares of Series B
Stock and Series KBH Stock pursuant to this subsection shall be an amount in
cash equal to the greater of (a) the Series B/KBH Original Purchase Price
(subject to equitable adjustment for any stock split, combination,
reclassification or other similar event involving the Series B/KBH Stock) plus
all Series B/KBH Accrued Dividends, or (b) the Fair Market Value of such share
(the "SCHEDULED REDEMPTION PRICE" and collectively with the Liquidation
Redemption Price, the "SERIES B/KBH REDEMPTION PRICE").
To the extent that one or more annual or other redemptions are occurring
concurrently, any redemption of the shares of Series B/KBH Stock shall be deemed
to occur and shall be paid in full prior to any other redemptions, including any
other redemption of shares of the Series A/KBL Stock.
Notwithstanding the foregoing, any Series B/KBH Holder may elect to
retain its outstanding shares of Series B/KBH Stock and not to subject such
shares to redemption by delivery of written notice to the Corporation at least
15 days prior to the applicable redemption date set forth above.
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(c) PRO RATA. If, on any Series B/KBH Redemption Date, fewer than all
shares of Series B/KBH Stock then outstanding are to be redeemed in accordance
with this Section, the shares to be redeemed shall be allocated pro rata among
the Series B/KBH Holders and the Redemption Notice mailed to each Holder shall
specify the number of shares to be redeemed from such Holder. Notwithstanding
the delivery of a Redemption Notice, Series B/KBH Holders subject to redemption
may convert such shares pursuant to Section 7 on or before the Series B/KBH
Redemption Date by delivering written notice thereof to the Corporation not
later than 10 days prior to the Series B/KBH Redemption Date.
(d) PAYMENT OF SERIES B/KBH REDEMPTION PRICE; TERMINATION OF RIGHTS.
On any Series B/KBH Redemption Date, the applicable Series B/KBH Redemption
Price in respect of the shares represented by the certificate or certificates
surrendered to the Corporation by the Holder thereof pursuant to the Redemption
Notice shall be paid to the order of the person whose name appears on such
certificate or certificates. Each surrendered certificate shall be canceled and
retired and a new certificate, representing the remaining, unredeemed shares of
Series B/KBH Stock, if any, shall be issued to the Holder of such shares. On any
Series B/KBH Redemption Date, the rights of a Holder with respect to shares
redeemed shall cease, other than such Holder's right to payment of the Series
B/KBH Redemption Price as of the Series B/KBH Redemption Date, upon surrender of
the certificate or certificates.
5. LIQUIDATION. In the event of any liquidation, dissolution or
winding-up of the Corporation, the Series B/KBH Holders shall be entitled,
before any assets of the Corporation shall be distributed among or paid over to
the holders of Junior Securities, but after distribution of such assets among,
or payment thereof over to, creditors of the Corporation, to receive from the
assets of the Corporation available for distribution to stockholders in cash,
the Series B/KBH Liquidation Amount. If the assets of the Corporation legally
available for distribution shall be insufficient to permit the payment in full
of the Series B/KBH Liquidation Amount to the Series B/KBH Holders, then the
entire assets of the Corporation legally available for distribution shall be
distributed ratably among the Series B/KBH Holders in proportion to the
respective amounts which would have been payable upon such Liquidation Event on
such shares of Series B/KBH Stock if all amounts payable thereon had been paid
in full. In the event that such distribution of assets is other than in cash,
such distribution of cash and other assets (including securities) shall be made
ratably among the holders of the shares of Series B/KBH Stock based upon the
fair market value of any such assets as determined by a nationally recognized
valuation consultant selected mutually by the holders of a majority in voting
power of the Series B/KBH Stock then outstanding and the Corporation (or if such
selection cannot be made, by a nationally recognized independent valuation
consultant selected by the American Arbitration Association in accordance with
its rules). In the event of any liquidation, dissolution or winding-up of the
Corporation, after payment shall have been made to the holders of shares of
Series B/KBH Stock of the full amount to which they shall be entitled as
aforesaid, and then after payment of the Series A/KBL Liquidation Amount to the
Series A/KBL Holders under the Series A/KBL Certificate of Designations, the
holders of any Junior Securities and the Series B/KBH Holders shall be entitled
to participate equally, on an as-converted basis in the case of the Series B/KBH
Stock and any Junior Securities convertible into Common Stock, in all remaining
assets of the Corporation available for distribution to its stockholders. The
provisions of this Section 5 shall not be
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applicable to any shares of Series B/KBH Stock that have been redeemed pursuant
to Section 4(a) hereof in connection with such Liquidation Event. The holders of
the Series B/KBH Stock shall have the right to treat any merger, consolidation,
sale of all or substantially all of the assets of the Corporation, or sale of a
majority of the voting capital stock of the Corporation, as a liquidation of the
Corporation and, in connection therewith, to receive payment under this Section
5 upon surrender of their shares to the Corporation; PROVIDED, HOWEVER, that the
holders of the Series B/KBH Stock shall not have the right to treat any merger
or consolidation as a Liquidation Event if the Corporation is the survivor or
continuing corporation of such merger or consolidation and as a result thereof
there is no change in the Common Stock or Preferred Stock or the ownership
thereof.
6. VOTING.
(a) VOTES GENERALLY WITH COMMON STOCK. In addition to the rights
specified in Section 6(b) below and any other rights provided in the
Corporation's By-Laws, the shares of Series B Stock shall entitle each Holder
thereof to such number of votes as shall equal the number of shares of Common
Stock (rounded to the nearest whole number) into which the shares of Series B
Stock held by such Holder are then convertible pursuant to Section 7 and shall
entitle each such Holder to vote on all matters as to which holders of Common
Stock shall be entitled to vote, in the same manner and with the same effect as
such holders of Common Stock, voting together with the holders of Common Stock
as one class.
(b) SEPARATE CLASS VOTE. So long as any shares of Series B Stock are
outstanding, the consent of the holders of a majority of all of the outstanding
shares of Series B Stock and Series A Stock, voting as a single and separate
class in person or by proxy, at a special or annual meeting called for the
purpose, or by written consent in lieu of a meeting, shall be required before
the Corporation may:
(i) authorize or issue any class or series of capital stock
ranking senior or pari passu to the Series B/KBH Stock or the
Series A/KBL Stock with respect to rights to receive dividends,
redemption payments or distributions upon liquidation or winding
up of the Corporation or with respect to voting, antidilution
provisions or preemptive rights; PROVIDED, HOWEVER, that this
provision shall not apply to the issuance of the Second Round
Series B/KBH Stock (which itself shall be Series B/KBH Stock);
(ii) authorize, declare or distribute any dividend, whether in
cash or in kind, payable to any class or series of the
Corporation's common or preferred stock (except payment of
dividends on the Series B/KBH Stock as contemplated herein or
payment of dividends on the Series A/KBL Stock as contemplated
(and only to the extent permitted) in the Series A/KBL Certificate
of Designations) or to any other equity security of the
Corporation;
(iii) approve any liquidation, dissolution, sale, lease or
license of all or substantially all of the assets or business, or
of the assets or business of any subsidiary, of the Corporation;
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(iv) cancel, repeal or change any of the provisions of this
Certificate of Designations (or of any amendment hereto), any
other certificate of designations of the Corporation (or any
amendment thereto), the Certificate of Incorporation of the
Corporation or the By-laws of the Corporation;
(v) permit to lapse any of the following: its corporate
existence, essential rights, government approvals or franchises or
any licenses or Listed Rights (which the Board deems essential to
the Corporation's business) or other rights to use patents,
processes, licenses, trademarks, trade names or copyrights owned
or possessed by it (which the Board deems essential to the
Corporation's business);
(vi) transfer, assign or license (except end-user licenses
granted in the ordinary course of business) any of the
Corporation's Listed Rights or know-how, technology or trade
secrets now owned or hereafter acquired by the Corporation;
(vii) voluntarily dissolve, liquidate or wind-up or carry out any
partial liquidation or distribution or transaction in the nature
of a partial liquidation or distribution;
(viii) purchase, lease or otherwise acquire capital stock in any
corporation or equity interest in any other entity or lend money
to any person or entity (other than loans to any one person that,
individually or in the aggregate, shall not exceed $100,000 or
loans to any one employee that, individually or in the aggregate,
shall not exceed $200,000) or purchase a substantial part of the
operating assets of any person or entity;
(ix) consolidate with or merge into or with any other person or
entity or permit any other person or entity to consolidate with or
merge into it (except that a 100% subsidiary may consolidate with
or merge into the Corporation or another 100% subsidiary);
(x) permit any subsidiary (except a 100% subsidiary) to make
any (i) direct or indirect redemption, retirement, purchase or
other acquisition of any of the Corporation's capital stock (or
any warrant, option or other right with respect to such stock),
(ii) repayment of the Corporation's debt held by any Related Party
or by any Affiliate or subsidiary debt held by any Related Party
or by any Affiliate, or (iii) sale of any capital stock of the
Corporation to any third party;
(xi) issue (which term shall include without limitation the
issuance of any shares of, or the grant of any warrants, options
or other rights to purchase any shares of, or any commitment to
issue) any shares of its capital stock (which term shall include
without limitation, securities convertible into capital stock, or
rights to acquire capital stock), other than Excluded Stock, at a
price per share less than $5.50;
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(xii) redeem any shares of any capital stock of the Corporation
(except redemptions of Series B/KBH Stock as contemplated herein
or redemptions of Series A/KBL Stock as contemplated (and only to
the extent permitted) in the Series A/KBL Certificate of
Designations); or
(xiii) increase the size of the Board of Directors of the Company
above eight (8) members.
7. CONVERSION.
(a) OPTIONAL CONVERSION.
(i) The holder of any shares of Series B/KBH Stock shall have
the right, at such holder's option, at any time or from time to
time to convert any or all such holder's shares of Series B/KBH
Stock into such whole number of fully paid and nonassessable
shares of Common Stock (or Non-voting Common Stock, in the case of
Series KBH Stock) as equals (I) the product of (x) the Series
B/KBH Original Purchase Price plus, after the third anniversary of
the Series B/KBH Initial Issuance Date at the option of any
Holder, any unpaid Series B/KBH Accrued Dividends with respect to
the shares being converted, multiplied by (y) the number of shares
of Series B/KBH Stock being converted, divided by (II) the Series
B/KBH Conversion Price (as last adjusted and then in effect) for
the shares of the Series B/KBH Stock being converted, by surrender
of the certificates representing the shares of Series B/KBH Stock
so to be converted in the manner provided Section 7(a)(ii) below.
The Series B/KBH Conversion Price shall initially be equal to the
Series B/KBH Original Purchase Price; PROVIDED, HOWEVER, that such
Series B/KBH Conversion Price shall be subject to adjustment as
set forth in Section 7(a)(iv) below.
(ii) The holder of any shares of Series B/KBH Stock may exercise
such holder's conversion right pursuant to this Section by
delivering to the Corporation during regular business hours at the
office of any transfer agent of the Corporation for the Series
B/KBH Stock or at such other place as may be designated by the
Corporation, the certificate or certificates for the shares to be
converted, duly endorsed or assigned in blank or to the
Corporation (if required by it) accompanied by written notice
stating that such holder elects to convert such shares and stating
the name or names (with address) in which the certificate or
certificates for the shares of Common Stock (or Non-voting Common
Stock, in the case of Series KBH Stock) are to be issued.
Conversion shall be deemed to have been effected with respect to
conversion under (a) Section 7(a)(i) above, on the date when the
aforesaid delivery is made and (b) Section 7(b) on the date of
occurrence of a Series B/KBH Event of Conversion, as the case may
be, and any such date is referred to herein as the "SERIES B/KBH
CONVERSION DATE". As promptly as practicable thereafter the
Corporation shall issue and deliver to or upon the written order
of such holder, to the place designated by such holder, a
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<PAGE>
certificate or certificates for the number of full shares of
Common Stock (or Non-voting Common Stock, in the case of Series
KBH Stock) to which such holder is entitled and a check or cash in
respect of any fractional interest in a share of Common Stock (or
Non-voting Common Stock, in the case of Series KBH Stock), as
provided in Section 7(a)(iii) below, payable with respect to the
shares of Series B/KBH Stock so converted up to and including the
Series B/KBH Conversion Date. The person in whose names the
certificate or certificates for Common Stock (or Non-voting Common
Stock, in the case of Series KBH Stock) are to be issued shall be
deemed to have become a holder of Common Stock (or Non-voting
Common Stock, in the case of Series KBH Stock) on the applicable
Series B/KBH Conversion Date unless the transfer books of the
Corporation are closed on that date, in which event such holder
shall be deemed to have become a holder of Common Stock (or
Non-voting Common Stock, in the case of Series KBH Stock) on the
next succeeding date on which the transfer books are open, but the
Series B/KBH Conversion Price shall be that in effect on the
Series B/KBH Conversion Date. Upon conversion of only a portion of
the number of shares covered by a certificate representing shares
of Series B/KBH Stock surrendered for conversion, the Corporation
shall issue and deliver to or upon the written order of the holder
of the certificate so surrendered for conversion, at the expense
of the Corporation, a new certificate covering the number of
shares of Series B/KBH Stock representing the unconverted portion
of the certificate so surrendered.
(iii) No fractional shares of Common Stock (or Non-voting Common
Stock, in the case of Series KBH Stock) or scrip shall be issued
upon conversion of shares of Series B/KBH Stock. If more than one
share of Series B/KBH Stock shall be surrendered for conversion at
any one time by the same holder, the number of full shares of
Common Stock (or Non-voting Common Stock, in the case of Series
KBH Stock) issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of Series B/KBH Stock
so surrendered. Instead of any fractional shares of Common Stock
(or Non-voting Common Stock, in the case of Series KBH Stock)
which would otherwise be issuable upon conversion of any shares of
Series B/KBH Stock, the Corporation shall pay a cash adjustment in
respect of such fractional interest in an amount equal to the then
current Fair Market Value of a share of Common Stock multiplied by
such fractional interest.
(iv) The Series B/KBH Conversion Price shall be subject to
adjustment from time to time as follows:
(A) ADJUSTMENTS FOR DILUTING ISSUANCES UPON CONTINUED
PARTICIPATION. Unless the Corporation has requested and
received a waiver from the holders of a majority of the
Series A Stock and the Series B Stock, voting together as a
single class, if the Corporation shall at any time or from
time to time after the Series B/KBH Initial Issuance Date
issue or be deemed (by virtue of any of the provisions of
Section 7(a)(iv)), to have issued any capital stock
(including, without limitation, each class
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<PAGE>
of common stock of the Corporation) or other equity
interests (including, without limitation, warrants, rights,
calls or options exercisable for or convertible into such
capital stock or equity interests) in the Corporation,
other than Excluded Stock (or Second Round Series B/KBH
Stock), without consideration or for a consideration per
share (the "LAST ISSUE PRICE") less than the Series B/KBH
Conversion Price in effect immediately prior to each such
issuance or deemed issuance (a "DILUTING ISSUANCE"), the
Series B/KBH Conversion Price in effect immediately prior
thereto shall forthwith be adjusted, as of the opening of
business on the date of such issuance or deemed issuance,
to such Last Issue Price.
Notwithstanding the immediately preceding paragraph of this
subsection (A), if a Series B/KBH Holder has been given
written notice pursuant to Section 8 hereof and the
opportunity to purchase its Preemptive Share of such
Diluting Issuance and does not purchase its entire
Preemptive Share of such Diluting Issuance, but purchases a
lesser share of such Diluting Issuance or none, the Series
B/KBH Conversion Price for that portion of the shares of
Series B/KBH Stock of said Series B/KBH Holder equal to the
Non-Participating Percentage (as hereinafter defined) (the
"DILUTED STOCK") shall not be reduced for said issuance
pursuant to this subsection but each share of the Diluted
Stock which each such Series B/KBH Holder holds shall be
automatically converted immediately prior to the closing of
the applicable Diluting Issuance into one (1) share of
Series B1 Preferred Stock (or Series KBH1 Preferred Stock,
in the case of Series KBH Stock) which shall be convertible
into Common Stock (or Non-voting Common Stock, in the case
of Series KBH1 Stock) at the same price per share that
applied to the Diluted Stock immediately prior to such
Diluting Issuance, subject, however, to further adjustment
as herein provided. As used herein, the term
"NON-PARTICIPATING PERCENTAGE" means a percentage equal to
one hundred percent (100%) minus the percentage determined
by dividing the number of shares of the Diluting Issuance
which such Holder actually purchased by the maximum number
of shares of the Diluting Issuance which such Holder was
entitled to purchase on the basis of such Holder's
Preemptive Shares and expressing the resulting quotient as
a percentage.
Upon the conversion of Diluted Stock held by a Series B/KBH
Holder as set forth herein, such shares of Diluted Stock
shall no longer be outstanding on the books of the
Corporation and the Series B/KBH Holder shall be treated,
to the extent that said holder held such Diluted Stock, as
the record holder of such shares of Series B1 Preferred
Stock (or Series KBH1 Stock, in the case of Series KBH
Stock) on the date of closing of the applicable Diluting
Issuance.
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<PAGE>
For the purposes of any adjustment of the Series B/KBH
Conversion Price pursuant to this subsection (A), the
following provisions shall be applicable:
(1) In the case of the issuance of stock for
cash, the consideration shall be deemed to be the
amount of cash paid therefor.
(2) In the case of the issuance of stock for a
consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to
be the fair market value thereof as determined in
good faith by the Board, irrespective of any
accounting treatment; PROVIDED, HOWEVER, that the
aggregate fair market value of such non-cash and
cash consideration shall not exceed the current Fair
Market Value of the shares of stock being issued.
(3) In case of the issuance of (i) options to
purchase or rights to subscribe for Common Stock (or
Non-voting Common Stock, in the case of Series KBH
Stock); (ii) securities by their terms convertible
into or exchangeable for Common Stock (or Non-voting
Common Stock, in the case of Series KBH Stock); or
(iii) options to purchase or rights to subscribe for
such convertible or exchangeable securities:
(a) the aggregate number of shares of
Common Stock (or Non-voting Common Stock, in
the case of Series KBH Stock) deliverable
upon exercise of such options to purchase or
rights to subscribe for Common Stock (or
Non-voting Common Stock, in the case of
Series KBH Stock) shall be deemed to have
been issued at the time such options or
rights were issued and for a consideration
equal to the consideration (determined in the
manner provided in subdivisions (1) and (2)
above), if any, received by the Corporation
upon the issuance of such options or rights
plus the purchase price provided in such
options or rights for the Common Stock (or
Non-voting Common Stock, in the case of
Series KBH Stock) covered thereby;
(b) the aggregate number of shares of
Common Stock (or Non-voting Common Stock, in
the case of Series KBH Stock) deliverable
upon conversion of or in exchange for any
such convertible or exchangeable securities
or upon the exercise of options to purchase
or rights to subscribe for such convertible
or exchangeable securities and subsequent
conversion or exchange thereof shall be
deemed to have
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<PAGE>
been issued at the time such securities were
issued or such options or rights were issued
and for a consideration equal to the
consideration received by the Corporation for
any such securities and related options or
rights (excluding any cash received on
accounts of accrued interest or accrued
dividends), plus the additional
consideration, if any, to be received by the
Corporation upon the conversion or exchange
of such securities or the exercise of any
related options or rights (the consideration
in each case to be determined in the manner
provided in subdivisions (1) and (2) above,
with the proviso to subdivision (2) being
applied to the number of shares of Common
Stock (or Non-voting Common Stock, in the
case of Series KBH Stock) deliverable upon
such exercise);
(c) on any change in the number of shares
or exercise price of Common Stock (or
Non-voting Common Stock, in the case of
Series KBH Stock) deliverable upon the
exercise of any such options or rights or
conversions of or exchange for such
convertible or exchangeable securities, other
than a change resulting from the antidilution
provisions thereof, the Series B/KBH
Conversion Price, if previously adjusted,
shall forthwith be readjusted to such Series
B/KBH Conversion Price as would have obtained
had the adjustment made upon the issuance of
such options, rights or securities not
converted prior to such change or options or
rights related to such securities not
converted prior to such change having been
made upon the basis of such change; and
(d) on the expiration of any such options
or rights, the termination of any such rights
to convert or exchange or the expiration of
any options or rights related to such
convertible or exchangeable securities, the
Series B/KBH Conversion Price, if previously
adjusted, shall forthwith be readjusted to
such Series B/KBH Conversion Price as would
have obtained had such options, rights,
securities or options or rights related to
such securities not been issued.
(B) ADJUSTMENTS FOR CERTAIN DIVIDENDS, SUBDIVISIONS OR
SPLIT-UPS. If, at any time after the Series B/KBH Initial
Issuance Date, the number of shares of Common Stock (or
Non-voting Common Stock, in the case of Series KBH Stock)
outstanding is increased by a stock dividend payable in
shares of Common
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<PAGE>
Stock (or Non-voting Common Stock, in the case of Series
KBH Stock) or by a subdivision or split-up of shares of
Common Stock (or Non-voting Common Stock, in the case of
Series KBH Stock), then, upon the record date fixed for the
determination of holders of Common Stock (or Non-voting
Common Stock, in the case of Series KBH Stock) entitled to
receive such stock dividend, subdivision or split-up, the
Series B/KBH Conversion Price shall be appropriately
decreased so that the number of shares of Common Stock (or
Non-voting Common Stock, in the case of Series KBH Stock)
issuable on conversion of each share of Series B/KBH Stock
shall be increased in proportion to such increase in
outstanding shares.
(C) ADJUSTMENTS FOR COMBINATIONS. If, at any time
after the Series B/KBH Initial Issuance Date, the number of
shares of Common Stock (or Non-voting Common Stock, in the
case of Series KBH Stock) outstanding is decreased by a
combination of the outstanding shares of Common Stock (or
Non-voting Common Stock, in the case of Series KBH Stock),
then, upon the record date for such combination, the Series
B/KBH Conversion Price shall be appropriately increased so
that the number of shares of Common Stock (or Non-voting
Common Stock, in the case of Series KBH Stock) issuable on
conversion of each share of Series B/KBH Stock shall be
decreased in proportion to such decrease in outstanding
shares.
(D) ADJUSTMENTS FOR REORGANIZATIONS, MERGERS,
CONSOLIDATIONS, ETC. In case, at any time after the Series
B/KBH Initial Issuance Date, of any capital reorganization,
or any reclassification of the stock of the Corporation
(other than a change in par value or from par value to no
par value or from no par value to par value or as a result
of a stock dividend or subdivision, split-up or combination
of shares), or the consolidation or merger of the
Corporation with or into another person (other than a
consolidation or merger in which the Corporation is the
continuing corporation and which does not result in any
change in the Common Stock or Preferred Stock or the
ownership thereof or of the sale or other disposition of
all or substantially all of the properties and assets of
the Corporation as an entirety to any other person), each
share of Series B/KBH Stock shall, after such
reorganization, reclassification, consolidation, merger,
sale or other disposition, be convertible into the kind and
number of shares of stock or other securities or property
of the Corporation or of the corporation resulting from
such consolidation or surviving such merger or to which
such properties and assets shall have been sold or
otherwise disposed to which the holder of the number of
shares of Common Stock (or Non-voting Common Stock, in the
case of Series KBH Stock) deliverable (immediately prior to
the time of such reorganization, reclassification,
consolidation, merger, sale or other disposition) upon
conversion of such share would have been entitled upon such
reorganization, reclassification, consolidation, merger,
sale or other disposition. The provisions of this
subsection shall similarly apply to
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<PAGE>
successive reorganizations, reclassifications,
consolidations, mergers, sales or other dispositions.
(E) All calculations under this subsection (iv) shall be
made to the nearest one cent ($.01) or to the nearest
one-tenth (1/10) of a share, as the case maybe.
(F) In any case in which the provisions of this
subsection (iv) shall require that an adjustment shall
become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of
such event (i) issuing to the holder of any share of Series
B/KBH Stock converted after such record date and before the
occurrence of such event the additional shares of capital
stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares
of capital stock issuable upon such conversion before
giving effect to such adjustment and (ii) paying to such
holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section 7(a)(iii) above,
PROVIDED, HOWEVER, that the Corporation shall deliver to
such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional
shares, and such cash, upon the occurrence of the event
requiring such adjustment.
(v) Whenever the Series B/KBH Conversion Price shall be
adjusted as provided in Section 7(a)(iv), the Corporation shall
forthwith file, at the office of the transfer agent for the Series
B/KBH Stock or at such other place as may be designated by the
Corporation, a statement, signed by its independent certified
public accountants, showing in detail the facts requiring such
adjustment and the Series B/KBH Conversion Price that shall be in
effect after such adjustment. The Corporation shall also cause a
copy of such statement to be sent by first class, certified mail,
return receipt requested, postage prepaid, to each Series B/KBH
Holder at such holder's address appearing on the Corporation's
records. Where appropriate, such copy may be given in advance and
may be included as part of a notice required to be mailed under
the provisions of Section 7(a)(vi) below.
(vi) In the event the Corporation shall propose to take any
action of the types described in clauses (A), (B), (C), or (D) of
Section 7(a)(iv) above, the Corporation shall give notice to each
holder of shares of Series B/KBH Stock, in the manner set forth in
Section 7(a)(v) above, which notice shall specify the record date,
if any, with respect to, any such action and the date on which
such action is to take place. Such notice shall also set forth
such facts with respect thereto as shall be reasonably necessary
to indicate the effect of such action (to the extent such effect
may be known at the date of such notice) on the Series B/KBH
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable
upon the occurrence of such action or deliverable upon conversion
of shares of Series B/KBH Stock. In the
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<PAGE>
case of any action which would require the fixing of a record
date, such notice shall be given at least 20 days prior to the
date so fixed, and in case of all other action, notice shall be
given at least 30 days prior to the taking of such proposed
action. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(vii) The Corporation shall pay all documentary, stamp or
other transactional taxes attributable to the issuance or delivery
of shares of capital stock of the Corporation upon conversion of
any shares of Series B/KBH Stock; PROVIDED, HOWEVER, that the
Corporation shall not be required to pay any taxes which may be
payable in respect of any transfer involved in the issuance or
delivery of any certificate for such shares in a name other than
that of the holder of the shares of Series B/KBH Stock in respect
of which such shares are being issued.
(viii) The Corporation shall reserve, free from preemptive rights,
out of its authorized but unissued shares of Common Stock (or
Non-voting Common Stock, in the case of Series KBH Stock), solely
for the purpose of effecting the conversion of the shares of
Series B/KBH Stock, sufficient shares to provide for the
conversion of all outstanding shares of Series B/KBH Stock.
(ix) All shares of Common Stock (or Non-voting Common Stock, in
the case of Series KBH Stock) which may be issued in connection
with the conversion provisions set forth herein will, upon
issuance by the Corporation, be validly issued, fully paid and
nonassessable, with no personal liability attaching to the
ownership thereof, and free from all taxes, liens or charges with
respect thereto.
(b) AUTOMATIC CONVERSION. Upon the occurrence of a Series B/KBH Event
of Conversion, all shares of Series B/KBH Stock then outstanding shall, by
virtue of, and simultaneously with, the occurrence of the Series B/KBH Event of
Conversion and without any action on the part of the holders thereof, be deemed
automatically converted into such whole number of fully paid and nonassessable
shares of Common Stock (or Non-voting Common Stock, in the case of Series KBH
Stock) as equals (1) the product of (x) the Series B/KBH Original Purchase Price
plus, after the third anniversary of the Series B/KBH Initial Issuance Date at
the option of any Holder, any unpaid Series B/KBH Accrued Dividends with respect
to the shares being converted, multiplied by (y) the number of shares of Series
B/KBH Stock being converted divided by (2) the Series B/KBH Conversion Price as
last adjusted pursuant to Section 7(a)(iv) and then in effect.
8. PRE-EMPTIVE RIGHTS. (a) RIGHT TO PURCHASE. Until the occurrence of
a Series B/KBH Event of Conversion, the Series B/KBH Holders shall be entitled
to subscribe for their respective Preemptive Share of any New Securities which
the Corporation may, from time to time, propose to issue and sell, at any time
while any Series B/KBH Stock is outstanding and subject to the terms, conditions
and procedures set forth below.
(b) The Corporation shall first deliver to each Series B/KBH Holder a
written Notice of Intention to Sell offering to each Series B/KBH Holder the
right to purchase up to the
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<PAGE>
Preemptive Share of such Series B/KBH Holder of such shares of New Securities at
the purchase price and on the terms specified therein. Each Series B/KBH Holder
shall have the right and option, for a period of twenty (20) days after delivery
to said Series B/KBH Holder of such Notice of Intention to Sell, to purchase all
or any part of the Preemptive Share of such Series B/KBH Holder of the shares of
New Securities so offered at the purchase price and on the terms stated therein.
Such acceptance shall be made by delivering a written Notice of Acceptance to
the Corporation within the aforesaid twenty (20) day period.
The closing of any sales of shares of New Securities under the terms of
Section 8 shall be made at the offices of the Corporation on a mutually
satisfactory business day within five (5) business days after the expiration of
the aforesaid period. Delivery of certificates or other instruments evidencing
such shares of New Securities duly endorsed for transfer to the appropriate
Series B/KBH Holder shall be made on such date against payment of the purchase
price therefor.
(c) The Corporation may issue and sell all or any part of the
remaining shares of New Securities so offered for sale but not purchased
pursuant to Section 8 hereof at a price not less than the price offered, and on
terms not more favorable, to the purchaser thereof than the terms stated in the
original Notice of Intention to Sell, at any time within ninety (90) days after
the expiration of the offer required by Section 8. In the event the remaining
shares of New Securities are not sold by the Corporation during such ninety (90)
day period, the right of the Corporation to sell such remaining shares of New
Securities shall expire and the obligations of this Section 8 shall be
reinstated; PROVIDED, HOWEVER, that in the event the Corporation determines, at
any time during such ninety (90) day period, that the sale of all or any part of
the remaining shares of New Securities on the terms set forth in the Notice of
Intention to Sell is impractical, the Corporation can terminate the offer and
reinstate the procedure provided in this Section 8 without waiting for the
expiration of such ninety (90) day period.
9. FURTHER DILUTING ISSUANCES. The Corporation shall not permit or
cause to occur more than one Diluting Issuance unless, so as to facilitate
the adjustments required by Section 7(a)(iv)(A), the Corporation (I) has
taken all necessary action to create a new subseries of the Series B
Preferred Stock, which shall be PARI PASSU with the Series B Preferred Stock
and the Series B1 Preferred Stock for all purposes except conversion price,
(II) has taken all necessary action to create a new subseries of the Series
KBH Preferred Stock, which shall be PARI PASSU with the Series KBH Preferred
Stock and the Series KBH1 Preferred Stock for all purposes except conversion
price, (III) shall have amended this Certificate to provide that the shares
of Series B Stock held by any Holder thereof who fails to purchase its full
Preemptive Share of such additional Diluting Issuance shall be converted
automatically into such new subseries of Series B Stock, and (IV) shall have
amended this Certificate to provide that the shares of Series KBH Stock held
by any Holder thereof who fails to purchase its full Preemptive Share of such
additional Diluting Issuance shall be converted automatically into such new
subseries of Series KBH Stock. The shares of such subseries shall be
convertible into Common Stock (or Non-voting Common Stock, in the case of the
Series KBH Stock) immediately after such Diluting Issuance at the same price
per share that applied to the shares which were so converted immediately
prior to such Diluting Issuance. The consent of the Holders of the Preferred
Stock shall not be required in order to effect such new subseries.
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<PAGE>
GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATES OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES A1 REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES KBL NONVOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES KBL1 NONVOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), DOES HEREBY
CERTIFY:
1. The following resolutions were duly adopted by action of the Board
of Directors of the Corporation at a special meeting duly held on March 6, 2000,
pursuant to authority conferred upon the Board of Directors by the provisions of
Article 4 of the Certificate of Incorporation of the Corporation, as amended,
(referred to in the following designations as the "CERTIFICATE OF
INCORPORATION"), which authorize the issuance of 25,000,000 shares of a class of
capital stock designated as preferred stock, $.001 par value (the "PREFERRED
STOCK").
RESOLVED: That the provisions of the two Certificates of Designations,
Preferences and Other Special Rights and Qualifications, Limitations and
Restrictions of Preferred Stock of the Corporation (the first such
certificate relating to the Series A Redeemable Convertible Preferred
Stock and the Series A1 Redeemable Convertible Preferred Stock of the
Corporation, and the second such certificate relating to the Series KBL
Nonvoting Redeemable Convertible Preferred Stock and the Series KBL1
Nonvoting Redeemable Convertible Preferred Stock of the Corporation ),
both approved by the Board of Directors on August 22, 1998, and amended
by the Board of Directors on February 12, 2000 (the "SERIES A/KBL
CERTIFICATES OF Designations"), shall be further amended by deleting the
definition of "Series B/KBH Certificate of Designations" from Section 1
of EXHIBIT 1 to each of the Series A/KBL Certificates of Designations and
substituting therefor the following text:
"SERIES B/KBH CERTIFICATE OF DESIGNATIONS" shall mean the
Certificate of Designations, Preferences and Other Special Rights
and Qualifications, Limitations and Restrictions of Series B and
Series B1 Convertible Preferred Stock of the Corporation, and
Series KBH and Series KBH1 Non-voting
<PAGE>
Convertible Preferred Stock of the Corporation, dated as of
February 17, 2000, and amended as of March 8, 2000."
; and further
RESOLVED: That the Series A/KBL Certificates of Designations shall be
further amended by deleting the definition of "Series B/KBH Stock
Purchase Agreement" from Section 1 of EXHIBIT 1 to each of such
Certificates of Designations and substituting therefor the following
text:
""SERIES B/KBH STOCK PURCHASE AGREEMENT" shall mean that certain
Stock Purchase Agreement, dated as of February 17, 2000, and
amended as of February 29, 2000 and as of March 3, 2000, by and
among the Corporation and the Purchasers (as defined therein)."
; and further
RESOLVED: That except as amended hereby, each of the Series A/KBL
Certificates of Designations are hereby ratified and confirmed.
2. Such resolutions also were duly approved by the written consent of
the holders of the requisite number of shares of the Series A Redeemable
Convertible Preferred Stock, the Series A1 Redeemable Convertible Preferred
Stock , the Series KBL Nonvoting Redeemable Convertible Preferred Stock and the
Series KBL1 Nonvoting Redeemable Convertible Preferred Stock of the Corporation
and the holders of the requisite number of shares of the Series B Convertible
Preferred Stock, the Series B1 Convertible Preferred Stock, the Series KBH
Nonvoting Convertible Preferred Stock, and the Series KBH1 Nonvoting Convertible
Preferred Stock of the Corporation.
3. This amendment to the Series A/KBL Certificates of Designations
was duly adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Gualberto Ruano, its President, and attested to by
Kevin L. Rakin, its Secretary, as of this 8th day of March, 2000.
GENAISSANCE PHARMACEUTICALS, INC.
By: /s/ GUALBERTO RUANO
------------------------------
Gualberto Ruano
President
Attest:
By: /s/ KEVIN L. RAKIN
------------------------------
Kevin L. Rakin
Secretary
<PAGE>
GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES B CONVERTIBLE PREFERRED STOCK,
SERIES B1 CONVERTIBLE PREFERRED STOCK,
SERIES KBH NONVOTING CONVERTIBLE PREFERRED STOCK,
SERIES KBH1 NONVOTING CONVERTIBLE PREFERRED STOCK
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), DOES HEREBY
CERTIFY:
1. The following resolutions were duly adopted by action of the Board
of Directors of the Corporation at a special meeting duly held on March 6, 2000,
pursuant to authority conferred upon the Board of Directors by the provisions of
Article 4 of the Certificate of Incorporation of the Corporation, as amended,
(referred to in the following designations as the "CERTIFICATE OF
INCORPORATION"), which authorize the issuance of 25,000,000 shares of a class of
capital stock designated as preferred stock, $.001 par value (the "PREFERRED
STOCK").
RESOLVED: That the provisions of the Certificate of Designations,
Preferences and Other Special Rights and Qualifications, Limitations and
Restrictions of Preferred Stock of the Corporation (such certificate
relating to the Series B Convertible Preferred Stock, Series B1
Convertible Preferred Stock, Series KBH Nonvoting Convertible Preferred
Stock and Series KBH1 Nonvoting Convertible Preferred Stock of the
Corporation), approved by the Board of Directors on February 12, 2000 and
filed with the Delaware Secretary of State on February 17, 2000 (the
"SERIES B/KBH CERTIFICATE OF DESIGNATIONS"), shall be hereby amended to
increase the number of authorized shares of Series B Convertible
Preferred Stock from 8,200,000 to 8,543,524 and the number of authorized
shares of Series B1 Convertible Preferred Stock from 8,200,000 to
8,543,524; and further
RESOLVED: That the Series B/KBH Certificate of Designations shall be
further amended by deleting the definition of "Series A/KBL Certificate
of Designations" from Section 1 of EXHIBIT 1 to such Certificate of
Designations and substituting therefor the following text:
""SERIES A/KBL CERTIFICATE OF DESIGNATIONS" shall mean the
Certificate of Designations, Preferences and Other Special Rights
and Qualifications, Limitations and Restrictions of Series A and
Series A1 Redeemable Convertible Preferred Stock of the
<PAGE>
Corporation, dated as of August 24, 1998, and amended as of
February 17, 2000 and as of March 8, 2000, and the Certificate of
Designations, Preferences and Other Special Rights and
Qualifications, Limitations and Restrictions of Series KBL and the
Series KBL1 Non-voting Redeemable Convertible Preferred Stock of
the Corporation, dated as of August 24, 1998, and amended as of
February 17, 2000 and as of March 8, 2000."
;and further
RESOLVED: That the Series B/KBH Certificate of Designations shall be
further amended by deleting the definition of "Series B/KBH Stock
Purchase Agreement" from Section 1 of EXHIBIT 1 to such Certificate of
Designations and substituting therefor the following text:
""SERIES B/KBH STOCK PURCHASE AGREEMENT" shall mean that certain
Stock Purchase Agreement, dated as of February 17, 2000, and
amended as of February 29, 2000 and as of March 3, 2000, by and
among the Corporation and the Purchasers (as defined therein)."
and further
RESOLVED: That the Series B/KBH Certificate of Designations shall be
further amended by deleting the text of Section 2 of EXHIBIT 1 to such
Certificate of Designations in its entirety and substituting therefor the
following text:
"2. NUMBER OF SHARES. The designation of the four series of
preferred stock provided for herein shall be as follows: Series B
Preferred Stock, of which 8,543,524 shares shall be authorized;
Series B1 Preferred Stock, of which 8,543,524 shares shall be
authorized; Series KBH Preferred Stock, of which 550,000 shares
shall be authorized; and Series KBH1 Preferred Stock, of which
550,000 shares shall be authorized."
; and further
RESOLVED: That the Series B/KBH Certificate of Designations, as amended
hereby, shall apply to 8, 543,524 shares of Series B Convertible
Preferred Stock, 8, 543,524 shares of Series B1 Convertible Preferred
Stock, 550,000 shares of Series KBH Nonvoting Convertible Preferred
Stock, and 550,000 shares of Series KBH1 Nonvoting Convertible Preferred
Stock of the Corporation. Except as amended hereby, the Series B/KBH
Certificate of Designations is hereby ratified and confirmed.
2. Such resolutions also were duly approved by the written consent of
the holders of the requisite number of shares of the Series B Convertible
Preferred Stock, the Series B1
<PAGE>
Convertible Preferred Stock, the Series KBH Nonvoting Convertible Preferred
Stock and the Series KBH1 Nonvoting Convertible Preferred Stock of the
Corporation, and by the holders of the requisite number of shares of the Series
A Redeemable Convertible Preferred Stock, the Series A1 Redeemable Convertible
Preferred Stock, the Series KBL Nonvoting Redeemable Convertible Preferred Stock
and the Series KBL1 Nonvoting Redeemable Convertible Preferred Stock of the
Corporation.
3. This amendment to the Certificates of Designations was duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Gualberto Ruano, its President, and attested to by
Kevin L. Rakin, its Secretary, as of this 8 day of March, 2000.
GENAISSANCE PHARMACEUTICALS, INC.
By: /s/ GUALBERTO RUANO
------------------------------
Gualberto Ruano
President
Attest:
By: /s/ KEVIN L. RAKIN
------------------------------
Kevin L. Rakin
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GENAISSANCE PHARMACEUTICALS, INC.
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
1. This Certificate of Amendment amends the Certificate of
Incorporation of the Corporation, as amended (the "Certificate of
Incorporation"), by amending Article 4 to effect changes in the capital
structure of the Corporation.
2. The first sentence of Article 4 of the Certificate of
Incorporation, as amended, is amended hereby to read as follows:
"The total authorized capital stock of the corporation consists of
52,000,000 shares, of which 20,000,000 are shares of Common Stock,
$.001 par value (the "Common Stock"), 2,000,000 are shares of
Nonvoting Common Stock, $.001 par value (the "Nonvoting Common
Stock"), and 30,000,000 are shares of Preferred Stock, $.001 par
value ("Preferred Stock")."
3. The foregoing amendment to the Certificate of Incorporation was
duly adopted by written consent of the stockholders in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware.
4. This Amendment to the Certificate of Incorporation was duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Gualberto Ruano, its President, and attested to by Kevin L. Rakin, its
Secretary, this 10th day of March, 2000.
GENAISSANCE PHARMACEUTICALS, INC.
By: /s/ GUALBERTO RUANO
----------------------------
Gualberto Ruano
President
Attest:
By: /s/ KEVIN L. RAKIN
-------------------------
Kevin L. Rakin, Secretary
<PAGE>
GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATES OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES A1 REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES KBL NONVOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES KBL1 NONVOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), DOES HEREBY
CERTIFY:
1. The following resolution was duly adopted by action of the Board
of Directors of the Corporation at a special meeting duly held on March 10,
2000, pursuant to authority conferred upon the Board of Directors by the
provisions of Article 4 of the Certificate of Incorporation of the Corporation,
as amended, (referred to in the following designations as the "CERTIFICATE OF
INCORPORATION"), which authorize the issuance of 30,000,000 shares of a class of
capital stock designated as preferred stock, $.001 par value (the "PREFERRED
STOCK").
RESOLVED: That the provisions of the two Certificates of Designations,
Preferences and Other Special Rights and Qualifications, Limitations and
Restrictions of Preferred Stock of the Corporation (the first such
certificate relating to the Series A and Series A1 Redeemable Convertible
Preferred Stock, and the second such certificate relating to the Series
KBL and Series KBL1 Nonvoting Redeemable Convertible Preferred Stock)
(the "CERTIFICATES OF DESIGNATIONS"), both dated as of August 24, 1998,
and as amended as of February 17, 2000 and as of March 8, 2000, shall be
further amended by deleting the text of each in its entirety and
substituting therefor the text set forth in EXHIBIT I attached hereto.
Said Certificates of Designations, as amended hereby, shall apply to
2,437,500 shares of Series A Redeemable Convertible Preferred Stock,
2,437,500 shares of Series A1 Redeemable Convertible Preferred Stock,
330,500 shares of Series KBL Nonvoting Redeemable Convertible Preferred
Stock, and 330,500 shares of Series KBL1 Nonvoting Redeemable Convertible
Preferred Stock.
2. Such resolution also was duly approved by the written consent of
the holders of the requisite number of shares of the Series A Redeemable
Convertible Preferred Stock, the Series A1 Redeemable Convertible Preferred
Stock, the Series KBL Nonvoting Redeemable Convertible Preferred Stock, the
Series KBL1 Nonvoting Redeemable Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series B1 Convertible Preferred Stock, the
Series KBH
<PAGE>
Convertible Preferred Stock and the Series KBH1 Convertible Preferred Stock
of the Corporation.
3. This amendment to the Certificates of Designations was duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Gualberto Ruano, its President, and attested to by
Kevin L. Rakin, its Secretary, as of this 10th day of March , 2000.
GENAISSANCE PHARMACEUTICALS, INC.
By: /s/ GUALBERTO RUANO
------------------------------
Gualberto Ruano
President
Attest:
By: /s/ KEVIN L. RAKIN
---------------------------------
Kevin L. Rakin
Secretary
<PAGE>
EXHIBIT I
There are hereby designated four series of preferred stock of the
Corporation, the first consisting of 2,437,500 shares, as issued in a series
entitled "SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK" (referred to as the
"SERIES A PREFERRED STOCK"); the second consisting of 2,437,500 shares, as
issued in a series entitled "SERIES A1 REDEEMABLE CONVERTIBLE PREFERRED STOCK"
(referred to as the "SERIES A1 PREFERRED STOCK"); the third consisting of
330,500 shares, as issued in a series entitled "SERIES KBL NONVOTING REDEEMABLE
CONVERTIBLE PREFERRED STOCK" (referred to as the "SERIES KBL PREFERRED Stock");
and the fourth consisting of 330,500 shares, as issued in a series entitled
"SERIES KBL1 NONVOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK" (referred to as
the "SERIES KBL1 PREFERRED STOCK"); and that the preferences and privileges,
relative, participating, optional and other special rights, and qualifications,
limitations and restrictions of the shares of each such series, in addition to
those set forth in the Certificate of Incorporation of the Corporation, as
amended, are as set forth below:
1. DEFINITIONS. As used in this Certificate of Designations, the
following terms have the meanings specified below: "AFFILIATE" shall mean a
person (other than a subsidiary):
(i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Corporation;
(ii) which beneficially owns or holds 10% or more of any class
of the voting stock of the Corporation; or
(iii) 10% or more of the voting stock (or in the case of a person
which is not a corporation, 10% or more of the equity interest) of
which is beneficially owned or held by the Corporation or one of
its subsidiaries.
The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting
securities, by contract or otherwise.
"BOARD" shall mean the Corporation's Board of Directors.
"BUSINESS DAY" shall mean any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of Connecticut) on which banks are
authorized to be open for business in Hartford, Connecticut.
"COMMISSION" shall mean the United States Securities and Exchange
Commission.
"COMMON STOCK" shall mean the Common Stock, $.001 par value, of the
Corporation.
"DILUTED STOCK" shall have the meaning ascribed to it in Section
7(a)(iv)(A) hereof.
<PAGE>
"DILUTING ISSUANCE" shall mean an issuance of capital stock described in
Section 7(a)(iv)(A) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXCLUDED STOCK" shall mean shares of Common Stock issued by the
Corporation:
(i) as a stock dividend or upon any stock split or other
subdivision or combination of the outstanding shares of Common
Stock;
(ii) up to an aggregate of 1,557,375 shares of Common Stock
issued or issuable to employees pursuant to an employee stock
option plan approved by the Board; or
(iii) upon conversion of any Preferred Stock, warrants or other
convertible securities and set forth on Schedule 3.4 to the Series
B/KBH Stock Purchase Agreement.
"FAIR MARKET VALUE" at any date of one share of Common Stock shall be
deemed to be the average of the daily closing prices for the 30 consecutive
business days ending no more than five days before the day in question (as
adjusted for any stock dividend, split-up, combination or reclassification that
took effect during such 30 business day period). The closing price for each day
shall be the last reported sales price regular way or, in case no such reported
sales took place on such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (or if the Common
Stock is not at the time listed or admitted for trading on any such exchange,
then such price as shall be equal to the average of the last reported bid and
asked prices, as reported by the Nasdaq on such day, or if, on any day in
question, the security shall not be quoted on the Nasdaq, then such price shall
be equal to the last reported bid and asked prices on such day as reported by
the National Quotation Bureau, Inc. or any similar reputable quotation and
reporting service, if such quotation is not reported by the National Quotation
Bureau, Inc.); PROVIDED, HOWEVER, that if the Common Stock is traded in such
manner that the quotations referred to in this clause are not available for the
period required hereunder, the Fair Market Value shall be determined by a
nationally recognized independent investment banking firm selected mutually by
the holders of more than 50% of the voting power of the Series A/KBL Stock then
outstanding and the Corporation (or if such selection cannot be made, by a
nationally recognized independent banking firm selected by the American
Arbitration Association in accordance with its rules). With respect to the
Series A/KBL Stock, Fair Market Value shall be determined by a nationally
recognized independent investment banking firm selected mutually by the holders
of more than 50% of the voting power of the Series A/KBL Stock then outstanding
and the Corporation (or if such selection cannot be made, by a nationally
recognized independent banking firm selected by the American Arbitration
Association in accordance with its rules).
-2-
<PAGE>
"HOLDER" shall mean a holder of shares of Series A/KBL Stock, as
applicable, as reflected in the stock records of the Corporation; and each
Holder's address shall be as it appears in the stock records of the Corporation.
"JUNIOR SECURITIES" shall mean, as to the Series A/KBL Stock, each other
class or series of capital stock (including, without limitation, each class of
common stock of the Corporation and each other series of preferred stock) or
other equity interests (including, without limitation, warrants, rights, calls
or options exercisable for or convertible into such capital stock or equity
interests) in the Corporation, except Junior Securities shall not include the
Series B/KBH Stock or the Series C Stock.
"LIQUIDATION EVENT" shall mean, a merger, consolidation, liquidation,
dissolution, winding up of the affairs of the Corporation or sale of all or
substantially all of the assets of the Corporation as an entirety to a third
party or parties, whether voluntary or involuntary, or the sale by the
stockholders of the Corporation of a majority of the voting capital stock of the
Corporation; PROVIDED, HOWEVER, that a merger or consolidation shall not be
considered a Liquidation Event if the Corporation is the survivor or continuing
corporation of such merger or consolidation and as a result thereof there is no
change in the Common Stock or Preferred Stock or the ownership thereof.
"LIQUIDATION REDEMPTION PRICE" shall have the meaning ascribed to it in
Section 4(a).
"LISTED RIGHTS" shall mean all patents, patent applications, patent
rights, trademarks, trademark applications, trademark rights, trade names, trade
name rights, service marks and copyrights (whether registered or not) owned or
possessed by the Corporation and any improvements thereon.
"NEW SECURITIES" shall mean any capital stock (including, without
limitation, each class of common stock of the Corporation, any additional shares
of Preferred Stock, each other series of preferred stock of the Corporation and
any shares of capital stock held by the Corporation in its treasury upon the
disposition thereof) or other equity interests (including, without limitation,
warrants, rights, calls or options exercisable for or convertible into such
capital stock or equity interests) in the Corporation issued after the Series
A/KBL Initial Issue Date; PROVIDED, HOWEVER, that such term shall not include
Excluded Stock and shall not include Series B/KBH Stock or Series C Stock.
"NON-PARTICIPATING PERCENTAGE" shall have the meaning ascribed to it in
Section 7(a)(iv)(A) hereof.
"NON-VOTING COMMON STOCK" shall mean the Non-voting Common Stock, $.001
par value, of the Corporation.
"ORIGINAL CERTIFICATES OF DESIGNATION" shall mean the original
Certificate of Designations, Preferences and Other Special Rights and
Qualifications, Limitations and Restrictions of the Series A and Series A1
Redeemable Convertible Preferred Stock of the Corporation, dated as of August
24, 1998, and the original Certificate of Designations,
-3-
<PAGE>
Preferences and Other Special Rights and Qualifications, Limitations and
Restrictions of the Series KBL and Series KBL1 Non-voting Redeemable Convertible
Preferred Stock of the Corporation, dated as of August 24, 1998.
"PERSON" shall mean and include an individual, a corporation, a
partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.
"PREEMPTIVE SHARE" shall mean, immediately prior to any issue of shares
of New Securities, and as to each Series A/KBL Holder, the percentage which
expresses the ratio between (i) the total number of shares of Common Stock
(and/or Non-voting Common Stock, in the case of the Series KBL Stock) issuable
upon conversion of the Series A/KBL Stock owned by such Series A/KBL Holder,
plus the total number of shares of Common Stock (and Non-voting Common Stock, if
any) then owned by such Series A/KBL Holder that was received upon conversion of
Series A/KBL Stock, and (ii) the total number of shares of Common Stock and
Non-voting Common Stock then outstanding, plus the total number of shares of
Common Stock and Non-voting Common Stock issuable upon conversion of the then
outstanding Preferred Stock.
"PREFERRED STOCK" shall mean all of the outstanding shares of the Series
A Stock, Series KBL Stock, Series B Stock, Series KBH Stock and Series C Stock,
together, at the time in question.
"QUALIFIED IPO" shall mean the consummation of a firm commitment
underwritten public offering of shares of Common Stock registered under the
Securities Act which results in aggregate gross cash proceeds to the Corporation
of not less than forty million dollars ($40,000,000) and pursuant to which the
offering price per share is equal to or greater than $16.50 ($11.00 per share in
the event that the registration statement with respect to such offering shall be
filed with the Commission on or before February 11, 2001), equitably adjusted
for any Recapitalization Event.
"QUALIFIED LIQUIDATION EVENT" shall have the meaning ascribed to it in
Section 3(b).
"RECAPITALIZATION EVENT" shall mean any stock splits, stock dividends,
recapitalizations, reclassifications, and similar events.
"RELATED PARTY" shall mean any officer, director, significant employee or
consultant of the Corporation or any holder (other than any Series A/KBL Holder,
Series B/KBH Holder or Series C Holder) of 10% or more of any class of capital
stock of the Corporation or any member of the immediate family of any such
officer, director, employee, consultant or shareholder or any entity controlled
by any such officer, director, employee, consultant or shareholder or a member
of the immediate family of any such officer, director, employee, consultant or
shareholder.
"SCHEDULED REDEMPTION PRICE" shall have the meaning ascribed to it in
Section 4(b).
-4-
<PAGE>
"SECOND ROUND SERIES B/KBH STOCK" shall mean those shares of Series B/KBH
Stock that may be issued by the Corporation to certain investors (the "SECOND
ROUND INVESTORS") in the Second Closing as such term is defined in the Series
B/KBH Stock Purchase Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES A PREFERRED STOCK" shall mean the Series A Redeemable Convertible
Preferred Stock of the Corporation, par value $.001 per share.
"SERIES A1 PREFERRED STOCK" shall mean the Series A1 Redeemable
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES A STOCK" shall mean all of the outstanding shares of the Series A
Preferred Stock and the Series A1 Preferred Stock, together, at the time in
question, and any new subseries of the Series A Preferred Stock created pursuant
to Section 9 hereof.
"SERIES A/KBL ACCRUED DIVIDENDS" shall mean Series A/KBL Full Cumulative
Dividends to the date of determination, less the amount of all dividends paid
pursuant to Section 3, upon the relevant shares of Series A/KBL Stock.
"SERIES A/KBL AMENDMENT DATE" shall mean February 17, 2000.
"SERIES A/KBL CONVERSION DATE" shall have the meaning set forth in
Section 7(a)(ii).
"SERIES A/KBL CONVERSION PRICE" shall initially mean $4.00; PROVIDED,
HOWEVER, that the Series A/KBL Conversion Price shall be subject to adjustment
as set forth in Section 7(a)(iv).
"SERIES A/KBL EVENT OF CONVERSION" shall mean the consummation of a
Qualified IPO.
"SERIES A/KBL FULL CUMULATIVE DIVIDENDS" shall mean, as to any share of
Series A/KBL Stock (whether or not in respect of which such term is used there
shall have been net profits or net assets of the Corporation legally available
for the payment of such dividends), that amount which shall be equal to
dividends at the full rate fixed for the Series A/KBL Stock as provided herein
for the period of time elapsed from the Series A/KBL Initial Issuance Date to
the date as of which Series A/KBL Full Cumulative Dividends are to be computed.
"SERIES A/KBL HOLDER" shall mean a holder of shares of Series A Stock or
Series KBL Stock.
"SERIES A/KBL INITIAL ISSUANCE DATE" shall mean August 24, 1998.
"SERIES A/KBL LIQUIDATION AMOUNT" shall mean an amount in cash or
property (valued at its Fair Market Value), or a combination thereof, equal to
$4.00 per share of Series A/KBL Stock held by a Holder (which per share amount
shall be subject to equitable adjustment whenever there shall occur a stock
split, combination, reclassification or other similar event involving the Series
A/KBL Stock) plus all Series A/KBL Accrued Dividends.
-5-
<PAGE>
"SERIES A/KBL ORIGINAL PURCHASE PRICE" shall mean $4.00 per share of
Series A/KBL Stock.
"SERIES A/KBL REDEMPTION DATE" shall have the meaning set forth in
Section 4 hereof.
"SERIES A/KBL REDEMPTION PRICE" shall have the meaning set forth in
Section 4 hereof.
"SERIES A/KBL STOCK" shall mean all of the outstanding shares of the
Series A Stock and Series KBL Stock, together, at the time in question, which
shares are PARI PASSU for all purposes except voting (the Series KBL Stock being
non-voting) and conversion (the Series KBL Stock being convertible into
Non-voting Common Stock rather than voting Common Stock).
"SERIES B PREFERRED STOCK" shall mean the Series B Convertible Preferred
Stock of the Corporation, par value $.001 per share.
"SERIES B1 PREFERRED STOCK" shall mean the Series B1 Convertible
Preferred Stock of the Corporation, par value $.001 per share.
"SERIES B STOCK" shall mean all of the outstanding shares of the Series B
Preferred Stock and the Series B1 Preferred Stock, together, at the time in
question, which shares shall be PARI PASSU for all purposes except conversion
price, and any new subseries of the Series B Preferred Stock created pursuant to
Section 9 of the Series B/KBH Certificate of Designations.
"SERIES B/KBH CERTIFICATE OF DESIGNATIONS" shall mean the Certificate of
Designations, Preferences and Other Special Rights and Qualifications,
Limitations and Restrictions of Series B and Series B1 Convertible Preferred
Stock of the Corporation, and Series KBH and Series KBH1 Non-voting Convertible
Preferred Stock of the Corporation, dated as of February 17, 2000, and amended
as of March 8, 2000 and as of March 10, 2000.
"SERIES B/KBH HOLDER" shall mean a holder of shares of Series B Stock or
Series KBH Stock.
"SERIES B/KBH LIQUIDATION AMOUNT" shall mean the amount due to the Series
B/KBH Holders upon a Liquidation of the Company pursuant to the Series B/KBH
Certificate of Designations.
"SERIES B/KBH STOCK" shall mean all of the outstanding shares of the
Series B Stock and Series KBH Stock, together, at the time in question, which
shares shall be PARI PASSU for all purposes except voting (the Series KBH Stock
being non-voting) and conversion (the Series KBH Stock being convertible into
Non-voting Common Stock rather than voting Common Stock).
"SERIES B/KBH STOCK PURCHASE AGREEMENT" shall mean that certain Stock
Purchase Agreement, dated as of February 17, 2000, by and among the Corporation
and the Purchasers (as defined therein), as amended as of February 29, 2000 and
March 3, 2000.
-6-
<PAGE>
"SERIES C PREFERRED STOCK" shall mean the Series C Convertible Preferred
Stock of the Corporation, par value $.001 per share.
"SERIES C1 PREFERRED STOCK" shall mean the Series C1 Convertible
Preferred Stock of the Corporation, par value $.001 per share.
"SERIES C CERTIFICATE OF DESIGNATIONS" shall mean the Certificate of
Designations, Preferences and Other Special Rights and Qualifications,
Limitations and Restrictions of Series C Convertible Preferred Stock and Series
C1 Convertible Preferred Stock of the Corporation, dated as of March 10, 2000.
"SERIES C HOLDER" shall mean a holder of shares of Series C Stock.
"SERIES C LIQUIDATION AMOUNT" shall mean the amount due to the Series C
Holders upon a Liquidation of the Company pursuant to the Series C Certificate
of Designations.
"SERIES C STOCK" shall mean all of the outstanding shares of the Series C
Preferred Stock and the Series C1 Preferred Stock, together, at the time in
question, which shares shall be PARI PASSU for all purposes except conversion
price, and any new subseries of the Series C Preferred Stock created pursuant to
Section 9 of the Series C Certificate of Designations.
"SERIES C STOCK PURCHASE AGREEMENT" shall mean that certain Stock
Purchase Agreement, dated as of March 10, 2000, by and among the Corporation and
the Purchasers (as defined therein) of the Series C Stock.
"SERIES KBH PREFERRED STOCK" shall mean the Series KBH Nonvoting
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES KBH1 PREFERRED STOCK" shall mean the Series KBH1 Nonvoting
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES KBH STOCK" shall mean all of the outstanding shares of the Series
KBH Preferred Stock and the Series KBH1 Preferred Stock, together, at the time
in question, and any new subseries of the Series KBH Preferred Stock created
pursuant to Section 9 of the Series B/KBH Certificate of Designations.
"SERIES KBL PREFERRED STOCK" shall mean the Series KBL Nonvoting
Redeemable Convertible Preferred Stock of the Corporation, par value $.001 per
share.
"SERIES KBL1 PREFERRED STOCK" shall mean the Series KBL1 Nonvoting
Redeemable Convertible Preferred Stock of the Corporation, par value $.001 per
share.
"SERIES KBL STOCK" shall mean all of the outstanding shares of the Series
KBL Preferred Stock and the Series KBL1 Preferred Stock, together, at the time
in question, and any new subseries of the Series KBL Preferred Stock created
pursuant to Section 9 hereof.
"SUBSIDIARY" shall mean an entity a majority of the capital stock or
other ownership interest in which is owned directly or indirectly by the
Corporation, except that 100%
-7-
<PAGE>
"SUBSIDIARY" shall mean a subsidiary that is 100% owned by the Corporation
and/or its 100% subsidiaries.
2. NUMBER OF SHARES. The designation of the four series of preferred
stock provided for herein shall be as follows: Series A Preferred Stock, of
which 2,437,500 shares shall be authorized; Series A1 Preferred Stock, of which
2,437,500 shares shall be authorized; Series KBL Preferred Stock, of which
330,500 shares shall be authorized; Series KBL1 Preferred Stock, of which
330,500 shares shall be authorized.
3. DIVIDENDS.
(a) For the period beginning on the Series A/KBL Initial Issuance Date
and ending on the Series A/KBL Amendment Date, the holders of each share of
Series A/KBL Stock shall be entitled to receive dividends as provided under the
Original Certificate of Designations; PROVIDED, HOWEVER, that no such dividends
shall be paid in cash, rather than stock, without the prior approval of a
majority of the holders of the Series B Stock and Series C Stock, voting
together as a single class.
(b) From and after the Series A/KBL Amendment Date, the holder of
each share of Series A/KBL Stock shall be entitled to receive, before any
dividends shall be declared and paid upon or set aside for the Junior
Securities, but after any dividends shall be declared and paid upon or set
aside for the Series B/KBH Stock and Series C Stock, out of funds legally
available for that purpose, dividends in cash at the rate per annum per share
(the "SERIES A DIVIDEND RATE") equal to 8% of the Series A/KBL Original
Purchase Price, adjusted, as applicable, for any Recapitalization Event,
payable, when and as declared by the Board, upon the earliest of (a) a
Liquidation Event in accordance with Section 5 hereof, (b) upon redemption in
accordance with Section 4 hereof or (c) upon the Series A/KBL Event of
Conversion; PROVIDED, HOWEVER, that so long as any shares of Series B/KBH
Stock or Series C Stock shall remain outstanding, no such dividends shall be
paid on the Series A/KBL Stock unless approved by a majority of the holders
of the Series B Stock and Series C Stock, voting together as a separate
class. Until the third anniversary of the Series A/KBL Amendment Date, the
Corporation shall have the option to make any such payment either in cash or
in shares of Common Stock (Non-voting Common Stock in the case of the Series
KBL), provided that dividends declared and paid upon or set aside for all
shares of Series A/KBL Stock, of Series B/KBH Stock and of Series C Stock at
or about the same time are being paid in the same manner unless a different
method of payment is approved by a majority of the holders of the Series B
Stock and Series C Stock, voting together as a separate class. After the
third anniversary of the Series A/KBL Amendment Date, the Holder shall have
the option to receive any such payment either in cash or in shares of Common
Stock (Non-voting Common Stock in the case of the Series KBL). In the event
such dividends are paid in Common Stock (Non-voting Common Stock in the case
of the Series KBL), for purposes of computing the number of shares of Common
Stock (Non-voting Common Stock in the case of the Series KBL) to be issued
and the amount of the dividend paid, the value of the Common Stock
(Non-voting Common Stock in the case of the Series KBL) paid to any holder of
shares of Series A/KBL Stock shall be valued at the then Series A/KBL
Conversion Price. Dividends on shares of Series A/KBL Stock shall be
cumulative from the Series A/KBL
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Amendment Date (whether or not there shall be net profits or net assets of
the Corporation legally available for the payment of such dividends), so
that, if at any time Series A/KBL Full Cumulative Dividends upon the Series
A/KBL Stock shall not have been paid or declared and a sum sufficient for
payment thereof set apart, the amount of the deficiency in such dividends
shall be fully paid or dividends in such amount shall be declared on the
shares of the Series A/KBL Stock and a sum sufficient for the payment thereof
shall be set apart for such payment, before any dividend shall be declared or
paid or any other distribution ordered or made upon any Junior Securities
(but after any dividends shall be declared and paid upon or set aside for the
Series B/KBH Stock and the Series C Stock) or applied to the purchase or
redemption of Junior Securities. With respect to rights to dividends, the
Series A/KBL Stock shall rank prior to the Common Stock and all other Junior
Securities, but shall rank junior to the Series B/KBH Stock and Series C
Stock. All dividends declared upon the Series A/KBL Stock shall be declared
pro rata per share. All payments due under this Section to any holder of
shares of Series A/KBL Stock shall be made to the nearest cent.
Notwithstanding the foregoing, the holders of the Series A/KBL Stock shall
not be entitled to dividends on the Series A/KBL Stock pursuant to this
Section 3(b) in the event that on or before August 11, 2001 (i) there shall
be filed with the Commission a registration statement with respect to a
Qualified IPO (which registration statement shall have become effective
within three months of filing); or (ii) there shall occur a Qualified
Liquidation Event. The term "QUALIFIED LIQUIDATION EVENT" shall mean a
Liquidation Event in which the holders of the Series A/KBL Stock receive (per
share) cash or other property with a fair market value equal to at least 200%
of the Series A/KBL Original Purchase Price (as adjusted for any stock split,
combination, reclassification or other similar event involving the Series
A/KBL Stock) if the Qualified Liquidation Event occurs within one year after
the Series A/KBL Amendment Date, and 300% of the Series A/KBL Original
Purchase Price (as adjusted for any stock split, combination,
reclassification or other similar event involving the Series A/KBL Stock) if
the Qualified Liquidation Event occurs more than one year after the Series
A/KBL Amendment Date (but before August 12, 2001).
(c) From and after the Series A/KBL Amendment Date, in the event the
Corporation shall make or issue, or shall fix a record date for the
determination of holders of Common Stock (or Non-voting Common Stock) entitled
to receive a dividend or other distribution (other than a distribution in
liquidation or other distribution otherwise provided for herein) with respect to
the Common Stock (or Non-voting Common Stock) or any other Junior Securities
(based on "as if converted" amounts) payable in (i) securities of the
Corporation other than shares of Common Stock (or Non-voting Common Stock), or
(ii) cash, then, and in each such event, provision shall be made so that the
holders of the Series A/KBL Stock shall receive, subject to the prior payment in
full of any amounts due to the holders of the Series B/KBH Stock and the Series
C Stock in connection with such event, the number of securities or such other
assets of the Corporation which they would have received had their Series A/KBL
Stock been converted into Common Stock (or Non-voting Common Stock in the case
of the Series KBL) on the date of such event.
4. REDEMPTION.
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(a) REDEMPTION UPON A LIQUIDATION EVENT. (i) In connection and
concurrently with a Liquidation Event, the Corporation shall (to the extent
allowed by law) redeem, except as set forth hereafter, all the shares of Series
A/KBL Stock then outstanding, out of funds legally available therefor. The
amount per share payable upon any redemption of shares of Series A/KBL Stock
pursuant to this subsection shall be an amount in cash equal to the Liquidation
Redemption Price, as determined below. The Corporation shall deliver to each
holder of shares of Series A/KBL Stock, not later than 45 days prior to the
consummation of a Liquidation Event, notice of such proposed Liquidation Event,
including the date on which such Liquidation Event is expected to be
consummated. To the extent that one or more redemptions and/or a liquidation are
occurring concurrently, any redemption of the shares of Series A/KBL Stock shall
be deemed to occur and shall be paid after any redemption of shares of the
Series B/KBH Stock and Series C Stock, and prior to any other redemptions and/or
liquidations. Notwithstanding the foregoing, any Series A/KBL Holder may elect
to retain its outstanding shares of Series A/KBL Stock and not to subject such
shares to redemption by delivery of written notice to the Corporation at least
15 days prior to the date of the consummation of the Liquidation Event.
(ii) The amount per share payable upon any redemption of shares
of Series A/KBL pursuant to this subsection shall be an amount
equal to the greater of (a) the Series A/KBL Original Purchase
Price (subject to equitable adjustment for any stock split,
combination, reclassification or other similar event involving the
Series A/KBL Stock) plus all Series A/KBL Accrued Dividends, or
(b) the Fair Market Value of such share (the "LIQUIDATION
REDEMPTION PRICE").
(iii) Any date upon which Series A/KBL Stock is to be redeemed
pursuant to this Section 4 shall be referred to in this context as
a "SERIES A/KBL REDEMPTION DATE".
(b) SERIES A/KBL ANNUAL REDEMPTION. Except as set forth hereafter, the
Corporation shall (to the extent allowed by law) redeem the following shares of
Series A Stock and Series KBL Stock on the following dates, out of funds legally
available therefor:
(i) at any time on or after February 11, 2005, one-third of the
shares of each of the Series A Stock and Series KBL Stock then
outstanding;
(ii) at any time on or after February 11, 2006, an additional
number of shares of each of the Series A Stock and Series KBL
Stock equal to one-third of the shares of the Series A Stock and
Series KBL Stock, respectively, outstanding as of February 11,
2005;
(iii) at any time on or after February 11, 2007, all outstanding
shares of Series A Stock and Series KBL Stock;
PROVIDED, HOWEVER, that no such redemption provided for in Sections 4(b)(i),
(ii) or (iii) shall occur in the event that any shares of Series B/KBH Stock or
Series C Stock shall remain outstanding.
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The amount per share payable upon any redemption of shares of Series A
Stock and Series KBL Stock pursuant to this subsection shall be an amount in
cash equal to the greater of (a) the Series A/KBL Original Purchase Price
(subject to equitable adjustment for any stock split, combination,
reclassification or other similar event involving the Series A/KBL Stock) plus
all Series A/KBL Accrued Dividends, or (b) the Fair Market Value of such share
(the "SCHEDULED REDEMPTION PRICE" and collectively with the Liquidation
Redemption Price, the "SERIES A/KBL REDEMPTION PRICE").
To the extent that one or more annual or other redemptions are occurring
concurrently, any redemption of the shares of Series A/KBL Stock shall be deemed
to occur and shall be paid after any redemption of shares of the Series B/KBH
Stock and Series C Stock, but prior to any other redemptions.
Notwithstanding the foregoing, any Series A/KBL Holder may elect to
retain its outstanding shares of Series A/KBL Stock and not to subject such
shares to redemption by delivery of written notice to the Corporation at least
15 days prior to the applicable redemption date set forth above.
(c) PRO RATA. If, on any Series A/KBL Redemption Date, fewer than all
shares of Series A/KBL Stock then outstanding are to be redeemed in accordance
with this Section, the shares to be redeemed shall be allocated pro rata among
the Series A/KBL Holders and the Redemption Notice mailed to each Holder shall
specify the number of shares to be redeemed from such Holder. Notwithstanding
the delivery of a Redemption Notice, Series A/KBL Holders subject to redemption
may convert such shares pursuant to Section 7 on or before the Series A/KBL
Redemption Date by delivering written notice thereof to the Corporation not
later than 10 days prior to the Series A/KBL Redemption Date.
(d) PAYMENT OF SERIES A/KBL REDEMPTION PRICE; TERMINATION OF RIGHTS.
On any Series A/KBL Redemption Date, the applicable Series A/KBL Redemption
Price in respect of the shares represented by the certificate or certificates
surrendered to the Corporation by the Holder thereof pursuant to the Redemption
Notice shall be paid to the order of the person whose name appears on such
certificate or certificates. Each surrendered certificate shall be canceled and
retired and a new certificate, representing the remaining, unredeemed shares of
Series A/KBL Stock, if any, shall be issued to the Holder of such shares. On any
Series A/KBL Redemption Date, the rights of a Holder with respect to shares
redeemed shall cease, other than such Holder's right to payment of the Series
A/KBL Redemption Price as of the Series A/KBL Redemption Date, upon surrender of
the certificate or certificates.
5. LIQUIDATION. In the event of any liquidation, dissolution or
winding-up of the Corporation, the Series A/KBL Holders shall be entitled,
before any assets of the Corporation shall be distributed among or paid over to
the holders of Junior Securities, but after distribution of such assets among,
or payment thereof over to, creditors of the Corporation and the holders of the
Series B/KBH Stock and Series C Stock, to receive from the assets of the
Corporation available for distribution to stockholders in cash, the Series A/KBL
Liquidation Amount. If the assets of the Corporation legally available for
distribution shall be insufficient to permit the
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payment in full of the Series A/KBL Liquidation Amount to the Series A/KBL
Holders, then the assets of the Corporation legally available for distribution
shall be distributed ratably among the Series A/KBL Holders in proportion to the
respective amounts which would have been payable upon such Liquidation Event on
such shares of Series A/KBL Stock if all amounts payable thereon had been paid
in full. In the event that such distribution of assets is other than in cash,
such distribution of cash and other assets (including securities) shall be made
ratably among the holders of the shares of Series A/KBL Stock based upon the
fair market value of any such assets as determined by a nationally recognized
valuation consultant selected mutually by the holders of a majority in voting
power of the Series A/KBL Stock then outstanding and the Corporation (or if such
selection cannot be made, by a nationally recognized independent valuation
consultant selected by the American Arbitration Association in accordance with
its rules). In the event of any liquidation, dissolution or winding-up of the
Corporation, after payment shall have been made to the holders of shares of
Series A/KBL Stock of the full amount to which they shall be entitled as
aforesaid, the holders of any Junior Securities, the Series A/KBL Holders, the
Series B/KBH Holders and the Series C Holders shall be entitled to participate
equally, on an as-converted basis in the case of the Series A/KBL Stock, the
Series B/KBH Stock, the Series C Stock and any Junior Securities convertible
into Common Stock, in all remaining assets of the Corporation available for
distribution to its stockholders. The provisions of this Section 5 shall not be
applicable to any shares of Series A/KBL Stock that have been redeemed pursuant
to Section 4(a) hereof in connection with such Liquidation Event. The holders of
the Series A/KBL Stock shall have the right to treat any merger, consolidation,
sale of all or substantially all of the assets of the Corporation, or sale of a
majority of the voting capital stock of the Corporation, as a liquidation of the
Corporation and, in connection therewith, and subject to the prior payment in
full of any amounts due to the holders of the Series B/KBH Stock and Series C
Stock in connection with such event, to receive payment under this Section 5
upon surrender of their shares to the Corporation; PROVIDED, HOWEVER, that the
holders of the Series A/KBL Stock shall not have the right to treat any merger
or consolidation as a Liquidation Event if the Corporation is the survivor or
continuing corporation of such merger or consolidation and as a result thereof
there is no change in the Common Stock or Preferred Stock or the ownership
thereof.
6. VOTING.
(a) VOTES GENERALLY WITH COMMON STOCK. In addition to the rights
specified in Section 6(b) below and any other rights provided in the
Corporation's By-Laws, the shares of Series A Stock shall entitle each Holder
thereof to such number of votes as shall equal the number of shares of Common
Stock (rounded to the nearest whole number) into which the shares of Series A
Stock held by such Holder are then convertible pursuant to Section 7 and shall
entitle each such Holder to vote on all matters as to which holders of Common
Stock shall be entitled to vote, in the same manner and with the same effect as
such holders of Common Stock, voting together with the holders of Common Stock
as one class.
(b) SEPARATE CLASS VOTE. So long as any shares of Series A Stock are
outstanding, the consent of the holders of a majority of all of the outstanding
shares of Series A Stock, Series B Stock and Series C Stock, voting as a single
and separate class in person or by proxy, at a
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special or annual meeting called for the purpose, or by written consent in lieu
of a meeting, shall be required before the Corporation may:
(i) authorize or issue any class or series of capital stock
ranking senior or pari passu to the Series B/KBH Stock, the Series
C Stock or the Series A/KBL Stock with respect to rights to
receive dividends, redemption payments or distributions upon
liquidation or winding up of the Corporation or with respect to
voting, antidilution provisions or preemptive rights; PROVIDED,
HOWEVER, that this provision shall not apply to the issuance of
the Second Round Series B/KBH Stock (which itself shall be Series
B/KBH Stock);
(ii) authorize, declare or distribute any dividend, whether in
cash or in kind, payable to any class or series of the
Corporation's common or preferred stock (except payment of
dividends on the Series B/KBH Stock as contemplated by the Series
B/KBH Certificate of Designations or payment of dividends on the
Series C Stock as contemplated by the Series C Certificate of
Designations or payment of dividends on the Series A/KBL Stock as
contemplated (and only to the extent permitted) herein or to any
other equity security of the Corporation;
(iii) approve any liquidation, dissolution, sale, lease or
license of all or substantially all of the assets or business, or
of the assets or business of any subsidiary, of the Corporation;
(iv) cancel, repeal or change any of the provisions of this
Certificate of Designations (or of any amendment hereto), any
other certificate of designations of the Corporation (or any
amendment thereto), the Certificate of Incorporation of the
Corporation, or the By-laws of the Corporation;
(v) permit to lapse any of the following: its corporate
existence, essential rights, government approvals or franchises or
any licenses or Listed Rights (which the Board deems essential to
the Corporation's business) or other rights to use patents,
processes, licenses, trademarks, trade names or copyrights owned
or possessed by it (which the Board deems essential to the
Corporation's business);
(vi) transfer, assign or license (except end-user licenses
granted in the ordinary course of business) any of the
Corporation's Listed Rights or know-how, technology or trade
secrets now owned or hereafter acquired by the Corporation;
(vii) voluntarily dissolve, liquidate or wind-up or carry out any
partial liquidation or distribution or transaction in the nature
of a partial liquidation or distribution;
(viii) purchase, lease or otherwise acquire capital stock in any
corporation or equity interest in any other entity or lend money
to any person or entity (other than loans to any one person that,
individually or in the aggregate, shall not
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<PAGE>
exceed $100,000 or loans to any one employee that, individually or
in the aggregate, shall not exceed $200,000) or purchase a
substantial part of the operating assets of any person or entity;
(ix) consolidate with or merge into or with any other person or
entity or permit any other person or entity to consolidate with or
merge into it (except that a 100% subsidiary may consolidate with
or merge into the Corporation or another 100% subsidiary);
(x) permit any subsidiary (except a 100% subsidiary) to make
any (i) direct or indirect redemption, retirement, purchase or
other acquisition of any of the Corporation's capital stock (or
any warrant, option or other right with respect to such stock),
(ii) repayment of the Corporation's debt held by any Related Party
or by any Affiliate or subsidiary debt held by any Related Party
or by any Affiliate, or (iii) sale of any capital stock of the
Corporation to any third party;
(xi) issue (which term shall include without limitation the
issuance of any shares of, or the grant of any warrants, options
or other rights to purchase any shares of, or any commitment to
issue) any shares of its capital stock (which term shall include
without limitation, securities convertible into capital stock, or
rights to acquire capital stock), other than Excluded Stock, at a
price per share less than $8.25;
(xii) redeem any shares of any capital stock of the Corporation
(except redemptions of Series B/KBH Stock as contemplated in the
Series B/KBH Certificate of Designations or redemptions of Series
C Stock as contemplated in the Series C Certificate of
Designations or redemptions of Series A/KBL Stock as contemplated
(and only to the extent permitted) herein; or
(xiii) increase the size of the Board of Directors of the Company
above eight (8) members.
7. CONVERSION.
(a) OPTIONAL CONVERSION.
(i) The holder of any shares of Series A/KBL Stock shall have
the right, at such holder's option, at any time or from time to
time to convert any or all such holder's shares of Series A/KBL
Stock into such whole number of fully paid and nonassessable
shares of Common Stock (or Non-voting Common Stock, in the case of
Series KBL Stock) as equals (I) the product of (x) the Series
A/KBL Original Purchase Price plus, after the third anniversary of
the Series A/KBL Amendment Date at the option of any Holder, any
unpaid Series A/KBL Accrued Dividends with respect to the shares
being converted, multiplied by (y) the number of shares of Series
A/KBL Stock being converted, divided by (II) the
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Series A/KBL Conversion Price (as last adjusted and then in
effect) for the shares of the Series A/KBL Stock being converted,
by surrender of the certificates representing the shares of Series
A/KBL Stock so to be converted in the manner provided Section
7(a)(ii) below. The Series A/KBL Conversion Price shall initially
be equal to the Series A/KBL Original Purchase Price; PROVIDED,
HOWEVER, that such Series A/KBL Conversion Price shall be subject
to adjustment as set forth in Section 7(a)(iv) below.
(ii) The holder of any shares of Series A/KBL Stock may exercise
such holder's conversion right pursuant to this Section by
delivering to the Corporation during regular business hours at the
office of any transfer agent of the Corporation for the Series
A/KBL Stock or at such other place as may be designated by the
Corporation, the certificate or certificates for the shares to be
converted, duly endorsed or assigned in blank or to the
Corporation (if required by it) accompanied by written notice
stating that such holder elects to convert such shares and stating
the name or names (with address) in which the certificate or
certificates for the shares of Common Stock (or Non-voting Common
Stock, in the case of Series KBL Stock) are to be issued.
Conversion shall be deemed to have been effected with respect to
conversion under (a) Section 7(a)(i) above, on the date when the
aforesaid delivery is made and (b) Section 7(b) on the date of
occurrence of a Series A/KBL Event of Conversion, as the case may
be, and any such date is referred to herein as the "SERIES A/KBL
CONVERSION DATE". As promptly as practicable thereafter the
Corporation shall issue and deliver to or upon the written order
of such holder, to the place designated by such holder, a
certificate or certificates for the number of full shares of
Common Stock (or Non-voting Common Stock, in the case of Series
KBL Stock) to which such holder is entitled and a check or cash in
respect of any fractional interest in a share of Common Stock (or
Non-voting Common Stock, in the case of Series KBL Stock), as
provided in Section 7(a)(iii) below, payable with respect to the
shares of Series A/KBL Stock so converted up to and including the
Series A/KBL Conversion Date. The person in whose names the
certificate or certificates for Common Stock (or Non-voting Common
Stock, in the case of Series KBL Stock) are to be issued shall be
deemed to have become a holder of Common Stock (or Non-voting
Common Stock, in the case of Series KBL Stock) on the applicable
Series A/KBL Conversion Date unless the transfer books of the
Corporation are closed on that date, in which event such holder
shall be deemed to have become a holder of Common Stock (or
Non-voting Common Stock, in the case of Series KBL Stock) on the
next succeeding date on which the transfer books are open, but the
Series A/KBL Conversion Price shall be that in effect on the
Series A/KBL Conversion Date. Upon conversion of only a portion of
the number of shares covered by a certificate representing shares
of Series A/KBL Stock surrendered for conversion, the Corporation
shall issue and deliver to or upon the written order of the holder
of the certificate so surrendered for conversion, at the expense
of the Corporation, a new certificate covering the number of
shares of Series A/KBL Stock representing the unconverted portion
of the certificate so surrendered.
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(iii) No fractional shares of Common Stock (or Non-voting Common
Stock, in the case of Series KBL Stock) or scrip shall be issued
upon conversion of shares of Series A/KBL Stock. If more than one
share of Series A/KBL Stock shall be surrendered for conversion at
any one time by the same holder, the number of full shares of
Common Stock (or Non-voting Common Stock, in the case of Series
KBL Stock) issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of Series A/KBL Stock
so surrendered. Instead of any fractional shares of Common Stock
(or Non-voting Common Stock, in the case of Series KBL Stock)
which would otherwise be issuable upon conversion of any shares of
Series A/KBL Stock, the Corporation shall pay a cash adjustment in
respect of such fractional interest in an amount equal to the then
current Fair Market Value of a share of Common Stock multiplied by
such fractional interest.
(iv) The Series A/KBL Conversion Price shall be subject to
adjustment from time to time as follows:
(A) ADJUSTMENTS FOR DILUTING ISSUANCES UPON CONTINUED
PARTICIPATION. Unless the Corporation has requested and received a
waiver from the holders of a majority of the Series A Stock, the
Series B Stock and the Series C Stock, voting together as a single
class, if the Corporation shall at any time or from time to time
after the Series A/KBL Initial Issuance Date issue or be deemed
(by virtue of any of the provisions of Section 7(a)(iv)), to have
issued any capital stock (including, without limitation, each
class of common stock of the Corporation) or other equity
interests (including, without limitation, warrants, rights, calls
or options exercisable for or convertible into such capital stock
or equity interests) in the Corporation, other than Excluded
Stock, Second Round Series B/KBH Stock or Series C Stock, without
consideration or for a consideration per share (the "LAST ISSUE
PRICE") less than the Series A/KBL Conversion Price in effect
immediately prior to each such issuance or deemed issuance (a
"DILUTING ISSUANCE"), the Series A/KBL Conversion Price in effect
immediately prior thereto shall forthwith be adjusted, as of the
opening of business on the date of such issuance or deemed
issuance, to such Last Issue Price.
Notwithstanding the immediately preceding paragraph of this
subsection (A), if a Series A/KBL Holder has been given written
notice pursuant to Section 8 hereof and the opportunity to
purchase its Preemptive Share of such Diluting Issuance and does
not purchase its entire Preemptive Share of such Diluting
Issuance, but purchases a lesser share of such Diluting Issuance
or none, the Series A/KBL Conversion Price for that portion of the
shares of Series A/KBL Stock of said Series A/KBL Holder equal to
the Non-Participating Percentage (as hereinafter defined) (the
"DILUTED STOCK") shall not be reduced for said issuance pursuant
to this subsection but each share of the Diluted Stock which each
such Series A/KBL Holder holds shall be automatically converted
immediately prior to the closing of the applicable Diluting
Issuance into one (1) share of Series A1 Preferred Stock
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(or Series KBL1 Preferred Stock, in the case of Series KBL Stock)
which shall be convertible into Common Stock (or Non-voting Common
Stock, in the case of Series KBL1 Stock) at the same price per
share that applied to the Diluted Stock immediately prior to such
Diluting Issuance, subject, however, to further adjustment as
herein provided. As used herein, the term "NON-PARTICIPATING
PERCENTAGE" means a percentage equal to one hundred percent (100%)
minus the percentage determined by dividing the number of shares
of the Diluting Issuance which such Holder actually purchased by
the maximum number of shares of the Diluting Issuance which such
Holder was entitled to purchase on the basis of such Holder's
Preemptive Shares and expressing the resulting quotient as a
percentage.
Upon the conversion of Diluted Stock held by a Series A/KBL Holder
as set forth herein, such shares of Diluted Stock shall no longer
be outstanding on the books of the Corporation and the Series
A/KBL Holder shall be treated, to the extent that said holder held
such Diluted Stock, as the record holder of such shares of Series
A1 Preferred Stock (or Series KBL1 Stock, in the case of Series
KBL Stock) on the date of closing of the applicable Diluting
Issuance.
For the purposes of any adjustment of the Series A/KBL Conversion
Price pursuant to this subsection (A), the following provisions
shall be applicable:
(1) In the case of the issuance of stock for cash, the
consideration shall be deemed to be the amount of cash paid
therefor.
(2) In the case of the issuance of stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the
fair market value thereof as determined in good faith by
the Board, irrespective of any accounting treatment;
PROVIDED, HOWEVER, that the aggregate fair market value of
such non-cash and cash consideration shall not exceed the
current Fair Market Value of the shares of stock being
issued.
(3) In case of the issuance of (i) options to purchase
or rights to subscribe for Common Stock or Non-voting
Common Stock; (ii) securities by their terms convertible
into or exchangeable for Common Stock or Non-voting Common
Stock; or (iii) options to purchase or rights to subscribe
for such convertible or exchangeable securities:
(a) the aggregate number of shares of Common
Stock or Non-voting Common Stock deliverable upon
exercise of such options to purchase or rights to
subscribe for Common Stock or Non-voting Common
Stock shall be deemed to have been issued at the
time such options or rights were issued and for a
consideration equal to the consideration (determined
in the manner provided in subdivisions (1) and (2)
above), if any, received by the Corporation
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upon the issuance of such options or rights plus the
purchase price provided in such options or rights
for the Common Stock or Non-voting Common Stock
covered thereby;
(b) the aggregate number of shares of Common
Stock or Non-voting Common Stock deliverable upon
conversion of or in exchange for any such
convertible or exchangeable securities or upon the
exercise of options to purchase or rights to
subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the
time such securities were issued or such options or
rights were issued and for a consideration equal to
the consideration received by the Corporation for
any such securities and related options or rights
(excluding any cash received on accounts of accrued
interest or accrued dividends), plus the additional
consideration, if any, to be received by the
Corporation upon the conversion or exchange of such
securities or the exercise of any related options or
rights (the consideration in each case to be
determined in the manner provided in subdivisions
(1) and (2) above, with the proviso to subdivision
(2) being applied to the number of shares of Common
Stock or Non-voting Common Stock deliverable upon
such exercise);
(c) on any change in the number of shares or
exercise price of Common Stock or Non-voting Common
Stock deliverable upon the exercise of any such
options or rights or conversions of or exchange for
such convertible or exchangeable securities, other
than a change resulting from the antidilution
provisions thereof, the Series A/KBL Conversion
Price, if previously adjusted, shall forthwith be
readjusted to such Series A/KBL Conversion Price as
would have obtained had the adjustment made upon the
issuance of such options, rights or securities not
converted prior to such change or options or rights
related to such securities not converted prior to
such change having been made upon the basis of such
change; and
(d) on the expiration of any such options or
rights, the termination of any such rights to
convert or exchange or the expiration of any options
or rights related to such convertible or
exchangeable securities, the Series A/KBL Conversion
Price, if previously adjusted, shall forthwith be
readjusted to such Series A/KBL Conversion Price as
would have obtained had such options, rights,
securities or options or rights related to such
securities not been issued.
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(B) ADJUSTMENTS FOR CERTAIN DIVIDENDS, SUBDIVISIONS OR
SPLIT-UPS. If, at any time after the Series A/KBL Initial Issuance
Date, the number of shares of Common Stock or Non-voting Common
Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or Non-voting Common Stock or by a
subdivision or split-up of shares of Common Stock or Non-voting
Common Stock, then, upon the record date fixed for the
determination of holders of Common Stock or Non-voting Common
Stock entitled to receive such stock dividend, subdivision or
split-up, the Series A/KBL Conversion Price shall be appropriately
decreased so that the number of shares of Common Stock (or
Non-voting Common Stock, in the case of Series KBL Stock) issuable
on conversion of each share of Series A/KBL Stock shall be
increased in proportion to such increase in outstanding shares.
(C) ADJUSTMENTS FOR COMBINATIONS. If, at any time after the
Series A/KBL Initial Issuance Date, the number of shares of Common
Stock or Non-voting Common Stock outstanding is decreased by a
combination of the outstanding shares of Common Stock or
Non-voting Common Stock then, upon the record date for such
combination, the Series A/KBL Conversion Price shall be
appropriately increased so that the number of shares of Common
Stock (or Non-voting Common Stock, in the case of Series KBL
Stock) issuable on conversion of each share of Series A/KBL Stock
shall be decreased in proportion to such decrease in outstanding
shares.
(D) ADJUSTMENTS FOR REORGANIZATIONS, MERGERS, CONSOLIDATIONS,
ETC. In case, at any time after the Series A/KBL Initial Issuance
Date, of any capital reorganization, or any reclassification of
the stock of the Corporation (other than a change in par value or
from par value to no par value or from no par value to par value
or as a result of a stock dividend or subdivision, split-up or
combination of shares), or the consolidation or merger of the
Corporation with or into another person (other than a
consolidation or merger in which the Corporation is the continuing
corporation and which does not result in any change in the Common
Stock or Preferred Stock or the ownership thereof or of the sale
or other disposition of all or substantially all of the properties
and assets of the Corporation as an entirety to any other person),
each share of Series A/KBL Stock shall, after such reorganization,
reclassification, consolidation, merger, sale or other
disposition, be convertible into the kind and number of shares of
stock or other securities or property of the Corporation or of the
corporation resulting from such consolidation or surviving such
merger or to which such properties and assets shall have been sold
or otherwise disposed to which the holder of the number of shares
of Common Stock (or Non-voting Common Stock, in the case of Series
KBL Stock) deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation, merger, sale or
other disposition) upon conversion of such share would have been
entitled upon such reorganization, reclassification,
consolidation, merger, sale or other disposition. The provisions
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of this subsection shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales
or other dispositions.
(E) All calculations under this subsection (iv) shall be made
to the nearest one cent ($.01) or to the nearest one-tenth (1/10)
of a share, as the case maybe.
(F) In any case in which the provisions of this subsection (iv)
shall require that an adjustment shall become effective
immediately after a record date for an event, the Corporation may
defer until the occurrence of such event (i) issuing to the holder
of any share of Series A/KBL Stock converted after such record
date and before the occurrence of such event the additional shares
of capital stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares of
capital stock issuable upon such conversion before giving effect
to such adjustment and (ii) paying to such holder any amount in
cash in lieu of a fractional share of capital stock pursuant to
Section 7(a)(iii) above, PROVIDED, HOWEVER, that the Corporation
shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such
additional shares, and such cash, upon the occurrence of the event
requiring such adjustment.
(v) Whenever the Series A/KBL Conversion Price shall be
adjusted as provided in Section 7(a)(iv), the Corporation shall
forthwith file, at the office of the transfer agent for the Series
A/KBL Stock or at such other place as may be designated by the
Corporation, a statement, signed by its independent certified
public accountants, showing in detail the facts requiring such
adjustment and the Series A/KBL Conversion Price that shall be in
effect after such adjustment. The Corporation shall also cause a
copy of such statement to be sent by first class, certified mail,
return receipt requested, postage prepaid, to each Series A/KBL
Holder at such holder's address appearing on the Corporation's
records. Where appropriate, such copy may be given in advance and
may be included as part of a notice required to be mailed under
the provisions of Section 7(a)(vi) below.
(vi) In the event the Corporation shall propose to take any
action of the types described in clauses (A), (B), (C), or (D) of
Section 7(a)(iv) above, the Corporation shall give notice to each
holder of shares of Series A/KBL Stock, in the manner set forth in
Section 7(a)(v) above, which notice shall specify the record date,
if any, with respect to, any such action and the date on which
such action is to take place. Such notice shall also set forth
such facts with respect thereto as shall be reasonably necessary
to indicate the effect of such action (to the extent such effect
may be known at the date of such notice) on the Series A/KBL
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable
upon the occurrence of such action or deliverable upon conversion
of shares of Series A/KBL Stock. In the case of any action which
would require the fixing of a record date, such notice shall be
given at least 20 days prior to the date so fixed, and in case of
all other action, notice shall be given at least 30 days prior to
the taking of such proposed
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action. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(vii) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of
shares of capital stock of the Corporation upon conversion of any
shares of Series A/KBL Stock; PROVIDED, HOWEVER, that the
Corporation shall not be required to pay any taxes which may be
payable in respect of any transfer involved in the issuance or
delivery of any certificate for such shares in a name other than
that of the holder of the shares of Series A/KBL Stock in respect
of which such shares are being issued.
(viii) The Corporation shall reserve, free from preemptive rights,
out of its authorized but unissued shares of Common Stock (or
Non-voting Common Stock, in the case of Series KBL Stock), solely
for the purpose of effecting the conversion of the shares of
Series A/KBL Stock, sufficient shares to provide for the
conversion of all outstanding shares of Series A/KBL Stock.
(ix) All shares of Common Stock (or Non-voting Common Stock, in
the case of Series KBL Stock) which may be issued in connection
with the conversion provisions set forth herein will, upon
issuance by the Corporation, be validly issued, fully paid and
nonassessable, with no personal liability attaching to the
ownership thereof, and free from all taxes, liens or charges with
respect thereto.
(b) AUTOMATIC CONVERSION. Upon the occurrence of a Series A/KBL Event
of Conversion, all shares of Series A/KBL Stock then outstanding shall, by
virtue of, and simultaneously with, the occurrence of the Series A/KBL Event of
Conversion and without any action on the part of the holders thereof, be deemed
automatically converted into such whole number of fully paid and nonassessable
shares of Common Stock (or Non-voting Common Stock, in the case of Series KBL
Stock) as equals (1) the product of (x) the Series A/KBL Original Purchase Price
plus, after the third anniversary of the Series A/KBL Amendment Date at the
option of any Holder, any unpaid Series A/KBL Accrued Dividends with respect to
the shares being converted, multiplied by (y) the number of shares of Series
A/KL Stock being converted divided by (2) the Series A/KBL Conversion Price as
last adjusted pursuant to Section 7(a)(iv) and then in effect.
8. PRE-EMPTIVE RIGHTS. (a) RIGHT TO PURCHASE. Until the occurrence of
a Series A/KBL Event of Conversion, the Series A/KBL Holders shall be entitled
to subscribe for their respective Preemptive Share of any New Securities which
the Corporation may, from time to time, propose to issue and sell, at any time
while any Series A/KBL Stock is outstanding and subject to the terms, conditions
and procedures set forth below.
(b) The Corporation shall first deliver to each Series A/KBL Holder a
written Notice of Intention to Sell offering to each Series A/KBL Holder the
right to purchase up to the Preemptive Share of such Series A/KBL Holder of such
shares of New Securities at the purchase price and on the terms specified
therein. Each Series A/KBL Holder shall have the right and option, for a period
of twenty (20) days after delivery to said Series A/KBL Holder of such
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Notice of Intention to Sell, to purchase all or any part of the Preemptive Share
of such Series A/KBL Holder of the shares of New Securities so offered at the
purchase price and on the terms stated therein. Such acceptance shall be made by
delivering a written Notice of Acceptance to the Corporation within the
aforesaid twenty (20) day period.
The closing of any sales of shares of New Securities under the terms of
Section 8 shall be made at the offices of the Corporation on a mutually
satisfactory business day within five (5) business days after the expiration of
the aforesaid period. Delivery of certificates or other instruments evidencing
such shares of New Securities duly endorsed for transfer to the appropriate
Series A/KBL Holder shall be made on such date against payment of the purchase
price therefor.
(c) The Corporation may issue and sell all or any part of the
remaining shares of New Securities so offered for sale but not purchased
pursuant to Section 8 hereof at a price not less than the price offered, and on
terms not more favorable, to the purchaser thereof than the terms stated in the
original Notice of Intention to Sell, at any time within ninety (90) days after
the expiration of the offer required by Section 8. In the event the remaining
shares of New Securities are not sold by the Corporation during such ninety (90)
day period, the right of the Corporation to sell such remaining shares of New
Securities shall expire and the obligations of this Section 8 shall be
reinstated; PROVIDED, HOWEVER, that in the event the Corporation determines, at
any time during such ninety (90) day period, that the sale of all or any part of
the remaining shares of New Securities on the terms set forth in the Notice of
Intention to Sell is impractical, the Corporation can terminate the offer and
reinstate the procedure provided in this Section 8 without waiting for the
expiration of such ninety (90) day period.
9. FURTHER DILUTING ISSUANCES. The Corporation shall not permit or
cause to occur more than one Diluting Issuance unless the Corporation (I) has
taken all necessary action to create a new subseries of the Series A Preferred
Stock, which shall be PARI PASSU with the Series A Preferred Stock and the
Series A1 Preferred Stock for all purposes except conversion price, (II) has
taken all necessary action to create a new subseries of the Series KBL Preferred
Stock, which shall be PARI PASSU with the Series KBL Preferred Stock and the
Series KBL1 Preferred Stock for all purposes except conversion price, (III)
shall have amended this Certificate to provide that the shares of Series A Stock
held by any Holder thereof who fails to purchase its full Preemptive Share of
such additional Diluting Issuance shall be converted automatically into such new
subseries of Series A Stock, and (IV) shall have amended this Certificate to
provide that the shares of Series KBL Stock held by any Holder thereof who fails
to purchase its full Preemptive Share of such additional Diluting Issuance shall
be converted automatically into such new subseries of Series KBL Stock. The
shares of such subseries shall be convertible into Common Stock (or Non-voting
Common Stock, in the case of the Series KBL Stock) immediately after such
Diluting Issuance at the same price per share that applied to the shares which
were so converted immediately prior to such Diluting Issuance. The consent of
the Holders of the Preferred Stock shall not be required in order to effect such
new subseries.
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GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES B CONVERTIBLE PREFERRED STOCK,
SERIES B1 CONVERTIBLE PREFERRED STOCK,
SERIES KBH CONVERTIBLE PREFERRED STOCK,
SERIES KBH1 CONVERTIBLE PREFERRED STOCK
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
Genaissance Pharmaceuticals, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), hereby certifies
that, pursuant to authority conferred upon the Board of Directors by the
provisions of Article 4 of the Certificate of Incorporation of the Corporation,
as amended, (referred to in the following designations as the "CERTIFICATE OF
INCORPORATION"), which authorize the issuance of 30,000,000 shares of a class of
capital stock designated as preferred stock, $.001 par value, the following
resolution was duly adopted by the Board of Directors of the Corporation at a
special meeting held on March 10, 2000.
RESOLVED: That the provisions of the Certificate of Designations,
Preferences and Other Special Rights and Qualifications, Limitations and
Restrictions of Preferred Stock of the Corporation (relating to the
Series B Convertible Preferred Stock, Series B1 Convertible Preferred
Stock, Series KBH Convertible Preferred Stock and Series KBH1 Convertible
Preferred Stock) (the "CERTIFICATE OF DESIGNATIONS"), dated as of
February 17, 2000, and as amended as of March 8, 2000, shall be further
amended by deleting the text in its entirety and substituting therefor
the text set forth in EXHIBIT I attached hereto. Said Certificate of
Designations, as amended hereby, shall apply to 8,543,524 shares of
Series B Convertible Preferred Stock, 8,543,524 shares of Series B1
Convertible Preferred Stock, 550,000 shares of Series KBH Convertible
Preferred Stock, and 550,000 shares of Series KBH1 Convertible Preferred
Stock.
2. Such resolution also was duly approved by the written consent of
the holders of the requisite number of shares of the Series A Redeemable
Convertible Preferred Stock, the Series A1 Redeemable Convertible Preferred
Stock, the Series KBL Nonvoting Redeemable Convertible Preferred Stock, the
Series KBL1 Nonvoting Redeemable Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the Series B1 Convertible Preferred Stock, the
Series KBH Convertible Preferred Stock and the Series KBH1 Convertible Preferred
Stock.
3. This amendment to the Certificate of Designations was duly adopted
in accordance with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be signed by Gualberto Ruano, its President, and attested to by
Kevin L. Rakin, its Secretary, as of this 10th day of March , 2000.
By: /s/ GUALBERTO RUANO
---------------------------
Gualberto Ruano
President
ATTEST:
/s/ Kevin L. Rakin
---------------------------
Kevin L. Rakin
Secretary
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EXHIBIT I
1. DEFINITIONS. As used in this Certificate of Designations, the
following terms have the meanings specified below:
"AFFILIATE" shall mean a person (other than a subsidiary):
(i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Corporation;
(ii) which beneficially owns or holds 10% or more of any class
of the voting stock of the Corporation; or
(iii) 10% or more of the voting stock (or in the case of a person
which is not a corporation, 10% or more of the equity interest) of
which is beneficially owned or held by the Corporation or one of
its subsidiaries.
The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting
securities, by contract or otherwise.
"BOARD" shall mean the Corporation's Board of Directors.
"BUSINESS DAY" shall mean any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of Connecticut) on which banks are
authorized to be open for business in Hartford, Connecticut.
"COMMISSION" shall mean the United States Securities and Exchange
Commission.
"COMMON STOCK" shall mean the Common Stock, $.001 par value, of the
Corporation.
"DILUTED STOCK" shall have the meaning ascribed to it in Section
7(a)(iv)(A) hereof.
"DILUTING ISSUANCE" shall mean an issuance of capital stock described in
Section 7(a)(iv)(A) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXCLUDED STOCK" shall mean shares of Common Stock issued by the
Corporation:
(i) as a stock dividend or upon any stock split or other
subdivision or combination of the outstanding shares of Common
Stock;
(ii) up to an aggregate of 1,557,375 shares of Common Stock
issued or issuable to employees pursuant to an employee stock
option plan approved by the Board; or
<PAGE>
(iii) upon conversion of any Preferred Stock, warrants or other
convertible securities outstanding as of the Series B/KBH Initial
Issuance Date and set forth on Schedule 3.4 to the Series B/KBH
Stock Purchase Agreement.
"FAIR MARKET VALUE" at any date of one share of Common Stock shall be
deemed to be the average of the daily closing prices for the 30 consecutive
business days ending no more than five days before the day in question (as
adjusted for any stock dividend, split-up, combination or reclassification that
took effect during such 30 business day period). The closing price for each day
shall be the last reported sales price regular way or, in case no such reported
sales took place on such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (or if the Common
Stock is not at the time listed or admitted for trading on any such exchange,
then such price as shall be equal to the average of the last reported bid and
asked prices, as reported by the Nasdaq on such day, or if, on any day in
question, the security shall not be quoted on the Nasdaq, then such price shall
be equal to the last reported bid and asked prices on such day as reported by
the National Quotation Bureau, Inc. or any similar reputable quotation and
reporting service, if such quotation is not reported by the National Quotation
Bureau, Inc.); PROVIDED, HOWEVER, that if the Common Stock is traded in such
manner that the quotations referred to in this clause are not available for the
period required hereunder, the Fair Market Value shall be determined by a
nationally recognized independent investment banking firm selected mutually by
the holders of more than 50% of the combined voting power of the Series B/KBH
Stock and Series C Stock then outstanding and the Corporation (or if such
selection cannot be made, by a nationally recognized independent banking firm
selected by the American Arbitration Association in accordance with its rules).
With respect to the Series B/KBH Stock, Fair Market Value shall be determined by
a nationally recognized independent investment banking firm selected mutually by
the holders of more than 50% of the voting power of the Series B/KBH Stock then
outstanding and the Corporation (or if such selection cannot be made, by a
nationally recognized independent banking firm selected by the American
Arbitration Association in accordance with its rules).
"HOLDER" shall mean a holder of shares of Series B/KBH Stock, as
applicable, as reflected in the stock records of the Corporation; and each
Holder's address shall be as it appears in the stock records of the Corporation.
"JUNIOR SECURITIES" shall mean, as to the Series B/KBH Stock, each other
class or series of capital stock (including, without limitation, each class of
common stock of the Corporation and each other series of preferred stock of the
Corporation including the Series A/KBL Stock) or other equity interests
(including, without limitation, warrants, rights, calls or options exercisable
for or convertible into such capital stock or equity interests) in the
Corporation but shall exclude the Series C Stock.
"LIQUIDATION EVENT" shall mean, a merger, consolidation, liquidation,
dissolution, winding up of the affairs of the Corporation or sale of all or
substantially all of the assets of the Corporation as an entirety to a third
party or parties, whether voluntary or involuntary, or the sale by the
stockholders of the Corporation of a majority of the voting capital stock of the
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Corporation; PROVIDED, HOWEVER, that a merger or consolidation shall not be
considered a Liquidation Event if the Corporation is the survivor or continuing
corporation of such merger or consolidation and as a result thereof there is no
change in the Common Stock or Preferred Stock or the ownership thereof.
"LIQUIDATION REDEMPTION PRICE" shall have the meaning assigned to such
term in Section 4(a).
"LISTED RIGHTS" shall mean all patents, patent applications, patent
rights, trademarks, trademark applications, trademark rights, trade names, trade
name rights, service marks and copyrights (whether registered or not) owned or
possessed by the Corporation and any improvements thereon.
"NEW SECURITIES" shall mean any capital stock (including, without
limitation, each class of common stock of the Corporation, any additional shares
of Preferred Stock, each other series of preferred stock of the Corporation and
any shares of capital stock held by the Corporation in its treasury upon the
disposition thereof) or other equity interests (including, without limitation,
warrants, rights, calls or options exercisable for or convertible into such
capital stock or equity interests) in the Corporation issued after the Series
B/KBH Initial Issue Date; PROVIDED, HOWEVER, that such term shall not include
(i) Excluded Stock, (ii) Second Round Series B/KBH Stock or (iii) Series C
Stock.
"NON-PARTICIPATING PERCENTAGE" shall have the meaning ascribed to it in
Section 7(a)(iv)(A) hereof.
"NON-VOTING COMMON STOCK" shall mean the Non-voting Common Stock, $.001
par value, of the Corporation.
"PERSON" shall mean and include an individual, a corporation, a
partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.
"PREEMPTIVE SHARE" shall mean, immediately prior to any issue of shares
of New Securities, and as to each Series B/KBH Holder, the percentage which
expresses the ratio between (i) the total number of shares of Common Stock (or
Non-voting Common Stock, in the case of the Series KBH Stock) issuable upon
conversion of the Series B/KBH Stock owned by such Series B/KBH Holder, plus the
total number of shares of Common Stock (and Non-voting Common Stock, if any)
then owned by such Series B/KBH Holder that was received upon conversion of
Series B/KBH Stock, and (ii) the total number of shares of Common Stock and
Non-voting Common Stock then outstanding, plus the total number of shares of
Common Stock and Non-voting Common Stock issuable upon conversion of the then
outstanding Preferred Stock.
"PREFERRED STOCK" shall mean all of the outstanding shares of the Series
A Stock, Series KBL Stock, Series B Stock, Series KBH Stock and Series C Stock,
together, at the time in question.
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"QUALIFIED IPO" shall mean the consummation of a firm commitment
underwritten public offering of shares of Common Stock registered under the
Securities Act which results in aggregate gross cash proceeds to the Corporation
of not less than forty million dollars ($40,000,000) and pursuant to which the
offering price per share is equal to or greater than $16.50 ($11.00 per share in
the event that the registration statement with respect to such offering shall be
filed with the Commission on or before February 11, 2001), equitably adjusted
for any Recapitalization Event.
"QUALIFIED LIQUIDATION EVENT" shall have the meaning assigned to such
term in Section 3(a).
"RECAPITALIZATION EVENT" shall mean any stock splits, stock dividends,
recapitalizations, reclassifications, and similar events.
"RELATED PARTY" shall mean any officer, director, significant employee or
consultant of the Corporation or any holder (other than any Series A/KBL Holder,
Series B/KBH Holder, or Series C Holder) of 10% or more of any class of capital
stock of the Corporation or any member of the immediate family of any such
officer, director, employee, consultant or shareholder or any entity controlled
by any such officer, director, employee, consultant or shareholder or a member
of the immediate family of any such officer, director, employee, consultant or
shareholder.
"SCHEDULED REDEMPTION PRICE" shall have the meaning ascribed to it in
Section 4(b).
"SECOND ROUND SERIES B/KBH ISSUANCE DATE" shall mean the issuance date of
the Second Round Series B/KBH Stock.
"SECOND ROUND SERIES B/KBH STOCK" shall mean those shares of Series B/KBH
Stock that may be issued by the Corporation to certain investors (the "SECOND
ROUND INVESTORS") in the Second Closing as such term is defined in the Series
B/KBH Stock Purchase Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES A PREFERRED STOCK" shall mean the Series A Redeemable Convertible
Preferred Stock of the Corporation, par value $.001 per share.
"SERIES A1 PREFERRED STOCK" shall mean the Series A1 Redeemable
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES A STOCK" shall mean all of the outstanding shares of the Series A
Preferred Stock and the Series A1 Preferred Stock, together, at the time in
question, and any new subseries of the Series A Preferred Stock created pursuant
to Section 9 of the Series A/KBL Certificate of Designations.
"SERIES A/KBL CERTIFICATE OF DESIGNATIONS" shall mean the Certificate of
Designations, Preferences and Other Special Rights and Qualifications,
Limitations and Restrictions of Series A and Series A1 Redeemable Convertible
Preferred Stock of the Corporation, dated as of August
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24, 1998, and amended as of February 17, 2000 , March 8, 2000 and March 10,
2000, and the Certificate of Designations, Preferences and Other Special Rights
and Qualifications, Limitations and Restrictions of Series KBL and the Series
KBL1 Non-voting Redeemable Convertible Preferred Stock of the Corporation, dated
as of August 24, 1998, and amended as of February 17, 2000, March 8, 2000 and
March 10, 2000.
"SERIES A/KBL HOLDER" shall mean a holder of shares of Series A Stock or
Series KBL Stock.
"SERIES A/KBL LIQUIDATION AMOUNT" shall mean the amount due to the Series
A/KBL Holders upon a Liquidation of the Company pursuant to the Series A/KBL
Certificate of Designations.
"SERIES A/KBL STOCK" shall mean all of the outstanding shares of the
Series A Stock and Series KBL Stock, together, at the time in question, which
shares are PARI PASSU for all purposes except voting (the Series KBL Stock being
non-voting) and conversion (the Series KBL Stock being convertible into
Non-voting Common Stock rather than voting Common Stock).
"SERIES B PREFERRED STOCK" shall mean the Series B Convertible Preferred
Stock of the Corporation, par value $.001 per share.
"SERIES B1 PREFERRED STOCK" shall mean the Series B1 Convertible
Preferred Stock of the Corporation, par value $.001 per share.
"SERIES B STOCK" shall mean all of the outstanding shares of the Series B
Preferred Stock and the Series B1 Preferred Stock, together, at the time in
question, which shares shall be PARI PASSU for all purposes except conversion
price, and any new subseries of the Series B Preferred Stock created pursuant to
Section 9 hereof.
"SERIES B/KBH ACCRUED DIVIDENDS" shall mean Series B/KBH Full Cumulative
Dividends to the date of determination, less the amount of all dividends paid
pursuant to Section 3, upon the relevant shares of Series B/KBH Stock.
"SERIES B/KBH CONVERSION DATE" shall have the meaning set forth in
Section 7(a)(ii).
"SERIES B/KBH CONVERSION PRICE" shall initially mean $5.50; PROVIDED,
HOWEVER, that the Series B/KBH Conversion Price shall be subject to adjustment
as set forth in Section 7(a)(iv).
"SERIES B/KBH EVENT OF CONVERSION" shall mean the consummation of a
Qualified IPO.
"SERIES B/KBH FULL CUMULATIVE DIVIDENDS" shall mean, as to any share of
Series B/KBH Stock (whether or not in respect of which such term is used there
shall have been net profits or net assets of the Corporation legally available
for the payment of such dividends), that amount which shall be equal to
dividends at the full rate fixed for the Series B/KBH Stock as provided herein
for the period of time elapsed from the Series B/KBH Initial Issuance Date (the
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Second Round Series B/KBH Issuance Date in the case of the Second Round Series
B/KBH Stock) to the date as of which Series B/KBH Full Cumulative Dividends are
to be computed.
"SERIES B/KBH HOLDER" shall mean a holder of shares of Series B Stock or
Series KBH Stock.
"SERIES B/KBH INITIAL ISSUANCE DATE" shall mean February 17, 2000.
"SERIES B/KBH LIQUIDATION AMOUNT" shall mean an amount in cash or
property (valued at its Fair Market Value), or a combination thereof, equal to
$5.50 per share of Series B/KBH Stock held by a Holder (which per share amount
shall be subject to equitable adjustment whenever there shall occur a stock
split, combination, reclassification or other similar event involving the Series
B/KBH Stock) plus all Series B/KBH Accrued Dividends.
"SERIES B/KBH ORIGINAL PURCHASE PRICE" shall mean $5.50 per share of
Series B/KBH Stock.
"SERIES B/KBH REDEMPTION DATE" shall have the meaning set forth in
Section 4 hereof.
"SERIES B/KBH REDEMPTION PRICE" shall have the meaning set forth in
Section 4 hereof.
"SERIES B/KBH STOCK" shall mean all of the outstanding shares of the
Series B Stock and Series KBH Stock, together, at the time in question, which
shares shall be PARI PASSU for all purposes except voting (the Series KBH Stock
being non-voting) and conversion (the Series KBH Stock being convertible into
Non-voting Common Stock rather than voting Common Stock).
"SERIES B/KBH STOCK PURCHASE AGREEMENT" shall mean that certain Stock
Purchase Agreement, dated as of February 17, 2000, by and among the Corporation
and the Purchasers (as defined therein) of the Series B Preferred Stock and
Series KBH Preferred Stock, as amended as of February 29, 2000 and March 3,
2000.
"SERIES C PREFERRED STOCK" shall mean the Series C Convertible Preferred
Stock of the Corporation, par value $.001 per share.
"SERIES C1 PREFERRED STOCK" shall mean the Series C1 Convertible
Preferred Stock of the Corporation, par value $.001 per share.
"SERIES C ACCRUED DIVIDENDS" shall mean Series C Full Cumulative
Dividends to the date of determination, less the amount of all dividends paid
pursuant to Section 3 of the Series C Certificate of Designation, upon the
relevant shares of Series C Stock.
"SERIES C CERTIFICATE OF DESIGNATIONS" shall mean the Certificate of
Designations, Preferences and Other Special Rights and Qualifications,
Limitations and Restrictions of Series C Convertible Preferred Stock and Series
C1 Convertible Preferred Stock of the Corporation, dated as of March 10, 2000.
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"SERIES C FULL CUMULATIVE DIVIDENDS" shall mean, as to any share of
Series C Stock (whether or not in respect of which such term is used there shall
have been net profits or net assets of the Corporation legally available for the
payment of such dividends), that amount which shall be equal to dividends at the
full rate fixed for the Series C Stock as provided in the Series C Certificate
of Designations for the period of time elapsed from the Series C Initial
Issuance Date to the date as of which Series C Full Cumulative Dividends are to
be computed.
"SERIES C HOLDER" shall mean a holder of shares of Series C Stock.
"SERIES C INITIAL ISSUANCE DATE" shall mean March 10, 2000.
"SERIES C LIQUIDATION AMOUNT" shall mean an amount in cash or property
(valued at its Fair Market Value), or a combination thereof, equal to $8.25 per
share of Series C Stock held by a Holder (which per share amount shall be
subject to equitable adjustment whenever there shall occur a stock split,
combination, reclassification or other similar event involving the Series C
Stock) plus all Series C Accrued Dividends.
"SERIES C ORIGINAL PURCHASE PRICE" shall mean $8.25 per share of Series C
Stock.
"SERIES C STOCK" shall mean all of the outstanding shares of the Series C
Preferred Stock and the Series C1 Preferred Stock, together, at the time in
question, which shares shall be PARI PASSU for all purposes except conversion
price, and any new subseries of the Series C Preferred Stock created pursuant to
Section 9 of the Series C Certificate of Designations.
"SERIES C STOCK PURCHASE AGREEMENT" shall mean that certain Stock
Purchase Agreement, dated as of March 10, 2000, by and among the Corporation and
the Purchasers (as defined therein) of the Series C Stock.
"SERIES KBH PREFERRED STOCK" shall mean the Series KBH Nonvoting
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES KBH1 PREFERRED STOCK" shall mean the Series KBH1 Nonvoting
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES KBH STOCK" shall mean all of the outstanding shares of the Series
KBH Preferred Stock and the Series KBH1 Preferred Stock, together, at the time
in question, and any new subseries of the Series KBH Preferred Stock created
pursuant to Section 9 hereof.
"SERIES KBL PREFERRED STOCK" shall mean the Series KBL Nonvoting
Redeemable Convertible Preferred Stock of the Corporation, par value $.001 per
share.
"SERIES KBL1 PREFERRED STOCK" shall mean the Series KBL1 Nonvoting
Redeemable Convertible Preferred Stock of the Corporation, par value $.001 per
share.
"SERIES KBL STOCK" shall mean all of the outstanding shares of the Series
KBL Preferred Stock and the Series KBL1 Preferred Stock, together, at the time
in question, and any new
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subseries of the Series KBL Preferred Stock created pursuant to Section 9 of the
Series A/KBL Certificate of Designations.
"SUBSIDIARY" shall mean an entity a majority of the capital stock or
other ownership interest in which is owned directly or indirectly by the
Corporation, except that 100% "SUBSIDIARY" shall mean a subsidiary that is 100%
owned by the Corporation and/or its 100% subsidiaries.
2. NUMBER OF SHARES. The designation of the four series of preferred
stock provided for herein shall be as follows: Series B Preferred Stock, of
which 8,543,524 shares shall be authorized; Series B1 Preferred Stock, of which
8,543,524 shares shall be authorized; Series KBH Preferred Stock, of which
550,000 shares shall be authorized; and Series KBH1 Preferred Stock, of which
550,000 shares shall be authorized.
3. DIVIDENDS.
(a) The holder of each share of Series B/KBH Stock shall be entitled
to receive, before any dividends shall be declared and paid upon or set aside
for the Junior Securities, out of funds legally available for that purpose,
dividends in cash at the rate per annum per share (the "SERIES B DIVIDEND RATE")
equal to 8% of the Series B/KBH Original Purchase Price, adjusted, as
applicable, for any Recapitalization Event, payable, when and as declared by the
Board and, in any event, upon the earliest of (a) a Liquidation Event in
accordance with Section 5 hereof, (b) upon redemption in accordance with Section
4 hereof or (c) upon the Series B/KBH Event of Conversion. Until the third
anniversary of the Series B/KBH Initial Issuance Date, the Corporation shall
have the option to make any such payment either in cash or in shares of Common
Stock (Non-voting Common Stock in the case of the Series KBH), provided that
dividends declared and paid upon or set aside for all shares of Series B/KBH
Stock, of Series A/KBL Stock and of Series C Stock at or about the same time are
being paid in the same manner unless a different method of payment is approved
by a majority of the holders of the Series B Stock and Series C Stock, voting
together as a separate class. After the third anniversary of the Series B/KBH
Initial Issuance Date, the Holder shall have the option to receive any such
payment either in cash or in shares of Common Stock (Non-voting Common Stock in
the case of the Series KBH). In the event such dividends are paid in Common
Stock (Non-voting Common Stock in the case of the Series KBH), for purposes of
computing the number of shares of Common Stock (Non-voting Common Stock in the
case of the Series KBH) to be issued and the amount of the dividend paid, the
value of the Common Stock (Non-voting Common Stock in the case of the Series
KBH) paid to any holder of shares of Series B/KBH Stock shall be valued at the
then Series B/KBH Conversion Price. Dividends on shares of Series B/KBH Stock
shall be cumulative from the Series B/KBH Initial Issuance Date (Second Round
Series B/KBH Issuance Date in the case of the Second Round Series B/KBH Stock),
whether or not there shall be net profits or net assets of the Corporation
legally available for the payment of such dividends, so that, if at any time
Series B/KBH Full Cumulative Dividends upon the Series B/KBH Stock shall not
have been paid or declared and a sum sufficient for payment thereof set apart,
the amount of the deficiency in such dividends shall be fully paid or dividends
in such amount shall be declared on the shares of the Series B/KBH Stock and a
sum sufficient for the payment thereof shall be set
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apart for such payment, before any dividend shall be declared or paid or any
other distribution ordered or made upon any Junior Securities and before any sum
or sums shall be set aside for or applied to the purchase or redemption of
Junior Securities. With respect to rights to dividends, the Series B/KBH Stock
shall rank pari passu with the Series C Stock but prior to the Common Stock and
all other Junior Securities. All dividends declared upon the Series B/KBH Stock
shall be declared pro rata per share. All payments due under this Section to any
holder of shares of Series B/KBH Stock shall be made to the nearest cent.
Notwithstanding the foregoing, the holders of the Series B/KBH Stock shall not
be entitled to dividends on the Series B/KBH Stock pursuant to this Section 3(a)
in the event that on or before August 11, 2001(i) there shall be filed with the
Commission a registration statement with respect to a Qualified IPO (which
registration statement shall have become effective within three months of
filing); or (ii) there shall occur a Qualified Liquidation Event. The term
"QUALIFIED LIQUIDATION EVENT" shall mean a Liquidation Event in which (i) the
holders of the Series B/KBH Stock receive (per share) cash or other property
with a fair market value equal to at least 200% of the Series B/KBH Original
Purchase Price (as adjusted for any stock split, combination, reclassification
or other similar event involving the Series B/KBH Stock) if the Qualified
Liquidation Event occurs within one year after the Series B/KBH Initial Issuance
Date, and 300% of the Series B/KBH Original Purchase Price (as adjusted for any
stock split, combination, reclassification or other similar event involving the
Series B/KBH Stock) if the Qualified Liquidation Event occurs more than one year
after the Series B/KBH Initial Issuance Date (but before August 12, 2001) and
(ii) the holders of the Series C Stock receive (per share) cash or other
property with a fair market value equal to at least 200% of the Series C
Original Purchase Price (as adjusted for any stock split, combination,
reclassification or other similar event involving the Series C Stock) if the
Qualified Liquidation Event occurs within one year after the Series B/KBH
Initial Issuance Date, and 300% of the Series C Original Purchase Price (as
adjusted for any stock split, combination, reclassification or other similar
event involving the Series C Stock) if the Qualified Liquidation Event occurs
more than one year after the Series B/KBH Initial Issuance Date (but before
August 12, 2001).
(b) In the event the Corporation shall make or issue, or shall fix a
record date for the determination of holders of Common Stock (or Non-voting
Common Stock) entitled to receive a dividend or other distribution (other than a
distribution in liquidation or other distribution otherwise provided for herein)
with respect to the Common Stock (or Non-voting Common Stock) or any other
Junior Securities (based on "as if converted amounts") other than the Series
A/KBL Stock payable in (i) securities of the Corporation other than shares of
Common Stock (or Non-voting Common Stock), or (ii) cash, then, and in each such
event, provision shall be made so that the holders of the Series B/KBH Stock
shall receive the number of securities or such other assets of the Corporation
which they would have received had their Series B/KBH Stock been converted into
Common Stock (or Non-voting Common Stock in the case of the Series KBH) on the
date of such event.
4. REDEMPTION.
(a) REDEMPTION UPON A LIQUIDATION EVENT. (i) In connection and
concurrently with a Liquidation Event, the Corporation shall (to the extent
allowed by law)
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redeem, except as set forth hereafter, all the shares of Series B/KBH Stock then
outstanding, out of funds legally available therefor. The amount per share
payable upon any redemption of shares of Series B/KBH Stock pursuant to this
subsection shall be an amount in cash equal to the Liquidation Redemption Price,
as determined below. The Corporation shall deliver to each holder of shares of
Series B/KBH Stock, not later than 45 days prior to the consummation of a
Liquidation Event, notice of such proposed Liquidation Event, including the date
on which such Liquidation Event is expected to be consummated. To the extent
that one or more redemptions and/or a liquidation are occurring concurrently,
any redemption of the shares of Series B/KBH Stock shall be deemed to occur and
shall be paid pari passu with any redemption of the shares of Series C Stock but
in full prior to any other redemptions and/or liquidations, including any other
redemption of shares of the Series A/KBL Stock. Notwithstanding the foregoing,
any Series B/KBH Holder may elect to retain its outstanding shares of Series
B/KBH Stock and not to subject such shares to redemption by delivery of written
notice to the Corporation at least 15 days prior to the date of the consummation
of the Liquidation Event.
(ii) The amount per share payable upon any redemption of shares
of Series B/KBH pursuant to this subsection shall be an amount
equal to the greater of (a) the Series B/KBH Original Purchase
Price (subject to equitable adjustment for any stock split,
combination, reclassification or other similar event involving the
Series B/KBH Stock) plus all Series B/KBH Accrued Dividends, or
(b) the Fair Market Value of such share (the "LIQUIDATION
REDEMPTION PRICE").
(iii) Any date upon which Series B/KBH Stock is to be redeemed
pursuant to this Section 4 shall be referred to in this context as
a "SERIES B/KBH REDEMPTION DATE".
(b) SERIES B ANNUAL REDEMPTION. Except as set forth hereafter, the
Corporation shall (to the extent allowed by law) redeem the following shares of
Series B Stock and Series KBH Stock on the following dates, out of funds legally
available therefor:
(i) at any time on or after February 11, 2005, one-third of the
shares of each of the Series B Stock and Series KBH Stock then
outstanding.
(ii) at any time on or after February 11, 2006, an additional
number of shares of each of the Series B Stock and Series KBH
Stock equal to one-third of the shares of the Series B Stock and
Series KBH Stock, respectively, outstanding as of February 11,
2005.
(iii) at any time on or after February 11, 2007, all outstanding
shares of Series B Stock and Series KBH Stock.
The amount per share payable upon any redemption of shares of Series B
Stock and Series KBH Stock pursuant to this subsection shall be an amount in
cash equal to the greater of (a) the Series B/KBH Original Purchase Price
(subject to equitable adjustment for any stock split, combination,
reclassification or other similar event involving the Series B/KBH Stock) plus
all Series B/KBH Accrued Dividends, or (b) the Fair Market Value of such share
(the "SCHEDULED REDEMPTION PRICE" and collectively with the Liquidation
Redemption Price, the "SERIES B/KBH REDEMPTION PRICE").
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To the extent that one or more annual or other redemptions are occurring
concurrently, any redemption of the shares of Series B/KBH Stock shall be deemed
to occur and shall be paid pari passu with any redemption of the shares of
Series C Stock but in full prior to any other redemptions, including any other
redemption of shares of the Series A/KBL Stock.
Notwithstanding the foregoing, any Series B/KBH Holder may elect to
retain its outstanding shares of Series B/KBH Stock and not to subject such
shares to redemption by delivery of written notice to the Corporation at least
15 days prior to the applicable redemption date set forth above.
(c) PRO RATA. If, on any Series B/KBH Redemption Date, fewer than all
shares of Series B/KBH Stock then outstanding are to be redeemed in accordance
with this Section, the shares to be redeemed shall be allocated pro rata among
the Series B/KBH Holders and the Redemption Notice mailed to each Holder shall
specify the number of shares to be redeemed from such Holder. Notwithstanding
the delivery of a Redemption Notice, Series B/KBH Holders subject to redemption
may convert such shares pursuant to Section 7 on or before the Series B/KBH
Redemption Date by delivering written notice thereof to the Corporation not
later than 10 days prior to the Series B/KBH Redemption Date.
(d) PAYMENT OF SERIES B/KBH REDEMPTION PRICE; TERMINATION OF RIGHTS.
On any Series B/KBH Redemption Date, the applicable Series B/KBH Redemption
Price in respect of the shares represented by the certificate or certificates
surrendered to the Corporation by the Holder thereof pursuant to the Redemption
Notice shall be paid to the order of the person whose name appears on such
certificate or certificates. Each surrendered certificate shall be canceled and
retired and a new certificate, representing the remaining, unredeemed shares of
Series B/KBH Stock, if any, shall be issued to the Holder of such shares. On any
Series B/KBH Redemption Date, the rights of a Holder with respect to shares
redeemed shall cease, other than such Holder's right to payment of the Series
B/KBH Redemption Price as of the Series B/KBH Redemption Date, upon surrender of
the certificate or certificates.
5. LIQUIDATION. In the event of any liquidation, dissolution or
winding-up of the Corporation, the Series B/KBH Holders shall be entitled,
before any assets of the Corporation shall be distributed among or paid over to
the holders of Junior Securities, but after distribution of such assets among,
or payment thereof over to, creditors of the Corporation, to receive from the
assets of the Corporation available for distribution to stockholders in cash,
the Series B/KBH Liquidation Amount. If the assets of the Corporation legally
available for distribution shall be insufficient to permit the payment in full
of the Series B/KBH Liquidation Amount and the Series C Liquidation Amount to
the Series B/KBH Holders and the Series C Holders, then the entire assets of the
Corporation legally available for distribution shall be distributed ratably
among the Series B/KBH Holders and Series C Holders in proportion to the
respective amounts which would have been payable upon such Liquidation Event on
such shares of Series B/KBH Stock and Series C Stock if all amounts payable
thereon had been paid in full. In the event that such distribution of assets is
other than in cash, such distribution of cash and other assets (including
securities) shall be made ratably among the holders of the shares of Series
B/KBH Stock and Series C Stock based upon the fair market value of any such
assets as determined by a
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nationally recognized valuation consultant selected mutually by the holders of a
majority in voting power of the Series B/KBH Stock and the Series C Stock then
outstanding and the Corporation (or if such selection cannot be made, by a
nationally recognized independent valuation consultant selected by the American
Arbitration Association in accordance with its rules). In the event of any
liquidation, dissolution or winding-up of the Corporation, after payment shall
have been made to the holders of shares of Series B/KBH Stock and Series C Stock
of the full amount to which they shall be entitled as aforesaid, and then after
payment of the Series A/KBL Liquidation Amount to the Series A/KBL Holders under
the Series A/KBL Certificate of Designations, the holders of any Junior
Securities and the Series B/KBH Holders and Series C Holders shall be entitled
to participate equally, on an as-converted basis in the case of the Series B/KBH
Stock, the Series C Stock and any Junior Securities convertible into Common
Stock, in all remaining assets of the Corporation available for distribution to
its stockholders. The provisions of this Section 5 shall not be applicable to
any shares of Series B/KBH Stock or Series C Stock that have been redeemed
pursuant to Section 4(a) hereof in connection with such Liquidation Event. The
holders of the Series B/KBH Stock shall have the right to treat any merger,
consolidation, sale of all or substantially all of the assets of the
Corporation, or sale of a majority of the voting capital stock of the
Corporation, as a liquidation of the Corporation and, in connection therewith,
to receive payment under this Section 5 upon surrender of their shares to the
Corporation; PROVIDED, HOWEVER, that the holders of the Series B/KBH Stock shall
not have the right to treat any merger or consolidation as a Liquidation Event
if the Corporation is the survivor or continuing corporation of such merger or
consolidation and as a result thereof there is no change in the Common Stock or
Preferred Stock or the ownership thereof.
6. VOTING.
(a) VOTES GENERALLY WITH COMMON STOCK. In addition to the rights
specified in Section 6(b) below and any other rights provided in the
Corporation's By-Laws, the shares of Series B Stock shall entitle each Holder
thereof to such number of votes as shall equal the number of shares of Common
Stock (rounded to the nearest whole number) into which the shares of Series B
Stock held by such Holder are then convertible pursuant to Section 7 and shall
entitle each such Holder to vote on all matters as to which holders of Common
Stock shall be entitled to vote, in the same manner and with the same effect as
such holders of Common Stock, voting together with the holders of Common Stock
as one class.
(b) SEPARATE CLASS VOTE. So long as any shares of Series B Stock are
outstanding, the consent of the holders of a majority of all of the outstanding
shares of Series B Stock, Series C Stock and Series A Stock, voting as a single
and separate class in person or by proxy, at a special or annual meeting called
for the purpose, or by written consent in lieu of a meeting, shall be required
before the Corporation may:
(i) authorize or issue any class or series of capital stock
ranking senior or pari passu to the Series B/KBH Stock, the Series
C Stock or the Series A/KBL Stock with respect to rights to
receive dividends, redemption payments or distributions upon
liquidation or winding up of the Corporation or with respect to
voting,
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antidilution provisions or preemptive rights; PROVIDED, HOWEVER,
that this provision shall not apply to the issuance of the Second
Round Series B/KBH Stock (which itself shall be Series B/KBH
Stock);
(ii) authorize, declare or distribute any dividend, whether in
cash or in kind, payable to any class or series of the
Corporation's common or preferred stock (except payment of
dividends on the Series B/KBH Stock as contemplated herein or
payment of dividends on the Series C Stock as contemplated (and
only to the extent permitted) in the Series C Certificate of
Designations or payment of dividends on the Series A/KBL Stock as
contemplated (and only to the extent permitted) in the Series
A/KBL Certificate of Designations) or to any other equity security
of the Corporation;
(iii) approve any liquidation, dissolution, sale, lease or
license of all or substantially all of the assets or business, or
of the assets or business of any subsidiary, of the Corporation;
(iv) cancel, repeal or change any of the provisions of this
Certificate of Designations (or of any amendment hereto), any
other certificate of designations of the Corporation (or any
amendment thereto), the Certificate of Incorporation of the
Corporation or the By-laws of the Corporation;
(v) permit to lapse any of the following: its corporate
existence, essential rights, government approvals or franchises or
any licenses or Listed Rights (which the Board deems essential to
the Corporation's business) or other rights to use patents,
processes, licenses, trademarks, trade names or copyrights owned
or possessed by it (which the Board deems essential to the
Corporation's business);
(vi) transfer, assign or license (except end-user licenses
granted in the ordinary course of business) any of the
Corporation's Listed Rights or know-how, technology or trade
secrets now owned or hereafter acquired by the Corporation;
(vii) voluntarily dissolve, liquidate or wind-up or carry out any
partial liquidation or distribution or transaction in the nature
of a partial liquidation or distribution;
(viii) purchase, lease or otherwise acquire capital stock in any
corporation or equity interest in any other entity or lend money
to any person or entity (other than loans to any one person that,
individually or in the aggregate, shall not exceed $100,000 or
loans to any one employee that, individually or in the aggregate,
shall not exceed $200,000) or purchase a substantial part of the
operating assets of any person or entity;
(ix) consolidate with or merge into or with any other person or
entity or permit any other person or entity to consolidate with or
merge into it (except that a 100%
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subsidiary may consolidate with or merge into the Corporation or
another 100% subsidiary);
(x) permit any subsidiary (except a 100% subsidiary) to make
any (i) direct or indirect redemption, retirement, purchase or
other acquisition of any of the Corporation's capital stock (or
any warrant, option or other right with respect to such stock),
(ii) repayment of the Corporation's debt held by any Related Party
or by any Affiliate or subsidiary debt held by any Related Party
or by any Affiliate, or (iii) sale of any capital stock of the
Corporation to any third party;
(xi) issue (which term shall include without limitation the
issuance of any shares of, or the grant of any warrants, options
or other rights to purchase any shares of, or any commitment to
issue) any shares of its capital stock (which term shall include
without limitation, securities convertible into capital stock, or
rights to acquire capital stock), other than Excluded Stock, at a
price per share less than $8.25;
(xii) redeem any shares of any capital stock of the Corporation
(except redemptions of Series B/KBH Stock as contemplated herein
or redemptions of Series C Stock as contemplated (and only to the
extent permitted) in the Series C Certificate of Designations or
redemptions of Series A/KBL Stock as contemplated (and only to the
extent permitted) in the Series A/KBL Certificate of
Designations); or
(xiii) increase the size of the Board of Directors of the Company
above eight (8) members.
7. CONVERSION.
(a) OPTIONAL CONVERSION.
(i) The holder of any shares of Series B/KBH Stock shall have
the right, at such holder's option, at any time or from time to
time to convert any or all such holder's shares of Series B/KBH
Stock into such whole number of fully paid and nonassessable
shares of Common Stock (or Non-voting Common Stock, in the case of
Series KBH Stock) as equals (I) the product of (x) the Series
B/KBH Original Purchase Price plus, after the third anniversary of
the Series B/KBH Initial Issuance Date at the option of any
Holder, any unpaid Series B/KBH Accrued Dividends with respect to
the shares being converted, multiplied by (y) the number of shares
of Series B/KBH Stock being converted, divided by (II) the Series
B/KBH Conversion Price (as last adjusted and then in effect) for
the shares of the Series B/KBH Stock being converted, by surrender
of the certificates representing the shares of Series B/KBH Stock
so to be converted in the manner provided Section 7(a)(ii) below.
The Series B/KBH Conversion Price shall initially be equal to the
Series B/KBH Original Purchase Price; PROVIDED,
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HOWEVER, that such Series B/KBH Conversion Price shall be subject
to adjustment as set forth in Section 7(a)(iv) below.
(ii) The holder of any shares of Series B/KBH Stock may exercise
such holder's conversion right pursuant to this Section by
delivering to the Corporation during regular business hours at the
office of any transfer agent of the Corporation for the Series
B/KBH Stock or at such other place as may be designated by the
Corporation, the certificate or certificates for the shares to be
converted, duly endorsed or assigned in blank or to the
Corporation (if required by it) accompanied by written notice
stating that such holder elects to convert such shares and stating
the name or names (with address) in which the certificate or
certificates for the shares of Common Stock (or Non-voting Common
Stock, in the case of Series KBH Stock) are to be issued.
Conversion shall be deemed to have been effected with respect to
conversion under (a) Section 7(a)(i) above, on the date when the
aforesaid delivery is made and (b) Section 7(b) on the date of
occurrence of a Series B/KBH Event of Conversion, as the case may
be, and any such date is referred to herein as the "SERIES B/KBH
CONVERSION DATE". As promptly as practicable thereafter the
Corporation shall issue and deliver to or upon the written order
of such holder, to the place designated by such holder, a
certificate or certificates for the number of full shares of
Common Stock (or Non-voting Common Stock, in the case of Series
KBH Stock) to which such holder is entitled and a check or cash in
respect of any fractional interest in a share of Common Stock (or
Non-voting Common Stock, in the case of Series KBH Stock), as
provided in Section 7(a)(iii) below, payable with respect to the
shares of Series B/KBH Stock so converted up to and including the
Series B/KBH Conversion Date. The person in whose names the
certificate or certificates for Common Stock (or Non-voting Common
Stock, in the case of Series KBH Stock) are to be issued shall be
deemed to have become a holder of Common Stock (or Non-voting
Common Stock, in the case of Series KBH Stock) on the applicable
Series B/KBH Conversion Date unless the transfer books of the
Corporation are closed on that date, in which event such holder
shall be deemed to have become a holder of Common Stock (or
Non-voting Common Stock, in the case of Series KBH Stock) on the
next succeeding date on which the transfer books are open, but the
Series B/KBH Conversion Price shall be that in effect on the
Series B/KBH Conversion Date. Upon conversion of only a portion of
the number of shares covered by a certificate representing shares
of Series B/KBH Stock surrendered for conversion, the Corporation
shall issue and deliver to or upon the written order of the holder
of the certificate so surrendered for conversion, at the expense
of the Corporation, a new certificate covering the number of
shares of Series B/KBH Stock representing the unconverted portion
of the certificate so surrendered.
(iii) No fractional shares of Common Stock (or Non-voting Common
Stock, in the case of Series KBH Stock) or scrip shall be issued
upon conversion of shares of Series B/KBH Stock. If more than one
share of Series B/KBH Stock shall be surrendered for conversion at
any one time by the same holder, the number of full
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shares of Common Stock (or Non-voting Common Stock, in the case of
Series KBH Stock) issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series
B/KBH Stock so surrendered. Instead of any fractional shares of
Common Stock (or Non-voting Common Stock, in the case of Series
KBH Stock) which would otherwise be issuable upon conversion of
any shares of Series B/KBH Stock, the Corporation shall pay a cash
adjustment in respect of such fractional interest in an amount
equal to the then current Fair Market Value of a share of Common
Stock multiplied by such fractional interest.
(iv) The Series B/KBH Conversion Price shall be subject to
adjustment from time to time as follows:
(A) ADJUSTMENTS FOR DILUTING ISSUANCES UPON CONTINUED
PARTICIPATION. Unless the Corporation has requested and
received a waiver from the holders of a majority of the
Series A Stock, the Series B Stock and the Series C Stock,
voting together as a single class, if the Corporation shall
at any time or from time to time after the Series B/KBH
Initial Issuance Date issue or be deemed (by virtue of any
of the provisions of Section 7(a)(iv)), to have issued any
capital stock (including, without limitation, each class of
common stock of the Corporation) or other equity interests
(including, without limitation, warrants, rights, calls or
options exercisable for or convertible into such capital
stock or equity interests) in the Corporation, other than
Excluded Stock (or Second Round Series B/KBH Stock),
without consideration or for a consideration per share (the
"LAST ISSUE PRICE") less than the Series B/KBH Conversion
Price in effect immediately prior to each such issuance or
deemed issuance (a "DILUTING Issuance"), the Series B/KBH
Conversion Price in effect immediately prior thereto shall
forthwith be adjusted, as of the opening of business on the
date of such issuance or deemed issuance, to such Last
Issue Price.
Notwithstanding the immediately preceding paragraph of this
subsection (A), if a Series B/KBH Holder has been given
written notice pursuant to Section 8 hereof and the
opportunity to purchase its Preemptive Share of such
Diluting Issuance and does not purchase its entire
Preemptive Share of such Diluting Issuance, but purchases a
lesser share of such Diluting Issuance or none, the Series
B/KBH Conversion Price for that portion of the shares of
Series B/KBH Stock of said Series B/KBH Holder equal to the
Non-Participating Percentage (as hereinafter defined) (the
"DILUTED STOCK") shall not be reduced for said issuance
pursuant to this subsection but each share of the Diluted
Stock which each such Series B/KBH Holder holds shall be
automatically converted immediately prior to the closing of
the applicable Diluting Issuance into one (1) share of
Series B1 Preferred Stock (or Series KBH1 Preferred Stock,
in the case of Series KBH Stock) which shall be convertible
into Common Stock (or Non-voting Common Stock, in the case
of Series KBH1 Stock) at the same price per share that
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applied to the Diluted Stock immediately prior to such
Diluting Issuance, subject, however, to further adjustment
as herein provided. As used herein, the term
"NON-PARTICIPATING PERCENTAGE" means a percentage equal to
one hundred percent (100%) minus the percentage determined
by dividing the number of shares of the Diluting Issuance
which such Holder actually purchased by the maximum number
of shares of the Diluting Issuance which such Holder was
entitled to purchase on the basis of such Holder's
Preemptive Shares and expressing the resulting quotient as
a percentage.
Upon the conversion of Diluted Stock held by a Series B/KBH
Holder as set forth herein, such shares of Diluted Stock
shall no longer be outstanding on the books of the
Corporation and the Series B/KBH Holder shall be treated,
to the extent that said holder held such Diluted Stock, as
the record holder of such shares of Series B1 Preferred
Stock (or Series KBH1 Stock, in the case of Series KBH
Stock) on the date of closing of the applicable Diluting
Issuance.
For the purposes of any adjustment of the Series B/KBH
Conversion Price pursuant to this subsection (A), the
following provisions shall be applicable:
(1) In the case of the issuance of stock for
cash, the consideration shall be deemed to be the
amount of cash paid therefor.
(2) In the case of the issuance of stock for a
consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to
be the fair market value thereof as determined in
good faith by the Board, irrespective of any
accounting treatment; PROVIDED, HOWEVER, that the
aggregate fair market value of such non-cash and
cash consideration shall not exceed the current Fair
Market Value of the shares of stock being issued.
(3) In case of the issuance of (i) options to
purchase or rights to subscribe for Common Stock or
Non-voting Common Stock; (ii) securities by their
terms convertible into or exchangeable for Common
Stock or Non-voting Common Stock; or (iii) options
to purchase or rights to subscribe for such
convertible or exchangeable securities:
(a) the aggregate number of shares of
Common Stock or Non-voting Common Stock
deliverable upon exercise of such options to
purchase or rights to subscribe for Common
Stock or Non-voting Common Stock shall be
deemed to have been issued at the time such
options or rights were
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issued and for a consideration equal to the
consideration (determined in the manner
provided in subdivisions (1) and (2) above),
if any, received by the Corporation upon the
issuance of such options or rights plus the
purchase price provided in such options or
rights for the Common Stock or Non-voting
Common Stock covered thereby;
(b) the aggregate number of shares of
Common Stock or Non-voting Common Stock
deliverable upon conversion of or in exchange
for any such convertible or exchangeable
securities or upon the exercise of options to
purchase or rights to subscribe for such
convertible or exchangeable securities and
subsequent conversion or exchange thereof
shall be deemed to have been issued at the
time such securities were issued or such
options or rights were issued and for a
consideration equal to the consideration
received by the Corporation for any such
securities and related options or rights
(excluding any cash received on accounts of
accrued interest or accrued dividends), plus
the additional consideration, if any, to be
received by the Corporation upon the
conversion or exchange of such securities or
the exercise of any related options or rights
(the consideration in each case to be
determined in the manner provided in
subdivisions (1) and (2) above, with the
proviso to subdivision (2) being applied to
the number of shares of Common Stock or
Non-voting Common Stock deliverable upon such
exercise);
(c) on any change in the number of shares
or exercise price of Common Stock or
Non-voting Common Stock deliverable upon the
exercise of any such options or rights or
conversions of or exchange for such
convertible or exchangeable securities, other
than a change resulting from the antidilution
provisions thereof, the Series B/KBH
Conversion Price, if previously adjusted,
shall forthwith be readjusted to such Series
B/KBH Conversion Price as would have obtained
had the adjustment made upon the issuance of
such options, rights or securities not
converted prior to such change or options or
rights related to such securities not
converted prior to such change having been
made upon the basis of such change; and
(d) on the expiration of any such options
or rights, the termination of any such rights
to convert or exchange or the expiration of
any options or rights related to such
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convertible or exchangeable securities, the
Series B/KBH Conversion Price, if previously
adjusted, shall forthwith be readjusted to
such Series B/KBH Conversion Price as would
have obtained had such options, rights,
securities or options or rights related to
such securities not been issued.
(B) ADJUSTMENTS FOR CERTAIN DIVIDENDS, SUBDIVISIONS OR
SPLIT-UPS. If, at any time after the Series B/KBH Initial
Issuance Date, the number of shares of Common Stock or
Non-voting Common Stock outstanding is increased by a stock
dividend payable in shares of Common Stock or Non-voting
Common Stock or by a subdivision or split-up of shares of
Common Stock or Non-voting Common Stock, then, upon the
record date fixed for the determination of holders of
Common Stock or Non-voting Common Stock entitled to receive
such stock dividend, subdivision or split-up, the Series
B/KBH Conversion Price shall be appropriately decreased so
that the number of shares of Common Stock (or Non-voting
Common Stock, in the case of Series KBH Stock) issuable on
conversion of each share of Series B/KBH Stock shall be
increased in proportion to such increase in outstanding
shares.
(C) ADJUSTMENTS FOR COMBINATIONS. If, at any time after
the Series B/KBH Initial Issuance Date, the number of
shares of Common Stock or Non-voting Common Stock
outstanding is decreased by a combination of the
outstanding shares of Common Stock or Non-voting Common
Stock, then, upon the record date for such combination, the
Series B/KBH Conversion Price shall be appropriately
increased so that the number of shares of Common Stock (or
Non-voting Common Stock, in the case of Series KBH Stock)
issuable on conversion of each share of Series B/KBH Stock
shall be decreased in proportion to such decrease in
outstanding shares.
(D) ADJUSTMENTS FOR REORGANIZATIONS, MERGERS,
CONSOLIDATIONS, ETC. In case, at any time after the Series
B/KBH Initial Issuance Date, of any capital reorganization,
or any reclassification of the stock of the Corporation
(other than a change in par value or from par value to no
par value or from no par value to par value or as a result
of a stock dividend or subdivision, split-up or combination
of shares), or the consolidation or merger of the
Corporation with or into another person (other than a
consolidation or merger in which the Corporation is the
continuing corporation and which does not result in any
change in the Common Stock or Preferred Stock or the
ownership thereof or of the sale or other disposition of
all or substantially all of the properties and assets of
the Corporation as an entirety to any other person), each
share of Series B/KBH Stock shall, after such
reorganization, reclassification, consolidation, merger,
sale or other disposition, be convertible into the
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kind and number of shares of stock or other securities or
property of the Corporation or of the corporation resulting
from such consolidation or surviving such merger or to
which such properties and assets shall have been sold or
otherwise disposed to which the holder of the number of
shares of Common Stock (or Non-voting Common Stock, in the
case of Series KBH Stock) deliverable (immediately prior to
the time of such reorganization, reclassification,
consolidation, merger, sale or other disposition) upon
conversion of such share would have been entitled upon such
reorganization, reclassification, consolidation, merger,
sale or other disposition. The provisions of this
subsection shall similarly apply to successive
reorganizations, reclassifications, consolidations,
mergers, sales or other dispositions.
(E) All calculations under this subsection (iv) shall be
made to the nearest one cent ($.01) or to the nearest
one-tenth (1/10) of a share, as the case maybe.
(F) In any case in which the provisions of this
subsection (iv) shall require that an adjustment shall
become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of
such event (i) issuing to the holder of any share of Series
B/KBH Stock converted after such record date and before the
occurrence of such event the additional shares of capital
stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares
of capital stock issuable upon such conversion before
giving effect to such adjustment and (ii) paying to such
holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section 7(a)(iii) above,
PROVIDED, HOWEVER, that the Corporation shall deliver to
such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional
shares, and such cash, upon the occurrence of the event
requiring such adjustment.
(v) Whenever the Series B/KBH Conversion Price shall be
adjusted as provided in Section 7(a)(iv), the Corporation shall
forthwith file, at the office of the transfer agent for the Series
B/KBH Stock or at such other place as may be designated by the
Corporation, a statement, signed by its independent certified
public accountants, showing in detail the facts requiring such
adjustment and the Series B/KBH Conversion Price that shall be in
effect after such adjustment. The Corporation shall also cause a
copy of such statement to be sent by first class, certified mail,
return receipt requested, postage prepaid, to each Series B/KBH
Holder at such holder's address appearing on the Corporation's
records. Where appropriate, such copy may be given in advance and
may be included as part of a notice required to be mailed under
the provisions of Section 7(a)(vi) below.
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<PAGE>
(vi) In the event the Corporation shall propose to take any
action of the types described in clauses (A), (B), (C), or (D) of
Section 7(a)(iv) above, the Corporation shall give notice to each
holder of shares of Series B/KBH Stock, in the manner set forth in
Section 7(a)(v) above, which notice shall specify the record date,
if any, with respect to, any such action and the date on which
such action is to take place. Such notice shall also set forth
such facts with respect thereto as shall be reasonably necessary
to indicate the effect of such action (to the extent such effect
may be known at the date of such notice) on the Series B/KBH
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable
upon the occurrence of such action or deliverable upon conversion
of shares of Series B/KBH Stock. In the case of any action which
would require the fixing of a record date, such notice shall be
given at least 20 days prior to the date so fixed, and in case of
all other action, notice shall be given at least 30 days prior to
the taking of such proposed action. Failure to give such notice,
or any defect therein, shall not affect the legality or validity
of any such action.
(vii) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of
shares of capital stock of the Corporation upon conversion of any
shares of Series B/KBH Stock; PROVIDED, HOWEVER, that the
Corporation shall not be required to pay any taxes which may be
payable in respect of any transfer involved in the issuance or
delivery of any certificate for such shares in a name other than
that of the holder of the shares of Series B/KBH Stock in respect
of which such shares are being issued.
(viii) The Corporation shall reserve, free from preemptive rights,
out of its authorized but unissued shares of Common Stock (or
Non-voting Common Stock, in the case of Series KBH Stock), solely
for the purpose of effecting the conversion of the shares of
Series B/KBH Stock, sufficient shares to provide for the
conversion of all outstanding shares of Series B/KBH Stock.
(ix) All shares of Common Stock (or Non-voting Common Stock, in
the case of Series KBH Stock) which may be issued in connection
with the conversion provisions set forth herein will, upon
issuance by the Corporation, be validly issued, fully paid and
nonassessable, with no personal liability attaching to the
ownership thereof, and free from all taxes, liens or charges with
respect thereto.
(b) AUTOMATIC CONVERSION. Upon the occurrence of a Series B/KBH Event
of Conversion, all shares of Series B/KBH Stock then outstanding shall, by
virtue of, and simultaneously with, the occurrence of the Series B/KBH Event of
Conversion and without any action on the part of the holders thereof, be deemed
automatically converted into such whole number of fully paid and nonassessable
shares of Common Stock (or Non-voting Common Stock, in the case of Series KBH
Stock) as equals (1) the product of (x) the Series B/KBH Original Purchase Price
plus, after the third anniversary of the Series B/KBH Initial Issuance Date at
the option of any Holder, any unpaid Series B/KBH Accrued Dividends with respect
to
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the shares being converted, multiplied by (y) the number of shares of Series
B/KBH Stock being converted divided by (2) the Series B/KBH Conversion Price as
last adjusted pursuant to Section 7(a)(iv) and then in effect.
8. PRE-EMPTIVE RIGHTS. (a) RIGHT TO PURCHASE. Until the occurrence of
a Series B/KBH Event of Conversion, the Series B/KBH Holders shall be entitled
to subscribe for their respective Preemptive Share of any New Securities which
the Corporation may, from time to time, propose to issue and sell, at any time
while any Series B/KBH Stock is outstanding and subject to the terms, conditions
and procedures set forth below.
(b) The Corporation shall first deliver to each Series B/KBH Holder a
written Notice of Intention to Sell offering to each Series B/KBH Holder the
right to purchase up to the Preemptive Share of such Series B/KBH Holder of such
shares of New Securities at the purchase price and on the terms specified
therein. Each Series B/KBH Holder shall have the right and option, for a period
of twenty (20) days after delivery to said Series B/KBH Holder of such Notice of
Intention to Sell, to purchase all or any part of the Preemptive Share of such
Series B/KBH Holder of the shares of New Securities so offered at the purchase
price and on the terms stated therein. Such acceptance shall be made by
delivering a written Notice of Acceptance to the Corporation within the
aforesaid twenty (20) day period.
The closing of any sales of shares of New Securities under the terms of
Section 8 shall be made at the offices of the Corporation on a mutually
satisfactory business day within five (5) business days after the expiration of
the aforesaid period. Delivery of certificates or other instruments evidencing
such shares of New Securities duly endorsed for transfer to the appropriate
Series B/KBH Holder shall be made on such date against payment of the purchase
price therefor.
(c) The Corporation may issue and sell all or any part of the
remaining shares of New Securities so offered for sale but not purchased
pursuant to Section 8 hereof at a price not less than the price offered, and on
terms not more favorable, to the purchaser thereof than the terms stated in the
original Notice of Intention to Sell, at any time within ninety (90) days after
the expiration of the offer required by Section 8. In the event the remaining
shares of New Securities are not sold by the Corporation during such ninety (90)
day period, the right of the Corporation to sell such remaining shares of New
Securities shall expire and the obligations of this Section 8 shall be
reinstated; PROVIDED, HOWEVER, that in the event the Corporation determines, at
any time during such ninety (90) day period, that the sale of all or any part of
the remaining shares of New Securities on the terms set forth in the Notice of
Intention to Sell is impractical, the Corporation can terminate the offer and
reinstate the procedure provided in this Section 8 without waiting for the
expiration of such ninety (90) day period.
9. FURTHER DILUTING ISSUANCES. The Corporation shall not permit or
cause to occur more than one Diluting Issuance unless, so as to facilitate the
adjustments required by Section 7(a)(iv)(A), the Corporation (I) has taken all
necessary
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action to create a new subseries of the Series B Preferred Stock, which shall be
PARI PASSU with the Series B Preferred Stock and the Series B1 Preferred Stock
for all purposes except conversion price, (II) has taken all necessary action to
create a new subseries of the Series KBH Preferred Stock, which shall be PARI
PASSU with the Series KBH Preferred Stock and the Series KBH1 Preferred Stock
for all purposes except conversion price, (III) shall have amended this
Certificate to provide that the shares of Series B Stock held by any Holder
thereof who fails to purchase its full Preemptive Share of such additional
Diluting Issuance shall be converted automatically into such new subseries of
Series B Stock, and (IV) shall have amended this Certificate to provide that the
shares of Series KBH Stock held by any Holder thereof who fails to purchase its
full Preemptive Share of such additional Diluting Issuance shall be converted
automatically into such new subseries of Series KBH Stock. The shares of such
subseries shall be convertible into Common Stock (or Non-voting Common Stock, in
the case of the Series KBH Stock) immediately after such Diluting Issuance at
the same price per share that applied to the shares which were so converted
immediately prior to such Diluting Issuance. The consent of the Holders of the
Preferred Stock shall not be required in order to effect such new subseries.
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GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES C CONVERTIBLE PREFERRED STOCK,
SERIES C1 CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
Genaissance Pharmaceuticals, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), hereby certifies
that, pursuant to authority conferred upon the Board of Directors by the
provisions of Article 4 of the Certificate of Incorporation of the Corporation,
as amended, (referred to in the following designations as the "CERTIFICATE OF
INCORPORATION"), which authorize the issuance of 30,000,000 shares of a class of
capital stock designated as preferred stock, $.001 par value, the following
resolution was duly adopted by the Board of Directors of the Corporation at a
special meeting duly held on March 10, 2000.
RESOLVED: That there is hereby designated a series of the Preferred Stock
(as that term is defined in Article 4 of the Certificate of Incorporation of the
Corporation, as amended), consisting of 2,242,245 shares, which will be issued
in a series entitled "SERIES C CONVERTIBLE PREFERRED STOCK" (referred to as the
"SERIES C PREFERRED STOCK"), and 2,242,245 shares, which will be issued in a
series entitled "SERIES C1 CONVERTIBLE PREFERRED STOCK" (referred to as the
"SERIES C1 PREFERRED STOCK"), and that the preferences and privileges, relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions of all shares of each such series, in addition to
those set forth in the Certificate of Incorporation of the Corporation, as
amended, are as set forth in the attached EXHIBIT I.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations to be signed by Gualberto Ruano, its President, and attested to by
Kevin L. Rakin, its Secretary, as of this 10th day of March, 2000.
By: /s/ GUALBERTO RUANO
-------------------------
Gualberto Ruano
President
ATTEST:
/s/ KEVIN L. RAKIN
-------------------------
Kevin L. Rakin
Secretary
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EXHIBIT I
1. DEFINITIONS. As used in this Certificate of Designations, the
following terms have the meanings specified below:
"AFFILIATE" shall mean a person (other than a subsidiary):
(i) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Corporation;
(ii) which beneficially owns or holds 10% or more of any class
of the voting stock of the Corporation; or
(iii) 10% or more of the voting stock (or in the case of a person
which is not a corporation, 10% or more of the equity interest) of
which is beneficially owned or held by the Corporation or one of
its subsidiaries.
The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management
and policies of a person, whether through the ownership of voting
securities, by contract or otherwise.
"BOARD" shall mean the Corporation's Board of Directors.
"BUSINESS DAY" shall mean any day (other than a day which is a Saturday,
Sunday or legal holiday in the State of Connecticut) on which banks are
authorized to be open for business in Hartford, Connecticut.
"COMMISSION" shall mean the United States Securities and Exchange
Commission.
"COMMON STOCK" shall mean the Common Stock, $.001 par value, of the
Corporation.
"DILUTED STOCK" shall have the meaning ascribed to it in Section
7(a)(iv)(A) hereof.
"DILUTING ISSUANCE" shall mean an issuance of capital stock described in
Section 7(a)(iv)(A) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXCLUDED STOCK" shall mean shares of Common Stock issued by the
Corporation:
(i) as a stock dividend or upon any stock split or other
subdivision or combination of the outstanding shares of Common
Stock;
(ii) up to an aggregate of 1,557,375 shares of Common Stock
issued or issuable to employees pursuant to an employee stock
option plan approved by the Board; or
(iii) upon conversion of any Preferred Stock, warrants or other
convertible securities outstanding as of the Series C Initial
Issuance Date and set forth on Schedule 3.4 to the Series C Stock
Purchase Agreement.
<PAGE>
"FAIR MARKET VALUE" at any date of one share of Common Stock shall be
deemed to be the average of the daily closing prices for the 30 consecutive
business days ending no more than five days before the day in question (as
adjusted for any stock dividend, split-up, combination or reclassification that
took effect during such 30 business day period). The closing price for each day
shall be the last reported sales price regular way or, in case no such reported
sales took place on such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading (or if the Common
Stock is not at the time listed or admitted for trading on any such exchange,
then such price as shall be equal to the average of the last reported bid and
asked prices, as reported by the Nasdaq on such day, or if, on any day in
question, the security shall not be quoted on the Nasdaq, then such price shall
be equal to the last reported bid and asked prices on such day as reported by
the National Quotation Bureau, Inc. or any similar reputable quotation and
reporting service, if such quotation is not reported by the National Quotation
Bureau, Inc.); PROVIDED, HOWEVER, that if the Common Stock is traded in such
manner that the quotations referred to in this clause are not available for the
period required hereunder, the Fair Market Value shall be determined by a
nationally recognized independent investment banking firm selected mutually by
the holders of more than 50% of the combined voting power of the Series B/KBH
Stock and Series C Stock then outstanding and the Corporation (or if such
selection cannot be made, by a nationally recognized independent banking firm
selected by the American Arbitration Association in accordance with its rules).
With respect to the Series C Stock, Fair Market Value shall be determined by a
nationally recognized independent investment banking firm selected mutually by
the holders of more than 50% of the voting power of the Series C Stock then
outstanding and the Corporation (or if such selection cannot be made, by a
nationally recognized independent banking firm selected by the American
Arbitration Association in accordance with its rules).
"HOLDER" shall mean a holder of shares of Series C Stock, as applicable,
as reflected in the stock records of the Corporation; and each Holder's address
shall be as it appears in the stock records of the Corporation.
"JUNIOR SECURITIES" shall mean, as to the Series C Stock, each other
class or series of capital stock (including, without limitation, each class of
common stock of the Corporation and each other series of preferred stock of the
Corporation including the Series A/KBL Stock) or other equity interests
(including, without limitation, warrants, rights, calls or options exercisable
for or convertible into such capital stock or equity interests) in the
Corporation but shall exclude the Series B/KBH Stock.
"LIQUIDATION EVENT" shall mean, a merger, consolidation, liquidation,
dissolution, winding up of the affairs of the Corporation or sale of all or
substantially all of the assets of the Corporation as an entirety to a third
party or parties, whether voluntary or involuntary, or the sale by the
stockholders of the Corporation of a majority of the voting capital stock of the
Corporation; PROVIDED, HOWEVER, that a merger or consolidation shall not be
considered a Liquidation Event if the Corporation is the survivor or continuing
corporation of such merger or consolidation and as a result thereof there is no
change in the Common Stock or Preferred Stock or the ownership thereof.
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"LIQUIDATION REDEMPTION PRICE" shall have the meaning assigned to such
term in Section 4(a).
"LISTED RIGHTS" shall mean all patents, patent applications, patent
rights, trademarks, trademark applications, trademark rights, trade names, trade
name rights, service marks and copyrights (whether registered or not) owned or
possessed by the Corporation and any improvements thereon.
"NEW SECURITIES" shall mean any capital stock (including, without
limitation, each class of common stock of the Corporation, any additional shares
of Preferred Stock, each other series of preferred stock of the Corporation and
any shares of capital stock held by the Corporation in its treasury upon the
disposition thereof) or other equity interests (including, without limitation,
warrants, rights, calls or options exercisable for or convertible into such
capital stock or equity interests) in the Corporation issued after the Series C
Initial Issue Date; PROVIDED, HOWEVER, that such term shall not include Excluded
Stock.
"NON-PARTICIPATING PERCENTAGE" shall have the meaning ascribed to it in
Section 7(a)(iv)(A) hereof.
"NON-VOTING COMMON STOCK" shall mean the Non-voting Common Stock, $.001
par value, of the Corporation.
"PERSON" shall mean and include an individual, a corporation, a
partnership, a trust, an unincorporated organization and a government or any
department, agency or political subdivision thereof.
"PREEMPTIVE SHARE" shall mean, immediately prior to any issue of shares
of New Securities, and as to each Series C Holder, the percentage which
expresses the ratio between (i) the total number of shares of Common Stock
issuable upon conversion of the Series C Stock owned by such Series C Holder,
plus the total number of shares of Common Stock then owned by such Series C
Holder that was received upon conversion of Series C Stock, and (ii) the total
number of shares of Common Stock and Non-voting Common Stock then outstanding,
plus the total number of shares of Common Stock and Non-voting Common Stock
issuable upon conversion of the then outstanding Preferred Stock.
"PREFERRED STOCK" shall mean all of the outstanding shares of the Series
A Stock, Series KBL Stock, Series B Stock, Series KBH Stock and Series C Stock,
together, at the time in question.
"QUALIFIED IPO" shall mean the consummation of a firm commitment
underwritten public offering of shares of Common Stock registered under the
Securities Act which results in aggregate gross cash proceeds to the Corporation
of not less than forty million dollars ($40,000,000) and pursuant to which the
offering price per share is equal to or greater than $16.50 ($11.00 per share in
the event that the registration statement with respect to such offering shall be
filed with the Commission on or before February 11, 2001), equitably adjusted
for any Recapitalization Event.
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"QUALIFIED LIQUIDATION EVENT" shall have the meaning assigned to such
term in Section 3(a).
"RECAPITALIZATION EVENT" shall mean any stock splits, stock dividends,
recapitalizations, reclassifications, and similar events.
"RELATED PARTY" shall mean any officer, director, significant employee or
consultant of the Corporation or any holder (other than any Series A/KBL Holder,
Series B/KBH Holder or Series C Holder) of 10% or more of any class of capital
stock of the Corporation or any member of the immediate family of any such
officer, director, employee, consultant or shareholder or any entity controlled
by any such officer, director, employee, consultant or shareholder or a member
of the immediate family of any such officer, director, employee, consultant or
shareholder.
"SCHEDULED REDEMPTION PRICE" shall have the meaning ascribed to it in
Section 4(b).
"SECOND ROUND SERIES B/KBH ISSUANCE DATE" shall mean the issuance date of
the Second Round Series B/KBH Stock.
"SECOND ROUND SERIES B/KBH STOCK" shall mean those shares of Series B/KBH
Stock that was issued by the Corporation to certain investors (the "Second Round
Investors") in the Second Closing as such term is defined in the Series B/KBH
Stock Purchase Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES A PREFERRED STOCK" shall mean the Series A Redeemable Convertible
Preferred Stock of the Corporation, par value $.001 per share.
"SERIES A1 PREFERRED STOCK" shall mean the Series A1 Redeemable
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES A STOCK" shall mean all of the outstanding shares of the Series A
Preferred Stock and the Series A1 Preferred Stock, together, at the time in
question, which shares shall be PARI PASSU for all purposes except conversion
price, and any new subseries of the Series A Preferred Stock created pursuant to
Section 9 of the Series A/KBL Certificate of Designations.
"SERIES A/KBL CERTIFICATE OF DESIGNATIONS" shall mean the Certificate of
Designations, Preferences and Other Special Rights and Qualifications,
Limitations and Restrictions of Series A and Series A1 Redeemable Convertible
Preferred Stock of the Corporation, dated as of August 24, 1998, and amended as
of February 17, 2000, March 8, 2000 and March 10, 2000, and the Certificate of
Designations, Preferences and Other Special Rights and Qualifications,
Limitations and Restrictions of Series KBL and the Series KBL1 Non-voting
Redeemable Convertible Preferred Stock of the Corporation, dated as of August
24, 1998, and amended as of February 17, 2000, March 8, 2000 and March 10, 2000.
"SERIES A/KBL HOLDER" shall mean a holder of shares of Series A Stock or
Series KBL Stock.
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"SERIES A/KBL LIQUIDATION AMOUNT" shall mean the amount due to the Series
A/KBL Holders upon a Liquidation of the Company pursuant to the Series A/KBL
Certificate of Designations.
"SERIES A/KBL STOCK" shall mean all of the outstanding shares of the
Series A Stock and Series KBL Stock, together, at the time in question, which
shares are PARI PASSU for all purposes except voting (the Series KBL Stock being
non-voting) and conversion (the Series KBL Stock being convertible into
Non-voting Common Stock rather than voting Common Stock).
"SERIES B PREFERRED STOCK" shall mean the Series B Convertible Preferred
Stock of the Corporation, par value $.001 per share.
"SERIES B1 PREFERRED STOCK" shall mean the Series B1 Convertible
Preferred Stock of the Corporation, par value $.001 per share.
"SERIES B STOCK" shall mean all of the outstanding shares of the Series B
Preferred Stock and the Series B1 Preferred Stock, together, at the time in
question, which shares shall be PARI PASSU for all purposes except conversion
price, and any new subseries of the Series B Preferred Stock created pursuant to
Section 9 of the Series B/KBH Certificate of Designations.
"SERIES B/KBH ACCRUED DIVIDENDS" shall mean Series B/KBH Full Cumulative
Dividends to the date of determination, less the amount of all dividends paid
pursuant to Section 3 of the Series B/KBH Certificate of Designations, upon the
relevant shares of Series B/KBH Stock.
"SERIES B/KBH CERTIFICATE OF DESIGNATIONS" shall mean the Certificate of
Designations, Preferences and Other Special Rights and Qualifications,
Limitations and Restrictions of Series B Convertible Preferred Stock, Series B1
Convertible Preferred Stock, Series KBH Convertible Preferred Stock, and Series
KBH1 Convertible Preferred Stock of the Corporation, dated as of February 17,
2000, and amended as of March 8, 2000 and March 10, 2000.
"SERIES B/KBH FULL CUMULATIVE DIVIDENDS" shall mean, as to any share of
Series B/KBH Stock (whether or not in respect of which such term is used there
shall have been net profits or net assets of the Corporation legally available
for the payment of such dividends), that amount which shall be equal to
dividends at the full rate fixed for the Series B/KBH Stock as provided in the
Series B/KBL Certificate of Designations for the period of time elapsed from the
Series B/KBH Initial Issuance Date (the Second Round Series B/KBH Issuance Date
in the case of the Second Round Series B/KBH Stock) to the date as of which
Series B/KBH Full Cumulative Dividends are to be computed.
"SERIES B/KBH HOLDER" shall mean a holder of shares of Series B Stock or
Series KBH Stock.
"SERIES B/KBH INITIAL ISSUANCE DATE" shall mean February 17, 2000.
"SERIES B/KBH LIQUIDATION AMOUNT" shall mean an amount in cash or
property (valued at its Fair Market Value), or a combination thereof, equal to
$5.50 per share of Series B/KBH Stock held by a Series B/KBH Holder (which per
share amount shall be subject to equitable
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adjustment whenever there shall occur a stock split, combination,
reclassification or other similar event involving the Series B/KBH Stock) plus
all Series B/KBH Accrued Dividends.
"SERIES B/KBH ORIGINAL PURCHASE PRICE" shall mean $5.50 per share of
Series B/KBH Stock.
"SERIES B/KBH STOCK" shall mean all of the outstanding shares of the
Series B Stock and Series KBH Stock, together, at the time in question, which
shares shall be PARI PASSU for all purposes except voting (the Series KBH Stock
being non-voting) and conversion (the Series KBH Stock being convertible into
Non-voting Common Stock rather than voting Common Stock).
"SERIES B/KBH STOCK PURCHASE AGREEMENT" shall mean that certain Stock
Purchase Agreement, dated as of February 17, 2000, and amended as of February
29, 2000 and as of March 3, 2000, by and among the Corporation and the
Purchasers (as defined therein) of the Series B/KBH Stock.
"SERIES C PREFERRED STOCK" shall mean the Series C Convertible Preferred
Stock of the Corporation, par value $.001 per share.
"SERIES C1 PREFERRED STOCK" shall mean the Series C1 Convertible
Preferred Stock of the Corporation, par value $.001 per share.
"SERIES C ACCRUED DIVIDENDS" shall mean Series C Full Cumulative
Dividends to the date of determination, less the amount of all dividends paid
pursuant to Section 3, upon the relevant shares of Series C Stock.
"SERIES C CONVERSION DATE" shall have the meaning set forth in Section
7(a)(ii).
"SERIES C CONVERSION PRICE" shall initially mean $8.25; PROVIDED,
HOWEVER, that the Series C Conversion Price shall be subject to adjustment as
set forth in Section 7(a)(iv).
"SERIES C EVENT OF CONVERSION" shall mean the consummation of a Qualified
IPO.
"SERIES C FULL CUMULATIVE DIVIDENDS" shall mean, as to any share of
Series C Stock (whether or not in respect of which such term is used there shall
have been net profits or net assets of the Corporation legally available for the
payment of such dividends), that amount which shall be equal to dividends at the
full rate fixed for the Series C Stock as provided herein for the period of time
elapsed from the Series C Initial Issuance Date to the date as of which Series C
Full Cumulative Dividends are to be computed.
"SERIES C HOLDER" shall mean a holder of shares of Series C Stock.
"SERIES C INITIAL ISSUANCE DATE" shall mean March 10, 2000.
"SERIES C LIQUIDATION AMOUNT" shall mean an amount in cash or property
(valued at its Fair Market Value), or a combination thereof, equal to $8.25 per
share of Series C Stock held by a Holder (which per share amount shall be
subject to equitable adjustment whenever there shall
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occur a stock split, combination, reclassification or other similar event
involving the Series C Stock) plus all Series C Accrued Dividends.
"SERIES C ORIGINAL PURCHASE PRICE" shall mean $8.25 per share of Series C
Stock.
"SERIES C REDEMPTION DATE" shall have the meaning set forth in Section 4
hereof.
"SERIES C REDEMPTION PRICE" shall have the meaning set forth in Section 4
hereof.
"SERIES C STOCK" shall mean all of the outstanding shares of the Series C
Preferred Stock and the Series C1 Preferred Stock, together, at the time in
question, which shares shall be PARI PASSU for all purposes except conversion
price, and any new subseries of the Series C Preferred Stock created pursuant to
Section 9 hereof.
"SERIES C STOCK PURCHASE AGREEMENT" shall mean that certain Stock
Purchase Agreement, dated as of March 10, 2000, by and among the Corporation and
the Purchasers (as defined therein).
"SERIES KBH PREFERRED STOCK" shall mean the Series KBH Nonvoting
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES KBH1 PREFERRED STOCK" shall mean the Series KBH1 Nonvoting
Convertible Preferred Stock of the Corporation, par value $.001 per share.
"SERIES KBH STOCK" shall mean all of the outstanding shares of the Series
KBH Preferred Stock and the Series KBH1 Preferred Stock, together, at the time
in question, and any new subseries of the Series KBH Preferred Stock created
pursuant to Section 9 of the Series B/KBH Certificate of Designations.
"SERIES KBL PREFERRED STOCK" shall mean the Series KBL Nonvoting
Redeemable Convertible Preferred Stock of the Corporation, par value $.001 per
share.
"SERIES KBL1 PREFERRED STOCK" shall mean the Series KBL1 Nonvoting
Redeemable Convertible Preferred Stock of the Corporation, par value $.001 per
share.
"SERIES KBL STOCK" shall mean all of the outstanding shares of the Series
KBL Preferred Stock and the Series KBL1 Preferred Stock, together, at the time
in question, and any new subseries of the Series KBL Preferred Stock created
pursuant to Section 9 of the Series A/KBL Certificate of Designations.
"SUBSIDIARY" shall mean an entity a majority of the capital stock or
other ownership interest in which is owned directly or indirectly by the
Corporation, except that 100% "SUBSIDIARY" shall mean a subsidiary that is 100%
owned by the Corporation and/or its 100% subsidiaries.
2. NUMBER OF SHARES. The designation of the two series of preferred
stock provided for herein shall be as follows: Series C Preferred Stock, of
which 2,424,242 shares shall be authorized; and Series C1 Preferred Stock, of
which 2,424,242 shares shall be authorized.
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3. DIVIDENDS.
(a) The holder of each share of Series C Stock shall be entitled to
receive, before any dividends shall be declared and paid upon or set aside for
the Junior Securities, out of funds legally available for that purpose,
dividends in cash at the rate per annum per share (the "SERIES C DIVIDEND RATE")
equal to 8% of the Series C Original Purchase Price, adjusted, as applicable,
for any Recapitalization Event, payable, when and as declared by the Board and,
in any event, upon the earliest of (a) a Liquidation Event in accordance with
Section 5 hereof, (b) upon redemption in accordance with Section 4 hereof or (c)
upon the Series C Event of Conversion. Until the third anniversary of the Series
B/KBH Initial Issuance Date, the Corporation shall have the option to make any
such payment either in cash or in shares of Common Stock, provided that
dividends declared and paid upon or set aside for all shares of Series C Stock,
of Series B/KBH Stock and of Series A/KBL Stock at or about the same time are
being paid in the same manner unless a different method of payment is approved
by a majority of the holders of the Series B Stock and Series C Stock, voting
together as a separate class. After the third anniversary of the Series B/KBH
Initial Issuance Date, the Holder shall have the option to receive any such
payment either in cash or in shares of Common Stock. In the event such dividends
are paid in Common Stock, for purposes of computing the number of shares of
Common Stock to be issued and the amount of the dividend paid, the value of the
Common Stock paid to any holder of shares of Series C Stock shall be valued at
the then Series C Conversion Price. Dividends on shares of Series C Stock shall
be cumulative from the Series C Initial Issuance Date, whether or not there
shall be net profits or net assets of the Corporation legally available for the
payment of such dividends, so that, if at any time Series C Full Cumulative
Dividends upon the Series C Stock shall not have been paid or declared and a sum
sufficient for payment thereof set apart, the amount of the deficiency in such
dividends shall be fully paid or dividends in such amount shall be declared on
the shares of the Series C Stock and a sum sufficient for the payment thereof
shall be set apart for such payment, before any dividend shall be declared or
paid or any other distribution ordered or made upon any Junior Securities and
before any sum or sums shall be set aside for or applied to the purchase or
redemption of Junior Securities. With respect to rights to dividends, the Series
C Stock shall rank pari passu with the Series B/KBH Stock but prior to the
Common Stock and all other Junior Securities. All dividends declared upon the
Series C Stock shall be declared pro rata per share. All payments due under this
Section to any holder of shares of Series C Stock shall be made to the nearest
cent. Notwithstanding the foregoing, the holders of the Series C Stock shall not
be entitled to dividends on the Series C Stock pursuant to this Section 3(a) in
the event that on or before August 11, 2001(i) there shall be filed with the
Commission a registration statement with respect to a Qualified IPO (which
registration statement shall have become effective within three months of
filing); or (ii) there shall occur a Qualified Liquidation Event. The term
"QUALIFIED LIQUIDATION EVENT" shall mean a Liquidation Event in which (i) the
holders of the Series B/KBH Stock receive (per share) cash or other property
with a fair market value equal to at least 200% of the Series B/KBH Original
Purchase Price (as adjusted for any stock split, combination, reclassification
or other similar event involving the Series B/KBH Stock) if the Qualified
Liquidation Event occurs within one year after the Series B/KBH Initial Issuance
Date, and 300% of the Series B/KBH Original Purchase Price (as adjusted for any
stock split, combination, reclassification or other similar event involving the
Series B/KBH Stock) if the Qualified Liquidation Event occurs more than one year
after the Series B/KBH Initial Issuance Date (but before August 12, 2001), and
(ii) the holders of the Series C Stock receive (per share) cash or other
property with a fair market value
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equal to at least 200% of the Series C Original Purchase Price (as adjusted for
any stock split, combination, reclassification or other similar event involving
the Series C Stock) if the Qualified Liquidation Event occurs within one year
after the Series B/KBH Initial Issuance Date, and 300% of the Series C Original
Purchase Price (as adjusted for any stock split, combination, reclassification
or other similar event involving the Series C Stock) if the Qualified
Liquidation Event occurs more than one year after the Series B/KBH Initial
Issuance Date (but before August 12, 2001).
(b) In the event the Corporation shall make or issue, or shall fix a
record date for the determination of holders of Common Stock entitled to receive
a dividend or other distribution (other than a distribution in liquidation or
other distribution otherwise provided for herein) with respect to the Common
Stock or any other Junior Securities (based on "as if converted amounts") other
than the Series A/KBL Stock payable in (i) securities of the Corporation other
than shares of Common Stock, or (ii) cash, then, and in each such event,
provision shall be made so that the holders of the Series C Stock shall receive
the number of securities or such other assets of the Corporation which they
would have received had their Series C Stock been converted into Common Stock on
the date of such event.
4. REDEMPTION.
(a) REDEMPTION UPON A LIQUIDATION EVENT. (i) In connection and
concurrently with a Liquidation Event, the Corporation shall (to the extent
allowed by law) redeem, except as set forth hereafter, all the shares of Series
C Stock then outstanding, out of funds legally available therefor. The amount
per share payable upon any redemption of shares of Series C Stock pursuant to
this subsection shall be an amount in cash equal to the Liquidation Redemption
Price, as determined below. The Corporation shall deliver to each holder of
shares of Series C Stock, not later than 45 days prior to the consummation of a
Liquidation Event, notice of such proposed Liquidation Event, including the date
on which such Liquidation Event is expected to be consummated. To the extent
that one or more redemptions and/or a liquidation are occurring concurrently,
any redemption of the shares of Series C Stock shall be deemed to occur and
shall be paid pari passu with any redemption of the shares of Series B/KBH Stock
but in full prior to any other redemptions and/or liquidations, including any
other redemption of shares of the Series A/KBL Stock. Notwithstanding the
foregoing, any Series C Holder may elect to retain its outstanding shares of
Series C Stock and not to subject such shares to redemption by delivery of
written notice to the Corporation at least 15 days prior to the date of the
consummation of the Liquidation Event.
(ii) The amount per share payable upon any redemption of shares
of Series C pursuant to this subsection shall be an amount equal
to the greater of (a) the Series C Original Purchase Price
(subject to equitable adjustment for any stock split, combination,
reclassification or other similar event involving the Series C
Stock) plus all Series C Accrued Dividends, or (b) the Fair Market
Value of such share (the "LIQUIDATION REDEMPTION PRICE").
(iii) Any date upon which Series C Stock is to be redeemed
pursuant to this Section 4 shall be referred to in this context as
a "SERIES C REDEMPTION DATE".
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(b) SERIES C ANNUAL REDEMPTION. Except as set forth hereafter, the
Corporation shall (to the extent allowed by law) redeem the following shares of
Series C Stock on the following dates, out of funds legally available therefor:
(i) at any time on or after February 11, 2005, except, in the
case of any intended recipient which is subject to an applicable
governmental regulation prohibiting such redemption, not earlier
than permitted by such regulation, one-third of the shares of each
of the Series C Stock then outstanding.
(ii) at any time on or after February 11, 2006, an additional
number of shares of each of the Series C Stock equal to one-third
of the shares of the Series C Stock, respectively, outstanding as
of February 11, 2005.
(iii) at any time on or after February 11, 2007, all outstanding
shares of Series C Stock.
The amount per share payable upon any redemption of shares of Series C
Stock pursuant to this subsection shall be an amount in cash equal to the
greater of (a) the Series C Original Purchase Price (subject to equitable
adjustment for any stock split, combination, reclassification or other similar
event involving the Series C Stock) plus all Series C Accrued Dividends, or (b)
the Fair Market Value of such share (the "SCHEDULED REDEMPTION PRICE" and
collectively with the Liquidation Redemption Price, the "SERIES C REDEMPTION
PRICE").
To the extent that one or more annual or other redemptions are occurring
concurrently, any redemption of the shares of Series C Stock shall be deemed to
occur and shall be paid pari passu with any redemption of the shares of Series
B/KBH Stock but in full prior to any other redemptions, including any other
redemption of shares of the Series A/KBL Stock.
Notwithstanding the foregoing, any Series C Holder may elect to retain
its outstanding shares of Series C Stock and not to subject such shares to
redemption by delivery of written notice to the Corporation at least 15 days
prior to the applicable redemption date set forth above.
(c) PRO RATA. If, on any Series C Redemption Date, fewer than all
shares of Series C Stock then outstanding are to be redeemed in accordance with
this Section, the shares to be redeemed shall be allocated pro rata among the
Series C Holders and the Redemption Notice mailed to each Holder shall specify
the number of shares to be redeemed from such Holder. Notwithstanding the
delivery of a Redemption Notice, Series C Holders subject to redemption may
convert such shares pursuant to Section 7 on or before the Series C Redemption
Date by delivering written notice thereof to the Corporation not later than 10
days prior to the Series C Redemption Date.
(d) PAYMENT OF SERIES C REDEMPTION PRICE; TERMINATION OF RIGHTS. On
any Series C Redemption Date, the applicable Series C Redemption Price in
respect of the shares represented by the certificate or certificates surrendered
to the Corporation by the Holder thereof pursuant to the Redemption Notice shall
be paid to the order of the person whose name appears on such certificate or
certificates. Each surrendered certificate shall be canceled and retired and a
new certificate, representing the remaining, unredeemed shares of Series C
Stock, if any, shall be issued to the Holder of such shares. On any Series C
Redemption Date, the rights of a Holder
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with respect to shares redeemed shall cease, other than such Holder's right to
payment of the Series C Redemption Price as of the Series C Redemption Date,
upon surrender of the certificate or certificates.
5. LIQUIDATION. In the event of any liquidation, dissolution or
winding-up of the Corporation, the Series C Holders shall be entitled, before
any assets of the Corporation shall be distributed among or paid over to the
holders of Junior Securities, but after distribution of such assets among, or
payment thereof over to, creditors of the Corporation, to receive from the
assets of the Corporation available for distribution to stockholders in cash,
the Series C Liquidation Amount. If the assets of the Corporation legally
available for distribution shall be insufficient to permit the payment in full
of the Series B/KBH Liquidation Amount and the Series C Liquidation Amount to
the Series B/KBH Holders and the Series C Holders, then the entire assets of the
Corporation legally available for distribution shall be distributed ratably
among the Series B/KBH Holders and Series C Holders in proportion to the
respective amounts which would have been payable upon such Liquidation Event on
such shares of Series B/KBH Stock and Series C Stock if all amounts payable
thereon had been paid in full. In the event that such distribution of assets is
other than in cash, such distribution of cash and other assets (including
securities) shall be made ratably among the holders of the shares of Series
B/KBH Stock and Series C Stock based upon the fair market value of any such
assets as determined by a nationally recognized valuation consultant selected
mutually by the holders of a majority in voting power of the Series B/KBH Stock
and the Series C Stock then outstanding and the Corporation (or if such
selection cannot be made, by a nationally recognized independent valuation
consultant selected by the American Arbitration Association in accordance with
its rules). In the event of any liquidation, dissolution or winding-up of the
Corporation, after payment shall have been made to the holders of shares of
Series B/KBH Stock and Series C Stock of the full amount to which they shall be
entitled as aforesaid, and then after payment of the Series A/KBL Liquidation
Amount to the Series A/KBL Holders under the Series A/KBL Certificate of
Designations, the holders of any Junior Securities and the Series B/KBH Holders
and Series C Holders shall be entitled to participate equally, on an
as-converted basis in the case of the Series B/KBH Stock, the Series C Stock and
any Junior Securities convertible into Common Stock, in all remaining assets of
the Corporation available for distribution to its stockholders. The provisions
of this Section 5 shall not be applicable to any shares of Series B/KBH Stock or
Series C Stock that have been redeemed pursuant to Section 4(a) hereof in
connection with such Liquidation Event. The holders of the Series C Stock shall
have the right to treat any merger, consolidation, sale of all or substantially
all of the assets of the Corporation, or sale of a majority of the voting
capital stock of the Corporation, as a liquidation of the Corporation and, in
connection therewith, to receive payment under this Section 5 upon surrender of
their shares to the Corporation; PROVIDED, HOWEVER, that the holders of the
Series C Stock shall not have the right to treat any merger or consolidation as
a Liquidation Event if the Corporation is the survivor or continuing corporation
of such merger or consolidation and as a result thereof there is no change in
the Common Stock or Preferred Stock or the ownership thereof.
6. VOTING.
(a) VOTES GENERALLY WITH COMMON STOCK. In addition to the rights
specified in Section 6(b) below and any other rights provided in the
Corporation's By-Laws, the shares of Series C Stock shall entitle each Holder
thereof to such number of votes as shall equal the
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number of shares of Common Stock (rounded to the nearest whole number) into
which the shares of Series C Stock held by such Holder are then convertible
pursuant to Section 7 and shall entitle each such Holder to vote on all matters
as to which holders of Common Stock shall be entitled to vote, in the same
manner and with the same effect as such holders of Common Stock, voting together
with the holders of Common Stock as one class.
(b) SEPARATE CLASS VOTE. So long as any shares of Series C Stock are
outstanding, the consent of the holders of a majority of all of the outstanding
shares of Series B Stock, Series C Stock and Series A Stock, voting as a single
and separate class in person or by proxy, at a special or annual meeting called
for the purpose, or by written consent in lieu of a meeting, shall be required
before the Corporation may:
(i) authorize or issue any class or series of capital stock
ranking senior or pari passu to the Series B/KBH Stock, the Series
C Stock or the Series A/KBL Stock with respect to rights to
receive dividends, redemption payments or distributions upon
liquidation or winding up of the Corporation or with respect to
voting, antidilution provisions or preemptive rights;
(ii) authorize, declare or distribute any dividend, whether in
cash or in kind, payable to any class or series of the
Corporation's common or preferred stock (except payment of
dividends on the Series C Stock as contemplated herein or payment
of dividends on the Series B/KBH Stock as contemplated (and only
to the extent permitted) in the Series B/KBH Certificate of
Designations) or payment of dividends on the Series A/KBL Stock as
contemplated (and only to the extent permitted) in the Series
A/KBL Certificate of Designations) or to any other equity security
of the Corporation;
(iii) approve any liquidation, dissolution, sale, lease or
license of all or substantially all of the assets or business, or
of the assets or business of any subsidiary, of the Corporation;
(iv) cancel, repeal or change any of the provisions of this
Certificate of Designations (or of any amendment hereto), any
other certificate of designations of the Corporation (or any
amendment thereto), the Certificate of Incorporation of the
Corporation or the By-laws of the Corporation;
(v) permit to lapse any of the following: its corporate
existence, essential rights, government approvals or franchises or
any licenses or Listed Rights (which the Board deems essential to
the Corporation's business) or other rights to use patents,
processes, licenses, trademarks, trade names or copyrights owned
or possessed by it (which the Board deems essential to the
Corporation's business);
(vi) transfer, assign or license (except end-user licenses
granted in the ordinary course of business) any of the
Corporation's Listed Rights or know-how, technology or trade
secrets now owned or hereafter acquired by the Corporation;
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(vii) voluntarily dissolve, liquidate or wind-up or carry out any
partial liquidation or distribution or transaction in the nature
of a partial liquidation or distribution;
(viii) purchase, lease or otherwise acquire capital stock in any
corporation or equity interest in any other entity or lend money
to any person or entity (other than loans to any one person that,
individually or in the aggregate, shall not exceed $100,000 or
loans to any one employee that, individually or in the aggregate,
shall not exceed $200,000) or purchase a substantial part of the
operating assets of any person or entity;
(ix) consolidate with or merge into or with any other person or
entity or permit any other person or entity to consolidate with or
merge into it (except that a 100% subsidiary may consolidate with
or merge into the Corporation or another 100% subsidiary);
(x) permit any subsidiary (except a 100% subsidiary) to make
any (i) direct or indirect redemption, retirement, purchase or
other acquisition of any of the Corporation's capital stock (or
any warrant, option or other right with respect to such stock),
(ii) repayment of the Corporation's debt held by any Related Party
or by any Affiliate or subsidiary debt held by any Related Party
or by any Affiliate, or (iii) sale of any capital stock of the
Corporation to any third party;
(xi) issue (which term shall include without limitation the
issuance of any shares of, or the grant of any warrants, options
or other rights to purchase any shares of, or any commitment to
issue) any shares of its capital stock (which term shall include
without limitation, securities convertible into capital stock, or
rights to acquire capital stock), other than Excluded Stock, at a
price per share less than $8.25;
(xii) redeem any shares of any capital stock of the Corporation
(except redemptions of Series C Stock as contemplated herein or
redemptions of Series B/KBH Stock as contemplated (and only to the
extent permitted) in the Series B/KBH Certificate of Designations
or redemptions of Series A/KBL Stock as contemplated (and only to
the extent permitted) in the Series A/KBL Certificate of
Designations); or
(xiii) increase the size of the Board of Directors of the Company
above eight (8) members.
7. CONVERSION.
(a) OPTIONAL CONVERSION.
(i) The holder of any shares of Series C Stock shall have the
right, at such holder's option, at any time or from time to time
to convert any or all such holder's shares of Series C Stock into
such whole number of fully paid and nonassessable shares of Common
Stock as equals (I) the product of (x) the Series C Original
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<PAGE>
Purchase Price plus, after the third anniversary of the Series
B/KBH Initial Issuance Date at the option of any Holder, any
unpaid Series C Accrued Dividends with respect to the shares being
converted, multiplied by (y) the number of shares of Series C
Stock being converted, divided by (II) the Series C Conversion
Price (as last adjusted and then in effect) for the shares of the
Series C Stock being converted, by surrender of the certificates
representing the shares of Series C Stock so to be converted in
the manner provided Section 7(a)(ii) below. The Series C
Conversion Price shall initially be equal to the Series C Original
Purchase Price; PROVIDED, HOWEVER, that such Series C Conversion
Price shall be subject to adjustment as set forth in Section
7(a)(iv) below.
(ii) The holder of any shares of Series C Stock may exercise
such holder's conversion right pursuant to this Section by
delivering to the Corporation during regular business hours at the
office of any transfer agent of the Corporation for the Series C
Stock or at such other place as may be designated by the
Corporation, the certificate or certificates for the shares to be
converted, duly endorsed or assigned in blank or to the
Corporation (if required by it) accompanied by written notice
stating that such holder elects to convert such shares and stating
the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued.
Conversion shall be deemed to have been effected with respect to
conversion under (a) Section 7(a)(i) above, on the date when the
aforesaid delivery is made and (b) Section 7(b) on the date of
occurrence of a Series C Event of Conversion, as the case may be,
and any such date is referred to herein as the "SERIES C
CONVERSION DATE". As promptly as practicable thereafter the
Corporation shall issue and deliver to or upon the written order
of such holder, to the place designated by such holder, a
certificate or certificates for the number of full shares of
Common Stock to which such holder is entitled and a check or cash
in respect of any fractional interest in a share of Common Stock,
as provided in Section 7(a)(iii) below, payable with respect to
the shares of Series C Stock so converted up to and including the
Series C Conversion Date. The person in whose names the
certificate or certificates for Common Stock are to be issued
shall be deemed to have become a holder of Common Stock on the
applicable Series C Conversion Date unless the transfer books of
the Corporation are closed on that date, in which event such
holder shall be deemed to have become a holder of Common Stock on
the next succeeding date on which the transfer books are open, but
the Series C Conversion Price shall be that in effect on the
Series C Conversion Date. Upon conversion of only a portion of the
number of shares covered by a certificate representing shares of
Series C Stock surrendered for conversion, the Corporation shall
issue and deliver to or upon the written order of the holder of
the certificate so surrendered for conversion, at the expense of
the Corporation, a new certificate covering the number of shares
of Series C Stock representing the unconverted portion of the
certificate so surrendered.
(iii) No fractional shares of Common Stock or scrip shall be
issued upon conversion of shares of Series C Stock. If more than
one share of Series C Stock shall be surrendered for conversion at
any one time by the same holder, the
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<PAGE>
number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of
shares of Series C Stock so surrendered. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon
conversion of any shares of Series C Stock, the Corporation shall
pay a cash adjustment in respect of such fractional interest in an
amount equal to the then current Fair Market Value of a share of
Common Stock multiplied by such fractional interest.
(iv) The Series C Conversion Price shall be subject to
adjustment from time to time as follows:
(A) ADJUSTMENTS FOR DILUTING ISSUANCES UPON CONTINUED
PARTICIPATION. Unless the Corporation has requested and
received a waiver from the holders of a majority of the
Series A Stock, the Series B Stock and the Series C Stock,
voting together as a single class, if the Corporation shall
at any time or from time to time after the Series C Initial
Issuance Date issue or be deemed (by virtue of any of the
provisions of Section 7(a)(iv)), to have issued any capital
stock (including, without limitation, each class of common
stock of the Corporation) or other equity interests
(including, without limitation, warrants, rights, calls or
options exercisable for or convertible into such capital
stock or equity interests) in the Corporation, other than
Excluded Stock (or Second Round Series B/KBH Stock),
without consideration or for a consideration per share (the
"LAST ISSUE PRICE") less than the Series C Conversion Price
in effect immediately prior to each such issuance or deemed
issuance (a "DILUTING ISSUANCE"), the Series C Conversion
Price in effect immediately prior thereto shall forthwith
be adjusted, as of the opening of business on the date of
such issuance or deemed issuance, to such Last Issue Price.
Notwithstanding the immediately preceding paragraph of this
subsection (A), if a Series C Holder has been given written
notice pursuant to Section 8 hereof and the opportunity to
purchase its Preemptive Share of such Diluting Issuance and
does not purchase its entire Preemptive Share of such
Diluting Issuance, but purchases a lesser share of such
Diluting Issuance or none, the Series C Conversion Price
for that portion of the shares of Series C Stock of said
Series C Holder equal to the Non-Participating Percentage
(as hereinafter defined) (the "DILUTED STOCK") shall not be
reduced for said issuance pursuant to this subsection but
each share of the Diluted Stock which each such Series C
Holder holds shall be automatically converted immediately
prior to the closing of the applicable Diluting Issuance
into one (1) share of Series C1 Preferred Stock which shall
be convertible into Common Stock at the same price per
share that applied to the Diluted Stock immediately prior
to such Diluting Issuance, subject, however, to further
adjustment as herein provided. As used herein, the term
"NON-PARTICIPATING PERCENTAGE" means a percentage equal to
one hundred percent (100%) minus the percentage determined
by dividing the number of shares of the Diluting Issuance
which such Holder
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<PAGE>
actually purchased by the maximum number of shares of the
Diluting Issuance which such Holder was entitled to
purchase on the basis of such Holder's Preemptive Shares
and expressing the resulting quotient as a percentage.
Upon the conversion of Diluted Stock held by a Series C
Holder as set forth herein, such shares of Diluted Stock
shall no longer be outstanding on the books of the
Corporation and the Series C Holder shall be treated, to
the extent that said holder held such Diluted Stock, as the
record holder of such shares of Series C1 Preferred Stock
on the date of closing of the applicable Diluting Issuance.
For the purposes of any adjustment of the Series C
Conversion Price pursuant to this subsection (A), the
following provisions shall be applicable:
(1) In the case of the issuance of stock for
cash, the consideration shall be deemed to be the
amount of cash paid therefor.
(2) In the case of the issuance of stock for a
consideration in whole or in part other than cash,
the consideration other than cash shall be deemed to
be the fair market value thereof as determined in
good faith by the Board, irrespective of any
accounting treatment; PROVIDED, HOWEVER, that the
aggregate fair market value of such non-cash and
cash consideration shall not exceed the current Fair
Market Value of the shares of stock being issued.
(3) In case of the issuance of (i) options to
purchase or rights to subscribe for Common Stock or
Non-voting Common Stock; (ii) securities by their
terms convertible into or exchangeable for Common
Stock or Non-voting Common Stock; or (iii) options
to purchase or rights to subscribe for such
convertible or exchangeable securities:
(a) the aggregate number of shares of
Common Stock or Non-voting Common Stock
deliverable upon exercise of such options to
purchase or rights to subscribe for Common
Stock or Non-voting Common Stock shall be
deemed to have been issued at the time such
options or rights were issued and for a
consideration equal to the consideration
(determined in the manner provided in
subdivisions (1) and (2) above), if any,
received by the Corporation upon the issuance
of such options or rights plus the purchase
price provided in such options or rights for
the Common Stock or Non-voting Common Stock
covered thereby;
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<PAGE>
(b) the aggregate number of shares of
Common Stock or Non-voting Common Stock
deliverable upon conversion of or in exchange
for any such convertible or exchangeable
securities or upon the exercise of options to
purchase or rights to subscribe for such
convertible or exchangeable securities and
subsequent conversion or exchange thereof
shall be deemed to have been issued at the
time such securities were issued or such
options or rights were issued and for a
consideration equal to the consideration
received by the Corporation for any such
securities and related options or rights
(excluding any cash received on accounts of
accrued interest or accrued dividends), plus
the additional consideration, if any, to be
received by the Corporation upon the
conversion or exchange of such securities or
the exercise of any related options or rights
(the consideration in each case to be
determined in the manner provided in
subdivisions (1) and (2) above, with the
proviso to subdivision (2) being applied to
the number of shares of Common Stock or
Non-voting Common Stock deliverable upon such
exercise);
(c) on any change in the number of shares
or exercise price of Common Stock or
Non-voting Common Stock deliverable upon the
exercise of any such options or rights or
conversions of or exchange for such
convertible or exchangeable securities, other
than a change resulting from the antidilution
provisions thereof, the Series C Conversion
Price, if previously adjusted, shall
forthwith be readjusted to such Series C
Conversion Price as would have obtained had
the adjustment made upon the issuance of such
options, rights or securities not converted
prior to such change or options or rights
related to such securities not converted
prior to such change having been made upon
the basis of such change; and
(d) on the expiration of any such options
or rights, the termination of any such rights
to convert or exchange or the expiration of
any options or rights related to such
convertible or exchangeable securities, the
Series C Conversion Price, if previously
adjusted, shall forthwith be readjusted to
such Series C Conversion Price as would have
obtained had such options, rights, securities
or options or rights related to such
securities not been issued.
(B) ADJUSTMENTS FOR CERTAIN DIVIDENDS, SUBDIVISIONS OR
SPLIT-UPS. If, at any time after the Series C Initial
Issuance Date, the number of shares of Common Stock or
Non-voting Common Stock outstanding is
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<PAGE>
increased by a stock dividend payable in shares of Common
Stock or Non-voting Common Stock or by a subdivision or
split-up of shares of Common Stock or Non-voting Common
Stock, then, upon the record date fixed for the
determination of holders of Common Stock or Non-voting
Common Stock entitled to receive such stock dividend,
subdivision or split-up, the Series C Conversion Price
shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of each share
of Series C Stock shall be increased in proportion to such
increase in outstanding shares.
(C) ADJUSTMENTS FOR COMBINATIONS. If, at any time after
the Series C Initial Issuance Date, the number of shares of
Common Stock or Non-voting Common Stock outstanding is
decreased by a combination of the outstanding shares of
Common Stock or Non-voting Common Stock, then, upon the
record date for such combination, the Series C Conversion
Price shall be appropriately increased so that the number
of shares of Common Stock issuable on conversion of each
share of Series C Stock shall be decreased in proportion to
such decrease in outstanding shares.
(D) ADJUSTMENTS FOR REORGANIZATIONS, MERGERS,
CONSOLIDATIONS, ETC. In case, at any time after the Series
C Initial Issuance Date, of any capital reorganization, or
any reclassification of the stock of the Corporation (other
than a change in par value or from par value to no par
value or from no par value to par value or as a result of a
stock dividend or subdivision, split-up or combination of
shares), or the consolidation or merger of the Corporation
with or into another person (other than a consolidation or
merger in which the Corporation is the continuing
corporation and which does not result in any change in the
Common Stock or Preferred Stock or the ownership thereof or
of the sale or other disposition of all or substantially
all of the properties and assets of the Corporation as an
entirety to any other person), each share of Series C Stock
shall, after such reorganization, reclassification,
consolidation, merger, sale or other disposition, be
convertible into the kind and number of shares of stock or
other securities or property of the Corporation or of the
corporation resulting from such consolidation or surviving
such merger or to which such properties and assets shall
have been sold or otherwise disposed to which the holder of
the number of shares of Common Stock deliverable
(immediately prior to the time of such reorganization,
reclassification, consolidation, merger, sale or other
disposition) upon conversion of such share would have been
entitled upon such reorganization, reclassification,
consolidation, merger, sale or other disposition. The
provisions of this subsection shall similarly apply to
successive reorganizations, reclassifications,
consolidations, mergers, sales or other dispositions.
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<PAGE>
(E) All calculations under this subsection (iv) shall be
made to the nearest one cent ($.01) or to the nearest
one-tenth (1/10) of a share, as the case maybe.
(F) In any case in which the provisions of this
subsection (iv) shall require that an adjustment shall
become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of
such event (i) issuing to the holder of any share of Series
C Stock converted after such record date and before the
occurrence of such event the additional shares of capital
stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares
of capital stock issuable upon such conversion before
giving effect to such adjustment and (ii) paying to such
holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section 7(a)(iii) above,
PROVIDED, HOWEVER, that the Corporation shall deliver to
such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional
shares, and such cash, upon the occurrence of the event
requiring such adjustment.
(v) Whenever the Series C Conversion Price shall be adjusted as
provided in Section 7(a)(iv), the Corporation shall forthwith
file, at the office of the transfer agent for the Series C Stock
or at such other place as may be designated by the Corporation, a
statement, signed by its independent certified public accountants,
showing in detail the facts requiring such adjustment and the
Series C Conversion Price that shall be in effect after such
adjustment. The Corporation shall also cause a copy of such
statement to be sent by first class, certified mail, return
receipt requested, postage prepaid, to each Series C Holder at
such holder's address appearing on the Corporation's records.
Where appropriate, such copy may be given in advance and may be
included as part of a notice required to be mailed under the
provisions of Section 7(a)(vi) below.
(vi) In the event the Corporation shall propose to take any
action of the types described in clauses (A), (B), (C), or (D) of
Section 7(a)(iv) above, the Corporation shall give notice to each
holder of shares of Series C Stock, in the manner set forth in
Section 7(a)(v) above, which notice shall specify the record date,
if any, with respect to, any such action and the date on which
such action is to take place. Such notice shall also set forth
such facts with respect thereto as shall be reasonably necessary
to indicate the effect of such action (to the extent such effect
may be known at the date of such notice) on the Series C
Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable
upon the occurrence of such action or deliverable upon conversion
of shares of Series C Stock. In the case of any action which would
require the fixing of a record date, such notice shall be given at
least 20 days prior to the date so fixed, and in case of all other
action, notice shall be given at least 30 days prior to the taking
of such proposed action. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of any
such action.
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<PAGE>
(vii) The Corporation shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of
shares of capital stock of the Corporation upon conversion of any
shares of Series C Stock; PROVIDED, HOWEVER, that the Corporation
shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of
any certificate for such shares in a name other than that of the
holder of the shares of Series C Stock in respect of which such
shares are being issued.
(viii) The Corporation shall reserve, free from preemptive rights,
out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of the shares of
Series C Stock, sufficient shares to provide for the conversion of
all outstanding shares of Series C Stock.
(ix) All shares of Common Stock which may be issued in
connection with the conversion provisions set forth herein will,
upon issuance by the Corporation, be validly issued, fully paid
and nonassessable, with no personal liability attaching to the
ownership thereof, and free from all taxes, liens or charges with
respect thereto.
(b) AUTOMATIC CONVERSION. Upon the occurrence of a Series C Event of
Conversion, all shares of Series C Stock then outstanding shall, by virtue of,
and simultaneously with, the occurrence of the Series C Event of Conversion and
without any action on the part of the holders thereof, be deemed automatically
converted into such whole number of fully paid and nonassessable shares of
Common Stock as equals (1) the product of (x) the Series C Original Purchase
Price plus, after the third anniversary of the Series B/KBH Initial Issuance
Date at the option of any Holder, any unpaid Series C Accrued Dividends with
respect to the shares being converted, multiplied by (y) the number of shares of
Series C Stock being converted divided by (2) the Series C Conversion Price as
last adjusted pursuant to Section 7(a)(iv) and then in effect.
8. PRE-EMPTIVE RIGHTS. (a) RIGHT TO PURCHASE. Until the occurrence of
a Series C Event of Conversion, the Series C Holders shall be entitled to
subscribe for their respective Preemptive Share of any New Securities which the
Corporation may, from time to time, propose to issue and sell, at any time while
any Series C Stock is outstanding and subject to the terms, conditions and
procedures set forth below.
(b) The Corporation shall first deliver to each Series C Holder a
written Notice of Intention to Sell offering to each Series C Holder the right
to purchase up to the Preemptive Share of such Series C Holder of such shares of
New Securities at the purchase price and on the terms specified therein. Each
Series C Holder shall have the right and option, for a period of twenty (20)
days after delivery to said Series C Holder of such Notice of Intention to Sell,
to purchase all or any part of the Preemptive Share of such Series C Holder of
the shares of New Securities so offered at the purchase price and on the terms
stated therein. Such acceptance shall be made by delivering a written Notice of
Acceptance to the Corporation within the aforesaid twenty (20) day period.
The closing of any sales of shares of New Securities under the terms of
Section 8 shall be made at the offices of the Corporation on a mutually
satisfactory business day within five (5)
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<PAGE>
business days after the expiration of the aforesaid period. Delivery of
certificates or other instruments evidencing such shares of New Securities duly
endorsed for transfer to the appropriate Series C Holder shall be made on such
date against payment of the purchase price therefor.
(c) The Corporation may issue and sell all or any part of the
remaining shares of New Securities so offered for sale but not purchased
pursuant to Section 8 hereof at a price not less than the price offered, and on
terms not more favorable, to the purchaser thereof than the terms stated in the
original Notice of Intention to Sell, at any time within ninety (90) days after
the expiration of the offer required by Section 8. In the event the remaining
shares of New Securities are not sold by the Corporation during such ninety (90)
day period, the right of the Corporation to sell such remaining shares of New
Securities shall expire and the obligations of this Section 8 shall be
reinstated; PROVIDED, HOWEVER, that in the event the Corporation determines, at
any time during such ninety (90) day period, that the sale of all or any part of
the remaining shares of New Securities on the terms set forth in the Notice of
Intention to Sell is impractical, the Corporation can terminate the offer and
reinstate the procedure provided in this Section 8 without waiting for the
expiration of such ninety (90) day period.
9. FURTHER DILUTING ISSUANCES. The Corporation shall not permit or
cause to occur more than one Diluting Issuance unless, so as to facilitate the
adjustments required by Section 7(a)(iv)(A), the Corporation (I) has taken all
necessary action to create a new subseries of the Series C Preferred Stock,
which shall be PARI PASSU with the Series C Preferred Stock and the Series C1
Preferred Stock for all purposes except conversion price, and (II) shall have
amended this Certificate to provide that the shares of Series C Stock held by
any Holder thereof who fails to purchase its full Preemptive Share of such
additional Diluting Issuance shall be converted automatically into such new
subseries of Series C Stock. The shares of such subseries shall be convertible
into Common Stock immediately after such Diluting Issuance at the same price per
share that applied to the shares which were so converted immediately prior to
such Diluting Issuance. The consent of the Holders of the Preferred Stock shall
not be required in order to effect such new subseries.
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<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "Corporation"), DOES HEREBY CERTIFY:
1. This Certificate of Amendment amends the Certificate of
Incorporation of the Corporation, as amended (the "Certificate of
Incorporation"), by amending Article 4 to the effect changes in the capital
structure of the Corporation.
2. The text of Article 4 of the Certificate of Incorporation is
amended hereby to read as set forth in Exhibit A attached hereto and hereby
made a part hereof.
3. The foregoing amendment to the Certificate of Incorporation was
duly adopted by written consent of the stockholders in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware.
4. This Amendment to the Certificate if Incorporation was duly adopted
in accordance with the provisions of Section 242 of the General Corporation
Law of the State of Delware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Gualberto Ruano, its President, and attested to by Kevin Rakin, its
Secretary, this 25th day of July, 2000.
GENAISSANCE PHARMACEUTICALS, INC.
By: /s/ Gualberto Ruano
-------------------------
Gualberto Ruano
President
ATTEST:
By: /s/ Kevin L. Rakin
-------------------------
Kevin L. Rakin
Secretary
<PAGE>
EXHIBIT A
Amendment to
Certificate of Incorporation
of
Genaissance Pharmaceuticals, Inc.
Pursuant to
Section 242 of the
Delaware General Corporation Law
The Certificate of Incorporation of Genaissance Pharmaceuticals, Inc.,
a Delaware corporation, has been amended by deleting subsection C.(ii) of
Article 4 thereof without substitution and by renumbering subsection C.(iii)
of said Article 4 to become subsection C.(ii) of Article 4.
<PAGE>
GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATES OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES A1 REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES KBL NONVOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES KBL1 NONVOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), DOES HEREBY
CERTIFY:
1. The following resolutions were duly adopted by a Unanimous Written
Consent of the Board of Directors of the Corporation, dated as of July 20,
2000, pursuant to authority conferred upon the Board of Directors by the
provisions of Article 4 of the Certificate of Incorporation of the Corporation,
as amended, (referred to in the following designations as the "Certificate of
Incorporation"), which authorize the issuance of 30,000,000 shares of a class of
capital stock designated as preferred stock, $.001 par value (the "Preferred
Stock").
RESOLVED: That the provisions of the two Certificates of Designations,
Preferences and Other Special Rights and Qualifications, Limitations
and Restrictions of Preferred Stock of the Corporation (the first such
certificate relating to the Series A Redeemable Convertible Preferred
Stock and the Series A1 Redeemable Convertible Preferred Stock of the
Corporation, and the second such certificate relating to the Series KBL
Nonvoting Redeemable Convertible Preferred Stock and the Series KBL1
Nonvoting Redeemable Convertible Preferred Stock of the Corporation ),
both approved by the Board of Directors on August 22, 1998, and amended
by the Board of Directors as of February 12, 2000, as of March 8, 2000
and as of March 10, 2000 (the "Series A/KBL Certificates of
Designations"), shall be further amended by deleting the definition of
"Qualified IPO" from Section 1 of EXHIBIT 1 to each of the Series A/KBL
Certificates of Designations and substituting therefor the following
text:
"QUALIFIED IPO" shall mean the consummation of a firm
commitment underwritten public offering of shares of
Common Stock registered under the Securities Act which
results in aggregate gross cash proceeds to the
Corporation of not less than forty million dollars
($40,000,000) and pursuant to which the offering price
per share is equal to or greater than $16.50
<PAGE>
($8.25 per share in the event that the registration
statement with respect to such offering shall be filed
with the Commission on or before February 11, 2001),
equitably adjusted for any Recapitalization Event.
; and further
RESOLVED: That except as amended hereby, each of the Series A/KBL
Certificates of Designations are hereby ratified and confirmed.
2. Such resolutions also were duly approved by the written consent of
the holders of the requisite number of shares of the Series A Redeemable
Convertible Preferred Stock, the Series A1 Redeemable Convertible Preferred
Stock, the Series KBL Nonvoting Redeemable Convertible Preferred Stock and the
Series KBL1 Nonvoting Redeemable Convertible Preferred Stock of the Corporation
and the holders of the requisite number of shares of the Series B Convertible
Preferred Stock, the Series B1 Convertible Preferred Stock, the Series KBH
Nonvoting Convertible Preferred Stock, the Series KBH1 Nonvoting Convertible
Preferred Stock, the Series C Convertible Preferred Stock, and the Series C1
Convertible Preferred Stock of the Corporation.
3. This amendment to the Series A/KBL Certificates of Designations was
duly adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to Certificate of Designations to be signed by Gualberto Ruano, its
President, and attested to by Kevin L. Rakin, its Secretary, as of this 25th
day of July, 2000.
GENAISSANCE PHARMACEUTICALS, INC.
By: /s/ Gualberto Ruano
--------------------------
Gualberto Ruano
President
Attest:
By: /s/ Kevin L. Rakin
---------------------
Kevin L. Rakin
Secretary
<PAGE>
GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES B CONVERTIBLE PREFERRED STOCK,
SERIES B1 CONVERTIBLE PREFERRED STOCK,
SERIES KBH CONVERTIBLE PREFERRED STOCK,
SERIES KBH1 CONVERTIBLE PREFERRED STOCK
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), DOES HEREBY
CERTIFY:
1. The following resolutions were duly adopted by a Unanimous Written
Consent of the Board of Directors of the Corporation, dated as of July 20,
2000, pursuant to authority conferred upon the Board of Directors by the
provisions of Article 4 of the Certificate of Incorporation of the Corporation,
as amended, (referred to in the following designations as the "Certificate of
Incorporation"), which authorize the issuance of 30,000,000 shares of a class of
capital stock designated as preferred stock, $.001 par value (the "Preferred
Stock").
RESOLVED: That the provisions of the Certificate of Designations,
Preferences and Other Special Rights and Qualifications, Limitations
and Restrictions of Preferred Stock of the Corporation (relating to the
Series B Convertible Preferred Stock, Series B1 Convertible Preferred
Stock, Series KBH Convertible Preferred Stock and Series KBH1
Convertible Preferred Stock) (the "Series B Certificate of
Designations"), dated as of February 17, 2000, and as amended as of
March 8, 2000 and as of March 10, 2000, shall be further amended by
deleting the definition of "Qualified IPO" from Section 1 of EXHIBIT 1
to the Series B Certificate of Designations and substituting therefor
the following text:
"QUALIFIED IPO" shall mean the consummation of a firm
commitment underwritten public offering of shares of
Common Stock registered under the Securities Act which
results in aggregate gross cash proceeds to the
Corporation of not less than forty million dollars
($40,000,000) and pursuant to which the offering price per
share is equal to or greater than $16.50 ($8.25 per share
in the event that the registration statement with respect
to such offering shall be filed with the Commission on
<PAGE>
or before February 11, 2001), equitably adjusted for any
Recapitalization Event.
; and further
RESOLVED: That except as amended hereby, the Series B Certificate of
Designations is hereby ratified and confirmed.
2. Such resolutions also were duly approved by the written consent of
the holders of the requisite number of shares of the Series A Redeemable
Convertible Preferred Stock, the Series A1 Redeemable Convertible Preferred
Stock, the Series KBL Nonvoting Redeemable Convertible Preferred Stock and the
Series KBL1 Nonvoting Redeemable Convertible Preferred Stock of the Corporation
and the holders of the requisite number of shares of the Series B Convertible
Preferred Stock, the Series B1 Convertible Preferred Stock, the Series KBH
Nonvoting Convertible Preferred Stock, the Series KBH1 Nonvoting Convertible
Preferred Stock, the Series C Convertible Preferred Stock, and the Series C1
Convertible Preferred Stock of the Corporation.
3. This amendment to the Series B Certificate of Designations was duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to Certificate of Designations to be signed by Gualberto Ruano, its
President, and attested to by Kevin L. Rakin, its Secretary, as of this 25th
day of July, 2000.
By: /s/ Gualberto Ruano
------------------------
Gualberto Ruano
President
ATTEST:
/s/ Kevin L. Rakin
-------------------------
Kevin L. Rakin
Secretary
<PAGE>
GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES C CONVERTIBLE PREFERRED STOCK,
SERIES C1 CONVERTIBLE PREFERRED STOCK
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), DOES HEREBY
CERTIFY:
1. The following resolutions were duly adopted by a Unanimous Written
Consent of the Board of Directors of the Corporation, dated as of July 20,
2000, pursuant to authority conferred upon the Board of Directors by the
provisions of Article 4 of the Certificate of Incorporation of the
Corporation, as amended, (referred to in the following designations as the
"Certificate of Incorporation"), which authorize the issuance of 30,000,000
shares of a class of capital stock designated as preferred stock, $.001 par
value (the "Preferred Stock").
RESOLVED: That the provisions of the Certificate of Designations,
Preferences and Other Special Rights and Qualifications, Limitations
and Restrictions of Preferred Stock of the Corporation (relating to the
Series C Convertible Preferred Stock and the Series C1 Convertible
Preferred Stock) (the "Series C Certificate of Designations"), dated as
of March 10, 2000, shall be amended by deleting the definition of
"Qualified IPO" from Section 1 of EXHIBIT 1 to the Series C Certificate
of Designations and substituting therefor the following text:
"QUALIFIED IPO" shall mean the consummation of a firm
commitment underwritten public offering of shares of
Common Stock registered under the Securities Act which
results in aggregate gross cash proceeds to the
Corporation of not less than forty million dollars
($40,000,000) and pursuant to which the offering price per
share is equal to or greater than $16.50 ($8.25 per share
in the event that the registration statement with respect
to such offering shall be filed with the Commission on or
before February 11, 2001), equitably adjusted for any
Recapitalization Event.
; and further
RESOLVED: That except as amended hereby, the Series C Certificate of
Designations is hereby ratified and confirmed.
<PAGE>
2. Such resolutions also were duly approved by the written consent of the
holders of the requisite number of shares of the Series A Redeemable Convertible
Preferred Stock, the Series A1 Redeemable Convertible Preferred Stock, the
Series KBL Nonvoting Redeemable Convertible Preferred Stock and the Series KBL1
Nonvoting Redeemable Convertible Preferred Stock of the Corporation and the
holders of the requisite number of shares of the Series B Convertible Preferred
Stock, the Series B1 Convertible Preferred Stock, the Series KBH Nonvoting
Convertible Preferred Stock, the Series KBH1 Nonvoting Convertible Preferred
Stock, the Series C Convertible Preferred Stock, and the Series C1 Convertible
Preferred Stock of the Corporation.
3. This amendment to the Series C Certificate of Designations was duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to Certificate of Designations to be signed by Gualberto Ruano, its
President, and attested to by Kevin L. Rakin, its Secretary, as of this 25th
day of July, 2000.
By: /s/ Gualberto Ruano
--------------------
Gualberto Ruano
President
ATTEST:
/s/ Kevin L. Rakin
----------------------
Kevin L. Rakin
Secretary
<PAGE>
GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATES OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES A1 REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES KBL NONVOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK,
SERIES KBL1 NONVOTING REDEEMABLE CONVERTIBLE PREFERRED STOCK
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), DOES HEREBY
CERTIFY:
1. The following resolution was duly adopted by action of the Board of
Directors of the Corporation at a special meeting duly held on June 20, 2000,
pursuant to authority conferred upon the Board of Directors by the provisions of
the Certificate of Incorporation of the Corporation, as amended, (referred to in
the following designations as the "CERTIFICATE OF INCORPORATION").
RESOLVED: That the provisions of the two Certificates of Designations,
Preferences and Other Special Rights and Qualifications, Limitations
and Restrictions of Preferred Stock of the Corporation (the first such
certificate relating to the Series A Redeemable Convertible Preferred
Stock and the Series A1 Redeemable Convertible Preferred Stock of the
Corporation, and the second such certificate relating to the Series KBL
Nonvoting Redeemable Convertible Preferred Stock and the Series KBL1
Nonvoting Redeemable Convertible Preferred Stock of the Corporation ),
both approved by the Board of Directors on August 22, 1998, as amended
(the "Series A/KBL Certificates of Designations"), shall be further
amended by deleting the definition of "Excluded Stock" from Section 1
of Exhibit 1 to each of the Series A/KBL Certificates of Designations
and substituting therefor the following text:
"EXCLUDED STOCK" shall mean shares of Common Stock issued
by the Corporation:
(i) as a stock dividend or upon any stock split or
other subdivision or combination of the outstanding shares
of Common Stock;
<PAGE>
(ii) up to an aggregate of 1,557,375 shares of Common
Stock issued or issuable to employees pursuant to an
employee stock option plan approved by the Board;
(iii) upon conversion of any Preferred Stock, warrants
or other convertible securities outstanding as of the
Series B/KBH Initial Issuance Date and set forth on
Schedule 3.4 to the Series B/KBH Stock Purchase Agreement;
or
(iv) warrants, rights or options for the purchase of
up to an aggregate of 250,000 shares of Common Stock (and
all Common Stock issued pursuant thereto) issued with the
approval of the Board to lenders or other parties providing
leasehold improvement financing or equipment financing to
the Corporation;
2. Such resolution also was duly approved by the written consent of the
holders of the requisite number of shares of the Series A Redeemable Convertible
Preferred Stock, the Series A1 Redeemable Convertible Preferred Stock, the
Series KBL Nonvoting Redeemable Convertible Preferred Stock, the Series KBL1
Nonvoting Redeemable Convertible Preferred Stock, the Series B Convertible
Preferred Stock, the Series B1 Convertible Preferred Stock, the Series KBH
Convertible Preferred Stock and the Series KBH1 Convertible Preferred Stock of
the Corporation.
3. This amendment to the Certificates of Designations was duly adopted
in accordance with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
-2-
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Gualberto Ruano, its President, and attested to by
Kevin L. Rakin, its Secretary, as of this 28th day of July, 2000.
GENAISSANCE PHARMACEUTICALS, INC.
By: /s/ Gualberto Ruano
-------------------------
Gualberto Ruano
President
Attest:
By: /s/ Kevin L. Rakin
------------------------
Kevin L. Rakin
Secretary
<PAGE>
GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES B CONVERTIBLE PREFERRED STOCK,
SERIES B1 CONVERTIBLE PREFERRED STOCK,
SERIES KBH CONVERTIBLE PREFERRED STOCK,
SERIES KBH1 CONVERTIBLE PREFERRED STOCK
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
Genaissance Pharmaceuticals, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), hereby certifies
that, pursuant to authority conferred upon the Board of Directors by the
provisions of the Certificate of Incorporation of the Corporation, as amended,
(referred to in the following designations as the "CERTIFICATE OF
INCORPORATION"), the following resolution was duly adopted by the Board of
Directors of the Corporation at a special meeting held on June 20, 2000.
RESOLVED: That the provisions of the Certificate of
Designations, Preferences and Other Special Rights and
Qualifications, Limitations and Restrictions of Preferred
Stock of the Corporation (such certificate relating to the
Series B Convertible Preferred Stock, Series B1 Convertible
Preferred Stock, Series KBH Nonvoting Convertible Preferred
Stock and Series KBH1 Nonvoting Convertible Preferred Stock
of the Corporation), approved by the Board of Directors on
February 12, 2000 and filed with the Delaware Secretary of
State on February 17, 2000, as amended (the "SERIES B/KBH
CERTIFICATE OF DESIGNATIONS"), shall be further amended by
deleting the definition of "Excluded Stock" from Section 1 of
EXHIBIT 1 to such Certificate of Designations and
substituting therefor the following text:
"EXCLUDED STOCK" shall mean shares of Common Stock
issued by the Corporation:
(i) as a stock dividend or upon any stock split
or other subdivision or combination of the outstanding
shares of Common Stock;
(ii) up to an aggregate of 1,557,375 shares of
Common Stock issued or issuable to employees pursuant
to an employee stock option plan approved by the
Board;
<PAGE>
(iii) upon conversion of any Preferred Stock,
warrants or other convertible securities outstanding
as of the Series B/KBH Initial Issuance Date and set
forth on Schedule 3.4 to the Series B/KBH Stock
Purchase Agreement; or
(iv) warrants, rights or options for the
purchase of up to an aggregate of 250,000 shares of
Common Stock (and all Common Stock issued pursuant
thereto) issued with the approval of the Board to
lenders or other parties providing leasehold
improvement financing or equipment financing to the
Corporation.
2. Such resolution also was duly approved by the written consent of the
holders of the requisite number of shares of the Series A Redeemable Convertible
Preferred Stock, the Series A1 Redeemable Convertible Preferred Stock, the
Series KBL Nonvoting Redeemable Convertible Preferred Stock, the Series KBL1
Nonvoting Redeemable Convertible Preferred Stock, the Series B Convertible
Preferred Stock, the Series B1 Convertible Preferred Stock, the Series KBH
Convertible Preferred Stock and the Series KBH1 Convertible Preferred Stock.
3. This amendment to the Certificate of Designations was duly adopted
in accordance with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Gualberto Ruano, its President, and attested to by
Kevin L. Rakin, its Secretary, as of this 28th day of July, 2000.
By: /s/ Gualberto Ruano
-------------------------
Gualberto Ruano
President
Attest:
By: /s/ Kevin L. Rakin
------------------------
Kevin L. Rakin
Secretary
<PAGE>
GENAISSANCE PHARMACEUTICALS, INC.
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SERIES C CONVERTIBLE PREFERRED STOCK,
SERIES C1 CONVERTIBLE PREFERRED STOCK
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
GENAISSANCE PHARMACEUTICALS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "CORPORATION"), DOES HEREBY
CERTIFY:
1. The following resolution was duly adopted by action of the Board of Directors
of the Corporation at a special meeting duly held on June 20, 2000, pursuant to
authority conferred upon the Board of Directors by the provisions of the
Certificate of Incorporation of the Corporation, as amended, (referred to in the
following designations as the "CERTIFICATE OF INCORPORATION").
RESOLVED: That the provisions of the Certificate of Designations,
Preferences and Other Special Rights and Qualifications,
Limitations and Restrictions of Preferred Stock of the Corporation
(such certificate relating to the Series C Convertible Preferred
Stock and Series C1 Convertible Preferred Stock of the
Corporation), approved by the Board of Directors and filed with
the Delaware Secretary of State on March 10, 2000, as amended (the
"SERIES C CERTIFICATE OF DESIGNATIONS"), shall be further amended
by deleting the definition of "Excluded Stock" from Section 1 of
EXHIBIT 1 to such Certificate of Designations and substituting
therefor the following text:
"EXCLUDED STOCK" shall mean shares of Common Stock issued
by the Corporation:
(i) as a stock dividend or upon any stock split or
other subdivision or combination of the outstanding shares
of Common Stock;
(ii) up to an aggregate of 1,557,375 shares of Common
Stock issued or issuable to employees pursuant to an
employee stock option plan approved by the Board;
<PAGE>
(iii) upon conversion of any Preferred Stock, warrants
or other convertible securities outstanding as of the
Series B/KBH Initial Issuance Date and set forth on
Schedule 3.4 to the Series B/KBH Stock Purchase Agreement;
or
(iv) warrants, rights or options for the purchase of
up to an aggregate of 250,000 shares of Common Stock (and
all Common Stock issued pursuant thereto) issued with the
approval of the Board to lenders or other parties providing
leasehold improvement financing or equipment financing to
the Corporation.
2. Such resolution also was duly approved by the written consent of the
holders of the requisite number of shares of the Series A Redeemable Convertible
Preferred Stock, the Series A1 Redeemable Convertible Preferred Stock, the
Series KBL Nonvoting Redeemable Convertible Preferred Stock, the Series KBL1
Nonvoting Redeemable Convertible Preferred Stock, the Series B Convertible
Preferred Stock, the Series B1 Convertible Preferred Stock, the Series KBH
Convertible Preferred Stock and the Series KBH1 Convertible Preferred Stock, and
Series C and Series C1.
3. This amendment to the Certificate of Designations was duly adopted
in accordance with the provisions of Section 242 of the General Corporation Law
of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Gualberto Ruano, its President, and attested to by
Kevin L. Rakin, its Secretary, as of this 28th day of July, 2000.
By: /s/ Gualberto Ruano
-------------------------
Gualberto Ruano
President
Attest:
By: /s/ Kevin L. Rakin
------------------------
Kevin L. Rakin
Secretary
