<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JULY 31, 1999
----------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________to_______________________
Commission File Number 001-15167
----------------------------------------
BIOPURE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2836871
(State of Incorporation) (IRS Employer Identification Number)
11 Hurley Street, Cambridge, Massachusetts 02141
(Address of principal executive offices) (Zip Code)
(617) 234-6500
(Registrant's telephone number)
-------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of August 27, 1999.
Class A Common Stock, $.01 par value ...........22,280,867
Class B Common Stock, $1.00 par value ...............117.7
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<PAGE> 2
BIOPURE CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I - Financial Information:
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at
July 31, 1999 and October 31, 1998 1-2
Condensed Consolidated Statements of Operations
for the quarters ended July 31, 1999 and August 1, 1998 and
for the nine months ended July 31, 1999 and August 1, 1998 3
Condensed Consolidated Statements of Cash Flows
for the nine months ended July 31, 1999 and August 1, 1998 4
Notes to Condensed Consolidated Financial Statements 5-7
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 8-11
Item 3 - Quantitative and Qualitative Disclosure of Market Risk 12
Part II - Other Information:
Item 1 - Legal Proceedings 13
Item 2 - Changes in Securities and Use of Proceeds 13
Item 4 - Submission of Matters to a Vote of Security Holders 13
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibit Index
</TABLE>
<PAGE> 3
FORM 10-Q
PART 1
ITEM 1
PAGE 1
BIOPURE CORPORATION
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
July 31, 1999 October 31, 1998
------------- ----------------
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 7,995 $ 6,063
Accounts receivable, net 393 346
Inventories, net 4,370 3,072
Subscription receivable from underwriters 39,060 --
Current portion of restricted cash 3,508 3,508
Other current assets 186 186
------- -------
Total current assets 55,512 13,175
Property, plant and equipment, net 28,330 29,606
Investment in affiliate 131 131
Other assets 1,494 1,936
------- -------
Total assets $85,467 $44,848
======= =======
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable $ 691 $ 1,523
Accrued expenses 9,475 7,666
Current portion of long-term debt 4,500 2,000
------- -------
Total current liabilities 14,666 11,189
Long-term debt -- 4,000
Deferred compensation 1,772 1,910
Common stock to be repurchased (1,694,273
shares of Class A Common Stock at July 31, 1999
and 2,013,956 at October 31,1998) 5,300 6,300
Stockholders' equity:
Convertible preferred stock, $0.01 par value,
30,000,000 shares authorized at July 31, 1999
and 9,000,000 at October 31, 1998
Series A, no shares outstanding at
July 31, 1999 and 346,663 at
October 31, 1998 -- 3
Series B, no shares outstanding at
July 31, 1999 and 2,127,251 at
October 31, 1998 -- 22
Series C, no shares outstanding at July 31, 1999
and 2,830,188 at October 31, 1998 -- 28
Common stock:
Class A, $0.01 par value, 100,000,000 shares
authorized at July 31, 1999 and 40,000,000
at October 31, 1998, 22,280,867 shares
outstanding at July 31, 1999 and 10,539,225
at October 31, 1998 223 107
Class B, $1.00 par value, 179 shares
authorized, 117.7 shares outstanding -- --
</TABLE>
<PAGE> 4
FORM 10-Q
PART 1
ITEM 1
PAGE 2
BIOPURE CORPORATION
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
(Continued)
Capital in excess of par value 281,747 197,495
Contributed capital 24,574 24,574
Notes receivable (2,429) (2,291)
Treasury stock, at cost (no shares
of Class A Common Stock at July 31,
1999 and 203,278 at October 31, 1998) -- (1,583)
Accumulated deficit (240,386) (196,906)
--------- ---------
Total stockholders' equity 63,729 21,449
--------- ---------
Total liabilities and stockholders'
equity $ 85,467 $ 44,848
========= =========
Note: The balance sheet at October 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
<PAGE> 5
FORM 10-Q
PART I
ITEM 1
PAGE 3
BIOPURE CORPORATION
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Revenues:
Oxyglobin $ 641 $ 253 $ 2,122 $ 377
Other -- 28 64 118
-------- -------- -------- --------
Total revenues 641 281 2,186 495
Cost of revenues 1,741 -- 4,970 --
-------- -------- -------- --------
Gross profit (loss) (1,100) 281 (2,784) 495
Operating expenses:
Research and development 7,449 5,120 17,320 17,205
Sales and marketing 724 573 2,236 1,642
General and administrative 1,158 1,166 3,572 3,185
-------- -------- -------- --------
Total operating expenses 9,331 6,859 23,128 22,032
-------- -------- -------- --------
Loss from operations (10,431) (6,578) (25,912) (21,537)
Other income (expense) 88 (63) 347 402
-------- -------- -------- --------
Net loss (10,343) (6,641) (25,565) (21,135)
Stock dividends on preferred stock (17,915) -- (17,915) --
-------- -------- -------- --------
Net loss applicable to
common stockholders $(28,258) $(6,641) $(43,480) $(21,135)
======== ======== ======== ========
Historical:
Basic net loss
per common share $ (2.29) $ (0.53) $ (3.53) $ (1.70)
Weighted average shares used in
computing basic net loss
per common share 12,328 12,465 12,331 12,439
Pro forma:
Pro forma basic net loss
per common share $ (1.38) $ (0.36) $ (2.21) $ (1.16)
Weighted average shares used in
computing pro forma basic net
loss per common share 20,496 18,405 19,669 18,161
</TABLE>
See accompanying notes.
<PAGE> 6
FORM 10-Q
PART I
ITEM 1
PAGE 4
BIOPURE CORPORATION
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------------
July 31, 1999 August 1, 1998
------------- --------------
<S> <C> <C>
Operating activities:
Net loss $(25,565) $(21,135)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 2,927 2,417
Equity compensation 67 276
Deferred compensation (138) 158
Accrued interest on stockholders' notes receivable (137) (135)
Accounts receivable (47) (113)
Inventories (1,298) (2,690)
Other current assets (339) 32
Accounts payable (832) 175
Accrued expenses 767 (394)
-------- --------
Net cash used in operating activities (24,595) (21,409)
Investing activities:
Purchase of property, plant and equipment (1,652) (4,230)
Other assets 442 (141)
Restricted cash -- (2,392)
-------- --------
Net cash used in investing activities (1,210) (6,763)
Financing activities:
Net proceeds from sale of common stock -- 1,764
Net proceeds from sale of preferred stock 30,149 28,209
Payment of long-term debt (1,500) (1,500)
Repurchase of common stock (1,000) --
Proceeds from exercise of options 88 68
-------- --------
Net cash provided by financing activities 27,737 28,541
Net increase in cash and cash equivalents 1,932 369
Cash and cash equivalents at beginning of period 6,063 13,527
-------- --------
Cash and cash equivalents at end of period $ 7,995 $ 13,896
======== ========
</TABLE>
See accompanying notes.
<PAGE> 7
FORM 10-Q
PART I
ITEM 1
PAGE 5
BIOPURE CORPORATION
Notes to Condensed Consolidated Financial Statements
July 31, 1999
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and pursuant
to the rules and regulations of the Securities and Exchange
Commission (SEC). Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation
have been included. Operating results for the three and nine months
periods ended July 31, 1999 are not necessarily indicative of the
results that may be expected for the year ended October 31, 1999.
For further information, refer to the consolidated financial
statements and footnotes thereto for the year ended October 31, 1998,
included in the Company's Registration Statement on Form S-1,
Registration No. 333-78829.
2. INITIAL PUBLIC OFFERING
On July 21, 1999 the Class A Common Stock was combined on a
two-for-three basis. This combination has been retroactively
reflected in the accompanying consolidated financial statements.
On July 29, 1999 Biopure entered into an agreement for the initial
public offering (IPO) of 3,500,000 shares of Class A Common Stock at
a price of $12 per share, less an underwriting discount, and on
August 4, 1999 the Company received $39,060,000 of proceeds from the
offering, before estimated expenses of $1,358,000. As of July 31,
1999 we recorded a subscription receivable from underwriters of
$39,060,000 and an increase in stockholders' equity of $37,702,000
for the estimated net proceeds of the offering and accrued $1,126,000
for expenses of the offering. Upon the closing of the IPO, all shares
of preferred stock converted into shares of Class A Common Stock.
This conversion of preferred stock into common stock has been
reflected in the equity section of the balance sheet as if it had
occurred as of July 31, 1999.
3. NET LOSS PER SHARE
Historical basic net loss per share is computed based on the
weighted-average number of common shares outstanding during the
period. Diluted net loss per share is computed based upon the
weighted-average number of common shares outstanding during the year,
adjusted for the dilutive effect of shares issuable upon the
conversion of preferred stock outstanding and the exercise of common
stock options and warrants determined based upon the average market
price of common stock for the period. Diluted net loss per share is
not presented in the accompanying condensed consolidated financial
statements because the Company had losses for all periods presented.
The pro forma basic net loss per common share is computed using the
weighted-average number of outstanding common shares assuming
conversion of all convertible preferred shares into common shares at
date of original issuance.
Subsequent to May 20, 1999, an additional 93,750 units of Series D
Convertible Preferred Stock were sold with aggregate net proceeds of
$1,125,000. In accordance with the provisions of EITF 98-5, for
<PAGE> 8
FORM 10-Q
PART I
ITEM 1
PAGE 6
BIOPURE CORPORATION
Notes to Condensed Consolidated Financial Statements
July 31, 1999
(Unaudited)
(Continued)
those units sold after May 20, 1999, the Company treated any shares
of Class A Common Stock issued upon conversion in excess of
two-thirds of one share of Class A Common Stock for each share of
Series D Convertible Preferred Stock as a dividend for accounting
purposes. The Company recorded a dividend of $155,000 in the third
quarter of 1999.
The holders of the Series B and Series C Convertible Preferred Stock
agreed to convert their shares at the time of the Company's IPO on
the condition that the holders of the Series B Convertible Preferred
Stock receive an additional 280,000 shares in the aggregate upon
conversion and the holders of the Series C Convertible Preferred
Stock receive an additional 1,200,000 shares in the aggregate upon
conversion. The fair market value of such additional shares has been
treated, for accounting purposes, as a dividend. Consequently, the
Company recorded a dividend of $17,760,000 in the third quarter of
1999.
The following table sets forth the computation of basic and pro forma
loss per share for the three and nine months ended July 31, 1999 and
August 1, 1998 (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ -----------------------
July 31, August 1, July 31, August 1,
1999 1998 1999 1998
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Historical:
Net loss $(10,343) $ (6,641) $(25,565) $(21,135)
Stock dividends on
preferred stock (17,915) -- (17,915) --
-------- -------- -------- --------
Net loss applicable to
common stockholders $(28,258) $ (6,641) $(43,480) $(21,135)
======== ======== ======== ========
Weighted-average number of
common shares outstanding 12,328 12,465 12,331 12,439
======== ======== ======== ========
Basic net loss
per common share $ (2.29) $ (0.53) $ (3.53) $ (1.70)
======== ======== ======== ========
Pro forma:
Weighted-average number of
common shares:
Historical outstanding 12,328 12,465 12,331 12,439
Issued upon conversion
of preferred stock 8,168 5,940 7,338 5,722
-------- -------- -------- --------
Total weighted-average number
of common shares used in
computing pro forma basic net
loss per common share 20,496 18,405 19,669 18,161
======== ======== ======== ========
Pro forma basic net loss
per common share $ (1.38) $ (0.36) $ (2.21) $ (1.16)
======== ======== ======== ========
</TABLE>
<PAGE> 9
FORM 10-Q
PART I
ITEM 1
PAGE 7
BIOPURE CORPORATION
Notes to Condensed Consolidated Financial Statements
July 31, 1999
(Unaudited)
(Continued)
4. INVENTORIES
Inventories are valued at the lower of cost (determined using the
first-in, first-out method) or market. Inventories were as follows
(in thousands):
<TABLE>
<CAPTION>
July 31, 1999 October 31, 1998
------------- ----------------
<S> <C> <C>
Raw materials ................................ $1,094 $ 935
Work-in-process .............................. 416 542
Finished goods ............................... 2,860 1,595
------ ------
$4,370 $3,072
====== ======
</TABLE>
5. LITIGATION
The Company is a party to litigation initially filed in 1990 arising from
certain joint venture agreements for development and distribution of
product in Central and South America. Summary judgments were entered
against the two plaintiffs in 1994. The plaintiffs each appealed the
judgments; one of the appeals was voluntarily dismissed. The other appeal
was denied in part and remanded to the trial court for further findings
based on lack of jurisdiction. It is anticipated that the trial court will
make the requisite findings in the calendar year 1999. In connection with
the summary judgments, the Company agreed to a settlement with a
third-party intervenor with claims against one of the plaintiffs. Final
payment of the settlement is subject to the outcome of the pending appeal;
however, the Company has provided for such settlement in the accompanying
consolidated financial statements. At July 31, 1999, the Company had
$3,508,000 in escrow in connection with this settlement and included this
amount in other current assets. The settlement amount has been recorded as
a current obligation.
<PAGE> 10
FORM 10-Q
PART I
ITEM 2
PAGE 8
BIOPURE CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
July 31, 1999
Except for historical information contained herein, some matters discussed in
this report constitute forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Actual results could differ materially from
those projected in the forward-looking statements as a result of the risk
factors set forth in this report and in the Company's Registration Statement
(Form S-1, Registration No. 333-78829) and Prospectus dated July 29, 1999. In
light of the substantial risks and uncertainties inherent in all future
projections, the inclusion of forward-looking statements in this report should
not be regarded as representations by the Company that the objectives or plans
of the Company will be achieved. Many factors could cause the Company's actual
results, performance or achievements to differ materially from those in the
forward-looking statements. Reference is made in particular to the discussions
set forth below in this Report under "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and set forth in the
Registration Statement (Form S-1, Registration No. 333-78829) and Prospectus'
under the captions "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1999 COMPARED TO THREE MONTHS ENDED AUGUST 1, 1998
Total revenues increased 128.1% to $641,000 in the third quarter of fiscal 1999
from $281,000 in the third quarter of fiscal 1998. Revenues in the third quarter
of fiscal 1999 consisted of Oxyglobin (veterinary product) sales.
Cost of revenues was $1,741,000 in the third quarter of fiscal 1999. We did not
recognize any cost of revenues in the third quarter of fiscal 1998. All such
costs during the third quarter of 1998 were allocated to research and
development expenses prior to FDA approval of Oxyglobin in March 1998 and while
we expanded manufacturing capacity following FDA approval.
Research and development expenses increased 45.5% to $7,449,000 in the third
quarter of fiscal 1999 from $5,120,000 in the third quarter of fiscal 1998. This
increase was primarily attributable to increased Phase III clinical trial
activity and pre-clinical activity related to our human oxygen therapeutic
product, Hemopure, partially offset by the allocation of that portion of
manufacturing expenses associated with the production of Oxyglobin to cost of
revenues.
Sales and marketing expenses increased 26.6% to $724,000 in the third quarter of
fiscal 1999 from $573,000 in the third quarter of fiscal 1998. This increase was
primarily attributable to increased sales and marketing personnel and selling,
marketing and distribution expenses related to Oxyglobin.
Total other income (expense) was income of $88,000 in the third quarter of
fiscal 1999 compared to an expense of $63,000 in the third quarter of fiscal
1998. This favorable change of $151,000 was primarily associated with $208,000
of other expenses incurred in the third quarter of fiscal 1998 associated with a
discontinued development project unrelated to oxygen therapeutics.
Basic net loss per common share for the quarter was $2.29, compared with a basic
net loss per common share of $0.53 for the same period in 1998. The pro forma
basic net loss per common share was $1.38, compared with $0.36 for the same
period in 1998. The 1999 historic and pro forma basic net loss per common share
include a one-time loss of $1.45 and $0.87, respectively, associated with
$17,915,000 in common stock dividends issued to preferred stockholders.
<PAGE> 11
FORM 10-Q
PART I
ITEM 2
PAGE 9
BIOPURE CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
July 31, 1999
(Continued)
NINE MONTHS ENDED JULY 31, 1999 COMPARED TO NINE MONTHS ENDED AUGUST 1, 1998
Total revenues increased 341.6% to $2,186,000 in the first nine months of fiscal
1999 from $495,000 in the first nine months of fiscal 1998. Revenues in the
first nine months of fiscal 1999 include $2,122,000 of Oxyglobin sales.
Oxyglobin sales commenced in mid-March of fiscal 1998 to a discrete number of
emergency and specialty practices in the United States. We launched Oxyglobin in
the United States in October 1998.
Cost of revenues was $4,970,000 in the first nine months of fiscal 1999. We did
not realize any cost of revenues in the first nine months of fiscal 1998. Cost
of revenues in the first nine months in fiscal 1999 reflects the allocation of a
portion of the manufacturing costs associated with the production of Oxyglobin.
These costs were entirely allocated to research and development expenses prior
to August 1998.
Research and development expenses increased 0.7% to $17,320,000 in the first
nine months of fiscal 1999 from $17,205,000 in the first nine months of fiscal
1998. This increase was primarily attributable to increased Phase III clinical
trial activity and pre-clinical activity related to our human oxygen therapeutic
product, Hemopure, largely offset by the allocation of manufacturing expenses
associated with the production of Oxyglobin to cost of revenues.
Sales and marketing expenses increased 36.2% to $2,236,000 in the first nine
months of fiscal 1999 from $1,642,000 in the first nine months of fiscal 1998.
This increase was primarily attributable to increased sales and marketing
personnel, as well as selling, advertising, marketing and distribution expenses
related to Oxyglobin.
General and administrative expenses increased 12.2% to $3,572,000 in the first
nine months of fiscal 1999 from $3,185,000 in the first nine months of fiscal
1998. This was attributable to increased management personnel and intellectual
property related legal fees and was partially offset by decreased market
research and public relations activities.
Total other income, net, decreased by 13.7% to $347,000 in the first nine months
of fiscal 1999 compared to $402,000 in the first nine months of fiscal 1998.
This decrease of $55,000 was primarily attributable to a $667,000 decrease in
interest income associated with lower average cash balances. Partially
offsetting this reduction in interest income was a $204,000 reduction in
interest expense associated with a lower long-term debt balance. Additionally,
$200,000 of other income was realized in the nine months of fiscal 1999 as
compared to $208,000 of other expense realized in the nine months of fiscal
1998, both of which were associated with a discontinued development project
unrelated to oxygen therapeutics.
Basic net loss per common share for the 1999 nine month period was $3.53,
compared with $1.70 for the same period in 1998. The pro forma basic net loss
per common share was $2.21, compared with $1.16 for the same period in 1998. For
the 1999 nine month period, the historic and pro forma basic net loss per common
share include a one-time loss of $1.45 and $0.91, respectively, associated with
$17,915,000 in common stock dividends issued to preferred stockholders.
<PAGE> 12
FORM 10-Q
PART I
ITEM 2
PAGE 10
BIOPURE CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
July 31, 1999
(Continued)
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 1999, we had current assets of $55,512,000, which consisted
primarily of $7,995,000 in cash and cash equivalents, $4,370,000 in net
inventory and $39,060,000 in subscription receivable from underwriters related
to shares of common stock sold through our initial public offering. At July 31,
1999, current liabilities were $14,666,000.
We have financed operations from inception primarily through sales of equity
securities, development and license agreement payments, interest income and
debt.
In December 1998 and April and May 1999 we sold Series D Convertible Preferred
Stock with aggregate net proceeds of $30,149,000. In July 1999, we sold
3,500,000 shares of Class A Common Stock in our IPO with total net proceeds of
$37,702,000. Our primary investment objective is preservation of principal and
currently we invest in high-grade commercial paper and money market funds which
are intended to minimize risks of interest rate changes.
In October 1996, we incurred $9,000,000 in long-term debt to Pharmacia & Upjohn,
Inc. in connection with the mutual termination of a strategic alliance. As of
July 31, 1999, we had repaid $4,500,000 of the principal amount of this debt.
The $4,500,000 outstanding principal balance became payable upon the completion
of our IPO and has been reflected in current liabilities at July 31, 1999.
On August 5, 1999 the Company paid $4,000,000 which was in addition to an
existing balance of $1,000,000 in an escrow account to complete the August 9,
1999 repurchase of 1,694,273 shares of our Class A Common Stock from a
stockholder.
We have not been profitable since inception and had an accumulated deficit of
$240,386,000 as of July 31, 1999. We will continue to generate losses from
operations for the foreseeable future. We will explore opportunities to raise
capital through sales of equity and debt securities, potential partnerships,
bank borrowings or leasing arrangements.
We believe our current cash, cash equivalents and short-term investments, should
be more than sufficient to meet our projected requirements for the next twelve
months including the anticipated completion of our pivotal Phase III trial. Our
cash requirements may vary significantly from current projections.
As of October 31, 1998, we had net operating loss carryforwards of approximately
$140,000,000 to offset future federal and state taxable income through 2013. Due
to the degree of uncertainty related to the ultimate realization of such prior
losses, no benefit has been recognized in our financial statements as of October
31, 1998. Utilization of such losses in future years may be limited under the
change of stock ownership rules of the Internal Revenue Service.
<PAGE> 13
FORM 10-Q
PART I
ITEM 2
PAGE 11
BIOPURE CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
July 31, 1999
(Continued)
YEAR 2000 COMPLIANCE
Some currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These systems
and software products will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. As a result, computer systems and
software used by many companies and governmental agencies may need to be
upgraded to comply with such Year 2000 requirements or risk system failure or
miscalculations causing disruptions of normal business activities.
STATE OF READINESS
We have made an assessment of the ability of our critical information and
non-information systems to function properly with respect to dates in the year
2000 and thereafter. We have based this assessment upon communications with
equipment and software vendors, literature supplied with software and in
connection with maintenance contracts and test evaluations of our systems. Our
critical systems are defined as: transactional systems affecting product
manufacturing, delivery and quality; systems which play an infrastructure role
in supporting our business and scientific operations; and systems which use
forward-looking or date-based forecasting such as sample or batch expiration
dates.
We have identified potential problems in some of our critical systems and began
repairing, upgrading or replacing such systems in the second quarter of fiscal
1999. We expect to complete this process by the end of the fourth quarter of
fiscal 1999. We expect to repair, replace or upgrade non-critical systems by the
end of calendar year 1999. We will continue to monitor and remediate our
critical and non-critical systems.
COSTS
To date, we have incurred, or are committed to incur, approximately $85,000 in
costs in connection with identifying and evaluating Year 2000 compliance issues.
Most of our expenses generally relate to, and are expected to continue to relate
to, the operating costs associated with time spent by employees in the
assessment process, the repair, upgrade or replacement process and Year 2000
compliance matters. We estimate that the total cost of our Year 2000 project
will be $300,000 and intend to expense such costs as they are incurred. We
expect to fund all of these expenses from working capital. In the event that we
incur expenses higher than anticipated, such additional expenses could harm our
business.
RISKS
We have also commenced an assessment of the Year 2000 risks of our key
suppliers, including contract research organizations working on our clinical
trials, vendors and veterinary distributors of Oxyglobin. Our assessment is
based upon questionnaires submitted to and Year 2000 disclosures received from
these third parties. We believe that any Year 2000 risks associated with these
third parties will not have a material effect on our business. We base our
beliefs on the following facts: our key suppliers, vendors and veterinary
distributors are in the process of upgrading to Year 2000-compliant systems, and
our clinical trial information that might be sensitive to the change from 1999
to 2000 is minimal.
CONTINGENCY PLAN
In the event that we do not complete our Year 2000 conversion, we will manually
perform those tasks which would otherwise be performed by our non-Year
2000-compliant systems until such systems are repaired, upgraded or replaced. In
this event, we anticipate that we may experience delays in our production runs.
<PAGE> 14
FORM 10-Q
PART I
ITEM 3
PAGE 12
BIOPURE CORPORATION
Management's Discussion and Analysis of
Financial Condition and Results of Operations
July 31, 1999
(Continued)
QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK
The Company currently does not have any foreign currency exchange risks with the
exception of negligible exchange fluctuations associated with expenses for
clinical trial and regulatory activities outside of the United States. The
Company invests its cash and cash equivalents in high-grade commercial paper and
money market funds.
<PAGE> 15
FORM 10-Q
PART II
ITEM 1-6
PAGE 13
BIOPURE CORPORATION
Part II - Other Information
July 31, 1999
ITEM 1 - LEGAL PROCEEDINGS
Reference is made to "Business - Litigation" in Registration Statement
No. 333-78829.
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS
During the third fiscal quarter ended July 31, 1999, the Corporation sold
397,250 shares of Series D Convertible Preferred Stock ("Series D Stock") with
warrants to purchase one share of Class A Common Stock for each 15 shares of
Series D Stock acquired. Sales were completed May 13 through May 27, 1999. The
securities were sold to accredited investors, as defined in Regulation D under
the Securities Act of 1933. The price per unit was $12.00. Aggregate
commissions were $78,750.
The Corporation relied upon Section 4(2) of the Securities Act of 1933
following the requirements described in Securities Act Rule 506 and
Regulation D.
By its terms the Series D Stock sold in May 1999 was automatically convertible
upon consummation of an initial public offering at a ratio related to (a) the
initial public offering price to the public and (b) the period of time the
Series D Stock was outstanding. The Series D Stock converted into Class A Common
Stock on August 4, 1999 at conversion ratios of 0.815, 0.810 and 0.805 for
Series D Stock issued on May 13, May 20 and May 27, 1999 respectively.
The Corporation's first registration statement, Registration No. 333-78829,
became effective July 29, 1999, and the offering commenced July 30, 1999. The
offering has terminated with the sale of all of the securities registered,
except for the underwriters' overallotment option.
The managing underwriters were J.P. Morgan and Co., Adams, Harkness & Hill, Inc.
and Robert W. Baird & Co. Incorporated.
The securities registered were 3,500,000 shares of Class A Common Stock, plus
575,000 additional shares to cover the underwriters' overallotment option. All
shares were registered for the account of the issuer.
The aggregate price of the offering amount registered and sold, not including
shares to cover the underwriters' overallotment option, was $42,000,000.
Expenses incurred in connection with the issuance and distribution of the
securities registered were as follows: for underwriting discounts and
commissions - $2,940,000; finders fees - $0; expenses paid to or for
underwriters - $0; other expenses - $1,358,000; and total expenses - $4,298,000.
Other expenses and total expenses are estimates. None of such payments were
direct or indirect payments to directors or officers of the issuer or their
associates or to persons owning 10 percent or more of any class of equity
securities of the issuer or any of its affiliates or direct or indirect payments
to others.
The net offering proceeds to the issuer after deducting underwriters' discounts
and the total expenses described above were $37,702,000.
Following the effective date of the registration statement there remained one
business day in the period covered by this report. The Company did not receive
proceeds from the offering during the period.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Two matters were submitted to a vote of security holders during the third fiscal
quarter ended July 31, 1999; (1) approval of the 1999 Omnibus Securities and
Incentive Plan (the "Omnibus Plan") and (2) approval of amendments to the
Corporation's Restated Certificate of Incorporation (the "Amendments").
(1) As of July 9, 1999 the requisite amount of consents to the Omnibus
Plan were attained with 11,238,544 votes for and 18,333 against.
(2) As of July 21, 1999 the requisite amount of consents to the
Amendments were attained with 14,818,170 votes for and 27,333
against.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits are listed in the accompanying Exhibit Index.
(b) No reports on Form 8-K were filed during the quarter for which
this report is filed.
<PAGE> 16
FORM 10-Q
PART II
PAGE 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOPURE CORPORATION
Date: September 14, 1999 By: /s/ Carl W. Rausch
------------------------------
Carl W. Rausch
Chairman of the Board
Chief Executive Officer
Date: September 14, 1999 By: /s/ Brian A. Lajoie
------------------------------
Brian A. Lajoie
Vice President/Controller
<PAGE> 17
EXHIBIT INDEX
Number Description
- ------ -----------
3(i) Amended Restated Certificate of Incorporation
27.1 Financial Data Schedule for nine months ended
July 31, 1999
27.2 Financial Data Schedule for nine months ended
August 1, 1998
27.3 Financial Data Schedule for three months ended
July 31, 1999
27.4 Financial Data Schedule for three months ended
August 1, 1998
<PAGE> 1
Exhibit 3(i)
RESTATED CERTIFICATE OF INCORPORATION
OF BIOPURE CORPORATION
PURSUANT TO SECTIONS 242 AND 245 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
Biopure Corporation, a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Biopure Corporation (the
"Corporation"). The Corporation was originally incorporated under the name
Biopure Fine Chemicals, Inc., which name was changed to "Biopure Corporation" on
October 31, 1985. The original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on July 30, 1984 and was restated on
November 14, 1997.
2. This Restated Certificate of Incorporation restates and further amends
the Restated Certificate of Incorporation of the Corporation and has been
adopted and approved in accordance with Sections 242 and 245 of the General
Corporation Laws of the State of Delaware.
3. The text of the Restated Certificate of Incorporation as heretofore
amended is hereby amended and restated to read in its entirety as follows:
A. FIRST: NAME. The name of the Corporation is:
Biopure Corporation
B. SECOND: REGISTERED AGENT. The registered office of the Corporation is
to be located at 1013 Centre Road, in the City of Wilmington, County of New
Castle, State of Delaware and the registered agent's name is the Corporation
Service Company.
C. THIRD: PURPOSE. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
D. FOURTH: CAPITALIZATION. The total number of shares of capital stock
which the Corporation shall have authority to issue is 49,000,179 shares,
divided into two classes. The total authorized number of shares of common stock
is 40,000,179, consisting of 40,000,000 shares of Class A Common Stock, par
value $0.01 ("Common Stock"), and 179 shares of Class B Common Stock, par value
$1.00 ("Class B Common Stock"). The total authorized number of shares of
preferred stock ("Preferred Stock") is 9,000,000 shares, par value $.01 per
share, of which 346,663 shares are designated Series A Convertible Preferred
Stock ("Series A Preferred Stock"), 2,358,490 shares are designated Series B
Convertible Preferred Stock ("Series B Preferred Stock") 2,830,188 shares are
designated Series C Convertible Preferred Stock ("Series C Preferred Stock") and
3,333,333 shares are designated Series D Convertible Preferred Stock ("Series D
Preferred Stock").
<PAGE> 2
Except as otherwise provided herein with respect to the Series A Preferred
Stock, the Series B Preferred Stock, Series C Preferred Stock and the Series D
Preferred Stock, and subject to any limitations prescribed by law, the Board of
Directors is authorized to provide for the issuance of shares of Preferred Stock
in series, and by filing a certificate pursuant to the applicable law of the
State of Delaware (such certificate being hereinafter referred to as a
"Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences, and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof. The number of authorized
shares of Preferred Stock in any such series may be increased or decreased (but
not below the number of shares thereof then outstanding) by the affirmative vote
of holders of a majority of the voting power entitled to vote generally in the
election of directors, without a vote of the holders of Preferred Stock of such
series, unless a vote of any such holders is required pursuant to the terms of
any Preferred Stock Designation.
The powers, preferences and rights of the shares of the Common Stock, the
Class B Common Stock, the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock and the Series D Preferred Stock and the
qualifications, limitations or restrictions thereof, are as follows:
4.1. COMMON STOCK
4.1.1. Except as otherwise required by law and subject to the voting
rights of the holders of Preferred Stock, the holders of Common Stock are
entitled at all times to one vote per share on all matters to be voted on by the
Corporation's stockholders.
4.1.2. The holders of the Common Stock are entitled to receive
dividends when and as dividends on the Common Stock are declared by the Board of
Directors.
4.2. CLASS B COMMON STOCK
4.2.1. DIVIDENDS. The holders of the Class B Common Stock shall not be
entitled to receive dividends.
4.2.2. VOTING RIGHTS. The holders of the Class B Common Stock shall
have no right as such holders to vote at or participate in any meeting of
stockholders of the Corporation or to receive any notice of such meeting, except
as required by law.
4.2.3. DISTRIBUTION OF ASSETS. In the event of the voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation, and
after all amounts to which the holders of Preferred Stock have been paid or set
aside in cash for payment, the holders of Class B Common Stock will be entitled
to receive on a PARI PASSU basis with the holders of Common Stock all of the
remaining assets of the Corporation available for distribution to holders of its
Common Stock. For purposes of determining the portion of such remaining assets
to be received
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<PAGE> 3
by holders of the Class B Common Stock, shares of Class B Common Stock shall be
deemed to have been converted into a number of shares of Common Stock to be
determined by multiplying the Share Limit by the Class B Liquidation Ratio.
4.2.4. CONVERSION. All outstanding shares of Class B Common Stock
shall be automatically converted into shares of Common Stock at the time and on
the terms set forth below.
(a) Upon receipt by the Corporation of the Determination, all
shares of Class B Common Stock shall, subject to adjustment as provided in
subparagraph (b) below, be automatically converted into that number of shares of
Common Stock equal to the product of the Exchange Rate (based on the Fair Market
Value per share of Common Stock as set forth in the Determination) and the Class
B Conversion Value provided that the aggregate number of shares of Common Stock
issued pursuant to this provision shall not exceed an amount equal to the
product of the Class B Conversion Ratio and the Share Limit.
If each outstanding share of the Class B Common Stock is so
automatically converted, it shall be converted without any further action by the
holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent; provided,
however, that the Corporation shall not be obligated to issue certificates
evidencing the shares of the Common Stock issuable upon conversion of any shares
of the Class B Common Stock unless certificates evidencing such shares of the
Class B Common Stock are either delivered to the Corporation or any transfer
agent, as hereinafter provided, or the holder notifies the Corporation that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection therewith. Upon the occurrence of the automatic
conversion of the Class B Common Stock, the holders of the Class B Common Stock
shall surrender the certificates representing such shares at the office of the
Corporation or of any transfer agent for the Class B Common Stock or the Common
Stock. Thereupon, there shall be issued and delivered to such holder, promptly
at such office and in his name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of Common
Stock into which the shares of the Class B Common Stock surrendered were
converted on the date on which the Determination was received by the
Corporation.
(b) Any conversion of Class B Common Stock under subparagraph
(a) shall be subject to adjustment as described below. In the event that the
Corporation shall (i) declare a dividend or make a distribution on Common Stock
payable in shares of its capital stock (whether shares of Common Stock or of
capital stock of any other class), (ii) subdivide outstanding shares of Common
Stock into a greater number of shares, (iii) combine outstanding shares of
Common Stock into a smaller number of shares, or (iv) issue any shares of its
capital stock by reclassification of Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Corporation is the continuing Corporation), then if the record date, in the case
of such a dividend or distribution, or the effective date, in the case of such a
subdivision, combination or reclassification, is after the 30th day after PLA
and ELA
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<PAGE> 4
Approval, then the holder shall be entitled to receive upon conversion of its
shares of Class B Common Stock pursuant to paragraph (a) above the aggregate
number and kind of shares which, if such conversion had been made at the
Exchange Rate and subject to the Share Limit in effect immediately prior to such
event, the holder would have owned upon such conversion and been entitled to
receive by virtue of such dividend, distribution, subdivision, combination or
reclassification.
(c) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of shares of the Class B Common Stock,
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Class B Common
Stock; and if at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of the Class B Common Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of the Common Stock to such number of shares as
shall be sufficient for such purpose.
4.2.5. DEFINITIONS.
"Class B Conversion Ratio" means a fraction, the numerator of which
shall be 24.574 plus the number of shares of Class B Common Stock held by the
holders and the denominator of which shall be 225.
"Class B Conversion Value" means the multiplicative product of (x)
24.574 plus the number of outstanding shares of Class B Common Stock and (y) $1
million.
"Class B Liquidation Ratio" means a fraction, the numerator of which
shall be the number of shares of Class B Common Stock held by the holders and
the denominator of which shall be 225.
"Determination" means the determination by the Qualified Arbitrator of
the Fair Market Value of the Corporation as of the 30th day following PLA and
ELA Approval pursuant to a Determination Process which shall commence on the
30th day following PLA and ELA Approval.
"Determination Process" means the following process through which the
Determination shall be made:
(a) On or before the 40th day following PLA and ELA Approval,
the Corporation and the holder of the Class B Common Stock (the "Parties") shall
agree on the appointment of a Qualified Arbitrator and such Qualified Arbitrator
shall within 60 days further make the Determination, provided, however, that:
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<PAGE> 5
(i) if the Parties shall not agree on the appointment of a
Qualified Arbitrator as aforesaid, the Parties shall each appoint a
disinterested third party as its representative on or before such 40th day
following PLA and ELA Approval and the representatives thus appointed shall
appoint a Qualified Arbitrator, and such Qualified Arbitrator shall be
instructed to make the determination within 30 days;
(ii) if either Party shall have failed to appoint a
representative as aforesaid, the first representative appointed shall appoint
the Qualified Arbitrator;
(iii) if the two representatives appointed by the Parties
shall be unable to agree upon the appointment of the Qualified Arbitrator within
15 days of their appointment, they shall give notice of such failure to agree to
the Parties and, either of the Parties upon notice to the other Party may apply
for such appointment to the Chancery Court of Delaware; and
(iv) in the event of the failure, refusal or inability of
the Qualified Arbitrator to act, a new Qualified Arbitrator shall be appointed
in its stead, which appointment shall be made in the same manner as hereinbefore
provided for the appointment of the Qualified Arbitrator.
(b) The Qualified Arbitrator shall give notice to the Parties
stating its determination, and shall furnish to each a copy of such
determination signed by it. Such Determination, absent manifest error, shall be
binding.
"Exchange Rate" means at any time of determination the amount
determined in accordance with the following formula:
1
-------------------------------------------
Fair Market Value per Share of Common Stock
"Fair Market Value per Share of Common Stock" means the Determination
of the fair market value of the Company divided by 20,453,287 adjusted to the
same extent of any adjustments pursuant to the definition of "Share Limit,"
being the number of shares, as of January 20, 1997, of Common Stock on a fully
diluted basis that gives effect to any outstanding options, warrants, rights or
securities convertible into or exercisable for Common Stock, and agreements to
issue any such securities or rights, in each case, to the extent that such
issuance would have a dilutive effect on such fair market value after also
taking into account any exercise price payable in connection with the exercise
thereof; provided, that if the product of the "Fair Market Value per Share of
Common Stock" and the aggregate number of shares of Common Stock outstanding and
issuable pursuant to any options, warrants, rights and agreements described
above (the "Aggregate Biopure Common Equity Value") is more than $3,000,000,000,
then the "Fair Market Value per Share of Common Stock" shall be deemed to be
such amount as would cause the Aggregate Biopure Common Equity Value to be
$3,000,000,000.
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<PAGE> 6
"Hemopure" means a bovine hemoglobin source Blood Product known as
Hemopure developed for clinical use by the Corporation which is the subject of
pending United States and foreign patent applications.
"PLA and ELA Approval" means receipt of all regulatory approvals
required for the development, production, use, lease, sale, license, sublicense
and other disposition of Hemopure for the sale and distribution of Hemopure for
in vivo use as an oxygen transport material in humans in the United States.
"Qualified Arbitrator" means an investment banking or appraisal firm
of nationally recognized standing having the knowledge and experience necessary
to make the Determination selected in accordance with the procedures set forth
in the definition of Determination Process above.
"Share Limit" means, at the time of the Determination, 3,017,700,
subject to adjustment as follows: In the event that the Corporation shall on or
after January 20, 1997 (i) declare a dividend or make a distribution on Common
Stock payable in shares of its capital stock (whether shares of Common Stock or
of capital stock of any other class) and set a record date for such dividend or
distribution as a date prior to the date on which the Corporation receives the
Determination, (ii) subdivide outstanding shares of Common Stock into a greater
number of shares, (iii) combine outstanding shares of Common Stock into a
smaller number of shares, or (iv) issue any shares of its capital stock by
reclassification of Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Corporation is the
continuing Corporation), then the Share Limit in effect immediately prior to
such event shall automatically be adjusted immediately after the record date, in
the case of such a dividend or distribution, or the effective date, in the case
of such a subdivision, combination or reclassification, to be such aggregate
number of shares of Common Stock that a holder of a number of shares of Common
Stock equal to the Share Limit in effect immediately prior to such event, would
have been entitled to receive by virtue of such dividend, distribution,
subdivision, combination or reclassification.
4.3. SERIES A PREFERRED STOCK
4.3.1. DIVIDENDS. Subject to Sections 4.4.4(b), 4.5.4(b) and 4.6.4(b)
hereof, the holders of outstanding shares of Series A Preferred Stock shall
participate equally, share for share, with the holders of shares of Common
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and any other class or series of stock of the Corporation authorized after
June 20, 1997 entitled to receive payment of dividends and entitled to receive
assets on liquidation, dissolution or winding up of the affairs of the
Corporation on a parity with the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock (such stock, with
the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock, the "Parity Stock"), in all
dividends and distributions payable out of funds legally available therefor
(except as otherwise provided in Section 4.3.2), if and when declared by the
Board of Directors, except that the holder of each
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<PAGE> 7
share of Series A Preferred Stock shall be entitled to receive dividends and
distributions in the amount payable in respect of the number of shares of Common
Stock into which such Series A Preferred Stock could be converted, pursuant to
the provisions of Section 4.3.4 hereof, on the record date for the dividend or
distribution on Common Stock.
4.3.2. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) TREATMENT AT LIQUIDATION, DISSOLUTION OR WINDING UP. In the
event of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the holders of each share of Series A Preferred Stock
shall be entitled to be paid first out of the assets of the Corporation
available for distribution to holders of the Corporation's capital stock before
any distribution or payment shall be made to the holders of Common Stock and
Class B Common Stock (the "Corporation Assets"), an amount equal to the GREATER
of:
(i) $3.75 per share of Series A Preferred Stock (which
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), plus all declared but unpaid dividends thereon (the
aggregate of such amount with respect to all the outstanding Series A Preferred
Stock being referred to as the "Preference"), or
(ii) such amount per share of Series A Preferred Stock as
would have been payable had each such share been converted to Common Stock
immediately prior to such event of liquidation, dissolution or winding up
pursuant to the provisions of Section 4.3.4.
If the Corporation Assets shall be insufficient to permit the
payment in full to holders of the Series A Preferred Stock of the amounts thus
distributable, then the entire assets of the Corporation available for such
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock and other Parity Stock. After such payment shall have been made
in full to the holders of Series A Preferred Stock and other Parity Stock, or
funds necessary for such payment shall have been set aside by the Corporation in
trust for the account of the holders of the Series A Preferred Stock so as to be
available for such payment, the holders of the Series A Preferred Stock shall be
entitled to no further participation in the distribution of the assets of the
Corporation and shall have no further rights of conversion, and the remaining
assets available for distribution shall be distributed ratably among the holders
of the Common Stock and the Class B Common Stock.
(b) TREATMENT OF REORGANIZATIONS, CONSOLIDATIONS, MERGERS, AND
SALES OF ASSETS. A reorganization of the Common Stock as provided in Section
4.3.4(h) or a consolidation or merger of the Corporation or a sale of all or
substantially all of the assets of the Corporation shall be regarded as a
liquidation, dissolution or winding up of the affairs of the Corporation within
the meaning of this Section 4.3.2; PROVIDED, HOWEVER, that each holder of Series
A Preferred Stock shall have the right to elect the benefits of the provisions
of Section 4.3.4(h) hereof in lieu of receiving payment in liquidation,
dissolution or winding up of the Corporation pursuant to this Section 4.3.2.
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<PAGE> 8
(c) DISTRIBUTIONS OTHER THAN CASH. Whenever the distribution
provided for in this Section 4.3.2 shall be payable in property other than cash,
the value of such distribution shall be the fair market value of such property
as determined in good faith by the Board of Directors of the Corporation.
4.3.3. VOTING RIGHTS. Except as otherwise expressly provided in
Section 4.3.5 hereof, or as required by law, each holder of Series A Preferred
Stock shall be entitled to vote on all matters and shall be entitled to that
number of votes equal to the largest number of whole shares of Common Stock into
which such shares of Series A Preferred Stock could be converted, pursuant to
Section 4.3.4 hereof, in each case determined as of the record date for the
determination of shareholders entitled to vote on such matter (or to act by
written consent, if such is the case). Except as otherwise expressly provided
herein or as required by law, the holders of shares of Common Stock, and the
holders of shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock shall vote together as a single
class on all matters.
4.3.4. CONVERSION RIGHTS. The holders of Series A Preferred Stock
shall have the following rights with respect to the conversion of the Series A
Preferred Stock into shares of Common Stock:
(a) GENERAL. Subject to and in compliance with the provisions of
this Section 4, any share of Series A Preferred Stock may, at the option of the
holder, be converted at any time into fully-paid and non-assessable shares of
Common Stock. The number of shares of Common Stock to which a holder of Series A
Preferred Stock shall be entitled upon conversion shall be the product obtained
by multiplying the Applicable Conversion Rate (determined as provided in Section
4.3.4(b)) by the number of shares of Series A Preferred Stock being converted.
(b) APPLICABLE CONVERSION RATE. The conversion rate in effect at
any time for the Series A Preferred Stock (the "Applicable Conversion Rate")
shall be the quotient obtained by dividing $3.75 by the Applicable Conversion
Value, calculated as provided in Section 4(c).
(c) APPLICABLE CONVERSION VALUE. The Applicable Conversion Value
in effect from time to time, except as adjusted in accordance with Section
4.3.4(d) hereof, shall be $3.75.
(d) ADJUSTMENTS TO APPLICABLE CONVERSION VALUE.
(i)(A) UPON SALE OF COMMON STOCK. If at any time the
Corporation shall issue or sell shares of its Common Stock without consideration
or at a price per share less than the Applicable Conversion Value in effect
immediately prior to such issuance or sale, then in each such case such
Applicable Conversion Value (with respect to all authorized shares of Series A
Preferred Stock, regardless whether some or all have been issued or not) upon
each such
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<PAGE> 9
issuance or sale, except as hereinafter provided, shall be lowered so as to be
equal to an amount determined by multiplying the Applicable Conversion Value by
a fraction:
(1) the numerator of which shall be (a) the number of
shares of Common Stock outstanding immediately prior to the issuance of such
additional shares of Common Stock plus (b) the number of shares of Common Stock
which the net aggregate consideration, if any, received by the Corporation for
the total number of such additional shares of Common Stock so issued would
purchase at the Applicable Conversion Value in effect immediately prior to such
issuance, and
(2) the denominator of which shall be (a) the number
of shares of Common Stock, outstanding immediately prior to the issuance of such
additional shares of Common Stock plus (b) the number of such additional shares
of Common Stock so issued.
(B) UPON ISSUANCE OF WARRANTS, OPTIONS AND RIGHTS TO COMMON
STOCK.
(1) For the purposes of this Section 4.3.4(d)(i), the
issuance of any warrants, options, subscriptions or purchase rights with respect
to shares of Common Stock and the issuance of any securities convertible into or
exchangeable for shares of Common Stock (or the issuance of any warrants,
options or any rights with respect to such convertible or exchangeable
securities) shall be deemed an issuance at such time of such Common Stock if the
Net Consideration Per Share (as hereinafter determined) which may be received by
the Corporation for such Common Stock shall be LESS THAN the Applicable
Conversion Value for the Series A Preferred Stock in effect at the time of such
issuance. Any obligation, agreement or undertaking to issue warrants, options,
subscriptions or purchase rights at any time in the future shall be deemed to be
an issuance at the time such obligation, agreement or undertaking is made or
arises. No adjustment of the Applicable Conversion Value for the Series A
Preferred Stock shall be made under this Section 4.3.4(d)(i) upon the issuance
of any shares of Common Stock which are issued pursuant to the exercise of any
warrants, options, subscriptions or purchase rights or pursuant to the exercise
of any conversion or exchange rights in any convertible securities if any
adjustment shall previously have been made upon the issuance of any such
warrants, options or subscriptions or purchase rights or upon the issuance of
any such convertible securities (or upon the issuance of any such warrants,
options or any rights therefor) as above provided.
Should the Net Consideration Per Share of any such
warrants, options, subscriptions or purchase rights or convertible securities be
decreased from time to time, then, upon the effectiveness of each such change,
the Applicable Conversion Value shall be adjusted to such Applicable Conversion
Value as would have obtained (1) had the adjustments made upon the issuance of
such warrants, options, rights or convertible securities been made upon the
basis of the actual Net Consideration Per Share of such securities, and (2) had
the adjustments made to the Applicable Conversion Value since the date of
issuance of such securities been made to the Applicable Conversion Value as
adjusted pursuant to (1) above. Any
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<PAGE> 10
adjustment of the Applicable Conversion Value with respect to this paragraph
which relates to warrants, options, subscriptions or purchase rights with
respect to shares of Common Stock shall be disregarded if, as, and when all of
such warrants, options, subscriptions or purchase rights expire or are cancelled
without being exercised, so that the Applicable Conversion Value effective
immediately upon such cancellation or expiration shall be equal to the
Applicable Conversion Value in effect at the time of the issuance of the expired
or cancelled warrants, options, subscriptions or purchase rights, with such
additional adjustments as would have been made to that Applicable Conversion
Value had the expired or cancelled warrants, options, subscriptions or purchase
rights not been issued.
(2) For purposes of this paragraph, the "Net
Consideration Per Share" which may be received by the Corporation shall be
determined as follows:
a. The "Net Consideration Per Share" shall mean
the amount equal to the total amount of consideration, if any, received by the
Corporation for the issuance of such warrants, options, subscriptions or other
purchase rights or convertible or exchangeable securities, plus the minimum
amount of consideration, if any, payable to the Corporation upon exercise or
conversion thereof, divided by the aggregate number of shares of Common Stock
that would be issued if all such warrants, options, subscriptions or other
purchase rights or convertible or exchangeable securities were exercised,
exchanged or converted.
b. The Net Consideration Per Share which may be
received by the Corporation shall be determined in each instance as of the date
of issuance of warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities without giving effect to any possible
future upward price adjustments or rate adjustments which may be applicable with
respect to such warrants, options, subscriptions or other purchase rights or
convertible or exchangeable securities.
(C) STOCK DIVIDENDS. In the event the Corporation shall
make or issue, or shall fix a record date for the determination of holders of
any stock of the Corporation entitled to receive a dividend or other
distribution payable in Common Stock or securities of the Corporation
convertible into or otherwise exchangeable for the Common Stock of the
Corporation, then such Common Stock or other securities issued in payment of
such dividend shall be deemed to have been issued without consideration, EXCEPT
FOR (i) dividends payable in shares of Common Stock payable PRO RATA to holders
of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock
and Series D Preferred Stock and to holders of any other class of stock, whether
or not paid to holders of any other class of stock, or (ii) dividends payable in
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock; PROVIDED, HOWEVER, that the holders of any
shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock shall be entitled to receive such shares of
Common Stock for which the shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock are then
convertible at the Applicable Conversion Value.
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(D) CONSIDERATION OTHER THAN CASH. For purposes of this
Section 4.3.4(d)(i), if a part or all of the consideration received by the
Corporation in connection with the issuance of shares of the Common Stock or the
issuance of any of the securities described in this Section 4.3.4(d)(i) consists
of property other than cash, such consideration shall be deemed to have a fair
market value as is reasonably determined in good faith by the Board of Directors
of the Corporation.
(E) EXCEPTIONS. This Section 4.3.4(d)(i) shall not apply:
(1) to a maximum of 400,000 shares of Common Stock, or options exercisable
therefor (such number subject to equitable adjustment in the event of any stock
split, combination, reclassification or other similar event), issuable to
officers and employees of the Corporation pursuant to any stock option plan,
stock purchase plan or other bona fide compensation arrangement approved by the
Board of Directors of the Corporation; and (2) under any of the circumstances
which would constitute an Extraordinary Common Stock Event (as hereinafter
defined in Section 4.3.4(d)(ii)).
(d) (ii) ADJUSTMENTS TO APPLICABLE CONVERSION VALUE UPON
EXTRAORDINARY COMMON STOCK EVENT. Upon the happening of an Extraordinary Common
Stock Event (as hereinafter defined), the Applicable Conversion Value shall,
simultaneously with the happening of such Extraordinary Common Stock Event, be
adjusted by multiplying the then effective Applicable Conversion Value by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such Extraordinary Common Stock Event and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after such Extraordinary Common Stock Event, and the product so
obtained shall thereafter be the Applicable Conversion Value. The Applicable
Conversion Value, as so adjusted, shall be readjusted in the same manner upon
the happening of any successive Extraordinary Common Stock Event or Events.
"Extraordinary Common Stock Event" shall mean (A) a
subdivision of outstanding shares of Common Stock into a greater number of
shares of the Common Stock, or (B) a combination of outstanding shares of the
Common Stock into a smaller number of shares of the Common Stock.
(e) AUTOMATIC CONVERSION UPON INITIAL PUBLIC OFFERING.
(i) Immediately upon the closing of an underwritten public
offering on a firm commitment basis pursuant to an effective
registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Common Stock for the
account of the Corporation resulting in gross proceeds to the
Corporation of at least $5,000,000 at a price per share of at
least $12.00 (as adjusted for stock splits, stock dividends,
recapitalization and similar events), all outstanding shares of
Series A Preferred Stock shall be converted automatically into
the number of shares of Common Stock into which such class of
Series A Preferred Stock is convertible pursuant to Section 4.3.4
hereof as of the closing of such underwritten public offering
without any further action by the
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holders of such shares and whether or not the certificates
representing such shares are surrendered to the Corporation or
its transfer agent for the Common Stock.
(ii) Upon the occurrence of the conversion specified in the
preceding paragraph (i), the holders of Series A Preferred Stock
shall, upon notice from the Corporation, surrender the
certificates representing such shares at the office of the
Corporation or of its transfer agent for the Common Stock.
Thereupon, there shall be issued and delivered to such holder a
certificate or certificates for the number of shares of Common
Stock into which the shares of such class of Series A Preferred
Stock surrendered were convertible on the date on which such
conversion occurred. The Corporation shall not be obligated to
issue such certificates unless certificates evidencing such
shares of the Series A Preferred Stock being converted are either
delivered to the Corporation or any such transfer agent, or the
holder notifies the Corporation or any such transfer agent that
such certificates have been stolen or destroyed and executes an
agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection therewith.
(f) DIVIDENDS. 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 payable in (i) securities of the Corporation other than
shares of Common Stock or (ii) assets (excluding cash dividends or
distributions), then and in each such event provision shall be made so that the
holders of Series A Preferred Stock shall receive upon conversion thereof in
addition to the number of shares of Common Stock receivable thereupon, the
number of securities or such other assets of the Corporation which they would
have received had the Series A Preferred Stock been converted into Common Stock,
on the date of such event and had they thereafter, during the period from the
date of such event to and including the Conversion Date (as that term is
hereafter defined in Section 4.3.4(j)), retained such securities or such other
assets receivable by them as aforesaid during such period, giving application to
all adjustments called for during such period under this Section 4 with respect
to the rights of the holders of the Series A Preferred Stock.
(g) CAPITAL REORGANIZATION OR RECLASSIFICATION. If the Common
Stock issuable upon the conversion of the Series A Preferred Stock shall be
changed into the same or different number of shares of any class or classes of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend or a merger or
sale of assets provided for elsewhere in this Section 4.3.4, or the sale of all
or substantially all of the Corporation's properties and assets to any other
person), then and in each such event the holder of each share of Series A
Preferred Stock shall have the right thereafter to convert such shares into the
kind and amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification or other change by holders of the
number of shares of Common Stock into which such shares of Series A Preferred
Stock might have been
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converted immediately prior to such reorganization, reclassification or change,
all subject to further adjustment as provided herein.
(h) CAPITAL REORGANIZATION, MERGER OR SALE OF ASSETS. If at any
time or from time to time there shall be a capital reorganization of the Common
Stock (other than a subdivision, combination, reclassification, or exchange of
shares provided for elsewhere in this Section 4) or a merger or consolidation of
the Corporation with or into another corporation, or the sale of all or
substantially all of the Corporation's properties and assets to any other
person, then, as a part of such merger, or consolidation or sale, provision
shall be made so that the holders of Series A Preferred Stock shall thereafter
be entitled to receive upon conversion of the Series A Preferred Stock, the
number of shares of stock or other securities or property of the Corporation, or
of the successor Corporation resulting from such merger, consolidation or sale,
to which such holders would have been entitled if such holders had converted
their shares of Series A Preferred Stock immediately prior to such capital
reorganization, merger, consolidation, or sale. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section
4.3.4 with respect to the rights of the holders of the Series A Preferred Stock
after the reorganization, merger, consolidation or sale to the end that the
provisions of this Section 4.3 (including adjustment of the Applicable
Conversion Value then in effect and the number of shares issuable upon
conversion of the Series A Preferred Stock) shall be applicable after that event
in as nearly equivalent a manner as may be practicable.
Each holder of Series A Preferred Stock upon the occurrence of a
capital reorganization, merger or consolidation of the Corporation, or the sale
of all or substantially all its assets and properties, as such events are more
fully set forth in the first paragraph of this Section 4.3.4(h), shall have the
option of electing treatment of his shares of Series A Preferred Stock under
either this Section 4.3.4(h) or Section 4.3.2 hereof, notice of which election
shall be submitted in writing to the Corporation at its principal offices no
later than ten (10) business days before the effective date of such event.
(i) ACCOUNTANT'S CERTIFICATE AS TO ADJUSTMENTS; NOTICES BY
CORPORATION. In each case of an adjustment or readjustment of the Applicable
Conversion Rate, the Corporation at its expense will furnish each holder of
Series A Preferred Stock with a certificate, prepared by independent public
accountants of recognized standing, showing such adjustment or readjustment, and
stating in detail the facts upon which such adjustment or readjustment is based.
(j) EXERCISE OF CONVERSION PRIVILEGE. To exercise its conversion
privilege, a holder of Series A Preferred Stock shall surrender the certificate
or certificates representing the shares being converted to the Corporation at
its principal office, and shall give written notice to the Corporation at that
office that such holder elects to convert such shares. Such notice shall also
state the name or names (with address or addresses) in which the certificate or
certificates for shares of Common Stock issuable upon such conversion shall be
issued. The certificate or certificates for shares of Series A Preferred Stock
surrendered for conversion shall be accompanied by proper assignment thereof to
the Corporation or in blank. The date when such written notice is received by
the Corporation, together with the certificate or certificates
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<PAGE> 14
representing the shares of Series A Preferred Stock being converted, shall be
the "Conversion Date." As promptly as practicable after the Conversion Date, the
Corporation shall issue and shall deliver to the holder of the shares of Series
A Preferred Stock being converted, or on its written order, such certificate or
certificates as it may request for the number of whole shares of Stock issuable
upon the conversion of such shares of Series A Preferred Stock, as the case may
be, in accordance with the provisions of this Section 4.3.4, cash in the amount
of all accrued and unpaid dividends on such shares of each class of Series A
Preferred Stock, up to and including the Conversion Date, and cash, as provided
in Section 4.3.4(k), in respect of any fraction of share of Common Stock
issuable upon such conversion. Such conversion shall be deemed to have been
effected immediately prior to the close of business on the Conversion Date, and
at such time the rights of the holder as holder of the converted shares of
Series A Preferred Stock shall cease and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such Conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
(k) CASH IN LIEU OF FRACTIONAL SHARES. No fractional shares of
Common Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series A Preferred Stock. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of
Series A Preferred Stock, the Corporation shall pay to the holder of the shares
of Series A Preferred Stock, as the case may be, which were converted, a cash
adjustment in respect of such fractional shares in an amount equal to the same
fraction of the market price per share of Common Stock (as determined in a
reasonable manner prescribed by the Board of Directors) at the close of business
on the Conversion Date. The determination as to whether or not any fractional
shares are issuable shall be based upon the total number of shares of Series A
Preferred Stock being converted at any one time by any holder thereof, not upon
each share of Series A Preferred Stock being converted.
(l) PARTIAL CONVERSION. In the event some but not all of the
shares of Series A Preferred Stock represented by a certificate or certificates
surrendered by a holder are converted, the Corporation shall execute and deliver
to or on the order of the holder, at the expense of the Corporation, a new
certificate representing the number of shares of Series A Preferred Stock which
were not converted.
(m) RESERVATION OF COMMON STOCK. The Corporation shall at all
times reserve and keep available 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, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Series A Preferred Stock, and if at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of Series A Preferred Stock, the
Corporation shall take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose. For purposes of this Section 4.3.4, the term
Common Stock shall include the Corporation's Common Stock, $.01 par value per
share, any other capital stock or any class or classes (however designated) of
the Corporation,
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authorized on or after the date hereof, the holders of which shall have the
right, without limitation as to amount, either to all or a share of the balance
of current dividends and distributions on any shares entitled to preference, and
the holders of which shall ordinarily, in the absence of contingencies, be
entitled to vote for directors of the Corporation (even though the right so to
vote has been suspended by the happening of such a contingency); and any other
securities into which any of the securities described above may be converted or
exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.
4.3.5. RESTRICTIONS AND LIMITATIONS.
(a)(i) CORPORATE ACTION WITH RESPECT TO SERIES A PREFERRED STOCK.
Except as expressly provided herein or as required by law, so long as an
aggregate of 100,000 shares of Series A Preferred Stock remain outstanding, the
Corporation shall not, and shall not permit any subsidiary (which shall mean any
corporation or trust of which the Corporation directly or indirectly owns at the
time a majority of the outstanding shares of every class other than directors'
qualifying shares) to, without the approval by the holders of at least sixty-six
and two-thirds percent (66-2/3%) of the then outstanding shares of Series A
Preferred Stock voting separately as a class:
(1) redeem, purchase or otherwise acquire for value (or pay
into or set aside for a sinking fund for such purpose), any share or shares of
Series A Preferred Stock;
(2) authorize or issue, or obligate itself to authorize or
issue, additional shares of Series A Preferred Stock, or additional shares of
Common Stock except as set forth in Section 4.3.4(d)(i)(E) hereof or except with
respect to stock option or purchase plans for key employees;
(3) merge or consolidate with any other entity, or sell,
assign, lease or otherwise dispose of or voluntarily part with the control of
(whether in one transaction or in a series of transactions) all, or
substantially all, of its assets (whether now owned or hereinafter acquired) or
sell, assign or otherwise dispose of (whether in one transaction or in series of
transactions) any of its accounts receivable (whether now in existence or
hereinafter created) at a discount or with recourse, to any person, or permit
any subsidiary to do any of the foregoing, except for sales or other
dispositions of assets in the ordinary course of business and except that (A)
any subsidiary may merge into or consolidate with or transfer assets to any
other subsidiary and (B) any subsidiary may merge into or transfer assets to the
Corporation.
(4) amend or restate its Certificate of Incorporation, if
such amendment would:
(i) Change the relative seniority rights of the holders of
Series A Preferred Stock, as to the payment of dividends in relation to the
holders of any other capital stock of the Corporation; or
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(ii) reduce the amount payable to the holders of Series A
Preferred Stock upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, or change the relative seniority of the
liquidation preferences of the holders of Series A Preferred Stock, to the
rights upon liquidation of the holders of any capital stock of the Corporation
or change the dividend rights of the holders of Series A Preferred Stock, as the
case may be; or
(iii) authorize or issue, or obligate itself to authorize or
issue, any other equity security senior to or on a parity with the Series A
Preferred Stock as to liquidation preferences, conversion rights, voting rights,
dividend rights or otherwise; or
(iv) cancel or modify the conversion rights of the holders
of Series A Preferred Stock provided for in Section 4.3.4 herein; or
(v) otherwise adversely change any of the rights,
preferences, privileges or limitations, which are provided for herein for the
benefit of the Series A Preferred Stock.
4.3.6. NO DILUTION OR IMPAIRMENT. The Corporation will not, by
amendment or restatement of its Certificate of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Series A Preferred Stock
set forth herein, but will at all times in good faith assist in the carrying out
of all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holders of the Series A
Preferred Stock against dilution or other impairment. Without limiting the
generality of the foregoing, the Corporation (a) will not increase the par value
of any shares of stock receivable on the conversion of the Series A Preferred
Stock above the amount payable therefor on such conversion, (b) will take all
such action as may be necessary or appropriate in order that the Corporation may
validly and legally issue fully paid and nonassessable shares of stock on the
conversion of all Series A Preferred Stock from time to time outstanding, (c)
will not transfer all or substantially all of its properties and assets to any
other person (corporate or otherwise), or consolidate with or merge into any
other person or permit any such person to consolidate with or merge into the
Corporation (if the Corporation is not the surviving person), unless such other
person shall expressly assume in writing and will be bound by all the terms of
the Series A Preferred Stock, as the case may be, set forth herein.
4.3.7. NOTICES OF RECORD DATE. In the event of
(a) any taking by the Corporation of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
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(b) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger or consolidation of the Corporation, or any transfer of all or
substantially all of the assets of the Corporation to any other corporation, or
any other entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding up of the Corporation, then and in each such event the Corporation shall
mail or cause to be mailed to each holder of Series A Preferred Stock a notice
specifying (i) the date on which any such record is to be taken for the purpose
of such dividend, distribution or right and a description of such dividend,
distribution or right, (ii) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding up is expected to become effective and (iii)
the time, if any, that is to be fixed, as to when the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other property deliverable
upon such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding up. Such notice shall
be mailed at least thirty (30) days prior to the date specified in such notice
on which such action is to be taken.
4.4. SERIES B PREFERRED STOCK.
4.4.1. LIQUIDATION RIGHTS. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, each holder of a share of Series B Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or surplus funds of the Corporation to the holders of Common Stock or
Class B Common Stock by reason of their ownership thereof, an amount equal to
any declared but unpaid dividends on such share of Series B Preferred Stock to
and including the date full payment is so tendered to the holders of the Series
B Preferred Stock with respect to such liquidation, dissolution or winding up,
plus an amount equal to the greater of: (a)(i) if such liquidation, dissolution
or winding up occurs prior to the third anniversary of the Series B Original
Issue Date, the Return Amount per share or (ii) if such liquidation, dissolution
or winding up occurs on or after the third anniversary of the Series B Original
Issue Date, $21.73 per share or (b) such amount per share of Series B Preferred
Stock as would have been payable had each share of Parity Stock been converted
to Common Stock immediately prior to such liquidation, dissolution or winding up
pursuant to the provisions of Section 4.4.2; provided that the amount
distributable per share of Common Stock pursuant to this clause (b) exceeds
$31.80. The liquidation amount set forth in this Section 4.4.1 shall be subject
to equitable adjustment whenever there shall occur a stock split, stock
dividend, combination, reorganization, recapitalization, reclassification or
other similar event involving a change in the Series B Preferred Stock.
"RETURN AMOUNT" shall mean, as of any date, an amount equal to the
Series B Original Issue Price plus a 35% annualized rate of return on the Series
B Original Issue Price from the Series B Original Issue Date to such date.
"SERIES B ORIGINAL ISSUE PRICE" shall mean Ten Dollars and Sixty Cents
($10.60).
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If the assets or surplus funds to be distributed to the holders of the
Series B Preferred Stock, Series A Preferred Stock and other Parity Stock are
insufficient to permit the payment to such holders of their full preferential
amount, the assets and surplus funds legally available for distribution shall be
distributed ratably among the holders of the Series B Preferred Stock and other
Parity Stock in proportion to the full preferential amount each such holder is
otherwise entitled to receive. In the event that the holder of Series B
Preferred Stock receives the liquidation rights under option (a) set forth above
in this Section 4.4.1, and after payment to the Series B Preferred Stockholders
of the liquidation amount described above and after all preference amounts to
the holders of Parity Stock have been paid or set aside in cash for payment, the
remaining assets shall be distributed ratably to the holders of the Common
Stock, the Class B Common Stock, the Series B Preferred Stock, the Series C
Preferred Stock and Series D Preferred Stock on a common equivalent basis (i.e.,
as if each share had been converted to Common Stock immediately prior to the
liquidation, dissolution or winding up pursuant to the provisions of Section
4.4.2), provided that the holders of Series B Preferred Stock will stop
participating once they have received a total liquidation amount per share of
$31.80, plus any declared but unpaid dividends.
A merger, acquisition, sale of voting control or sale of substantially
all of the assets of the Corporation shall be deemed to be a liquidation within
the meaning of this Section 4.4.1, but only if the holders of the outstanding
stock of the Corporation immediately prior to the closing of such merger, sale
or acquisition hold, immediately after such transaction, less than a majority in
interest of the issued and outstanding shares of voting securities (as measured
by voting power) of the purchasing corporation or of the corporation (including
without limitation the Corporation) surviving or resulting from such merger, as
the case may be; provided, however, that (i) any holder of Series B Preferred
Stock may elect, by notice to the Corporation no later than 5 days before the
effective date of such event, to be treated under the provisions of Section
4.4.2(d)(vii) in lieu of this Section 4.4.1 in connection with such sale, merger
or consolidation and (ii) in the event the consideration payable to the
Corporation or to the holders of its outstanding stock in connection with any
such sale, merger or consolidation (the "Transaction Consideration") does not
consist entirely of cash, then the Corporation may satisfy its obligations under
this Section 4.4.1. by paying to the holders of Series B Preferred Stock a
portion of the Transaction Consideration with a fair market value equal to the
amount required to be distributed pursuant to this Section 4.4.1. The fair
market value of the Transaction Consideration shall be as determined in good
faith by the Board of Directors of the Corporation. If the Transaction
Consideration consists of more than one type of consideration, then each type of
consideration shall be distributed or offered to each holder of Series B
Preferred Stock in the same proportions as such type of consideration represents
of the total Transaction Consideration.
4.4.2. CONVERSION. The holders of Series B Preferred Stock shall have
conversion rights as follows (the "Series B Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series B Preferred Stock
shall be convertible at the option of the holder thereof at any time after the
date of issuance and without the payment of any additional consideration
therefor into that number of fully paid and
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nonassessable shares of Common Stock as is determined by dividing Ten and 60/100
Dollars ($10.60) by the then effective Conversion Price (as defined below) as
adjusted pursuant to this Section 4.4.2 and in effect at the time of conversion.
The initial Conversion Price of the Series B Preferred Stock shall be Ten and
60/100 Dollars ($10.60). Subject to Section 4.4.2(e), the Conversion Price shall
be subject to adjustment (in order to adjust the number of shares of Common
Stock into which the Series B Preferred Stock is convertible) as hereinafter
provided. Each person so converting shares of Series B Preferred Stock shall
forfeit any declared but unpaid dividends up to the time of the conversion.
(b) AUTOMATIC CONVERSION. Each share of Series B Preferred Stock
shall automatically and immediately be converted into shares of Common Stock at
the then effective Conversion Price upon:
(i) the closing of a firm commitment underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the Corporation to the public at a public offering price of at least
$15.00 per share (with such amount to be appropriately adjusted in the event of
any stock dividend, stock distribution or subdivision as provided in Section
4.4.2(d)(vi)) and having an aggregate offering price to the public resulting in
net proceeds to the Corporation (after deducting commissions payable to the
underwriters) in excess of $40,000,000; or
(ii) the written consent of holders in interest of 80% or
more of the Series B Preferred Stock then outstanding.
The person(s) entitled to receive Common Stock issuable upon a
conversion of Series B Preferred Stock hereunder shall not be deemed to have
converted the Series B Preferred Stock until immediately prior to the closing of
such offering or the receipt by the Corporation of such consent. Each person who
holds of record Series B Preferred Stock immediately prior to an automatic
conversion shall forfeit any declared but unpaid dividends up to the time of the
automatic conversion.
(c) MECHANICS OF CONVERSION. No fractional shares of Common
Stock shall be issued upon conversion of Series B Preferred Stock. In lieu of
any fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the greater of
the price to public in the IPO (as such term is defined in Section 4.6.2(b)(ii))
or the then effective applicable Conversion Price. Before any holder of Series B
Preferred Stock shall be entitled to convert the same into full shares of Common
Stock under Section 4.4.2(a), such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series B Preferred Stock, and shall give written notice
to the Corporation at such office that such holder elects to convert the same
and shall state therein his name or the name or names of his nominees in which
such holder wishes the certificate or certificates for shares of Common Stock to
be issued, together with the applicable federal taxpayer identification number.
The Corporation shall, as
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soon as practicable thereafter, issue and deliver at such office to such holder
of Series B Preferred Stock, or to his nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled, together with cash in lieu of any fraction of a share. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Series B Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
(d) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES:
(i) SPECIAL DEFINITIONS. For purposes of this Section
4.4.2(d), the following definitions shall apply:
(1) "OPTION" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(2) "SERIES B ORIGINAL ISSUE DATE" shall mean June 25,
1997.
(3) "CONVERTIBLE SECURITIES" shall mean any evidences
of indebtedness, shares (other than Common Stock, Class B Common Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock) or other securities directly or indirectly convertible into or
exchangeable for Common Stock.
(4) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares of Common Stock issued (or, pursuant to Section 4.4.2(d)(iii), deemed to
be issued) by the Corporation after the Series B Original Issue Date, other than
shares of Common Stock issued or issuable:
(A) upon conversion of shares of Class B Common
Stock, Series A, Preferred Stock Series C Preferred Stock or Series D Preferred
Stock or by way of dividend or distribution on shares of Common Stock, Class B
Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock;
(B) to officers, directors or employees of, or
consultants to, the Corporation pursuant to action by the Board of Directors
after the Series B Original Issue Date under any stock purchase or option plan
or other employee or director stock incentive or compensation program up to an
aggregate of 500,000 shares; and
(C) upon the exercise of options and warrants
outstanding on the Series B Original Issue Date up to an aggregate of 271,525
shares.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
number of shares of Common Stock into which Series B Preferred Stock is
convertible shall be
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made by adjustment in the Conversion Price of Series B Preferred Stock in
respect of the issuance of Additional Shares of Common Stock or otherwise,
unless the consideration per share for such Additional Shares of Common Stock
issued or deemed to be issued by the Corporation is less than the Conversion
Price of Series B Preferred Stock in effect on the date of, and immediately
prior to, the issue of such Additional Shares.
(iii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES
OF COMMON STOCK.
(1) OPTIONS AND CONVERTIBLE SECURITIES. In the event
the Corporation at any time or from time to time after the Series B Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 4.4.2(d)(v)) of such Additional Shares
of Common Stock would be less than the Conversion Price of the Series B
Preferred Stock in effect on the date of and immediately prior to such issue, or
such record date, as the case may be, and provided further that in any such case
in which Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price of
the Series B Preferred Stock shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price of the Series B Preferred Stock computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price of the Series B Preferred Stock
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto) and any subsequent adjustments based thereon shall,
upon such expiration, be recomputed as if:
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(I) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if any, actually received by
the Corporation upon such conversion or exchange, and
(II) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the Corporation
(determined pursuant to Section 4.4.2(d)(v)) upon the issue of the Convertible
Securities with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the Conversion Price of the Series B
Preferred Stock to an amount which exceeds the lower of (i) the Conversion Price
of the Series B Preferred Stock on the original adjustment date, or (ii) the
Conversion Price of the Series B Preferred Stock that would have resulted from
any issuance of Additional Shares of Common Stock between the original
adjustment date and such readjustment date;
(E) in the case of any Options which expire by their
terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Conversion Price of the Series B Preferred Stock shall be made
until the expiration or exercise of all such Options, whereupon such adjustment
shall be made in the same manner provided in clause (C) above; and
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made in the Conversion Price of the Series B Preferred
Stock which became effective on such record date shall be cancelled as of the
close of business on such record date, and thereafter the Conversion Price of
the Series B Preferred Stock shall be adjusted pursuant to this Section
4.4.2(d)(iii) as of the actual date of their issuance.
(2) STOCK DIVIDENDS, STOCK DISTRIBUTIONS AND
SUBDIVISIONS. In the event the Corporation at any time or from time to time
after the Series B Original Issue Date of the Series B Preferred Stock shall
declare or pay any dividend or make any other distribution on the Common Stock
payable in Common Stock, or effect a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in
Common Stock), then and in any such event, Additional Shares of Common Stock
shall not be deemed to
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have been issued, but the Conversion Price of each series of Series B Preferred
Stock shall be adjusted in accordance with Section 4.4.2(d)(vi).
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK.
In the event the Corporation shall issue Additional Shares
of Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 4.4.2(d)(iii)) without consideration or for a consideration
per share less than the Conversion Price of the Series B Preferred Stock in
effect on the date of and immediately prior to such issue, then and in such
event, in order to increase the number of shares of Common Stock into which the
Series B Preferred Stock is convertible, concurrently with such issuance, the
Conversion Price of the Series B Preferred Stock shall be reduced to a price
(calculated to the nearest cent) equal to the price per Additional Share of
Common Stock being so issued or deemed to be issued, provided that the
Conversion Price shall not be so reduced at such time if the amount of such
reduction would be an amount less than $0.05, but any such amount shall be
carried forward and reduction with respect thereto made at the time of and
together with any subsequent reduction which, together with such amount and any
other amount or amounts so carried forward, shall aggregate $0.05 or more.
(v) DETERMINATION OF CONSIDERATION. For purposes of this
Section 4.4.2(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY: Such consideration shall:
(A) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the Corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 4.4.2(d)(iii)(1),
relating to Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the Corporation as
consideration for the issue of such Options or Convertible Securities, plus the
minimum
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aggregate amount of additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration until such subsequent adjustment
occurs) payable to the Corporation upon the exercise of such Options or the
conversion or exchange of such Convertible Securities or in the case of Options
for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by (y)
the maximum number of shares of Common Stock (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such number until such subsequent adjustment occurs)
issuable upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) ADJUSTMENT FOR DIVIDENDS, DISTRIBUTIONS, SUBDIVISIONS,
COMBINATIONS OR CONSOLIDATION OF COMMON STOCK.
(1) STOCK DIVIDENDS, DISTRIBUTIONS OR SUBDIVISIONS. In
the event the Corporation at any time or from time to time shall declare or pay
any dividend or make any other distribution on the Common Stock payable in
Common Stock, or effect a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a dividend in Common
Stock), the Conversion Price on the Series B Preferred Stock in effect
immediately prior to such stock dividend, stock distribution or subdivision
shall, concurrently with the effectiveness of such stock dividend, stock
distribution or subdivision, be proportionately decreased.
(2) COMBINATIONS OR CONSOLIDATIONS. In the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Conversion Price of the Series B Preferred Stock in effect immediately prior
to such combination or consolidation shall, concurrently with the effectiveness
of such combination or consolidation, be proportionately increased.
(vii) ADJUSTMENT FOR MERGER OR REORGANIZATION. Subject to
the last sentence of this Section 4.4.2(d)(vii), in case of any consolidation or
merger of the Corporation with or into another corporation or the conveyance of
all or substantially all of the assets of the Corporation to another
corporation, each share of Series B Preferred Stock shall thereafter be
convertible, at the option of the holder thereof in the manner described in the
last sentence of this Section, into the number of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
of the Corporation deliverable upon conversion of such Series B Preferred Stock
would have been entitled upon such consolidation, merger or conveyance. In any
such case, appropriate adjustment (as determined by the Board of Directors)
shall be made in the application of these provisions set forth with respect to
the rights and interest thereafter of the holders of the Series B Preferred
Stock, to the end that these provisions (including provisions with respect to
changes in and other adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other property thereafter deliverable upon the conversion of the Series B
Preferred Stock. In the event that such merger or consolidation of the
Corporation or the sale of all or substantially all its
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<PAGE> 25
assets shall also be subject to the provisions of Section 4.4.1 above, each
holder of Series B Preferred Stock may elect to obtain the treatment of such
holder's shares of Series B Preferred Stock under this Section 4.4.2(d)(vii) in
lieu of that described in Section 4.4.1, notice of which election shall be
submitted in writing to the Corporation at its principal offices no later than
five (5) days before the effective date of such event.
(e) NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4.4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series B Preferred Stock against impairment.
(f) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section
4.4.2, the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with these terms and furnish to each holder of Series
B Preferred Stock a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based; provided that the failure to promptly provide such notice shall not
affect the effectiveness of such adjustment, readjustment or conversion. The
Corporation shall, upon the written request at any time of any holder of Series
B Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price of the Series B Preferred Stock at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of the Series B
Preferred Stock.
(g) NOTICES OF RECORD DATE. In the event of (i) any taking by
the Corporation of a record date of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, or (ii) any capital reorganization of
the Corporation, any reclassification or recapitalization of the capital stock
of the Corporation, any merger or consolidation of the Corporation, and any
transfer of all or substantially all of the assets of the Corporation to any
other Corporation, or any other entity or person, or any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, the
Corporation shall mail to each holder of Series B Preferred Stock at least 30
days prior to the record date specified therein, a notice specifying (A) the
date on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (C) the time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) shall be entitled to exchange their shares
of Common Stock (or other
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<PAGE> 26
securities) for securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up.
(h) COMMON STOCK RESERVED. The Corporation shall reserve and
keep available out of its authorized but unissued Common Stock such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of the Series B Preferred Stock.
4.4.3. VOTING RIGHTS.
The holders of shares of Series B Preferred Stock shall be
entitled to notice of any stockholders' meeting and to vote upon any and all
matters submitted to a stockholder for a vote, as though the Common Stock,
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock constituted a single class of stock, except with
respect to those matters on which the Delaware Corporation Law requires that a
vote must be by a separate class or classes or by separate series, as to which
each such class or series shall have the right to vote in accordance with such
law, and holders of Series B Preferred Stock shall have that number of votes per
share as is equal to the number of shares of Common Stock into which each such
share of Series B Preferred Stock held by such holder is then convertible.
4.4.4. DIVIDEND RIGHTS.
(a) The holders of outstanding Series B Preferred Stock shall be
entitled to receive a dividend (determined on the basis of the number of shares
of Common Stock into which a share of Series B Preferred Stock is then
convertible) equal to any dividend declared or paid on Common Stock, Series A
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
calculated on an as converted basis, based on the number of shares of Common
Stock into which such Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock is convertible on the date of
such declaration (or, if the Board makes no declaration, on the date of
payment).
(b) Such Series B Preferred Stock dividends shall be paid prior
to any payment of any dividends on the Common Stock. In the event such dividends
are not paid prior to the payment of the Series B Preferred Stock liquidation
preference in accordance with Section 4.4.1 hereof, such dividends shall be
payable on liquidation and redemption in accordance with Section 4.4.1 hereof.
4.4.5. COVENANTS. In addition to Section 4.4.3 and any vote which the
Series B Preferred Stock may have under Delaware law, so long as any shares of
Series B Preferred Stock shall be outstanding, the Corporation shall not,
without first obtaining the affirmative vote or written consent of not less than
seventy five percent (75%) of such outstanding shares of Series B Preferred
Stock:
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(a) amend, restate or repeal any provision of, or add any
provision to, the Corporation's Restated Certificate of Incorporation or By-Laws
if such action would change the preferences, rights, privileges or powers of, or
the restrictions provided for the benefit of, the Series B Preferred Stock
generally or increases the number of authorized shares of Series B Preferred
Stock;
(b) reclassify any Common Stock into shares having any
preference or priority as to dividends or assets superior to any such preference
or priority of the Series B Preferred Stock;
(c) create or issue any other class or classes of stock or
series of stock or debt securities having any preference or priority as to
dividends or assets superior to any such preference or priority of the Series B
Preferred Stock; or
(d) create or issue any other class or classes of stock ranking
on a parity as to any preference or priority as to dividends or assets other
than Preferred Stock (i) with an aggregate liquidation preference not to exceed
$30,000,000 and (ii) having terms no more favorable to an investor than the
terms of the Series B Preferred Stock.
4.4.6. CONVERTED OR OTHERWISE ACQUIRED SHAREs. Any share of Series B
Preferred Stock that is converted under Section 4.4.2 or otherwise acquired by
the Corporation will be canceled and will not be reissued, sold or transferred.
4.5. SERIES C PREFERRED STOCK.
4.5.1. LIQUIDATION RIGHTS. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, each holder of a share of Series C Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or surplus funds of the Corporation to the holders of Common Stock or
Class B Common Stock by reason of their ownership thereof, an amount equal to
any declared but unpaid dividends on such share of Series C Preferred Stock to
and including the date full payment is so tendered to the holders of the Series
C Preferred Stock with respect to such liquidation, dissolution or winding up,
plus an amount equal to the greater of: (a)(i) if such liquidation, dissolution
or winding up occurs prior to the third anniversary of the Series C Original
Issue Date, the Return Amount per share or (ii) if such liquidation, dissolution
or winding up occurs on or after the third anniversary of the Series C Original
Issue Date, $21.73 per share or (b) such amount per share of Series C Preferred
Stock as would have been payable had each share of Parity Stock been converted
to Common Stock immediately prior to such liquidation, dissolution or winding up
pursuant to the provisions of Section 4.5.2; provided that the amount
distributable per share of Common Stock pursuant to this clause (b) exceeds
$31.80. The liquidation amounts set forth in this Section 4.5.1 shall be subject
to equitable adjustment whenever there shall occur a stock split, stock
dividend, combination, reorganization, recapitalization, reclassification or
other similar event involving a change in the Series C Preferred Stock.
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"RETURN AMOUNT" shall mean, as of any date, an amount equal to the
Series C Original Issue Price plus a 35% annualized rate of return on the Series
C Original Issue Price from the Series C Original Issue Date to such date.
"SERIES C ORIGINAL ISSUE PRICE" shall mean Ten Dollars and Sixty Cents
($10.60).
If the assets or surplus funds to be distributed to the holders of the
Series C Preferred Stock and other Parity Stock are insufficient to permit the
payment to such holders of their full preferential amount, the assets and
surplus funds legally available for distribution shall be distributed ratably
among the holders of the Series C Preferred Stock and other Parity Stock in
proportion to the full preferential amount each such holder is otherwise
entitled to receive. In the event that the holder of Series C Preferred Stock
receives the liquidation rights under option (a) set forth above in this Section
4.5.1, and after payment to the Series C Preferred Stockholders of the
liquidation amount described above and after all preference amounts to the
holders of Parity Stock have been paid or set aside in cash for payment, the
remaining assets shall be distributed ratably to the holders of the Common
Stock, the Class B Common Stock, the Series B Preferred Stock, the Series C
Preferred Stock and the Series D Preferred Stock on a common equivalent basis
(i.e., as if each share had been converted to Common Stock immediately prior to
the liquidation, dissolution or winding up pursuant to the provisions of Section
4.5.2), provided that the holders of Series C Preferred Stock will stop
participating once they have received a total liquidation amount per share of
$31.80, plus any declared but unpaid dividends.
A merger, acquisition, sale of voting control or sale of substantially
all of the assets of the Corporation shall be deemed to be a liquidation within
the meaning of this Section 4.5.1, but only if the holders of the outstanding
stock of the Corporation immediately prior to the closing of such merger, sale
or acquisition hold, immediately after such transaction, less than a majority in
interest of the issued and outstanding shares of voting securities (as measured
by voting power) of the purchasing corporation or of the corporation (including
without limitation the Corporation) surviving or resulting from such merger, as
the case may be; provided, however, that any holder of Series C Preferred Stock
may elect by notice to the Corporation no later than five (5) days before the
effective date of such event, to be treated under the provisions of Section
4.5.2(d)(vii) in lieu of this Section 4.5.1 in connection with such merger,
acquisition, sale or consolidation. In the event the consideration payable to
the Corporation or to the holders of its outstanding stock in connection with
any such sale or merger (the "Transaction Consideration") does not consist
entirely of cash, then the Corporation may satisfy its obligations under this
Section 4.5.1. by paying to the holders of Series C Preferred Stock a portion of
the Transaction Consideration with a fair market value equal to the amount
required to be distributed pursuant to this Section 4.5.1. The fair market value
of the Transaction Consideration shall be as determined in good faith by the
Board of Directors of the Corporation. If the Transaction Consideration consists
of more than one type of consideration, then each type of consideration shall be
distributed or offered to each holder of Series C Preferred Stock in the same
proportions as such type of consideration represents of the total Transaction
Consideration.
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4.5.2. CONVERSION. The holders of Series C Preferred Stock shall have
conversion rights as follows (the "Series C Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series C Preferred Stock
shall be convertible at the option of the holder thereof at any time after the
date of issuance and without the payment of any additional consideration
therefor into that number of fully paid and nonassessable shares of Common Stock
as is determined by dividing Ten and 60/100 Dollars $10.60) by the Conversion
Price (as defined below) as adjusted pursuant to this Section 4.5.2 and in
effect at the time of conversion. The initial Conversion Price of the Series C
Preferred Stock shall be Ten and 60/100 Dollars ($10.60). Subject to Section
4.5.2(d), the Conversion Price shall be subject to adjustment (in order to
adjust the number of shares of Common Stock into which the Series C Preferred
Stock is convertible) as hereinafter provided. Each person so converting shares
of Series C Preferred Stock shall forfeit any declared but unpaid dividends up
to the time of the conversion.
(b) AUTOMATIC CONVERSION. Each share of Series C Preferred Stock
shall automatically and immediately be converted into shares of Common Stock at
the then effective Conversion Price upon:
(i) the closing of a public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the Corporation
to the public at a public offering price of at least: (a) $20.00 per share
during the first year following the Series C Original Issue Date (pro-rated
based upon the number of months elapsed during such period), (b) $20.00 during
the second year following the Series C Original Issue Date, plus $0.50 for each
month or partial month elapsed during such year, (c) $26.00 during the third
year following the Series C Original Issue Date plus $0.75 for each month or
partial month elapsed during each year; and (d) $35.00 on and following the
third anniversary of the Series C Original Issue Date (in each case
appropriately adjusted in the event of any stock dividend, stock distribution or
subdivision as provided in Section 4.5.2(d)(vi)), and having an aggregate
offering price to the public resulting in net proceeds to the Corporation (after
deducting commissions payable to the underwriters and expenses) of not less than
$40,000,000 (a "Qualifying IPO"); or
(ii) the written consent of the holders in interest of
two-thirds or more of the Series C Preferred Stock then outstanding.
The person(s) entitled to receive Common Stock issuable upon a
conversion of Series C Preferred Stock hereunder shall not be deemed to have
converted the Series C Preferred Stock until immediately prior to the closing of
the IPO or the receipt by the Corporation of such consent, as the case may be.
Each person who holds of record Series C Preferred Stock immediately prior to an
automatic conversion shall forfeit any declared but unpaid dividends up to the
time of the automatic conversion.
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(c) MECHANICS OF CONVERSION. No fractional shares of Common
Stock shall be issued upon conversion of Series C Preferred Stock. In lieu of
any fractional share to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the greater of
the price to public in the IPO (as such term is defined in Section 4.6.2(b)(ii))
or the then effective applicable Conversion Price. Before any holder of Series C
Preferred Stock shall be entitled to convert the same into full shares of Common
Stock under Section 4.5.2(a), such holder shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series C Preferred Stock, and shall give written notice
to the Corporation at such office that such holder elects to convert the same
and shall state therein his name or the name or names of his nominees in which
such holder wishes the certificate or certificates for shares of Common Stock to
be issued, together with the applicable federal taxpayer identification number.
The Corporation shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of Series C Preferred Stock, or to his nominee or
nominees, a certificate or certificates for the number of shares of Common Stock
to which he shall be entitled, together with cash in lieu of any fraction of a
share. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the shares of Series C
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.
(d) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES:
(i) SPECIAL DEFINITIONS. For purposes of this Section
4.5.2(d), the following definitions shall apply:
(1) "OPTION" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(2) "SERIES C ORIGINAL ISSUE DATE" shall mean November
17, 1997.
(3) "CONVERTIBLE SECURITIES" shall mean any evidences
of indebtedness, shares (other than Common Stock, Class B Common Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock) or other securities directly or indirectly convertible into or
exchangeable for Common Stock.
(4) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares of Common Stock issued (or, pursuant to Section 4.5.2(d)(iii), deemed to
be issued) by the Corporation after the Series C Original Issue Date, other than
shares of Common Stock issued or issuable:
(A) upon conversion of shares of Class B Common
Stock; Series A Preferred Stock, Series B Preferred Stock or Series D Preferred
Stock or by way of
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dividend or distribution on shares of Common Stock, Class B Common Stock, Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series
D Preferred Stock; and
(B) to officers, directors or employees of, or
consultants to, the Corporation pursuant to action by the Board of Directors
after the Series C Original Issue Date under any stock purchase or option plan
or other employee or director stock incentive or compensation program up to an
aggregate of 730,040 shares of Common Stock.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
number of shares of Common Stock into which Series C Preferred Stock is
convertible shall be made by adjustment in the Conversion Price of Series C
Preferred Stock in respect of the issuance of Additional Shares of Common Stock
or otherwise, unless the consideration per share for such Additional Shares of
Common Stock issued or deemed to be issued by the Corporation is less than the
Conversion Price of Series C Preferred Stock in effect on the date of, and
immediately prior to, the issue of such Additional Shares.
(iii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES
OF COMMON STOCK.
(1) OPTIONS AND CONVERTIBLE SECURITIES. In the event
the Corporation at any time or from time to time after the Series C Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 4.5.2(d)(v)) of such Additional Shares
of Common Stock would be less than the Conversion Price of the Series C
Preferred Stock in effect on the date of and immediately prior to such issue, or
such record date, as the case may be, and provided further that in any such case
in which Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price of
the Series C Preferred Stock shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price of the Series C Preferred Stock
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computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be recomputed to reflect
such increase or decrease insofar as it affects such Options or the rights of
conversion or exchange under such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price of the Series C Preferred Stock
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto) and any subsequent adjustments based thereon shall,
upon such expiration, be recomputed as if:
(I) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if any, actually received by
the Corporation upon such conversion or exchange, and
(II) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the Corporation
(determined pursuant to Section 4.5.2(d)(v)) upon the issue of the Convertible
Securities with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the Conversion Price of the Series C
Preferred Stock to an amount which exceeds the lower of (i) the Conversion Price
of the Series C Preferred Stock on the original adjustment date, or (ii) the
Conversion Price of the Series C Preferred Stock that would have resulted from
any issuance of Additional Shares of Common Stock between the original
adjustment date and such readjustment date;
(E) in the case of any Options which expire by their
terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Conversion Price of the Series C Preferred Stock shall be made
until the expiration or exercise of all such Options, whereupon such adjustment
shall be made in the same manner provided in clause (C) above; and
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made
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in the Conversion Price of the Series C Preferred Stock which became effective
on such record date shall be cancelled as of the close of business on such
record date, and thereafter the Conversion Price of the Series C Preferred Stock
shall be adjusted pursuant to this Section 4.5.2(d)(iii) as of the actual date
of their issuance.
(2) STOCK DIVIDENDS, STOCK DISTRIBUTIONS AND
SUBDIVISIONS. In the event the Corporation at any time or from time to time
after the Series C Original Issue Date of the Series C Preferred Stock shall
declare or pay any dividend or make any other distribution on the Common Stock
payable in Common Stock, or effect a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in
Common Stock), then and in any such event, Additional Shares of Common Stock
shall not be deemed to have been issued, but the Conversion Price of each series
of Series C Preferred Stock shall be adjusted in accordance with Section
4.5.2(d)(vi).
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK.
In the event the Corporation shall issue Additional Shares
of Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 4.5.2(d)(iii)) without consideration or for a consideration
per share less than the Conversion Price of the Series C Preferred Stock in
effect on the date of and immediately prior to such issue, then and in such
event, in order to increase the number of shares of Common Stock into which the
Series C Preferred Stock is convertible, concurrently with such issuance, the
Conversion Price of the Series C Preferred Stock shall be reduced to a price
(calculated to the nearest cent) equal to the price per Additional Share of
Common Stock being so issued or deemed to be issued, provided that the
Conversion Price shall not be so reduced at such time if the amount of such
reduction would be an amount less than $0.05, but any such amount shall be
carried forward and reduction with respect thereto made at the time of and
together with any subsequent reduction which, together with such amount and any
other amount or amounts so carried forward, shall aggregate $0.05 or more.
(v) DETERMINATION OF CONSIDERATION. For purposes of this
Section 4.5.2(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY: Such consideration shall:
(A) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the Corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
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(C) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 4.5.2(d)(iii)(1),
relating to Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the Corporation as
consideration for the issue of such Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration until such subsequent
adjustment occurs) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by (y)
the maximum number of shares of Common Stock (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such number until such subsequent adjustment occurs)
issuable upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) ADJUSTMENT FOR DIVIDENDS, DISTRIBUTIONS, SUBDIVISIONS,
COMBINATIONS OR CONSOLIDATION OF COMMON STOCK.
(1) STOCK DIVIDENDS, DISTRIBUTIONS OR SUBDIVISIONS. In
the event the Corporation at any time or from time to time shall declare or pay
any dividend or make any other distribution on the Common Stock payable in
Common Stock, or effect a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a dividend in Common
Stock), the Conversion Price on the Series C Preferred Stock in effect
immediately prior to such stock dividend, stock distribution or subdivision
shall, concurrently with the effectiveness of such stock dividend, stock
distribution or subdivision, be proportionately decreased.
(2) COMBINATIONS OR CONSOLIDATIONS. In the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Conversion Price of the Series C Preferred Stock in effect immediately prior
to such combination or consolidation shall, concurrently with the effectiveness
of such combination or consolidation, be proportionately increased.
(vii) ADJUSTMENT FOR MERGER OR REORGANIZATION. Subject to
the last sentence of this Section 4.5.2(d)(vii), in case of any consolidation or
merger of the Corporation with or into another corporation or the conveyance of
all or substantially all of the assets of the Corporation to another
corporation, each share of Series C Preferred Stock shall thereafter be
convertible, at the option of the holder thereof in the manner described in the
last sentence of this
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Section, into the number of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such Series C Preferred Stock would have been
entitled upon such consolidation, merger or conveyance. In any such case,
appropriate adjustment (as determined by the Board of Directors) shall be made
in the application of these provisions set forth with respect to the rights and
interest thereafter of the holders of the Series C Preferred Stock, to the end
that these provisions (including provisions with respect to changes in and other
adjustments of the Conversion Price) shall thereafter be applicable, as nearly
as reasonably may be, in relation to any shares of stock or other property
thereafter deliverable upon the conversion of the Series C Preferred Stock. In
the event that such merger or consolidation of the Corporation or the sale of
all or substantially all its assets shall also be subject to the provisions of
Section 4.5.1 above, each holder of Series C Preferred Stock may elect to obtain
the treatment of such holder's shares of Series C Preferred Stock under this
Section 4.5.2(d)(vii) in lieu of that described in Section 4.5.1, notice of
which election shall be submitted in writing to the Corporation at its principal
offices no later than five (5) days before the effective date of such event.
(e) NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4.5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series C Preferred Stock against impairment.
(f) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section
4.5.2, the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with these terms and furnish to each holder of Series
C Preferred Stock a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based; provided that the failure to promptly provide such notice shall not
affect the effectiveness of such adjustment, readjustment or conversion. The
Corporation shall, upon the written request at any time of any holder of Series
C Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price of the Series C Preferred Stock at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of the Series C
Preferred Stock.
(g) NOTICES OF RECORD DATE. In the event of (i) any taking by
the Corporation of a record date of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, or (ii) any capital reorganization of
the Corporation, any reclassification or recapitalization of the capital stock
of the Corporation, any merger or consolidation of the Corporation, and any
transfer
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of all or substantially all of the assets of the Corporation to any other
Corporation, or any other entity or person, or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Series C Preferred Stock at least 30 days prior to the
record date specified therein, a notice specifying (A) the date on which any
such record is to be taken for the purpose of such dividend or distribution and
a description of such dividend or distribution, (B) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective, and (C) the time, if
any, that is to be fixed, as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up.
(h) COMMON STOCK RESERVED. The Corporation shall reserve and
keep available out of its authorized but unissued Common Stock such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of the Series C Preferred Stock.
4.5.3. VOTING RIGHTS.
The holders of shares of Series C Preferred Stock shall be
entitled to notice of any stockholders' meeting and to vote upon any and all
matters submitted to a stockholder for a vote, as though the Common Stock,
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
the Series D Preferred Stock constituted a single class of stock, except with
respect to those matters on which the Delaware Corporation Law requires that a
vote must be by a separate class or classes or by separate series, as to which
each such class or series shall have the right to vote in accordance with such
law, and holders of Series C Preferred Stock shall have that number of votes per
share as is equal to the largest number of whole shares of Common Stock into
which the Series C Preferred Stock held by such holder is then convertible.
4.5.4. DIVIDEND RIGHTS.
(a) The holders of outstanding Series C Preferred Stock shall be
entitled to receive a dividend (determined on the basis of the number of shares
of Common Stock into which a share of Series C Preferred Stock is then
convertible) equal to any dividend declared or paid on Common Stock, Series A
Preferred Stock, Series B Preferred Stock or Series D Preferred Stock,
calculated on an as converted basis, based on the number of shares of Common
Stock into which such Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock is convertible on the date of
such declaration (or, if the Board makes no declaration, on the date of
payment).
(b) Such Series C Preferred Stock dividends shall be paid prior
to any payment of any dividends on the Common Stock, the Series A Preferred
Stock or the Series B Preferred Stock. In the event such dividends are not paid
prior to the payment of the Series C
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Preferred Stock liquidation preference in accordance with Section 4.5.1, such
dividends shall be payable on liquidation in accordance with Section 4.5.1.
4.5.5. COVENANTS. In addition to Section 4.5.3 and any vote which the
Series C Preferred Stock may have under Delaware law, so long as any shares of
Series C Preferred Stock shall be outstanding, the Corporation shall not,
without first obtaining the affirmative vote or written consent of at least
two-thirds of such outstanding shares of Series C Preferred Stock, take any
action that:
(a) alters, restates or changes the rights, preferences or
privileges of the Series C Preferred Stock;
(b) increases or decreases the authorized number of shares of
Series C Preferred Stock;
(c) creates (by reclassification or otherwise) any new class or
series of shares or debt securities having rights, preferences or privileges
senior to or on a parity with the Series C Preferred Stock;
(d) results in the redemption of any shares of Common Stock
(other than pursuant to employee agreements or in connection with redemption of
certain shares held by B. Braun Melsungen AG); or
(e) amends, restates or waives any provision of the Company's
Restated Certificate of Incorporation or by-laws relative to the Series C
Preferred Stock.
4.5.6. CONVERTED, REDEEMED OR OTHERWISE ACQUIRED SHARES. Any share of
Series C Preferred Stock that is converted under Section 4.5.2 or otherwise
acquired by the Corporation will be canceled and will not be reissued, sold or
transferred.
4.6. SERIES D PREFERRED STOCK.
4.6.1. LIQUIDATION RIGHTS. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, each holder of a share of Series D Preferred Stock shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or surplus funds of the Corporation to the holders of Common Stock or
Class B Common Stock by reason of their ownership thereof, an amount equal to
any declared but unpaid dividends on such share of Series D Preferred Stock to
and including the date full payment is so tendered to the holders of the Series
D Preferred Stock with respect to such liquidation, dissolution or winding up,
plus an amount equal to the greater of: (a)(i) if such liquidation, dissolution
or winding up occurs prior to the third anniversary of the Series D Original
Issue Date, the Return Amount per share or (ii) if such liquidation, dissolution
or winding up occurs on or after the third anniversary of the Series D Original
Issue Date, $24.60 per share or (b) such amount per share of Series D Preferred
Stock as would have been payable had each share of
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Parity Stock been converted to Common Stock immediately prior to such
liquidation, dissolution or winding up pursuant to the provisions of Section
4.6.2; provided that the amount distributable per share of Common Stock pursuant
to this clause (b) exceeds $36.00.
For purposes of this Section 4.6.1, Section 4.6.2 and Section 4.6.6:
"RETURN AMOUNT" shall mean, as of any date, an amount equal to the
Series D Original Issue Price plus a 35% annualized rate of return on the Series
D Original Issue Price from the Series D Original Issue Date to such date. By
way of illustration, on the first, second and third anniversaries of the Series
D Original Issue Date, the Return Amount will be $16.20, $20.40 and $24.60
respectively.
"SERIES D ORIGINAL ISSUE PRICE" shall mean Twelve Dollars ($12.00).
The liquidation amounts set forth in this Section 4.6.1 shall be subject to
equitable adjustment whenever there shall occur a stock split, stock dividend,
combination, reorganization, recapitalization, reclassification or other similar
event involving a change in the Series D Preferred Stock.
If the assets or surplus funds to be distributed to the holders of the
Series D Preferred Stock and other Parity Stock are insufficient to permit the
payment to such holders of their full preferential amount, the entire assets of
the Corporation legally available for distribution shall be distributed ratably
among the holders of the Series D Preferred Stock and Parity Stock in proportion
to the full preferential amount each such holder is otherwise entitled to
receive. In the event that the holder of Series D Preferred Stock receives the
liquidation rights under option (a) set forth above in this Section 4.6.1, and
after payment to the Series D Preferred Stockholders of the liquidation amount
described above and after all preference amounts to the holders of the Parity
Stock have been paid or set aside in cash for payment, the remaining assets
shall be distributed ratably to the holders of the Common Stock, the Class B
Common Stock, the Series B Preferred Stock, the Series C Preferred Stock and the
Series D Preferred Stock on a common equivalent basis (i.e., as if each share
had been converted to Common Stock immediately prior to the liquidation,
dissolution or winding up pursuant to the provisions of Section 4.6.2), provided
that the holders of Series D Preferred Stock will stop participating once they
have received a total liquidation amount per share of $36.00, plus any declared
but unpaid dividends.
A merger, acquisition, sale of voting control or sale of substantially
all of the assets of the Corporation shall be deemed to be a liquidation within
the meaning of this Section 4.6.1, but only if the holders of the outstanding
stock of the Corporation immediately prior to the closing of such merger, sale
or acquisition hold, immediately after such transaction, less than a majority in
interest of the issued and outstanding shares of voting securities (as measured
by voting power) of the purchasing corporation or of the corporation (including
without limitation the Corporation) surviving or resulting from such merger, as
the case may be; provided, however, that any holder of Series D Preferred Stock
may elect by notice to the
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Corporation no later than five (5) days before the effective date of such event,
to be treated under the provisions of Section 4.6.2(d)(vii) in lieu of this
Section 4.6.1 in connection with such merger, acquisition, sale or
consolidation. In the event the consideration payable to the Corporation or to
the holders of its outstanding stock in connection with any such sale or merger
(the "Transaction Consideration") does not consist entirely of cash, then the
Corporation may satisfy its obligations under this Section 4.6.1 by paying to
the holders of Series D Preferred Stock a portion of the Transaction
Consideration with a fair market value equal to the amount required to be
distributed pursuant to this Section 4.6.1. The fair market value of the
Transaction Consideration shall be as determined in good faith by the Board of
Directors of the Corporation. If the Transaction Consideration consists of more
than one type of consideration, then each type of consideration shall be
distributed or offered to each holder of Series D Preferred Stock in the same
proportions as such type of consideration represents of the total Transaction
Consideration.
4.6.2. CONVERSION. The holders of Series D Preferred Stock shall have
conversion rights as follows (the "Series D Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series D Preferred Stock
shall be convertible at the option of the holder thereof at any time after the
date of issuance and without the payment of any additional consideration
therefor into that number of fully paid and nonassessable shares of Common Stock
as is determined by dividing Twelve Dollars ($12.00) by the Conversion Price (as
defined below) as adjusted pursuant to this Section 4.6.2 and in effect at the
time of conversion. The Conversion Price of the Series D Preferred Stock shall
be Twelve Dollars ($12.00) and shall be subject to adjustment pursuant to
Section 4.6.2(d) (in order to adjust the number of shares of Common Stock into
which the Series D Preferred Stock is convertible) as hereinafter provided. Each
person so converting shares of Series D Preferred Stock shall forfeit any
declared but unpaid dividends up to the time of the conversion.
(b) AUTOMATIC CONVERSION. Each share of Series D Preferred Stock
shall automatically and immediately be converted into shares of Common Stock at
the Conversion Price upon:
(i) the vote of the holders in interest of at least
two-thirds of the Series D Preferred Stock then outstanding at the then
effective Conversion Factor; or
(ii) the closing of an initial public offering pursuant to
an effective registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Common Stock for the account of the
Corporation (the "IPO"); provided that if the price to the public in the IPO is
less than $16.00 per share (as adjusted for stock splits, stock dividends,
recapitalizations and similar events), each share of Series D Preferred Stock
shall be converted into shares of Common stock at the greater of (i) the number
of shares of Common Stock such shares of Series D Preferred Stock can be
converted into at the Conversion Price or (ii) the number of shares of Common
Stock (including fractional shares expressed to four decimal places) that when
multiplied by the greater of the price to the public in the IPO and $10.60
equals the Return Amount multiplied by the total number of shares of Common
Stock.
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The person(s) entitled to receive Common Stock issuable upon a
conversion of Series D Preferred Stock hereunder shall not be deemed to have
converted the Series D Preferred Stock until immediately prior to the closing of
the IPO or the receipt by the Corporation of such consent, as the case may be.
Each person who holds of record Series D Preferred Stock immediately prior to an
automatic conversion shall forfeit any declared but unpaid dividends up to the
time of the automatic conversion.
(c) MECHANICS OF CONVERSION. No fractional shares of Common
Stock shall be issued upon conversion of Series D Preferred Stock. In lieu of
any fractional share to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the greater of
the price to public in the IPO or the then effective applicable Conversion
Price. Before any holder of Series D Preferred Stock shall be entitled to
convert the same into full shares of Common Stock under Section 4.6.2(a), such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for the Series D
Preferred Stock, and shall give written notice to the Corporation at such office
that such holder elects to convert the same and shall state therein his name or
the name or names of his nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued, together with the
applicable federal taxpayer identification number. The Corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder
of Series D Preferred Stock, or to his nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled, together with cash in lieu of any fraction of a share. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Series D Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
(d) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES:
(i) SPECIAL DEFINITIONS. For purposes of this Section
4.6.2(d), the following definitions shall apply:
(1) "OPTION" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(2) "SERIES D ORIGINAL ISSUE DATE" shall mean December
23, 1998.
(3) "CONVERTIBLE SECURITIES" shall mean any evidences
of indebtedness, shares (other than Common Stock, Class B Common Stock, Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock) or other securities directly or indirectly convertible into or
exchangeable for Common Stock.
(4) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares of Common Stock issued (or, pursuant to Section 4.6.2(d)(iii), deemed to
be issued) by the
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Corporation after the Series D Original Issue Date, other than shares of Common
Stock issued or issuable:
(A) upon conversion of shares of Class B Common
Stock, Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock or by way of dividend or distribution on shares of Common Stock, Class B
Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or Series D Preferred Stock; and
(B) to officers, directors or employees of, or
consultants to, the Corporation pursuant to action by the Board of Directors
after the Series D Original Issue Date under any stock purchase or option plan
or other employee or director stock incentive or compensation program up to an
aggregate of 919,390 shares of Common Stock.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
number of shares of Common Stock into which Series D Preferred Stock is
convertible shall be made by adjustment in the Conversion Price of Series D
Preferred Stock in respect of the issuance of Additional Shares of Common Stock
or otherwise, unless the consideration per share for such Additional Shares of
Common Stock issued or deemed to be issued by the Corporation is less than the
Conversion Price of Series D Preferred Stock in effect on the date of, and
immediately prior to, the issue of such Additional Shares.
(iii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES
OF COMMON STOCK.
(1) OPTIONS AND CONVERTIBLE SECURITIES. In the event
the Corporation at any time or from time to time after the Series D Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that Additional Shares of
Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Section 4.6.2(d)(v)) of such Additional Shares
of Common Stock would be less than the Conversion Price of the Series D
Preferred Stock in effect on the date of and immediately prior to such issue, or
such record date, as the case may be, and provided further that in any such case
in which Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price of
the Series D Preferred Stock shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
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(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price of the Series D Preferred Stock computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price of the Series D Preferred Stock
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto) and any subsequent adjustments based thereon shall,
upon such expiration, be recomputed as if:
(I) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if any, actually received by
the Corporation upon such conversion or exchange, and
(II) in the case of Options for Convertible
Securities, only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the Corporation
(determined pursuant to Section 4.6.2(d)(v)) upon the issue of the Convertible
Securities with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the Conversion Price of the Series D
Preferred Stock to an amount which exceeds the lower of (i) the Conversion Price
of the Series D Preferred Stock on the original adjustment date, or (ii) the
Conversion Price of the Series D Preferred Stock that would have resulted from
any issuance of Additional Shares of Common Stock between the original
adjustment date and such readjustment date;
(E) in the case of any Options which expire by their
terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Conversion Price
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of the Series D Preferred Stock shall be made until the expiration or exercise
of all such Options, whereupon such adjustment shall be made in the same manner
provided in clause (C) above; and
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made in the Conversion Price of the Series D Preferred
Stock which became effective on such record date shall be cancelled as of the
close of business on such record date, and thereafter the Conversion Price of
the Series D Preferred Stock shall be adjusted pursuant to this Section
4.6.2(d)(iii) as of the actual date of their issuance.
(2) STOCK DIVIDENDS, STOCK DISTRIBUTIONS AND
SUBDIVISIONS. In the event the Corporation at any time or from time to time
after the Series D Original Issue Date of the Series D Preferred Stock shall
declare or pay any dividend or make any other distribution on the Common Stock
payable in Common Stock, or effect a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in
Common Stock), then and in any such event, Additional Shares of Common Stock
shall not be deemed to have been issued, but the Conversion Price of each series
of Series D Preferred Stock shall be adjusted in accordance with Section
4.6.2(d)(vi).
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK.
In the event the Corporation shall issue Additional Shares
of Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section 4.6.2(d)(iii)) without consideration or for a consideration
per share less than the Conversion Price of the Series D Preferred Stock in
effect on the date of and immediately prior to such issue, then and in such
event, in order to increase the number of shares of Common Stock into which the
Series D Preferred Stock is convertible, concurrently with such issuance, the
Conversion Price of the Series D Preferred Stock shall be reduced to a price
(calculated to the nearest cent) equal to the price per Additional Share of
Common Stock being so issued or deemed to be issued, provided that the
Conversion Price shall not be so reduced at such time if the amount of such
reduction would be an amount less than $0.05, but any such amount shall be
carried forward and reduction with respect thereto made at the time of and
together with any subsequent reduction which, together with such amount and any
other amount or amounts so carried forward, shall aggregate $0.05 or more.
(v) DETERMINATION OF CONSIDERATION. For purposes of this
Section 4.6.2(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
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(1) CASH AND PROPERTY: Such consideration shall:
(A) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the Corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 4.6.2(d)(iii)(1),
relating to Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable by the Corporation as
consideration for the issue of such Options or Convertible Securities, plus the
minimum aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration until such subsequent
adjustment occurs) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by (y)
the maximum number of shares of Common Stock (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such number until such subsequent adjustment occurs)
issuable upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) ADJUSTMENT FOR DIVIDENDS, DISTRIBUTIONS, SUBDIVISIONS,
COMBINATIONS OR CONSOLIDATION OF COMMON STOCK.
(1) STOCK DIVIDENDS, DISTRIBUTIONS OR SUBDIVISIONS. In
the event the Corporation at any time or from time to time shall declare or pay
any dividend or make any other distribution on the Common Stock payable in
Common Stock, or effect a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a dividend in Common
Stock), the Conversion Price on the Series D Preferred Stock in effect
immediately prior to such stock dividend, stock distribution or subdivision
shall, concurrently with the effectiveness of such stock dividend, stock
distribution or subdivision, be proportionately decreased.
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(2) COMBINATIONS OR CONSOLIDATIONS. In the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Conversion Price of the Series D Preferred Stock in effect immediately prior
to such combination or consolidation shall, concurrently with the effectiveness
of such combination or consolidation, be proportionately increased.
(vii) ADJUSTMENT FOR MERGER OR REORGANIZATION. Subject to
the last sentence of this Section 4.6.2(d)(vii), in case of any consolidation or
merger of the Corporation with or into another corporation or the conveyance of
all or substantially all of the assets of the Corporation to another
corporation, each share of Series D Preferred Stock shall thereafter be
convertible, at the option of the holder thereof in the manner described in the
last sentence of this Section, into the number of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
of the Corporation deliverable upon conversion of such Series D Preferred Stock
would have been entitled upon such consolidation, merger or conveyance. In any
such case, appropriate adjustment (as determined by the Board of Directors)
shall be made in the application of these provisions set forth with respect to
the rights and interest thereafter of the holders of the Series D Preferred
Stock, to the end that these provisions (including provisions with respect to
changes in and other adjustments of the Conversion Price) shall thereafter be
applicable, as nearly as reasonably may be, in relation to any shares of stock
or other property thereafter deliverable upon the conversion of the Series D
Preferred Stock. In the event that such merger or consolidation of the
Corporation or the sale of all or substantially all its assets shall also be
subject to the provisions of Section 4.6.1 above, each holder of Series D
Preferred Stock may elect to obtain the treatment of such holder's shares of
Series D Preferred Stock under this Section 4.6.2(d)(vii) in lieu of that
described in Section 4.6.1, notice of which election shall be submitted in
writing to the Corporation at its principal offices no later than five (5) days
before the effective date of such event.
(e) NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 4.6 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series D Preferred Stock against impairment.
(f) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section
4.6.2, the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with these terms and furnish to each holder of Series
D Preferred Stock a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based; provided that the failure to promptly provide such notice shall not
affect the effectiveness of such adjustment, readjustment or conversion. The
Corporation shall, upon the written request at any time of any holder of Series
D Preferred Stock,
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furnish or cause to be furnished to such holder a like certificate setting forth
(i) such adjustments and readjustments, (ii) the Conversion Price of the Series
D Preferred Stock at the time in effect, and (iii) the number of shares of
Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of the Series D Preferred Stock.
(g) NOTICES OF RECORD DATE. In the event of (i) any taking by
the Corporation of a record date of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, or (ii) any capital reorganization of
the Corporation, any reclassification or recapitalization of the capital stock
of the Corporation, any merger or consolidation of the Corporation, and any
transfer of all or substantially all of the assets of the Corporation to any
other Corporation, or any other entity or person, or any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, the
Corporation shall mail to each holder of Series D Preferred Stock at least 30
days prior to the record date specified therein, a notice specifying (A) the
date on which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (C) the time, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) shall be entitled to exchange their shares
of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up.
(h) COMMON STOCK RESERVED. The Corporation shall reserve and
keep available out of its authorized but unissued Common Stock such number of
shares of Common Stock as shall from time to time be sufficient to effect
conversion of the Series D Preferred Stock.
4.6.3. VOTING RIGHTS.
The holders of shares of Series D Preferred Stock shall be
entitled to notice of any stockholders' meeting and to vote upon any and all
matters submitted to a stockholder for a vote, as though the Common Stock,
Series A Preferred Stock, Series B Preferred Stock, the Series C Preferred Stock
and the Series D Preferred Stock constituted a single class of stock, except
with respect to those matters on which the Delaware Corporation Law requires
that a vote must be by a separate class or classes or by separate series, as to
which each such class or series shall have the right to vote in accordance with
such law, and holders of Series D Preferred Stock shall have that number of
votes per share as is equal to the largest number of whole shares of Common
Stock into which the Series D Preferred Stock held by such holder is then
convertible.
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4.6.4. DIVIDEND RIGHTS.
(a) The holders of outstanding Series D Preferred Stock shall be
entitled to receive a dividend (determined on the basis of the number of shares
of Common Stock into which a share of Series D Preferred Stock is then
convertible) equal to any dividend declared or paid on Common Stock, Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock,
calculated on an as converted basis, based on the number of shares of Common
Stock into which such Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock is convertible on the date of
such declaration (or, if the Board makes no declaration, on the date of
payment).
(b) Such Series D Preferred Stock dividends shall be paid prior
to any payment of any dividends on the Common Stock, the Series A Preferred
Stock, the Series B Preferred Stock or the Series C Preferred Stock. In the
event such dividends are not paid prior to the payment of the Series D Preferred
Stock liquidation preference in accordance with Section 4.6.1, such dividends
shall be payable on liquidation in accordance with Section 4.6.1.
4.6.5. COVENANTS. In addition to Section 4.6.3 and any vote which the
Series D Preferred Stock may have under Delaware law, so long as any shares of
Series D Preferred Stock shall be outstanding, the Corporation shall not,
without first obtaining the affirmative vote or written consent of at least
two-thirds of such outstanding shares of Series D Preferred Stock, take any
action that:
(a) alters, restates or changes the rights, preferences or
privileges of the Series D Preferred Stock;
(b) increases or decreases the authorized number of shares of
Series D Preferred Stock;
(c) creates (by reclassification or otherwise) any new class or
series of shares having rights, preferences or privileges senior to or on a
parity with the Series D Preferred Stock;
(d) results in the redemption of any shares of Common Stock
(other than pursuant to employee agreements or in connection with redemption of
certain shares held by B. Braun Melsungen AG); or
(e) amends, restates or waives any provision of the Company's
Restated Certificate of Incorporation or by-laws relative to the Series D
Preferred Stock.
4.6.6. REDEMPTION.
(a) The Corporation may, at its sole option, commencing no
earlier than six (6) months following the Series D Original Issue Date,
repurchase in whole at any time or in
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part from time to time, the Series D Preferred Stock for the Return Amount (as
such term is defined in Section 4.6.1), commencing on the Series D Original
Issue Date and continuing through the date of redemption. If a Liquidity Event
occurs within twelve (12) months following such repurchase, the Corporation
shall make a payment to the holder of each share of Series D Preferred Stock
that it has purchased of cash payment equal to the excess, if any, of ninety
percent (90%) of the value attributable to such share by the Liquidity Event (or
that would have been attributable if the share had been outstanding at the time
of the Liquidity Event), without regard to liquidity discounts or other
restrictions, over the price paid by the Corporation for such share upon
exercise of the repurchase option.
For purposes of this Section 4.6.6:
"LIQUIDITY EVENT" shall mean an IPO or any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation,
including a merger, acquisition, sale of voting control or sale of substantially
all of the assets of the Corporation that is deemed a liquidation under Section
4.6.1.
(b) If less than all of the outstanding shares of the Series D
Preferred Stock are to be redeemed, the shares to be redeemed shall be
apportioned among all of the registered holders of the Series D Preferred Stock
outstanding, taken together, as nearly as possible in proportion to their
holdings as shown by the books of the Corporation.
(c) Notice of the intention of the Corporation to redeem shares
of the Series D Preferred Stock and of the date and place for redemption shall
be given by first class mail, postage prepaid, mailed at least twenty (20) and
not more than sixty (60) days prior to the date designated for redemption to
each holder of record of shares so to be redeemed at his last known address as
shown by the records of the Corporation, but no failure to mail such notice or
any defect therein or in the mailing thereof shall affect the validity of the
proceedings for such redemption except as to the holder to whom the Corporation
failed to mail such notice or whose notice or the mailing thereof was defective.
Each such notice shall state: (i) the redemption date; (ii) the number of shares
of Series D Preferred Stock to be redeemed and, if less than all the shares held
by such holder are to be redeemed, the number of such shares to be redeemed;
(iii) the redemption price; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date.
On or after the date of redemption designed in such notice, each
holder of shares called for redemption, upon surrender to the Corporation at the
place designated in such notice of the certificate or certificates for such
shares, properly endorsed in blank for transfer or accompanied by proper
instruments of assignment or transfer in blank, shall thereupon be entitled to
receive payment of the redemption price in cash. In case less than all shares
represented by a surrendered certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
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If such notice of redemption shall have been duly given, and if on or
before the redemption date funds necessary for the redemption of the shares to
be redeemed shall have been set aside in cash so as to be and continue to be
available therefor, then notwithstanding that any certificate representing any
shares so called for redemption shall not have been surrendered, all rights with
respect to the shares so called for redemption shall forthwith after such
redemption date cease, except only the right of the holder to receive the
redemption price without interest. Any moneys so set aside by the Corporation
and unclaimed by the end of three years from the date fixed for such redemption
shall revert to the general funds of the Corporation.
(d) All shares of the Series D Preferred Stock redeemed or
otherwise acquired by the Corporation shall be cancelled and retired and shall
not be reissued.
FIFTH: BY-LAWS. The board of directors of the Corporation is expressly
authorized to adopt, amend or repeal the by-laws of the Corporation.
SIXTH: DIRECTORS. Elections of directors need not be by written ballot
except and to the extent provided in the by-laws of the Corporation.
SEVENTH: LIABILITY. No director shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that to the extent required by the
provisions of Section 102(b)(7) of the General Corporation Law of the State of
Delaware or any successor statute, as the same may be interpreted or amended
from time to time, or any other laws of the State of Delaware, this provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the Corporation or its 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 the State of Delaware or (iv) for any transaction from which the director
derived an improper personal benefit. If the General Corporation Law of the
State of Delaware hereafter is amended to authorize the further elimination or
limitation on personal liability of directors, then the liability of a director
of the Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended General
Corporation Law of the State of Delaware. Any repeal or modification of this
Article SEVENTH by the stockholders of the Corporation shall be prospective
only, and shall not adversely affect any limitation on the personal liability of
a director of the Corporation existing at the time of such repeal or
modification.
EIGHTH: INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
8.1 INDEMNIFICATION. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or an officer of the Corporation or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee
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benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding
is alleged action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists or
may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such indemnities in
connection therewith; provided, however, that, except as provided in Section 8.3
of this Article EIGHTH with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnities in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
8.2 RIGHT TO ADVANCEMENT OF EXPENSES.
The right to indemnification conferred in Section 8.1 of this Article
EIGHTH shall include the right to be paid by the Corporation the expenses
(including attorneys' fees) incurred in defending any such proceeding in advance
of its final disposition (hereinafter an "advancement of expenses"); provided,
however, that, if the Delaware General Corporation Law requires, an advancement
of expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking
(hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal (hereinafter a "final
adjudication") that such indemnitee is not entitled to be indemnified for such
expenses under this Section 8.2 or otherwise. The rights to indemnification and
to the advancement of expenses conferred in Sections 8.1 and 8.2 of this Article
EIGHTH shall be contract rights and such rights shall continue as to an
indemnitee who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the indemnitee's heirs, executors and administrators.
8.3 RIGHT OF INDEMNITEE TO BRING SUIT.
If a claim under Sections 8.1 or 8.2 of this Article EIGHTH is not
paid in full by the Corporation within sixty (60) days after a written claim has
been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
(20) days, the indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit. In (i) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an
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advancement of expenses) it shall be a defense that, and (ii) in any suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the Corporation shall be entitled to recover such
expenses upon a final adjudication that, the indemnitee has not met any
applicable standard for indemnification set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal
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counsel, or its stockholders) that the indemnitee has not met such applicable
standard of conduct, shall create a presumption that the indemnitee has not met
the applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article EIGHTH or otherwise shall be on the Corporation.
8.4 NON-EXCLUSIVITY OF RIGHTS.
The rights to indemnification and to the advancement of expenses
conferred in this Article EIGHTH shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, the Corporation's
Certificate of Incorporation, by-laws, agreement, vote of stockholders or
disinterested directors or otherwise.
8.5 INSURANCE.
The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another Corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Delaware General Corporation Law.
8.6 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION.
The Corporation may, to the extent authorized from time to time by the
Board of Directors, grant rights to indemnification and to the advancement of
expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Article with respect to the indemnification and
advancement of expenses of directors and officers of the Corporation.
IN WITNESS WHEREOF, the undersigned has caused this Restated
Certificate of Incorporation to be executed in its corporate name by its Senior
Vice President this 22nd day of December, 1998.
/s/ Jane Kober
------------------------
Name: Jane Kober
Title: Senior Vice President
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CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF BIOPURE CORPORATION
PURSUANT TO SECTION 242 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
Biopure Corporation, a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Biopure Corporation (the
"Corporation"). The Corporation was originally incorporated under the name
Biopure Fine Chemicals, Inc., which name was changed to "Biopure Corporation" on
October 31, 1985. The original Certificate of Incorporation was filed with the
Secretary of State of the State of Delaware on July 30, 1984 and was restated on
November 14, 1997 and December 22, 1998.
2. This Certificate of Amendment to the Restated Certificate of
Incorporation amends the Restated Certificate of Incorporation of the
Corporation and has been adopted and approved in accordance with Section 242 of
the General Corporation Laws of the State of Delaware.
3. Section 4.6.2(d)(i) (2) of Article 4 of the Restated Certificate of
Incorporation is hereby amended to read in its entirety as follows:
"SERIES D ORIGINAL ISSUE DATE" shall mean, as to any share of Series D
Preferred Stock, the date such share was issued by the Corporation.
IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Amendment to the Restated Certificate of Incorporation to be executed in its
corporate name by its Senior Vice President this 6th day of May, 1999.
/s/ Jane Kober
--------------------------------
Name: Jane Kober
Title: Senior Vice President
<PAGE> 54
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF BIOPURE CORPORATION
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
Biopure Corporation, a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Biopure Corporation (the
"Corporation"). The Corporation was originally incorporated under the name
Biopure Fine Chemicals, Inc., which name was changed to "Biopure
Corporation" on October 31, 1985. The original Certificate of Incorporation
was filed with the Secretary of State of the State of Delaware on July 30,
1984 and was restated on December 22, 1998 and amended on May 6, 1999.
2. This Certificate of Amendment to the Restated Certificate of
Incorporation amends the Restated Certificate of Incorporation of the
Corporation and has been adopted and approved in accordance with Section
242 of the General Corporation Law of the State of Delaware.
3. The Restated Certificate of Incorporation is hereby amended to add a
new Article TWELFTH to read in its entirety as follows:
TWELFTH: COMBINATION. The outstanding shares of the Corporation's
Common Stock shall be combined such that each outstanding share shall become
two-thirds of one share of Common Stock. No fractional shares will be issued as
a result of such combination. Instead the Corporation shall pay in cash the fair
value of fractions of a share.
IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Amendment to the Restated Certificate of Incorporation to be executed in its
corporate name by its Senior Vice President, General Counsel and Secretary this
21st day of July, 1999.
/s/ Jane Kober
----------------------------------------
Name: Jane Kober
Title: Senior Vice President, General
Counsel and Secretary
<PAGE> 55
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF BIOPURE CORPORATION
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
Biopure Corporation, a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Biopure Corporation (the
"Corporation"). The Corporation was originally incorporated under the name
Biopure Fine Chemicals, Inc., which name was changed to "Biopure
Corporation" on October 31, 1985. The original Certificate of Incorporation
was filed with the Secretary of State of the State of Delaware on July 30,
1984, restated on December 22, 1998 and amended on May 6, 1999 and July 21,
1999.
2. This Certificate of Amendment to the Restated Certificate of
Incorporation amends the Restated Certificate of Incorporation of the
Corporation and has been adopted and approved in accordance with Section
242 and Section 228 of the General Corporation Law of the State of
Delaware. Pursuant to Section 103 of the General Corporation Law of the
State of Delaware, this Certificate of Amendment to the Restated
Certificate of Incorporation shall not be effective until 12:01 a.m.
Delaware time on August 4, 1999.
3. The Corporation's Restated Certificate of Incorporation is hereby
amended by striking the first paragraph of Article FOURTH in its entirety
and substituting therefore the following paragraph:
FOURTH: CAPITALIZATION. The total number of shares of capital stock
which the Corporation shall have authority to issue is 130,000,179 shares,
divided into two classes. The total authorized number of shares of common stock
is 100,000,179, consisting of 100,000,000 shares of Class A Common Stock, par
value $0.01 ("Common Stock"), and 179 shares of Class B Common Stock, par value
$1.00 ("Class B Common Stock"). The total authorized number of shares of
preferred stock ("Preferred Stock") is 30,000,000 shares, par value $.01 per
share.
4. The Corporation's Restated Certificate of Incorporation is hereby
amended to insert a new third paragraph of Article FOURTH, directly before
the current third paragraph of Article FOURTH, to read in its entirety as
follows:
The number of shares of each of the designated series of Preferred
Stock shall be as follows: 346,663 shares are designated Series A Convertible
Preferred Stock ("Series A Preferred Stock"), 2,127,251 shares are designated
Series B Convertible Preferred Stock ("Series B Preferred Stock"), 2,830,188
shares are designated Series C Convertible Preferred
<PAGE> 56
Stock ("Series C Preferred Stock") and 2,610,264 shares are designated Series D
Convertible Preferred Stock ("Series D Preferred Stock").
5. The Corporation's Restated Certificate of Incorporation is hereby
amended to add a new Section 4.3.8. to read in its entirety as follows:
4.3.8. CONVERTED OR OTHERWISE ACQUIRED SHARES. Any share of Series A
Preferred Stock that is converted under Section 4.3.4 or otherwise acquired by
the Corporation shall not be reissued as a share of such series (and such
reissuance as a share of such series is prohibited), but shall instead, upon its
retirement and the filing of a proper certificate pursuant to Section 243 of the
Delaware General Corporation Law, become a share, undesignated as to series, of
the Corporation's class of Preferred Stock.
6. The Corporation's Restated Certificate of Incorporation is hereby
amended by striking Section 4.4.6. and substituting therefore the following
Section 4.4.6:
4.4.6. CONVERTED OR OTHERWISE ACQUIRED SHARES. Any share of Series B
Preferred Stock that is converted under Section 4.4.2 or otherwise acquired by
the Corporation shall not be reissued as a share of such series (and such
reissuance as a share of such series is prohibited), but shall instead, upon its
retirement and the filing of a proper certificate pursuant to Section 243 of the
Delaware General Corporation Law, become a share, undesignated as to series, of
the Corporation's class of Preferred Stock.
7. The Corporation's Restated Certificate of Incorporation is hereby
amended by striking Section 4.5.6 and substituting therefore the following
Section 4.5.6:
4.5.6. CONVERTED, REDEEMED OR OTHERWISE ACQUIRED SHARES. Any share of
Series C Preferred Stock that is converted under Section 4.5.2 or otherwise
acquired by the Corporation shall not be reissued as a share of such series (and
such reissuance as a share of such series is prohibited), but shall instead,
upon its retirement and the filing of a proper certificate pursuant to Section
243 of the Delaware General Corporation Law, become a share, undesignated as to
series, of the Corporation's class of Preferred Stock.
8. Section 4.6.2(b)(ii) of the Corporation's Restated Certificate of
Incorporation is hereby amended by deleting the phrase "multiplied by the
total number of shares of Common Stock" so that the Section reads as
follows:
(ii) the closing of an initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the Corporation
(the "IPO"); provided that if the price to the public in the IPO is less than
$16.00 per share (as adjusted for stock splits, stock dividends,
recapitalizations and similar events), each share of Series D Preferred Stock
shall be converted into shares of Common Stock at the greater of (i) the number
of shares of Common Stock such shares of Series D Preferred Stock can be
converted into at the Conversion Price or (ii) the
-2-
<PAGE> 57
number of shares of Common Stock (including fractional shares expressed to four
decimal places) that when multiplied by the greater of the price to the public
in the IPO and $10.60 equals the Return Amount.
9. The Corporation's Restated Certificate of Incorporation is hereby
amended by striking Section 4.6.6(d) and substituting therefore the
following Section 4.6.6(d):
(d) Any share of Series D Preferred Stock that is redeemed, or is
converted under Section 4.6.2 or otherwise acquired by the Corporation, shall
not be reissued as a share of such series (and such reissuance as a share of
such series is prohibited), but shall instead, upon its retirement and the
filing of a proper certificate pursuant to Section 243 of the Delaware General
Corporation Law, become a share, undesignated as to series, of the Corporation's
class of Preferred Stock.
10. The Corporation's Restated Certificate of Incorporation is hereby
amended by striking Article FIFTH and substituting therefore the following
Article FIFTH:
FIFTH: BY-LAWS. The board of directors of the Corporation is expressly
authorized to adopt, amend or repeal the by-laws of the Corporation, subject to
the vote of directors otherwise required herein.
11. The Corporation's Restated Certificate of Incorporation is hereby
amended by striking Article SIXTH in its entirety and substituting
therefore the following Article SIXTH:
SIXTH: DIRECTORS; NO STOCKHOLDER ACTION BY WRITTEN CONSENT, ETC. The
following provisions are inserted for the management of the business and the
conduct of the affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the Corporation and of its directors
and stockholders:
The business and affairs of the Corporation shall be managed by or
under the direction of the board of directors. In addition to the powers and
authority expressly conferred upon them by statute or by this Restated
Certificate of Incorporation or the by-laws of the Corporation, the directors
are hereby empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation.
The directors of the Corporation need not be elected by written ballot
unless the by-laws so provide.
Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders.
Special meetings of stockholders of the Corporation may be called only
by the Chairman of the Board or the President or by the Board of Directors
acting pursuant to a
-3-
<PAGE> 58
resolution adopted by a majority of the Whole Board. For purposes of this
Restated Certificate of Incorporation, the term "Whole Board" shall mean the
total number of authorized directors whether or not there exist any vacancies in
previously authorized directorships.
12. The Corporation's Restated Certificate of Incorporation is hereby
amended by striking Article SEVENTH and substituting therefore the
following Article SEVENTH:
SEVENTH: CLASSIFIED BOARD. Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, the number of directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the Whole Board. The directors, other than those who may be elected
by the holders of any series of Preferred Stock under specified circumstances,
shall be divided into three classes, with the term of office of the first class
to expire at the Corporation's first annual meeting of stockholders following
the effectiveness of this Article, the term of office of the second class to
expire at the Corporation's second annual meeting of stockholders following the
effectiveness of this Article and the term of office of the third class to
expire at the Corporation's third annual meeting of stockholders following the
effectiveness of this Article. At each annual meeting of stockholders, directors
elected to succeed those directors whose terms expire shall be elected for a
term of office to expire at the third succeeding annual meeting of stockholders
after their election.
Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the board of directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall, unless otherwise provided by law or by resolution
of the Board of Directors, be filled only by a majority vote of the directors
then in office, though less than a quorum, and directors so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of office of the class to which they have been chosen expires. No decrease
in the authorized number of directors shall shorten the term of any incumbent
director.
Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
by-laws of the Corporation.
Subject to the rights of the holders of any series of Preferred Stock
then outstanding, any directors, or the entire board of directors, may be
removed from office at any time, but only for cause and only by the affirmative
vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of
the voting power of all of the then-outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class.
13. The Corporation's Restated Certificate of Incorporation is hereby
amended by striking Article EIGHTH and substituting therefore the following
Article EIGHTH:
-4-
<PAGE> 59
EIGHTH: AMENDMENT TO BY-LAWS. The Board of Directors is expressly
empowered to adopt, amend or repeal the by-laws of the Corporation. Any
adoption, amendment or repeal of the by-laws of the Corporation by the Board of
Directors shall require the approval of a majority of the Whole Board. The
stockholders shall also have power to adopt, amend or repeal the by-laws of the
Corporation; provided, however, that, in addition to any vote of the holders of
any class or series of stock of the Corporation required by law or by this
Restated Certificate of Incorporation, the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the voting power of all of
the then-outstanding shares of the capital stock of the Corporation entitled to
vote generally in the election of directors, voting together as a single class,
shall be required to adopt, amend or repeal any provision of the by-laws of the
Corporation.
14. The Corporation's Restated Certificate of Incorporation is hereby
amended by adding a new Article NINTH to read in its entirety as follows:
NINTH: AMENDMENTS TO CERTIFICATE. The Corporation reserves the right
to amend, alter or repeal any provision contained in this Restated Certificate
of Incorporation in the manner prescribed by the laws of the State of Delaware
and all rights conferred upon stockholders are granted subject to this
reservation; provided, however, that, notwithstanding any other provision of
this Restated Certificate of Incorporation or any provision of law that might
otherwise permit a lesser vote or no vote, but in addition to any vote of the
holders of any class or series of the stock of this Corporation required by law
or by this Restated Certificate of Incorporation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of all of the then-outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend or repeal this Article
NINTH, or Articles FIFTH, SIXTH, SEVENTH, EIGHTH, TENTH or ELEVENTH or to adopt
an agreement of merger or consolidation or to approve the sale, lease, exchange
or other disposition of all or substantially all of the Corporation's property
and assets; provided that on and after July 31, 2003, the affirmative vote of
the holders of at least a majority of the voting power of all of the
then-outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to adopt an agreement of merger or consolidation or to approve the
sale, lease, exchange or other disposition of all or substantially all of the
Corporation's property and assets.
15. The previous Article SEVENTH of the Corporation's Restated Certificate
of Incorporation is hereby renumbered as Article TENTH and reads in its
entirety as follows:
TENTH: LIABILITY. No director shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that to the extent required by the
provisions of Section 102(b)(7) of the General Corporation Law of the State of
Delaware or any successor statute, as the same may be interpreted or amended
from time to time, or any other laws of the State of Delaware, this provision
shall not eliminate or limit the liability of a director (i) for any breach of
the director's
-5-
<PAGE> 60
duty of loyalty to the Corporation or its 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 the
State of Delaware or (iv) for any transaction from which the director derived an
improper personal benefit. If the General Corporation Law of the State of
Delaware hereafter is amended to authorize the further elimination or limitation
on personal liability of directors, then the liability of a director of the
Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended General
Corporation Law of the State of Delaware. Any repeal or modification of this
Article TENTH by the stockholders of the Corporation shall be prospective only,
and shall not adversely affect any limitation on the personal liability of a
director of the Corporation existing at the time of such repeal or modification.
16. The previous Article EIGHTH of the Corporation's Restated Certificate
of Incorporation is hereby renumbered as Article ELEVENTH and reads in its
entirety as follows:
ELEVENTH: INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
11.1 INDEMNIFICATION. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or an officer of the Corporation or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by such indemnities in connection therewith; provided, however, that,
except as provided in Section 11.3 of this Article ELEVENTH with respect to
proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnities in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
11.2 RIGHT TO ADVANCEMENT OF EXPENSES. The right to indemnification
conferred in Section 11.1 of this Article ELEVENTH shall include the right to be
paid by the Corporation the expenses (including attorneys' fees) incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee
in his or her capacity as a director or officer (and not in any other
-6-
<PAGE> 61
capacity in which service was or is rendered by such indemnitee, including,
without limitation, service to an employee benefit plan) shall be made only upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
Section 11.2 or otherwise. The rights to indemnification and to the advancement
of expenses conferred in Sections 11.1 and 11.2 of this Article ELEVENTH shall
be contract rights and such rights shall continue as to an indemnitee who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators.
11.3 RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Sections 11.1
or 11.2 of this Article ELEVENTH is not paid in full by the Corporation within
sixty (60) days after a written claim has been received by the Corporation,
except in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty (20) days, the indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of suit
that indemnification of the indemnitee is proper in the circumstances because
the indemnitee has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
Article ELEVENTH or otherwise shall be on the Corporation.
11.4 NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and to
the advancement of expenses conferred in this Article ELEVENTH shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Certificate of Incorporation, by-laws,
agreement, vote of stockholders or disinterested directors or otherwise.
-7-
<PAGE> 62
11.5 INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another Corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
11.6 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses to
any employee or agent of the Corporation to the fullest extent of the provisions
of this Article with respect to the indemnification and advancement of expenses
of directors and officers of the Corporation.
IN WITNESS WHEREOF, the undersigned has caused this Certificate of
Amendment to the Restated Certificate of Incorporation to be executed in its
corporate name by its Senior Vice President, General Counsel and Secretary this
30th day of July, 1999.
/s/ Jane Kober
----------------------------------------
Name: Jane Kober
Title: Senior Vice President, General
Counsel and Secretary
-8-
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