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Exhibit 3.1
SEVENTH RESTATED CERTIFICATE OF INCORPORATION
OF
3-DIMENSIONAL PHARMACEUTICALS, INC.
3-DIMENSIONAL PHARMACEUTICALS, INC. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware (the "General Corporation Law"), hereby certifies as follows:
FIRST: The name of the Corporation is 3-Dimensional Pharmaceuticals, Inc.
The Certificate of Incorporation of the Corporation was originally filed by the
Corporation with the Secretary of State of the State of Delaware on March 11,
1993, a Certificate of Amendment to the Certificate of Incorporation was filed
by the Corporation with the Secretary of State of Delaware on September 29, 1993
and a Restated Certificate of Incorporation (the "First Restated Certificate of
Incorporation") was filed by the Corporation with the Secretary of State of
Delaware on October 13, 1993. Certificates of Amendment to the First Restated
Certificate of Incorporation were filed with the Secretary of State of Delaware
on December 13, 1993, April 21, 1994, December 12, 1994, May 16, 1995, May 26,
1995, August 14, 1995, December 12, 1995, December 27, 1995, February 8, 1996,
June 20, 1996 and September 25, 1996. A Second Restated Certificate of
Incorporation was filed by the Corporation with the Secretary of State of
Delaware on October 11, 1996. A Third Restated Certificate of Incorporation was
filed by the Corporation with the Secretary of State of Delaware on March 12,
1997. A Fourth Restated Certificate of Incorporation was filed by the
Corporation with the Secretary of State of Delaware on June 12, 1997.
Certificates of Amendment to the Fourth Restated Certificate of Incorporation
were filed with the Secretary of State of Delaware on August 6, 1997 and
November 14, 1997. The Fifth Restated Certificate of Incorporation was filed by
the Corporation with the Secretary of State of Delaware on December 31, 1997.
Certificates of Amendment to the Fifth Restated Certificate of Incorporation
were filed on October 12, 1999 and November 18, 1999. The Sixth Restated
Certificate of Incorporation was filed by the Corporation with the Secretary of
State of Delaware on March 31, 2000.
SECOND: This Seventh Restated Certificate of Incorporation restates and
integrates and further amends the Certificate of Incorporation of the
Corporation. This Seventh Restated Certificate of Incorporation was duly adopted
in accordance with the provisions of Sections 242 and 245 and was approved by
written consent of the stockholders of the Corporation given in accordance with
the provisions of Section 228 of the General Corporation Law (prompt notice of
such action having been given to those stockholders who did not consent in
writing).
THIRD: The text of the Certificate of Incorporation of the Corporation is
hereby restated and amended to read in its entirety as follows:
ARTICLE FIRST
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Name
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The name of the Corporation is 3-Dimensional Pharmaceuticals, Inc.
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ARTICLE SECOND
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Registered Agent
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The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.
ARTICLE THIRD
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Purpose
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The Corporation is organized to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law.
ARTICLE FOURTH
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Capital Stock
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The Corporation shall have the authority to issue 97,994,126 shares of all
classes of stock, consisting of 6,926,461 shares of Series A-1 Preferred Stock,
$.001 par value (formerly denominated the Series A Preferred Stock) (the "Series
A-1 Preferred Stock"), 4,333,990 shares of Series A-2 Preferred Stock, $.001 par
value (the "Series A-2 Preferred Stock"), 10,304,264 shares of Series A-3
Preferred Stock, $.001 par value (the "Series A-3 Preferred Stock"), 4,000,000
shares of Series A-4 Preferred Stock, $.001 par value (the "Series A-4 Preferred
Stock," 9,572,248 shares of Series A-5 Preferred Stock, $.001 par value, (the
"Series A-5 Preferred Stock") and collectively with the Series A-1 Preferred
Stock, Series A-2 Preferred Stock, Series A-3 Preferred Stock and Series A-4
Preferred Stock, the "Series A Preferred Stock"), 1,000,000 shares of Series B
Preferred Stock, $.001 par value (the "Series B Preferred Stock"), 5,000,000
shares of Series C Preferred Stock, $.001 par value (the "Series C Preferred
Stock,") 625,000 shares of Series D Preferred Stock, $.001 par value (the
"Series D Preferred Stock,") and collectively with the Series A Preferred Stock,
the Series B Preferred Stock, the Series C Preferred Stock, the Series D
Preferred Stock the "Preferred Stock"), and 56,232,163 shares of Common Stock,
$.001 par value ("Common Stock").
Unless otherwise provided, all Section references in this Article Fourth
shall refer to Sections of this Article Fourth.
A. SERIES A PREFERRED STOCK
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The Series A Preferred Stock shall have the following designations, powers,
preferences, relative, participating, optional or other special rights,
qualifications, limitations and restrictions:
1. Dividends
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a. Dividends are payable on the Series A Preferred Stock, when, as and if
declared by the Board of Directors.
b. So long as any Series A Preferred Stock is outstanding the Corporation
shall not declare or pay any dividend or make any distribution (whether in cash,
shares of capital stock of the Corporation or other property) on shares of its
Common Stock unless prior thereto or simultaneously therewith (A) all dividends
and distributions previously declared on the Series A Preferred Stock and (B)
any cumulative dividends in accordance with Section A.1(d) shall have been paid
or the Corporation shall have irrevocably deposited or set aside cash or
obligations the payment of which is backed by the full faith and credit of the
United States ("United States Obligations") sufficient for the payment thereof.
c. If the Board of Directors declares dividends or other distributions
(other than on Liquidation (as hereinafter defined in Section A.2(a))) on the
Common Stock in cash, property or securities (including Common Stock) of the
Corporation (or subscription or other rights to purchase or acquire securities
(including Common Stock) of the Corporation), the Board of Directors shall
simultaneously declare a dividend or distribution at the same rate and in the
same form on the Series A Preferred Stock, so that the Series A Preferred Stock
participates equally with the Common Stock in such dividend or distribution. For
purposes of determining its proportional share of the dividend or distribution,
each share of the Series A Preferred Stock shall be deemed to be that number of
shares of Common Stock into which such share of Series A Preferred Stock is then
convertible, rounded to the nearest one-tenth of a share.
d. From and after (i) with respect to the Series A-1 Preferred Stock,
October 14, 1998, (ii) with respect to the Series A-2 Preferred Stock, the fifth
anniversary of the Original Series A-2 Issuance Date (as hereinafter defined in
Section A.5(d)(i)), (iii) with respect to the Series A-3 Preferred Stock, the
fifth anniversary of the Original Series A-3 Issuance Date (as hereinafter
defined in Section A.5(d)(i)), (iv) with respect to the Series A-4 Preferred
Stock, the fifth anniversary of the Original Series A-4 Issuance Date (as
hereinafter defined in Section A.5(d)(i)), and (v) with respect to the Series
A-5 Preferred Stock, the fifth anniversary of the Original Series A-5 Issuance
Date (as hereinafter defined in Section A.5(d)(i), the applicable Series A
Preferred Stock will be entitled to dividends at the rate of ten (10%) per share
per annum (or such greater amount of dividends as such Series A Preferred Stock
would be entitled to if such Series A Preferred Stock were converted into Common
Stock), of the applicable Original Series A Purchase Price (as hereinafter
defined in Section A.2(a)), as adjusted for any combinations or divisions or
similar recapitalization affecting the Series A Preferred Stock after the
applicable Original Series A Issuance Date (as hereinafter defined in Section
A.5(d)(i)), payable in equal quarterly installments on the first day of January,
April, July and October (and any dividends payable to holders of Series A
Preferred Stock which are not paid shall be cumulative). If less then the full
dividend is declared on all of the shares of Series A Preferred Stock which are
then entitled to dividends, then
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a dividend must be declared ratably on the Series A-1 Preferred Stock, the
Series A-2 Preferred Stock, the Series A-3 Preferred Stock, the Series A-4
Preferred Stock and the Series A-5 Preferred Stock. Nothing in this Section
A.1(d) shall be deemed to limit the rights of the Series A Preferred Stock under
Sections A.1(b) and A.1(c).
2. Rights on Liquidation, Dissolution, Winding-Up.
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a. In the event of any liquidation, dissolution or winding-up of the
affairs of the Corporation (collectively, a "Liquidation"), whether voluntary or
involuntary, before any payment of cash or distribution of other property shall
be made to the holders of the Common Stock (the "Common Stockholders") or any
other class or series of stock ranking on Liquidation junior to the Series A
Preferred Stock, the holders of Series A Preferred Stock ("Series A Preferred
Stockholders"), shall be entitled to receive out of the assets of the
Corporation legally available for distribution to its stockholders, an amount
equal to the applicable Original Series A Purchase Price (as defined below) per
share (as appropriately adjusted for any combinations or divisions or similar
recapitalization affecting the Series A Preferred Stock after the applicable
Original Series A Issuance Date) (the "Liquidation Preference"), whether from
capital, surplus or earnings, plus an amount equal to any accrued but unpaid
cumulative dividends thereon and any declared but unpaid dividends thereon. As
used herein, the "Original Series A Purchase Price" for the Series A-1 Preferred
Stock is $1.00 per share, the "Original Series A Purchase Price" for the Series
A-2 Preferred Stock is $1.25 per share, the "Original Series A Purchase Price"
for the Series A-3 Preferred Stock is $1.21309 per share, the "Original Series A
Purchase Price" for the Series A-4 Preferred Stock is $2.60 per share and the
"Original Series A Purchase Price" for the Series A-5 Preferred Stock at $3.00
per share.
b. If, upon any Liquidation, the assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the Series A
Preferred Stockholders, the holders of the Series B Preferred Stock (the "Series
B Preferred Stockholders"), the holders of the Series C Preferred Stock (the
"Series C Preferred Stockholders") and the holders of the Series D Preferred
Stock (the "Series D Preferred Stockholders") the full amounts to which they
shall be entitled, the Series A Preferred Stockholders, the Series B Preferred
Stockholders, the Series C Preferred Stockholders and the Series D Preferred
Stockholders shall share ratably in any distribution of assets in proportion to
the respective amounts which would be payable to them in respect of the shares
held by them if all amounts payable to them in respect of such were paid in full
pursuant to Section A.2(a), Section B.2(a), Section C.2(a) and Section D.2(a).
c. In the event of any Liquidation, after payment shall have been made to
the Series A Preferred Stockholders, the Series B Preferred Stockholders, the
Series C Preferred Stockholders and the Series D Preferred Stockholders of the
full amount to which each shall be entitled pursuant to Section A.2(a), Section
B.2(a), Section C.2(a) and Section D.2(a), respectively, with respect to each
other class or series of
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capital stock (other than Common Stock) ranking on Liquidation junior to the
Series A Preferred Stock (in descending order of seniority), the Series A
Preferred Stockholders, as a class, shall be entitled to receive an amount equal
(and in like kind) to the aggregate preferential amount fixed for each such
junior class or series of capital stock, which amount shall be distributed among
the Series A Preferred Stockholders based on the number of shares of Common
Stock into which such shares of Series A Preferred Stock are then convertible.
If, upon any Liquidation, the assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the Series A
Preferred Stockholders and a class or series of capital stock (other than the
Common Stock) junior to the Series A Preferred Stock the full amounts to which
they shall be entitled pursuant to the immediately preceding sentence, the
holders of the Series A Preferred Stock and such other class or series of
capital stock shall share ratably in any distribution of assets according to the
respective preferential amounts fixed for the Series A Preferred Stock (pursuant
to Section A.2(a)) and such junior class or series of capital stock which would
be payable in respect of the shares held by them upon such distribution if all
amounts payable on or with respect to such shares were paid in full.
d. In the event that after payment of the full amount to which the
holders of Series A Preferred Stock shall be entitled as aforesaid, cash or
other property remains, such remaining proceeds shall be distributed pro rata
among the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stock and the Common Stock. For purposes
of determining its proportional share of the cash or other property, each share
of the Series A Preferred Stock shall be deemed to be that number of shares of
Common Stock into which such share of Series A Preferred Stock is then
convertible, rounded to the nearest one-tenth of a share.
3. Merger, Consolidation, etc.
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In the event the Corporation shall sell, lease or otherwise dispose of
all or substantially all of the assets of the Corporation or merge or
consolidate another corporation into or with the Corporation (other than a
merger or consolidation in which the Series A Preferred Stockholders receive
securities of the surviving corporation having substantially similar rights to
the Series A Preferred Stock and in which the stockholders of the Corporation
immediately prior to such a transaction are holders of at least a majority of
the voting securities of the surviving corporation immediately thereafter), then
the proceeds of or any property deliverable from such transaction shall be
distributed among the holders of the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock and
the Common Stock according to the provisions of Section A.2 as if such
transaction were a Liquidation, unless the treatment of such a transaction as a
Liquidation pursuant to this Section A.3 is waived in writing by the Series A
Preferred Stockholders of record that hold at least two-thirds of the
outstanding Series A Preferred Stock. Such waiver by the Series A Preferred
Stockholders shall be binding upon the holders of the Series B Preferred Stock,
Series C Preferred Stock, the Series D Preferred Stock and Common Stock.
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4. Voting.
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a. General. In addition to the rights otherwise provided for herein or by
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law, the Series A Preferred Stockholders shall be entitled to vote, together
with the Series B Preferred Stockholders, Series C Preferred Stockholders, the
Series D Preferred Stock and Common Stockholders, as one class on all matters
submitted to a vote of stockholders, in the same manner and with the same effect
as the Common Stockholders. In any such vote, each share of Series A Preferred
Stock shall entitle the holder thereof to one vote per share for each share of
Common Stock (including fractional shares) into which each share of Series A
Preferred Stock is then convertible, rounded to the nearest one-tenth of a
share.
b. Election of Board of Directors.
(i) (A) In addition to the rights specified in Section A.4(a), the
holders of a majority in voting power of the Series A-1 Preferred Stock, Series
A-2 Preferred Stock, Series A-4 Preferred Stock and Series A-5 Preferred Stock,
voting together as a separate class, shall have the exclusive right to elect to
the Board of Directors of the Corporation that number of directors which shall
be equal to a majority of the total number of directors on the Board of
Directors (the "Series A-1/A-2/A-4/A-5 Directors"). In any election of Series A-
1/A-2/A-4/A-5 Directors pursuant to this Section A.4(b), each outstanding share
of Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series A-4 Preferred
Stock and Series A-5 Preferred Stock shall entitle the holder thereof to the
number of votes per share that equals the number of shares of Common Stock
(including fractional shares) into which each such share is then convertible,
rounded up to the nearest one-tenth of a share. The voting rights of the holders
of Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series A-4 Preferred
Stock and Series A-5 Preferred Stock contained in this Section A.4(b) may be
exercised at a special meeting of the holders of Series A-1 Preferred Stock,
Series A-2 Preferred Stock, Series A-4 Preferred Stock and Series A-5 Preferred
Stock called as provided in accordance with the By-laws of the Corporation, at
any annual or special meeting of the stockholders of the Corporation, or by
written consent of the holders of Series A-1 Preferred Stock, Series A-2
Preferred Stock, Series A-4 Preferred Stock and Series A-5 Preferred Stock in
lieu of a meeting. The Series A-1/A-2/A-4/A-5 Directors elected pursuant to this
Section A.4(b) shall serve from the date of their election and qualification
until their successors have been duly elected and qualified.
(B) In addition to the rights specified in Section A.4(a), the
holders of a majority in voting power of the Series A-3 Preferred Stock, voting
together as a separate class, shall have the exclusive right to elect two
directors to the Board of Directors of the Corporation (the "Series A-3
Directors"), one of which Series A-3 Directors shall be nominated by Rho
Management Trust II and one of which shall be nominated by Abingworth
Bioventures SICAV. In any election of Series A-3 Directors pursuant to this
Section A.4(b), each share of Series A-3 Preferred Stock shall entitle the
holder thereof to the number of votes per share that equals the number of shares
of Common Stock (including fractional shares) into which each such share is then
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convertible, rounded up to the nearest one-tenth of a share. The voting rights
of the holders of Series A-3 Preferred Stock contained in this Section A.4(b)
may be exercised at a special meeting of the holders of Series A-3 Preferred
Stock called as provided in accordance with the By-laws of the Corporation, at
any annual or special meeting of the stockholders of the Corporation, or by
written consent of the holders of Series A-3 Preferred Stock in lieu of a
meeting. The Series A-3 Directors elected pursuant to this Section A.4(b) shall
serve from the date of their election and qualification until their successors
have been duly elected and qualified.
(ii) A vacancy in the directorships to be elected pursuant to Section
A.4(b)(i) (including any vacancy created on account of an increase in the number
of directors on the Board of Directors) may be filled only by vote at a meeting
called in accordance with the By-laws of the Corporation or written consent in
lieu of a meeting in accordance with Section A.4(b)(i).
c. Protective Provisions. So long as any Series A Preferred Stock is
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outstanding, the Corporation shall not, without the written consent in lieu of a
meeting, or the affirmative vote at a meeting called for such purpose, of Series
A Preferred Stockholders of record that hold at least a majority of the
outstanding Series A Preferred Stock, voting as a separate class:
(i) authorize, issue or agree to authorize or issue any shares of
capital stock of the Corporation, any right or options to receive any capital
stock, or any security convertible into or exchangeable for capital stock,
except in each case, pursuant to the Equity Compensation Plan of the
Corporation;
(ii) change as a whole, by subdivision or combination in any manner, the
number of shares of the Common Stock then outstanding into a different number of
shares, with or without par value, without making the identical change as a
whole in the number of shares of Series A Preferred Stock then outstanding;
(iii) amend, alter or repeal, in any manner whatsoever, the
designations, powers, preferences, relative, participating, optional or other
special rights, qualifications, limitations and restrictions of the Series A
Preferred Stock;
(iv) sell, abandon, transfer, lease or otherwise dispose of all or
substantially all of the properties or assets of the Corporation or any of its
subsidiaries;
(v) declare or pay any dividend or make any distribution (whether in
cash, shares of capital stock of the Corporation, or other property) on shares
of its capital stock other than the Series A Preferred Stock;
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(vi) merge or consolidate with or into, or permit any subsidiary of
the Corporation to merge or consolidate with or into, any other corporation,
corporations or other entity or entities, or effect any transaction or series of
related transactions in which more than 50% of the voting power of the
Corporation is transferred;
(vii) voluntarily dissolve, liquidate or wind-up or carry out any
partial liquidation or distribution or transaction in the nature of a partial
liquidation or distribution;
(viii) increase the number of shares of any series of Preferred
Stock of the Corporation authorized to be issued;
(ix) reclassify any shares of the Corporation's capital stock as
shares ranking senior to or on parity with the Series A Preferred Stock with
respect to rights on Liquidation, redemption or for the payment of any dividend
or distribution other than in Liquidation;
(x) amend, alter or repeal any provision of the Certificate of
Incorporation of the Corporation;
(xi) amend or repeal any provisions of the By-laws of the
Corporation so as to adversely affect the rights of the holders of the Series A
Preferred Stock; or
(xii) directly or indirectly, redeem, purchase or otherwise acquire
for value (including through an exchange), or set apart money or other property
for any mandatory purchase or other analogous fund for the redemption, purchase
or acquisition of, any shares of Common Stock, except pursuant to (A) Section
A.6 hereof, or (B) the terms of any grant made under the Equity Compensation
Plan of the Corporation or other stock compensation plans for employees and
others who render services to the Corporation.
5. Conversion.
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a. Right to Convert
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(i) Any Series A Preferred Stockholder shall have the right, at any
time or from time to time, prior to the closing date (the "Closing Date") of the
Company's first Public Offering (as hereinafter defined) to convert any or all
of its shares of Series A Preferred Stock into that number of fully paid and
nonassessable shares of Common Stock for each share of Series A Preferred Stock
equal to the quotient of the
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Liquidation Preference divided by the applicable Series A Preferred Conversion
Price for that share (as defined in Section A.5(d)) (as last adjusted and then
in effect) rounded to the nearest one-tenth of a share.
(ii) (A) Any Series A Preferred Stock that remains unconverted on the
Closing Date shall be automatically converted without notice and without any
action on the part of the holder thereof into shares of Common Stock on the
Closing Date in accordance with the preceding sentence. After the Closing Date
all rights of holders of shares of Series A Preferred Stock with respect to
Series A Preferred Stock, except the right to receive shares of Common Stock in
accordance with this Section, shall cease and the shares of Series A Preferred
Stock shall no longer be deemed to be outstanding, whether or not the
Corporation has received the certificates representing such shares.
(B) A Public Offering is defined as an Underwritten Offering (as
hereinafter defined) by the Corporation of authorized but unissued shares of
Common Stock resulting in gross proceeds to the Company (before deducting
underwriting commissions and expenses of the offering) of not less than
$15,000,000 or such greater amount as is required to meet applicable listing
standards; provided that, with respect to the automatic conversion of the Series
A Preferred Stock, a Public Offering shall be at a price per share of not less
than $3.75 (as adjusted for stock splits, stock combinations, stock dividends
and similar transactions). An Underwritten Offering is defined as a firm
commitment offering by one or more underwriters in an offering registered under
the Securities Act of 1933, as amended (the "Securities Act").
(C) The Corporation shall promptly send by first-class mail,
postage prepaid, to each Series A Preferred Stockholder at such holder's address
appearing on the Corporation's records a copy of (i) each registration statement
filed by the Corporation under the Securities Act and each amendment thereof and
each exhibit and schedule thereto and (ii) each order of the Securities and
Exchange Commission declaring any such registration statement to be effective.
(D) Holders of Series A Preferred Stock converted into shares of
Common Stock pursuant to this Section A.5 shall be entitled to payment of any
accrued but unpaid cumulative dividends and any declared but unpaid dividends
payable with respect to such shares of Series A Preferred Stock, up to and
including the Series A Conversion Date (as hereinafter defined in Section
A.5(b)) or the Closing Date, as the case may be.
b. Mechanics of Conversion
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(i) Any Series A Preferred Stockholder that exercises its right to
convert its shares of Series A Preferred Stock into Common Stock shall deliver
the certificate(s) for the shares to be converted ("Series A Preferred
Certificate"), duly endorsed or assigned in blank to the Corporation, during
regular business hours, at the office of the transfer agent of the Corporation,
if any, at the principal place of business of the Corporation or at such other
place as may be designated by the Corporation.
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(ii) Each Series A Preferred Certificate shall be accompanied by
written notice stating that such holder elects to convert such shares and
stating the name or names (with address) in which the certificate(s) for the
shares of Common Stock ("Common Certificate") are to be issued. Such conversion
shall be deemed to have been effected on the date when the aforesaid delivery is
made ("Series A Conversion Date").
(iii) As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, at the place
designated by such holder, a Common Certificate(s) for the number of full shares
of Common Stock to which such holder is entitled and a check or cash for any
fractional interest in a share of Common Stock, as provided in Section A.5(c)
below, and for any accrued but unpaid cumulative dividends and any declared but
unpaid dividends, payable with respect to the converted shares of Series A
Preferred Stock, up to and including the Series A Conversion Date or the Closing
Date, as the case may be.
(iv) The person in whose name each Common Certificate is to be issued
shall be deemed to have become a stockholder of record of Common Stock on the
applicable Series A Conversion Date or the Closing Date, as the case may be,
unless the transfer books of the Corporation are closed on that date, in which
event such holder shall be deemed to have become a stockholder of record on the
next succeeding date on which the transfer books are open; provided, that the
Series A Preferred Conversion Price shall be that in effect on the Series A
Conversion Date or the Closing Date, as the case may be.
(v) Upon conversion of only a portion of the shares covered by a
Series A Preferred Certificate, the Corporation, at its own expense, shall issue
and deliver to or upon the written order of the holder of such Series A
Preferred Certificate, a new Series A Preferred Certificate representing the
number of unconverted shares of Series A Preferred Stock from the Series A
Preferred Certificate so surrendered.
c. Issuance of Common Stock on Conversion
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(i) If a Series A Preferred Stockholder shall surrender more than one
Series A Preferred Certificate for conversion at any one time, the number of
such shares of Common Stock issuable upon conversion thereof shall be computed
on the basis of the aggregate number of shares of Series A Preferred Stock so
surrendered.
(ii) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series A Preferred Stock. The Corporation shall pay a
cash adjustment for such fractional interest in an amount equal to the then
Current Market Price (as hereinafter defined) of a share of Common Stock
multiplied by such fractional interest.
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d. Conversion Price; Adjustment. The Series A Preferred Conversion Price
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for the Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the Series
A-3 Preferred Stock, the Series A-4 Preferred Stock or Series A-5 Preferred
Stock, as the case may be, shall initially be equal to the Liquidation
Preference for such series and shall be subject to adjustment from time to time
as follows:
(i) If the Corporation shall at any time or from time to time after the
date of original issuance of the first share of the Series A-1 Preferred Stock
(the "Original Series A-1 Issuance Date"), the date of original issuance of the
first share of the Series A-2 Preferred Stock (the "Original Series A-2 Issuance
Date"), the date of original issuance of the first share of the Series A-3
Preferred Stock (the "Original Series A-3 Issuance Date"), the date of original
issuance of the first share of the Series A-4 Preferred Stock (the "Original
Series A-4 Issuance Date") or the date of original issuance of the first share
of Series A-5 Preferred Stock (the "Original Series A-5 Issuance Date") (each of
the Original Series A-1 Issuance Date, the Original Series A-2 Issuance Date,
the Original Series A-3 Issuance Date, the Original Series A-4 Issuance Date and
the Original Series A-5 Issuance Date are sometimes referred to as an "Original
Series A Issuance Date") issue any shares of Additional Stock (as hereinafter
defined in Section A.5 (d)(ii)), without consideration or for a consideration
per share of Common Stock or underlying Common Stock, as the case may be, less
than the applicable Series A Preferred Conversion Price in effect for such
Series A Preferred Stock immediately prior to such issue, the Series A Preferred
Conversion Price in effect for such series of Series A Preferred Stock
immediately prior to each such issue shall be adjusted to a price for such
series of Series A Preferred Stock determined by multiplying the applicable
Series A Preferred Conversion Price by a fraction, the numerator of which shall
be the number of shares of Common Stock outstanding immediately prior to such
issue plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for all such Additional Stock so
issued would purchase at such Series A Preferred Conversion Price in effect
immediately prior to the issuance of such Additional Stock, and the denominator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of shares of such Additional Stock; provided
that, for the purpose of this clause (i), all shares of Common Stock (except as
otherwise provided in this clause (i)) issuable upon conversion of all
outstanding shares of Series A Preferred Stock shall be deemed to be
outstanding, and immediately after any shares of Additional Stock are deemed to
be issued pursuant to paragraph (C) of this clause (i), such shares of
Additional Stock shall be deemed to be outstanding. For the purposes of any
adjustment of the Series A Preferred Conversion Price pursuant to this clause
(i), the following provisions shall be applicable:
(A) In the case of the issuance of Common Stock in whole or in part for
cash, the consideration shall be deemed to be the amount of cash paid therefor,
plus the value of any property other than cash received by the Corporation as
provided in paragraph (B) of this clause (i), less any discounts, commissions or
other expenses allowed, paid or incurred by the Corporation for any underwriting
or otherwise in connection with the issuance and sale thereof.
12
<PAGE>
(B) In the case of the issuance of Common Stock for consideration in whole
or in part in property or consideration other than cash, the value of such
property or consideration other than cash shall be deemed to be the fair market
value thereof as determined in good faith by the Board of Directors of the
Corporation, irrespective of any accounting treatment; provided, however, that
-------- -------
such fair market value shall not exceed the aggregate Current Market Price of
the shares of Common Stock being issued, less any cash consideration paid for
such shares.
(C) In the case of the issuance of (I) options to purchase or rights to
subscribe for Common Stock, (II) securities convertible into or exchangeable for
Common Stock or (III) options to purchase or rights to subscribe for such
convertible or exchangeable securities:
(1) the aggregate maximum number of shares of Common Stock deliverable
upon exercise of such options to purchase, or rights to subscribe for Common
Stock shall be deemed to have been issued at the time such options or rights
were issued and for a consideration equal to the consideration (determined in
the manner provided in paragraphs (A) and (B) above), if any, received by the
Corporation upon the issuance of such options or rights plus the minimum
purchase price provided in such options or rights for the Common Stock covered
thereby;
(2) the aggregate maximum number of shares of Common Stock deliverable
upon conversion of, or in exchange for, any such convertible or exchangeable
securities or upon the exercise of options to purchase, or rights to subscribe
for, such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration received by the Corporation for any such securities and
related options or rights (excluding any cash received on account of accrued
interest or accrued dividends), plus the additional consideration, if any, to be
received by the Corporation upon the conversion or exchange of such securities
or the exercise of any related options or rights (determined in the manner
provided in paragraphs (A) and (B) above); and
(3) if there is any decrease in the conversion or exercise price of, or
any increase in the number of shares to be received upon exercise, conversion or
exchange of any such options, rights or convertible or exchangeable securities
(other than a change resulting from the antidilution provisions thereof), the
applicable Series A Preferred Conversion Price shall be automatically lowered to
reflect such change.
(ii) "Additional Stock" shall mean any shares of Common Stock, other than
Excluded Stock (as hereinafter defined), or any shares of preferred
13
<PAGE>
stock or other securities convertible into, exchangeable for or exercisable for
shares of Common Stock, other than Excluded Stock.
(iii) "Excluded Stock" shall mean
(A) The Series A Preferred Stock and Common Stock issued upon
conversion of any shares of Series A Preferred Stock;
(B) Securities issued pursuant to the acquisition of another
corporation, partnership, joint venture, trust or other entity by the
Corporation by merger, consolidation, stock acquisition, reorganization, or
otherwise whereby the Corporation, or its stockholders of record immediately
prior to the effectiveness of such transaction, directly or indirectly own at
least the majority of the voting power of such other entity or the resulting or
surviving corporation immediately after such transaction;
(C) Common Stock issued to employees, consultants or others who
provide services to the Corporation, pursuant to any options to purchase or
rights to subscribe for such Common Stock granted pursuant to the Equity
Compensation Plan of the Corporation or other stock compensation plans for
employees and others who render services to the Corporation, as approved by the
Corporation's Board of Directors, giving effect to appropriate adjustment to
prevent dilution thereof;
(D) Warrants issued pursuant to (1) the Loan Agreement entered into
among the Corporation as borrower and certain Series A Preferred Stockholders as
lenders in December 1994, (2) the Loan Agreement entered into among the
Corporation as borrower and certain Series A Preferred Stockholders as lenders
in August 1995, (3) the Loan Agreement entered into among the Corporation as
borrower and certain Series A Preferred Stockholders as lenders in December
1995, (4) the Loan Agreement entered into among the Corporation as borrower and
certain Series A Preferred Stockholders as lenders in February 1996, (5) the
Loan Agreement entered into among the Corporation as borrower and certain Series
A Preferred Stockholders as lenders in June 1996 and (6) the Loan Agreement
entered into among the Corporation as borrower and certain Series A Preferred
Stockholders as lenders in September 1996, and Common Stock issued upon exercise
of such warrants;
(E) The Series B Preferred Stock and Common Stock issued upon
conversion of any shares of Series B Preferred Stock;
(F) The Series C Preferred Stock and Common Stock issued upon
conversion of any shares of Series C Preferred Stock;
14
<PAGE>
(G) The Series D Preferred Stock and Common Stock issued upon
conversion of any shares of Series D Preferred Stock;
(H) Warrants issued in connection with the Master Lease Agreement
entered into between the Corporation as borrower and Transamerica Business
Credit Corporation as lender in June 1997 and Common Stock issued upon exercise
of such warrants; and
(I) Securities authorized by the affirmative vote of at least 75% of
the Corporation's Board of Directors then in office to be issued in connection
with (x) bridge loan financings from institutional and/or other accredited
investors or (y) corporate partnering transactions or other strategic alliances
with pharmaceutical or other companies related to the Corporation's business.
(iv) If the Corporation shall at any time after the applicable
Original Series A Issuance Date fix a record date for the subdivision or split-
up of shares of Common Stock, then, following the record date fixed for the
determination of holders of Common Stock entitled to receive such subdivision or
split-up (or the date of such subdivisions or split-up, if no record date is
fixed), the applicable Series A Preferred Conversion Price shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of each share of the Series A Preferred Stock shall be increased in
proportion to such increase in outstanding shares.
(v) If, at any time after the applicable Original Series A Issuance
Date, the number of shares of Common Stock outstanding is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date fixed for such combination (or the date of such combination, if no
record date is fixed), the applicable Series A Preferred Conversion Price shall
be appropriately increased so that the number of shares of Common Stock issuable
on conversion of each share of Series A Preferred Stock shall be decreased in
proportion to such decrease in outstanding shares.
(vi) If, at any time after the applicable Original Series A Issuance
Date, there shall be any capital reorganization, or any reclassification of the
capital stock of the Corporation (other than a change in par value or from par
value to no par value or from no par value to par value or as a result of a
stock dividend or subdivision, split-up or combination of shares), or the
consolidation or merger of the Corporation with or into another corporation
(other than a consolidation or merger described in Section A.3 hereof or in
which the Corporation is the continuing corporation and which does not result in
any change in the powers, designations, preferences and rights (or the
qualifications, limitations or restrictions, if any) of the Series A Preferred
Stock) (an "Extraordinary Transaction"), the applicable Series A Preferred
Conversion Price with respect to the Series A Preferred Stock outstanding after
the Extraordinary
15
<PAGE>
Transaction shall be adjusted to provide that the shares of Series A Preferred
Stock outstanding immediately prior to the effectiveness of the Extraordinary
Transaction shall be convertible into the kind and number of shares of stock or
other securities or property of the Corporation or of the corporation resulting
from or surviving such Extraordinary Transaction which the holder of the number
of shares of Common Stock deliverable (immediately prior to the effectiveness of
the Extraordinary Transaction) upon conversion of such Series A Preferred Stock
would have been entitled to receive upon such Extraordinary Transaction. The
provisions of this Section A.5(d)(vi) shall similarly apply to successive
Extraordinary Transactions.
(vii) All calculations under this Section A.5(d) shall be made to the
nearest one-tenth of a cent ($.001) or to the nearest one-tenth of a share, as
the case may be.
(viii) As used herein, the "Current Market Price" at any date of one share
of Common Stock shall be deemed to be the average of the daily closing prices
for the thirty (30) consecutive business days ending on the fifth (5th) business
day before the day in question (as adjusted for any stock dividend, split-up,
combination or reclassification that took effect during such thirty (30)
business day period) as follows:
(A) If the Common Stock is listed or admitted for trading on a
national securities exchange, the closing price for each day shall be the last
reported sales price regular way or, in case no such reported sales took place
on such day, the average of the last reported bid and asked prices regular way,
in either case, on the principal national securities exchange on which the
Common Stock is listed or admitted to trading.
(B) If the Common Stock is not at the time listed or admitted for
trading on any such exchange, then such price as shall be equal to the last
reported sale price, or, if there is no such sale price, the average of the last
reported bid and asked prices, as reported by the National Association of
Securities Dealers Automated Quotations System ("NASDAQ") on such day.
(C) If, on any day in question, the security shall not be listed or
admitted to trading on a national securities exchange or quoted on the NASDAQ,
then such price shall be equal to the last reported bid and asked prices on such
day as reported by the National Quotation Bureau, Inc. or any similar reputable
quotation and reporting service, if such quotation is not reported by the
National Quotation Bureau, Inc.
(D) If the Common Stock is not traded in such manner that the
quotations referred to in this clause (viii) are available for the period
required
16
<PAGE>
hereunder, the Current Market Price shall be determined by the Board of
Directors of the Corporation.
(ix) In any case in which the provisions of this Section A.5(d) shall
require that an adjustment shall become effective immediately after a record
date for an event, the Corporation may defer until the occurrence of that event
(A) issuing to the holder of any share of Series A Preferred Stock converted
after such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares of capital stock
issuable upon such conversion before giving effect to such adjustment and (B)
paying to such holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section A.5(c) above; provided, however, that the
-------- -------
Corporation shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares, in
such case, upon the occurrence of the event requiring such adjustment.
e. Notice of Adjustments
---------------------
(i) Whenever the Series A Preferred Conversion Price shall be adjusted
as provided in Section A.5(d) above, the Corporation shall file, at its
principal office, at the office of the transfer agent for the Series A Preferred
Stock, if any, or at such other place as may be designated by the Corporation, a
statement, signed by its President and by its Chief Financial Officer, showing
in detail the facts requiring such adjustment and the Series A Preferred
Conversion Price that shall be in effect after such adjustment. The Corporation
shall also cause a copy of such statement to be sent by first-class, certified
mail, return receipt requested, postage prepaid, to each Series A Preferred
Stockholder at such holder's address appearing on the Corporation's records.
Where appropriate, such copy may be given in advance and may be included as part
of a notice required to be mailed under the provisions of clause (ii) below.
(ii) In the event the Corporation shall propose to file a registration
statement under the Securities Act for a Public Offering or to take any action
of the types described in clauses (i), (iv), (v) or (vi) of Section A.5(d)
above, the Corporation shall give notice to each Series A Preferred Stockholder,
in the manner set forth in Section A.5(e)(i) above, which shall specify the
record date, if any, with respect to any such action and the date on which such
action is to take place. The notice shall also set forth such facts as are
reasonably necessary to indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Series A Preferred
Conversion Price and the number, kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of such
action or deliverable upon conversion of shares of Series A Preferred Stock. In
the case of any action which would require the fixing of a record date, such
notice shall be given at least ten (10) days prior to the date so fixed, and in
case of all other action, such notice shall be given at least fifteen (15) days
prior to the taking of such proposed action. Failure to give
17
<PAGE>
such notice, or any defect therein, shall not affect the legality or validity of
any such action.
f. Transfer Taxes. The Corporation shall pay all documentary, stamp or
--------------
other transactional taxes (excluding income taxes) attributable to the issuance
or delivery of shares of capital stock of the Corporation upon conversion of any
shares of Series A Preferred Stock; provided, however, that the Corporation
shall not be required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for such shares
in a name other than that of the holder of the shares of Series A Preferred
Stock in respect of which such shares are being issued.
g. Reservation of Common Stock. The Corporation shall at all times reserve,
---------------------------
free from preemptive rights, out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of
Series A Preferred Stock, sufficient shares of Common Stock to provide for the
conversion of all outstanding shares of Series A Preferred Stock.
h. Status of Common Stock. All shares of Common Stock which may be issued
----------------------
in connection with the conversion provisions set forth herein will, upon
issuance by the Corporation, be validly issued, fully paid and nonassessable,
free from preemptive rights and free from all taxes, liens or charges with
respect thereto created or imposed by the Corporation.
6. Redemption.
----------
a. (i) At the request of the holders of a majority of the Series A
Preferred Stock, excluding the Series A-5 Preferred Stockholders, then
outstanding (each, a "Holder" and collectively, the "Holders") made, from time
to time, at any date after March 12, 2002, the fifth anniversary of the Original
Series A-3 Issuance Date ("Fifth Anniversary Date") (the date fixed for any such
redemption, as determined pursuant to Section A.6(b) hereof, being a "Redemption
Date"), the Corporation shall redeem (unless otherwise prevented by law), at a
redemption price per share equal to the Liquidation Preference, plus an amount
equal to any accrued but unpaid cumulative dividends thereon and any declared
but unpaid dividends thereon, up to 25% of the shares of Series A Preferred
Stock held by the Holders on the Fifth Anniversary Date (the "Holders' Shares"),
and after each of the sixth, seventh and eighth anniversaries of the Original
Series A-3 Issuance Date, the foregoing redemption rights and obligations shall
extend to an additional 25% of the Holders' Shares. If any Holder transfers
shares of the Series A Preferred Stock after the Fifth Anniversary Date, the
foregoing redemption rights, to the extent not previously exercised by the
Holder, shall be allocated by the Corporation among the transferor and
transferees of such Holder's Shares, pro rata, each being entitled to redeem 25%
of the shares of the Series A Preferred Stock then held by such transferor or
transferee. The payment to be made to each Holder on the Redemption Date is
hereinafter referred to as the "Redemption Payment."
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<PAGE>
(ii) At the request of the holders of a majority of the Series A-5
Preferred Stock then outstanding made, from time to time, at any date after the
fifth anniversary of the Original Series A-5 Issuance Date ("Fifth A-5
Anniversary Date"), the Corporation shall redeem (unless otherwise prevented by
law), at a redemption price per share equal to the Liquidation Preference, plus
an amount equal to any accrued but unpaid cumulative dividends thereon and any
declared but unpaid dividends thereon, up to 25% of the shares of Series A-5
Preferred Stock held by the holders on the Fifth A-5 Anniversary Date (the "A-5
Holders' Shares"), and after each of the sixth, seventh and eighth anniversaries
of the Original Series A-3 Issuance Date, the foregoing redemption rights and
obligations shall extend to an additional 25% of the A-5 Holders' Shares. If any
holder transfers shares of the Series A-5 Preferred Stock after the Fifth
Anniversary Date, the foregoing redemption rights, to the extent not previously
exercised by the holder, shall be allocated by the Corporation among the
transferor and transferees of such A-5 Holder's Shares, pro rata, each being
entitled to redeem 25% of the shares of the Series A-5 Preferred Stock then held
by such transferor or transferee.
b. (i) Promptly after receipt of any such request, the Company shall fix a
date for redemption (the "Redemption Date") which shall be not less than 60 days
after the notice from the Holders requesting redemption. On and after the
Redemption Date, all rights of any Series A Preferred Stockholder with respect
to the shares of Series A Preferred Stock redeemed on that Redemption Date,
except the right to receive the Redemption Payment as provided herein, shall
cease, and such shares shall no longer be deemed to be outstanding, whether or
not the Corporation has received the certificates representing such shares, on
the condition that the Corporation pays or irrevocably deposits or sets aside
cash in an amount equal to, the Redemption Payment.
(ii) Notice of the redemption of any shares of the Series A Preferred
Stock shall be mailed by first-class mail to each holder of record of such
shares at the address for such holder shown on the Corporation records, not less
than 30 nor more than 60 days prior to the Redemption Date; provided, however,
-------- -------
that neither the failure to mail any such notice nor any defects contained in
any such notice shall affect the validity of the proceedings for the redemption
of any of the shares to be redeemed. If less than all the shares owned by a
Holder are to be redeemed, the notice shall specify the number of shares and the
certificate numbers thereof which are to be redeemed.
c. Notwithstanding anything to the contrary contained in this Section A.6,
the Corporation shall not be obligated to acquire any shares on any Redemption
Date to the extent that the acquisition thereof would violate any law, statute,
rule, regulation, policy or guideline promulgated by any federal, state, local
or foreign governmental authority applicable to the Corporation, provided that
the Corporation shall use all legally permissible methods in the reduction of
capital and revaluation of assets, including appraisal, in order to obtain a
legal source of funds with which to pay the Redemption Payment and shall acquire
such shares as soon as permitted by applicable laws, statutes, rules,
regulations, policies and guidelines.
19
<PAGE>
7. Miscellaneous.
-------------
a. Shares of Series A Preferred Stock are not subject to or entitled
to the benefit of a sinking fund.
b. Redeemed shares of Series A Preferred Stock shall not be reissued
but shall be retired. Upon the retirement of redeemed shares the capital of the
Corporation shall be reduced.
c. The shares of the Series A Preferred Stock shall not have any
preferences, voting powers or relative, participating, optional, preemptive or
other special rights except as set forth above in this Certificate of
Incorporation of the Corporation, as amended from time to time.
B. SERIES B PREFERRED STOCK
------------------------
The Series B Preferred Stock shall have the following designations,
powers, preferences, relative, participating, optional or other special rights,
qualifications, limitations and restrictions:
1. Dividends.
---------
a. Dividends are payable on the Series B Preferred Stock, when, as
and if declared by the Board of Directors.
b. So long as any Series B Preferred Stock is outstanding the
Corporation shall not declare or pay any dividend or make any distribution
(whether in cash, shares of capital stock of the Corporation or other property)
on shares of its Common Stock unless prior thereto or simultaneously therewith
any dividends and distributions previously declared on the Series B Preferred
Stock shall have been paid or the Corporation shall have irrevocably deposited
or set aside cash or United States Obligations sufficient for the payment
thereof.
c. If the Board of Directors declares dividends or other
distributions (other than on Liquidation) on the Common Stock in cash, property
or securities (including Common Stock) of the Corporation (or subscription or
other rights to purchase or acquire securities (including Common Stock) of the
Corporation), the Board of Directors shall simultaneously declare a dividend or
distribution at the same rate and in the same form on the Series B Preferred
Stock so that the Series B Preferred Stock participates equally with the Series
A Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock
and the Common Stock in such dividend or distribution. For purposes of
determining its proportional share of the dividend or distribution, each share
of the Series B Preferred Stock shall be deemed to be that number of shares of
Common
20
<PAGE>
Stock into which such share of Series B Preferred Stock is then convertible,
rounded to the nearest one-tenth of a share.
2. Rights on Liquidation, Dissolution, Winding-up.
----------------------------------------------
a. In the event of any Liquidation, whether voluntary or involuntary,
before any payment of cash or distribution of other property shall be made to
the Common Stockholders or any other class or series of stock ranking on
Liquidation junior to the Series B Preferred Stock, the Series B Preferred
Stockholders, subject to the rights of any series of preferred stock ranking
senior to the Series A Preferred Stock and the Series B Preferred Stock, shall
be entitled to receive out of the assets of the Corporation legally available
for distribution to its stockholders, $2.25 per share (as appropriately adjusted
for any combinations or divisions or similar recapitalizations affecting the
Series B Preferred Stock after the Original Series B Issuance Date (as
hereinafter defined)) (the "Series B Liquidation Preference"), whether from
capital, surplus or earnings, plus an amount equal to any declared but unpaid
dividends thereon. Upon the occurrence of a Liquidation, the Series B Preferred
Stock shall rank pari passu with the Series A Preferred Stock, the Series C
---- -----
Preferred Stock, the Series D Preferred Stock and any other series of preferred
stock hereinafter created which ranks pari passu with the Series A Preferred
---- -----
Stock (the "Pari Passu Preferred Stock").
---- -----
b. If, upon any Liquidation, the assets of the Corporation available
for distribution to its stockholders shall be insufficient to pay the Series A
Preferred Stockholders, the Series B Preferred Stockholders, the Series C
Preferred Stockholders, the Series D Preferred Stockholders and the holders of
Pari Passu Preferred Stock the full amounts to which they shall be entitled, the
---- -----
Series A Preferred Stockholders, the Series B Preferred Stockholders, the Series
C Preferred Stockholders, the Series D Preferred Stockholders and the holders of
Pari Passu Preferred Stock shall share ratably in any distribution of assets in
---- -----
proportion to the amounts payable to them if all amounts payable with respect to
such shares on Liquidation were paid in full.
c. In the event of any Liquidation, so long as the Series A Preferred
Stockholders are entitled to distributions pursuant to Section A.2(c) and such
distributions have been paid in full, and after payment shall have been made to
the Series A Preferred Stockholders, the Series B Preferred Stockholders, the
Series C Preferred Stockholders, the Series D Preferred Stockholders and the
holders of Pari Passu Preferred Stock of the full amount to which they shall be
---- -----
entitled pursuant to Section B.2(a), with respect to each other class or series
of capital stock (other than Common Stock) ranking on Liquidation junior to the
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock, the Series D Preferred Stockholders and the Pari Passu Preferred Stock
---- -----
(in descending order of seniority), the Series A Preferred Stockholders, the
Series B Preferred Stockholders, the Series C Preferred Stockholders, the Series
D Preferred Stockholders and the holders of Pari Passu Preferred Stock, as a
---- -----
class, shall be entitled to receive an amount equal (and in like kind) to the
aggregate preferential amount
21
<PAGE>
fixed for each such junior class or series of capital stock, which amount shall
be distributed among the Series A Preferred Stockholders, the Series B Preferred
Stockholders, the Series C Preferred Stockholders, the Series D Preferred
Stockholders and the holders of Pari Passu Preferred Stock in an equal amount
---- -----
per share of the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock, the Series D Preferred Stockholders and the Pari Passu
---- -----
Preferred Stock then outstanding. If, upon any Liquidation, the assets of the
Corporation available for distribution to its stockholders shall be insufficient
to pay the Series A Preferred Stockholders, the Series B Preferred Stockholders,
the Series C Preferred Stockholders, the Series D Preferred Stockholders and the
holders of Pari Passu Preferred Stock and a class or series of capital stock
---- -----
(other than the Common Stock) junior to the Series A Preferred Stock, the Series
B Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stockholders and the Pari Passu Preferred Stock the full amounts to which they
---- -----
shall be entitled pursuant to the immediately preceding sentence, the Series A
Preferred Stockholders, the Series B Preferred Stockholders, the Series C
Preferred Stockholders, the Series D Preferred Stockholders and the holders of
Pari Passu Preferred Stock and such other class or series of capital stock shall
---- -----
share ratably in any distribution of assets according to the respective
preferential amounts fixed for the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stockholders and the Pari Passu Preferred Stock and such junior class or series
---- -----
of capital stock which would be payable in respect of the shares held by them
upon such distribution if all amounts payable on or with respect to such shares
were paid in full.
d. In the event that after payment of the full amount to which the
Series A Preferred Stockholders, the Series B Preferred Stockholders, the Series
C Preferred Stockholders, the Series D Preferred Stockholders and the holders of
Pari Passu Preferred Stock shall be entitled as aforesaid, cash or other
---- -----
property remains, such remaining proceeds shall be distributed pro rata among
--- ----
the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stockholders, the Pari Passu Preferred
---- -----
Stock and the Common Stock. For purposes of determining its proportional share
of the cash or other property, each share of the Series B Preferred Stock shall
be deemed to be that number of shares of Common Stock into which such share of
Series B Preferred Stock is then convertible, rounded to the nearest one-tenth
of a share.
3. Voting.
------
a. General. In addition to the rights otherwise provided for herein or
-------
by law, the Series B Preferred Stockholders shall be entitled to vote, together
with the Series A Preferred Stockholders, the Series C Preferred Stockholders,
the Series D Preferred Stockholders the holders of any other class or series
entitled to vote on such matters and the Common Stockholders, as one class on
all matters submitted to a vote of stockholders, in the same manner and with the
same effect as the Series A Preferred Stockholders, the Series C Preferred
Stockholders, the Series D Preferred Stockholders and the Common Stockholders.
In any such vote, each share of Series B Preferred Stock
22
<PAGE>
shall entitle the holder thereof to one vote per share for each share of Common
Stock (including fractional shares) into which each share of Series B Preferred
Stock is then convertible, rounded to the nearest one-tenth of a share.
b. Protective Provision. So long as any Series B Preferred Stock is
--------------------
outstanding, the Corporation shall not, without the written consent in lieu of a
meeting, or the affirmative vote at a meeting called for such purpose, of Series
B Preferred Stockholders of record that hold at least a majority of the
outstanding Series B Preferred Stock, voting as a separate class, amend, alter
or repeal, in any manner whatsoever, the designations, powers, preferences,
relative, participating, optional or other special rights, qualifications,
limitations and restrictions of the Series B Preferred Stock.
4. Conversion.
----------
a. Right to Convert.
----------------
(i) Any Series B Preferred Stockholder shall have the right, at
any time or from time to time, prior to the Closing Date of the Corporation's
first Underwritten Offering in which all of the then outstanding shares of
Series A Preferred Stock are converted in connection therewith, to convert any
or all of its shares of Series B Preferred Stock into that number of fully paid
and nonassessable shares of Common Stock for each share of Series B Preferred
Stock equal to the quotient of the Series B Liquidation Preference divided by
the Series B Preferred Conversion Price for that share (as defined in Section
B.4(d)) (as last adjusted and then in effect) rounded to one-tenth of a share.
(ii) (A) Any Series B Preferred Stock that remains unconverted on
the Closing Date shall be automatically converted without notice and without any
action on the part of the holder thereof into shares of Common Stock on the
Closing Date in accordance with Section B.4(a)(i). After the Closing Date all
rights of holders of shares of Series B Preferred Stock with respect to Series B
Preferred Stock, except the right to receive shares of Common Stock in
accordance with this Section B.4, shall cease and the shares of Series B
Preferred Stock shall no longer be deemed to be outstanding, whether or not the
Corporation has received the certificates representing such shares.
(B) The Corporation shall promptly send by first-class mail,
postage prepaid, to each Series B Preferred Stockholder at such holder's address
appearing on the Corporation's records a copy of (i) each registration statement
filed by the Corporation under the Securities Act and each amendment thereof and
each exhibit and schedule thereto and (ii) each order of the Securities and
Exchange Commission declaring any such registration statement to be effective.
(C) Holders of Series B Preferred Stock converted into
shares of Common Stock pursuant to this Section B.4 shall be entitled to payment
of any
23
<PAGE>
declared but unpaid dividends payable with respect to such shares of Series B
Preferred Stock, up to and including the Series B Conversion Date (as defined in
Section B.4(b) below) or the Closing Date, as the case may be.
b. Mechanics of Conversion.
-----------------------
(i) Any Series B Preferred Stockholder that exercises its right to
convert its shares of Series B Preferred Stock into Common Stock shall deliver
the certificate(s) for the shares to be converted ("Series B Preferred
Certificate"), duly endorsed or assigned in blank to the Corporation, during
regular business hours, at the office of the transfer agent of the Corporation,
if any, at the principal place of business of the Corporation or at such other
place as may be designated by the Corporation.
(ii) Each Series B Preferred Certificate shall be accompanied by
written notice stating that such holder elects to convert such shares and
stating the name or names (with address) in which the Common Certificates are to
be issued. Such conversion shall be deemed to have been effected on the date
when the aforesaid delivery is made ("Series B Conversion Date").
(iii) As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, at the place
designated by such holder, a Common Certificate(s) for the number of full shares
of Common Stock to which such holder is entitled and a check or cash for any
fractional interest in a share of Common Stock, as provided in Section B.4(c)
below, and for any declared but unpaid dividends, payable with respect to the
converted shares of Series B Preferred Stock, up to and including the Series B
Conversion Date or the Closing Date, as the case may be.
(iv) The person in whose name each Common Certificate is to be issued
shall be deemed to have become a stockholder of record of Common Stock on the
applicable Series B Conversion Date or the Closing Date, as the case may be,
unless the transfer books of the Corporation are closed on that date, in which
event such holder shall be deemed to have become a stockholder of record on the
next succeeding date on which the transfer books are open; provided, that the
--------
Series B Preferred Conversion Price shall be that in effect on the Series B
Conversion Date or the Closing Date, as the case may be.
(v) Upon conversion of only a portion of the shares covered by a
Series B Preferred Certificate, the Corporation, at its own expense, shall issue
and deliver to or upon the written order of the holder of such Series B
Preferred Certificate, a new Series B Preferred Certificate representing the
number of unconverted shares of Series B Preferred Stock from the Series B
Preferred Certificate so surrendered.
24
<PAGE>
c. Issuance of Common Stock on Conversion.
--------------------------------------
(i) If a Series B Preferred Stockholder shall surrender more than one
Series B Preferred Certificate for conversion at any one time, the number of
such shares of Common Stock issuable upon conversion thereof shall be computed
on the basis of the aggregate number of shares of Series B Preferred Stock so
surrendered.
(ii) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series B Preferred Stock. The Corporation shall pay a
cash adjustment for such fractional interest in an amount equal to the then
Current Market Price of a share of Common Stock multiplied by such fractional
interest.
d. Conversion Price; Adjustment. The Series B Preferred Conversion Price
----------------------------
shall initially be equal to the Series B Liquidation Preference and shall be
subject to adjustment from time to time as follows:
(i) If the Corporation shall at any time after the original issuance
of the first share of Series B Preferred Stock (the "Original Series B Issuance
Date") fix a record date for the subdivision or split-up of shares of Common
Stock, then, following the record date fixed for the determination of holders of
Common Stock entitled to receive such subdivision or split-up (or the date of
such subdivisions or split-up, if no record date is fixed), the Series B
Preferred Conversion Price shall be appropriately decreased so that the number
of shares of Common Stock issuable on conversion of each share of the Series B
Preferred Stock shall be increased in proportion to such increase in outstanding
shares.
(ii) If, at any time after the Original Series B Issuance Date, the
number of shares of Common Stock outstanding is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date fixed
for such combination (or the date of such combination, if no record date is
fixed), the Series B Preferred Conversion Price shall be appropriately increased
so that the number of shares of Common Stock issuable on conversion of each
share of Series B Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares.
(iii) If, at any time after the Original Series B Issuance Date, there
shall be any Extraordinary Transaction, the Series B Preferred Conversion Price
with respect to the Series B Preferred Stock outstanding after the Extraordinary
Transaction shall be adjusted to provide that the shares of Series B Preferred
Stock outstanding immediately prior to the effectiveness of the Extraordinary
Transaction shall be convertible into the kind and number of shares of stock or
other securities or property of the Corporation or of the corporation resulting
from or surviving such Extraordinary Transaction which the holder of the number
of shares of Common Stock deliverable (immediately prior to the effectiveness of
the Extraordinary Transaction) upon conversion of such Series B Preferred Stock
would have been entitled to receive upon
25
<PAGE>
such Extraordinary Transaction. The provisions of this Section B.4(d)(iii) shall
similarly apply to successive Extraordinary Transactions.
(iv) All calculations under this Section B.4(d) shall be made to the
nearest one-tenth of a cent ($.001) or to the nearest one-tenth of a share, as
the case may be.
(v) In any case in which the provisions of this Section B.4(d) shall
require that an adjustment shall become effective immediately after a record
date for an event, the Corporation may defer until the occurrence of that event
(A) issuing to the holder of any share of Series B Preferred Stock converted
after such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such conversion by reason of the
adjustment required by such event over and above the shares of capital stock
issuable upon such conversion before giving effect to such adjustment and (B)
paying to such holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section B.4(c) above; provided, however, that the
-------- -------
Corporation shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares, in
such case, upon the occurrence of the event requiring such adjustment.
e. Notice of Adjustments.
---------------------
(i) Whenever the Series B Preferred Conversion Price shall be
adjusted as provided in Section B.4(d) above, the Corporation shall file, at its
principal office, at the office of the transfer agent for the Series B Preferred
Stock, if any, or at such other place as may be designated by the Corporation, a
statement, signed by its President and by its Chief Financial Officer, showing
in detail the facts requiring such adjustment and the Series B Preferred
Conversion Price that shall be in effect after such adjustment. The Corporation
shall also cause a copy of such statement to be sent, by first-class, certified
mail, return receipt requested, postage prepaid, to each Series B Preferred
Stockholder at such holder's address appearing on the Corporation's records.
Where appropriate, such copy may be given in advance and may be included as part
of a notice required to be mailed under the provisions of clause (ii) below.
(ii) In the event the Corporation shall propose to file a registration
statement under the Securities Act for a Public Offering or to take any action
of the types described in clauses (i), (ii) or (iii) of Section B.4(d) above,
the Corporation shall give notice to each Series B Preferred Stockholder, in the
manner set forth in Section B.4(e)(i) above, which shall specify the record
date, if any, with respect to any such action and the date on which such action
is to take place. The notice shall also set forth such facts as are reasonably
necessary to indicate the effect of such action (to the extent such effect may
be known at the date of such notice) on the Series B Preferred Conversion Price
and the number, kind or class of shares or other securities or property which
shall be deliverable or purchasable upon the occurrence of such action or
deliverable upon conversion of shares of Series B Preferred Stock. In the case
of any
26
<PAGE>
action which would require the fixing of a record date, such notice shall be
given at least ten (10) days prior to the date so fixed, and in case of all
other action, such notice shall be given at least fifteen (15) days prior to the
taking of such proposed action. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of any such action.
f. Transfer Taxes. The Corporation shall pay all documentary, stamp or
--------------
other transactional taxes (excluding income taxes) attributable to the issuance
or delivery of shares of capital stock of the Corporation upon conversion of any
shares of Series B Preferred Stock; provided, however, that the Corporation
-------- -------
shall not be required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for such shares
in a name other than that of the holder of the shares of Series B Preferred
Stock in respect of which such shares are being issued.
g. Reservation of Common Stock. The Corporation shall at all times
---------------------------
reserve, free from preemptive rights, out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of Series B Preferred Stock, sufficient shares of Common Stock to provide
for the conversion of all outstanding shares of Series B Preferred Stock.
h. Status of Common Stock. All shares of Common Stock which may be
----------------------
issued in connection with the conversion provisions set forth herein will, upon
issuance by the Corporation, be validly issued, fully paid and nonassessable,
free from preemptive rights and free from all taxes, liens or charges with
respect thereto created or imposed by Corporation.
5. Miscellaneous.
-------------
a. Shares of Series B Preferred Stock are not subject to or entitled
to redemption or the benefit of a sinking fund.
b. Converted shares of Series B Preferred Stock shall not be reissued
but shall be retired. Upon the retirement of converted shares the capital of the
Corporation shall be reduced.
c. The shares of the Series B Preferred Stock shall not have any
preferences, voting powers or relative, participating, optional, preemptive or
other special rights except as set forth above in this Certificate of
Incorporation of the Corporation, as amended from time to time.
27
<PAGE>
C. SERIES C PREFERRED STOCK
------------------------
The Series C Preferred Stock shall have the following designations,
powers, preferences, relative, participating, optional or other special rights,
qualifications, limitations and restrictions:
1. Dividends.
---------
a. Dividends are payable on the Series C Preferred Stock, when, as and
if declared by the Board of Directors.
b. So long as any Series C Preferred Stock is outstanding the
Corporation shall not declare or pay any dividend or make any distribution
(whether in cash, shares of capital stock of the Corporation or other property)
on shares of its Common Stock unless prior thereto or simultaneously therewith
any dividends and distributions previously declared on the Series C Preferred
Stock shall have been paid or the Corporation shall have irrevocably deposited
or set aside cash or United States Obligations sufficient for the payment
thereof.
c. If the Board of Directors declares dividends or other distributions
(other than on Liquidation) on the Common Stock in cash, property or securities
(including Common Stock) of the Corporation (or subscription or other rights to
purchase or acquire securities (including Common Stock) of the Corporation), the
Board of Directors shall simultaneously declare a dividend or distribution at
the same rate and in the same form on the Series C Preferred Stock so that the
Series C Preferred Stock participates equally with the Series A Preferred Stock,
the Series B Preferred Stock and the Common Stock in such dividend or
distribution. For purposes of determining its proportional share of the dividend
or distribution, each share of the Series C Preferred Stock shall be deemed to
be that number of shares of Common Stock into which such share of Series C
Preferred Stock is then convertible, rounded to the nearest one-tenth of a
share.
2. Rights on Liquidation, Dissolution, Winding-up.
----------------------------------------------
a. In the event of any Liquidation, whether voluntary or involuntary,
before any payment of cash or distribution of other property shall be made to
the Common Stockholders or any other class or series of stock ranking on
Liquidation junior to the Series C Preferred Stock, the Series C Preferred
Stockholders, subject to the rights of any series of preferred stock ranking
senior to the Series A Preferred Stock and the Series C Preferred Stock, shall
be entitled to receive out of the assets of the Corporation legally available
for distribution to its stockholders, $2.50 per share (as appropriately adjusted
for any combinations or divisions or similar recapitalizations affecting the
Series C Preferred Stock after the Original Series C Issuance Date (as
hereinafter defined)) (the "Series C Liquidation Preference"), whether from
capital, surplus or earnings, plus an amount equal to any declared but unpaid
dividends thereon. Upon the occurrence of a
28
<PAGE>
Liquidation, the Series C Preferred Stock shall rank pari passu with the Series
---- -----
A Preferred Stock, the Series B Preferred Stock and the Pari Passu Preferred
---- -----
Stock.
b. If, upon any Liquidation, the assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the Series A
Preferred Stockholders, the Series B Preferred Stockholders, the Series C
Preferred Stockholders and the holders of Pari Passu Preferred Stock the full
---- -----
amounts to which they shall be entitled, the Series A Preferred Stockholders,
the Series B Preferred Stockholders, the Series C Preferred Stockholders and the
holders of Pari Passu Preferred Stock shall share ratably in any distribution of
---- -----
assets in proportion to the amounts payable to them if all amounts payable with
respect to such shares on Liquidation were paid in full.
c. In the event of any Liquidation, so long as the Series A Preferred
Stockholders are entitled to distributions pursuant to Section A.2(c) and such
distributions have been paid in full, and after payment shall have been made to
the Series A Preferred Stockholders, the Series B Preferred Stockholders, the
Series C Preferred Stockholders and the holders of Pari Passu Preferred Stock of
---- -----
the full amount to which they shall be entitled pursuant to Section C.2(a), with
respect to each other class or series of capital stock (other than Common Stock)
ranking on Liquidation junior to the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock and the Pari Passu Preferred Stock
---- -----
(in descending order of seniority), the Series A Preferred Stockholders, the
Series B Preferred Stockholders, the Series C Preferred Stockholders and the
holders of Pari Passu Preferred Stock, as a class, shall be entitled to receive
---- -----
an amount equal (and in like kind) to the aggregate preferential amount fixed
for each such junior class or series of capital stock, which amount shall be
distributed among the Series A Preferred Stockholders, the Series B Preferred
Stockholders, the Series C Preferred Stockholders and the holders of Pari Passu
---- -----
Preferred Stock in an equal amount per share of the Series A Preferred Stock,
the Series B Preferred Stock, the Series C Preferred Stock and the Pari Passu
---- -----
Preferred Stock then outstanding. If, upon any Liquidation, the assets of the
Corporation available for distribution to its stockholders shall be insufficient
to pay the Series A Preferred Stockholders, the Series B Preferred Stockholders,
the Series C Preferred Stockholders and the holders of Pari Passu Preferred
---- -----
Stock and a class or series of capital stock (other than the Common Stock)
junior to the Series A Preferred Stock, the Series B Preferred Stock, the Series
C Preferred Stock and the Pari Passu Preferred Stock the full amounts to which
---- -----
they shall be entitled pursuant to the immediately preceding sentence, the
Series A Preferred Stockholders, the Series B Preferred Stockholders, the Series
C Preferred Stockholders and the holders of Pari Passu Preferred Stock and such
---- -----
other class or series of capital stock shall share ratably in any distribution
of assets according to the respective preferential amounts fixed for the Series
A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock
and the Pari Passu Preferred Stock and such junior class or series of capital
---- -----
stock which would be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to such shares were paid
in full.
29
<PAGE>
d. In the event that after payment of the full amount to which the
Series A Preferred Stockholders, the Series B Preferred Stockholders, the Series
C Preferred Stockholders and the holders of Pari Passu Preferred Stock shall be
---- -----
entitled as aforesaid, cash or other property remains, such remaining proceeds
shall be distributed pro rata among the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Pari Passu Preferred Stock
---- -----
and the Common Stock. For purposes of determining its proportional share of the
cash or other property, each share of the Series C Preferred Stock shall be
deemed to be that number of shares of Common Stock into which such share of
Series C Preferred Stock is then convertible, rounded to the nearest one-tenth
of a share.
3. Voting.
------
a. General. In addition to the rights otherwise provided for herein or
-------
by law, the Series C Preferred Stockholders shall be entitled to vote, together
with the Series A Preferred Stockholders, the Series B Preferred Stockholders,
the holders of any other class or series entitled to vote on such matters and
the Common Stockholders, as one class on all matters submitted to a vote of
stockholders, in the same manner and with the same effect as the Series A
Preferred Stockholders, the Series B Preferred Stockholders and the Common
Stockholders. In any such vote, each share of Series C Preferred Stock shall
entitle the holder thereof to one vote per share for each share of Common Stock
(including fractional shares) into which each share of Series C Preferred Stock
is then convertible, rounded to the nearest one-tenth of a share.
b. Protective Provision. So long as any Series C Preferred Stock is
--------------------
outstanding, the Corporation shall not, without the written consent in lieu of a
meeting, or the affirmative vote at a meeting called for such purpose, of Series
C Preferred Stockholders of record that hold at least a majority of the
outstanding Series C Preferred Stock, voting as a separate class, amend, alter
or repeal, in any manner whatsoever, the designations, powers, preferences,
relative, participating, optional or other special rights, qualifications,
limitations and restrictions of the Series C Preferred Stock.
4. Conversion.
----------
a. Right to Convert.
----------------
(i) Any Series C Preferred Stockholder shall have the right, at any
time or from time to time, prior to the Closing Date of the Corporation's first
Underwritten Offering in which all of the then outstanding shares of Series A
Preferred Stock are converted in connection therewith, to convert any or all of
its shares of Series C Preferred Stock into that number of fully paid and
nonassessable shares of Common Stock for each share of Series C Preferred Stock
equal to the quotient of the Series C Liquidation Preference divided by the
Series C Preferred Conversion Price for that share (as defined in Section
C.4(d)) (as last adjusted and then in effect) rounded to one-tenth of a share.
30
<PAGE>
(ii) (A) Any Series C Preferred Stock that remains unconverted on the
Closing Date shall be automatically converted without notice and without any
action on the part of the holder thereof into shares of Common Stock on the
Closing Date in accordance with Section C.4(a)(i). After the Closing Date all
rights of holders of shares of Series C Preferred Stock with respect to Series C
Preferred Stock, except the right to receive shares of Common Stock in
accordance with this Section C.4, shall cease and the shares of Series C
Preferred Stock shall no longer be deemed to be outstanding, whether or not the
Corporation has received the certificates representing such shares.
(B) The Corporation shall promptly send by first-class mail,
postage prepaid, to each Series C Preferred Stockholder at such holder's address
appearing on the Corporation's records a copy of (i) each registration statement
filed by the Corporation under the Securities Act and each amendment thereof and
each exhibit and schedule thereto and (ii) each order of the Securities and
Exchange Commission declaring any such registration statement to be effective.
(C) Holders of Series C Preferred Stock converted into shares of
Common Stock pursuant to this Section C.4 shall be entitled to payment of any
declared but unpaid dividends payable with respect to such shares of Series C
Preferred Stock, up to and including the Series C Conversion Date (as defined in
Section C.4(b) below) or the Closing Date, as the case may be.
b. Mechanics of Conversion.
-----------------------
(i) Any Series C Preferred Stockholder that exercises its right to
convert its shares of Series C Preferred Stock into Common Stock shall deliver
the certificate(s) for the shares to be converted ("Series C Preferred
Certificate"), duly endorsed or assigned in blank to the Corporation, during
regular business hours, at the office of the transfer agent of the Corporation,
if any, at the principal place of business of the Corporation or at such other
place as may be designated by the Corporation.
(ii) Each Series C Preferred Certificate shall be accompanied by
written notice stating that such holder elects to convert such shares and
stating the name or names (with address) in which the Common Certificates are to
be issued. Such conversion shall be deemed to have been effected on the date
when the aforesaid delivery is made ("Series C Conversion Date").
(iii) As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, at the place
designated by such holder, a Common Certificate(s) for the number of full shares
of Common Stock to which such holder is entitled and a check or cash for any
fractional interest in a share of Common Stock, as provided in Section C.4(c)
below, and for any declared but unpaid
31
<PAGE>
dividends, payable with respect to the converted shares of Series C Preferred
Stock, up to and including the Series C Conversion Date or the Closing Date, as
the case may be.
(iv) The person in whose name each Common Certificate is to be issued
shall be deemed to have become a stockholder of record of Common Stock on the
Series C Conversion Date or the Closing Date, as the case may be, unless the
transfer books of the Corporation are closed on that date, in which event such
holder shall be deemed to have become a stockholder of record on the next
succeeding date on which the transfer books are open; provided, that the Series
--------
C Preferred Conversion Price shall be that in effect on the Series C Conversion
Date or the Closing Date, as the case may be.
(v) Upon conversion of only a portion of the shares covered by a
Series C Preferred Certificate, the Corporation, at its own expense, shall issue
and deliver to or upon the written order of the holder of such Series C
Preferred Certificate, a new Series C Preferred Certificate representing the
number of unconverted shares of Series C Preferred Stock from the Series C
Preferred Certificate so surrendered.
c. Issuance of Common Stock on Conversion.
--------------------------------------
(i) If a Series C Preferred Stockholder shall surrender more than one
Series C Preferred Certificate for conversion at any one time, the number of
such shares of Common Stock issuable upon conversion thereof shall be computed
on the basis of the aggregate number of shares of Series C Preferred Stock so
surrendered.
(ii) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series C Preferred Stock. The Corporation shall pay a
cash adjustment for such fractional interest in an amount equal to the then
Current Market Price of a share of Common Stock multiplied by such fractional
interest.
d. Conversion Price; Adjustment. The Series C Preferred Conversion Price
----------------------------
shall initially be equal to the Series C Liquidation Preference and shall be
subject to adjustment from time to time as follows:
(i) If the Corporation shall at any time or from time to time after
the date of original issuance of the first share of the Series C Preferred Stock
(the "Original Series C Issuance Date") issue any shares of Additional Stock,
without consideration or for a consideration per share of Common Stock or
underlying Common Stock, as the case may be, less than the Series C Preferred
Conversion Price in effect for such Series C Preferred Stock immediately prior
to such issue, the Series C Preferred Conversion Price in effect for the Series
C Preferred Stock immediately prior to each such issue shall be adjusted to a
price for the Series C Preferred Stock determined by multiplying the Series C
Preferred Conversion Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to
32
<PAGE>
such issue plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for all such Additional Stock so
issued would purchase at such Series C Preferred Conversion Price in effect
immediately prior to the issuance of such Additional Stock, and the denominator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of shares of such Additional Stock; provided
that, for the purpose of this clause (i), all shares of Common Stock (except as
otherwise provided in this clause (i)) issuable upon conversion of all
outstanding shares of Series C Preferred Stock shall be deemed to be
outstanding, and immediately after any shares of Additional Stock are deemed to
be issued pursuant to paragraph (C) of this clause (i), such shares of
Additional Stock shall be deemed to be outstanding. For the purposes of any
adjustment of the Series C Preferred Conversion Price pursuant to this clause
(i), the following provisions shall be applicable:
(A) In the case of the issuance of Common Stock in whole or in part for
cash, the consideration shall be deemed to be the amount of cash paid therefor,
plus the value of any property other than cash received by the Corporation as
provided in paragraph (B) of this clause (i), less any discounts, commissions or
other expenses allowed, paid or incurred by the Corporation for any underwriting
or otherwise in connection with the issuance and sale thereof.
(B) In the case of the issuance of Common Stock for consideration in
whole or in part in property or consideration other than cash, the value of such
property or consideration other than cash shall be deemed to be the fair market
value thereof as determined in good faith by the Board of Directors of the
Corporation, irrespective of any accounting treatment; provided, however, that
-------- -------
such fair market value shall not exceed the aggregate Current Market Price of
the shares of Common Stock being issued, less any cash consideration paid for
such shares.
(C) In the case of the issuance of (I) options to purchase or rights to
subscribe for Common Stock, (II) securities convertible into or exchangeable for
Common Stock or (III) options to purchase or rights to subscribe for such
convertible or exchangeable securities:
(1) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase, or rights to subscribe
for Common Stock shall be deemed to have been issued at the time such options or
rights were issued and for a consideration equal to the consideration
(determined in the manner provided in paragraphs (A) and (B) above), if any,
received by the Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
33
<PAGE>
(2) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of, or in exchange for, any such convertible
or exchangeable securities or upon the exercise of options to purchase, or
rights to subscribe for, such convertible or exchangeable securities and
subsequent conversion or exchange thereof shall be deemed to have been issued at
the time such securities were issued or such options or rights were issued and
for a consideration equal to the consideration received by the Corporation for
any such securities and related options or rights (excluding any cash received
on account of accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Corporation upon the conversion or
exchange of such securities or the exercise of any related options or rights
(determined in the manner provided in paragraphs (A) and (B) above); and
(3) if there is any decrease in the conversion or
exercise price of, or any increase in the number of shares to be received upon
exercise, conversion or exchange of any such options, rights or convertible or
exchangeable securities (other than a change resulting from the antidilution
provisions thereof), the Series C Preferred Conversion Price shall be
automatically lowered to reflect such change.
(ii) In the event that the price per share to the public of the
Common Stock (the "Series C Per Share Price") in the Corporation's first firm
commitment offering by one or more underwriters of authorized but unissued
shares of Common Stock registered under the Securities Act is less than $2.50
per share (as adjusted for stock splits, stock combinations, stock dividends and
similar transactions), the Series C Preferred Conversion Price for the Series C
Preferred Stock shall be adjusted on the Closing Date to the Series C Per Share
Price (and thereafter subject to further adjustment pursuant to Section
C.4(d)(i) above).
(iii) If the Corporation shall at any time after the Original Series
C Issuance Date fix a record date for the subdivision or split-up of shares of
Common Stock, then, following the record date fixed for the determination of
holders of Common Stock entitled to receive such subdivision or split-up (or the
date of such subdivisions or split-up, if no record date is fixed), the Series C
Preferred Conversion Price shall be appropriately decreased so that the number
of shares of Common Stock issuable on conversion of each share of the Series C
Preferred Stock shall be increased in proportion to such increase in outstanding
shares.
(iv) If, at any time after the Original Series C Issuance Date, the
number of shares of Common Stock outstanding is decreased by a combination of
the outstanding shares of Common Stock, then, following the record date fixed
for such combination (or the date of such combination, if no record date is
fixed), the Series C Preferred Conversion Price shall be appropriately increased
so that the number of shares of Common Stock issuable on conversion of each
share of Series C Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares.
34
<PAGE>
(v) If, at any time after the Original Series C Issuance Date,
there shall be any Extraordinary Transaction, the Series C Preferred Conversion
Price with respect to the Series C Preferred Stock outstanding after the
Extraordinary Transaction shall be adjusted to provide that the shares of Series
C Preferred Stock outstanding immediately prior to the effectiveness of the
Extraordinary Transaction shall be convertible into the kind and number of
shares of stock or other securities or property of the Corporation or of the
corporation resulting from or surviving such Extraordinary Transaction which the
holder of the number of shares of Common Stock deliverable (immediately prior to
the effectiveness of the Extraordinary Transaction) upon conversion of such
Series C Preferred Stock would have been entitled to receive upon such
Extraordinary Transaction. The provisions of this Section C.4(d)(v) shall
similarly apply to successive Extraordinary Transactions.
(vi) All calculations under this Section C.4(d) shall be made to the
nearest one-tenth of a cent ($.001) or to the nearest one-tenth of a share, as
the case may be.
(vii) In any case in which the provisions of this Section C.4(d)
shall require that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the occurrence of that
event (A) issuing to the holder of any share of Series C Preferred Stock
converted after such record date and before the occurrence of such event the
additional shares of capital stock issuable upon such conversion by reason of
the adjustment required by such event over and above the shares of capital stock
issuable upon such conversion before giving effect to such adjustment and (B)
paying to such holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section C.4(c) above; provided, however, that the
Corporation shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares, in
such case, upon the occurrence of the event requiring such adjustment.
e. Notice of Adjustments.
---------------------
(i) Whenever the Series C Preferred Conversion Price shall be
adjusted as provided in Section C.4(d) above, the Corporation shall file, at its
principal office, at the office of the transfer agent for the Series C Preferred
Stock, if any, or at such other place as may be designated by the Corporation, a
statement, signed by its President and by its Chief Financial Officer, showing
in detail the facts requiring such adjustment and the Series C Preferred
Conversion Price that shall be in effect after such adjustment. The Corporation
shall also cause a copy of such statement to be sent, by first-class, certified
mail, return receipt requested, postage prepaid, to each Series C Preferred
Stockholder at such holder's address appearing on the Corporation's records.
Where appropriate, such copy may be given in advance and may be included as part
of a notice required to be mailed under the provisions of clause (ii) below.
35
<PAGE>
(ii) In the event the Corporation shall propose to file
a registration statement under the Securities Act for a Public Offering or to
take any action of the types described in clauses (i), (iii), (iv) or (v) of
Section C.4(d) above, the Corporation shall give notice to each Series C
Preferred Stockholder, in the manner set forth in Section C.4(e)(i) above, which
shall specify the record date, if any, with respect to any such action and the
date on which such action is to take place. The notice shall also set forth such
facts as are reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the Series C
Preferred Conversion Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon conversion of shares of Series C
Preferred Stock. In the case of any action which would require the fixing of a
record date, such notice shall be given at least ten (10) days prior to the date
so fixed, and in case of all other action, such notice shall be given at least
fifteen (15) days prior to the taking of such proposed action. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
any such action.
f. Transfer Taxes. The Corporation shall pay all documentary,
--------------
stamp or other transactional taxes (excluding income taxes) attributable to the
issuance or delivery of shares of capital stock of the Corporation upon
conversion of any shares of Series C Preferred Stock; provided, however, that
-------- -------
the Corporation shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the holder of the shares of Series
C Preferred Stock in respect of which such shares are being issued.
g. Reservation of Common Stock. The Corporation shall at all
---------------------------
times reserve, free from preemptive rights, out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of Series C Preferred Stock, sufficient shares of Common Stock to
provide for the conversion of all outstanding shares of Series C Preferred
Stock.
h. Status of Common Stock. All shares of Common Stock which may
----------------------
be issued in connection with the conversion provisions set forth herein will,
upon issuance by the Corporation, be validly issued, fully paid and
nonassessable, free from preemptive rights and free from all taxes, liens or
charges with respect thereto created or imposed by Corporation.
5. Miscellaneous.
-------------
a. Shares of Series C Preferred Stock are not subject to or
entitled to redemption or the benefit of a sinking fund.
36
<PAGE>
b. Converted shares of Series C Preferred Stock shall not be
reissued but shall be retired. Upon the retirement of converted shares the
capital of the Corporation shall be reduced.
c. The shares of the Series C Preferred Stock shall not have any
preferences, voting powers or relative, participating, optional, preemptive or
other special rights except as set forth above in this Certificate of
Incorporation of the Corporation, as amended from time to time.
D. SERIES D PREFERRED STOCK
------------------------
The Series D Preferred Stock shall have the following designations,
powers, preferences, relative, participating, optional or other special rights,
qualifications, limitations and restrictions:
1. Dividends.
---------
a. Dividends are payable on the Series D Preferred Stock, when,
as and if declared by the Board of Directors.
b. So long as any Series D Preferred Stock is outstanding the
Corporation shall not declare or pay any dividend or make any distribution
(whether in cash, shares of capital stock of the Corporation or other property)
on shares of its Common Stock unless prior thereto or simultaneously therewith
any dividends and distributions previously declared on the Series D Preferred
Stock shall have been paid or the Corporation shall have irrevocably deposited
or set aside cash or United States Obligations sufficient for the payment
thereof.
c. If the Board of Directors declares dividends or other
distributions (other than on Liquidation) on the Common Stock in cash, property
or securities (including Common Stock) of the Corporation (or subscription or
other rights to purchase or acquire securities (including Common Stock) of the
Corporation), the Board of Directors shall simultaneously declare a dividend or
distribution at the same rate and in the same form on the Series D Preferred
Stock so that the Series D Preferred Stock participates equally with the Series
A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock
and the Common Stock in such dividend or distribution. For purposes of
determining its proportional share of the dividend or distribution, each share
of the Series D Preferred Stock shall be deemed to be that number of shares of
Common Stock into which such share of Series D Preferred Stock is then
convertible, rounded to the nearest one-tenth of a share.
37
<PAGE>
2. Rights on Liquidation, Dissolution, Winding-up.
----------------------------------------------
a. In the event of any Liquidation, whether voluntary or
involuntary, before any payment of cash or distribution of other property shall
be made to the Common Stockholders or any other class or series of stock ranking
on Liquidation junior to the Series D Preferred Stock, the Series D Preferred
Stockholders, subject to the rights of any series of preferred stock ranking
senior to the Series A Preferred Stock and the Series D Preferred Stock, shall
be entitled to receive out of the assets of the Corporation legally available
for distribution to its stockholders, $8.00 per share (as appropriately adjusted
for any combinations or divisions or similar recapitalizations affecting the
Series D Preferred Stock after the Original Series D Issuance Date (as
hereinafter defined)) (the "Series D Liquidation Preference"), whether from
capital, surplus or earnings, plus an amount equal to any declared but unpaid
dividends thereon. Upon the occurrence of a Liquidation, the Series D Preferred
Stock shall rank pari passu with the Series A Preferred Stock, the Series B
---- -----
Preferred Stock of the Series C Preferred Stock and the Pari Passu Preferred
---- -----
Stock.
b. If, upon any Liquidation, the assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the
Series A Preferred Stockholders, the Series B Preferred Stockholders, the Series
C Preferred Stockholders, the Series D Preferred Stockholders and the holders of
Pari Passu Preferred Stock the full amounts to which they shall be entitled, the
---- -----
Series A Preferred Stockholders, the Series B Preferred Stockholders, the Series
C Preferred Stockholders, the Series D Preferred Stockholders and the holders of
Pari Passu Preferred Stock shall share ratably in any distribution of assets in
---- -----
proportion to the amounts payable to them if all amounts payable with respect to
such shares on Liquidation were paid in full.
c. In the event of any Liquidation, so long as the Series A
Preferred Stockholders are entitled to distributions pursuant to Section A.2(c)
and such distributions have been paid in full, and after payment shall have been
made to the Series A Preferred Stockholders, the Series B Preferred
Stockholders, the Series C Preferred Stockholders, the Series D Preferred
Stockholders and the holders of Pari Passu Preferred Stock of the full amount to
which they shall be entitled pursuant to Section D.2(a), with respect to each
other class or series of capital stock (other than Common Stock) ranking on
Liquidation junior to the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock, the Series D Preferred Stock and the Pari
----
Passu Preferred Stock (in descending order of seniority), the Series A Preferred
-----
Stockholders, the Series B Preferred Stockholders, the Series C Preferred
Stockholders, the Series D Preferred Stockholders and the holders of Pari Passu
---- -----
Preferred Stock, as a class, shall be entitled to receive an amount equal (and
in like kind) to the aggregate preferential amount fixed for each such junior
class or series of capital stock, which amount shall be distributed among the
Series A Preferred Stockholders, the Series B Preferred Stockholders, the Series
C Preferred Stockholders, the Series D Preferred Stockholders and the holders of
Pari Passu Preferred Stock in an equal amount per share of the Series A
---- -----
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stockholders and
38
<PAGE>
the Pari Passu Preferred Stock then outstanding. If, upon any Liquidation, the
---- -----
assets of the Corporation available for distribution to its stockholders shall
be insufficient to pay the Series A Preferred Stockholders, the Series B
Preferred Stockholders, the Series C Preferred Stockholders, the Series D
Preferred Stockholders and the holders of Pari Passu Preferred Stock and a class
---- -----
or series of capital stock (other than the Common Stock) junior to the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stockholders and the Pari Passu Preferred Stock the full
---- -----
amounts to which they shall be entitled pursuant to the immediately preceding
sentence, the Series A Preferred Stockholders, the Series B Preferred
Stockholders, the Series C Preferred Stockholders, the Series D Preferred
Stockholders and the holders of Pari Passu Preferred Stock and such other class
---- -----
or series of capital stock shall share ratably in any distribution of assets
according to the respective preferential amounts fixed for the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, the
Series D Preferred Stockholders and the Pari Passu Preferred Stock and such
junior class or series of capital stock which would be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to such shares were paid in full.
d. In the event that after payment of the full amount to which the
Series A Preferred Stockholders, the Series B Preferred Stockholders, the Series
C Preferred Stockholders, the Series D Preferred Stockholders and the holders of
Pari Passu Preferred Stock shall be entitled as aforesaid, cash or other
---- -----
property remains, such remaining proceeds shall be distributed pro rata among
the Series A Preferred Stock, the Series B Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stockholders, the Pari Passu Preferred
---- -----
Stock and the Common Stock. For purposes of determining its proportional share
of the cash or other property, each share of the Series D Preferred Stock shall
be deemed to be that number of shares of Common Stock into which such share of
Series D Preferred Stock is then convertible, rounded to the nearest one-tenth
of a share.
3. Voting.
------
a. General. In addition to the rights otherwise provided for
-------
herein or by law, the Series D Preferred Stockholders shall be entitled to vote,
together with the Series A Preferred Stockholders, the Series B Preferred
Stockholders, the Series C Preferred Stockholders and the holders of any other
class or series entitled to vote on such matters and the Common Stockholders, as
one class on all matters submitted to a vote of stockholders, in the same manner
and with the same effect as the Series A Preferred Stockholders, the Series B
Preferred Stockholders, the Series C Preferred Stockholders and the Common
Stockholders. In any such vote, each share of Series D Preferred Stock shall
entitle the holder thereof to one vote per share for each share of Common Stock
(including fractional shares) into which each share of Series D Preferred Stock
is then convertible, rounded to the nearest one-tenth of a share.
39
<PAGE>
b. Protective Provision. So long as any Series D Preferred Stock
--------------------
is outstanding, the Corporation shall not, without the written consent in lieu
of a meeting, or the affirmative vote at a meeting called for such purpose, of
Series D Preferred Stockholders of record that hold at least a majority of the
outstanding Series D Preferred Stock, voting as a separate class, amend, alter
or repeal, in any manner whatsoever, the designations, powers, preferences,
relative, participating, optional or other special rights, qualifications,
limitations and restrictions of the Series D Preferred Stock.
4. Conversion.
----------
a. Right to Convert.
----------------
(i) Any Series D Preferred Stockholder shall have the right,
at any time or from time to time, prior to the Closing Date of the Corporation's
first Underwritten Offering in which all of the then outstanding shares of
Series A Preferred Stock are converted in connection therewith, to convert any
or all of its shares of Series D Preferred Stock into that number of fully paid
and nonassessable shares of Common Stock for each share of Series D Preferred
Stock equal to the quotient of the Series D Liquidation Preference divided by
the Series D Preferred Conversion Price for that share (as defined in Section
D.4(d)) (as last adjusted and then in effect) rounded to one-tenth of a share.
(ii) (A) Any Series D Preferred Stock that remains
unconverted on the Closing Date shall be automatically converted without notice
and without any action on the part of the holder thereof into shares of Common
Stock on the Closing Date in accordance with Section D.4(a)(i). After the
Closing Date all rights of holders of shares of Series D Preferred Stock with
respect to Series D Preferred Stock, except the right to receive shares of
Common Stock in accordance with this Section D.4, shall cease and the shares of
Series D Preferred Stock shall no longer be deemed to be outstanding, whether or
not the Corporation has received the certificates representing such shares.
(B) The Corporation shall promptly send by first-class
mail, postage prepaid, to each Series D Preferred Stockholder at such holder's
address appearing on the Corporation's records a copy of (i) each registration
statement filed by the Corporation under the Securities Act and each amendment
thereof and each exhibit and schedule thereto and (ii) each order of the
Securities and Exchange Commission declaring any such registration statement to
be effective.
(C) Holders of Series D Preferred Stock converted into
shares of Common Stock pursuant to this Section D.4 shall be entitled to payment
of any declared but unpaid dividends payable with respect to such shares of
Series D Preferred Stock, up to and including the Series D Conversion Date (as
defined in Section D.4(b) below) or the Closing Date, as the case may be.
40
<PAGE>
b. Mechanics of Conversion.
-----------------------
(i) Any Series D Preferred Stockholder that exercises its
right to convert its shares of Series D Preferred Stock into Common Stock shall
deliver the certificate(s) for the shares to be converted ("Series D Preferred
Certificate"), duly endorsed or assigned in blank to the Corporation, during
regular business hours, at the office of the transfer agent of the Corporation,
if any, at the principal place of business of the Corporation or at such other
place as may be designated by the Corporation.
(ii) Each Series D Preferred Certificate shall be
accompanied by written notice stating that such holder elects to convert such
shares and stating the name or names (with address) in which the Common
Certificates are to be issued. Such conversion shall be deemed to have been
effected on the date when the aforesaid delivery is made ("Series D Conversion
Date").
(iii) As promptly as practicable thereafter, the Corporation
shall issue and deliver to or upon the written order of such holder, at the
place designated by such holder, a Common Certificate(s) for the number of full
shares of Common Stock to which such holder is entitled and a check or cash for
any fractional interest in a share of Common Stock, as provided in Section
D.4(c) below, and for any declared but unpaid dividends, payable with respect to
the converted shares of Series D Preferred Stock, up to and including the Series
D Conversion Date or the Closing Date, as the case may be.
(iv) The person in whose name each Common Certificate is to
be issued shall be deemed to have become a stockholder of record of Common Stock
on the Series D Conversion Date or the Closing Date, as the case may be, unless
the transfer books of the Corporation are closed on that date, in which event
such holder shall be deemed to have become a stockholder of record on the next
succeeding date on which the transfer books are open; provided, that the Series
D Preferred Conversion Price shall be that in effect on the Series D Conversion
Date or the Closing Date, as the case may be.
(v) Upon conversion of only a portion of the shares
covered by a Series D Preferred Certificate, the Corporation, at its own
expense, shall issue and deliver to or upon the written order of the holder of
such Series D Preferred Certificate, a new Series D Preferred Certificate
representing the number of unconverted shares of Series D Preferred Stock from
the Series D Preferred Certificate so surrendered.
c. Issuance of Common Stock on Conversion.
--------------------------------------
(i) If a Series D Preferred Stockholder shall surrender
more than one Series D Preferred Certificate for conversion at any one time, the
number of such shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series D Preferred
Stock so surrendered.
41
<PAGE>
(ii) No fractional shares of Common Stock shall be issued
upon conversion of shares of Series D Preferred Stock. The Corporation shall pay
a cash adjustment for such fractional interest in an amount equal to the then
Current Market Price of a share of Common Stock multiplied by such fractional
interest.
d. Conversion Price; Adjustment. The Series D Preferred
----------------------------
Conversion Price shall initially be equal to the Series D Liquidation Preference
and shall be subject to adjustment from time to time as follows:
(i) If the Corporation shall at any time after the date of
original issuance of the first share of Series D Preferred Stock (the "Original
Series D Issuance Date") fix a record date for the subdivision or split-up of
shares of Common Stock, then, following the record date fixed for the
determination of holders of Common Stock entitled to receive such subdivision or
split-up (or the date of such subdivisions or split-up, if no record date is
fixed), the Series D Preferred Conversion Price shall be appropriately decreased
so that the number of shares of Common Stock issuable on conversion of each
share of the Series D Preferred Stock shall be increased in proportion to such
increase in outstanding shares.
(ii) If, at any time after the Original Series D Issuance
Date, the number of shares of Common Stock outstanding is decreased by a
combination of the outstanding shares of Common Stock, then, following the
record date fixed for such combination (or the date of such combination, if no
record date is fixed), the Series D Preferred Conversion Price shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of each share of Series D Preferred Stock shall be decreased in
proportion to such decrease in outstanding shares.
(iii) If, at any time after the Original Series D Issuance
Date, there shall be any Extraordinary Transaction, the Series D Preferred
Conversion Price with respect to the Series D Preferred Stock outstanding after
the Extraordinary Transaction shall be adjusted to provide that the shares of
Series D Preferred Stock outstanding immediately prior to the effectiveness of
the Extraordinary Transaction shall be convertible into the kind and number of
shares of stock or other securities or property of the Corporation or of the
corporation resulting from or surviving such Extraordinary Transaction which the
holder of the number of shares of Common Stock deliverable (immediately prior to
the effectiveness of the Extraordinary Transaction) upon conversion of such
Series D Preferred Stock would have been entitled to receive upon such
Extraordinary Transaction. The provisions of this Section D.4(d)(v) shall
similarly apply to successive Extraordinary Transactions.
(iv) All calculations under this Section D.4(d) shall be
made to the nearest one-tenth of a cent ($.001) or to the nearest one-tenth of a
share, as the case may be.
42
<PAGE>
(v) In any case in which the provisions of this Section
D.4(d) shall require that an adjustment shall become effective immediately after
a record date for an event, the Corporation may defer until the occurrence of
that event (A) issuing to the holder of any share of Series D Preferred Stock
converted after such record date and before the occurrence of such event the
additional shares of capital stock issuable upon such conversion by reason of
the adjustment required by such event over and above the shares of capital stock
issuable upon such conversion before giving effect to such adjustment and (B)
paying to such holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section D.4(c) above; provided, however, that the
-------- -------
Corporation shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares, in
such case, upon the occurrence of the event requiring such adjustment.
e. Notice of Adjustments.
---------------------
(i) Whenever the Series D Preferred Conversion Price shall
be adjusted as provided in Section D.4(d) above, the Corporation shall file, at
its principal office, at the office of the transfer agent for the Series D
Preferred Stock, if any, or at such other place as may be designated by the
Corporation, a statement, signed by its President and by its Chief Financial
Officer, showing in detail the facts requiring such adjustment and the Series D
Preferred Conversion Price that shall be in effect after such adjustment. The
Corporation shall also cause a copy of such statement to be sent, by first-
class, certified mail, return receipt requested, postage prepaid, to each Series
D Preferred Stockholder at such holder's address appearing on the Corporation's
records. Where appropriate, such copy may be given in advance and may be
included as part of a notice required to be mailed under the provisions of
clause (ii) below.
(ii) In the event the Corporation shall propose to file a
registration statement under the Securities Act for a Public Offering or to take
any action of the types described in clauses (i), (ii) or (iii) of Section
D.4(d) above, the Corporation shall give notice to each Series D Preferred
Stockholder, in the manner set forth in Section D.4(e)(i) above, which shall
specify the record date, if any, with respect to any such action and the date on
which such action is to take place. The notice shall also set forth such facts
as are reasonably necessary to indicate the effect of such action (to the extent
such effect may be known at the date of such notice) on the Series D Preferred
Conversion Price and the number, kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of such
action or deliverable upon conversion of shares of Series D Preferred Stock. In
the case of any action which would require the fixing of a record date, such
notice shall be given at least ten (10) days prior to the date so fixed, and in
case of all other action, such notice shall be given at least fifteen (15) days
prior to the taking of such proposed action. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of any such action.
43
<PAGE>
f. Transfer Taxes. The Corporation shall pay all documentary,
--------------
stamp or other transactional taxes (excluding income taxes) attributable to the
issuance or delivery of shares of capital stock of the Corporation upon
conversion of any shares of Series D Preferred Stock; provided, however, that
-------- -------
the Corporation shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the holder of the shares of Series
D Preferred Stock in respect of which such shares are being issued.
g. Reservation of Common Stock. The Corporation shall at all
---------------------------
times reserve, free from preemptive rights, out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of Series D Preferred Stock, sufficient shares of Common Stock to
provide for the conversion of all outstanding shares of Series D Preferred
Stock.
h. Status of Common Stock. All shares of Common Stock which may
----------------------
be issued in connection with the conversion provisions set forth herein will,
upon issuance by the Corporation, be validly issued, fully paid and
nonassessable, free from preemptive rights and free from all taxes, liens or
charges with respect thereto created or imposed by Corporation.
5. Miscellaneous.
-------------
a. Shares of Series D Preferred Stock are not subject to or
entitled to redemption or the benefit of a sinking fund.
b. Converted shares of Series D Preferred Stock shall not be
reissued but shall be retired. Upon the retirement of converted shares the
capital of the Corporation shall be reduced.
c. The shares of the Series D Preferred Stock shall not have any
preferences, voting powers or relative, participating, optional, preemptive or
other special rights except as set forth above in this Certificate of
Incorporation of the Corporation, as amended from time to time.
E. COMMON STOCK
------------
1. Voting.
------
Series A Preferred Stockholders, Series B Preferred Stockholders,
Series C Preferred Stockholders, Series D Preferred Stockholders, any other
class or series of capital stock entitled to vote and Common Stockholders shall
vote together as one class on all matters submitted to a vote of stockholders,
except that Series A Preferred Stockholders are entitled, in addition, to vote
as a separate class on the matters described in Section A.4(b) and (c), and
except further that Series B Preferred Stockholders, Series C Preferred
Stockholders and Series D Preferred Stockholders are entitled, in addition,
44
<PAGE>
to vote as a separate class on the matters described in Section B.3(b), Section
C.3(b) and in Section D.3(b), respectively. Each Common Stockholder shall be
entitled to one vote for each share of Common Stock held on all matters as to
which Common Stockholders shall be entitled to vote. The number of authorized
shares of Common Stock may be increased or decreased (but not below the number
of shares thereof then outstanding) by the affirmative vote of the holders of a
majority of the Common Stock, the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, Series D Preferred Stockholders
and any other class or series of capital stock entitled to vote, irrespective of
the provisions of Section 242(b)(2) of Title 8 of the Delaware Code.
2. Other Rights.
------------
Subject to the foregoing, the Common Stock shall have all rights of
common stock under Title 8 of the Delaware Code, as the same shall be amended
from time to time.
ARTICLE FIFTH
-------------
Directors
---------
The number of directors of the Corporation shall be such number as
from time to time shall be fixed by, or in the manner provided in, the By-laws
of the Corporation. Unless and except to the extent that the By-laws of the
Corporation otherwise require, the election of directors of the Corporation need
not be by written ballot.
ARTICLE SIXTH
-------------
By-Laws
-------
The Board of Directors of the Corporation is expressly authorized and
empowered, in addition to the stockholders of the Corporation, to adopt, amend
and repeal the By-laws of the Corporation.
ARTICLE SEVENTH
---------------
Compromises and Arrangements
----------------------------
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
Section 291 of the General Corporation Law or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
45
<PAGE>
Section 279 of the General Corporation Law, order a meeting of creditors or
class of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, to be summoned in such manner as such court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Corporation as a consequence of
such compromise or arrangement, then such compromise or arrangement and such
reorganization shall, if sanctioned by the court to which such application has
been made, be binding on all the creditors or class of creditors, and/or on all
of the stockholders or class of stockholders of the Corporation, as the case may
be, and also on the Corporation.
ARTICLE EIGHTH
--------------
Limitation of Liability
-----------------------
No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however, that nothing contained in this ARTICLE EIGHTH shall
-------- -------
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, or (iv) for any transaction from which the director derived an improper
personal benefit. No amendment to or repeal of this ARTICLE EIGHTH shall apply
to or have any effect on the liability or alleged liability of any director of
the Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
ARTICLE NINTH
-------------
Amendments and Repeal
---------------------
The Corporation reserves the right at any time, and from time to time,
to amend, alter, change or repeal any provision contained in this Certificate of
Incorporation in accordance with this Certificate of Incorporation. All rights
conferred upon the stockholders of the Corporation are granted subject to this
reservation.
46
<PAGE>
IN WITNESS WHEREOF, said Board of Directors of 3-Dimensional
Pharmaceuticals, Inc. has caused this Seventh Restated Certificate of
Incorporation to be signed by its Chief Executive Officer and attested by its
Secretary, this _______ day of April, 2000.
3-DIMENSIONAL PHARMACEUTICALS, INC.
By: /s/ David C. U'Prichard
---------------------------------
David C. U'Prichard
Chief Executive Officer
ATTEST:
/s/ Scott Horvitz
-------------------------
Scott Horvitz
Secretary
47
