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Exhibit 3.1
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DOV PHARMACEUTICAL, INC.
DOV Pharmaceutical Inc., a corporation organized and existing under the
General Corporation Law (the "DGCL") of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: The Corporation's original certificate of incorporation was filed
with the Secretary of State of Delaware on November 2, 2000, under the name DOV
Pharmaceutical, Inc., and was amended by the Corporation's amended and restated
certificate of incorporation filed with the Secretary of State of Delaware on
November 20, 2000.
SECOND: The Corporation's second amended and restated certificate of
incorporation in the form attached hereto as EXHIBIT A has been duly adopted in
accordance Sections 245 and 242 of the DGCL by the Corporation's directors and
stockholders.
THIRD: The Corporation's second amended and restated certificate of
incorporation in the form attached hereto as EXHIBIT A has been duly approved by
the stockholders of the Corporation in accordance with Section 228 of the DGCL.
FOURTH: The second amended and restated certificate of incorporation so
adopted reads in full as set forth on EXHIBIT A attached hereto and is
incorporated herein.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its President this ___ day of __________________, 2001.
DOV Pharmaceutical, Inc.
by: /s/ Bernard Beer
------------------------------------
Name: Bernard Beer
Title: President
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EXHIBIT A
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DOV PHARMACEUTICAL, INC.
ARTICLE I
The name of the Corporation is DOV Pharmaceutical, Inc.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the DGCL.
ARTICLE IV
The total number of shares of stock that the Corporation has authority to
issue is 40,000,000 shares, consisting of 30,000,000 shares of common stock, par
value $0.0001 per share (the "Common Stock") and 10,000,000 shares of preferred
stock, par value $1.00 per share (the "Preferred Stock"). A description of the
respective classes and series of stock and a statement of the designations,
preferences, voting powers, relative, participating, optional or other special
rights and privileges, and the qualifications, limitations and restrictions of
the Common Stock and Preferred Stock are as follows:
A. SERIES B PREFERRED STOCK
1. DESIGNATION AND NUMBER OF SHARES. The shares of such series shall be
designated as "Series B Preferred Stock" ("Series B Preferred"). The number of
shares initially constituting Series B Preferred shall be 354,643; provided that
if more than such number of shares of Series B Preferred are issuable upon the
exercise of rights (the "Rights") issued pursuant to that certain
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Convertible Promissory Note (the "Convertible Note") and that certain
Convertible Exchangeable Promissory Note (the "Exchangeable Note"), each dated
January 21, 1999 (the Exchangeable Note, together with the Convertible Note, the
"Elan Notes"), and issued by the Corporation in favor of Elan International
Services, Ltd. ("EIS"), the Corporation's board of directors (the "Board") shall
direct by resolution or resolutions that a certificate be properly executed,
acknowledged, filed and recorded providing for the number of shares of Series B
Preferred authorized to be issued to be increased (to the extent that the
Certificate of Incorporation then permits) to the number of shares (rounded up
to the nearest whole number) issuable upon exercise of such Rights.
2. VOTING RIGHTS. The holders of Series B Preferred shall have the
following voting rights:
(a) So long as the holders of Series B Preferred own at least 10% of
the capital stock of the Corporation, the holders of Series B Preferred, as a
class, shall be entitled to nominate and elect one director to the Board. Such
director shall be elected by the affirmative vote of a majority of the shares of
Series B Preferred cast at a special meeting of such holders called for that
purpose, and any vacancy of such Board seat shall be filled by a vote of such
holders. This director shall have votes equal to 9.9% of all votes that may be
cast at a meeting of the Board (including the vote of the director elected by
the holders of Series B Preferred).
(b) Except as provided herein or by applicable law, holders of
Series B Preferred shall have no voting power and shall not be entitled to
receive notice of any meetings of the Corporation's stockholders. Further,
except as provided herein or by applicable law, the consent of the holders of
Series B Preferred shall not be required to authorize or take any corporate
action. In cases where a provision of law expressly confers the right to vote
upon the holders of Series B Preferred each such holder shall be entitled to one
vote for each share of such stock standing to such holder's name upon the
Corporation's books.
3. CONVERSION. The holders of Series B shall have conversion rights as
follows:
(a) At any time, upon the affirmative vote of 75% of the holders of
Series B Preferred, each share of Series B Preferred shall be convertible,
without payment of any additional consideration by the holder thereof, into one
share of the Corporation's Common Stock.
(b) The Corporation shall reserve and keep available out of its
authorized but unissued Common Stock such number of shares of Common Stock as
shall be sufficient to effect conversion of Series B Preferred.
4. ADDITIONAL RIGHTS. Except as expressly set forth otherwise herein, the
holders of Series B Preferred shall have the same rights as the holders of the
Common Stock.
B. SERIES C PREFERRED STOCK
1. DESIGNATION. A total of 1,750,000 shares of the Preferred Stock shall
be designated as series C convertible preferred stock ("Series C Preferred").
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2. VOTING RIGHTS.
(a) Holders of Series C Preferred are entitled to vote on any and
all matters submitted to a vote of the stockholders. For such purposes, each
holder of Series C Preferred is entitled to cast the number of votes it would
have had the right to cast had all of its Series C Preferred been converted, as
provided in Section 5, into Common Stock ("as Converted Basis"), as of the
record date of the meeting at which such votes are to be cast or as of the date
any written consent is taken, including any fraction of a share of Common Stock
into which a holder's Series C Preferred would be convertible. Subject to
Section 2(b), holders of Series C Preferred do not have any right to vote their
shares as a separate class, except as may be otherwise required by Delaware law.
Each record holder of Series C Preferred is entitled to notice of all meetings
or actions of stockholders.
(b) So long as any shares of Series C Preferred remain outstanding,
the Corporation shall not, without the affirmative vote by (or written consent
of) the holders of a majority of the then outstanding shares of Series C
Preferred, voting as a single class of preferred shares or as may be otherwise
required by law or this Certificate:
(i) amend this Certificate or the By-laws of the Corporation in any
manner that would or could prejudice the rights of the holders of
shares of Series C Preferred, including any such amendment (or
similar effect that would occur by virtue of the merger or
consolidation of the Corporation) that does any of the following:
(A) increases or decreases the par value of the issued shares
of Series C Preferred;
(B) changes issued shares of Series C Preferred into a lesser
number of shares of the same class unless in connection with
such changes to reduce shares, an appropriate change is made
in the Series C Conversion Price (as defined in Section 5(b))
and the powers, designations, preferences and relative,
participating, optional and other special rights of the class
remain the same as those designated herein for Series C
Preferred, or into the same or a different number of shares of
any other class, with or without par value, theretofore or
then authorized;
(C) changes the terms of, or adds terms to, the terms of
Series C Preferred in any manner prejudicial to the holders of
such shares;
(D) changes the terms of issued shares of any class senior,
junior or PARI PASSU to the shares of Series C Preferred in
any manner prejudicial to the holders of shares of Series C
Preferred;
(E) authorizes shares of another class that are convertible
into, or authorizes the conversion of shares of another class
into, shares of Series
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C Preferred or authorizes the Board to fix or alter conversion
rights of shares of another class that are convertible into
shares of Series C Preferred;
(F) provides, in the case of an amendment described in Section
2(b)(i)(A) or (B), that the stated capital of the Corporation
shall be reduced or eliminated as a result of the amendment,
or provides, in the case of Section 2(b)(i)(E), that the
stated capital of the Corporation shall be reduced or
eliminated upon the exercise of such conversion rights;
(G) changes substantially the purposes of the Corporation, or
provides that thereafter an amendment to the Certificate may
be adopted that changes substantially the purposes of the
Corporation; or
(H) changes the Corporation into a nonprofit corporation.
(ii) authorize, issue or sell or obligate itself to authorize, issue
or sell any class of its capital stock or other securities
(including debt securities) convertible into or exercisable for any
equity security that ranks senior or PARI PASSU in right, either as
to voting, dividends or upon liquidation, with the shares of Series
C Preferred; provided that the Corporation may issue shares of
Preferred Stock to EIS or an affiliate of EIS (as defined in Rule
405 of the General Rules and Regulations under the Securities Act of
1933, as the same may be amended from time to time, an "Affiliate")
in connection with EIS's or an Affiliate's, as the case may be,
exchange and retirement in full (the "Exchange") of the outstanding
principal amount including (if EIS or an Affiliate so elects)
accrued but unpaid interest under the Exchangeable Note into such
shares of Preferred Stock ("EIS Preferred"). The Corporation may
provide that the holders of EIS Preferred receive (a) non-cumulative
dividend rights that rank PARI PASSU with the dividend rights of the
holders of Series C Preferred and the holders of Series D Preferred;
provided that the rate of such dividend right shall not exceed seven
percent of the price per share at which EIS Preferred is issued in
connection with the Exchange and (b) a liquidation right that ranks
PARI PASSU or senior to the liquidation right of the holders of
Series C Preferred; provided that such senior liquidation right
shall not exceed the holders of EIS Preferred's pro rata share of
the Initial Liquidation Amount (as defined below), which may be paid
without further preference as follows: (1) to the holders of EIS
Preferred, pro rata based upon a number equal to the Exchangeable
Note Amount (as defined below), (2) to the holders of Series C
Preferred and Series D Preferred (as defined in Section (C)(1)), pro
rata based upon their respective percentages, determined by the
Series C Preference Amount (as defined in Section B(4)(a)) and the
Series D Preference Amount (as defined in Section C(4)(a)), of the
number equal to the Series C Preference Amount; provided further
that after payment in full of the Initial Liquidation Amount to the
holders of Series C Preferred, Series D Preferred and EIS Preferred,
the holders of Series C Preferred and Series D Preferred shall
thereafter share pro rata in any remaining liquidation proceeds up
to the aggregate of their respective Preference
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Amounts based upon the Series C Preference Amount and the Series D
Preference Amount reduced in each case by their respective portions
received of the Initial Liquidation Amount. "Initial Liquidation
Amount" means the outstanding principal amount including (if EIS or
an Affiliate so elects) accrued but unpaid interest of the
Exchangeable Note (as of the date of Exchange of the Exchangeable
Note, the "Exchangeable Note Amount") plus a number equal to the
Series C Preference Amount;
(iii) effect (a) any sale, lease, assignment, transfer or other
conveyance of all or substantially all the assets or capital stock
of the Corporation, (b) any recapitalization, reclassification,
reorganization or any similar transaction with respect to any of its
shares of capital stock, (c) any consolidation or merger involving
the Corporation or (d) any transaction or series of related
transactions in which more than 50% of the voting power of the
Corporation is disposed of;
(iv) incur any indebtedness whatsoever in excess of an aggregate of
$1,000,000 other than indebtedness (now or hereafter in existence)
(x) to trade creditors in the ordinary course of business, or (y)
pursuant to the Elan Notes, or senior indebtedness, without limit,
ranking on a PARI PASSU basis with the portion (as calculated below)
of the Series C Preference Amount with respect to the occurrence,
relating to the note issued in connection with such indebtedness, of
any of the events set forth in Section 1 of the agreement dated as
of June 20, 2000, among the Corporation, EIS and the holders of
Series C Preferred relating to PARI PASSU treatment upon liquidation
(as defined therein) (the "Series C Liquidation Proceeds
Agreement"), and funded by banks, bank holding companies, insurance
companies and other investors customarily defined as institutional
investors, such portion to be equal to the percentage of the Series
C Preference Amount that the Series C Preference Amount bears to the
aggregate of the Series C and Series D Preference Amounts;
(v) pre-pay or make any advance payment on any indebtedness (now or
hereafter in existence) of the Corporation except as may be required
or permitted by the Corporation to discharge either of or both the
Elan Notes or as required by other indebtedness permitted to be
incurred pursuant to Section 2(b)(iv);
(vi) redeem or repurchase any securities of the Corporation
(including any indebtedness convertible into any equity securities
of the Corporation); provided that the foregoing shall not apply to
the Corporation's repurchase or redemption of shares of its capital
stock (including the exercise of a right of first refusal upon a
transfer of securities of the Corporation) pursuant to provisions
contained in stock option agreements and common stock purchase
agreements entered into under the Corporation's stock option plans
with respect to the 1,992,500 shares reserved for issuance
thereunder;
(vii) declare or pay any dividends or distributions on any equity
securities of the Corporation; or
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(viii) except pursuant to a merger or consolidation, increase the
maximum size of the Board beyond nine members.
3. DIVIDENDS RIGHTS.
The holders of outstanding shares of Series C Preferred are entitled to
receive dividends at the rate of $0.28 per share per annum, payable when, as and
if declared by the Board out of funds legally available therefor, on a PARI
PASSU basis with the holders of outstanding shares of Series D Preferred and, if
the Exchangeable Note is exchanged by Exchange ("Exchanged"), on a PARI PASSU
basis with the holders of outstanding shares of EIS Preferred, prior and in
preference to any declaration or payment of any dividend on (i) Common Stock,
(ii) Series B Preferred and (iii) any other series of Preferred Stock that is or
may be issued or outstanding in the future, in arrears on the first day of
January of each year. The dividends provided for in this Section 3 shall not be
cumulative.
4. LIQUIDATION RIGHTS.
(a) Upon the dissolution, liquidation or winding up of the affairs
of the Corporation, whether voluntary or involuntary (collectively,
"Dissolution"), or, subject to Section 4(b), the sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all the property and assets of the Corporation, or the
reorganization, consolidation or merger of the Corporation with or into any
other company or companies, or a transaction or series of related transactions
in which more than 50% of the voting power of the Corporation is disposed of or
sold (whether by the Corporation or the holders of outstanding capital stock),
the holders of outstanding shares of Series C Preferred will be entitled to
receive from the Corporation's assets available for distribution to stockholders
cash in the amount of $4.04 per share, plus an amount equal to all declared but
unpaid dividends on such shares (the "Series C Preference Amount"), pro rata
with the holders of Series D Preferred based upon the Series C Preference Amount
and the Series D Preference Amount and, if the Exchangeable Note is Exchanged,
pro rata or such other basis authorized by Section B(2)(b)(ii) with the holders
of EIS Preferred, but before any payment or distribution is made to the holders
of Series B Preferred or Common Stock or shares of any class or series of
capital stock of the Corporation other than such shares ranking PARI PASSU
therewith; provided that any proceeds actually received by the holders of
outstanding shares of Series C Preferred pursuant to the Series C Liquidation
Proceeds Agreement or the Liquidation Proceeds Agreement, dated August __, 2001,
among the Corporation, the holders of Series C Preferred and the holders of
Series D Preferred (the "Liquidation Proceeds Agreement") shall reduce
dollar-for-dollar the Series C Preference Amount.
If, upon any such event, the Corporation has insufficient funds to
pay the Series C Preference Amount, the holders of Series C Preferred shall
share, pro rata with the holders of Series D Preferred based upon the Series C
Preference Amount and the Series D Preference Amount and, if the Exchangeable
Note is Exchanged, pro rata or such other basis authorized by Section
B(2)(b)(ii) with the holders of EIS Preferred, in any distribution of assets in
proportion to the full amounts to which they would otherwise be respectively
entitled.
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(b) Neither the sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
the property and assets of the Corporation, nor the reorganization,
consolidation or merger of the Corporation with or into any other company or
companies, nor a transaction or a series of related transactions in which more
than 50% of the voting power of the Corporation is disposed of or sold (whether
by the Corporation or the holders of the outstanding capital stock), shall be
deemed a Dissolution if the holders of at least 51% of the then outstanding
shares of Series C Preferred elect to have such events not deemed a Dissolution
by giving written notice to the Corporation; provided that such notice may be
issued subject to the Corporation's receipt of a like notice from the Series D
Preferred.
(c) Upon Dissolution and after the payment in cash to the holders of
outstanding shares of Series C Preferred of the Series C Preference Amount, all
remaining assets legally available for distribution shall be distributed to the
holders of Common Stock with all shares of Series C Preferred and Series D
Preferred being treated as if converted into Common Stock (with respect to
Series C Preferred, the "Series C Participation Right"); provided that the
Corporation shall not be required to effect Dissolution as a result of a sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property and assets of the
Corporation, and if such Dissolution does not occur, the holders of Series C
Preferred shall not be entitled to the Series C Participation Right; provided
further that if the holders of outstanding shares of Series C Preferred have
received the Series C Preference Amount in accordance with Section 4(a) upon (i)
a reorganization, consolidation or merger of the Corporation or (ii) a
transaction or a series of related transactions in which more than 50% of the
voting power of the Corporation is disposed of or sold, the shares of Series C
Preferred shall thereupon be deemed to be redeemed and the holders of Series C
Preferred shall not be entitled to the Series C Participation Right.
(d) If (i) the holders of Series C Preferred vote to convert their
shares of Series C Preferred into Common Stock immediately prior to or in
connection with an event specified in Section 4(a) or (ii) any holder of shares
of Series C Preferred otherwise converts its shares of Series C Preferred into
Common Stock in accordance with such holder's right under Section 5, the
priorities and preferences set forth in this Section 4 shall be of no further
effect and the holders of such Common Stock shall share all the assets of the
Corporation available for distribution to all holders of Common Stock ratably in
proportion to the number of shares of Common Stock held by them respectively.
5. CONVERSION RIGHTS.
(a) CONVERSION. Each outstanding share of Series C Preferred,
subject to the terms and conditions hereinafter set forth, shall be converted
into fully paid and nonassessable shares of Common Stock at the Series C
Conversion Price (as defined in Section 5(b)) in effect on the Series C
Conversion Date (as defined in Section 5(c)), at the following times and
pursuant to the following conditions: (i) at any time, at the option of the
holder of such outstanding share of Series C Preferred; (ii) automatically and
simultaneously upon the closing of a Public Offering (as defined in this Section
5(a)); or (iii) upon written notice to the Corporation at the election of the
holders of 51% of the outstanding shares of Series C Preferred. The closing of a
Public
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Offering means the consummation of the sale by the Corporation of Common Stock
pursuant to an effective registration statement under the Securities Act of
1933, as amended, where such sale yields gross proceeds of not less than
$20,000,000 and is made pursuant to a firm commitment underwriting (a "Public
Offering").
(b) CONVERSION PRICE. Each share of Series C Preferred shall be
convertible at an office or agency referred to below into a number of fully paid
and nonassessable shares of Common Stock (calculated as to each conversion to
the nearest 1/100th of a share) as is determined by dividing $4.04 by the Series
C Conversion Price in effect on the Series C Conversion Date. As of November 20,
2000, the "Series C Conversion Price" was $4.04 per share, which price may be
adjusted from time to time as provided in Section 5(f).
(c) METHOD OF CONVERSION. In order to exercise such conversion
privilege, the holder of any shares of Series C Preferred to be converted shall
present and surrender the certificate(s) representing such shares of Series C
Preferred during usual business hours at any office or agency of the Corporation
maintained for the transfer of shares of Series C Preferred and shall deliver a
written notice of its election to convert the shares of Series C Preferred
represented by such certificate(s), or any portion thereof, specified in such
notice. Such notice shall also state the name or names (with address or
addresses) in which the certificate or certificates for Common Stock issuable on
such conversion is to be issued. If so required by the Corporation, any
certificate for shares of Series C Preferred surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to the Corporation,
duly executed by the holder of such shares of Series C Preferred or such
holder's duly authorized representative. Each conversion of shares of Series C
Preferred shall be deemed to have been effected on the date (the "Series C
Conversion Date") on which the certificate or certificates representing such
shares of Series C Preferred has or have been surrendered and any required
notice and instruments of transfer received as aforesaid. Subject to the
provisions of Section 5(f)(ix), the person or persons in whose name or names any
certificate or certificates for Common Stock are issuable upon such conversion
shall be deemed to have become the holder or holders of record of such Common
Stock immediately prior to the close of business on the Series C Conversion
Date. Subject to the provisions of Section 5(f)(ix), as promptly as practicable
(and in any event within two business days) after the presentation and surrender
for conversion, as herein provided, of any certificate or certificates for
shares of Series C Preferred, the Corporation shall issue and deliver at such
office or agency, to or upon the written order of the holder thereof, a
certificate or certificates for the number of shares of Common Stock issuable
upon such conversion. In case any certificate or certificates for shares of
Series C Preferred are surrendered for conversion of less than all the shares of
Series C Preferred represented thereby, the Corporation shall deliver at such
office or agency, to or upon the written order of the holder thereof, a
certificate or certificates for the number of shares of Series C Preferred
represented by such surrendered certificate or certificates that are not
converted. The issuance of certificates for Common Stock issuable upon the
conversion of shares of Series C Preferred, and the issuance of certificates
representing shares of Series C Preferred not converted as described above,
shall be at the Corporation's expense and without charge to the converting
holder for any tax imposed on the Corporation in respect of the issue thereof.
The Corporation shall not, however, be required to pay any tax payable with
respect to any transfer involved in the issue and delivery of any certificate in
a name other than that of the holder of the shares of Series C Preferred and the
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Corporation is not required to issue or deliver any such certificate unless and
until the person requesting the issue thereof has paid to the Corporation the
amount of such tax or has established to the satisfaction of the Corporation
that such tax has been paid.
(d) NO ADJUSTMENT FOR DIVIDENDS. With respect to any conversion of
shares of Series C Preferred into Common Stock pursuant to this Section 5, no
adjustment shall be made for dividends declared but as yet unpaid on the shares
of Common Stock issuable upon conversion of Series C Preferred as of any record
date prior to the Series C Conversion Date; provided that upon the conversion of
such shares of Series C Preferred, the dividend declared but as yet unpaid on
the shares of Series C Preferred shall be payable on the Common Stock issued
upon such conversion as if such Common Stock were outstanding as of the record
date for the determination of holders entitled to receive said dividend.
(e) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued in connection with the exercise of any conversion right under this
Section 5, but in lieu of such fractional shares, the Corporation shall make a
cash payment therefor based on the Series C Conversion Price on the Series C
Conversion Date as reasonably determined in good faith by the Board.
(f) CONVERSION PRICE ADJUSTMENTS. The Series C Conversion Price
shall be subject to adjustment from time to time as follows:
(i) COMMON STOCK ISSUED AT LESS THAN CONVERSION PRICE. If the
Corporation issues or is deemed to have issued any Common Stock or
options to acquire Common Stock or securities convertible into or
exercisable for Common Stock other than Series C Excluded Shares (as
defined in subsection (iv)) without consideration or for a
consideration per share less than the Series C Conversion Price in
effect immediately prior to such issuance (the "Additional Common
Shares")
(A) at any time on or prior to December 20, 2001, then the
Series C Conversion Price in effect immediately following each
such issuance shall equal the lesser of the initial Series C
Conversion Price set forth in Section 5(b) and the price per
share at which such Additional Common Shares have been issued
or may be acquired in such issuance. If, at any time prior to
December 20, 2001, the holders of shares of Series C Preferred
elect to convert their shares of Series C Preferred into
Common Stock prior to the occurrence of such an issuance, and
subsequent to such conversion but prior to December 20, 2001,
the Corporation issues or is deemed to have issued Additional
Common Shares without consideration or for a consideration per
share less than the Series C Conversion Price in effect upon
such prior conversion, then the Corporation shall promptly
issue to such holders of Series C Preferred, for no additional
consideration, but subject to any adjustment required by
Section 5(f)(ii)(C)(4), that number of shares of Common Stock
equal to the difference obtained by subtracting the number of
shares of Common Stock
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issued in connection with the conversion of the shares of
Series C Preferred from the quotient obtained by dividing (x)
the dollar amount of total consideration paid for the shares
of Common Stock issued upon such conversion by (y) such lesser
price.
(B) at any time after December 20, 2001, but within 48 months
of the issuance of Series D Preferred, the Series C Conversion
Price in effect immediately following each such issuance shall
be reduced, concurrently with such issuance, to a price
(calculated to the nearest tenth of a cent) determined by
using the following formula:
NCP = (CP X S) + (P X NS)
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S + NS
where
NCP = Series C Conversion Price following issuance of
Additional Common Shares
CP = Series C Conversion Price prior to issuance of
Additional Common Shares
S = number of shares of Common Stock outstanding
(counting as outstanding Common Stock issuable
upon conversion of convertible preferred
securities and upon exercise of options and
warrants outstanding at the time) prior to
issuance of Additional Common Shares
P = price per share of Additional Common Shares
NS = number of Additional Common Shares issued.
(ii) For the purposes of any adjustment of the Series C Conversion
Price pursuant to Section 5(f)(i), the following provisions apply:
(A) CASH. In the case of the issuance of Common Stock for
cash, the amount of the consideration deemed to be received by
the Corporation shall be the amount of the cash proceeds
received by the Corporation for such Common Stock before
deducting therefrom any reasonable discounts, commissions,
taxes or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(B) CONSIDERATION OTHER THAN CASH. In the case of the issuance
of Common Stock (other than upon the conversion of shares of
capital stock or other securities of the Corporation) for a
consideration in whole or in
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part other than cash, including securities acquired in
exchange therefor (other than securities by their terms so
exchangeable), the consideration other than cash will be
deemed to be the fair value thereof (as determined in good
faith by the Board, whose determination will be conclusive to
the extent reasonable), irrespective of any accounting
treatment; provided that such fair value as determined by the
Board shall not exceed the aggregate Current Market Price (as
defined in Section 5(g)) of the Common Stock being issued as
of the date the Board authorizes the issuance of such Common
Stock.
(C) OPTIONS AND CONVERTIBLE SECURITIES. In the case of the
issuance of (i) options, warrants or other rights to purchase
or acquire Common Stock (whether or not at the time
exercisable) other than Series C Excluded Shares (as defined
in Section 5(f)(iv)), (ii) securities by their terms
convertible into or exchangeable for Common Stock (whether or
not at the time so convertible or exchangeable) or (iii)
options, warrants or rights to purchase such convertible or
exchangeable securities (whether or not at the time
exercisable);
(1) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options,
warrants or other rights to purchase or acquire Common
Stock shall be deemed to have been issued at the time
such options, warrants or other rights are issued and
for a consideration equal to the minimum consideration
(determined in the manner provided in Sections
5(f)(ii)(A) and (B)), if any, received or receivable by
the Corporation upon the exercise of such options,
warrants or other rights;
(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, warrants or other rights to
purchase or acquire such convertible or exchangeable
securities and the subsequent conversion or exchange
thereof, shall be deemed to have been issued at the time
such securities are issued or such options, warrants or
other rights are issued and for a consideration equal to
the consideration, if any, received by the Corporation
for any such securities and related options, warrants or
other 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 and the exercise of any related options,
warrants or other rights (the consideration in each case
to be determined in the manner provided in Sections
5(f)(ii)(A) and (B));
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(3) on any change in the number of shares of Common
Stock deliverable upon exercise of any such options,
warrants or other rights or conversion of or exchange of
such convertible or exchangeable securities, or any
change in the consideration to be received by the
Corporation upon such exercise, conversion or exchange,
including a change resulting from any subdivision,
split-up, combination or reclassification thereof, the
Series C Conversion Price as then in effect shall
forthwith be readjusted to such Series C Conversion
Price as would have been obtained had an adjustment been
made upon such options, warrants or other rights not
exercised becoming exercisable prior to such change, or
securities not converted or exchanged becoming
convertible or exchangeable prior to such change, upon
the basis of such change;
(4) on the expiration or cancellation of any such
options, warrants or other rights or the termination of
the right to convert or exchange such convertible or
exchangeable securities, if the Series C Conversion
Price has been adjusted upon such becoming exercisable,
convertible or exchangeable, such Series C Conversion
Price will forthwith be readjusted to such Series C
Conversion Price as would have been obtained had an
adjustment been made upon such options, warrants or
other rights or securities being on the basis of the
issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options,
warrants or other rights, or upon the conversion or
exchange of such securities; and
(5) if the Series C Conversion Price has been adjusted
upon such options, warrants or other rights being issued
or such convertible or exchangeable securities being
issued subject to Section 5(f)(ii)(C)(3), no further
adjustment of the Series C Conversion Price shall be
made for the actual issuance of Common Stock upon the
issuance thereof.
(iii) FUTURE CONVERSION PRICE PROTECTION. In the event the
Corporation consummates a financing on or prior to December 20,
2001, and pursuant to the terms of such financing issues convertible
securities or convertible debt containing conversion price
adjustment protections equivalent to those set forth in Section
5(f)(i)(A) for a period or periods in excess of 18 months, the
Corporation shall grant the holders of Series C Preferred an
extension of such protections beyond December 20, 2001, by the
amount of such excess time.
(iv) EXCLUDED SHARES. "Series C Excluded Shares" means Common Stock
issued or reserved for issuance by the Corporation: (a) as a stock
dividend payable in shares of Common Stock; (b) upon any subdivision
or split-up of the outstanding Common Stock; (c) upon conversion of
Series B Preferred; (d) in an
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amount up to 1,992,500 shares pursuant to the Corporation's stock
option plans; (e) upon exercise of outstanding warrants to purchase
299,123 shares of Common Stock; (f) upon the conversion of 1,750,000
shares of Series C Preferred and (g) upon the conversion of
1,345,000 shares of Series D Preferred.
(v) STOCK DIVIDENDS/STOCK SPLITS, ETC. If the number of shares of
Common Stock outstanding at any time after the date of issuance of
the shares of Series C Preferred is increased by a stock dividend
payable in Common Stock or by a subdivision or split-up of Common
Stock, then immediately after the record date fixed for the
determination of holders of Common Stock entitled to receive such
stock dividend or the effective date of such subdivision or
split-up, as the case may be, the Series C Conversion Price shall be
appropriately adjusted so that the holder of any shares of Series C
Preferred thereafter converted are entitled to receive the number of
shares of Common Stock of the Corporation that such holder would
have owned immediately following such action had such shares of
Series C Preferred been converted immediately prior thereto.
(vi) COMBINATION OF SHARES. If the number of shares of Common Stock
outstanding at any time after the date of issuance of the shares of
Series C Preferred is decreased by a combination of the outstanding
shares of Common Stock, then immediately after the effective date of
such combination, the Series C Conversion Price shall be
appropriately increased so that the holder of any shares of Series C
Preferred thereafter converted are entitled to receive the number of
shares of Common Stock of the Corporation that such holder would
have owned immediately following such action had such shares of
Series C Preferred been converted immediately prior thereto.
(vii) REORGANIZATIONS, ETC. In the case of any capital
reorganization of the Corporation, any reclassification of Common
Stock, the consolidation of the Corporation with or the merger of
the Corporation with or into any other entity (other than a
reorganization or merger solely for the purpose of the change in the
state of incorporation of the Corporation) or the sale, lease or
other transfer of all or substantially all the assets of the
Corporation to any other person or entity, each share of Series C
Preferred will after such capital reorganization, reclassification,
consolidation, merger, sale, lease or other transfer be convertible
into the number of shares of capital stock or other securities or
property to which the Common Stock issuable (at the time of such
capital reorganization, reclassification, consolidation, merger,
sale, lease, or other transfer) upon conversion of such shares of
Series C Preferred would have been entitled upon such capital
reorganization, reclassification, consolidation, merger, sale, lease
or other transfer; and in any such case, if necessary, the
provisions set forth herein with respect to the rights and interests
thereafter of the holders of the shares of Series C Preferred shall
be appropriately adjusted so as to be applicable, as nearly as may
reasonably be possible, to any shares of capital stock or other
securities or property thereafter deliverable on the conversion of
Series C Preferred. The subdivision or combination of Common Stock
issuable upon conversion of Series
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C Preferred at any time outstanding into a greater or lesser number
of shares of Common Stock (whether with or without par value) shall
not be deemed to be a reclassification of the Common Stock of the
Corporation for the purposes of this Section 5(f)(vi).
(viii) EVIDENCES OF INDEBTEDNESS OR ASSETS. If the Corporation
declares a distribution payable in securities, evidences of
indebtedness, assets or property (excluding dividends payable solely
in Common Stock) then, in each such case, each holder of Series C
Preferred shall be entitled to receive a proportionate share of any
such distribution as if it had converted into the number of shares
of Common Stock of the Corporation into which its Series C Preferred
would have been convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation
entitled to receive such distribution.
(ix) ROUNDING OF CALCULATIONS; MINIMUM ADJUSTMENT. All calculations
under this Section 5(f) will be made to the nearest cent or the
nearest 1/100th of a share; provided that no adjustment in the
Series C Conversion Price shall be made if the amount of such
adjustment would be less than $0.01 and provided further that any
such amount shall be carried forward and an adjustment with respect
thereto shall be made at the time of, and together with, any
subsequent adjustment that, together with such amount and any other
amount or amounts so carried forward, aggregates $0.01 or more.
(x) TIMING OF ISSUANCE OF ADDITIONAL COMMON SHARES UPON CERTAIN
ADJUSTMENTS. If this Section 5(f) requires that an adjustment shall
become effective immediately after the record date for an event with
respect to the holder of any Series C Preferred converted after such
record date and before the occurrence of such event, the Corporation
may defer until the occurrence of such event issuing to such holders
the additional shares of Common Stock (or indebtedness or assets as
the case may be) issuable (or distributable) upon such conversion by
reason of the adjustment required by such event over and above the
shares of Common Stock (or indebtedness or assets as the case may
be) issuable (or distributable) upon such conversion before giving
effect to such adjustment; provided that the Corporation upon
request shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional
shares (or indebtedness or assets as the case may be) upon the
occurrence of the event requiring such adjustment.
(xi) APPLICABLE ADJUSTMENT. If more than one provision of this
Section 5(f) requires an adjustment to the Series C Conversion Price
for Series C Preferred and if the transaction in question can
properly be treated as involving successive events each requiring
such an adjustment, then all such adjustments shall be made
successively and if they cannot be so treated the applicable
adjustment shall be the largest adjustment lowering the Series C
Conversion Price resulting from the application of any appropriate
provision of this Section 5(f) to such event.
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(g) CURRENT MARKET PRICE. The "Current Market Price" at any date
means the price per share of Common Stock on such date determined by the Board
as provided in this Section 5(g). The Current Market Price will be the average
of the daily closing prices per share of Common Stock for 30 consecutive
business days ending no more than 15 business days before the day in question
(as adjusted for any stock dividend, split, combination or reclassification that
took effect during such 30 business day period). The closing price for each day
means the last reported sales price regular way or, in case no such reported
sales take place on such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national securities exchange
on which the Common Stock is listed or admitted to trading, or if not listed or
admitted to trading on any national securities exchange, the average of the
highest bid and the lowest asked prices quoted on the National Association of
Securities Dealers Automated Quotation ("Nasdaq") System; provided that if the
Common Stock is not traded in such manner that the quotations referred to above
are available for the period required hereunder, the Current Market Price per
share of Common Stock will be deemed to be the fair value as reasonably
determined by the Board (whose determination will be conclusive), irrespective
of any accounting treatment; provided further that if within 15 days of
receiving notice of an event under Section 5(f) requiring calculation of the
Current Market Price, a holder of at least ten percent but no less than 100,000
shares of the currently outstanding Series C Preferred requests the appointment
of an independent appraiser, the Board shall, within ten days of such request,
appoint as an independent appraiser a nationally-known independent public
accounting firm or investment bank and the Board shall direct such independent
appraiser to conduct an appraisal and make a report on the Current Market Price
of a share of Common Stock within 30 days of its appointment. The determination
of the Current Market Price by such independent appraiser shall be final and
binding upon the Corporation and the holders of Series C Preferred. The costs of
such independent appraiser shall be paid by the Corporation if the Current
Market Price so determined is at least five percent lower than that so
determined by the Board; otherwise, such cost shall be paid by such requesting
holders. Any independent appraiser so utilized shall agree to treat all
information supplied by the Corporation in a confidential manner.
(h) STATEMENT REGARDING ADJUSTMENTS. Whenever the Series C
Conversion Price is adjusted as herein provided:
(i) the Corporation shall compute the adjusted Series C Conversion
Price in accordance with this Section 5 and will prepare a
certificate signed by the Treasurer of the Corporation setting forth
the adjusted Series C Conversion Price and the facts requiring such
adjustment, and such certificate shall forthwith be filed at the
office of the transfer agent or agents, if any, for Series C
Preferred and at the principal office of the Corporation; and
(ii) a notice stating that the Series C Conversion Price has been
adjusted and setting forth the adjusted Series C Conversion Price
and the facts requiring such adjustment shall, as soon as
practicable, be mailed to the holders of record of the outstanding
shares of Series C Preferred. Where appropriate, such notice may be
given in advance and may be included as part of a notice required to
be mailed under the provisions of Section 5(j).
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(i) CANCELLATION. All shares of Series C Preferred surrendered for
conversion as herein provided in this Section 5 shall no longer be deemed to be
outstanding and all rights with respect to such Series C Convertible Preferred
Stock, including the rights, if any, to receive notices and to vote, shall
forthwith cease and terminate, except only the right of the holders thereof to
receive Common Stock or other assets or property in exchange therefor.
(j) NOTICE TO HOLDERS. In the event that:
(i) the Corporation takes action to make any distribution or
dividend to the holders of any class of its capital stock;
(ii) the Corporation takes action to offer for subscription pro rata
to the holders of any class of its capital stock securities of any
kind;
(iii) the Corporation takes action to accomplish any capital
reorganization, or reclassification of the capital stock of the
Corporation, or consolidation or merger to which the Corporation is
a party and for which approval of any stockholders of the
Corporation is required, or the sale or transfer of all or
substantially all the assets of the Corporation; or
(iv) the Corporation takes action looking to a voluntary or
involuntary dissolution, liquidation or winding up of the affairs of
the Corporation;
then the Corporation shall (a) in case of such distribution, dividend or
offering of subscription rights, at least ten days prior to the date or expected
date on which the books of the Corporation are closed or a record has been taken
for the determination of holders entitled to such distribution or subscription
rights, and (b) in the case of any reorganization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up,
at least ten days prior to the date or expected date when the same takes place,
cause written notice thereof to be mailed to each holder of Series C Preferred
at such holder's address as shown on the books of the Corporation. The notice to
be given in accordance with this Section 5(j) shall also specify (x) the date or
expected date on which the holders of any class of the Corporation's capital
stock are entitled thereto, and (y) the date or expected date on which the
holders of any class of the Corporation's capital stock are entitled to exchange
their shares for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up, as the case may be.
(k) RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available, free from preemptive rights, out of its treasury
shares or its authorized but unissued Common Stock, for the purpose of effecting
the conversion of Series C Preferred, the full number of shares of Common Stock
then deliverable upon the conversion of all Series C Preferred then outstanding.
(l) RECLASSIFICATION OF COMMON STOCK. For the purposes of this
Section 5, the term "Common Stock" means (i) the class of stock designated as
the Common Stock of the Corporation on June 20, 2000, the date of filing of the
Corporation's amended and restated form
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of certificate of designation, and (ii) any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value or from no par value to par value, or from par value to
no par value. If at any time as a result of an adjustment made pursuant to the
provisions of Section 5(f)(vi), the holder of any Series C Preferred thereafter
surrendered for conversion becomes entitled to receive any shares of the
Corporation other than shares of Common Stock, then the number of such other
shares so receivable upon conversion of any Series C Preferred shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
Section 5(f)(vi), and the other provisions of this Section 5 with respect to the
Common Stock will apply on like terms to any such other shares.
(m) TREASURY SHARES. For the purpose of this Section 5, the sale or
other disposition of any Common Stock of the Corporation held in its treasury
shall be deemed to be an issuance thereof.
(n) APPROVALS. If any Common Stock to be reserved for the purpose of
conversion of shares of Series C Preferred requires registration with or
approval of any governmental authority under any federal or state law or of the
Nasdaq System before such shares may be validly issued or delivered upon
conversion, the Corporation shall in good faith and as expeditiously as possible
secure such registration or approval, as the case may be. If, and so long as,
any shares of Common Stock into which Series C Preferred are then convertible
are listed on any national securities exchange, the Corporation shall, if
permitted by the rules of such exchange, list and keep listed on such exchange,
upon official notice of issuance, all such Common Stock issuable upon
conversion.
(o) VALID ISSUANCE. All Common Stock that may be issued upon
conversion of shares of Series C Preferred shall upon issuance by the
Corporation be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issuance thereof, and the
Corporation shall take no action that will cause a contrary result (including,
without limitation, any action that would cause the Series C Conversion Price to
be less than the par value, if any, of the Common Stock).
(p) QUALIFIED PRIVATE OFFERING RIGHT OF CONVERSION. If the
Corporation proposes to make a sale of equity securities of the Corporation (or
notes convertible into such securities) to a financial investor (who is not also
a strategic investor) in an amount equal to at least $10,000,000 ("Qualified
Private Offering"), the holders of shares of Series C Preferred shall have the
option to exchange any of or all their shares of Series C Preferred (the total
consideration paid for the shares elected by any holder to be converted or
exchanged being referred to as the "Converted Portion") for the securities or
debt proposed to be issued in connection with such Qualified Private Offering
with the same powers, designations, preferences and other special rights of such
proposed securities or debt being offered to such financial investor. With
respect to any Converted Portion of shares of Series C Preferred, the number of
shares of new equity or debt securities to be issued for any such Converted
Portion will be equal to the quotient obtained by dividing (x) such Converted
Portion by (y) the Option Conversion Price (defined below). The "Option
Conversion Price" applicable to any Converted Portion shall equal the per share
issue price of the equity or debt securities issued in such Qualified Private
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Offering, or the initial per share conversion, exchange or exercise price, as
applicable, of any securities or other rights of the Corporation convertible,
exchangeable or exercisable into or for such equity or debt securities issued in
such Qualified Private Offering, as applicable. The right of exchange or
conversion is in addition to and not exclusive of the preemptive rights set
forth in Section 6. The right of conversion or exchange granted hereunder will
terminate if unexercised within 30 days after receipt of the notice described in
Section 6(b) with respect to such proposed issuance.
(q) CERTAIN EVENTS. If any event occurs of the type contemplated by
the provisions of this Section 5 but not expressly provided for by such
provisions, then the Board will make an appropriate adjustment in the number of
shares of Common Stock obtainable upon conversion of Series C Preferred so as to
fairly protect the rights of the holders of Series C Preferred.
6. PREEMPTIVE RIGHTS.
(a) Until any time prior to the date that is 30 days following the
closing of a Public Offering, the Corporation hereby grants to the holders of
such Series C Preferred a right to purchase any New Securities (as defined
below) that the Corporation may, from time to time, propose to issue and sell
(including any New Securities proposed to be issued and sold in connection with
a Qualified Private Offering). Such right shall allow the holders of shares of
Series C Preferred to purchase the number of the New Securities proposed to be
issued that would enable such holders to maintain their respective percentage
ownership of Shares (as defined below) on a fully diluted basis taking into
account all outstanding shares of Common Stock, all shares of Common Stock
issuable upon conversion of outstanding shares of Series B Preferred, Series C
Preferred, Series D Preferred and outstanding blank check preferred stock, but
not any unexercised outstanding options, warrants or other securities
convertible into or exchangeable for shares of Common Stock of the Corporation
("Pro Rata Portion"). The preemptive rights granted hereunder shall terminate if
unexercised within 30 days after receipt of the notice described in Section 6(b)
below. "New Securities" for the purposes of this Section 6 means any capital
stock of the Corporation (including treasury shares), whether now authorized or
not, and all rights, options, or warrants to purchase such capital stock and
securities of any type whatsoever that are, or may become, convertible into or
exchangeable for capital stock; provided that the term "New Securities" for the
purposes of this Section 6 does not include (i) securities issued upon the
conversion of any of the shares of Series B Preferred, Series C Preferred or
Series D Preferred into shares of Common Stock in accordance with this
Certificate; (ii) any stock options now issued or granted or hereafter granted
pursuant to the stock option plans of the Corporation in existence on the date
hereof, and any shares of Common Stock issued upon the exercise thereof; (iii)
shares of Common Stock or other securities exercisable for or convertible into
shares of Common Stock, issued pursuant to warrant agreements currently
outstanding as of the date hereof, (iv) shares of Common Stock or other
securities exercisable for, exchangeable into or convertible into shares of
Common Stock issued pursuant to the Elan Notes and (v) shares of Common Stock
issued pursuant to any stock split or stock dividend.
(b) If the Corporation proposes to undertake an issuance of New
Securities (including the issuance of New Securities in connection with a
Qualified Private Offering), it
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shall promptly give the holders of record of shares of Series C Preferred
written notice of its intention ("Series C New Issue Notice"), describing the
class and number of New Securities it intends to issue, the purchase price
therefor, the name of the investors that the Corporation proposes to issue such
New Securities to and such investor's status as a financial investor or a
strategic investor, and the terms upon which the Corporation proposes to issue
the same. The holders of shares of Series C Preferred shall have 30 days from
the date the Series C New Issue Notice is received by it to determine whether to
purchase all or any portion of its Pro Rata Portion of such New Securities for
the purchase price and upon the terms specified in the Series C New Issue Notice
by giving written notice to the Corporation, stating thereon the quantity of New
Securities to be purchased, and in the case of a Qualified Private Offering, the
quantity of shares of Series C Preferred that such holder is electing to convert
or exchange into the proposed New Securities.
(c) Upon the issuance of New Securities, the holders of shares of
Series C Preferred shall have a right of over-subscription such that if any of
such holders fails to purchase its Pro Rata Portion, the other holders of shares
of Series C Preferred shall, among them, have the right to purchase up to the
balance of the New Securities not so purchased. Such right of over-subscription
may be exercised by a holder of shares of Series C Preferred by such holder
specifying in the Series C New Issue Notice its intent to purchase more than its
Pro Rata Portion; provided that if as a result the portion of New Securities
available for purchase hereunder is oversubscribed, the oversubscribing holders
of shares Series C Preferred shall be cut back with respect to their
over-subscriptions on a pro rata basis in accordance with their respective Pro
Rata Portion or as they may otherwise agree among themselves.
C. SERIES D PREFERRED STOCK
1. DESIGNATION. A total of 1,400,000 shares of the Preferred Stock shall
be designated as series D convertible preferred stock ("Series D Preferred").
2. VOTING RIGHTS.
(a) Holders of Series D Preferred are entitled to vote on any and
all matters submitted to a vote of the stockholders. For such purposes, each
holder of Series D Preferred is entitled to cast the number of votes it would
have had the right to cast had all its Series D Preferred been converted, as
provided in Section 5, into Common Stock ("as Converted Basis"), as of the
record date of the meeting at which such votes are to be cast or as of the date
any written consent is taken, including any fraction of a share of Common Stock
into which a holder's Series D Preferred would be convertible. Subject to
Section 2(b), holders of Series D Preferred do not have any right to vote their
shares as a separate class, except as may be otherwise required by Delaware law.
Each record holder of Series D Preferred is entitled to notice of all meetings
or actions of stockholders.
(b) So long as any shares of Series D Preferred remain outstanding,
the Corporation shall not, without the affirmative vote by (or written consent
of) the holders of at least two-thirds of the then outstanding shares of Series
D Preferred, voting as a single class of preferred shares as may be otherwise
required by law or this Certificate:
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(i) amend this Certificate or the By-laws of the Corporation in any
manner that would or could prejudice the rights of the holders of
shares of Series D Preferred, including any such amendment (or
similar effect that would occur by virtue of the merger or
consolidation of the Corporation) that does any of the following:
(A) increases or decreases the par value of the issued shares
of Series D Preferred;
(B) changes issued shares of Series D Preferred into a lesser
number of shares of the same class unless in connection with
such changes to reduce shares, an appropriate change is made
in the Series D Conversion Price (as defined in Section 5(b))
and the powers, designations, preferences and relative,
participating, optional and other special rights of the class
remain the same as those designated herein for Series D
Preferred, or into the same or a different number of shares of
any other class, with or without par value, theretofore or
then authorized;
(C) changes the terms of, or adds terms to, the terms of
Series D Preferred in any manner prejudicial to the holders of
such shares;
(D) changes the terms of issued shares of any class senior,
junior or PARI PASSU to the shares of Series D Preferred in
any manner prejudicial to the holders of Series D Preferred;
(E) authorizes shares of another class that are convertible
into, or authorizes the conversion of shares of another class
into, shares of Series D Preferred or authorizes the Board to
fix or alter conversion rights of shares of another class that
are convertible into shares of Series D Preferred;
(F) provides, in the case of an amendment described in Section
2(b)(i)(A) or (B), that the stated capital of the Corporation
shall be reduced or eliminated as a result of the amendment,
or provides, in the case of Section 2(b)(i)(E), that the
stated capital of the Corporation shall be reduced or
eliminated upon the exercise of such conversion rights;
(G) changes substantially the purposes of the Corporation, or
provides that thereafter an amendment to the Certificate may
be adopted that changes substantially the purposes of the
Corporation; or
(H) changes the Corporation into a nonprofit corporation.
(ii) authorize, issue or sell or obligate itself to authorize, issue
or sell any class of its capital stock or other securities
(including debt securities) convertible into
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or exercisable for any equity security that ranks senior in right,
either as to voting, dividends or upon liquidation, with the shares
of Series D Preferred; provided that the Corporation may issue
shares of EIS Preferred in connection with the Exchange. The
Corporation may provide that the holders of EIS Preferred receive a
liquidation right that ranks senior to the liquidation right of the
holders of Series D Preferred; provided that such senior liquidation
right shall not exceed the holders of EIS Preferred's pro rata share
of the Initial Liquidation Amount, which may be paid in accordance
with Section B(2)(b)(ii), and after payment in full of the Initial
Liquidation Amount to the holders of Series C Preferred, Series D
Preferred and EIS Preferred, the holders of Series C Preferred and
Series D Preferred shall thereafter share pro rata in any remaining
liquidation proceeds up to the aggregate of their respective
Preference Amounts based upon the Series C Preference Amount and the
Series D Preference Amount reduced in each case by their respective
portions received of the Initial Liquidation Amount;
(iii) effect (a) any sale, lease, assignment, transfer or other
conveyance of all or substantially all the assets or capital stock
of the Corporation, (b) any recapitalization, reclassification,
reorganization or any similar transaction with respect to any of its
shares of capital stock, (c) any consolidation or merger involving
the Corporation or (d) any transaction or series of related
transactions in which more than 50% of the voting power of the
Corporation is disposed of;
(iv) incur any indebtedness whatsoever in excess of an aggregate of
$1,000,000 other than indebtedness (now or hereafter in existence)
(x) to trade creditors in the ordinary course of business, or (y)
pursuant to the Elan Notes, or senior indebtedness, without limit,
ranking on a PARI PASSU basis with the portion (as calculated below)
of the Series C Preference Amount with respect to the occurrence,
relating to the note issued in connection with such indebtedness, of
any of the events set forth in Section 1 of the Series C Liquidation
Proceeds Agreement relating to PARI PASSU treatment upon liquidation
(as defined therein), and funded by banks, bank holding companies,
insurance companies and other investors customarily defined as
institutional investors, such portion to be equal to the percentage
of the Series C Preference Amount that the Series D Preference
Amount bears to the aggregate of the Series C and Series D
Preference Amounts;
(v) pre-pay or make any advance payment on any indebtedness (now or
hereafter in existence) of the Corporation except as may be required
or permitted by the Corporation to discharge either of or both the
Elan Notes or as required by other indebtedness permitted to be
incurred pursuant to Section 2(b)(iv);
(vi) redeem or repurchase any securities of the Corporation
(including any indebtedness convertible into any equity securities
of the Corporation); provided that the foregoing shall not apply to
the Corporation's repurchase or redemption of shares of its capital
stock (including the exercise of a right of first refusal upon a
transfer of securities of the Corporation) pursuant to provisions
contained in stock option agreements and common stock purchase
agreements entered into
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under the Corporation's stock option plans with respect to the
1,992,500 shares reserved for issuance thereunder; or
(vii) except pursuant to a merger or consolidation, increase the
maximum size of the Board beyond nine members.
3. DIVIDEND RIGHTS.
The holders of outstanding shares of Series D Preferred are entitled to
receive dividends at the rate of $0.70 per share per annum, payable when, as and
if declared by the Board out of funds legally available therefor, on a PARI
PASSU basis with the holders of outstanding shares of Series C Preferred and, if
the Exchangeable Note is Exchanged, on a PARI PASSU basis with the holders of
outstanding shares of EIS Preferred, prior and in preference to any declaration
or payment of any dividend on (i) Common Stock, (ii) Series B Preferred and
(iii) any other series of Preferred Stock that is or may be issued or
outstanding in the future, in arrears on the first day of January of each year.
The dividends provided for in this Section 3 shall not be cumulative.
4. LIQUIDATION RIGHTS.
(a) Upon Dissolution or, subject to Section 4(b), the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property and assets of the
Corporation, or the reorganization, consolidation or merger of the Corporation
with or into any other company or companies, or a transaction or series of
related transactions in which more than 50% of the voting power of the
Corporation is disposed of or sold (whether by the Corporation or the holders of
the outstanding capital stock), the holders of outstanding shares of Series D
Preferred will be entitled to receive from the Corporation's assets available
for distribution to stockholders cash in the amount of $10.00 per share, plus an
amount equal to all declared but unpaid dividends on such shares (the "Series D
Preference Amount"), pro rata with the holders of Series C Preferred based upon
the Series C Preference Amount and the Series D Preference Amount and, if the
Exchangeable Note is Exchanged, pro rata or such other basis authorized by
Section C(2)(b)(ii) with the holders of the EIS Preferred, but before any
payment or distribution is made to the holders of Series B Preferred or Common
Stock, or shares of any class or series of capital stock of the Corporation
other than such shares ranking PARI PASSU therewith; provided that any proceeds
actually received by the holders of Series D Preferred pursuant to Liquidation
Proceeds Agreement shall reduce dollar-for-dollar the Series D Preference
Amount.
If, upon any such event, the Corporation has insufficient funds to
pay the Series D Preference Amount, the holders of Series D Preferred shall
share, pro rata with the holders of Series C Preferred based upon the Series C
Preference Amount and the Series D Preference Amount and, if the Exchangeable
Note is Exchanged, pro rata or such other basis authorized by Section
C(2)(b)(ii) with the holders of EIS Preferred, in any distribution of assets in
proportion to the full amounts to which they would otherwise be respectively
entitled.
(b) Neither the sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
the property and assets of the
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Corporation, nor the reorganization, consolidation or merger of the Corporation
with or into any other company or companies, nor a transaction or a series of
related transactions in which more than 50% of the voting power of the
Corporation is disposed of or sold (whether by the Corporation or the holders of
the outstanding capital stock), shall be deemed Dissolution if the holders of at
least two-thirds of the then outstanding shares of Series D Preferred elect to
have such events not deemed a Dissolution by giving written notice to the
Corporation; provided that such notice may be issued subject to the
Corporation's receipt of a like notice from the holders of Series C Preferred.
(c) Upon Dissolution and after the payment in cash to the holders of
Series D Preferred of the Series D Preference Amount, all remaining assets
legally available for distribution shall be distributed to the holders of Common
Stock with all shares of Series C Preferred and Series D Preferred being treated
as if converted into Common Stock (with respect to Series D Preferred, the
"Series D Participation Right"); provided that the Corporation shall not be
required to effect Dissolution as a result of a sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all the property and assets of the Corporation, and if such
Dissolution does not occur, the holders of Series D Preferred shall not be
entitled to the Series D Participation Right; provided further that if the
holders of outstanding shares of Series D Preferred have received the Series D
Preference Amount in accordance with Section 4(a) upon (i) a reorganization,
consolidation or merger of the Corporation or (ii) a transaction or a series of
related transactions in which more than 50% of the voting power of the
Corporation is disposed of or sold, the shares of Series D Preferred shall
thereupon be deemed to be redeemed and the holders of Series D Preferred shall
not be entitled to the Series D Participation Right.
(d) If (i) the holders of Series D Preferred vote to convert their
shares of Series D Preferred into Common Stock immediately prior to or in
connection with an event specified in Section 4(a) or (ii) any holder of shares
of Series D Preferred otherwise converts its shares of Series D Preferred into
Common Stock in accordance with such holder's right under Section 5, the
priorities and preferences set forth in this Section 4 shall be of no further
effect and the holders of such Common Stock shall share all the assets of the
Corporation available for distribution to all holders of Common Stock ratably in
proportion to the number of shares of Common Stock held by them respectively.
5. CONVERSION RIGHTS.
(a) CONVERSION RIGHT. Each outstanding share of Series D Preferred,
subject to the terms and conditions hereinafter set forth, shall be converted
into fully paid and nonassessable shares of Common Stock at the Series D
Conversion Price (as defined in Section 5(b)) in effect on the Series D
Conversion Date (as defined in Section 5(c)), at the following times and
pursuant to the following conditions: (i) at any time, at the option of the
holder of such outstanding share of Series D Preferred; (ii) upon written notice
to the Corporation at the election of the holders of 51% of the outstanding
shares of Series D Preferred or (iii) automatically and simultaneously upon the
closing of a Public Offering.
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(b) CONVERSION PRICE. Each share of Series D Preferred shall be
convertible at an office or agency referred to below into a number of fully paid
and nonassessable shares of Common Stock (calculated as to each conversion to
the nearest 1/100th of a share) as is determined by dividing $10.00 by the
Series D Conversion Price in effect on the Series D Conversion Date. As of the
date this Certificate is filed with the Secretary of State of Delaware, the
"Series D Conversion Price" is $10.00 per share, which price may be adjusted
from time to time as provided in Section 5(f).
(c) METHOD OF CONVERSION. In order to exercise such conversion
privilege, the holder of any shares of Series D Preferred to be converted shall
present and surrender the certificate(s) representing such shares of Series D
Preferred during usual business hours at any office or agency of the Corporation
maintained for the transfer of shares of Series D Preferred and shall deliver a
written notice of its election to convert the shares of Series D Preferred
represented by such certificate(s), or any portion thereof, specified in such
notice. Such notice shall also state the name or names (with address or
addresses) in which the certificate or certificates for Common Stock issuable on
such conversion is to be issued. If so required by the Corporation, any
certificate for shares of Series D Preferred surrendered for conversion shall be
accompanied by instruments of transfer, in form satisfactory to the Corporation,
duly executed by the holder of such shares of Series D Preferred or such
holder's duly authorized representative. Each conversion of shares of Series D
Preferred shall be deemed to have been effected on the date (the "Series D
Conversion Date") on which the certificate or certificates representing such
shares of Series D Preferred has or have been surrendered and any required
notice and instruments of transfer received as aforesaid. Subject to the
provisions of Section 5(f)(viii), the person or persons in whose name or names
any certificate or certificates for Common Stock are issuable upon such
conversion shall be deemed to have become the holder or holders of record of
such Common Stock immediately prior to the close of business on the Series D
Conversion Date. Subject to the provisions of Section 5(f)(viii), as promptly as
practicable (and in any event within two business days) after the presentation
and surrender for conversion, as herein provided, of any certificate or
certificates for shares of Series D Preferred, the Corporation shall issue and
deliver at such office or agency, to or upon the written order of the holder
thereof, a certificate or certificates for the number of shares of Common Stock
issuable upon such conversion. In case any certificate or certificates for
shares of Series D Preferred are surrendered for conversion of less than all the
shares of Series D Preferred represented thereby, the Corporation shall deliver
at such office or agency, to or upon the written order of the holder thereof, a
certificate or certificates for the number of shares of Series D Preferred
represented by such surrendered certificate or certificates that are not
converted. The issuance of certificates for Common Stock issuable upon the
conversion of shares of Series D Preferred, and the issuance of certificates
representing shares of Series D Preferred not converted as described above,
shall be at the Corporation's expense and without charge to the converting
holder for any tax imposed on the Corporation in respect of the issue thereof.
The Corporation shall not, however, be required to pay any tax payable with
respect to any transfer involved in the issue and delivery of any certificate in
a name other than that of the holder of the shares of Series D Preferred and the
Corporation is not required to issue or deliver any such certificate unless and
until the person requesting the issue thereof has paid to the Corporation the
amount of such tax or has established to the satisfaction of the Corporation
that such tax has been paid.
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(d) NO ADJUSTMENT FOR DIVIDENDS. With respect to any conversion of
shares of Series D Preferred into Common Stock pursuant to this Section 5, no
adjustment shall be made for dividends declared but as yet unpaid on the shares
of Common Stock issuable upon conversion of Series D Preferred as of any record
date prior to the Series D Conversion Date; provided that upon the conversion of
such shares of Series D Preferred, the dividend declared but as yet unpaid on
the shares of Series D Preferred shall be payable on the Common Stock issued
upon such conversion as if such Common Stock were outstanding as of the record
date for the determination of holders entitled to receive said dividend.
(e) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued in connection with the exercise of any conversion right under this
Section 5, but in lieu of such fractional shares, the Corporation shall make a
cash payment therefor based on the Series D Conversion Price on the Series D
Conversion Date as reasonably determined in good faith by the Board.
(f) CONVERSION PRICE ADJUSTMENTS. The Series D Conversion Price
shall be subject to adjustment from time to time as follows:
(i) COMMON STOCK ISSUED AT LESS THAN CONVERSION PRICE. If within 48
months of the issuance of Series D Preferred shares the Corporation
issues or is deemed to have issued any Common Stock or options to
acquire Common Stock or securities convertible into or exercisable
for Common Stock other than Series D Excluded Shares (as defined in
subsection (iii)) without consideration or for a consideration per
share less than the Series D Conversion Price in effect immediately
prior to such issuance (the "Additional Common Shares"), the Series
D Conversion Price in effect immediately following each such
issuance shall be reduced, concurrently with such issuance, to a
price (calculated to the nearest tenth of a cent) determined by
using the following formula:
NCP = (CP X S) + (P X NS)
------------------
S + NS
where
NCP = Series D Conversion Price following issuance of
Additional Common Shares
CP = Series D Conversion Price prior to issuance of
Additional Common Shares
S = number of shares of Common Stock outstanding
(counting as outstanding Common Stock issuable
upon conversion of convertible preferred
securities and upon exercise of options and
warrants outstanding at the time) prior to
issuance of Additional Common Shares
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P = price per share of Additional Common Shares
NS = number of Additional Common Shares issued.
(ii) For the purposes of any adjustment of the Series D Conversion
Price pursuant to Section 5(f)(i), the following provisions apply:
(A) CASH. In the case of the issuance of Common Stock for
cash, the amount of the consideration deemed to be received by
the Corporation shall be the amount of the cash proceeds
received by the Corporation for such Common Stock before
deducting therefrom any reasonable discounts, commissions,
taxes or other expenses allowed, paid or incurred by the
Corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(B) CONSIDERATION OTHER THAN CASH. In the case of the issuance
of Common Stock (other than upon the conversion of shares of
capital stock or other securities of the Corporation) for a
consideration in whole or in part other than cash, including
securities acquired in exchange therefor (other than
securities by their terms so exchangeable), the consideration
other than cash will be deemed to be the fair value thereof
(as determined in good faith by the Board, whose determination
will be conclusive to the extent reasonable), irrespective of
any accounting treatment; provided that such fair value as
determined by the Board shall not exceed the aggregate Current
Market Price (as defined in Section B(5)(g)) of the Common
Stock being issued as of the date the Board authorizes the
issuance of such Common Stock.
(C) OPTIONS AND CONVERTIBLE SECURITIES. In the case of the
issuance of (i) options, warrants or other rights to purchase
or acquire Common Stock (whether or not at the time
exercisable) other than Series D Excluded Shares (as defined
in Section 5(f)(iii)), (ii) securities by their terms
convertible into or exchangeable for Common Stock (whether or
not at the time so convertible or exchangeable) or (iii)
options, warrants or rights to purchase such convertible or
exchangeable securities (whether or not at the time
exercisable);
(1) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options,
warrants or other rights to purchase or acquire Common
Stock shall be deemed to have been issued at the time
such options, warrants or other rights are issued and
for a consideration equal to the minimum consideration
(determined in the manner provided in Sections
5(f)(ii)(A) and (B)), if any, received or receivable by
the Corporation upon the exercise of such options,
warrants or other rights;
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(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, warrants or other rights to
purchase or acquire such convertible or exchangeable
securities and the subsequent conversion or exchange
thereof, shall be deemed to have been issued at the time
such securities are issued or such options, warrants or
other rights are issued and for a consideration equal to
the consideration, if any, received by the Corporation
for any such securities and related options, warrants or
other 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 and the exercise of any related options,
warrants or other rights (the consideration in each case
to be determined in the manner provided in Sections
5(f)(ii)(A) and (B));
(3) on any change in the number of shares of Common
Stock deliverable upon exercise of any such options,
warrants or other rights or conversion of or exchange of
such convertible or exchangeable securities, or any
change in the consideration to be received by the
Corporation upon such exercise, conversion or exchange,
including a change resulting from any subdivision,
split-up, combination or reclassification thereof, the
Series D Conversion Price as then in effect shall
forthwith be readjusted to such Series D Conversion
Price as would have been obtained had an adjustment been
made upon such options, warrants or other rights not
exercised becoming exercisable prior to such change, or
securities not converted or exchanged becoming
convertible or exchangeable prior to such change, upon
the basis of such change;
(4) on the expiration or cancellation of any such
options, warrants or other rights or the termination of
the right to convert or exchange such convertible or
exchangeable securities, if the Series D Conversion
Price has been adjusted upon such becoming exercisable,
convertible or exchangeable, such Series D Conversion
Price will forthwith be readjusted to such Series D
Conversion Price as would have been obtained had an
adjustment been made upon such options, warrants or
other rights or securities being on the basis of the
issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options,
warrants or other rights, or upon the conversion or
exchange of such securities; and
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(5) if the Series D Conversion Price has been adjusted
upon such options, warrants or other rights being issued
or such convertible or exchangeable securities being
issued subject to Section 5(f)(ii)(C)(3), no further
adjustment of the Series D Conversion Price shall be
made for the actual issuance of Common Stock upon the
issuance thereof.
(iii) Excluded Shares. "Series D Excluded Shares" means Common Stock
issued or reserved for issuance by the Corporation: (a) upon
conversion of Series B Preferred, Series C Preferred or Series D
Preferred, or either of or both the Elan Notes; (b) in connection
with stock dividends, splits, combinations and similar events; (c)
in connection with any corporate partnering or strategic
relationship, not to exceed on a cumulative basis the number of
shares that represents 20% of the fully-diluted outstanding capital
stock of the Corporation as of the date of filing of this
Certificate; provided in each such case the consideration per share
of such Common Stock or Preferred Stock is at least $8.00; (d) in
connection with grants of shares of capital stock (or options) to
employees, officers, directors and consultants of the Corporation
pursuant to the Corporation's stock purchase or stock option plans
approved by the Board, in an amount up to 1,992,500 shares; (e) in
connection with acquisition transactions, not to exceed on a
cumulative basis the number of shares that represents 20% of the
fully-diluted outstanding capital stock of the Corporation as of the
date of filing of this Certificate; provided that the consideration
per share of such Common Stock or Preferred Stock is at least $8.00;
and (f) upon the exercise of any warrants outstanding, warrants
issued in connection with the sale of the Series D Preferred and up
to a maximum grant of warrants to purchase up to 25,000 shares of
capital stock of the Corporation issued during any 12-month period
(with the first such period to commence upon the filing of this
Certificate and with any unused portion thereof to carry forward
into any subsequent period or periods), with an exercise price not
less than fair market value of the Common Stock reasonably
determined by the Board.
(iv) Stock Dividends/Stock Splits, Etc. If the number of shares of
Common Stock outstanding at any time after the date of issuance of
the shares of Series D Preferred is increased by a stock dividend
payable in Common Stock or by a subdivision or split-up of Common
Stock, then immediately after the record date fixed for the
determination of holders of Common Stock entitled to receive such
stock dividend or the effective date of such subdivision or
split-up, as the case may be, the Series D Conversion Price shall be
appropriately adjusted so that the holder of any shares of Series D
Preferred thereafter converted are entitled to receive the number of
shares of Common Stock of the Corporation that such holder would
have owned immediately following such action had such shares of
Series D Preferred been converted immediately prior thereto.
(v) COMBINATION OF SHARES. If the number of shares of Common Stock
outstanding at any time after the date of issuance of the shares of
Series D
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Preferred is decreased by a combination of the outstanding shares of
Common Stock, then immediately after the effective date of such
combination, the Series D Conversion Price shall be appropriately
increased so that the holder of any shares of Series D Preferred
thereafter converted are entitled to receive the number of shares of
Common Stock of the Corporation that such holder would have owned
immediately following such action had such shares of Series D
Preferred been converted immediately prior thereto.
(vi) REORGANIZATIONS, ETC. In the case of any capital reorganization
of the Corporation, any reclassification of Common Stock, the
consolidation of the Corporation with or the merger of the
Corporation with or into any other entity (other than a
reorganization or merger solely for the purpose of changing the
state of incorporation of the Corporation or with another entity in
which the Corporation is the acquiring and surviving entity and that
does not result in any reclassification or change of the Common
Stock) or the sale, lease or other transfer of all or substantially
all the assets of the Corporation to any other person or entity,
each share of Series D Preferred shall after such capital
reorganization, reclassification, consolidation, merger, sale, lease
or other transfer be convertible into the number of shares of
capital stock or other securities or property to which the Common
Stock issuable (at the time of such capital reorganization,
reclassification, consolidation, merger, sale, lease, or other
transfer) upon conversion of such shares of Series D Preferred would
have been entitled upon such capital reorganization,
reclassification, consolidation, merger, sale, lease or other
transfer; and in any such case, if necessary, the provisions set
forth herein with respect to the rights and interests thereafter of
the holders of the shares of Series D Preferred shall be
appropriately adjusted so as to be applicable, as nearly as may
reasonably be possible, to any shares of capital stock or other
securities or property thereafter deliverable on the conversion of
Series D Preferred. The subdivision or combination of Common Stock
issuable upon conversion of Series D Preferred at any time
outstanding into a greater or lesser number of shares of Common
Stock (whether with or without par value) shall not be deemed to be
a reclassification of the Common Stock of the Corporation for the
purposes of this Section 5(f)(vi). The provisions of this Section
5(f)(vi) shall similarly attach to successive reclassifications,
reorganizations, changes, and conversions.
(vii) EVIDENCES OF INDEBTEDNESS OR ASSETS. If the Corporation
declares a distribution payable in securities, evidences of
indebtedness, assets or property (excluding dividends payable solely
in Common Stock) then, in each such case, each holder of Series D
Preferred shall be entitled to receive a proportionate share of any
such distribution as if it had converted into the number of shares
of Common Stock of the Corporation into which its Series D Preferred
would have been convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation
entitled to receive such distribution.
(viii) ROUNDING OF CALCULATIONS; MINIMUM ADJUSTMENT. All
calculations under this Section 5(f) shall be made to the nearest
cent or the nearest 1/100th of a share;
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provided that no adjustment in the Series D Conversion Price shall
be made if the amount of such adjustment would be less than $0.01
and provided further that any such amount shall be carried forward
and an adjustment with respect thereto shall be made at the time of,
and together with, any subsequent adjustment that, together with
such amount and any other amount or amounts so carried forward,
aggregates $0.01 or more.
(ix) TIMING OF ISSUANCE OF ADDITIONAL COMMON SHARES UPON CERTAIN
ADJUSTMENTS. If this Section 5(f) requires that an adjustment shall
become effective immediately after the record date for an event with
respect to the holder of any Series D Preferred converted after such
record date and before the occurrence of such event, the Corporation
may defer until the occurrence of such event issuing to such holders
the additional shares of Common Stock (or indebtedness or assets as
the case may be) issuable (or distributable) upon such conversion by
reason of the adjustment required by such event over and above the
shares of Common Stock (or indebtedness or assets as the case may
be) issuable (or distributable) upon such conversion before giving
effect to such adjustment; provided that the Corporation upon
request shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional
shares (or indebtedness or assets as the case may be) upon the
occurrence of the event requiring such adjustment.
(x) APPLICABLE ADJUSTMENT. If more than one provision of this
Section 5(f) requires an adjustment to the Series D Conversion Price
for Series D Preferred and if the transaction in question can
properly be treated as involving successive events each requiring
such an adjustment, then all such adjustments shall be made
successively and if they cannot be so treated the applicable
adjustment shall be the largest adjustment lowering the Series D
Conversion Price resulting from the application of any appropriate
provision of this Section 5(f) to such event.
(g) STATEMENT REGARDING ADJUSTMENTS. Whenever the Series D
Conversion Price is adjusted as herein provided, the Corporation shall prepare a
certificate setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment and the method by which such adjustment
was calculated. Such certificate shall be signed by its chief financial officer
and shall, as soon as practicable, be delivered to Series D Preferred holders of
record (such delivered certificate shall constitute notice), filed at the
principal office of the Corporation and, if applicable, filed at the office of
the transfer agent or agents for the Series D Preferred. Where appropriate, such
notice may be given in advance and may be included as part of a notice required
to be mailed under the provisions of Section 5(i).
(h) CANCELLATION. All shares of Series D Preferred surrendered for
conversion as herein provided in this Section 5 shall no longer be deemed to be
outstanding and all rights with respect to such Series D Preferred, including
the rights, if any, to receive notices and to vote, shall forthwith cease and
terminate, except only the right of the holders thereof to receive Common Stock
or other assets or property in exchange therefor.
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(i) NOTICE TO HOLDERS. In the event that:
(i) the Corporation takes action to make any distribution or
dividend to the holders of any class of its capital stock;
(ii) the Corporation takes action to offer for subscription pro rata
to the holders of any class of its capital stock securities of any
kind;
(iii) the Corporation takes action to accomplish any capital
reorganization, or reclassification of the capital stock of the
Corporation, or consolidation or merger to which the Corporation is
a party and for which approval of any stockholders of the
Corporation is required, or the sale or transfer of all or
substantially all the assets of the Corporation; or
(iv) the Corporation takes action looking to a voluntary or
involuntary dissolution, liquidation or winding up of the affairs of
the Corporation;
then the Corporation shall (a) in case of such distribution, dividend or
offering of subscription rights, at least ten days prior to the date or expected
date on which the books of the Corporation are closed or a record has been taken
for the determination of holders entitled to such distribution or subscription
rights, and (b) in the case of any reorganization, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up,
at least ten days prior to the date or expected date when the same takes place,
cause written notice thereof to be mailed to each holder of Series D Preferred
at such holder's address as shown on the books of the Corporation. The notice to
be given in accordance with this Section 5(i) shall also specify (x) the date or
expected date on which the holders of any class of the Corporation's capital
stock are entitled thereto, and (y) the date or expected date on which the
holders of any class of the Corporation's capital stock are entitled to exchange
their shares for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up, as the case may be.
(j) RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available, free from preemptive rights, out of its treasury
shares or its authorized but unissued Common Stock, for the purpose of effecting
the conversion of Series D Preferred, the full number of shares of Common Stock
then deliverable upon the conversion of all Series D Preferred then outstanding.
(k) RECLASSIFICATION OF COMMON STOCK. For the purposes of this
Section 5, the term "Common Stock" means (i) the class of stock designated as
the Common Stock of the Corporation on the date this Certificate was filed with
the Secretary of State of Delaware, and (ii) any other class of stock resulting
from successive changes or reclassifications of such Common Stock consisting
solely of changes in par value or from no par value to par value, or from par
value to no par value. If at any time as a result of an adjustment made pursuant
to the provisions of Section 5(f)(vi), the holder of any Series D Preferred
thereafter surrendered for conversion becomes entitled to receive any shares of
the Corporation other than shares of Common Stock, then the number of such other
shares so receivable upon conversion of any Series D Preferred
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shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Common
Stock contained in Section 5(f)(vi), and the other provisions of this Section 5
with respect to the Common Stock will apply on like terms to any such other
shares.
(l) APPROVALS. If any Common Stock to be reserved for the purpose of
conversion of shares of Series D Preferred requires registration with or
approval of any governmental authority under any federal or state law or of the
Nasdaq System before such shares may be validly issued or delivered upon
conversion, the Corporation shall in good faith and as expeditiously as possible
secure such registration or approval, as the case may be. If, and so long as,
any shares of Common Stock into which Series D Preferred are then convertible
are listed on any national securities exchange, the Corporation shall, if
permitted by the rules of such exchange, list and keep listed on such exchange,
upon official notice of issuance, all such Common Stock issuable upon
conversion.
(m) TREASURY SHARES. For the purpose of this Section 5, the sale or
other disposition of any Common Stock of the Corporation held in its treasury
shall be deemed to be an issuance thereof.
(n) VALID ISSUANCE. All Common Stock that may be issued upon
conversion of shares of Series D Preferred shall upon issuance by the
Corporation be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issuance thereof, and the
Corporation shall take no action that will cause a contrary result (including,
without limitation, any action that would cause the Series D Conversion Price to
be less than the par value, if any, of the Common Stock).
(o) QUALIFIED PRIVATE OFFERING RIGHT OF CONVERSION. If the
Corporation proposes to effect a Qualified Private Offering, the holders of
shares of Series D Preferred shall have the option to exchange any of or all
their shares of Series D Preferred (the total consideration paid for the shares
elected by any holder to be converted or exchanged being referred to as the
"Series D Converted Portion") for the securities or debt proposed to be issued
in connection with such Qualified Private Offering with the same powers,
designations, preferences and other special rights of such proposed securities
or debt being offered to such financial investor. With respect to any Series D
Converted Portion of shares of Series D Preferred, the number of shares of new
equity or debt securities to be issued for any such Series D Converted Portion
will be equal to the quotient obtained by dividing (x) such Series D Converted
Portion by (y) the Series D Option Conversion Price (defined below). The "Series
D Option Conversion Price" applicable to any Series D Converted Portion shall
equal the per share issue price of the equity or debt securities issued in such
Qualified Private Offering, or the initial per share conversion, exchange or
exercise price, as applicable, of any securities or other rights of the
Corporation convertible, exchangeable or exercisable into or for such equity or
debt securities issued in such Qualified Private Offering, as applicable. The
right of exchange or conversion is in addition to and not exclusive of the
preemptive rights set forth in Section (6). The right of conversion or exchange
granted hereunder will terminate if unexercised within 30 days after receipt of
the notice described in Section (6)(b) with respect to such proposed issuance.
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(p) CERTAIN EVENTS. If any event occurs of the type contemplated by
the provisions of this Section 5 but not expressly provided for by such
provisions, then the Board will make an appropriate adjustment in the number of
shares of Common Stock obtainable upon conversion of Series D Preferred so as to
fairly protect the rights of the holders of Series D Preferred.
6. PREEMPTIVE RIGHTS.
(a) Until any time prior to the date that is 30 days following the
closing of a Public Offering, the Corporation hereby grants to the holders of
such Series D Preferred a right to purchase any New Securities (as defined
below) that the Corporation may, from time to time, propose to issue and sell
(including any New Securities proposed to be issued and sold in connection with
a Qualified Private Offering). Such right shall allow the holders of shares of
Series D Preferred to purchase the number of the New Securities proposed to be
issued that would enable such holders to maintain their respective percentage
ownership of Shares (as defined below) on a fully diluted basis taking into
account all outstanding shares of Common Stock, all shares of Common Stock
issuable upon conversion of outstanding shares of Series B Preferred, Series C
Preferred, Series D Preferred and outstanding blank check preferred stock, but
not any unexercised outstanding options, warrants or other securities
convertible into or exchangeable for shares of Common Stock of the Corporation
("Pro Rata Portion"). The preemptive rights granted hereunder shall terminate if
unexercised within 30 days after receipt of the notice described in Section 6(b)
below. "New Securities" for the purposes of this Section 6 means any capital
stock of the Corporation (including treasury shares), whether now authorized or
not, and all rights, options, or warrants to purchase such capital stock and
securities of any type whatsoever that are, or may become, convertible into or
exchangeable for capital stock; provided that the term "New Securities" for the
purposes of this Section 6 does not include (i) securities issued upon the
conversion of any of the shares of Series B Preferred, Series C Preferred or
Series D Preferred into shares of Common Stock in accordance with this
Certificate; (ii) any stock options now issued or granted or hereafter granted
pursuant to a stock option plan of the Corporation in existence on the date of
filing of this Certificate, and any shares of Common Stock issued upon the
exercise thereof; (iii) any warrants now issued, or hereafter issued by the
Corporation or any subsidiary thereof up to a maximum grant of warrants to
purchase up to 25,000 shares of capital stock of the Corporation during any
12-month period (with the first such period to commence upon the filing of this
Certificate and with any unused portion thereof to carry forward into any
subsequent period or periods), with an exercise price not less than fair market
value of the Common Stock reasonably determined by the Board, and any shares of
Common Stock issued upon the exercise thereof; (iv) shares of Common Stock or
other securities exercisable for, exchangeable into or convertible into shares
of Common Stock issued pursuant to the Elan Notes; and (v) shares of Common
Stock issued pursuant to any stock split or stock dividend.
(b) If the Corporation proposes to undertake an issuance of New
Securities (including the issuance of New Securities in connection with a
Qualified Private Offering), it shall promptly give the holders of record of
shares of Series D Preferred written notice of its intention ("Series D New
Issue Notice"), describing the class and number of New Securities it
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intends to issue, the purchase price therefor, the names (if known) of the
investors that the Corporation proposes to issue such New Securities to and the
terms upon which the Corporation proposes to issue the same. The holders of
shares of Series D Preferred shall have 30 days from the date the Series D New
Issue Notice is received by it to determine whether to purchase all or any part
of its Pro Rata Portion of such New Securities for the purchase price and upon
the terms specified in the Series D New Issue Notice by giving written notice to
the Corporation, stating thereon the quantity of New Securities to be purchased,
and in the case of a Qualified Private Offering, the quantity of shares of
Series D Preferred that such holder is electing to convert or exchange into the
proposed New Securities; provided that such holders shall not have the right
pursuant to this Certificate to participate in a public offering of New
Securities if such holders are not eligible to so participate under Securities
and Exchange Commission laws, rules, regulations and interpretations then in
effect or administered (collectively, "SEC Law") or counsel to the Corporation
advises that such participation would present a material risk of violating SEC
Law.
(c) Upon the issuance of New Securities, the holders of shares of
Series D Preferred shall have a right of over-subscription such that if any of
such holders fails to purchase its Pro Rata Portion, the other holders of shares
of Series D Preferred shall, among them, have the right to purchase up to the
balance of the New Securities not so purchased. Such right of over-subscription
may be exercised by a holder of shares of Series D Preferred by such holder
specifying in the Series D New Issue Notice its intent to purchase more than its
Pro Rata Portion; provided that if as a result the portion of New Securities
available for purchase hereunder is oversubscribed, the oversubscribing holders
of shares Series D Preferred shall be cut back with respect to their
over-subscriptions on a pro rata basis in accordance with their respective Pro
Rata Portions or as they may otherwise agree among themselves.
D. UNDESIGNATED PREFERRED STOCK
1. DESIGNATION. A total of 6,550,357 shares of the Corporation Preferred
Stock shall remain Undesignated Preferred Stock ("Undesignated Preferred
Stock").
2. GENERAL. Subject to any limitations prescribed by law or this
Certificate, the Board may provide for the issuance of the shares of
Undesignated Preferred Stock in one or more classes or one or more series of
stock within any class, and by filing a certificate pursuant to applicable law
of the State of Delaware, to establish or change from time to time the number of
shares to be included in each such class or series, and to fix the designation,
voting powers, preferences, qualifications, privileges and rights of the shares
of each such class or series and any qualifications, limitations and
restrictions thereof. The Board may determine one or more of the following with
respect to each class or series of such Undesignated Preferred Stock:
(a) the distinctive class or serial designation and the number of
shares constituting such class or series;
(b) the dividend rates or the amount of dividends to be paid on the
shares of such class or series, whether dividends shall be cumulative and, if
so, from which date or dates,
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the payment date or dates for dividends, and the participating and other rights,
if any, with respect to dividends;
(c) the voting powers, full or limited, if any, of the shares of
such class or series;
(d) whether the shares of such class or series shall be redeemable
and, if so, the price or prices at which, and the terms and conditions on which,
such shares may be redeemed;
(e) the amount or amounts payable upon the shares of such class or
series and any preferences applicable thereto in the event of voluntary
liquidation, dissolution or winding up of the Corporation;
(f) whether the shares of such class or series shall be entitled to
the benefit of a sinking or retirement fund to be applied to the purchase or
redemption of such shares and, if so entitled, the amount of such fund and the
manner of its application, including the price or prices at which such shares my
be redeemed or purchased through the application of such fund;
(g) whether the shares of such class or series shall be convertible
into, or exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the Corporation
and, if so convertible or exchangeable, the conversion price or prices, or the
rate or rates of exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and conditions of such
conversion or exchange;
(h) the price or other consideration for which the shares of such
class or series shall be issued;
(i) whether the shares of such class or series that are redeemed or
converted have the status of authorized but unissued shares of preferred stock
and whether such shares may be reissued as shares of the same or any other class
or series of stock; and
(j) such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board may deem advisable.
Subject to the authority of the Board as set forth in clause (i)
above, any shares of Undesignated Preferred Stock shall, upon reacquisition
thereof by the Corporation, be restored to the status of authorized but unissued
Undesignated Preferred Stock under this subsection (2).
E. COMMON STOCK.
The voting, liquidation and dividend rights of the holders of the Common
Stock are subject to and qualified by the rights of the holders of each class or
series of Preferred Stock, unless otherwise provided for herein or in the
designation statement of such series of Preferred Stock.
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1. VOTING RIGHTS. The holders of shares of Common Stock shall be entitled
to one vote for each share so held with respect to all matters voted on by the
shareholders of the Corporation.
2. LIQUIDATION RIGHTS. Subject to the prior and superior right of the
Preferred Stock and the participation rights of Series C Preferred and Series D
Preferred set forth in Sections IV(B)(4)(c) and IV(C)(4)(b), upon any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of Common Stock shall be entitled to receive the
remaining funds or assets to be distributed to stockholders after such event.
Such funds or assets shall be paid to the holders of Common Stock and such
Preferred Stock pro rata in accordance with the shares thereof held or deemed to
be held by each of them.
3. DIVIDENDS. The holders of Common Stock shall be entitled to receive
such dividends from time to time as may be declared by the Board out of the
funds lawfully available therefor.
ARTICLE V
The name and mailing address of each person who is to serve as a director
until the next annual meeting of the stockholders and until their successor is
elected and qualified, is as follows:
Name Mailing Address
---- ---------------
Arnold S. Lippa c/o DOV Pharmaceutical, Inc.
433 Hackensack Avenue
Hackensack, New Jersey 07601
Bernard Beer c/o DOV Pharmaceutical, Inc.
433 Hackensack Avenue
Hackensack, New Jersey 07601
Zola Horovitz c/o DOV Pharmaceutical, Inc.
433 Hackensack Avenue
Hackensack, New Jersey 07601
Patrick Ashe c/o DOV Pharmaceutical, Inc.
433 Hackensack Avenue
Hackensack, New Jersey 07601
Mark Lampert c/o DOV Pharmaceutical, Inc.
433 Hackensack Avenue
Hackensack, New Jersey 07601
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ARTICLE VI
In furtherance and not in limitation of the powers conferred by statute,
the Board may to adopt and amend the by-laws of the Corporation.
ARTICLE VII
Meetings of the stockholders may be held within or without the State of
Delaware, unless otherwise specified in the by-laws.
ARTICLE VIII
Elections of directors need not be by written ballot unless the by-laws of
the Corporation shall so provide.
ARTICLE IX
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (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 that involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the director derived any improper personal benefit. No
amendment or repeal of this Section shall adversely affect the rights and
protection afforded to a director of the Corporation under this Section for acts
or omissions occurring prior to such amendment or repeal.
ARTICLE X
The Corporation reserves the right to amend any provision contained in
this Certificate of Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation.
ARTICLE XI
Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them 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 the provisions of
section 291 of the DGCL or on the application of trustees in dissolution or of
any receiver or receivers appointed for the Corporation under the provisions of
section 279 of the DGCL order a meeting of the creditors or class of creditors
or of the stockholders or class of stockholders of the Corporation, as the case
may be, to be summoned in such manner as the court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, or of the stockholders or class of stockholders of the Corporation,
as the case may be, agree to any
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compromise or arrangement and to any reorganization of the Corporation as
consequence of such compromise or arrangement, such compromise or arrangement
and such reorganization shall, if sanctioned by the court to which the
application has been made, be binding on all the creditors or class of
creditors, or on all the stockholders or class of stockholders, of the
Corporation, as the case may be, and also on the Corporation.
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