EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
AMERICAN PHARMA-LIEDTKE, INC.
I, the undersigned, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware do hereby certify as follows:
FIRST: The name of the corporation is American Pharma-Liedtke, Inc.
(the "Corporation").
SECOND: The address of the Corporation's registered office in the
State of Delaware is 1013 Centre Road, Wilmington, county of New Castle,
Delaware 19805. The name of its registered agent at such address is the
Corporation Service Company.
THIRD: The nature of the business of the Corporation and the objects
or purposes to be transacted, promoted or carried on by it are as follows: to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock that the Corporation is
authorized to issue is one thousand shares of common stock, par value one cent
($.01) per share.
FIFTH: The name and mailing address of the incorporator is as
follows:
Margaret M. Dall
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
SIXTH: Except as otherwise provided in the bylaws of the
Corporation, the board of directors is expressly authorized to make, alter,
amend or repeal the bylaws of the Corporation.
SEVENTH: Elections of directors need not be by written ballot unless
the bylaws of the Corporation shall so provide.
EIGHTH: The Corporation shall, to the full extent permitted by
Section 145 of the General Corporation Law of the State of Delaware as amended
from time-to-time, indemnify all persons whom it may indemnify pursuant thereto.
NINTH: To the fullest extent permitted by Delaware statutory or
decisional law, as the same exists now or may hereafter be amended or
interpreted, no director of this Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. This Article NINTH does not affect the availability at
equitable remedies for breach of fiduciary duties. Neither any amendment or
repeal of this Article NINTH, nor the adoption of any provision of this
Certificate of Incorporation inconsistent with this Article NINTH, shall
eliminate or reduce the effect of this
Article NINTH in respect of any matter occurring, or any cause of action, suit
or claim that, but for this Article NINTH, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
TENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code, or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of a
stockholder or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders of this Corporation, as the case say be, and also on this
Corporation.
IN WITNESS WHEREOF, I have executed this certificate, hereby
declaring and certifying that this is my act and deed, and that the facts herein
stated are true, and accordingly have hereunto set my hand this ninth day of
March, 1993.
/s/ Margaret M. Dall
-------------------------------------------
Margaret M. Dall, Incorporator
2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
American Pharma-Liedtke, Inc. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the sole Incorporator resolutions were duly adopted
setting forth an amendment of the Certificate of Incorporation of the
Corporation, declaring said amendment to be advisable. The resolution setting
forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "FIRST" so that, as
amended said Article shall be and read as follows:
"The name of the Corporation is American Pharmed Dr. Liedtke, Inc. (the
"Corporation")."
SECOND: That said amendment was duly adopted in accordance with the provisions
of Section 241 of the General Corporation Law of the State of Delaware.
FOURTH: That the Corporation has not received any payment for any of its stock.
IN WITNESS WHEREOF, said Corporation has caused this certificate to be signed by
its sole Incorporator, this 15th day of March, 1993.
BY: /s/ Margaret M. Dall
----------------------------------------
Margaret M. Dall, Incorporator
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AMERICAN PHARMED DR. LIEDTKE, INC.
American Pharmed Dr. Liedtke, Inc. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that the Certificate of Incorporation of this Corporation
be amended by changing the Article thereof numbered "FOURTH" so that, as
amended, said Article shall be and read as follows:
FOURTH: The total number of shares of stock that the Corporation is
authorized to issue is One Million (1,000,000) shares of common stock, par
value one cent ($.01) per share.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, the
sole stockholder, in accordance with Section 228 of the General Corporation Law
of the state of Delaware, approved the proposed Amendment to the Certificate of
Incorporation by Written Consent in Lieu of Special Meeting.
THIRD: That said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by Dr. R. K. Liedtke, its President, and Hanne Liedtke, its Secretary,
this 30th day of August 1993.
AMERICAN PHARMED DR. LIEDTKE, INC.
[SEAL] By: /s/ Rainer K. Liedtke
-------------------------------------
Dr. R. K. Liedtke, President
ATTEST: /s/ Hanne Liedtke
-------------------------------------
Hanne Liedtke, Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AMERICAN PHARMED DR. LIEDTKE, INC.
American Pharmed Dr. Liedtke, Inc. (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of said corporation for
consideration thereof. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that the Certificate of Incorporation of this Corporation
be amended by changing the Article thereof numbered "FOURTH" so that, as
amended, said Article shall be and read as follows:
FOURTH: The total number of shares of stock that the Corporation is
authorized to issue is Ten Million (10,000,000) shares of common stock,
par value one cent ($.01) per share.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, the
sole stockholder, in accordance with Section 228 of the General Corporation Law
of the state of Delaware, approved the proposed Amendment to the Certificate of
Incorporation by Written Consent in Lieu of Special Meeting.
THIRD: That said amendment was duly adopted in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
IN WITNESS WHEREOF, said Corporation has caused this certificate to be
signed by Dr. R. K. Liedtke, its President, and Hanne Liedtke, its Secretary,
this 20th day of May 1994.
AMERICAN PHARMED DR. LIEDTKE, INC.
[SEAL] By: /s/ Rainer K. Liedtke
-------------------------------------
Dr. R. K. Liedtke, President
ATTEST: /s/ Hanne Liedtke
-------------------------------------
Hanne Liedtke, Secretary
CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN PHARMED DR. LIEDTKE, INC.
American Pharmed Dr. Liedtke, Inc., (the "Corporation") a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the "General Corporation Law"), hereby
certifies as follows:
A. The name of the Corporation is American Pharmed Dr. Liedtke,
Inc. A Certificate of Incorporation of the Corporation originally was filed by
the Corporation with the Secretary of State of Delaware on March 9, 1993.
Certificates of Amendment were filed with the Secretary of State of Delaware on
March 19, 1993, September 8, 1993 and May 27, 1994.
B. This Amendment to the Certificate of Incorporation was duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law, and was approved by written consent of the stockholders of the
Corporation in accordance with the provisions of Section 228 of the General
Corporation Law (prompt notice of such action having been given to those
stockholder who did not consent in writing).
C. (1) Each three (3) issued and outstanding shares of the
Corporation's Common Stock shall be without any further action on the part of
the Corporation or any stockholder, automatically changed and reclassified into
two (2) shares of Common Stock of the Corporation (the "Recapitalization") and
each certificate representing outstanding shares of Common Stock shall
automatically and without further action on the part of the holder thereof
represent the number of shares of Common Stock issuable with respect to the
number of shares of Common Stock represented by such certificate.
(2) No fractional shares of Common Stock shall be issued in
connection with the Recapitalization and the number of shares of Common Stock
issuable in connection with the Recapitalization shall be rounded up to the next
highest number.
D. The Article numbered Fourth of the Certificate of
Incorporation of the Corporation is hereby deleted in its entirety and replaced
with the following:
FOURTH: The total number of shares of stock that the
Corporation is authorized to issue is Twenty Million (20,000,000)
shares of common stock, par value one cent ($.01) per share.
IN WITNESS WHEREOF, the undersigned has caused this Amendment to its
Certificate of Incorporation to be duly executed on its behalf as of the 15th
day of January, 1996.
AMERICAN PHARMED DR. LIEDTKE, INC.
By: /s/ Rainer K. Liedtke
-------------------------------------
Dr. R. K. Liedtke, President
ATTEST:
/s/ Teresa Munk
- --------------------------------
Teresa Munk, Secretary
2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF AMERICAN PHARMED DR. LIEDTKE, INC.
American Pharmed Dr. Liedtke, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of said corporation
resolutions were duly adopted proposing and declaring advisable that
the Certificate of Incorporation of said corporation be amended and
that such amendments be submitted to the stockholders of the
Corporation for their consideration, as follows:
RESOLVED: That the Board of Directors of this Corporation
recommends and deems it advisable that the Certificate
of Incorporation of this Corporation be amended by
changing the name of the Corporation, which name is set
forth in Article FIRST from "American Pharmed Dr.
Liedtke, Inc." to "American Pharmed Labs, Inc."; and
RESOLVED: That the Board of Directors of this Corporation
recommends and deems it advisable that the Certificate
of Incorporation of this Corporation be further amended
by deleting Article FOURTH thereof and substituting for
said Article FOURTH the new Article FOURTH set forth on
Exhibit A attached hereto; and
RESOLVED: That the aforesaid proposed amendments be submitted to
the stockholders of the Corporation for their
consideration; and
RESOLVED: That following the approval by the stockholders of the
aforesaid amendments as required by law, the officers of
this Corporation be, and they hereby are, and each of
them hereby is, authorized and directed (i) to prepare,
execute and file with the Secretary of State of the
State of Delaware a Certificate of Amendment setting
forth the aforesaid amendments in the form approved by
the stockholders and (ii) to take any and all other
actions necessary, desirable or convenient to give
effect to the aforesaid amendments or otherwise to carry
out the purposes of the foregoing Resolutions.
SECOND: That in lieu of a meeting and vote of stockholders, the stockholders
have given written consent to said amendments in accordance with the
provisions of section 228 of the General Corporation Law of the
State of Delaware, and written notice of the adoption of the
amendments has been given as provided in section 228 of the General
Corporation Law of the State of Delaware to every stockholder
entitled to such notice.
THIRD: That the aforesaid amendments were duly adopted in accordance with
the applicable provisions of sections 228 and 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said American Pharmed Dr. Liedtke, Inc. has
caused this certificate to be signed by Rainer K. Liedtke, its President, and
attested by Teresa Munk, its Secretary, this 16th day April, 1997.
ATTEST: AMERICAN PHARMED DR. LIEDTKE, INC.
/s/ Teresa Munk By: /s/ Rainer K. Liedtke
- ------------------------------- -------------------------------------
Teresa Munk Rainer K. Liedtke
Secretary President
2
EXHIBIT A
FOURTH: The total number of shares of all classes of stock which the
Corporation has authority to issue is 25,049,507 shares, consisting of
20,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), and 5,049,507 shares of Series A Convertible Preferred Stock, par value
$.0l per share (the "Series A Preferred Stock"), amounting to an aggregate par
value of $250,495.07.
The powers, preferences and rights, and the qualifications, limitations or
restrictions thereof, in respect of each class or series of stock of the
Corporation shall be as follows:
Section 1. Liquidation Rights.
(a) Liquidation Payments.
(i) In the event of any liquidation, dissolution or winding up of
the affairs of the Corporation, whether voluntary or involuntary, the holders of
Series A Preferred Stock shall be entitled to be paid first out of the assets of
the Corporation available for distribution to holders of the Corporation's
capital stock of all classes an amount equal to the greater of:
(1) an amount equal to $2.02 per share of Series A Preferred
Stock (which amount shall be subject to equitable adjustment whenever there
shall occur a stock dividend, stock split, combination of shares,
reclassification or other similar event with respect to the Series A Preferred
Stock), plus all dividends declared but unpaid thereon, to and including the
date full payment shall be tendered to the holders of the Series A Preferred
Stock with respect to such liquidation, dissolution or winding up, or
(2) an amount per share of Series A Preferred Stock as would
have been payable had all shares of Series A Preferred Stock been converted to
Common Stock immediately prior to such event of liquidation, dissolution or
winding up pursuant to the provisions of Section 2 hereof, plus all dividends
declared but unpaid on each share of Series A Preferred Stock to and including
the date full payment shall be tendered to the holders of the Series A Preferred
Stock with respect to such liquidation, dissolution or winding up.
If the assets of the Corporation shall be insufficient to permit the
payment in full to the holders of the Series A Preferred Stock of all amounts
distributable to them under this Subsection 1(a)(i), then the entire assets of
the Corporation available for such distribution shall be distributed ratably
among the holders of the Series A Preferred Stock in proportion to the full
preferential amount each such holder is otherwise entitled to receive under this
Subsection 1(a)(i).
(ii) After the payments described in Subsection 1(a)(i) shall have
been made in full to the holders of the Series A Preferred Stock, or funds
necessary for such payments shall have been set aside by the Corporation in
trust for the account of holders of Series A Preferred Stock so as to be
available for such payments, the remaining assets available for distribution
shall be distributed among the holders of the Common Stock ratably in proportion
to the number of shares of Common Stock then held by them.
(iii) Upon conversion of shares of Series A Preferred Stock into
shares of Common Stock pursuant to Section 2 below, the holder of such Common
Stock shall not be entitled to any preferential payment or distribution in case
of any liquidation, dissolution or
winding up, but shall share ratably in any distribution of the assets of the
Corporation to all the holders of Common Stock.
(iv) The amounts payable with respect to shares of Series A
Preferred Stock under this Subsection 1(a) are sometimes hereinafter referred to
as the "Liquidation Payments."
(b) Distributions Other than Cash. Whenever the distributions provided for
in this Section 1 shall be payable in property other than cash, the value of
such distributions shall be the fair market value of such property as determined
in good faith by the Board of Directors of the Corporation.
(c) Merger as Liquidation, etc. The merger or consolidation of the
Corporation into or with another corporation (except one in which the holders of
capital stock of the Corporation immediately prior to such merger or
consolidation continue to hold at least eighty percent (80%) in voting power of
the capital stock of the surviving corporation, in which case the provisions of
Subsection 2(h) shall apply), or the sale of all or substantially all of the
assets of the Corporation, shall be deemed to be a liquidation, dissolution or
winding up of the affairs of the Corporation for purposes of this Section 1
unless the holders of at least seventy-five percent (75%) of the then
outstanding shares of Series A Preferred Stock elect to the contrary, such
election to be made by giving written notice thereof to the Corporation at least
five (5) days before the effective date of such event. If such notice is given,
the provisions of Subsection 2(h) shall apply. Unless such election is made, any
amounts received by the holders of Series A Preferred Stock as a result of such
merger or consolidation shall be deemed to be applied toward, and all
consideration received by the Corporation in such asset sale together with all
other available assets of the Corporation shall be distributed toward, the
Liquidation Payments attributable to such shares of Series A Preferred Stock.
(d) Notice. Notice of any proposed liquidation, dissolution or winding up
of the affairs of the Corporation (including any merger, consolidation or sale
of assets which may be deemed to be a liquidation, dissolution or winding up of
the affairs of the Corporation under Subsection 1(c)), stating a payment date,
the amount of the Liquidation Payments and the place where said Liquidation
Payments shall be payable, shall be given to the holders of record of the Series
A Preferred Stock not less than thirty (30) days prior to the payment date
stated therein. Any holder of outstanding shares of Series A Preferred Stock may
waive notice required by this Subsection by a written document specifically
indicating such waiver.
Section 2. Conversion. The holders of Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Price. Each share of Series A Preferred
Stock shall be convertible, without the payment of any additional consideration
by the holder thereof and at the option of the holder thereof, at any time after
the date of issuance of such share, at the office of the Corporation or any
transfer agent for the Series A Preferred Stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing $2.02 by
the Conversion Price, determined as hereinafter provided, in effect at the time
of conversion. The Conversion Price at which shares of Common Stock shall be
deliverable upon conversion of Series A Preferred Stock without the payment of
any additional consideration by the holder thereof (the "Conversion Price")
shall initially be $2.02 per share of Common Stock. Such initial Conversion
Price shall be subject to adjustment, in order to adjust the number of shares of
Common Stock into which the Series A Preferred Stock is convertible, as
hereinafter provided.
2
(b) Automatic Conversion. Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Price upon:
(i) the closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for the account of
the Corporation to the public at an offering price per share (prior to
underwriter commissions and discounts) of not less than four (4) times the
initial Conversion Price (as adjusted pursuant to Subsection 2(e)(vi) hereof to
reflect any stock dividends, distributions, combinations, reclassifications or
other like transactions effected by the Corporation in respect of its Common
Stock) and with gross proceeds to the Corporation of not less than $15,000,000
(in the event of which offering, the person(s) entitled to receive the Common
Stock issuable upon such conversion of the Series A Preferred Stock shall not be
deemed to have converted that Series A Preferred Stock until the closing of such
offering); or
(ii) the written election of the holders of not less than
seventy-five percent (75%) of the then outstanding shares of the Series A
Preferred Stock to require such automatic conversion.
(c) Mechanics of Automatic Conversions. Upon the occurrence of the event
specified in Subsection 2(b), the Series A Preferred Stock shall be converted
automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the
Corporation or its transfer agent; provided, that all holders of shares of
Series A Preferred Stock shall be given written notice of the occurrence of the
event specified in Subsection 2(b) including the date such event occurred (the
"Mandatory Conversion Date"), and the Corporation shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon such
conversion unless certificates evidencing such shares of the Series A Preferred
Stock being converted are either delivered to the Corporation or its transfer
agent, or the holder notifies the Corporation or any transfer agent that such
certificates have been lost, stolen, or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection therewith and, if the Corporation so elects,
provides an appropriate indemnity bond. On the Mandatory Conversion Date, all
rights with respect to the Series A Preferred Stock so converted, shall
terminate, except any of the rights of the holder thereof, upon surrender of the
holder's certificate or certificates therefor, to receive certificates for the
number of shares of Common Stock into which such Series A Preferred Stock has
been converted, together with cash in an amount equal to all dividends declared
but unpaid on, and any and all other amounts owing with respect to, the shares
of Series A Preferred Stock converted to and including the time of conversion.
Upon the automatic conversion of the Series A Preferred Stock, the holders of
such Series A Preferred Stock shall surrender the certificates representing such
shares at the office of the Corporation or of its transfer agent. If so required
by the Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or by
the holder's attorney duly authorized in writing. Upon surrender of such
certificates there shall be issued and delivered to such holder, promptly at
such office and in the holder's name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of Common
Stock into which the shares of the Series A Preferred Stock surrendered were
convertible on the date on which such automatic conversion occurred, together
with cash in an amount equal to all dividends declared but unpaid on, and any
and all other amounts owing with respect to, the shares of Series A Preferred
Stock converted to and including the time of conversion. No fractional share of
Common Stock shall be
3
issued upon automatic conversion of the Series A Preferred Stock. In lieu of any
fractional share to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then current
fair value of one share of Common Stock, as determined in good faith by the
Board of Directors.
(d) Mechanics of Optional Conversions. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor at the office
of the Corporation or of any transfer agent for the Series A Preferred Stock,
and shall give written notice to the Corporation at such office that the holder
elects to convert the same and shall state therein the holder's name or the name
or names of the holder's nominees in which the holder wishes the certificate or
certificates for shames of Common Stock to be issued. On the date of conversion,
all rights with respect to the Series A Preferred Stock so converted, shall
terminate, except any of the rights of the holders thereof, upon surrender of
their certificate or certificates therefor, to receive certificates for the
number of shares of Common Stock into which such Series A Preferred Stock has
been converted and cash in an amount equal to all dividends declared but unpaid
on, and any and all other amounts owing with respect to, the shares of Series A
Preferred Stock being converted to and including the time of conversion. If so
required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
by the holder's attorney duly authorized in writing. No fractional share of
Common Stock shall be issued upon optional conversion of the Series A Preferred
Stock. In lieu of any fractional share to which the holder would otherwise be
entitled, the Corporation shall pay cash equal to such fraction multiplied by
the then current fair value of one share of Common Stock, as determined in good
faith by the Board of Directors. The Corporation shall, as soon as practicable
after surrender of the certificate or certificates for conversion, issue and
deliver at such office to such holder of Series A Preferred Stock, or to the
holder's nominee or nominees, a certificate or certificates for the number of
shares of Common Stock to which the holder shall be entitled as aforesaid,
together with cash in lieu of any fraction of a share and cash in an amount
equal to all dividends declared but unpaid thereon and any and all other amounts
owing with respect thereto at such time. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the shares of Series A Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
(e) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definitions. For purposes of this Subsection 2(e), the
following definitions shall apply:
(1) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(2) "Original Issue Date" shall mean the first date on which a
share of Series A Preferred Stock was issued.
(3) "Convertible Securities" shall mean any evidences of
indebtedness, shares of capital stock (other than Common Stock) or other
securities directly or indirectly convertible into or exchangeable for Common
Stock.
4
(4) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued (or, pursuant to Subsection 2(e)(iii), deemed to be
issued) by the Corporation after the Original Issue Date, other than:
(A) shares of Common Stock issued or issuable upon
conversion of shares of Series A Preferred Stock;
(B) up to 348,320 shares of Common Stock issued upon
exercise of options outstanding on the Original Issue Date;
(C) up to 750,000 shares of Common Stock issued or
issuable upon exercise of options granted after the Original Issue Date under
the Corporation's 1995 Stock Option Plan, as amended, which options have per
share exercise prices that are not less than the per share fair market value of
the Common Stock on the date of the option grant, and which number may be
adjusted upward by the affirmative vote of the Board of Directors which includes
the affirmative vote of both Preferred Directors.
(ii) No Adjustment of Conversion Price. Except as set forth in
Subsection 2(e)(vi), no adjustment in the number of shares of Common Stock into
which the Series A Preferred Stock is convertible shall be made, by adjustment
in the Conversion Price in respect of the issuance of Additional Shares of
Common Stock unless the consideration per share for an Additional Share of
Common Stock (determined pursuant to subsection 2(e)(v)) issued or deemed to be
issued by the Corporation is less than the Conversion Price in effect on the
date of, and immediately prior to, the issue of such Additional Share.
(iii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock.
(1) Options and Convertible Securities. In the event the
Corporation at any time or from time to time after the Original Issue Date shall
issue any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date; provided, that in any such case in
which Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price
adjusted as a result of such deemed issuance shall be made upon the subsequent
issue of Convertible Securities or shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price adjusted upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be
5
readjusted to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price adjusted upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration, be readjusted
as if:
(I) In the case of Convertible Securities or
Options for Common Stock the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if any, actually received by
the Corporation upon such conversion or exchange; and
(II) in the case of Options for Convertible
Securities only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the Corporation
(determined pursuant to Subsection 2(e)(v)) upon the issue of the Convertible
Securities with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C) above
shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (i) the Conversion Price immediately prior to the original
adjustment for such deemed issuance, or (ii) the Conversion Price that would
have resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment for such deemed issuance;
(E) in the case of any Options which expire by their
terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Conversion Price shall be made until the expiration or
exercise of all such Options, whereupon such adjustment shall be made in the
same manner provided in clause (C) above; and
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made in the Conversion Price which became effective on
such record date shall be cancelled as of the close of business on such record
date, and thereafter the Conversion Price shall be adjusted pursuant to this
Subsection 2(e)(iii) as of the actual date of their issuance.
(2) Stock Dividends, Stock Distributions and Subdivisions. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall declare or pay any dividend or make any other distribution on
the Common Stock payable in Common Stock or effect a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise
6
than by payment of a dividend in Common Stock), then and in any such event,
Additional Shares of Common Stock shall be deemed to have been issued:
(A) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of any class of securities entitled to receive such dividend or
distribution, or
(B) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which such corporate
action becomes effective.
If such record date shall have been fixed and no part of such dividend
shall have been paid on the date fixed therefor, the adjustment previously made
in the Conversion Price which became effective on such record date shall be
cancelled as of the close of business on such record date, and thereafter the
Conversion Price shall be adjusted pursuant to this Subsection 2(e)(iii) as of
the time of actual payment of such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event that at any time or from time to time after
the Original Issue Date, the Corporation shall issue Additional Shares of Common
Stock (including, without limitation, Additional Shares of Common Stock deemed
to be issued pursuant to Subsection 2(e)(iii)(1) but excluding Additional Shares
of Common Stock deemed to be issued pursuant to Subsection 2(e)(iii)(2), which
event is dealt with in Subsection 2(e)(vi)(1)), without consideration or for a
consideration per share less than the applicable Conversion Price in effect on
the date of and immediately prior to such issue, then and in such event, such
Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest one hundredth of one cent) determined in accordance
with the following formula:
P(1)Q(1) + P(2)Q(2)
Conversion Price = -------------------
Q(1) + Q(2)
where:
Conversion Price = New Conversion Price.
P(1) = Conversion Price of Series
A Preferred Stock in effect
immediately prior to new
issue.
Q(1) = Number of shares of Common
Stock outstanding, or deemed
to be outstanding as set
forth below, immediately
prior to such issue.
P(2) = Weighted average price per
share received by the
Corporation upon such issue.
Q(2) = Number of shares of Common
Stock issued, or deemed to
have been issued, in the
subject transaction.
7
provided, that for the purpose of this Subsection 2(e)(iv), all shares of Common
Stock issuable upon conversion of shares of Series A Preferred Stock outstanding
immediately prior to such issue shall be deemed to be outstanding, and
immediately after any Additional Shares of Common Stack are deemed issued
pursuant to Subsection 2(e)(iii), such Additional Shares of Common Stock shall
be deemed to be outstanding; and provided, further, that the applicable
Conversion Price shall not be so reduced at any time if the amount of such
reduction would be an amount less than $.005, but any such amount shall be
carried forward and reduction with respect thereto made at the time of and
together with any subsequent reduction which, together with such amount and any
other amount or amounts so carried forward, shall aggregate $.005 or more.
(v) Determination of Consideration. For purposes of this Subsection
2(e), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amounts of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of such issue, as determined
in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration per
share received by the Corporation for Additional Shares of Common Stock deemed
to have been issued pursuant to Subsection 2(e)(iii)(1), relating to Options and
Convertible Securities, shall be determined by dividing (x) the total amount, if
any, received or receivable by the Corporation as consideration for the issue of
such Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by (y)
the maximum number of shares of Common Stock (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities.
(vi) Adjustment for Dividends, Distributions, Subdivisions,
Combinations or Consolidations of Common Stock.
(1) Stock Dividends, Distributions or Subdivisions. In the
event the Corporation shall be deemed to issue Additional Shares of Common Stock
pursuant to Subsection 2(e)(iii)(2) in a stock dividend, stock distribution or
subdivision, the Conversion Price in effect
8
immediately before such deemed issuance shall, concurrently with the
effectiveness of such deemed issuance, be proportionately decreased.
(2) Combinations or Consolidations. In the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Conversion Price in effect immediately prior to such combination or
consolidation shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
(f) Adjustments for Certain Dividends and Distributions. In the event that
at any time or from time to time after the Original Issue Date the Corporation
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of Series A
Preferred Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Series A Preferred Stock
been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
conversion date, retained such securities receivable by them as aforesaid during
such period, giving application during such period to all adjustments called for
herein.
(g) Adjustment for Reclassification, Exchange, or Substitution. In the
event that at any time or from time to time after the Original Issue Date, the
Common Stock issuable upon the conversion of the Series A Preferred Stock shall
be changed into the same or a different number of shares of any class or classes
of stock, whether by capital reorganization, reclassification, or otherwise
(other than a subdivision or combination of shares or stock dividend provided
for above, or a merger, consolidation, or sale of assets provided for below),
then and in each such event the holder of any share or shares of Series A
Preferred Stock shall have the right thereafter to convert such shares into the
kind and amount of shares of stock and other securities and property receivable
upon such reorganization, reclassification, or other change, by the holder of a
number of shares of Common Stock equal to the number of shares of Common Stock
into which such shares of Series A Preferred Stock might have been converted
immediately prior to such reorganization, reclassification, or change, all
subject to further adjustment as provided herein.
(h) Adjustment for Merger, Consolidation or Sale of Assets. In the event
that at any time or from time to time after the Original Issue Date, the
Corporation shall merge or consolidate with or into another entity or sell all
or substantially all of its assets (other than a consolidation, merger or sale
which is treated as a liquidation pursuant to Subsection 1(c)), each share of
Series A Preferred Stock shall thereafter be convertible into the kind and
amount of shares of stock or other securities or property to which a holder of
the number of shares of Common Stock of the Corporation deliverable upon
conversion of such Series A Preferred Stock would have been entitled to receive
upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors) shall be made
in the application of the provisions set forth in this Section 2 with respect to
the rights and interest thereafter of the holders of Series A Preferred Stock,
to the end that the provisions set forth in this Section 2 (including provisions
with respect to changes in and other adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the conversion of
the Series A Preferred Stock.
9
(i) No Impairment. The Corporation shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but shall at
all times in good faith assist in the carrying out of all the provisions of this
Section 2 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock against impairment.
(j) Certificate as to Adjustment. Upon the occurrence of each adjustment
or readjustment of the Conversion Price pursuant to this Section 2, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each affected
holder of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any affected holder of Series A Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Price at the time in effect, and (iii)
the number of shares of Common Stock and the amount, if any, of other property
which at the time would be received upon the conversion of each share of Series
A Preferred Stock.
(k) Notices of Record Date. In the event of any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend which is the same as cash dividends paid in previous
quarters) or other distribution, the Corporation shall send notice to each
holder of Series A Preferred Stock at least ten (10) days prior to such record
date specifying the date on which any such record is to be taken for the purpose
of such dividend or distribution.
(l) Common Stock Reserved. The Corporation shall reserve and keep
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect conversion of
the Series A Preferred Stock.
(m) Certain Taxes. The Corporation shall pay any issue or transfer taxes
payable in connection with the conversion of the Series A Preferred Stock,
provided, however, that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer to a name other than that of the
holder of the Series A Preferred Stock.
(n) Closing of Books. The Corporation shall at no time close its transfer
books against the transfer of any Series A Preferred Stock or of any shares of
Common Stock issued or issuable upon the conversion of any shares of Series A
Preferred Stock in any manner which interferes with the timely conversion or
transfer of such Series A Preferred Stock or Common Stock.
Section 3. Restrictions.
(a) At any time when shares of Series A Preferred Stock are outstanding,
except where the vote of the holders of a greater number of shares of Series A
Preferred Stock is required by law or by this Certificate of Incorporation, and
in addition to any other vote required by law or this Certificate of
Incorporation, without the affirmative vote or written consent of the holders of
at least a majority in voting power of the then outstanding shares of Series A
Preferred Stock (with calculations based upon the number of shares Common Stock
into which such shares of
10
Series A Preferred Stock are then convertible), voting together as a single
class, the Corporation will not:
(i) amend, alter or change the designation of any preferences,
voting powers, qualifications, or special or relative rights or privileges of
the Series A Preferred Stock,
(ii) increase the authorized number of shares of Series A Preferred
Stock;
(iii) create, authorize or issue any class or series of stock having
any preference or priority over or being on a parity with any such preference or
priority of the Series A Preferred Stock or any security convertible into or
exchangeable or exercisable for any such class a series of stock;
(iv) effect any sale, lease, assignment, transfer or other
conveyance (other than the grant of a mortgage or security interest in
connection with indebtedness for borrowed money) of all or substantially all, or
any substantial part (i.e. more than twenty-five percent (25%) of the book value
as reflected on the most recent fiscal-year-end consolidated balance sheet of
the Corporation) of the properties or assets of the Corporation; or
(v) effect any liquidation, dissolution or winding up of, or any
consolidation or merger involving, the Corporation.
(b) Notwithstanding any other provision of this Certificate of
Incorporation or the Corporation's By-laws to the contrary, notice of any action
specified in Subsection 3(a) shall be given by the Corporation to each holder of
outstanding shares of Series A Preferred Stock by first class mail, postage
prepaid, addressed to such holder at the last address of such holder as shown by
the records of the Corporation, at least twenty (20) days before the date on
which the books of the Corporation shall close or a record shall be taken with
respect to such proposed action, or, if there shall be no such date, at least
twenty (20) days before the date when such proposed action is scheduled to take
place. Any holder of outstanding shares of Series A Preferred Stock may waive
any notice required by this Subsection by a written document specifically
indicating such waiver.
Section 4. Voting Rights.
(a) Except as otherwise required by law or hereinafter set forth, the
holders of Series A Preferred Stock shall be entitled to notice of any meeting
of stockholders and shall vote together with the holders of Common Stock as a
single class upon any matter submitted to the stockholders for a vote. With
respect to all questions as to which, under law, stockholders are required to
vote by classes or series, the Series A Preferred Stock shall vote together as a
single class separately from the Common Stock. Shares of Common Stock and Series
A Preferred Stock shall entitle the holders thereof to the following number of
votes on any matter as to which they are entitled to vote:
(i) holders of Common Stock shall have one vote per share; and
(ii) holders of Series A Preferred Stock shall have that number of
votes per share as is equal to the number of shares of Common Stock (including
fractions of a share) into which each such share of Series A Preferred Stock
held by such holder could be converted on the date for determination of
stockholders entitled to vote at the meeting or on the date of any written
consent.
11
(b) Any provision of the By-Laws of the Corporation to the contrary
notwithstanding, the number of directors (including Preferred Directors)
constituting the entire Board of Directors of the Corporation shall initially be
fixed at six (6) and may not be increased above seven (7) without the prior
written consent of each of the Preferred Directors or the holders of two-thirds
in voting power of the outstanding Series A Preferred Stock. The Board of
Directors shall not delegate any of its powers or duties to any committee of the
Board of Directors without the consent of all of the Preferred Directors then in
office, and any such committee shall include at least one (1) Preferred
Director.
(c) At all times during which shares of Series A Preferred Stock remain
outstanding, the holders of the outstanding shares of Series A Preferred Stock
shall have the exclusive right, separately from the Common Stock, to elect two
directors of the Corporation (the "Preferred Director"). Each Preferred Director
shall be elected by the vote or written consent of the holders of a majority in
voting power of the outstanding Series A Preferred Stock. If any Preferred
Director shall cease to serve as a director for any reason, another director
elected by the holders of the Series A Preferred Stock shall replace such
director. Each Preferred Director may be removed, with or without cause, and a
replacement Preferred Director may be elected in his or her stead, at any time
by the affirmative vote at a meeting of stockholders called for the purpose, or
by written consent, of the holders of a majority of the then outstanding shares
of Series A Preferred Stock.
(d) In addition to any rights which may be available under the
Corporation's By-Laws or otherwise under law, the holders of not less than
twenty-five percent (25%) in voting power of the outstanding Series A Preferred
Stock shall be entitled to call meetings of the stockholders of the Corporation.
Within five (5) business days after written application by the holders of not
less than twenty-five percent (25%) in voting power of the outstanding Series A
Preferred Stock, the President or Secretary, or such other officer of the
Corporation as may be authorized in the By-Laws of the Corporation to give
notice of meetings of stockholders of the Corporation, shall notify each
stockholder of the Corporation entitled to such notice of the date, time, place
and purpose of such meeting. No meeting of stockholders called pursuant to this
Subsection 4(d) shall take place more than ten (10) days after the date notice
of such meeting is given.
(e) The Corporation shall not alter, amend or repeal any provision of the
By-Laws without the consent of all of the Preferred Directors then in office.
Section 5. Dividends.
(a) Dividends may be declared and paid on the Series A Preferred Stock and
the Common Stock from funds lawfully available therefor as and when determined
by the Board of Directors of the Corporation.
(b) If, when and as dividends are declared and paid on shares of Common
Stock, the Corporation shall declare and pay at the same time to each holder of
Series A Preferred Stock, a dividend equal to the dividend which would have been
payable to such holder if the shares of Series A Preferred Stock held by such
holder had been converted into Common Stock on the record date for the
determination of holders of Common Stock entitled to receive such dividend.
Section 6. No Reissuance of Preferred Stock. No share or shares of
Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be
12
reissued, and all such shares shall be cancelled, retired and eliminated from
the shares which the Corporation shall be authorized to issue.
Section 7. Residual Rights. All rights accruing to the outstanding shares
of the Corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.
Section 8. Notices. All notices required or permitted to be sent to this
Article Fourth shall be deemed sufficient if contained in a written instrument
and delivered in person or duly sent by first-class mail postage prepaid (other
than in the case of notices to non-U.S. residents) or by fax or DHL, Federal
Express or other recognized express international courier service, addressed to
the intended recipient at the recipient's address as it appears on the books of
the Corporation.
13
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
AMERICAN PHARMED LABS, INC.
PURSUANT TO SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
AMERICAN PHARMED LABS, INC., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
hereby certifies as follows:
1. The name of the Corporation is "American Pharmed Labs, Inc.," and
the name under which the Corporation was originally incorporated was
"American Pharma-Liedtke, Inc."
2. The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on March
9, 1993.
3. The Certificate of Incorporation of the Corporation is hereby
amended by deleting Article "FIRST" thereof in its entirety and
substituting in lieu thereof the following:
"FIRST: The name of the corporation is EpiCept Corporation
(the "Corporation")."
4. In lieu of a meeting and vote of stockholders, the holders of at
least a majority of all the issued and outstanding capital stock
entitled to vote thereon have given their written consent to said
amendment in accordance with the provisions of Section 228 of the
General Corporation Law of the State of Delaware.
5. The aforesaid amendment was duly adopted in accordance with the
applicable provisions of Sections 242 and 228 of the General
Corporation Law of the State of Delaware, including approval by the
Board of Directors of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused this certificate to
be signed by its President and attested by its Assistant Secretary this 18th day
of November, 1999.
AMERICAN PHARMED LABS, INC.
By:/s/ Peter Golikov
--------------------------------------
Peter Golikov
President
Attest:
By: /s/ Lowell S. Lifschultz
---------------------------------
Lowell S. Lifschultz
Assistant Secretary
2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EPICEPT CORPORATION
EpiCept Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That at a meeting of the Board of Directors of said
corporation resolutions were duly adopted proposing and
declaring advisable that the Certificate of
Incorporation of said corporation be amended and that
such amendment be submitted to the stockholders of the
Corporation for their consideration, as follows:
RESOLVED: That the Board of Directors of this Corporation
recommends and deems it advisable that the
Certificate of Incorporation of this Corporation
be amended by deleting Article FOURTH thereof and
substituting for said Article FOURTH the new
article FOURTH set forth on Exhibit A attached
hereto; and
RESOLVED: That the aforesaid proposed amendment be submitted
to the stockholders of the Corporation for their
consideration; and
RESOLVED: That following the approval by the stockholders of
the aforesaid amendment (the "Amendment") as
required by law, the officers of this Corporation
be, and they hereby are, and each of them hereby
is, authorized and directed (i) to prepare,
execute and file with the Secretary of State of
the State of Delaware a Certificate of Amendment
setting forth the Amendment in the form approved
by the stockholders and (ii) to take any and all
other actions necessary, desirable or convenient
to give effect to the Amendment or otherwise to
carry out the purposes of the foregoing
Resolutions
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given written consent to said
amendments in accordance with the provisions of section
228 of the General Corporation Law of the State of
Delaware, and written notice of the adoption of the
Amendment has been given as provided in section 228 of
the General Corporation Law of the State of Delaware to
every stockholder entitled to such notice.
THIRD: That the Amendment was duly adopted in accordance with the
applicable provisions of sections 228 and 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, EpiCept Corporation has caused this certificate to be
signed by John E. Lucas, its Chief Executive Officer, this 25th day of January,
2000.
EPICEPT CORPORATION
By:/s/ John E. Lucas
-------------------------------------
Print Name: John E. Lucas
Its: Chief Executive Officer
2
EXHIBIT A
FOURTH: The total number of shares of all classes of stock which the
Corporation has authority to issue is 27,753,898 shares, consisting of (i)
20,000,000 shares of Common Stock, par value $.01 per share (the "Common
Stock"), and (ii) 7,753,898 shares of Preferred Stock, par value $.0l per share
(the "Preferred Stock"), of which (A) 4,554,162 shares are designated as Series
A Convertible Preferred Stock (the "Series A Preferred Stock") and (B) 3,199,736
shares are designated as Series B Convertible Preferred Stock (the "Series B
Preferred Stock"), amounting to an aggregate par value of $277,538.98.
The powers, preferences and rights, and the qualifications, limitations or
restrictions thereof, in respect of each class or series of stock of the
Corporation shall be as follows:
Section 1. Liquidation Rights.
(a) Liquidation Payments.
(i) In the event of any liquidation, dissolution or winding up of
the affairs of the Corporation, whether voluntary or involuntary, the holders of
Series B Preferred Stock shall be entitled to be paid first out of the assets of
the Corporation available for distribution to holders of the Corporation's
capital stock of all classes an amount equal to $3.00 per share of Series B
Preferred Stock (which amount shall be subject to equitable adjustment whenever
there shall occur a stock dividend payable in shares of Series B Preferred
Stock, stock split, combination of shares, reclassification or other similar
event with respect to the Series B Preferred Stock), plus all dividends accrued
or declared thereon but unpaid, to and including the date full payment shall be
tendered to the holders of the Series B Preferred Stock with respect to such
liquidation, dissolution or winding up.
If the assets of the Corporation shall be insufficient to permit the
payment in full to the holders of the Series B Preferred Stock of all amounts
distributable to them under this Subsection 1(a)(i), then the entire assets of
the Corporation available for such distribution shall be distributed ratably
among the holders of the Series B Preferred Stock in proportion to the full
preferential amount each such holder is otherwise entitled to receive under this
Subsection 1(a)(i).
No payment shall be made with respect to the Common Stock or Series A
Preferred Stock unless and until full payment has been made to the holders of
the Series B Preferred Stock of the amounts that they are entitled to receive
under this Subsection 1(a)(i).
(ii) After the payments described in Subsection 1(a)(i) shall have
been made in full to the holders of the Series B Preferred Stock, or funds
necessary for such payments shall have been set aside by the Corporation in
trust for the account of holders of Series B Preferred Stock so as to be
available for such payments, the holders of the Series A Preferred Stock shall
be entitled to be paid out of the assets of the Corporation available for
distribution to the holders of the Corporation's capital stock of all classes
$2.02 per share (subject to equitable adjustment in the event of any stock
dividend payable in shares of Series A Preferred Stock, stock split, combination
of shares, recapitalization or other similar event with respect to the Series A
Preferred Stock) plus all dividends declared thereon but unpaid, to and
including the date full payment shall be tendered to the holders of the Series A
Preferred Stock with respect to such liquidation, dissolution or winding up.
If the assets of the Corporation available for such distribution shall be
insufficient to permit the payment in full to the holders of the Series A
Preferred Stock of all amounts so distributable to them, then the entire assets
of the Corporation available for such distribution shall be distributed ratably
among the holders of the Series A Preferred Stock in proportion to the full
preferential amount each such holder is otherwise entitled to receive under this
Subsection 1(a)(ii).
(iii) After the payments described in Subsection 1(a)(i) and
Subsection 1(a)(ii) shall have been made in full to the holders of the Preferred
Stock, or funds necessary for such payments shall have been set aside by the
Corporation in trust for the account of holders of Preferred Stock so as to be
available for such payments, the remaining assets available for distribution
shall be distributed among the holders of the Common Stock and Preferred Stock
ratably in proportion to the number of shares of Common Stock then held by them
or issuable to them upon conversion of the Preferred Stock then held by them.
(iv) Upon conversion of shares of Preferred Stock into shares of
Common Stock pursuant to Section 2 below, the holder of such Common Stock shall
not be entitled to any preferential payment or distribution in case of any
liquidation, dissolution or winding up, but shall share ratably in any
distribution of the assets of the Corporation to all the holders of Common
Stock.
(v) The amounts payable with respect to shares of Series B Preferred
Stock and Series A Preferred Stock under this Subsection 1(a) are sometimes
hereinafter referred to as "Series B Liquidation Payments" and "Series A
Liquidation Payments," respectively, and together are sometimes hereinafter
referred to as the "Liquidation Payments."
(b) Distributions Other than Cash. Whenever the distributions provided for
in this Section 1 shall be payable in property other than cash, the value of
such distributions shall be the fair market value of such property as determined
in good faith by the Board of Directors of the Corporation. The Corporation
shall give prompt written notice of such valuation to each holder of Preferred
Stock.
(c) Merger as Liquidation, etc. The merger or consolidation of the
Corporation into or with another corporation (except one in which the holders of
capital stock of the Corporation immediately prior to such merger or
consolidation continue to hold at least eighty percent (80%) in voting power of
the capital stock of the surviving corporation, in which case the provisions of
Subsection 2(h) shall apply), or the sale of all or substantially all of the
assets of the Corporation, shall be deemed to be a liquidation, dissolution or
winding up of the affairs of the Corporation for purposes of this Section 1: (i)
with respect to the Series B Preferred Stock, unless the holders of at least
two-thirds of the then outstanding shares of the Series B Preferred Stock elect
to the contrary, and (ii) with respect to the Series A Preferred Stock, unless
the holders of at least seventy-five percent (75%) of the then outstanding
shares of Series A Preferred Stock elect to the contrary; such election in each
such case to be made by giving written notice thereof to the Corporation at
least five (5) days before the effective date of such event. If such notice is
given with respect to a series of Preferred Stock, the provisions of Subsection
2(h) shall apply to such series of Preferred Stock. Unless such election is made
with respect to a series of Preferred Stock, any amounts received by the holders
of such series of Preferred Stock as a result of such merger or consolidation
shall be deemed to be applied toward, and all consideration received by the
Corporation in such asset sale together with all other available assets of the
Corporation shall
2
be distributed toward, the Liquidation Payments attributable to the shares of
such series of Preferred Stock in the order of preference set forth in
Subsection 1(a).
(d) Notice. Notice of any proposed liquidation, dissolution or winding up
of the affairs of the Corporation (including any merger, consolidation or sale
of assets which may be deemed to be a liquidation, dissolution or winding up of
the affairs of the Corporation under Subsection 1(c)), stating a payment date,
the amount of the Liquidation Payments and the place where said Liquidation
Payments shall be payable, shall be given to the holders of record of the
Preferred Stock not less than thirty (30) days prior to the payment date stated
therein. Any holder of outstanding shares of Preferred Stock may waive notice
required by this Subsection by a written document specifically indicating such
waiver.
Section 2. Conversion. The holders of Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Price. Each share of Series A Preferred
Stock shall be convertible, without the payment of any additional consideration
by the holder thereof and at the option of the holder thereof, at any time after
the date of issuance of such share, at the office of the Corporation or any
transfer agent for the Series A Preferred Stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined in accordance with the
following:
(i) in the case of the Series A Preferred Stock, by dividing $2.02
by the Series A Conversion Price, determined as hereinafter provided, in effect
at the time of conversion. The Conversion Price at which shares of Common Stock
shall be deliverable upon conversion of Series A Preferred Stock without the
payment of any additional consideration by the holder thereof (the "Conversion
Price") shall, as of the Original Issue Date, be $1.883 per share of Common
Stock. Such Series A Conversion Price shall be subject to adjustment, in order
to adjust the number of shares of Common Stock into which the Series A Preferred
Stock is convertible, as hereinafter provided.
(ii) in the case of the Series B Preferred Stock, by dividing $1.50
by the Series B Conversion Price, determined as hereinafter provided, in effect
at the time of conversion. The Conversion Price at which shares of Common Stock
shall be deliverable upon conversion of Series B Preferred Stock without the
payment of any additional consideration by the holder thereof (the "Series B
Conversion Price") shall initially be $1.50 per share of Common Stock. Such
initial Series B Conversion Price shall be subject to adjustment, in order to
adjust the number of shares of Common Stock into which the Series B Preferred
Stock is convertible, as hereinafter provided.
The right of conversion with respect to any shares of Series B Preferred
Stock which shall have been called for redemption under Section 6 hereof shall
terminate at the close of business on the day fixed for redemption unless the
Corporation shall default in the payment of the redemption price, in which case
the right of conversion with respect to such shares shall continue unless and
until such redemption price is paid in full.
(b) Automatic Conversion.
(i) Each share of Series A Preferred Stock and Series B Preferred
Stock shall automatically be converted into shares of Common Stock at the Series
A Conversion Price or
3
Series A Conversion Price then in effect, as the case may be, upon the closing
of a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation to the
public at an offering price per share (prior to underwriter commissions and
discounts) of not less than $8.08 (as adjusted pursuant to reflect any stock
dividends, distributions, combinations, reclassifications or other like
transactions effected by the Corporation in respect of its Common Stock) and
with gross proceeds to the Corporation of not less than $15,000,000 (in the
event of which offering, the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Series A Preferred Stock shall not be
deemed to have converted that Preferred Stock until the closing of such
offering); or
(ii) Each share of Series A Preferred Stock shall automatically be
converted into shares of Common Stock at the applicable Series A Conversion
Price then in effect upon the written election of the holders of not less than
seventy-five percent (75%) of the then outstanding shares of the Series A
Preferred Stock to require such automatic conversion.
(iii) Each share of Series B Preferred Stock shall automatically be
converted into shares of Common Stock at the applicable Series B Conversion
Price then in effect upon the written election of the holders of not less than
two-thirds of the then outstanding shares of the Series B Preferred Stock to
require such automatic conversion.
(c) Mechanics of Automatic Conversions. Upon the occurrence of the event
specified in Subsection 2(b), the Preferred Stock of the applicable series shall
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, that all holders
of shares of Preferred Stock being converted shall be given written notice of
the occurrence of the event specified in Subsection 2(b) triggering such
conversion, including the date such event occurred (the "Automatic Conversion
Date"), and the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless
certificates evidencing such shares of the Preferred Stock being converted are
either delivered to the Corporation or its transfer agent, or the holder
notifies the Corporation or any transfer agent that such certificates have been
lost, stolen, or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith. On the Automatic Conversion Date, all rights with respect
to the Preferred Stock so converted, shall terminate, except any of the rights
of the holder thereof, upon surrender of the holder's certificate or
certificates therefor, to receive certificates for the number of shares of
Common Stock into which such Preferred Stock has been converted, together with
cash in an amount equal to all dividends declared but unpaid on, and any and all
other amounts owing with respect to, the shares of Preferred Stock converted to
and including the time of conversion. Upon the automatic conversion of the
Preferred Stock, the holders of such Preferred Stock shall surrender the
certificates representing such shares at the office of the Corporation or of its
transfer agent. If so required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by written instrument or instruments
of transfer, in form satisfactory to the Corporation, duly executed by the
registered holder or by the holder's attorney duly authorized in writing. Upon
surrender of such certificates there shall be issued and delivered to such
holder, promptly at such office and in the holder's name as shown on such
surrendered certificate or certificates, a certificate or certificates for the
number of shares of Common Stock into which the shares of the Preferred Stock
surrendered were convertible on the date on which such automatic conversion
occurred, together with cash in an amount equal to all dividends
4
declared but unpaid on, and any and all other amounts owing with respect to, the
shares of Preferred Stock converted to and including the time of conversion. No
fractional share of Common Stock shall be issued upon automatic conversion of
the Preferred Stock. In lieu of any fractional share to which the holder would
otherwise be entitled, the Corporation shall pay cash equal to such fraction
multiplied by the fair market value of one share of Common Stock on the
Automatic Conversion Date, as determined in good faith by the Board of
Directors.
(d) Mechanics of Optional Conversions. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of Common Stock, the
holder shall surrender the certificate or certificates therefor at the office of
the Corporation or of any transfer agent for the Preferred Stock, and shall give
written notice to the Corporation at such office that the holder elects to
convert the same and shall state therein the holder's name or the name or names
of the holder's nominees in which the holder wishes the certificate or
certificates for shares of Common Stock to be issued. On the date of conversion,
all rights with respect to the Preferred Stock so converted, shall terminate,
except any of the rights of the holders thereof, upon surrender of their
certificate or certificates therefor, to receive certificates for the number of
shares of Common Stock into which such Preferred Stock has been converted and
cash in an amount equal to all dividends declared but unpaid on, and any and all
other amounts owing with respect to, the shares of Preferred Stock being
converted to and including the time of conversion. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or by
the holder's attorney duly authorized in writing. No fractional share of Common
Stock shall be issued upon optional conversion of any Preferred Stock. In lieu
of any fractional share to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then current
fair market value of one share of Common Stock, as determined in good faith by
the Board of Directors. The Corporation shall, as soon as practicable after
surrender of the certificate or certificates for conversion, issue and deliver
at such office to such holder of Preferred Stock, or to the holder's nominee or
nominees, a certificate or certificates for the number of shares of Common Stock
to which the holder shall be entitled as aforesaid, together with cash in lieu
of any fraction of a share and cash in an amount equal to all dividends declared
but unpaid thereon and any and all other amounts owing with respect thereto at
such time. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.
(e) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definitions. For purposes of this Subsection 2(e), the
following definitions shall apply:
(1) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(2) "Original Issue Date" shall mean the first date on which a
share of Series B Preferred Stock was issued.
5
(3) "Convertible Securities" shall mean any evidences of
indebtedness, shares of capital stock (other than Common Stock) or other
securities directly or indirectly convertible into or exchangeable for Common
Stock.
(4) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued (or, pursuant to Subsection 2(e)(iii), deemed to be
issued) by the Corporation after the Original Issue Date, other than:
(A) shares of Common Stock issued or issuable upon
conversion of shares of Series A Preferred Stock or Series B Preferred Stock;
(B) up to 987,500 shares of Common Stock issued upon
exercise of options outstanding on the Original Issue Date;
(C) up to 17,487 shares of Common Stock issued or
issuable upon exercise of options granted after the Original Issue Date under
the Corporation's 1995 Stock Option Plan, as amended, which options have per
share exercise prices that are not less than the per share fair market value of
the Common Stock on the date of the option grant, and which number may be
adjusted upward by the affirmative vote of the Board of Directors which includes
the affirmative vote of both Series A Directors.
(ii) No Adjustment of Conversion Price. Except as set forth in
Subsection 2(e)(vi), no adjustment in the number of shares of Common Stock into
which any series of Preferred Stock is convertible shall be made, by adjustment
in the Conversion Price for such series in respect of the issuance of Additional
Shares of Common Stock unless the consideration per share for an Additional
Share of Common Stock (determined pursuant to subsection 2(e)(v)) issued or
deemed to be issued by the Corporation is less than the applicable Conversion
Price for such series in effect on the date of, and immediately prior to, the
issue of such Additional Share of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock.
(1) Options and Convertible Securities. In the event the
Corporation at any time or from time to time after the Original Issue Date shall
issue any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date; provided, that in any such case in
which Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price of any
series of Preferred Stock shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
6
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price of any series of Preferred Stock adjusted upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be readjusted to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price of any series of Preferred Stock
adjusted upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be readjusted as if:
(I) In the case of Convertible Securities or
Options for Common Stock the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation fur the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if any, actually received by
the Corporation upon such conversion or exchange; and
(II) in the case of Options for Convertible
Securities only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the Corporation
(determined pursuant to Subsection 2(e)(v)) upon the issue of the Convertible
Securities with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C) above
shall have the effect of increasing the Conversion Price of any series of
Preferred Stock to an amount which exceeds the lower of (i) the Conversion Price
of such series of Preferred Stock immediately prior to the original adjustment
date, or (ii) the Conversion Price of any such series of Preferred Stock that
would have resulted from any issuance of Additional Shares of Common Stock
between the original adjustment date and such readjustment.
(E) in the case of any Options which expire by their
terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Conversion Price of any such series of Preferred Stock shall
be made until the expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause (C) above; and
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made in the Conversion Price of any series of Preferred
Stock which became effective on such record
7
date shall be cancelled as of the close of business on such record date, and
thereafter the Conversion Price of such series of Preferred Stock shall be
adjusted pursuant to this Subsection 2(e)(iii) as of the actual date of their
issuance.
(2) Stock Dividends, Stock Distributions and Subdivisions. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall declare or pay any dividend or make any other distribution on
the Common Stock payable in Common Stock or effect a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in Common Stock), then and in any such event, Additional
Shares of Common Stock shall be deemed to have been issued with respect to each
series of Preferred Stock:
(A) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of any class of securities entitled to receive such dividend or
distribution, or
(B) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which such corporate
action becomes effective.
If such record date shall have been fixed and no part of such dividend or
distribution shall have been paid on the date fixed therefor, the adjustment
previously made in the Conversion Price of any series of Preferred Stock which
became effective on such record date shall be cancelled as of the close of
business on such record date, and thereafter the Conversion Price of such series
of Preferred Stock shall be adjusted pursuant to this Subsection 2(e)(iii) as of
the time of actual payment of such dividend or distribution
(iv) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event that at any time or from time to time after
the Original Issue Date, the Corporation shall issue Additional Shares of Common
Stock (including, without limitation, Additional Shares of Common Stock deemed
to be issued pursuant to Subsection 2(e)(iii)(1) but excluding Additional Shares
of Common Stock deemed to be issued pursuant to Subsection 2(e)(iii)(2), which
event is dealt with in Subsection 2(e)(vi)(1)), without consideration or for a
consideration per share less than the Conversion Price for any series of
Preferred Stock in effect on the date of and immediately prior to such issue,
then and in such event, such Conversion Price shall be reduced, concurrently
with such issue, to a price determined in accordance with the following formula:
P(1)Q(1) + P(2)Q(2)
NCP = ------------------------
Q(1) + Q(2)
where:
NCP = New Series A Conversion Price or Series
B Conversion Price, as applicable.
P(1) = Series A Conversion Price or Series B
Conversion Price, as applicable, in
effect immediately prior to new issue.
8
Q(1) = Number of shares of Common Stock
outstanding, or deemed to be outstanding
as set forth below, immediately prior
to such issue.
P(2) = Weighted average price per share
received by the Corporation upon such
issue.
Q(2) = Number of shares of Common Stock issued,
or deemed to have been issued, in the
subject transaction.
provided, that for the purpose of this Subsection 2(e)(iv), all shares of Common
Stock issuable upon conversion of shares of Series A Preferred Stock outstanding
immediately prior to such issue shall be deemed to be outstanding, and
immediately after any Additional Shares of Common Stack are deemed issued
pursuant to Subsection 2(e)(iii), such Additional Shares of Common Stock shall
be deemed to be outstanding.
(v) Determination of Consideration. For purposes of this Subsection
2(e), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amounts of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of such issue, as determined
in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration per
share received by the Corporation for Additional Shares of Common Stock deemed
to have been issued pursuant to Subsection 2(e)(iii)(1), relating to Options and
Convertible Securities, shall be determined by dividing (x) the total amount, if
any, received or receivable by the Corporation as consideration for the issue of
such Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by (y)
the maximum number of shares of Common Stock (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such
9
number) issuable upon the exercise of such Options or the conversion or exchange
of such Convertible Securities.
(vi) Adjustment for Dividends, Distributions, Subdivisions,
Combinations or Consolidations of Common Stock.
(1) Stock Dividends, Distributions or Subdivisions. In the
event the Corporation shall be deemed to issue Additional Shares of Common Stock
pursuant to Subsection 2(e)(iii)(2) in a stock dividend, stock distribution or
subdivision, the Conversion Price in effect immediately before such deemed
issuance shall, concurrently with the effectiveness of such deemed issuance, be
proportionately decreased.
(2) Combinations or Consolidations. In the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Conversion Price of each series of Preferred Stock in effect immediately
prior to such combination or consolidation shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
(f) Adjustments for Certain Dividends and Distributions. In the event that
at any time or from time to time after the Original Issue Date the Corporation
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of each series of
Preferred Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Preferred Stock been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period, giving application during such period to all adjustments called for
herein.
(g) Adjustment for Reclassification, Exchange, or Substitution. In the
event that at any time or from time to time after the Original Issue Date, the
Common Stock issuable upon the conversion of any series of Preferred Stock shall
be changed into the same or a different number of shares of any class or series
of stock or other securities or property, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a merger, consolidation, or sale
of assets provided for below), then and in each such event the holder of any
shares of such series of Preferred Stock shall have the right thereafter to
convert such shares into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification,
or other change, by the holder of a number of shares of Common Stock equal to
the number of shares of Common Stock into which such shares of such series of
Preferred Stock might have been converted immediately prior to such
reorganization, reclassification, or change, all subject to further adjustment
as provided herein.
(h) Adjustment for Merger, Consolidation or Sale of Assets. In the event
that at any time or from time to time after the Original Issue Date, the
Corporation shall merge or consolidate with or into another entity or sell all
or substantially all of its assets (other than a consolidation, merger or sale
which is treated as a liquidation with respect to any series of Preferred Stock
pursuant to Subsection 1(c)), each share of each series of Preferred Stock shall
thereafter be convertible into the kind and amount of shares of stock or other
securities or property to which a
10
holder of the number of shares of Common Stock of the Corporation deliverable
upon conversion of each such series of Preferred Stock would have been entitled
to receive upon such consolidation, merger or sale; and, in such case,
appropriate adjustment (as determined in good faith by the Board of Directors)
shall be made in the application of the provisions set forth in this Section 2
with respect to the rights and interest thereafter of the holders of each such
series of Preferred Stock, to the end that the provisions set forth in this
Section 2 (including provisions with respect to changes in and other adjustments
of the Conversion Price) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other securities or property
thereafter deliverable upon the conversion of each such series of Preferred
Stock.
(i) No Impairment. The Corporation shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but shall at
all times in good faith assist in the carrying out of all the provisions of this
Section 2 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment.
(j) Certificate as to Adjustment. Upon the occurrence of each adjustment
or readjustment of the Conversion Price pursuant to this Section 2, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each affected
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any affected holder of Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price for each series of Preferred Stock at
the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of each share of Preferred Stock.
(k) Notices of Record Date. In the event of any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend which is the same as cash dividends paid in previous
quarters) or other distribution, the Corporation shall send notice to each
holder of Preferred Stock at least ten (10) days prior to such record date
specifying the date on which any such record is to be taken for the purpose of
such dividend or distribution.
(l) Common Stock Reserved. The Corporation shall reserve and keep
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect conversion of
the Preferred Stock.
(m) Certain Taxes. The Corporation shall pay any issue or transfer taxes
payable in connection with the conversion of the Preferred Stock, provided,
however, that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer to a name other than that of the holder of
the Preferred Stock.
(n) Closing of Books. The Corporation shall at no time close its transfer
books against the transfer of any Preferred Stock or of any shares of Common
Stock issued or issuable upon the conversion of any shares of Preferred Stock in
any manner which interferes with the timely conversion or transfer of such
Preferred Stock or Common Stock.
11
(o) Good Faith. If any event occurs as to which in the reasonable opinion
of the Board of Directors of the Corporation, in good faith, the other
provisions of this Section 2 are not strictly applicable but the lack of any
adjustment in the Conversion Price of any series of Preferred Stock would not in
the opinion of the Board fairly protect the Conversion Rights of the holders of
such series of Preferred Stock in accordance with the basic intent and
principles of such provisions, or if strictly applicable would not fairly
protect the Conversion Rights of the holders of such series of Preferred Stock
in accordance with the basic intent and principles of such provisions, then the
Board of Directors of the Corporation shall cause the Corporation forthwith to
make such adjustment, if any, to the Conversion Price, on a basis consistent
with the basis intent and principles of this Section 2, as it in good faith
considers necessary to preserve, without dilution, the Conversion Rights of all
the holders of such series of Preferred Stock.
Section 3. Restrictions.
(a) At any time when shares of Series A Preferred Stock are outstanding,
except where the vote of the holders of a greater number of shares of Series A
Preferred Stock is required by law or by this Certificate of Incorporation, and
in addition to any other vote required by law or this Certificate of
Incorporation, without the affirmative vote or written consent of the holders of
at least a majority in voting power of the then outstanding shares of Series A
Preferred Stock (with calculations based upon the number of shares Common Stock
into which such shares of Series A Preferred Stock are then convertible), voting
together as a single class, the Corporation will not:
(i) amend, alter or change the designation of any preferences,
voting powers, qualifications, or special or relative rights or privileges of
the Series A Preferred Stock,
(ii) increase the authorized number of shares of Series A Preferred
Stock;
(iii) create, authorize or issue any class or series of stock having
any preference or priority over or being on a parity with any such preference or
priority of the Series A Preferred Stock or any security convertible into or
exchangeable or exercisable for any such class a series of stock;
(iv) effect any sale, lease, assignment, transfer or other
conveyance (other than the grant of a mortgage or security interest in
connection with indebtedness for borrowed money) of all or substantially all, or
any substantial part (i.e. more than twenty-five percent (25%) of the book value
as reflected on the most recent fiscal-year end consolidated balance sheet of
the Corporation) of the properties or assets of the Corporation;
(v) effect any liquidation, dissolution or winding up of, or any
consolidation or merger involving, the Corporation; or
(vi) effect any amendment, alteration or change of the By-Laws of
the Corporation that adversely affects the Series A Preferred Stock or the
holders thereof.
(b) At any time when shares of Series B Preferred Stock are outstanding,
except where the vote of the holders of a greater number of shares of Series B
Preferred Stock is required by law or by this Certificate of Incorporation, and
in addition to any other vote required by law or this Certificate of
Incorporation, without the affirmative vote or written consent of the holders of
at least two-thirds in voting power of the then outstanding shares of Series B
Preferred Stock
12
(with calculations based upon the number of shares Common Stock into which such
shares of Series B Preferred Stock are then convertible), voting together as a
single class, the Corporation will not:
(i) amend, alter or change the designation of any preferences,
voting powers, qualifications, or special or relative rights or privileges of
the Series B Preferred Stock,
(ii) increase the authorized number of shares of Series B Preferred
Stock;
(iii) create, authorize or issue any class or series of stock having
any preference or priority over or being on a parity with any such preference or
priority of the Series B Preferred Stock or any security convertible into or
exchangeable or exercisable for any such class a series of stock;
(iv) effect any sale, lease, assignment, transfer or other
conveyance (other than the grant of a mortgage or security interest in
connection with indebtedness for borrowed money) of all or substantially all, or
any substantial part (i.e. more than twenty-five percent (25%) of the book value
as reflected on the most recent fiscal-year-end consolidated balance sheet of
the Corporation) of the properties or assets of the Corporation;
(v) effect any liquidation, dissolution or winding up of, or any
consolidation or merger involving, the Corporation;
(vi) alter, amend or repeal any provision of the Certificate of
Incorporation; or
(vii) effect any amendment, alteration or change of the By-Laws of
the Corporation that adversely affects the Series B Preferred Stock or the
holders thereof.
Notwithstanding any other provision of this Certificate of
Incorporation or the Corporation's By-laws to the contrary, written notice of
any action specified in Subsections 3(a) or 3(b) shall be given in accordance
with Section 9 by the Corporation to each holder of each series of Preferred
Stock entitled to vote or consent with respect to such action at least twenty
(20) days before the date on which the books of the Corporation shall close or a
record shall be taken with respect to such proposed action, or, if there shall
be no such date, at least twenty (20) days before the date when such proposed
action is scheduled to take place. Any holder of outstanding shares of Preferred
Stock may waive any notice required by this Subsection by a written document
specifically indicating such waiver.
Section 4. Voting Rights.
(a) Except as otherwise required by law or set forth in this Certificate
of Incorporation, the holders of Preferred Stock shall be entitled to notice of
any meeting of stockholders and shall vote together with the holders of Common
Stock as a single class upon any matter submitted to the stockholders for a
vote. With respect to all questions as to which, under law, stockholders are
required to vote by classes or series, each of the Series A Preferred Stock and
the Series B Preferred Stock shall vote separately as a single class and series
apart from each other and from the Common Stock. Shares of Common Stock and
Preferred Stock shall entitle the holders thereof to the following number of
votes on any matter as to which they are entitled to vote:
(i) holders of Common Stock shall have one vote per share; and
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(ii) holders of Preferred Stock shall have that number of votes per
share as is equal to the number of shares of Common Stock (including fractions
of a share) into which each such share of Preferred Stock held by such holder
could be converted on the date for determination of stockholders entitled to
vote at the meeting or on the date of any written consent.
(b) Any provision of the By-Laws of the Corporation to the contrary
notwithstanding, the number of directors (including the Series A Directors (as
defined below)) constituting the entire Board of Directors of the Corporation
may not be decreased below six (6) or increased above seven (7) without the
prior written consent of each of the Series A Directors or the holders of
two-thirds in voting power of the outstanding Series A Preferred Stock. The
Board of Directors shall not delegate any of its powers or duties to any
committee of the Board of Directors without the consent of all of the Preferred
Directors then in office, and any such committee shall include at least one (1)
Series A Director.
(c) At all times during which shares of Series A Preferred Stock remain
outstanding, the holders of the outstanding shares of Series A Preferred Stock
shall have the exclusive right, separately from the Series B Preferred Stock and
the Common Stock, to elect two directors of the Corporation (the "Series A
Directors"). Each Series A Director shall be elected by the vote or written
consent of the holders of a majority in voting power of the outstanding Series A
Preferred Stock. If any Series A Director shall cease to serve as a director for
any reason, another director elected by the holders of the Series A Preferred
Stock shall replace such director. Each Series A Director may be removed, with
or without cause, and a replacement Series A Director may be elected in his or
her stead, at any time by the affirmative vote at a meeting of stockholders
called for the purpose, or by written consent, of the holders of a majority of
the then outstanding shares of Series A Preferred Stock,
(d) In addition to any rights which may be available under the
Corporation's By-Laws or otherwise under law, the holders of not less than
twenty-five percent (25%) in voting power of the outstanding Series A Preferred
Stock shall be entitled to call meetings of the stockholders of the Corporation.
Within five (5) business days after written application by the holders of not
less than twenty-five percent (25%) in voting power of the outstanding Series A
Preferred Stock, the President or Secretary, or such other officer of the
Corporation as may be authorized in the By-Laws of the Corporation to give
notice of meetings of stockholders of the Corporation, shall notify each
stockholder of the Corporation entitled to such notice of the date, time, place
and purpose of such meeting. No meeting of stockholders called pursuant to this
Subsection 4(d) shall take place more than ten (10) days after the date notice
of such meeting is given.
(e) The Corporation shall not alter, amend or repeal any provision of the
By-Laws without the consent of all of the Series A Directors.
Section 5. Dividends.
(a) Dividends may be declared and paid on Common Stock from funds lawfully
available therefor as and when determined by the Board of Directors of the
Corporation; provided that no dividends shall be declared or paid on Common
Stock until all dividends accrued or declared but unpaid on the Preferred Stock
shall have been paid in full; and provided further that when and as dividends
are declared and paid on shares of Common Stock, the Corporation shall declare
and pay at the same time to each holder of Preferred Stock a dividend equal to
the dividend which would have been payable to such holder if the shares of
Preferred Stock held by
14
such holder had been converted into Common Stock on the record date for the
determination of holders of Common Stock entitled to receive such dividend.
(b) Dividends may be declared and paid on Preferred Stock from funds
lawfully available therefor as and when determined by the Board of Directors of
the Corporation; provided that no dividends shall be declared or paid on Series
A Preferred Stock until all dividends accrued or declared but unpaid on the
Series B Preferred Stock shall have been paid in full; and provided further that
when and as dividends are declared and paid on shares of Series A Preferred
Stock, except pursuant to Subsection 5(a), the Corporation shall declare and pay
at the same time to each holder of Series B Preferred Stock an equivalent
dividend based on the number of shares of Common Stock into which each share of
Preferred Stock is then convertible.
(c) The holders of the Series B Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of any funds
legally available therefor, preferential cumulative dividends in cash at the
rate of seven percent (7.0%) per share per annum of the stated value thereof;
provided, however, that if the Corporation for any reason defaults on its
obligation to redeem any shares of Series B Preferred Stock in accordance with
Section 6 on or prior to the redemption dates specified therein, then such rate
shall increase by five percentage points to twelve percent (12.0%) per share per
annum of the stated value thereof from the date of such default. For such
purpose, the "stated value" of each share of Series B Preferred Stock shall be
$1.50 (which amount shall be subject to equitable adjustment whenever there
shall occur a stock dividend, stock split, combination of shares,
reclassification or similar event with respect to the Series B Preferred Stock).
Such dividends shall be cumulative and shall accrue from the Original Issue Date
(as defined in Subsection 2(e)(i)(2)), whether or not earned or declared and
whether or not in any fiscal year there shall be net profits or surplus
available for the payment of dividends in such fiscal year, so that if in any
fiscal year or years, such dividends are not paid in whole or in part upon the
Series B Preferred Stock, the portion of such dividends as shall be unpaid shall
accumulate as against the holders of the Common Stock and Series A Preferred
Stock.
(d) No dividends shall be declared or paid on the Common Stock or
Preferred Stock except as set forth in this Section 5.
Section 6. Redemption
(a) At the written election of any holder of Series B Preferred Stock made
not less than thirty (30) days prior to each of December 31, 2004, 2005 and
2006, the Corporation shall call for redemption, and shall redeem from such
holder not later than sixty (60) days after each December 31 as shall be
applicable, up to one third (1/3) of the shares of Series B Preferred Stock held
by such holder on December 31, 2004, at a redemption price per share (a
"Redemption Price") equal to $1.50 per share plus all dividends accrued or
declared but unpaid, and any and all other amounts owing with respect to, such
shares on the redemption date (the "Series B Redemption Price"). The Series B
Redemption Price shall be appropriately adjusted to take account of any stock
dividend, stock split, combination of shares, reclassification or other similar
event with respect to the Series B Preferred Stock. If any such holder does nor
elect to redeem on any redemption date all of the shares of Series B Preferred
Stock held by such holder which such holder may elect to have redeemed on such
redemption date, such holder may elect to have such shares redeemed on any
subsequent redemption date, or on December 31 of any year after 2006, by giving
not less than thirty (30) days prior written notice to the Corporation.
15
(b) Written notice of redemption shall be sent to each holder of record of
Series B Preferred Stock to be redeemed, not less than thirty (30) days nor more
than sixty (60) days prior to the redemption date set forth therein. Such notice
shall act forth (i) the date and place of redemption, (ii) the number of shares
to be redeemed, and (iii) the Series B Redemption Price. In the event that a
notice of redemption is given under this Subsection 6(b), the Corporation shall
be obligated to redeem the Series B Preferred Stock on the date and in the
amounts set forth in the notice. The Corporation, if advised to do so before the
close of business on the relevant redemption date by written notice from any
holder of record of Series B Preferred Stock to be redeemed, shall credit
against the number of shares of Series B Preferred Stock required to be redeemed
from such holder, and shall not redeem, the number of shares of Series B
Preferred Stock called for redemption which have been converted by such holder
after such holder made the written election with respect to such shares
described in Subsection 6(a) and on or before such redemption date.
(c) If, on or before a redemption date, the funds necessary for such
redemption shall have been set aside by the Corporation and deposited with a
bank or trust company, in trust for the pro rata benefit of the holders of the
Series B Preferred Stock that has been called for redemption, then,
notwithstanding that any certificates for shares that have been called for
redemption shall not have been surrendered for cancellation, the shares
represented thereby shall no longer be deemed outstanding from and after such
redemption date, and all rights of holders of such shares so called for
redemption shall forthwith, after such redemption date, cease and terminate with
respect to such shares, excepting only the right to receive the Series B
Redemption Price. Any interest accrued on funds so deposited and unclaimed by
stockholders entitled thereto shall be paid to such stockholders at the time
their respective shares are redeemed or to the Corporation at the time unclaimed
amounts are paid to it. In case the holders of Series B Preferred Stock which
shall have been called for redemption shall not, within three years after the
final redemption date, claim the amounts do deposited with respect to the
redemption thereof, any such bank or trust company shall, upon demand, pay over
to the Corporation such unclaimed amounts and thereupon such bank or trust
company shall be relieved of all responsibility in respect thereof to such
holder and such holder shall look only to the Corporation for the payment
thereof. Any funds so deposited with a bank or trust company which shall not be
required for such redemption by reason of the exercise subsequent to the date of
such deposit of the right of conversion of any shares or otherwise shall be
returned to the Corporation forthwith.
(d) If the Corporation for any reason defaults on its obligation to redeem
any of the shares of Series B Preferred Stock in accordance with Subsection 6(a)
on or prior to the redemption dates specified therein, then, notwithstanding
anything to the contrary contained in this Certificate of Incorporation, the
Corporation may not incur any indebtedness for money borrowed (unless the
proceeds of such incurrence of indebtedness are used to make all overdue
redemptions) without the prior affirmative vote or written consent of the
holders of not less than two-thirds of the then outstanding shares of Series B
Preferred Stock, other than borrowings or reborrowings under then-outstanding
lines of credit with institutional lenders and within then-existing credit
limits, or under replacement line of credit facilities with institutional
lenders with no greater credit limits, solely for the purpose of working
capital.
(e) If the funds of the Corporation legally available for redemption of
shares of Series B Preferred Stock on a redemption date are insufficient to
redeem the total number of shares of Series B Preferred Stock submitted for
redemption, those funds which are legally available will be used to redeem the
maximum possible number of whole shares ratably among the holders of
16
such shares in proportion to the redemption amounts otherwise payable to them.
The shares of Series B Preferred not redeemed shall remain outstanding and
entitled to all rights and preferences provided herein. At any time thereafter
when additional funds of the Corporation are legally available for the
redemption of such shares of Series B Preferred Stock submitted for redemption,
such funds will be used, at the end of the next succeeding fiscal quarter, to
redeem the balance of such shares, or such portion thereof for which funds are
then legally available.
Section 7. No Reissuance of Preferred Stock. No share or shares of
Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares which the Corporation shall be
authorized to issue.
Section 8. Residual Rights. All rights accruing to the outstanding shares
of the Corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.
Section 9. Notices. All notices to any party required or permitted to be
sent pursuant to this Article FOURTH ("Notices") shall be contained in a written
instrument addressed to such party at such party's address as it appears on the
books of the Corporation and shall be deemed given (a) when delivered in person
or duly sent by fax showing confirmation of receipt, (b) three days after being
duly send by first class mail postage prepaid (other than in the case of Notices
to or from any non-U.S. resident, which Notices must be sent in the manner
specified in clause (a) or (c)), or (c) two days after being duly sent by DHL,
Federal Express or other recognized express international courier service.
17
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EPICEPT CORPORATION
EpiCept Corporation, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That at a meeting of the Board of Directors of said
corporation resolutions were duly adopted proposing and
declaring advisable that the Certificate of
Incorporation of said corporation be amended and that
such amendments be submitted to the stockholders of the
Corporation for their consideration, as follows:
RESOLVED: That the Board of Directors of this Corporation
recommends and deems it advisable that the Certificate
of Incorporation of this Corporation be amended by
deleting Article FOURTH thereof and substituting for
said Article FOURTH the new article FOURTH set forth on
Exhibit A attached hereto; and
RESOLVED: That the aforesaid proposed amendment be submitted to
the stockholders of the Corporation for their
consideration; and
RESOLVED: That following the approval by the stockholders of the
aforesaid amendment (the "Amendment") as required by
law, the officers of this Corporation be, and they
hereby are, and each of them hereby is, authorized and
directed (i) to prepare, execute and file with the
Secretary of State of the State of Delaware a
Certificate of Amendment setting forth the Amendment in
the form approved by the stockholders and (ii) to take
any and all other actions necessary, desirable or
convenient to give effect to the Amendment or otherwise
to carry out the purposes of the foregoing Resolutions.
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given written consent to the Amendment in
accordance with the provisions of section 228 of the General
Corporation Law of the State of Delaware, and written notice
of the adoption of the Amendment has been given as provided in
section 228 of the General Corporation Law of the State of
Delaware to every stockholder entitled to such notice.
THIRD: That the Amendment was duly adopted in accordance with the
applicable provisions of sections 228 and 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, EpiCept Corporation has caused this certificate to be
signed by Peter Golikov, its Chief Executive Officer, this 21st day of December,
2000.
EPICEPT CORPORATION
By:/s/ Peter Golikov
--------------------------------------
Peter Golikov, President
2
EXHIBIT A
FOURTH: The total number of shares of all classes of stock which the
Corporation has authority to issue is 50,632,262 shares, consisting of (i)
31,000,000 shares of Common Stock, par value $.0001 per share (the "Common
Stock"), and (ii) 19,632,262 shares of Preferred Stock, par value $.0001 per
share (the "Preferred Stock"), of which (A) 3,422,620 shares are designated as
Series A Convertible Preferred Stock (the "Series A Preferred Stock"), (B)
3,440,069 shares are designated as Series B Convertible Preferred Stock (the
"Series B Preferred Stock") and (C) 12,769,573 shares are designated as Series C
Convertible Preferred Stock (the "Series C Preferred Stock"), amounting to an
aggregate par value of $5,063.23.
The powers, preferences and rights, and the qualifications, limitations or
restrictions thereof, in respect of each class or series of stock of the
Corporation shall be as follows:
Section 1. Liquidation Rights.
(a) Liquidation Payments.
(i) In the event of any liquidation, dissolution or winding up of
the affairs of the Corporation, whether voluntary or involuntary, the holders of
Series C Preferred Stock shall be entitled to be paid first out of the assets of
the Corporation available for distribution to holders of the Corporation's
capital stock of all classes an amount equal to $3.00 per share of Series C
Preferred Stock (which amount shall be subject to equitable adjustment whenever
there shall occur a stock dividend, stock split, combination of shares,
reclassification or other similar event with respect to the Series C Preferred
Stock), plus all dividends accrued or declared thereon but unpaid, to and
including the date full payment shall be tendered to the holders of the Series C
Preferred Stock with respect to such liquidation, dissolution or winding up.
If the assets of the Corporation shall be insufficient to permit the
payment in full to the holders of the Series C Preferred Stock of all amounts
distributable to them under this Subsection 1(a)(i), then the entire assets of
the Corporation available for such distribution shall be distributed ratably
among the holders of the Series C Preferred Stock in proportion to the full
preferential amount each such holder is otherwise entitled to receive under this
Subsection 1(a)(i).
No payment shall be made with respect to the Common Stock, Series B
Preferred Stock or Series A Preferred Stock unless and until full payment has
been made to the holders of the Series C Preferred Stock of the amounts that
they are entitled to receive under this Subsection 1(a)(i).
(ii) After the payments described in Subsection 1(a)(i) shall have
been made in full to the holders of the Series C Preferred Stock, or funds
necessary for such payments shall have been set aside by the Corporation in
trust for the account of holders of Series C Preferred Stock so as to be
available for such payments, the holders of Series B Preferred Stock shall be
entitled to be paid next out of the assets of the Corporation available for
distribution to holders of the Corporation's capital stock of all classes an
amount equal to $3.00 per share of Series B Preferred Stock (which amount shall
be subject to equitable adjustment whenever there shall occur a stock dividend,
stock split, combination of shares, reclassification or other similar event with
respect to the Series B Preferred Stock), plus all dividends accrued or declared
thereon but
18
unpaid, to and including the date full payment shall be tendered to the holders
of the Series B Preferred Stock with respect to such liquidation, dissolution or
winding up.
If the assets of the Corporation shall be insufficient to permit the
payment in full to the holders of the Series B Preferred Stock of all amounts
distributable to them under this Subsection 1(a)(ii), then the entire assets of
the Corporation available for such distribution after payment under Subsection
1(a)(i) above shall be distributed ratably among the holders of the Series B
Preferred Stock in proportion to the full preferential amount each such holder
is otherwise entitled to receive under this Subsection 1(a)(ii).
No payment shall be made with respect to the Common Stock or Series
A Preferred Stock unless and until full payment has been made to the holders of
the Series B Preferred Stock of the amounts that they are entitled to receive
under this Subsection 1(a)(ii).
(iii) After the payments described in Subsections 1(a)(i) and
1(a)(ii) shall have been made in full to the holders of the Series C Preferred
Stock and the holders of the Series B Preferred Stock, or funds necessary for
such payments shall have been set aside by the Corporation in trust for the
account of holders of Series C Preferred Stock and Series B Preferred Stock so
as to be available for such payments, the holders of the Series A Preferred
Stock shall be entitled to be paid out of the assets of the Corporation
available for distribution to the holders of the Corporation's capital stock of
all classes $2.02 per share (subject to equitable adjustment in the event of any
stock dividend, stock split, combination of shares, recapitalization or other
similar event with respect to the Series A Preferred Stock) plus all dividends
declared thereon but unpaid, to and including the date full payment shall be
tendered to the holders of the Series A Preferred Stock with respect to such
liquidation, dissolution or winding up.
If the assets of the Corporation available for such distribution shall be
insufficient to permit the payment in full to the holders of the Series A
Preferred Stock of all amounts so distributable to them, then the entire assets
of the Corporation available for such distribution after payment under
Subsection 1(a)(i) and 1(a)(ii) above shall be distributed ratably among the
holders of the Series A Preferred Stock in proportion to the full preferential
amount each such holder is otherwise entitled to receive under this Subsection
1(a)(iii).
(iv) After the payments described in Subsections 1(a)(i), 1(a)(ii)
and 1(a)(iii) shall have been made in full to the holders of the Preferred
Stock, or funds necessary for such payments shall have been set aside by the
Corporation in trust for the account of holders of Preferred Stock so as to be
available for such payments, the remaining assets available for distribution
shall be distributed among the holders of the Common Stock and Preferred Stock
ratably in proportion to the number of shares of Common Stock then held by them
or issuable to them upon conversion of the Preferred Stock then held by them.
(v) Upon conversion of shares of Preferred Stock into shares of
Common Stock pursuant to Section 2 below, the holders of such Common Stock shall
not be entitled to any preferential payment or distribution in case of any
liquidation, dissolution or winding up, but shall share ratably in any
distribution of the assets of the Corporation to all the holders of Common
Stock.
(vi) The amounts payable with respect to shares of Series C
Preferred Stock, Series B Preferred Stock and Series A Preferred Stock under
this Subsection 1(a) are sometimes hereinafter referred to as "Series C
Liquidation Payments," "Series B Liquidation Payments" and
2
"Series A Liquidation Payments," respectively, and together are sometimes
hereinafter referred to as the "Liquidation Payments."
(b) Distributions Other than Cash. Whenever the distributions provided for
in this Section 1 shall be payable in property other than cash, the value of
such distributions shall be the fair market value of such property as determined
in good faith by the Board of Directors of the Corporation. The Corporation
shall give prompt written notice of such valuation to each holder of Preferred
Stock.
(c) Merger as Liquidation, etc. The merger or consolidation of the
Corporation into or with another corporation (except one in which the holders of
capital stock of the Corporation immediately prior to such merger or
consolidation continue to hold at least eighty percent (80%) in voting power of
the capital stock of the surviving corporation, in which case the provisions of
Subsection 2(h) shall apply), or the sale of all or substantially all of the
assets of the Corporation, shall be deemed to be a liquidation, dissolution or
winding up of the affairs of the Corporation for purposes of this Section 1: (i)
with respect to the Series C Preferred Stock, unless the holders of at least
sixty percent (60%) in voting power of the then outstanding shares of Series C
Preferred Stock (with calculations based upon the number of shares of Common
Stock into which such shares of Series C Preferred Stock are then convertible)
elect to the contrary, (ii) with respect to the Series B Preferred Stock, unless
the holders of at least two-thirds in voting power of the then outstanding
shares of Series B Preferred Stock (with calculations based upon the number of
shares of Common Stock into which such shares of Series B Preferred Stock are
then convertible) elect to the contrary, and (iii) with respect to the Series A
Preferred Stock, unless the holders of at least seventy-five percent (75%) in
voting power of the then outstanding shares of Series A Preferred Stock (with
calculations based upon the number of shares of Common Stock into which such
shares of Series A Preferred Stock are then convertible) elect to the contrary.
An election under Subsection 1(c)(i), (ii) or (iii) shall be made by giving
written notice thereof to the Corporation at least five (5) days before the
effective date of such merger, consolidation or sale. If such notice is given
with respect to a series of Preferred Stock, the provisions of Subsection 2(h)
shall apply to such series of Preferred Stock. Unless such election is made with
respect to a series of Preferred Stock, any amounts received by the holders of
such series of Preferred Stock as a result of such merger or consolidation shall
be deemed to be applied toward, and all consideration received by the
Corporation in such asset sale together with all other available assets of the
Corporation shall be distributed toward, the Liquidation Payments attributable
to the shares of such series of Preferred Stock in the order of preference set
forth in Subsection 1(a).
(d) Notice. Notice of any proposed liquidation, dissolution or winding up
of the affairs of the Corporation (including any merger, consolidation or sale
of assets which may be deemed to be a liquidation, dissolution or winding up of
the affairs of the Corporation under Subsection 1(c)), stating a payment date,
the amount of the Liquidation Payments and the place where said Liquidation
Payments shall be payable, shall be given to the holders of record of the
Preferred Stock not less than thirty (30) days prior to the payment date stated
therein. Any holder of outstanding shares of Preferred Stock may waive notice
required by this Subsection by a written document specifically indicating such
waiver.
Section 2. Conversion. The holders of Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Price. Each share of Preferred Stock
shall be convertible, without the payment of any additional consideration by the
holder thereof and at the
3
option of the holder thereof, at any time after the date of issuance of such
share, at the office of the Corporation or any transfer agent for the Preferred
Stock, into such number of fully paid and nonassessable shares of Common Stock
as is determined in accordance with the following:
(i) in the case of the Series A Preferred Stock, by dividing $2.02
by the Series A Conversion Price, determined as hereinafter provided, in effect
at the time of conversion. The Conversion Price at which shares of Common Stock
shall be deliverable upon conversion. of Series A Preferred Stock without the
payment of any additional consideration by the holder thereof (the "Series A
Conversion Price") shall, as of the Original Issue Date, be $1.716 per share of
Common Stock. Such Series A Conversion Price shall be subject to adjustment, in
order to adjust the number of shares of Common Stock into which the Series A
Preferred Stock is convertible, as hereinafter provided.
(ii) in the case of the Series B Preferred Stock, by dividing $1.50
by the Series B Conversion Price, determined as hereinafter provided, in effect
at the time of conversion. The Conversion Price at which shares of Common Stock
shall be deliverable upon conversion of Series B Preferred Stock without the
payment of any additional consideration by the holder thereof (the "Series B
Conversion Price') shall initially be $1.50 per share of Common Stock. Such
initial Series B Conversion Price shall be subject to adjustment, in order to
adjust the number of shares of Common Stock into which the Series B Preferred
Stock is convertible, as hereinafter provided.
(iii) in the case of the Series C Preferred stock, by dividing $1.50
by the Series C Conversion Price, determined as hereinafter provided, in effect
at the time of conversion. The Conversion Price at which shares of Common Stock
shall be deliverable upon conversion of Series C Preferred Stock without the
payment of any additional consideration by the holder thereof (the "Series C
Conversion Price") shall initially be $1.50 per share of Common Stock, Such
initial Series C Conversion Price shall be subject to adjustment, in order to
adjust the number of shares of Common Stock into which the Series C Preferred
Stock is convertible, as hereinafter provided.
The right of conversion with respect to any shares of Series C Preferred
Stock or Series B Preferred Stock which shall have been called for redemption
under Section 6 hereof shall terminate at the close of business on the day fixed
for redemption unless the Corporation shall default in the payment of the
redemption price, in which case the right of conversion with respect to such
shares shall continue unless and until such redemption price is paid in full.
(b) Automatic Conversion.
(i) Each share of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock shall automatically be converted into shares of
Common Stock at the Series A Conversion Price, Series B Conversion Price or
Series C Conversion Price then in effect, as the case may be, upon the closing
of a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation to the
public at an offering price per share (prior to underwriter commissions and
discounts) of not less than $8.25 (as adjusted to reflect any stock dividends,
distributions, combinations, reclassifications or other like transactions
effected by the Corporation in respect of its Common Stock) and with gross
proceeds to the Corporation of not less than $15,000,000 (a "Qualified Public
Offering") (in the event of which offering, the person(s) entitled to receive
the Common Stock issuable upon such conversion of
4
the Preferred Stock shall not be deemed to have converted that Preferred Stock
until the closing of such offering).
(ii) Each share of Series A Preferred Stock shall automatically be
converted into shares of Common Stock at the applicable Series A Conversion
Price then in effect upon the written election to require such automatic
conversion of the holders of not less than seventy-five percent (75%) in voting
power of the then outstanding shares of Series A Preferred Stock (with
calculations based upon the number of shares of Common Stock into which such
shares of Series A Preferred Stock are then convertible).
(iii) Each share of Series B Preferred Stock shall automatically be
converted into shares of Common Stock at the applicable Series B Conversion
Price then in effect upon the written election to require such automatic
conversion of the holders of not less than two-thirds in voting power of the
then outstanding shares of Series B Preferred Stock (with calculations based
upon the number of shares of Common Stock into which such shares of Series B
Preferred Stock are then convertible).
(iv) Each share of Series C Preferred Stock shall automatically be
converted into shares of Common Stock at the applicable Series C Conversion
Price then in effect upon the written election to require such automatic
conversion of the holders of not less than sixty percent (60%) in voting power
of the then outstanding shares of Series C Preferred Stock (with calculations
based upon the number of shares of Common Stock into which such shares of Series
C Preferred Stock are then convertible).
(c) Mechanics of Automatic Conversions. Upon the occurrence of any event
specified in Subsection 2(b), the Preferred Stock of the applicable series shall
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided that all holders
of shares of Preferred Stock being converted shall be given written notice of
the occurrence of the event specified in Subsection 2(b) triggering such
conversion, including the date such event occurred (the "Automatic Conversion
Date"), and the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless
certificates evidencing such shares of the Preferred Stock being converted are
either delivered to the Corporation or its transfer agent, or the holder
notifies the Corporation or any transfer agent that such certificates have been
lost, stolen, or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith. On the Automatic Conversion Date, all rights with respect
to the Preferred Stock so converted, shall terminate, except any of the rights
of the holder thereof, upon surrender of the holder's certificate or
certificates therefor, to receive certificates representing the number of shares
of Common Stock into which such Preferred Stock has been converted, together
with cash in an amount equal to all dividends declared but unpaid on, and any
and all other amounts owing with respect to, the shares of Preferred Stock
converted to and including the time of conversion. Upon the automatic conversion
of any Preferred Stock, the holders of such Preferred Stock shall surrender the
certificates representing such shares at the office of the Corporation or of its
transfer agent. If so required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by written instrument or instruments
of transfer, in a form reasonably satisfactory to the Corporation, duly executed
by the registered holder or by the holder's attorney duly authorized in writing.
Upon surrender of such certificates there shall be issued and delivered to such
holder, promptly at such office and in the holder's name as shown cm such
surrendered certificate or certificates, a certificate or certificates for the
number of
5
shares of Common Stock into which the shares of the Preferred Stock surrendered
were convertible on the date on which such automatic conversion occurred,
together with cash in an amount equal to all dividends declared but unpaid on,
and any and all other amounts owing with respect to, the shares of Preferred
Stock converted to and including the time of conversion. No fractional share of
Common Stock shall be issued upon automatic conversion of any Preferred Stock.
In lieu of any fractional share to which the holder would otherwise be entitled,
the Corporation shall pay cash equal to such fraction multiplied by the fair
market value of one share of Common Stock on the Automatic Conversion Date, as
determined in good faith by the Board of Directors.
(d) Mechanics of Optional Conversions. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of Common Stock, the
holder shall surrender the certificate or certificates therefor at the office of
the Corporation or of any transfer agent for the Preferred Stock, and shall give
written notice to the Corporation at such office that the holder elects to
convert the same and shall state therein the holder's name or the name or names
of the holder's nominees in which the holder wishes the certificate or
certificates for shares of Common Stock to be issued. On the date of conversion,
all rights with respect to the Preferred Stock so converted, shall terminate,
except any of the rights of the holders thereof, upon surrender of their
certificate or certificates therefor, to receive certificates for the number of
shares of Common Stock into which such Preferred Stock has been converted and
cash in an amount equal to all dividends declared but unpaid on, and any and all
other amounts owing with respect to, the shares of Preferred Stock being
converted to and including the time of conversion. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in a form
reasonably satisfactory to the Corporation, duly executed by the registered
holder or by the holder's attorney duly authorized in writing. No fractional
share of Common Stock shall be issued upon optional conversion of any Preferred
Stock. In lieu of any fractional share to which the holder would otherwise be
entitled, the Corporation shall pay cash equal to such fraction multiplied by
the then current fair market value of one share of Common Stock, as determined
in good faith by the Board of Directors. The Corporation shall, as soon as
practicable after surrender of the certificate or certificates for conversion,
issue and deliver at such office to such holder of Preferred Stock, or to the
holder's nominee or nominees, a certificate or certificates for the number of
shares of Common Stock to which the holder shall be entitled as aforesaid,
together with cash in lieu of any fraction of a share and cash in an amount
equal to all dividends declared but unpaid thereon and any and all other amounts
owing with respect thereto at such time. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the shares of Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date.
(e) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definitions. For purposes of this Subsection 2(e), the
following definitions shall apply:
(1) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(2) "Original Issue Date" shall mean the first date on which a
share of Series C Preferred Stock was issued.
6
(3) "Convertible Securities" shall mean any evidences of
indebtedness, shares of capital stock (other than Common Stock) or other
securities directly or indirectly convertible into or exchangeable for Common
Stock.
(4) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued (or, pursuant to Subsection 2(e)(iii), deemed to be
issued) by the Corporation after the Original Issue Date, other than:
(A) shares of Common Stock issued or issuable upon
conversion of shares of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock;
(B) up to 2,092,500 shares of Common Stock issued upon
exercise of options outstanding on the Original Issue Date; or
(C) up to 2,487 shares of Common Stock issued or
issuable upon exercise of options granted after the Original Issue Date under
the Corporation's 1995 Stock Option Plan, as amended and/or restated, which
options have per share exercise prices that are not less than the per share fair
market value of the Common Stock on the date of the option grant, and which
number may be adjusted upward by the affirmative vote of the Board of Directors
that includes the affirmative vote of (i) at least one (1) of the Series A
Directors and (ii) the Series C Director.
(ii) No Adjustment of Conversion Price. Except as set forth in
Subsection 2(e)(vi), no adjustment in the number of shares of Common Stock into
which any series of Preferred Stock is convertible shall be made, by adjustment
in the applicable Conversion Price for such series in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share for an
Additional Share of Common Stock (determined pursuant to subsection 2(e)(v))
issued or deemed to be issued by the Corporation is less than the applicable
Conversion Price for such series in effect on the date of, and immediately prior
to, the issue of such Additional Share of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock.
(1) Options and Convertible Securities. In the event the
Corporation at any time or from time to time after the Original Issue Date shall
issue any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date; provided that in any such case in
which Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price of any
series of Preferred Stock shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
7
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price of any series of Preferred Stock adjusted upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be readjusted to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price of any series of Preferred Stock
adjusted upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be readjusted as if:
(I) In the case of Convertible Securities or
Options for Common Stock the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if any, actually received by
the Corporation upon such conversion or exchange; and
(II) in the case of Options for Convertible
Securities only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the Corporation
(determined pursuant to Subsection 2(e)(v)) upon the issue of the Convertible
Securities with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C) above
shall have the effect of increasing the Conversion Price of any series of
Preferred Stock to an amount which exceeds the lower of (i) the Conversion Price
of such series of Preferred Stock immediately prior to the original adjustment
date, or (ii) the Conversion Price of any such series of Preferred Stock that
would have resulted from any issuance of Additional Shares of Common Stock
between the original adjustment date and such readjustment date;
(E) in the case of any Options which expire by their
terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Conversion Price of any such series of Preferred Stock shall
be made until the expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause (C) above; and
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made in the Conversion Price of any series of Preferred
Stock which became effective on such record
8
date shall be cancelled as of the close of business on such record date, and
thereafter the Conversion Price of such series of Preferred Stock shall be
adjusted pursuant to this Subsection 2(e)(iii) as of the actual date of their
issuance.
(2) Stock Dividends, Stock Distributions and Subdivisions. In
the event the Corporation at any time or from time to time after the Original
issue Date shall declare or pay any dividend or make any other distribution on
the Common Stock payable in Common Stock or effect a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in Common Stock), then and in any such event, Additional
Shares of Common Stock shall be deemed to have been issued with respect to each
series of Preferred Stock:
(A) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of any class of securities entitled to receive such dividend or
distribution, or
(B) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which such corporate
action becomes effective.
If such record date shall have been fixed and no part of such dividend
or distribution shall have been paid on the date fixed therefor, the adjustment
previously made in the Conversion Price of any series of Preferred Stock which
became effective on such record date shall be cancelled as of the close of
business on such record date, and thereafter the Conversion Price of such series
of Preferred Stock shall be adjusted pursuant to this Subsection 2(e)(iii) as of
the time of actual payment of such dividend or distribution.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event that at any time or from time to time after
the Original Issue Date, the Corporation shall issue Additional Shares of Common
Stock (including, without limitation, Additional Shares of Common Stock deemed
to be issued pursuant to Subsection 2(e)(iii)(1) but excluding Additional Shares
of Common Stock deemed to be issued pursuant to Subsection. 2(e)(iii)(2), which
event is dealt with in Subsection 2(e)(vi)(1)), without consideration or for a
consideration per share less than the Conversion Price for any series of
Preferred Stock in effect on the date of and immediately prior to such issue,
then and in such event, such Conversion Price shall be reduced, concurrently
with such issue, to a price determined in accordance with the following formula:
P(1)Q(1) + P(2)Q(2)
NCP = -------------------
Q(1) + Q(2)
where:
NCP = New Series A Conversion Price, New Series B
Conversion Price or New Series C Conversion
Price, as applicable.
P(1) = Series A Conversion Price, Series B Conversion Price
or Series C Conversion Price, as applicable, in
effect immediately prior to new issue.
9
Q(1) = Number of shares of Common Stock outstanding, or
deemed to be outstanding as set forth below,
immediately prior to such issue.
P(2) = Weighted average price per share received by the
Corporation upon such issue.
Q(2) = Number of shares of Common Stock issued, or deemed to
have been issued, in the subject transaction.
provided that for the purpose of this Subsection 2(e)(iv), all shares of Common
Stock issuable upon conversion of shares of Preferred Stock outstanding
immediately prior to such issue shall be deemed to be outstanding, and
immediately after any Additional Shares of Common Stock are deemed issued
pursuant to Subsection 2(e)(iii), such Additional Shares of Common Stock shall
be deemed to be outstanding.
(v) Determination of Consideration. For purposes of this Subsection
2(c), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amounts of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of such issue, as determined
in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
Options and Convertible Securities. The consideration per share
received by the Corporation for Additional Shares of Common Stock deemed to have
been issued pursuant to Subsection 2(e)(iii)(1), relating to Options and
Convertible Securities, shall be determined by dividing (x) the total amount, if
any, received or receivable by the Corporation as consideration for the issue of
such Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by (y)
the maximum number of shares of Common Stock (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities.
10
(vi) Adjustment for Dividends, Distributions, Subdivisions,
Combinations or Consolidations of Common Stock.
(1) Stock Dividends, Distributions or Subdivisions. In the
event the Corporation shall be deemed to issue Additional Shares of Common Stock
pursuant to Subsection 2(e)(iii)(2) in a stock dividend, stock distribution or
subdivision, the Conversion Price of each series of Preferred Stock in effect
immediately before such deemed issuance shall, concurrently with the
effectiveness of such deemed issuance, be proportionately decreased.
(2) Combinations or Consolidations. In the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Conversion Price of each series of Preferred Stock in effect immediately
prior to such combination or consolidation shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
(f) Adjustments for Certain Dividends and Distributions. In the event that
at any time or from time to time after the Original Issue Date the Corporation
shall make or issue; or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of each series of
Preferred Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Preferred Stock been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period, giving application during such period to all adjustments called for
herein.
(g) Adjustment for Reclassification, Exchange, or Substitution. In the
event that at any time or from time to time after the Original Issue Date, the
Common Stock issuable upon the conversion of any series of Preferred Stock shall
be changed into the same or a different number of shares of any class or series
of stock or other securities or property, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a merger, consolidation, or sale
of assets provided for below), then and in each such event the holder of any
shares of such series of Preferred Stock shall have the right thereafter to
convert such shares into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification,
or other change, by the holder of a number of shares of Common Stock equal to
the number of shares of Common Stock into which such shares of such series of
Preferred Stock might have been converted immediately prior to such
reorganization, reclassification, or change, all subject to further adjustment
as provided herein.
(h) Adjustment for Merger, Consolidation or Sale of Assets. In the event
that at any time or from time to time after the Original Issue Date, the
Corporation shall merger or consolidate with or into another entity or sell all
or substantially all of its assets (other than a consolidation, merger or sale
which is treated as a liquidation wait respect to any series of Preferred Stock
pursuant to Subsection 1(c)), each share of each series of Preferred Stock shall
thereafter be convertible into the kind and amount of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
of the Corporation deliverable upon conversion of each such series of Preferred
Stock would have been entitled to receive upon such consolidation, merger or
sale; and, in such case, appropriate adjustment (as determined in good
11
faith by the Board of Directors) shall be made in the application of the
provisions set forth in this Section 2 with respect to the rights and interest
thereafter of the holders of each such series of Preferred Stock, to the end
that the provisions set forth in this Section 2 (including provisions with
respect to changes in and other adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other securities or property thereafter deliverable upon the
conversion of each such series of Preferred Stock.
(i) No Impairment. The Corporation shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but shall at
all times in good faith assist in the carrying out of all the provisions of this
Section 2 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment.
(j) Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Conversion Price pursuant to this Section 2, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each affected
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any affected holder of Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price for each series of Preferred Stock at
the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of each share of Preferred Stock.
(k) Notices of Record Date. In the event of any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend which is the same as cash dividends paid in previous
quarters) or other distribution, the Corporation shall send notice to each
holder of Preferred Stock at least ten (10) days prior to such record date
specifying the date on which any such record is to be taken for the purpose of
such dividend or distribution.
(l) Common Stock Reserved. The Corporation shall reserve and keep
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect conversion of
the Preferred Stock.
(m) Certain Taxes. The Corporation shall pay any issue or transfer taxes
payable in connection with the conversion of Preferred Stock; provided, however,
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer to a name other than that of the holder of the
Preferred Stock.
(n) Closing of Books. The Corporation shall at no time close its transfer
books against the transfer of any Preferred Stock or of any shares of Common
Stock issued or issuable upon the conversion of any shares of Preferred Stock in
any manner which interferes with the timely conversion or transfer of such
Preferred Stock or Common Stock.
(o) Good Faith. If any event occurs as to which in the reasonable opinion
of the Board of Directors of the Corporation, in good faith, the other
provisions of this Section 2 are not
12
strictly applicable but the lack of any adjustment in the Conversion Price of
any series of Preferred Stock would not in the opinion of the Board fairly
protect the Conversion Rights of the holders of such series of Preferred Stock
in accordance with the basic intent and principles of such provisions, or if
strictly applicable would not fairly protect the Conversion Rights of the
holders of such series of Preferred Stock in accordance with the basic intent
and principles of such provisions, then the Board of Directors of the
Corporation shall cause the Corporation forthwith to make such adjustment, if
any, to the Conversion Price, on a basis consistent with the basic intent and
principles of this Section 2, as it in good faith considers necessary to
preserve, without dilution, the Conversion Rights of all the holders of such
series of Preferred Stock.
Section 3. Restrictions.
(a) At any time when shares of Series A Preferred Stock are outstanding,
except where the vote of the holders of a greater number of shares of Series A
Preferred Stock is required by law or by this Certificate of Incorporation, and
in addition to any other vote required by law or this Certificate of
Incorporation, without the affirmative vote or written consent of the holders of
at least a majority in voting power of the then outstanding shares of Series A
Preferred Stock (with calculations based upon the number of shares of Common
Stock into which such shares of Series A Preferred Stock are then convertible),
voting together as a single class, the Corporation will not:
(i) amend, alter or change the designation of any preferences,
voting powers, qualifications, or special or relative rights or privileges of
the Series A Preferred Stock;
(ii) increase the authorized number of shares of Series A Preferred
Stock;
(iii) create, authorize or issue any class or series of stock having
any preference or priority over or being on a parity with any such preference or
priority of the Series A Preferred Stock or any security convertible into or
exchangeable or exercisable for any such class or series of stock;
(iv) effect any sale, lease, assignment, transfer or other
conveyance (other than the grant of a mortgage or security interest in
connection with indebtedness for borrowed money) of all or any substantial part
(i.e., more than twenty-five percent (25%) of the book value as reflected on the
most recent fiscal year-end consolidated balance sheet of the Corporation) of
the properties or assets of the Corporation;
(v) effect any liquidation, dissolution or winding up of, or any
consolidation or merger involving, the Corporation; or
(vi) effect any amendment, alteration or change of the By-Laws of
the Corporation that adversely affects the Series A Preferred Stock or the
holders thereof.
(b) At any time when shares of Series B Preferred Stock are outstanding,
except where the vote of the holders of a greater number of shares of Series B
Preferred Stock is required bylaw or by this Certificate of Incorporation, and
in addition to any other vote required by law or this Certificate of
Incorporation, without the affirmative vote or written consent of the holders of
at least two-thirds in voting power of the then outstanding shares of Series B
Preferred Stock (with calculations based upon the number of shares of Common
Stock into which such shares of Series
13
B Preferred Stock are then convertible), voting together as a single class, the
Corporation will not:
(i) amend, alter or change the designation of any preferences,
voting powers, qualifications, or special or relative rights or privileges of
the Series B Preferred Stock;
(ii) increase the authorized number of shares of Series B Preferred
Stock;
(iii) create, authorize or issue any class or series of stock having
any preference or priority over or being on a parity with any such preference or
priority of the Series B Preferred Stock or any security convertible into or
exchangeable or exercisable for any such class or series of stock;
(iv) effect any sale, lease, assignment, transfer or other
conveyance (other than the grant of a mortgage or security interest in
connection with indebtedness for borrowed money) of all or any substantial part
(i.e., more than twenty-five percent (25%) of the book value as reflected on the
most recent fiscal year-end consolidated balance sheet of the Corporation) of
the properties or assets of the Corporation;
(v) effect any liquidation, dissolution or winding up of, or any
consolidation or merger involving, the Corporation;
(vi) alter, amend or repeal any provision of the Certificate of
Incorporation; or
(vii) effect any amendment, alteration or change of the By-Laws of
the Corporation that adversely affects the Series B Preferred Stock or the
holders thereof.
(c) At any time when shares of Series C Preferred Stock are outstanding,
except where the vote of the holders of a greater number of shares of Series C
Preferred Stock is required by law or by this Certificate of Incorporation, and
in addition to any other vote required by law or this Certificate of
Incorporation, without the affirmative vote or written consent of the holders of
at least sixty percent (60%) in voting power of the then outstanding shares of
Series C Preferred Stock (with calculations based upon the number of shares of
Common Stock into which such shares of Series C Preferred Stock are then
convertible), voting together as a single class, the Corporation will not:
(i) amend, alter or change the designation of any preferences,
voting powers, qualifications, or special or relative rights or privileges of
the Series C Preferred Stock;
(ii) increase the authorized number of shares of capital stock of
the Corporation;
(iii) issue any shares of capital stock of the Corporation as
consideration (or partial consideration) for the Corporation's acquisition of
any entity or any property or assets of any entity;
(iv) create, authorize or issue any class or series of stock having
any preference or priority over or being on a parity with any such preference or
priority of the Series C Preferred Stock or any security convertible into or
exchangeable or exercisable for any such class or series of stock;
14
(v) effect any sale, lease, assignment, transfer or other conveyance
(other than the grant of a mortgage or security interest in connection with
indebtedness for borrowed money) of all or any substantial part (i.e., more than
twenty-five percent (25%) of the book value as reflected on the most recent
fiscal year-end consolidated balance sheet of the Corporation) of the properties
or assets of the Corporation, or any consolidation or merger involving the
Corporation, unless the consideration to be received in such transaction by
holders of Series C Preferred Stock is equal to or greater than $3.60 per share;
(vi) effect any liquidation, dissolution or winding up of the
Corporation;
(vii) alter, amend or repeal any provision of the Certificate of
Incorporation; or
(viii) effect any amendment, alteration or change of the By-Laws of
the Corporation that adversely affects the Series C Preferred Stock or the
holders thereof.
(d) Notwithstanding any other provision of this Certificate of
Incorporation or the Corporation's By-Laws to the contrary, written notice of
any action specified in Subsections 3(a), 3(b) or 3(c) shall be given in
accordance with Section 9 by the Corporation to each holder of each series of
Preferred Stock entitled to vote or consent with respect to such action at least
twenty (20) days before the dale on which the books of the Corporation shall
close or a record shall be taken with respect to such proposed action, or, if
there shall be no such date, at least twenty (20) days before the date when such
proposed action is scheduled to take place. Any holder of outstanding shares of
Preferred Stock may waive any notice required by this Subsection by a written
document specifically indicating such waiver.
Section 4. Voting Rights.
(a) Except as otherwise required by law or set forth in this Certificate
of Incorporation, the holders of Preferred Stock shall be entitled to notice of
any meeting of stockholders and shall vote together with the holders of Common
Stock as a single class upon any matter submitted to the stockholders for a
vote. With respect to all questions as to which, under law, stockholders are
required to vote by classes or series, each of the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock shall vote separately
as a single class and series apart from each other and from the Common Stock.
Shares of Common Stock and Preferred Stock shall entitle the holders thereof to
the following number of votes on any matter as to which they are entitled to
vote:
(i) holders of Common Stock shall have one vote per share; and
(ii) holders of Preferred Stock shall have that number of votes per
share as is equal to the number of shares of Common Stock (including fractions
of a share) into which each such share of Preferred Stock held by such holder
could be converted on the date for determination of stockholders entitled to
vote at the meeting or on the date of any written consent.
(b) Any provision of the By-Laws of the Corporation to the contrary
notwithstanding, the number of directors (including the Series A Directors and
the Series C Director (as such terms are defined below)) constituting the entire
Board of Directors of the Corporation may not be decreased below seven (7) or
increased above eight (8) without the prior written consent of (i) all of the
Series A Directors then in office and (ii) the Series C Director then in office.
The Board of Directors shall not delegate any of its powers or duties to any
committee of the Board of
15
Directors without the prior written consent of (i) all of the Series A Directors
then in office and (ii) the Series C Director then in office, and any such
committee shall include (i) at least one (1) Series A Director and (ii) the
Series C Director.
(c) At all times during which shares of Series A Preferred Stock remain
outstanding, the holders of the outstanding shares of Series A Preferred Stock
shall have the exclusive right, separately from the Series C Preferred Stock,
the Series B Preferred Stock and the Common Stock, to elect two (2) directors of
the Corporation (the "Series A Directors")). Each Series A Director shall be
elected by the affirmative vote or written consent of the holders of at least a
majority in voting power of the then outstanding shares of Series A Preferred
Stock (with calculations based upon the number of shares of Common Stock into
which such shares of Series A Preferred Stock are then convertible). If any
Series A Director shall cease to serve as a director for any reason, another
director elected by the holders of at least a majority in voting power of the
then outstanding shares of Series A Preferred Stock (with calculations based
upon the number of shares of Common Stock into which such shares of Series A
Preferred Stock are then convertible) shall replace such director. Each Series A
Director may be removed, with or without cause, and a replacement Series A
Director may be elected in his or her stead at any time by the affirmative vote
or written consent of the holders of at least a majority in voting power of the
then outstanding shares of Series A Preferred Stock (with calculations based
upon the number of shares of Common Stock into which such shares of Series A
Preferred Stock are then convertible).
(d) At all times during which shares of Series C Preferred Stock remain
outstanding, Merlin General Partner II Limited (in its capacities as general
partner of The Merlin Biosciences Fund L.P. and as managing partner of The
Merlin Biosciences Fund GbR; in both of such capacities, collectively,
"Merlin"), or, where Merlin no longer holds at least 500,000 shares of Common
Stock in the aggregate (including shares of Common Stock into which Merlin's
shares of Preferred Stock are then convertible), the holders of the outstanding
shares of Series C Preferred Stock, shall have the exclusive right, separately
from the Series B Preferred Stock, the Series A Preferred Stock and the Common
Stock, to elect one (1) director of the Corporation (the "Series C Director").
For so long as Merlin has the exclusive right to elect the Series C Director,
Merlin shall be able to elect, replace or remove the Series C Director by any
method it shall in its own discretion deem appropriate. At such time as Merlin
no longer has the exclusive right to appoint the Series C Director, the Series C
Director shall be elected, replaced and removed by the holders of the Series C
Preferred Stock as set forth in this Subsection 4(d) below. The Series C
Director shall be elected by the affirmative vote or written consent of the
holders of at least sixty percent (60%) in voting power of the then outstanding
shares of Series C Preferred Stock (with calculations based upon the number of
shares of Common Stock into which such shares of Series C Preferred Stock are
then convertible). If the Series C Director shall cease to serve as a director
for any reason, another director elected by the holders of at least sixty
percent (60%) in voting power of the then outstanding shares of Series C
Preferred Stock (with calculations based upon the number of shares of Common
Stock into which such shares of Series C Preferred Stock are then convertible)
shall replace such director. The Series C Director may be removed, with or
without cause, and a replacement Series C Director may be elected in his or her
stead, at any time by the affirmative vote or written consent of the holders of
at least sixty percent (60%) in voting power of the then outstanding shares of
Series C Preferred Stock (with calculations based upon the number of shares of
Common Stock into which such shares of Series C Preferred Stock are then
convertible).
16
(e) In addition to any rights which may be available under the
Corporation's By-Laws or otherwise under law, the holders of not less than (i)
twenty-five percent (25%) in voting power of the outstanding shares of Series A
Preferred Stock (with calculations based upon the number of shares of Common
Stock into which such shares of Series A Preferred Stock are then convertible)
or (ii) twenty-five percent (25%) in voting power of the outstanding shares of
Series C Preferred Stock (with calculations based upon the number of shares of
Common Stock into which such shares of Series C Preferred Stock are then
convertible) shall be entitled to call meetings of the stockholders of the
Corporation. Within five (5) business days after written application by such
holders, the President or Secretary, or such other officer of the Corporation as
may be authorized in the By-Laws of the Corporation to give notice of meetings
of stockholders of the Corporation, shall notify each stockholder of the
Corporation entitled to such notice of the date, time, place and purpose of such
meeting. No meeting of stockholders called pursuant to this Subsection 4(e)
shall take place more than ten (10) days after the date notice of such meeting
is given.
(f) The Corporation shall not alter, amend or repeal any provision of the
By-Laws without the consent of (i) all of the Series A Directors and (ii) the
Series C Director.
Section 5. Dividends.
(a) Dividends may be declared and paid on Common Stock from funds lawfully
available therefor as and when determined by the Board of Directors of the
Corporation; provided that no dividends shall be declared or paid on Common
Stock until all dividends accrued or declared but unpaid on the Preferred Stock
shall have been paid in full; and provided further that when and as dividends
are declared and paid on shares of Common Stock, the Corporation shall declare
and pay at the same time to each holder of Preferred Stock a dividend equal to
the dividend which would have been payable to such holder if the shares of
Preferred Stock held by such holder had been converted into Common Stock on the
record date for the determination of holders of Common Stock entitled to receive
such dividend.
(b) Dividends may be declared and paid on Preferred Stock from funds
lawfully available therefor as and when determined by the Board of Directors of
the Corporation; provided that (i) no dividends shall be declared or paid on
Series B Preferred Stock, Series A Preferred Stock or Common Stock until all
dividends accrued or declared but unpaid on the Series C Preferred Stock shall
have been paid in full; (ii) thereafter no dividends shall be declared or paid
on Series A Preferred Stock or Common Stock until all dividends accrued or
declared but unpaid on the Series B Preferred Stock shall have been paid in
full; (iii) when and as dividends are declared and paid on shares of Series B
Preferred Stock or Series A Preferred Stock, except pursuant to Subsection 5(a),
the Corporation shall declare and pay at the same time to each holder of Series
C Preferred Stock an equivalent dividend based on the number of shares of Common
Stock into which each share of Series C Preferred Stock is then convertible; and
(iv) when and as dividends are declared and paid on shares of Series A Preferred
Stock, except pursuant to Subsection 5(a), the Corporation shall declare and pay
at the same time to each holder of Series B Preferred Stock an equivalent
dividend based on the number of shares of Common Stock into which each share of
Series B Preferred Stock is then convertible.
(c) The holders of the Series C Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of any funds
legally available therefor, preferential cumulative dividends in cash at the
rate of seven percent (7.0%) per share per annum of the stated value thereof;
provided, however, that if the Corporation for any reason defaults on its
obligation to redeem any shares of Series C Preferred Stock in accordance with
Section 6 on or prior to the
17
redemption dates specified therein, then such rate shall increase by five
percentage points to twelve percent (12.0%) per share per annum of the stated
value thereof from the date of such default. For such purpose, the "stated
value" of each share of Series C Preferred Stock shall be $1.50 (which amount
shall be subject to equitable adjustment whenever there shall occur a stock
dividend, stock split, combination of shares, reclassification or similar event
with respect to the Series C Preferred Stock). Such dividends shall be
cumulative and shall accrue from the Original Issue Date (as defined in
Subsection 2(e)(i)(2)), whether or not earned or declared and whether or not in
any fiscal year there shall be net profits or surplus available for the payment
of dividends in such fiscal year. so that if in any fiscal year or years, such
dividends are not paid in whole or in part upon the Series C Preferred Stock,
the portion of such dividends as shall be unpaid shall accumulate as against the
holders of the Common Stock, Series A Preferred Stock and Series B Preferred
Stock.
(d) Subject to Subsection 5(b), the holders of the Series B Preferred
Stock shall be entitled to receive, when and as declared by the Board of
Directors, out of any funds legally available therefor, preferential cumulative
dividends in cash at the rate of seven percent (7.0%) per share per annum of the
stated value thereof; provided, however, that if the Corporation for any reason
defaults on its obligation to redeem any shares of Series B Preferred Stock in
accordance with Section 6 on or prior to the redemption dates specified therein,
then such rate shall increase by five percentage points to twelve percent
(12.0%) per share per annum of the stated value thereof from the date of such
default. For such purpose, the "stated value" of each share of Series B
Preferred Stock shall be $1.50 (which amount shall be subject to equitable
adjustment whenever there shall occur a stock dividend, stock split, combination
of shares, reclassification or similar event with respect to the Series B
Preferred Stock). Such dividends shall be cumulative and shall accrue from the
original issue date of the Series B Preferred Stock (January 28, 2000), whether
or not earned or declared and whether or not in any fiscal year there shall be
net profits or surplus available for the payment of dividends in such fiscal
year, so that if in any fiscal year or years, such dividends are not paid in
whole or in part upon the Series B Preferred Stock, the portion of such
dividends as shall be unpaid shall accumulate as against the holders of the
Common Stock and Series A Preferred Stock.
(e) No dividends shall be declared or paid on the Common Stock or
Preferred Stock except as set forth in this Section 5.
Section 6. Redemption.
(a) At the written election of any holder of Series C Preferred Stock or
Series B Preferred Stock made not less than thirty (30) days prior to each of
December 31, 2004, 2005 and 2006, the Corporation shall call for redemption, and
shall redeem from such holder not later than sixty (60) days after such December
31 as shall be applicable, up to one third (1/3) of the shares of Series C
Preferred Stock and/or Series B Preferred Stock (the "Redemption Shares") held
by such holder on December 31, 2004, at a Redemption Price equal to $1.50 per
share plus all dividends accrued or declared but unpaid, and any and all other
amounts owing with respect to, such shares on the redemption date (the
"Redemption Price"). The Redemption Price shall be appropriately adjusted to
take account of any stock dividend, stock split, combination of shares,
reclassification or other similar event with respect to the Redemption Shares.
If any such holder does not elect to redeem on any redemption date all of the
Redemption Shares held by such holder which such holder may elect to have
redeemed on such redemption date, such holder may elect to have such shares
redeemed on any subsequent redemption date, or on December 31 of
18
any year after 2006, by giving not less than thirty (30) days prior written
notice to the Corporation.
(b) Written notice of redemption shall be sent to each holder of record of
Redemption Shares to be redeemed, not less than thirty (30) days nor more than
sixty (60) days prior to the redemption date set forth therein. Such notice
shall set forth (i) the date and place of redemption, (ii) the number of shares
to be redeemed, and (iii) the Redemption Price. In the event that a notice of
redemption is given under this Subsection 6(b), the Corporation shall be
obligated to redeem the Redemption Shares noticed for redemption on the date and
in the amounts set forth in the notice. The Corporation, if advised to do so
before the close of business on the relevant redemption date by written notice
from any holder of record of Redemption Shares to be redeemed, shall credit
against the number of Redemption Shares required to be redeemed from such
holder, and shall not redeem, the number of Redemption Shares called for
redemption which have been converted by such holder after such holder made the
written election with respect to such shares described in Subsection 6(a) and on
or before such redemption date.
(c) If, on or before a redemption date, the funds necessary for such
redemption shall have been set aside by the Corporation and deposited with a
bank or trust company, in trust for the pro rata benefit of the holders of the
Redemption Shares that have been called for redemption, then, notwithstanding
that any certificates for shares that have been called for redemption shall not
have been surrendered for cancellation, the shares represented thereby shall no
longer be deemed outstanding from and after such redemption date, and all rights
of holders of such shares so called for redemption shall forthwith, after such
redemption date, cease and terminate with respect to such shares, excepting only
the right to receive the Redemption Price. Any interest accrued on funds so
deposited and unclaimed by stockholders entitled thereto shall be paid to such
stockholders at the time their respective shares are redeemed or to the
Corporation at the time unclaimed amounts are paid to it, In case the holders of
Redemption Shares which shall have been called for redemption shall not, within
three (3) years after the final redemption date, claim the amounts so deposited
with respect to the redemption thereof, any such bank or trust company shall,
upon demand, pay over to the Corporation such unclaimed amounts and thereupon
such bank or trust company shall be relieved of all responsibility in respect
thereof to such holder and such holder shall look only to the Corporation for
the payment thereof. Any funds so deposited with a bank or trust company which
shall not be required for such redemption by reason of the exercise subsequent
to the date of such deposit of the right of conversion of any shares or
otherwise shall be returned to the Corporation forthwith.
(d) If the Corporation for any reason defaults on its obligation to redeem
any of the Redemption Shares in accordance with Subsection 6(a) on or prior to
the redemption date specified therein, then, notwithstanding anything to the
contrary contained in this Certificate of Incorporation, the Corporation may not
incur any indebtedness for money borrowed (unless the proceeds of such
occurrence of indebtedness are used to make all overdue redemptions) without the
prior affirmative vote or written consent of the holders of not less than
two-thirds in voting power of the then outstanding shares of Series B Preferred
Stock and Series C Preferred Stock voting together (with calculations based upon
the number of shares of Common Stock into which such shares of Series B
Preferred Stock and Series C Preferred Stock are then convertible), other than
borrowings or reborrowings under then-outstanding lines of credit with
institutional lenders and within then-existing credit limits, or under
replacement line of credit facilities with institutional lenders with no greater
credit limits, solely for the purposes of working capital.
19
(e) If the funds of the Corporation legally available for redemption of
shares of Series C Preferred Stock or Series B Preferred Stock on a redemption
date are insufficient to redeem the total number of shares of Series C Preferred
Stock and Series B Preferred Stock submitted for redemption, those funds which
are legally available will be used to redeem the maximum possible number of
whole shares ratably among the holders of such shares in proportion to the
redemption amounts otherwise payable to them. The shares of Series C Preferred
Stock and Series B Preferred Stock not redeemed shall remain outstanding and
entitled to all rights and preferences provided herein. At any time thereafter
when additional funds of the Corporation are legally available for the
redemption of such shares of Series B Preferred Stock and Series C Preferred
Stock submitted for redemption, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available.
Section 7. No Reissuance of Preferred Stock. No share or shares of
Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares which the Corporation shall be
authorized to issue.
Section 8. Residual Rights. All rights accruing to the outstanding shares
of the Corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.
Section 9. Notices. All notices to any party required or permitted to be
sent pursuant to this Article FOURTH ("Notices") shall be contained in a written
instrument addressed to such party at such party's address as it appears on the
books of the Corporation and shall be deemed given (a) when delivered in person
or duly sent by fax showing confirmation of receipt, (b) three days after being
duly sent by first-class mail, postage prepaid (other than in the case of
Notices to or from any non-U.S. resident, which Notices must be sent in the
manner specified in clause (a) or (c)), or (c) two days after being duly sent by
DHL, Federal Express or other recognized express international courier service.
Section 10. Preemptive Rights. Pursuant to the terms and conditions of a
certain Amended and Restated Shareholder Rights Agreement between the
Corporation and certain of its stockholders, each holder of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock is granted, so long
as such holder holds not less than 500,000 shares of the corporation's Common
Stock (including Common Stock issuable upon the conversion of the Preferred
Stock), the right of first refusal to purchase its pro rata share of any new
securities (subject to certain exceptions) that the Corporation may, from time
to time, propose to sell or issue. Such rights of first refusal shall terminate
and be of no further force or effect upon and following the close of a Qualified
Public Offering.
20
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EPICEPT CORPORATION
ADOPTED IN ACCORDANCE WITH THE PROVISIONS
OF SECTION 242 OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
EPICEPT CORPORATION, a corporation organized and existing under the
General Corporation Law of the State of Delaware, does hereby certify as
follows:
FIRST, that the Certificate of Incorporation of said corporation be
amended as follows:
By striking out ARTICLE FOURTH, as it now exists, and inserting in lieu
and instead thereof a new ARTICLE FOURTH reading as follows:
FOURTH: The total number of shares of all classes of stock which the
Corporation has authority to issue is 79,632,262 shares, consisting of (i)
60,000,000 shares of Common Stock, par value $.0001 per share (the "Common
Stock"), and (ii) 19,632,262 shares of Preferred Stock, par value $.000l
per share (the "Preferred Stock"), of which (A) 3,422,620 shares are
designated as Series A Convertible Preferred Stock (the "Series A
Preferred Stock"), (B) 3,440,069 shares are designated as Series B
Convertible Preferred Stock (the "Series B Preferred Stock") and (C)
12,769,573 shares are designated as Series C Convertible Preferred Stock
(the "Series C Preferred Stock"), amounting to an aggregate par value of
$7,963.23.
SECOND, In lieu of a meeting and vote of stockholders, the holders of at
least a majority of all the issued and outstanding capital stock entitled to
vote thereon have given their written consent to said amendment in accordance
with the provisions of Section 228 of the General Corporation Law of the State
of Delaware.
THIRD, The aforesaid amendment was duly adopted in accordance with the
applicable provisions of Sections 242 and 228 of the General Corporation Law of
the State of Delaware, including approval by the Board of Directors of the
Corporation.
IN WITNESS WHEREOF, EPICEPT CORPORATION has caused this certificate to be
signed by its Chief Executive Officer this 10th day of August, 2004.
/s/ John V. Talley, Jr.
----------------------------------------------
John V. Talley, Jr., Chief Executive Officer
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EPICEPT CORPORATION
EPICEPT CORPORATION (hereinafter called the "corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify:
1. The name of the corporation is EPICEPT CORPORATION.
2. The Certificate of Amendment of Certificate of Incorporation of the
corporation, which was filed by the Secretary of State of Delaware on August 18,
2004 (hereinafter called the "amendment"), is hereby corrected.
3. The inaccuracy or defect to be corrected in the amendment is as
follows:
The amendment inadvertently replaced the entire ARTICLE FOURTH
with the paragraph indicated as the new ARTICLE FOURTH in the amendment, rather
than merely replacing the first paragraph of ARTICLE FOURTH.
4. ARTICLE FOURTH of the instrument in corrected form is attached
hereto as EXHIBIT A.
IN WITNESS WHEREOF, EPICEPT CORPORATION has caused this certificate to be signed
by its Chief Executive Officer this 10th day of September, 2004.
/s/ John V. Talley, Jr.
---------------------------------------------
John V. Talley, Jr., Chief Executive Officer
EXHIBIT A
FOURTH: The total number of shares of all classes of stock which the
Corporation has authority to issue is 79,632,262 shares, consisting of (i)
60,000,000 shares of Common Stock, par value $.0001 per share (the "Common
Stock"), and (ii) 19,632,262 shares of Preferred Stock, par value $.0001 per
share (the "Preferred Stock"), of which (A) 3,422,620 shares are designated as
Series A Convertible Preferred Stock (the "Series A Preferred Stock"), (B)
3,440,069 shares are designated as Series B Convertible Preferred Stock (the
"Series B Preferred Stock") and (C) 12,769,573 shares are designated as Series C
Convertible Preferred Stock (the "Series C Preferred Stock"), amounting to an
aggregate par value of $7,963.23.
The powers, preferences and rights, and the qualifications, limitations or
restrictions thereof, in respect of each class or series of stock of the
Corporation shall be as follows:
Section 1. Liquidation Rights.
(a) Liquidation Payments.
(i) In the event of any liquidation, dissolution or winding up of
the affairs of the Corporation, whether voluntary or involuntary, the holders of
Series C Preferred Stock shall be entitled to be paid first out of the assets of
the Corporation available for distribution to holders of the Corporation's
capital stock of all classes an amount equal to $3.00 per share of Series C
Preferred Stock (which amount shall be subject to equitable adjustment whenever
there shall occur a stock dividend, stock split, combination of shares,
reclassification or other similar event with respect to the Series C Preferred
Stock), plus all dividends accrued or declared thereon but unpaid, to and
including the date full payment shall be tendered to the holders of the Series C
Preferred Stock with respect to such liquidation, dissolution or winding up.
If the assets of the Corporation shall be insufficient to permit the
payment in full to the holders of the Series C Preferred Stock of all amounts
distributable to them under this Subsection 1(a)(i), then the entire assets of
the Corporation available for such distribution shall be distributed ratably
among the holders of the Series C Preferred Stock in proportion to the full
preferential amount each such holder is otherwise entitled to receive under this
Subsection 1(a)(i).
No payment shall be made with respect to the Common Stock, Series B
Preferred Stock or Series A Preferred Stock unless and until full payment has
been made to the holders of the Series C Preferred Stock of the amounts that
they are entitled to receive under this Subsection 1(a)(i).
(ii) After the payments described in Subsection 1(a)(i) shall have
been made in full to the holders of the Series C Preferred Stock, or funds
necessary for such payments shall have been set aside by the Corporation in
trust for the account of holders of Series C Preferred Stock so as to be
available for such payments, the holders of Series B Preferred Stock shall be
entitled to be paid next out of the assets of the Corporation available for
distribution to holders of the Corporation's capital stock of all classes an
amount equal to $3.00 per share of Series B Preferred Stock (which amount shall
be subject to equitable adjustment whenever there shall occur a stock dividend,
stock split, combination of shares, reclassification or other similar event with
respect to the Series B Preferred Stock), plus all dividends accrued or declared
thereon but unpaid, to and including the date full payment shall be tendered to
the holders of the Series B Preferred Stock with respect to such liquidation,
dissolution or winding up.
If the assets of the Corporation shall be insufficient to permit the
payment in full to the holders of the Series B Preferred Stock of all amounts
distributable to them under this Subsection 1(a)(ii), then the entire assets of
the Corporation available for such distribution after payment under Subsection
1(a)(i) above shall be distributed ratably among the holders of the Series B
Preferred Stock in proportion to the full preferential amount each such holder
is otherwise entitled to receive under this Subsection 1(a)(ii).
No payment shall be made with respect to the Common Stock or Series A
Preferred Stock unless and until full payment has been made to the holders of
the Series B Preferred Stock of the amounts that they are entitled to receive
under this Subsection 1(a)(ii).
(iii) After the payments described in Subsections 1(a)(i) and
1(a)(ii) shall have been made in full to the holders of the Series C Preferred
Stock and the holders of the Series B Preferred Stock, or funds necessary for
such payments shall have been set aside by the Corporation in trust for the
account of holders of Series C Preferred Stock and Series B Preferred Stock so
as to be available for such payments, the holders of the Series A Preferred
Stock shall be entitled to be paid out of the assets of the Corporation
available for distribution to the holders of the Corporation's capital stock of
all classes $2.02 per share (subject to equitable adjustment in the event of any
stock dividend, stock split, combination of shares, recapitalization or other
similar event with respect to the Series A Preferred Stock) plus all dividends
declared thereon but unpaid, to and including the date full payment shall be
tendered to the holders of the Series A Preferred Stock with respect to such
liquidation, dissolution or winding up.
If the assets of the Corporation available for such distribution shall be
insufficient to permit the payment in full to the holders of the Series A
Preferred Stock of all amounts so distributable to them, then the entire assets
of the Corporation available for such distribution after payment under
Subsection 1(a)(i) and 1(a)(ii) above shall be distributed ratably among the
holders of the Series A Preferred Stock in proportion to the full preferential
amount each such holder is otherwise entitled to receive under this Subsection
1(a)(iii).
(iv) After the payments described in Subsections 1(a)(i), 1(a)(ii)
and 1(a)(iii) shall have been made in full to the holders of the Preferred
Stock, or funds necessary for such payments shall have been set aside by the
Corporation in trust for the account of holders of Preferred Stock so as to be
available for such payments, the remaining assets available for distribution
shall be distributed among the holders of the Common Stock and Preferred Stock
ratably in proportion to the number of shares of Common Stock then held by them
or issuable to them upon conversion of the Preferred Stock then held by them.
(v) Upon conversion of shares of Preferred Stock into shares of
Common Stock pursuant to Section 2 below, the holders of such Common Stock shall
not be entitled to any preferential payment or distribution in case of any
liquidation, dissolution or winding up, but shall share ratably in any
distribution of the assets of the Corporation to all the holders of Common
Stock.
(vi) The amounts payable with respect to shares of Series C
Preferred Stock, Series B Preferred Stock and Series A Preferred Stock under
this Subsection 1(a) are sometimes hereinafter referred to as "Series C
Liquidation Payments," "Series B Liquidation Payments" and "Series A Liquidation
Payments," respectively, and together are sometimes hereinafter referred to as
the "Liquidation Payments."
2
(b) Distributions Other than Cash. Whenever the distributions provided for
in this Section 1 shall be payable in property other than cash, the value of
such distributions shall be the fair market value of such property as determined
in good faith by the Board of Directors of the Corporation. The Corporation
shall give prompt written notice of such valuation to each holder of Preferred
Stock.
(c) Merger as Liquidation, etc. The merger or consolidation of the
Corporation into or with another corporation (except one in which the holders of
capital stock of the Corporation immediately prior to such merger or
consolidation continue to hold at least eighty percent (80%) in voting power of
the capital stock of the surviving corporation, in which case the provisions of
Subsection 2(h) shall apply), or the sale of all or substantially all of the
assets of the Corporation, shall be deemed to be a liquidation, dissolution or
winding up of the affairs of the Corporation for purposes of this Section 1: (i)
with respect to the Series C Preferred Stock, unless the holders of at least
sixty percent (60%) in voting power of the then outstanding shares of Series C
Preferred Stock (with calculations based upon the number of shares of Common
Stock into which such shares of Series C Preferred Stock are then convertible)
elect to the contrary, (ii) with respect to the Series B Preferred Stock, unless
the holders of at least two-thirds in voting power of the then outstanding
shares of Series B Preferred Stock (with calculations based upon the number of
shares of Common Stock into which such shares of Series B Preferred Stock are
then convertible) elect to the contrary, and (iii) with respect to the Series A
Preferred Stock, unless the holders of at least seventy-five percent (75%) in
voting power of the then outstanding shares of Series A Preferred Stock (with
calculations based upon the number of shares of Common Stock into which such
shares of Series A Preferred Stock are then convertible) elect to the contrary.
An election under Subsection 1(c)(i), (ii) or (iii) shall be made by giving
written notice thereof to the Corporation at least five (5) days before the
effective date of such merger, consolidation or sale. If such notice is given
with respect to a series of Preferred Stock, the provisions of Subsection 2(h)
shall apply to such series of Preferred Stock. Unless such election is made with
respect to a series of Preferred Stock, any amounts received by the holders of
such series of Preferred Stock as a result of such merger or consolidation shall
be deemed to be applied toward, and all consideration received by the
Corporation in such asset sale together with all other available assets of the
Corporation shall be distributed toward, the Liquidation Payments attributable
to the shares of such series of Preferred Stock in the order of preference set
forth in Subsection 1(a).
(d) Notice. Notice of any proposed liquidation, dissolution or winding up
of the affairs of the Corporation (including any merger, consolidation or sale
of assets which may be deemed to be a liquidation, dissolution or winding up of
the affairs of the Corporation under Subsection 1(c)), stating a payment date,
the amount of the Liquidation Payments and the place where said Liquidation
Payments shall be payable, shall be given to the holders of record of the
Preferred Stock not less than thirty (30) days prior to the payment date stated
therein. Any holder of outstanding shares of Preferred Stock may waive notice
required by this Subsection by a written document specifically indicating such
waiver.
Section 2. Conversion. The holders of Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert; Conversion Price. Each share of Preferred Stock
shall be convertible, without the payment of any additional consideration by the
holder thereof and at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the Corporation or any transfer
agent for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock as is determined in accordance with the following:
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(i) in the case of the Series A Preferred Stock, by dividing $2.02
by the Series A Conversion Price, determined as hereinafter provided, in effect
at the time of conversion. The Conversion Price at which shares of Common Stock
shall be deliverable upon conversion of Series A Preferred Stock without the
payment of any additional consideration by the holder thereof (the "Series A
Conversion Price") shall, as of the Original Issue Date, be $1.716 per share of
Common Stock. Such Series A Conversion Price shall be subject to adjustment, in
order to adjust the number of shares of Common Stock into which the Series A
Preferred Stock is convertible, as hereinafter provided.
(ii) in the case of the Series B Preferred Stock, by dividing $1.50
by the Series B Conversion Price, determined as hereinafter provided, in effect
at the time of conversion. The Conversion Price at which shares of Common Stock
shall be deliverable upon conversion of Series B Preferred Stock without the
payment of any additional consideration by the holder thereof (the "Series B
Conversion Price") shall initially be $1.50 per share of Common Stock. Such
initial Series B Conversion Price shall be subject to adjustment, in order to
adjust the number of shares of Common Stock into which the Series B Preferred
Stock is convertible, as hereinafter provided.
(iii) in the case of the Series C Preferred stock, by dividing $1.50
by the Series C Conversion Price, determined as hereinafter provided, in effect
at the time of conversion. The Conversion Price at which shares of Common Stock
shall be deliverable upon conversion of Series C Preferred Stock without the
payment of any additional consideration by the holder thereof (the "Series C
Conversion Price") shall initially be $1.50 per share of Common Stock. Such
initial Series C Conversion Price shall be subject to adjustment, in order to
adjust the number of shares of Common Stock into which the Series C Preferred
Stock is convertible, as hereinafter provided.
The right of conversion with respect to any shares of Series C Preferred
Stock or Series B Preferred Stock which shall have been called for redemption
under Section 6 hereof shall terminate at the close of business on the day fixed
for redemption unless the Corporation shall default in the payment of the
redemption price, in which case the right of conversion with respect to such
shares shall continue unless and until such redemption price is paid in full,
(b) Automatic Conversion.
(i) Each share of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock shall automatically be converted into shares of
Common Stock at the Series A Conversion Price, Series B Conversion Price or
Series C Conversion Price then in effect, as the case may be, upon the closing
of a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation to the
public at an offering price per share (prior to underwriter commissions and
discounts) of not less than $8.25 (as adjusted to reflect any stock dividends,
distributions, combinations, reclassifications or other like transactions
effected by the Corporation in respect of its Common Stock) and with gross
proceeds to the Corporation of not less than $15,000,000 (a "Qualified Public
Offering") (in the event of which offering, the person(s) entitled to receive
the Common Stock issuable upon such conversion of the Preferred Stock shall not
be deemed to have converted that Preferred Stock until the closing of such
offering).
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(ii) Each share of Series A Preferred Stock shall automatically be
converted into shares of Common Stock at the applicable Series A Conversion
Price then in effect upon the written election to require such automatic
conversion of the holders of not less than seventy-five percent (75%) in voting
power of the then outstanding shares of Series A Preferred Stock (with
calculations based upon the number of shares of Common Stock into which such
shares of Series A Preferred Stock are then convertible).
(iii) Each share of Series B Preferred Stock shall automatically be
converted into shares of Common Stock at the applicable Series B Conversion
Price then in effect upon the written election to require such automatic
conversion of the holders of not less than two-thirds in voting power of the
then outstanding shares of Series B Preferred Stock (with calculations based
upon the number of shares of Common Stock into which such shares of Series B
Preferred Stock are then convertible).
(iv) Each share of Series C Preferred Stock shall automatically be
converted into shares of Common Stock at the applicable Series C Conversion
Price then in effect upon the written election to require such automatic
conversion of the holders of not less than sixty percent (60%) in voting power
of the then outstanding shares of Series C Preferred Stock (with calculations
based upon the number of shares of Common Stock into which such shares of Series
C Preferred Stock are then convertible).
(c) Mechanics of Automatic Conversions. Upon the occurrence of any event
specified in Subsection 2(b), the Preferred Stock of the applicable series shall
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided that all holders
of shares of Preferred Stock being converted shall be given written notice of
the occurrence of the event specified in Subsection 2(b) triggering such
conversion, including the date such event occurred (the "Automatic Conversion
Date"), and the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless
certificates evidencing such shares of the Preferred Stock being converted are
either delivered to the Corporation or its transfer agent, or the holder
notifies the Corporation or any transfer agent that such certificates have been
lost, stolen, or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection therewith. On the Automatic Conversion Date, all rights with respect
to the Preferred Stock so converted, shall terminate, except any of the rights
of the holder thereof, upon surrender of the holder's certificate or
certificates therefor, to receive certificates representing the number of shares
of Common Stock into which such Preferred Stock has been converted, together
with cash in an amount equal to all dividends declared but unpaid on, and any
and all other amounts owing with respect to, the shares of Preferred Stock
converted to and including the time of conversion. Upon the automatic conversion
of any Preferred Stock, the holders of such Preferred Stock shall surrender the
certificates representing such shares at the office of the Corporation or of its
transfer agent. If so required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by written instrument or instruments
of transfer, in a form reasonably satisfactory to the Corporation, duly executed
by the registered holder or by the holder's attorney duly authorized in writing.
Upon surrender of such certificates there shall be issued and delivered to such
holder, promptly at such office and in the holder's name as shown on such
surrendered certificate or certificates, a certificate or certificates for the
number of shares of Common Stock into which the shares of the Preferred Stock
surrendered were convertible on the date on which such automatic conversion
occurred, together with cash in an amount equal to all
5
dividends declared but unpaid on, and any and all other amounts owing with
respect to, the shares of Preferred Stock converted to and including the time of
conversion. No fractional share of Common Stock shall be issued upon automatic
conversion of any Preferred Stock. In lieu of any fractional share to which the
holder would otherwise be entitled, the Corporation shall pay cash equal to such
fraction multiplied by the fair market value of one share of Common Stock on the
Automatic Conversion Date, as determined in good faith by the Board of
Directors.
(d) Mechanics of Optional Conversions. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of Common Stock, the
holder shall surrender the certificate or certificates therefor at the office of
the Corporation or of any transfer agent for the Preferred Stock, and shall give
written notice to the Corporation at such office that the holder elects to
convert the same and shall state therein the holder's name or the name or names
of the holder's nominees in which the holder wishes the certificate or
certificates for shares of Common Stock to be issued. On the date of conversion,
all rights with respect to the Preferred Stock so converted, shall terminate,
except any of the rights of the holders thereof, upon surrender of their
certificate or certificates therefor, to receive certificates for the number of
shares of Common Stock into which such Preferred Stock has been converted and
cash in an amount equal to all dividends declared but unpaid on, and any and all
other amounts owing with respect to, the shares of Preferred Stock being
converted to and including the time of conversion. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in a form
reasonably satisfactory to the Corporation, duly executed by the registered
holder or by the holder's attorney duly authorized in writing. No fractional
share of Common Stock shall be issued upon optional conversion of any Preferred
Stock. In lieu of any fractional share to which the holder would otherwise be
entitled, the Corporation shall pay cash equal to such fraction multiplied by
the then current fair market value of one share of Common Stock, as determined
in good faith by the Board of Directors. The Corporation shall, as soon as
practicable after surrender of the certificate or certificates for conversion,
issue and deliver at such office to such holder of Preferred Stock, or to the
holder's nominee or nominees, a certificate or certificates for the number of
shares of Common Stock to which the holder shall be entitled as aforesaid,
together with cash in lieu of any fraction of a share and cash in an amount
equal to all dividends declared but unpaid thereon and any and all other amounts
owing with respect thereto at such time. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the shares of Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date.
(e) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definitions. For purposes of this Subsection 2(e), the
following definitions shall apply:
(1) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(2) "Original Issue Date" shall mean the first date on which a
share of Series C Preferred Stock was issued.
6
(3) "Convertible Securities" shall mean any evidences of
indebtedness, shares of capital stock (other than Common Stock) or other
securities directly or indirectly convertible into or exchangeable for Common
Stock.
(4) "Additional Shares of Common Stock" shall mean all shares
of Common Stock issued (or, pursuant to Subsection 2(e)(iii), deemed to be
issued) by the Corporation after the Original Issue Date, other than:
(A) shares of Common Stock issued or issuable upon
conversion of shares of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock;
(B) up to 2,092,500 shares of Common Stock issued upon
exercise of options outstanding on the Original Issue Date; or
(C) up to 2,487 shares of Common Stock issued or
issuable upon exercise of options granted after the Original Issue Date under
the Corporation's 1995 Stock Option Plan, as amended and/or restated, which
options have per share exercise prices that are not less than the per share fair
market value of the Common Stock on the date of the option grant, and which
number may be adjusted upward by the affirmative vote of the Board of Directors
that includes the affirmative vote of (i) at least one (1) of the Series A
Directors and (ii) the Series C Director.
(ii) No Adjustment of Conversion Price. Except as set forth in
Subsection 2(e)(vi), no adjustment in the number of shares of Common Stock into
which any series of Preferred Stock is convertible shall be made, by adjustment
in the applicable Conversion Price for such series in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share for an
Additional Share of Common Stock (determined pursuant to subsection 2(e)(v))
issued or deemed to be issued by the Corporation is less than the applicable
Conversion Price for such series in effect on the date of, and immediately prior
to, the issue of such Additional Share of Common Stock.
(iii) Issue of Securities Deemed Issue of Additional Shares of
Common Stock.
(1) Options and Convertible Securities. In the event the
Corporation at any time or from time to time after the Original Issue Date shall
issue any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities entitled to receive any such
Options or Convertible Securities, then the maximum number of shares (as set
forth in the instrument relating thereto without regard to any provisions
contained therein for a subsequent adjustment of such number) of Common Stock
issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date; provided that in any such case in
which Additional Shares of Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price of any
series of Preferred Stock shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
7
(B) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price of any series of Preferred Stock adjusted upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be readjusted to reflect such increase or decrease
insofar as it affects such Options or the rights of conversion or exchange under
such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price of any series of Preferred Stock
adjusted upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be readjusted as if:
(I) In the case of Convertible Securities or
Options for Common Stock the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if any, actually received by
the Corporation upon such conversion or exchange; and
(II) in the case of Options for Convertible
Securities only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the Corporation
(determined pursuant to Subsection 2(e)(v)) upon the issue of the Convertible
Securities with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C) above
shall have the effect of increasing the Conversion Price of any series of
Preferred Stock to an amount which exceeds the lower of (i) the Conversion Price
of such series of Preferred Stock immediately prior to the original adjustment
date, or (ii) the Conversion Price of any such series of Preferred Stock that
would have resulted from any issuance of Additional Shares of Common Stock
between the original adjustment date and such readjustment date;
(E) in the case of any Options which expire by their
terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Conversion Price of any such series of Preferred Stock shall
be made until the expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause (C) above; and
(F) if such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made in the Conversion Price of any series of Preferred
Stock which became effective on such record date
8
shall be cancelled as of the close of business on such record date, and
thereafter the Conversion Price of such series of Preferred Stock shall be
adjusted pursuant to this Subsection 2(e)(iii) as of the actual date of their
issuance.
(2) Stock Dividends Stock Distributions and Subdivisions. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall declare or pay any dividend or make any other distribution on
the Common Stock payable in Common Stock or effect a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in Common Stock), then and in any such event, Additional
Shares of Common Stock shall be deemed to have been issued with respect to each
series of Preferred Stock:
(A) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of any class of securities entitled to receive such dividend or
distribution, or
(B) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which such corporate
action becomes effective.
If such record date shall have been fixed and no part of such dividend or
distribution shall have been paid on the date fixed therefor, the adjustment
previously made in the Conversion Price of any series of Preferred Stock which
became effective on such record date shall be cancelled as of the close of
business on such record date, and thereafter the Conversion Price of such series
of Preferred Stock shall be adjusted pursuant to this Subsection 2(e)(iii) as of
the time of actual payment of such dividend or distribution.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event that at any time or from time to time after
the Original Issue Date, the Corporation shall issue Additional Shares of Common
Stock (including, without limitation, Additional Shares of Common Stock deemed
to be issued pursuant to Subsection 2(e)(iii)(1) but excluding Additional Shares
of Common Stock deemed to be issued pursuant to Subsection 2(e)(iii)(2), which
event is dealt with in Subsection 2(e)(vi)(1)), without consideration or for a
consideration per share less than the Conversion Price for any series of
Preferred Stock in effect on the date of and immediately prior to such issue,
then and in such event, such Conversion Price shall be reduced, concurrently
with such issue, to a price determined in accordance with the following formula:
P(1)Q(1) + P(2)Q(2)
NCP = ---------------------
Q(1) + Q(2)
where:
NCP = New Series A Conversion Price, New Series B
Conversion Price or New Series C Conversion Price, as
applicable.
P(1) = Series A Conversion Price, Series B Conversion Price
or Series C Conversion Price, as applicable, in
effect immediately prior to new issue.
9
Q(1) = Number of shares of Common Stock outstanding, or
deemed to be outstanding as set forth below,
immediately prior to such issue.
P(2) = Weighted average price per share received by
the Corporation upon such issue.
Q(2) = Number of shares of Common Stock issued, or deemed to
have been issued, in the subject transaction.
provided that for the purpose of this Subsection 2(e)(iv), all shares of Common
Stock issuable upon conversion of shares of Preferred Stock outstanding
immediately prior to such issue shall be deemed to be outstanding, and
immediately after any Additional Shares of Common Stock are deemed issued
pursuant to Subsection 2(e)(iii), such Additional Shares of Common Stock shall
be deemed to be outstanding.
(v) Determination of Consideration. For purposes of this Subsection
2(e), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amounts of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of such issue, as determined
in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration per
share received by the Corporation for Additional Shares of Common Stock deemed
to have been issued pursuant to Subsection 2(e)(iii)(1), relating to Options and
Convertible Securities, shall be determined by dividing (x) the total amount, if
any, received or receivable by the Corporation as consideration for the issue of
such Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such consideration) payable to the Corporation upon the exercise of such Options
or the conversion or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible Securities, by (y)
the maximum number of shares of Common Stock (as set forth in the instruments
relating thereto, without regard to any provision contained therein for a
subsequent adjustment of such number) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities.
10
(vi) Adjustment for Dividends, Distributions, Subdivisions,
Combinations or Consolidations of Common Stock.
(1) Stock Dividends, Distributions or Subdivisions. In
the event the Corporation shall be deemed to issue Additional Shares of Common
Stock pursuant to Subsection 2(e)(iii)(2) in a stock dividend, stock
distribution or subdivision, the Conversion Price of each series of Preferred
Stock in effect immediately before such deemed issuance shall, concurrently with
the effectiveness of such deemed issuance, be proportionately decreased.
(2) Combinations or Consolidations. In the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Conversion Price of each series of Preferred Stock in effect immediately
prior to such combination or consolidation shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
(f) Adjustments for Certain Dividends and Distributions. In the event that
at any time or from time to time after the Original Issue Date the Corporation
shall make or issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, then and in
each such event provision shall be made so that the holders of each series of
Preferred Stock shall receive upon conversion thereof in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Preferred Stock been
converted into Common Stock on the date of such event and had they thereafter,
during the period from the date of such event to and including the conversion
date, retained such securities receivable by them as aforesaid during such
period, giving application during such period to all adjustments called for
herein.
(g) Adjustment for Reclassification, Exchange, or Substitution. In the
event that at any time or from time to time after the Original Issue Date, the
Common Stock issuable upon the conversion of any series of Preferred Stock shall
be changed into the same or a different number of shares of any class or series
of stock or other securities or property, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a merger, consolidation, or sale
of assets provided for below), then and in each such event the holder of any
shares of such series of Preferred Stock shall have the right thereafter to
convert such shares into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification,
or other change, by the holder of a number of shares of Common Stock equal to
the number of shares of Common Stock into which such shares of such series of
Preferred Stock might have been converted immediately prior to such
reorganization, reclassification, or change, all subject to further adjustment
as provided herein.
(h) Adjustment for Merger, Consolidation or Sale of Assets. In the event
that at any time or from time to time after the Original Issue Date, the
Corporation shall merge or consolidate with or into another entity or sell all
or substantially all of its assets (other than a consolidation, merger or sale
which is treated as a liquidation with respect to any series of Preferred Stock
pursuant to Subsection 1(c)), each share of each series of Preferred Stock shall
thereafter be convertible into the kind and amount of shares of stock or other
securities or property to which a holder of the number of shares of Common Stock
of the Corporation deliverable upon conversion of each such series of Preferred
Stock would have been entitled to receive upon such consolidation, merger or
sale; and, in such case, appropriate adjustment (as determined in good
11
faith by the Board of Directors) shall be made in the application of the
provisions set forth in this Section 2 with respect to the rights and interest
thereafter of the holders of each such series of Preferred Stock, to the end
that the provisions set forth in this Section 2 (including provisions with
respect to changes in and other adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other securities or property thereafter deliverable upon the
conversion of each such series of Preferred Stock.
(i) No Impairment. The Corporation shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but shall at
all times in good faith assist in the carrying out of all the provisions of this
Section 2 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment.
(j) Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Conversion Price pursuant to this Section 2, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each affected
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any affected holder of Preferred Stock, furnish or cause to be furnished
to such holder alike certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price for each series of Preferred Stock at
the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of each share of Preferred Stock.
(k) Notices of Record Date. In the event of any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend which is the same as cash dividends paid in previous
quarters) or other distribution, the Corporation shall send notice to each
holder of Preferred Stock at least ten (10) days prior to such record date
specifying the date on which any such record is to be taken for the purpose of
such dividend or distribution.
(l) Common Stock Reserved. The Corporation shall reserve and keep
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect conversion of
the Preferred Stock.
(m) Certain Taxes. The Corporation shall pay any issue or transfer taxes
payable in connection with the conversion of Preferred Stock; provided, however,
that the Corporation shall not be required to pay any tax which may be payable
in respect of any transfer to a name other than that of the holder of the
Preferred Stock.
(n) Closing of Books. The Corporation shall at no time close its transfer
books against the transfer of any Preferred Stock or of any shares of Common
Stock issued or issuable upon the conversion of any shares of Preferred Stock in
any manner which interferes with the timely conversion or transfer of such
Preferred Stock or Common Stock.
(o) Good Faith. If any event occurs as to which in the reasonable opinion
of the Board of Directors of the Corporation, in good faith, the other
provisions of this Section 2 are not
12
strictly applicable but the lack of any adjustment in the Conversion Price of
any series of Preferred Stock would not in the opinion of the Board fairly
protect the Conversion Rights of the holders of such series of Preferred Stock
in accordance with the basic intent and principles of such provisions, or if
strictly applicable would not fairly protect the Conversion Rights of the
holders of such series of Preferred Stock in accordance with the basic intent
and principles of such provisions, then the Board of Directors of the
Corporation shall cause the Corporation forthwith to make such adjustment, if
any, to the Conversion Price, on a basis consistent with the basic intent and
principles of this Section 2, as it in good faith considers necessary to
preserve, without dilution, the Conversion Rights of all the holders of such
series of Preferred Stock.
Section 3. Restrictions.
(a) At any time when shares of Series A Preferred Stock are outstanding,
except where the vote of the holders of a greater number of shares of Series A
Preferred Stock is required by law or by this Certificate of Incorporation, and
in addition to any other vote required by law or this Certificate of
Incorporation, without the affirmative vote or written consent of the holders of
at least a majority in voting power of the then outstanding shares of Series A
Preferred Stock (with calculations based upon the number of shares of Common
Stock into which such shares of Series A Preferred Stock are then convertible),
voting together as a single class, the Corporation will not:
(i) amend, alter or change the designation of any preferences,
voting powers, qualifications, or special or relative rights or privileges of
the Series A Preferred Stock;
(ii) increase the authorized number of shares of Series A Preferred
Stock;
(iii) create, authorize or issue any class or series of stock having
any preference or priority over or being on a parity with any such preference or
priority of the Series A Preferred Stock or any security convertible into or
exchangeable or exercisable for any such class or series of stock;
(iv) effect any sale, lease, assignment, transfer or other
conveyance (other than the grant of a mortgage or security interest in
connection with indebtedness for borrowed money) of all or any substantial part
(i.e., more than twenty-five percent (25%) of the book value as reflected on the
most recent fiscal year-end consolidated balance sheet of the Corporation) of
the properties or assets of the Corporation;
(v) effect any liquidation, dissolution or winding up of, or any
consolidation or merger involving, the Corporation; or
(vi) effect any amendment, alteration or change of the By-Laws of
the Corporation that adversely affects the Series A Preferred Stock or the
holders thereof.
(b) At any time when shares of Series B Preferred Stock are outstanding,
except where the vote of the holders of a greater number of shares of Series B
Preferred Stock is required by law or by this Certificate of Incorporation, and
in addition to any other vote required by law or this Certificate of
Incorporation, without the affirmative vote or written consent of the holders of
at least two-thirds in voting power of the then outstanding shares of Series B
Preferred Stock (with calculations based upon the number of shares of Common
Stock into which such shares of
13
Series B Preferred Stock are then convertible), voting together as a single
class, the Corporation will not:
(i) amend, alter or change the designation of any preferences,
voting powers, qualifications, or special or relative rights or privileges of
the Series B Preferred Stock;
(ii) increase the authorized number of shares of Series B Preferred
Stock;
(iii) create, authorize or issue any class or series of stock having
any preference or priority over or being on a parity with any such preference or
priority of the Series B Preferred Stock or any security convertible into or
exchangeable or exercisable for any such class or series of stock;
(iv) effect any sale, lease, assignment, transfer or other
conveyance (other than the grant of a mortgage or security interest in
connection with indebtedness for borrowed money) of all or any substantial part
(i.e., more than twenty-five percent (25%) of the book value as reflected on the
most recent fiscal year-end consolidated balance sheet of the Corporation) of
the properties or assets of the Corporation;
(v) effect any liquidation, dissolution or winding up of, or any
consolidation or merger involving, the Corporation;
(vi) alter, amend or repeal any provision of the Certificate of
Incorporation; or
(vii) effect any amendment, alteration or change of the By-Laws of
the Corporation that adversely affects the Series B Preferred Stock or the
holders thereof.
(c) At any time when shares of Series C Preferred Stock are outstanding,
except where the vote of the holders of a greater number of shares of Series C
Preferred Stock is required by law or by this Certificate of Incorporation, and
in addition to any other vote required by law or this Certificate of
Incorporation, without the affirmative vote or written consent of the holders of
at least sixty percent (60%) in voting power of the then outstanding shares of
Series C Preferred Stock (with calculations based upon the number of shares of
Common Stock into which such shares of Series C Preferred Stock are then
convertible), voting together as a single class, the Corporation will not:
(i) amend, alter or change the designation of any preferences,
voting powers, qualifications, or special or relative rights or privileges of
the Series C Preferred Stock;
(ii) increase the authorized number of shares of capital stock of
the Corporation;
(iii) issue any shares of capital stock of the Corporation as
consideration (or partial consideration) for the Corporation's acquisition of
any entity or any property or assets of any entity;
(iv) create, authorize or issue any class or series of stock having
any preference or priority over or being on a parity with any such preference or
priority of the Series C Preferred Stock or any security convertible into or
exchangeable or exercisable for any such class or series of stock;
14
(v) effect any sale, lease, assignment, transfer or other conveyance
(other than the grant of a mortgage or security interest in connection with
indebtedness for borrowed money) of all or any substantial part (i.e., more than
twenty-five percent (25%) of the book value as reflected on the most recent
fiscal year-end consolidated balance sheet of the Corporation) of the properties
or assets of the Corporation, or any consolidation or merger involving the
Corporation, unless the consideration to be received in such transaction by
holders of Series C Preferred Stock is equal to or greater than $3.60 per share;
(vi) effect any liquidation, dissolution or winding up of the
Corporation;
(vii) alter, amend or repeal any provision of the Certificate of
Incorporation; or
(viii) effect any amendment, alteration or change of the By-Laws of
the Corporation that adversely affects the Series C Preferred Stock or the
holders thereof.
(d) Notwithstanding any other provision of this Certificate of
Incorporation or the Corporation's By-Laws to the contrary, written notice of
any action specified in Subsections 3(a), 3(b) or 3(c) shall be given in
accordance with Section 9 by the Corporation to each holder of each series of
Preferred Stock entitled to vote or consent with respect to such action at least
twenty (20) days before the date on which the books of the Corporation shall
close or a record shall be taken with respect to such proposed action, or, if
there shall be no such date, at least twenty (20) days before the date when such
proposed action is scheduled to take place. Any holder of outstanding shares of
Preferred Stock may waive any notice required by this Subsection by a written
document specifically indicating such waiver.
Section 4. Voting Rights.
(a) Except as otherwise required by law or set forth in this Certificate
of Incorporation, the holders of Preferred Stock shall be entitled to notice of
any meeting of stockholders and shall vote together with the holders of Common
Stock as a single class upon any matter submitted to the stockholders for a
vote. With respect to all questions as to which, under law, stockholders are
required to vote by classes or series, each of the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock shall vote separately
as a single class and series apart from each other and from the Common Stock.
Shares of Common Stock and Preferred Stock shall entitle the holders thereof to
the following number of votes on any matter as to which they are entitled to
vote:
(i) holders of Common Stock shall have one vote per share; and
(ii) holders of Preferred Stock shall have that number of votes per
share as is equal to the number of shares of Common Stock (including fractions
of a share) into which each such share of Preferred Stock held by such holder
could be converted on the date for determination of stockholders entitled to
vote at the meeting or on the date of any written consent.
(b) Any provision of the By-Laws of the Corporation to the contrary
notwithstanding, the number of directors (including the Series A Directors and
the Series C Director (as such terms are defined below)) constituting the entire
Board of Directors of the Corporation may not be decreased below seven (7) or
increased above eight (8) without the prior written consent of (i) all of the
Series A Directors then in office and (ii) the Series C Director then in office.
The Board of Directors shall not delegate any of its powers or duties to any
committee of the Board of
15
Directors without the prior written consent of (i) all of the Series A Directors
then in office and (ii) the Series C Director then in office, and any such
committee shall include (i) at least one (1) Series A Director and (ii) the
Series C Director.
(c) At all times during which shares of Series A Preferred Stock remain
outstanding, the holders of the outstanding shares of Series A Preferred Stock
shall have the exclusive right, separately from the Series C Preferred Stock,
the Series B Preferred Stock and the Common Stock, to elect two (2) directors of
the Corporation (the "Series A Directors")). Each Series A Director shall be
elected by the affirmative vote or written consent of the holders of at least a
majority in voting power of the then outstanding shares of Series A Preferred
Stock (with calculations based upon the number of shares of Common Stock into
which such shares of Series A Preferred Stock are then convertible). If any
Series A Director shall cease to serve as a director for any reason, another
director elected by the holders of at least a majority in voting power of the
then outstanding shares of Series A Preferred Stock (with calculations based
upon the number of shares of Common Stock into which such shares of Series A
Preferred Stock are then convertible) shall replace such director. Each Series A
Director may be removed, with or without cause, and a replacement Series A
Director may be elected in his or her stead, at any time by the affirmative vote
or written consent of the holders of at least a majority in voting power of the
then outstanding shares of Series A Preferred Stock (with calculations based
upon the number of shares of Common Stock into which such shares of Series A
Preferred Stock are then convertible).
(d) At all times during which shares of Series C Preferred Stock remain
outstanding, Merlin General Partner II Limited (in its capacities as general
partner of The Merlin Biosciences Fund L.P. and as managing partner of The
Merlin Biosciences Fund GbR; in both of such capacities, collectively,
"Merlin"), or, where Merlin no longer holds at least 500,000 shares of Common
Stock in the aggregate (including shares of Common Stock into which Merlin's
shares of Preferred Stock are then convertible), the holders of the outstanding
shares of Series C Preferred Stock, shall have the exclusive right, separately
from the Series B Preferred Stock, the Series A Preferred Stock and the Common
Stock, to elect one (1) director of the Corporation (the "Series C Director").
For so long as Merlin has the exclusive right to elect the Series C Director,
Merlin shall be able to elect, replace or remove the Series C Director by any
method it shall in its own discretion deem appropriate. At such time as Merlin
no longer has the exclusive right to appoint the Series C Director, the Series C
Director shall be elected, replaced and removed by the holders of the Series C
Preferred Stock as set forth in this Subsection 4(d) below. The Series C
Director shall be elected by the affirmative vote or written consent of the
holders of at least sixty percent (60%) in voting power of the then outstanding
shares of Series C Preferred Stock (with calculations based upon the number of
shares of Common Stock into which such shares of Series C Preferred Stock are
then convertible). If the Series C Director shall cease to serve as a director
for any reason, another director elected by the holders of at least sixty
percent (60%) in voting power of the then outstanding shares of Series C
Preferred Stock (with calculations based upon the number of shares of Common
Stock into which such shares of Series C Preferred Stock are then convertible)
shall replace such director. The Series C Director may be removed, with or
without cause, and a replacement Series C Director may be elected in his or her
stead, at any time by the affirmative vote or written consent of the holders of
at least sixty percent (60%) in voting power of the then outstanding shares of
Series C Preferred Stock (with calculations based upon the number of shares of
Common Stock into which such shares of Series C Preferred Stock are then
convertible).
16
(e) In addition to any rights which may be available under the
Corporation's By-Laws or otherwise under law, the holders of not less than (i)
twenty-five percent (25%) in voting power of the outstanding shares of Series A
Preferred Stock (with calculations based upon the number of shares of Common
Stock into which such shares of Series A Preferred Stock are then convertible)
or (ii) twenty-five percent (25%) in voting power of the outstanding shares of
Series C Preferred Stock (with calculations based upon the number of shares of
Common Stock into which such shares of Series C Preferred Stock are then
convertible) shall be entitled to call meetings of the stockholders of the
Corporation. Within five (5) business days alter written application by such
holders, the President or Secretary, or such other officer of the Corporation as
may be authorized in the By-Laws of the Corporation to give notice of meetings
of stockholders of the Corporation, shall notify each stockholder of the
Corporation entitled to such notice of the date, time, place and purpose of such
meeting. No meeting of stockholders called pursuant to this Subsection 4(e)
shall take place more than ten (10) days after the date notice of such meeting
is given.
(f) The Corporation shall not alter, amend or repeal any provision of the
By-Laws without the consent of (i) all of the Series A Directors and (ii) the
Series C Director.
Section 5. Dividends.
(a) Dividends may be declared and paid on Common Stock from funds lawfully
available therefor as and when determined by the Board of Directors of the
Corporation; provided that no dividends shall be declared or paid on Common
Stock until all dividends accrued or declared but unpaid on the Preferred Stock
shall have been paid in full; and provided further that when and as dividends
are declared and paid on shares of Common Stock, the Corporation shall declare
and pay at the same time to each holder of Preferred Stock a dividend equal to
the dividend which would have been payable to such holder if the shares of
Preferred Stock held by such holder had been converted into Common Stock on the
record date for the determination of holders of Common Stock entitled to receive
such dividend.
(b) Dividends may be declared and paid on Preferred Stock from funds
lawfully available therefor as and when determined by the Board of Directors of
the Corporation; provided that (i) no dividends shall be declared or paid on
Series B Preferred Stock, Series A Preferred Stock or Common Stock until all
dividends accrued or declared but unpaid on the Series C Preferred Stock shall
have been paid in full; (ii) thereafter no dividends shall be declared or paid
on Series A Preferred Stock or Common Stock until all dividends accrued or
declared but unpaid on the Series B Preferred Stock shall have been paid in
full; (iii) when and as dividends are declared and paid on shares of Series B
Preferred Stock or Series A Preferred Stock, except pursuant to Subsection 5(a),
the Corporation shall declare and pay at the same time to each holder of Series
C Preferred Stock an equivalent dividend based on the number of shares of Common
Stock into which each share of Series C Preferred Stock is then convertible; and
(iv) when and as dividends are declared and paid on shares of Series A Preferred
Stock, except pursuant to Subsection 5(a), the Corporation shall declare and pay
at the same time to each holder of Series B Preferred Stock an equivalent
dividend based on the number of shares of Common Stock into which each share of
Series B Preferred Stock is then convertible.
(c) The holders of the Series C Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of any funds
legally available therefor, preferential cumulative dividends in cash at the
rate of seven percent (7.0%) per share per annum of the stated value thereof;
provided, however, that if the Corporation for any reason defaults on its
obligation to redeem any shares of Series C Preferred Stock in accordance with
Section 6 on or prior to the
17
redemption dates specified therein, then such rate shall increase by five
percentage points to twelve percent (12.0%) per share per annum of the stated
value thereof from the date of such default. For such purpose, the "stated
value" of each share of Series C Preferred Stock shall be $1.50 (which amount
shall be subject to equitable adjustment whenever there shall occur a stock
dividend, stock split, combination of shares, reclassification or similar event
with respect to the Series C Preferred Stock). Such dividends shall be
cumulative and shall accrue from the Original Issue Date (as defined in
Subsection 2(e)(i)(2)), whether or not earned or declared and whether or not in
any fiscal year there shall be net profits or surplus available for the payment
of dividends in such fiscal year, so that if in any fiscal year or years, such
dividends are not paid in whole or in part upon the Series C Preferred Stock,
the portion of such dividends as shall be unpaid shall accumulate as against the
holders of the Common Stock, Series A Preferred Stock and Series B Preferred
Stock.
(d) Subject to Subsection 5(b), the holders of the Series B Preferred
Stock shall be entitled to receive, when and as declared by the Board of
Directors, out of any funds legally available therefor, preferential cumulative
dividends in cash at the rate of seven percent (7.0%) per share per annum of the
stated value thereof; provided, however, that if the Corporation for any reason
defaults on its obligation to redeem any shares of Series B Preferred Stock in
accordance with Section 6 on or prior to the redemption dates specified therein,
then such rate shall increase by five percentage points to twelve percent
(12.0%) per share per annum of the stated value thereof from the date of such
default. For such purpose, the "stated value" of each share of Series B
Preferred Stock shall be $1.50 (which amount shall be subject to equitable
adjustment whenever there shall occur a stock dividend, stock split, combination
of shares, reclassification or similar event with respect to the Series B
Preferred Stock). Such dividends shall be cumulative and shall accrue from the
original issue date of the Series B Preferred Stock (January 28, 2000), whether
or not earned or declared and whether or not in any fiscal year there shall be
net profits or surplus available for the payment of dividends in such fiscal
year, so that if in any fiscal year or years, such dividends are not paid in
whole or in part upon the Series B Preferred Stock, the portion of such
dividends as shall be unpaid shall accumulate as against the holders of the
Common Stock and Series A Preferred Stock.
(e) No dividends shall be declared or paid on the Common Stock or
Preferred Stock except as set forth in this Section 5.
Section 6. Redemption.
(a) At the written election of any holder of Series C Preferred Stock or
Series B Preferred Stock made not less than thirty (30) days prior to each of
December 31, 2004, 2005 and 2006, the Corporation shall call for redemption, and
shall redeem from such holder not later than sixty (60) days after such December
31 as shall be applicable, up to one third (1/3) of the shares of Series C
Preferred Stock and/or Series B Preferred Stock (the "Redemption Shares") held
by such holder on December 31, 2004, at a Redemption Price equal to $1.50 per
share plus all dividends accrued or declared but unpaid, and any and all other
amounts owing with respect to, such shares on the redemption date (the
"Redemption Price"). The Redemption Price shall be appropriately adjusted to
take account of any stock dividend, stock split, combination of shares,
reclassification or other similar event with respect to the Redemption Shares.
If any such holder does not elect to redeem on any redemption date all of the
Redemption Shares held by such holder which such holder may elect to have
redeemed on such redemption date, such holder may elect to have such shares
redeemed on any subsequent redemption date, or on December 31 of
18
any year after 2006, by giving not less than thirty (30) days prior written
notice to the Corporation.
(b) Written notice of redemption shall be sent to each holder of record of
Redemption Shares to be redeemed, not less than thirty (30) days nor more than
sixty (60) days prior to the redemption date set forth therein. Such notice
shall set forth (i) the date and place of redemption, (ii) the number of shares
to be redeemed, and (iii) the Redemption Price. In the event that a notice of
redemption is given under this Subsection 6(b), the Corporation shall be
obligated to redeem the Redemption Shares noticed for redemption on the date and
in the amounts set forth in the notice. The Corporation, if advised to do so
before the close of business on the relevant redemption date by written notice
from any holder of record of Redemption Shares to be redeemed, shall credit
against the number of Redemption Shares required to be redeemed from such
bolder, and shall not redeem, the number of Redemption Shares called for
redemption which have been converted by such holder after such holder made the
written election with respect to such shares described in Subsection 6(a) and on
or before such redemption date.
(c) If, on or before a redemption date, the funds necessary for such
redemption shall have been set aside by the Corporation and deposited with a
bank or trust company, in trust for the pro rata benefit of the holders of the
Redemption Shares that have been called for redemption, then, notwithstanding
that any certificates for shares that have been called for redemption shall not
have been surrendered for cancellation, the shares represented thereby shall no
longer be deemed outstanding from and alter such redemption date, and all rights
of holders of such shares so called for redemption shall forthwith, after such
redemption date, cease and terminate with respect to such shares, excepting only
the right to receive the Redemption Price. Any interest accrued on funds so
deposited and unclaimed by stockholders entitled thereto shall be paid to such
stockholders at the time their respective shares are redeemed or to the
Corporation at the time unclaimed amounts are paid to it. In case the holders of
Redemption Shares which shall have been called for redemption shall not, within
three (3) years after the final redemption date, claim the amounts so deposited
with respect to the redemption thereof, any such bank or trust company shall,
upon demand, pay over to the Corporation such unclaimed amounts and thereupon
such bank or trust company shall be relieved of all responsibility in respect
thereof to such holder and such holder shall look only to the Corporation for
the payment thereof. Any funds so deposited with a bank or trust company which
shall not be required for such redemption by reason of the exercise subsequent
to the date of such deposit of the right of conversion of any shares or
otherwise shall be returned to the Corporation forthwith.
(d) If the Corporation for any reason defaults on its obligation to redeem
any of the Redemption Shares in accordance with Subsection 6(a) on or prior to
the redemption date specified therein, then, notwithstanding anything to the
contrary contained in this Certificate of Incorporation, the Corporation may not
incur any indebtedness for money borrowed (unless the proceeds of such
incurrence of indebtedness are used to make all overdue redemptions) without the
prior affirmative vote or written consent of the holders of not less than
two-thirds in voting power of the then outstanding shares of Series B Preferred
Stock and Series C Preferred Stock voting together (with calculations based upon
the number of shares of Common Stock into which such shares of Series B
Preferred Stock and Series C Preferred Stock are then convertible), other than
borrowings or reborrowings under then-outstanding lines of credit with
institutional lenders and within then-existing credit limits, or under
replacement line of credit facilities with institutional lenders with no greater
credit limits, solely for the purposes of working capital.
19
(e) If the funds of the Corporation legally available for redemption of
shares of Series C Preferred Stock or Series B Preferred Stock on a redemption
date are insufficient to redeem the total number of shares of Series C Preferred
Stock and Series B Preferred Stock submitted for redemption, those funds which
are legally available will be used to redeem the maximum possible number of
whole shares ratably among the holders of such shares in proportion to the
redemption amounts otherwise payable to them. The shares of Series C Preferred
Stock and Series B Preferred Stock not redeemed shall remain outstanding and
entitled to all rights and preferences provided herein. At any time thereafter
when additional funds of the Corporation are legally available for the
redemption of such shares of Series B Preferred Stock and Series C Preferred
Stock submitted for redemption, such funds will be used, at the end of the next
succeeding fiscal quarter, to redeem the balance of such shares, or such portion
thereof for which funds are then legally available.
Section 7. No Reissuance of Preferred Stock. No share or shares of
Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares which the Corporation shall be
authorized to issue.
Section 8. Residual Rights. All rights accruing to the outstanding shares
of the Corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.
Section 9. Notices. All notices to any party required or permitted to be
sent pursuant to this Article FOURTH ("Notices") shall be contained in a written
instrument addressed to such party at such party's address as it appears on the
books of the Corporation and shall be deemed given (a) when delivered in person
or duly sent by fax showing confirmation of receipt, (b) three days after being
duly sent by first-class mail, postage prepaid (other than in the case of
Notices to or from any non-U.S. resident, which Notices must be sent in the
manner specified in clause (a) or (c)), or (c) two days after being duly sent by
DHL, Federal Express or other recognized express international courier service.
Section 10. Preemptive Rights. Pursuant to the terms and conditions of a
certain Amended and Restated Shareholder Rights Agreement between the
Corporation and certain of its stockholders, each holder of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock is granted, so long
as such holder holds not less than 500,000 shares of the Corporation's Common
Stock (including Common Stock issuable upon the conversion of the Preferred
Stock), the right of first refusal to purchase its pro rata share of any new
securities (subject to certain exceptions) that the Corporation may, from time
to time, propose to sell or issue. Such rights of first refusal shall terminate
and be of no further force or effect upon and following the close of a Qualified
Public Offering.
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