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Exhibit No. 3.4
CERTIFICATE OF DESIGNATION
for
SERIES B CONVERTIBLE PREFERRED STOCK
of
HYBRIDON, INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
HYBRIDON, INC., a corporation organized and existing under the laws
of the State of Delaware (the "Corporation"), does hereby certify that pursuant
to the authority conferred on the board of directors of the Corporation (the
"Board of Directors") by the Restated Certificate of Incorporation, as amended
(the "Certificate of Incorporation") of the Corporation and in accordance with
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors adopted the following resolution establishing a series of 85,000
shares of preferred stock of the Corporation designated as "Series B Convertible
Preferred Stock":
RESOLVED, that pursuant to the authority conferred on the Board of
Directors by the Certificate of Incorporation, a series of preferred stock,
par value $.01 per share, of the Corporation is hereby established and
created, and that the designation and number of shares thereof and the
voting and other powers, preferences and relative participating, optional
or other special rights of, the shares of such series and the
qualifications, limitations and restrictions thereof are as follows:
Series B Convertible Preferred Stock
1. Designation and Amount and Definitions. (a) There shall be
a series of Preferred Stock designated as "Series B Convertible Preferred Stock"
and the number of shares constituting such series shall be 85,000. Such series
is referred to herein as the "Series B Preferred Stock". Notwithstanding any
other provision in this Certificate of Designation of the Series B Preferred
Stock (the "Certificate of Designation") to the contrary, such series shall be
senior to the common stock, par value $.001 per share of the Corporation (the
"Common Stock"), and the Series A Convertible Preferred Stock, $.01 par value
per share, of the Corporation (the "Series A Preferred Stock"), with respect to
dividends and the distribution of assets upon liquidation, dissolution or
winding up. Such number of shares may be increased or decreased by resolution of
the Board of Directors, subject to the provisions of Section 7 hereof; provided,
however, that no decrease shall reduce the number of shares of Series B
Preferred Stock to fewer than the number of shares then issued and outstanding.
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(b) As used in this Certificate of Designation, except as
otherwise provided in Subsection 4(c), the following terms shall have the
following meanings:
(i) "Closing Bid Price" for any security for
each trading day shall be the reported per share closing bid
price of such security regular way on the Stock Market on such
trading day, or, if there were no transactions on such trading
day, the average of the reported closing bid and asked prices,
regular way, of such security on the relevant Stock Market on
such trading day.
(ii) "Fair Market Value" of any asset
(including any security) means the fair market value thereof
as mutually determined by the Corporation and the holders of a
majority of the Series B Preferred Stock then outstanding. If
the Corporation and the holders of a majority of the Series B
Preferred Stock then outstanding are unable to reach agreement
on any valuation matter, such valuation shall be submitted to
and determined by a nationally recognized independent
investment bank selected by the Board of Directors and the
holders of a majority of the Series B Preferred Stock then
outstanding (or, if such selection cannot be agreed upon
promptly, or in any event within ten (10) days, then such
valuation shall be made by a nationally recognized independent
investment banking firm selected by the American Arbitration
Association in New York City in accordance with its rules),
the costs of which valuation shall be paid for by the
Corporation.
(iii) "Market Price" shall mean the average
Closing Bid Price for twenty (20) consecutive trading days,
ending with the trading day prior to the date as of which the
Market Price is being determined (with appropriate adjustments
for subdivisions or combinations of shares effected during
such period), provided that if the prices referred to in the
definition of Closing Bid Price cannot be determined on any
trading day, the Closing Bid Price for such trading day will
be deemed to equal Fair Market Value of such security on such
trading day.
(iv) "Registered Holders" shall mean, at any
time, the holders of record of the Series B Preferred Stock.
(v) "Stock Market" shall mean, with respect
to any security, the principal national securities exchange on
which such security is listed or admitted to trading or, if
such security is not listed or admitted to trading on any
national securities exchange, shall mean The Nasdaq National
Market System ("NNM") or The Nasdaq SmallCap Market ("SCM"
and, together with NNM, "Nasdaq") or, if
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such security is not quoted on Nasdaq, shall mean the OTC
Bulletin Board or, if such security is not quoted on the OTC
Bulletin Board, shall mean the over-the-counter market as
furnished by any NASD member firm selected from time to time
by the Corporation for that purpose.
(vi) "Trading Day" shall mean a day on which
the relevant Stock Market is open for the transaction of
business.
2. Dividends and Distributions. (a) The holders, as of the
Dividend Record Date (as defined below), of the Series B Preferred Stock shall
be entitled to receive semi-annual dividends on their respective shares of
Series B Preferred Stock (aggregating, for this purpose, all shares of Series B
Preferred Stock held of record or, to the Corporation's knowledge, beneficially
by such holder), payable, at the option of the Corporation, in cash or
additional shares of Series B Preferred Stock, at the rate of 8% per annum
(computed on the basis of a 360-day year of twelve 30 day months) of the
Dividend Base Amount (as defined below), payable semi-annually in arrears;
provided that, to the extent the declaration or payment of such dividend is
prohibited by applicable law, such dividend need not be paid but shall
nevertheless accrue and shall be paid promptly when applicable law permits. Such
dividends shall accrue (i) from March 6, 2001 for shares of Series B Preferred
Stock issued within thirty days of the date of the filing of this Certificate of
Designation, or (ii) from the date of issuance for shares of Series B Preferred
Stock issued after thirty days from the date of filing of this Certificate of
Designation, and shall be paid semi-annually on April 1 and October 1 of each
year or, if any such day is not a business day, on the next succeeding business
day. Such dividends shall be paid, at the election of the Corporation, either in
cash or additional duly authorized, fully paid and non assessable shares of
Series B Preferred Stock. In calculating the number of shares of Series B
Preferred Stock to be paid with respect to each dividend, the Series B Preferred
Stock shall be valued at $100.00 per share (subject to appropriate adjustment to
reflect any stock split, combination, reclassification or reorganization of the
Series B Preferred Stock). Notwithstanding the foregoing, the Corporation shall
not be required to issue fractional shares of Series B Preferred Stock; the
Corporation may elect, in its sole discretion, independently for each holder,
whether such number of shares (on an aggregated basis) will be rounded to the
nearest whole share (with .5 of a share rounded upward) or whether such holder
will be given cash in lieu of any fractional shares. The "Dividend Base Amount"
of a share of Series B Preferred Stock shall be $100.00 plus all accrued but
unpaid dividends (subject to appropriate adjustment to reflect any stock split,
combination, reclassification or reorganization of the Series B Preferred
Stock). The "Dividend Record Date" shall mean, for each semi-annual dividend,
the March 15 or September 15, as the case may be, immediately preceding the
dividend payment date.
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(b) In addition to the foregoing, subject to the rights of the
holders of any shares of any series or class of capital stock ranking prior, and
superior to, or pari passu with, the shares of Series B Preferred Stock with
respect to dividends, and prior to the rights of the holders of Common Stock,
Series A Preferred Stock and any other series or class of capital stock, the
holders of shares of Series B Preferred Stock shall be entitled to receive, as,
when and if declared by the Board of Directors, out of assets legally available
for that purpose, dividends or distributions in cash, stock or otherwise.
(c) The Corporation shall not declare or pay any dividend or
distribution on any Junior Stock (as defined below) of the Corporation unless
all dividends required by Section 2(a) have been or contemporaneously are
declared and paid, or declared and a sum sufficient for the payment thereof set
apart for such payment, on the Series B Preferred Stock.
(d) [Reserved]
(e) All dividends or distributions declared upon the Series B
Preferred Stock shall be declared pro rata per share.
(f) Any reference to "distribution" contained in this Section
2 shall not be deemed to include any distribution made in connection with or in
lieu of any Liquidation Event (as defined below).
(g) No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series B Preferred
Stock which may be in arrears (it being understood that this provision does not
alter the Corporation's obligations under Section 2(a)).
(h) So long as any shares of the Series B Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any class or series of
stock of the Corporation ranking, as to dividends, on a parity with the Series B
Preferred Stock, for any period unless all dividends have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof set apart for such payment, on the Series B Preferred Stock.
When dividends are not paid in full or a sum sufficient for such payment is not
set apart, as aforesaid, upon the shares of the Series B Preferred Stock and any
other class or series of stock ranking on a parity as to dividends with the
Series B Preferred Stock, all dividends declared upon such other stock shall be
declared pro rata so that the amounts of dividends per share declared on the
Series B Preferred Stock and such other stock shall in all cases bear to each
other the same ratio that accrued dividends per share
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on the shares of the Series B Preferred Stock and on such other stock bear to
each other.
(i) So long as any shares of the Series B Preferred Stock are
outstanding, no other stock of the Corporation ranking on a parity with the
Series B Preferred Stock as to dividends or upon liquidation, dissolution or
winding up shall be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a sinking fund or
otherwise for the purchase or redemption of any shares of any such stock) by the
Corporation unless the dividends, if any, accrued on all outstanding shares of
the Series B Preferred Stock shall have been paid or set apart for payment.
(j) "Junior Stock" shall mean the Common Stock, Series A
Preferred Stock, and any shares of preferred stock of any series or class of the
Corporation, whether presently outstanding or hereafter issued, which are junior
to the shares of Series B Preferred Stock with respect to (i) the distribution
of assets on any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, (ii) dividends or (iii) voting.
3. Liquidation Preference. (a) In the event of a (i)
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, (ii) a sale or other disposition of all or substantially all of the
assets of the Corporation or (iii) any consolidation, merger, combination,
reorganization or other transaction in which the Corporation is not the
surviving entity or shares of Common Stock constituting in excess of 50% of the
voting power of the Corporation are exchanged for or changed into stock or
securities of another entity, cash and/or any other property (a "Merger
Transaction") (items (i), (ii) and (iii) of this sentence being collectively
referred to as a "Liquidation Event"), after payment or provision for payment of
debts and other liabilities of the Corporation, the holders of the Series B
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, whether such
assets are capital, surplus, or earnings, before any payment or declaration and
setting apart for payment of any amount shall be made in respect of any Junior
Stock of the Corporation, an amount equal to the Dividend Base Amount at such
time; provided, however, in the case of a Merger Transaction, such payment may
be made in cash, property (valued as provided in Subsection 3(b)) and/or
securities (valued as provided in Subsection 3(b)) of the entity surviving such
Merger Transaction. In the case of property or in the event that any such
securities are subject to an investment letter or other similar restriction on
transferability, the value of such property or securities shall be determined by
agreement between the Corporation and the holders of a majority of the Series B
Preferred Stock then outstanding. If upon any Liquidation Event, whether
voluntary or involuntary, the assets to be distributed to the holders of the
Series B Preferred Stock shall be insufficient to
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permit the payment to such shareholders of the full preferential amounts
aforesaid, then all of the assets of the Corporation to be distributed shall be
so distributed ratably to the holders of the Series B Preferred Stock on the
basis of the number of shares of Series B Preferred Stock held. Notwithstanding
item (iii) of the first sentence of this Subsection 3(a), any consolidation,
merger, combination, reorganization or other transaction in which the
Corporation is not the surviving entity but the stockholders of the Corporation
immediately prior to such transaction own in excess of 50% of the voting power
of the corporation surviving such transaction and own amongst themselves such
interest in substantially the same proportions as prior to such transaction,
shall not be considered a Liquidation Event provided that the surviving
corporation shall make appropriate provisions to ensure that the terms of this
Certificate of Designation survive any such transaction. All shares of Series B
Preferred Stock shall rank as to payment upon the occurrence of any Liquidation
Event senior to the Common Stock, the Series A Preferred Stock, and, unless the
terms of such series shall provide otherwise, senior to all other series of the
Corporation's preferred stock.
(b) Any securities or other property to be delivered to the
holders of the Series B Preferred Stock pursuant to Subsection 3(a) hereof shall
be valued as follows:
(i) Securities not subject to an investment letter or
other similar restriction on free marketability:
(A) If actively traded on a Stock Market,
the per share value shall be deemed to be the Market Price of
such securities as of the third day prior to the date of
valuation.
(B) If not actively traded on a Stock
Market, the value shall be the Fair Market Value of such
securities.
(ii) For securities for which there is an active
public market but which are subject to an investment letter or
other restrictions on free marketability, the value shall be
the Fair Market Value thereof, determined by discounting
appropriately the per share Market Price thereof.
(iii) For all other securities, the value shall be
the Fair Market Value thereof.
4. Conversion.
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(a) Right of Conversion. The shares of Series B Preferred
Stock are convertible, in whole or in part, at the option of the holder thereof
and upon notice to the Corporation as set forth in Subsection 4(b), into fully
paid and nonassessable shares of Common Stock and such other securities and
property as hereinafter provided. The initial conversion price per share of
Common Stock (the "Conversion Price"), shall be $.50, subject to adjustment as
provided herein. The rate at which each share of Series B Preferred Stock is
convertible at any time into Common Stock (the "Conversion Rate") shall be
determined by dividing the then existing Conversion Price (determined in
accordance with this Section 4, including the last paragraph hereof) into the
Dividend Base Amount.
(b) Conversion Procedures. Any holder of shares of Series B
Preferred Stock desiring to convert such shares into Common Stock shall
surrender the certificate or certificates evidencing such shares of Series B
Preferred Stock at the office of the transfer agent for the Series B Preferred
Stock, which certificate or certificates, if the Corporation shall so require,
shall be duly endorsed to the Corporation or in blank, or accompanied by proper
instruments of transfer to the Corporation or in blank, accompanied by
irrevocable written notice to the Corporation that the holder elects so to
convert such shares of Series B Preferred Stock and specifying the name or names
(with address) in which a certificate or certificates evidencing shares of
Common Stock are to be issued. The Corporation need not deem a notice of
conversion to be received unless the holder complies with all the provisions
hereof. The Corporation will instruct the transfer agent (which may be the
Corporation) to make a notation of the date that a notice of conversion is
received, which date of receipt shall be deemed to be the date of receipt for
purposes hereof.
The Corporation shall, as soon as practicable after such
deposit of certificates evidencing shares of Series B Preferred Stock
accompanied by the written notice and compliance with any other conditions
herein contained, deliver at such office of such transfer agent to the person
for whose account such shares of Series B Preferred Stock were so surrendered,
or to the nominee or nominees of such person, certificates evidencing the number
of full shares of Common Stock to which such person shall be entitled as
aforesaid, subject to Section 4(d). Subject to the following provisions of this
paragraph, such conversion shall be deemed to have been made as of the date of
such surrender of the shares of Series B Preferred Stock to be converted, and
the person or persons entitled to receive the Common Stock deliverable upon
conversion of such Series B Preferred Stock shall be treated for all purposes as
the record holder or holders of such Common Stock on such date; provided,
however, that the Corporation shall not be required to convert any shares of
Series B Preferred Stock while the stock transfer books of the Corporation are
closed for any purpose, but the surrender of Series B Preferred Stock for
conversion during any period while such books are so closed shall become
effective for
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conversion immediately upon the reopening of such books as if the surrender had
been made on the date of such reopening, and the conversion shall be at the
conversion rate in effect on such date. No adjustments in respect of any
dividends on shares surrendered for conversion or any dividend on the Common
Stock issued upon conversion shall be made upon the conversion of any shares of
Series B Preferred Stock.
The Corporation shall at all times, reserve and keep available
out of its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of Series B Preferred Stock,
such number of shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of the Series B Preferred
Stock.
All notices of conversion shall be irrevocable; provided,
however, that if the Corporation has sent notice of an event pursuant to
Subsection 4(g) hereof, a holder of Series B Preferred Stock may, at its
election, provide in its notice of conversion that the conversion of its shares
of Series B Preferred Stock shall be contingent upon the occurrence of the
record date or effectiveness of such event (as specified by such holder),
provided that such notice of conversion is received by the Corporation prior to
such record date or effective date, as the case may be.
(c) Adjustment of Conversion Rate and Conversion Price.
(i) As used in this Subsection 4(c), the following
terms shall have the following meanings:
"Capital Stock" of any Person means the Common Stock
or Preferred Stock of such Person. Unless otherwise stated
herein or the context otherwise requires, "Capital Stock"
means Capital Stock of the Corporation; "Common Stock" of any
Person other than the Corporation means the common equity
(however designated), including, without limitation, common
stock or partnership or membership interests of, or
participation or interests in such Person (or equivalents
thereof).
"Common Stock" of the Corporation means the Common
Stock, par value $.001 per share, of the Corporation, any
successor class or classes of common equity (however
designated) of the Corporation into or for which such Common
Stock may hereafter be converted, exchanged or reclassified
and any class or classes of common equity (however designated)
of the Corporation which may be distributed or issued with
respect to such Common Stock or successor class of classes to
holders thereof generally. Unless otherwise stated herein or
the
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context requires otherwise, "Common Stock" means Common Stock
of the Corporation;
"Current Market Price" means, when used with respect
to any security as of any date, the last sale price, regular
way, or, in case no such sale takes place on such date, the
average of the closing bid and asked prices, regular way, of
such security in either case as reported for consolidated
transactions on the New York Stock Exchange or, if such
security is not listed or admitted to trading on the New York
Stock Exchange, as reported for consolidated transactions with
respect to securities listed on the principal national
securities exchange on which such security is listed or
admitted to trading or, if such security is not listed or
admitted to trading on any national securities exchange, as
reported on the Nasdaq National Market, or, if such security
is not listed or admitted to trading on the Nasdaq National
Market, as reported on the Nasdaq SmallCap Market, or if such
security is not listed or admitted to trading on any national
securities exchange or the Nasdaq National Market or the
Nasdaq SmallCap Market, the average of the high bid and low
asked prices of such security in the over-the-counter market,
as reported by the National Association of Securities Dealers,
Inc. Automated Quotations System or such other system then in
use or, if such security is not quoted by any such
organization, the average of the closing bid and asked prices
of such security furnished by an NASD member firm selected by
the Corporation. If such security is not quoted by any such
organization and no such NASD member firm is able to provide
such prices, the Current Market Price of such security shall
be the Fair Market Value thereof;
"Fair Market Value" means, at any date as to any
asset, Property or right (including without limitation,
Capital Stock of any Person, evidence of indebtedness or other
securities, but excluding cash), the fair market value of such
item as determined in good faith by the Board of Directors,
whose determination shall be conclusive; provided, however,
that such determination is described in an Officers'
Certificate filed with the transfer agent and that, if there
is a Current Market Price for such item on such date, "Fair
Market Value" means such Current Market Price (without giving
effect to the last sentence of the definition thereof);
"GAAP" means, as of any date, generally accepted
accounting principles in the United States and does not
include any
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interpretations or regulations that have been proposed but
that have not become effective;
"Officer" means, with respect to any Person, the
Chairman of the Board, the Chief Executive Officer, the
President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary, any Assistant Secretary or any Vice
President of such Person;
"Officers' Certificate" means a certificate signed on
behalf of the Corporation by two Officers, one of whom must be
the Chairman of the Board, the President, the Treasurer or a
Vice-President of the Corporation;
"Person" means any individual, corporation,
partnership, association, trust or any other entity or
organization, including a government or political subdivision
or any agency or instrumentality thereof;
"Preferred Stock" of any Person means the class or
classes of equity, ownership or participation interests
(however designated) in such Person, including, without
limitation, stock, share, partnership and membership
interests, which are preferred as to the payment of dividends
or distributions by, or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of,
such Person (or equivalent thereof) over interests of any
other class of interests of such Person. Unless otherwise
stated herein or the context otherwise requires, "Preferred
Stock" means Preferred Stock of the Corporation;
"Property" of any Person means any and all types of
real, personal, tangible, intangible or mixed property owned
by such Person whether or not included on the most recent
consolidated balance sheet of such Person in accordance with
GAAP;
"Subsidiary" of a Person on any date means any other
Person of whom such Person owns, directly or indirectly
through a Subsidiary or Subsidiaries of such Person, Capital
Stock with voting power, acting independently and under
ordinary circumstances, entitling such person to elect a
majority of the board of directors or other governing body of
such other Person. Unless otherwise stated herein or the
context otherwise requires, "Subsidiary" means a Subsidiary of
the Corporation.
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(ii) If the Corporation shall (i) pay a dividend or
other distribution, in Common Stock, on any class of Capital
Stock of the Corporation, (ii) subdivide the outstanding
Common Stock into a greater number of shares by any means or
(iii) combine the outstanding Common Stock into a smaller
number of shares by any means including, without limitation, a
reverse stock split), then in each such case the Conversion
Price in effect immediately prior thereto shall be adjusted so
that the Registered Holder of any shares of Series B Preferred
Stock thereafter surrendered for conversion shall be entitled
to receive the number of shares of Common Stock that such
Registered Holder would have owned or have been entitled to
receive upon the happening of such event had such Series B
Preferred Stock been converted immediately prior to the
relevant record date or, if there is no such record date, the
effective date of such event. An adjustment made pursuant to
this Paragraph 4(c)(ii) shall become effective immediately
after the record date for the determination of stockholders
entitled to receive such dividend or distribution and shall
become effective immediately after the effective date of such
subdivision or combination, as the case may be.
(iii) If the Corporation shall (i) issue or
distribute (at a price per share less than the Current Market
Price per share of such Capital Stock on the date of such
issuance or distribution) Capital Stock generally to holders
of Common Stock or to holders of any class or series of
Capital Stock which is convertible into or exchangeable or
exercisable for Common Stock (excluding an issuance or
distribution of Common Stock described in Paragraph 4(c)(ii))
or (ii) issue or distribute generally to such holders rights,
warrants, options or convertible or exchangeable securities
entitling the holder thereof to subscribe for, purchase,
convert into or exchange for Capital Stock at a price per
share less than the Current Market Price per share of such
Capital Stock on the date of issuance or distribution, then,
in each such case, at the earliest of (A) the date the
Corporation enters into a firm contract for such issuance or
distribution, (B) the record date for the determination of
stockholders entitled to receive any such Capital Stock or any
such rights, warrants, options or convertible or exchangeable
securities or (C) the date of actual issuance or distribution
of any such Capital Stock or any such rights, warrants,
options or convertible or exchangeable securities, the
Conversion Price shall be reduced by multiplying the
Conversion Price in effect immediately prior to such earliest
date by:
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(A) if such Capital Stock is Common Stock, a
fraction the numerator of which is the number of
shares of Common Stock outstanding, on such earliest
date plus the number of shares of Common Stock which
could be purchased at the Current Market Price per
share of Common Stock on the date of such issuance or
distribution with the aggregate consideration (based
on the Fair Market Value thereof) received or
receivable by the Corporation either (A) in
connection with such issuance or distribution or (B)
upon the conversion, exchange, purchase or
subscription of all such rights, warrants, options or
convertible or exchangeable securities (the
"Aggregate Consideration"), and the denominator of
which is the number of shares of Common Stock
outstanding on such earliest date plus the number of
shares of Common Stock to be so issued or distributed
or to be issued upon the conversion, exchange,
purchase or subscription of all such rights,
warrants, options or convertible or exchangeable
securities; or
(B) if such Capital Stock is other than Common
Stock, a fraction the numerator of which is the
Current Market Price per share of Common Stock on
such earliest date minus an amount equal to (A) the
difference between (1) the Current Market Price per
share of such Capital Stock multiplied by the number
of shares of such Capital Stock to be so issued and
(2) the Aggregate Consideration, divided by (B) the
number of shares of Common Stock outstanding on such
date, and the denominator of which is the Current
Market Price per share of Common Stock on such
earliest date.
Such adjustment shall be made successively whenever any such
Capital Stock, rights, warrants, options or convertible or
exchangeable securities are so issued or distributed. In
determining whether any rights, warrants, options or
convertible or exchangeable securities entitle the holders
thereof to subscribe for, purchase, convert into or exchange
for shares of such Capital Stock at less than such Current
Market Price, there shall be taken into account the Fair
Market Value of any consideration received or receivable by
the Corporation for such rights, warrants, options or
convertible or exchangeable securities. If any right, warrant,
option or convertible or exchangeable security, the issuance
of which resulted in an adjustment in the Conversion Price
pursuant to this Paragraph 4(c)(iii), shall expire and shall
not have been exercised, the Conversion Price shall
immediately upon such expiration be recomputed to the
Conversion Price which would have
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been in effect if such right, warrant, option or convertible
or exchangeable securities had never been distributed or
issued. Notwithstanding anything contained in this paragraph
to the contrary, (i) the issuance of Capital Stock upon the
exercise of such rights, warrants or options or the conversion
or exchange of such convertible or exchangeable securities
will not cause an adjustment in the Conversion Price if no
such adjustment would have been required at the time such
right, warrant, option or convertible or exchangeable security
was issued or distributed; provided, however, that, if the
consideration payable upon such exercise, conversion or
exchange and/or the Capital Stock receivable thereupon are
changed after the time of the issuance or distribution of such
right, warrant, option or convertible or exchangeable security
then such change shall be deemed to be the expiration thereof
without having been exercised and the issuance or distribution
of new options, rights, warrants or convertible or
exchangeable securities and (ii) the issuance of convertible
preferred stock of the Corporation as a dividend on
convertible preferred stock of the Corporation will not cause
an adjustment in the Conversion Price if no such adjustment
would have been required at the time such underlying
convertible preferred stock was issued (or as a result of any
subsequent modification to the terms thereof) and the
conversion provisions of such convertible stock so issued as a
dividend are the same as in such underlying convertible
preferred stock.
Notwithstanding any contained in this Certificate of
Designation to the contrary, options, rights or warrants
issued or distributed by the Corporation, including options,
rights or warrants distributed prior to the date of filing of
this Certificate of Designation, to holders of Common Stock
generally which, until the occurrence of a specified event or
events (a "Trigger Event"), (i) are deemed to be transferred
with Common Stock, (ii) are not exercisable and (iii) are also
issued on a pro rata basis with respect to future issuances of
Common Stock, shall be deemed not to have been issued or
distributed for purposes of this Subsection 4(c) (and no
adjustment to the Conversion Price under this Subsection 4(c)
will be required) until the occurrence of the earliest Trigger
Event. Upon the occurrence of a Trigger Event, such options,
rights or warrants shall continue to be deemed not to have
been issued or distributed for purposes of this Subsection
4(c) (and no adjustment to the Conversion Price under this
Subsection 4(c) will be required) if and for so long as each
Registered Holder who thereafter converts such Registered
Holder's Series B Preferred Stock shall be entitled to receive
upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion,
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a number of such options, rights or warrants, as the case may
be, equal to the number of options, rights or warrants to
which a holder of the number of shares of Common Stock equal
to the number of shares of Common Stock issuable upon
conversion of such Registered Holder's Series B Preferred
Stock is entitled to receive at the time of such conversion in
accordance with the terms and provisions of, and applicable
to, such options, rights or warrants. Upon the expiration of
any such options, rights or warrants or at such time, if any,
as a Registered Holder is not entitled to receive such
options, rights or warrants upon conversion of such Registered
Holder's Series B Preferred Stock, an adjustment (if any is
required) to the Conversion Price shall be made in accordance
with this Paragraph 4(c)(iii) with respect to the issuance of
all such options, rights and warrants as of the date of
issuance thereof, but subject to the provisions of the
preceding paragraph, if any such option, right or warrant,
including any such options right or warrants distributed prior
to the date of filing of this Certificate of Designation, are
subject to events, upon the occurrence of which such options,
rights or warrants become exercisable to purchase different
securities, evidence of indebtedness, cash, Properties or
other assets or different amounts thereof, then, subject to
the preceding provision of this paragraph, the date of the
occurrence of any and each such event shall be deemed to be
the date of distribution and record date with respect to new
options, right or warrants with such new purchase rights (and
a termination or expiration of the existing options, rights or
warrants without exercise thereof). In addition, in the event
of any distribution (or deemed distribution) of options,
rights or warrants, or any Trigger Event or other event of the
type described in the preceding sentence, that required (or
would have required but for the provisions of Paragraph
4(c)(vi) or this paragraph) an adjustment to the Conversion
Price under this Subsection 4(c) and such options, rights or
warrants shall thereafter have been redeemed or repurchased
without having been exercised, then the Conversion Price shall
be adjusted upon such redemption or repurchase to give effect
to such distribution, Trigger Event or other event, as the
case may, as though it had instead been a cash distribution,
equal on a per share basis to the result of the aggregate
redemption or repurchase price received by holders of such
options, rights or warrants divided by the number of shares of
Common Stock outstanding as of the date of such repurchase or
redemption, made to holders of Common Stock generally as of
the date of such redemption or repurchase.
15
(iv) If the Corporation shall pay or distribute, as a
dividend or otherwise, generally to holders of Common Stock or
any class or series of Capital Stock which is convertible into
or exercisable or exchangeable for Common Stock any assets,
Properties or rights (including, without limitation, evidences
of indebtedness of the Corporation, any Subsidiary or any
other Person, cash or Capital Stock or other securities of the
Corporation, any Subsidiary or any other Person, but excluding
payments and distributions as described in Paragraphs 4(c)(ii)
or (iii), dividends and distributions in connection with a
Liquidation Event and distributions consisting solely of cash
described in Paragraph 4(c)(v)), then in each such case the
Conversion Price shall be reduced by multiplying the
Conversion Price in effect immediately prior to the date of
such payment or distribution by a fraction, the numerator of
which is the Current Market Price per share of Common Stock on
the record date for the determination of stockholders entitled
to receive such payment or distribution less the Fair Market
Value per share of Common Stock on such record date of the
assets, Properties or rights so paid or distributed, and the
denominator of which is the Current Market Price per share of
Common Stock on such record date. Such adjustment shall become
effective immediately after such record date. For purposes of
this Paragraph 4(c)(iv), such Fair Market Value per share
shall equal the aggregate Fair Market Value on such record
date of the assets, Properties or rights so paid or
distributed divided by the number of shares of Common Stock
outstanding on such record date. For all purposes of this
Certificate of Designation, adjustments to any security's
conversion or exercise price pursuant to such security's
original terms shall not be deemed a distribution or dividend
to holders thereof.
(v) If the Corporation shall, by dividend or
otherwise, make a distribution (other than in connection with
the liquidation, dissolution or winding up of the Corporation
in its entirety), generally to holders of Common Stock or any
class or series of Capital Stock which is convertible into or
exercisable or exchangeable for Common Stock, consisting
solely of cash where (x) the sum of (i) the aggregate amount
for such cash plus (ii) the aggregate amount of all cash so
distributed (by dividend or otherwise) to such holders within
the 12-month period ending on the record date for determining
stockholder entitled to receive such distribution with respect
to which no adjustment has been made to the Conversion Price
pursuant to this Paragraph 4(c)(v) exceeds (y) 10% of the
result of the multiplication of (1) the Current Market Price
per share of Common Stock on such record date times (2)
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the number of shares of Common Stock outstanding on such
record date, then the Conversion Price shall be reduced,
effective immediately prior to the opening of business on the
day following such record date, by multiplying the Conversion
Price in effect immediately prior to the close of business on
the day prior to such record date by a fraction, the numerator
of which is the Current Market Price per share of Common Stock
on such record date less the aggregate amount of cash per
share so distributed and the denominator of which is such
Current Market Price; provided, however, that, if the
aggregate amount of cash per share is equal to or greater than
such Current Market Price, then, in lieu of the foregoing
adjustment, adequate provisions shall be made so that each
Registered Holder shall have the right to receive upon
conversion (with respect to each share of Common Stock issued
upon such conversion and in addition to the Common Stock
issuable upon conversion) the aggregate amount of cash per
share such Registered Holder would have received had such
Registered Holder's Series B Preferred Stock been converted
immediately prior to such record date. In no event shall the
Conversion Price be increased pursuant to this Paragraph
4(c)(v); provided, however, that if such distribution is not
so made, the Conversion Price shall be adjusted to be the
Conversion Price which would have been in effect if such
distribution had not been declared. For purposes of this
Paragraph 4(c)(v), such aggregate amount of cash per share
shall equal such sum divided by the number of shares of Common
Stock outstanding on such record date.
(vi) The provisions of this Subsection 4(c) shall
similarly apply to all successive events of the type described
in this Subsection 4(c). Notwithstanding anything contained
herein to the contrary, no adjustment in the Conversion Price
shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Conversion Price
then in effect; provided, however, that any adjustments which
by reason of this Paragraph 4(c)(vi) are not required to be
made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 4
shall be made by the Corporation and shall be made to the
nearest cent or to the nearest one hundredth of a share, as
the case may be, and the transfer agent shall be entitled to
rely conclusively thereon. Except as provided in this Section
4, no adjustment in the Conversion Price will be made for the
issuance of Common Stock or any securities convertible into or
exchangeable for Common Stock or carrying the right to
purchase Common Stock or any securities so convertible or
exchangeable.
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(vii) Whenever the Conversion Price is adjusted as
provided herein, the Corporation shall promptly file with the
transfer agent an Officers' Certificate setting forth the
Conversion Price in effect after such adjustment and setting
forth a brief statement of the facts requiring such
adjustment. Promptly after delivery of such Officers'
Certificate, the Corporation shall give or cause to be given
to each Registered Holder a notice of such adjustment of the
Conversion Price setting forth the adjusted Conversion Price
and the date on which such adjustment becomes effective.
(viii) Notwithstanding anything contained herein to
the contrary, in any case in which this Subsection 4(c)
provides that an adjustment in the Conversion Price shall
become effective immediately after a record date for an event,
the Corporation may defer until the occurrence of such event
(i) issuing to the Registered Holder of any Series B Preferred
Stock converted after such record date and before the
occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment
required by such event over and above the number of shares of
Common Stock issuable upon such conversion before giving
effect to such adjustment and (ii) paying to such Registered
Holder any amount in cash in lieu of any fractional share of
Common Stock pursuant to Subsection 4(d).
(ix) Notwithstanding any other provision hereof, no
adjustment to the Conversion Price shall be made upon the
issuance or exercise or conversion of (1) any Capital Stock
issued or cash paid as dividends on the Series B Preferred
Stock, or (2) any Capital Stock issued or cash paid upon the
mandatory conversion or redemption of any Series B Preferred
Stock in accordance with Section 5 of this Certificate of
Designation.
(d) No Fractional Shares. No fractional shares or scrip
representing fractional shares of Common Stock shall be issued upon conversion
of Series B Preferred Stock. If more than one certificate evidencing shares of
Series B Preferred Stock shall be surrendered for conversion at one time by the
same holder, the number of full shares issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series B Preferred
Stock so surrendered. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of such aggregate number of shares
of Series B Preferred Stock, the Corporation may elect, in its sole discretion,
independently for each holder, whether such number of shares of Common Stock
will be rounded to the nearest whole share (with a .5 of a share rounded upward)
or whether such holder will be given cash, in
18
lieu of any fractional share, in an amount equal to the same fraction of the
Market Price of the Common Stock as of the close of business on the day of
conversion.
(e) [Reserved]
(f) Reservation of Shares; Transfer Taxes, Etc. The
Corporation shall at all times reserve and keep available, out of its authorized
and unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the Series B Preferred Stock, such number of shares of its Common
Stock free of preemptive rights as shall be sufficient to effect the conversion
of all shares of Series B Preferred Stock from time to time outstanding. The
Corporation shall use its best efforts from time to time, in accordance with the
laws of the State of Delaware to increase the authorized number of shares of
Common Stock if at any time the number of shares of authorized, unissued and
unreserved Common Stock shall not be sufficient to permit the conversion of all
the then-outstanding shares of Series B Preferred Stock.
The Corporation shall pay any and all issue or other taxes
(excluding any income taxes) that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of the Series B Preferred
Stock. The Corporation shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue or delivery of
Common Stock (or other securities or assets) in a name other than that in which
the shares of Series B Preferred Stock so converted were registered, and no such
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Corporation the amount of such tax or has established, to
the satisfaction of the Corporation, that such tax has been paid or need not be
paid.
(g) Prior Notice of Certain Events. In case:
(i) the Corporation shall declare any dividend (or
any other distribution); or
(ii) the Corporation shall authorize the granting to
the holders of Common Stock or the Series A Preferred Stock of
rights or warrants to subscribe for or purchase any shares of
stock of any class or of any other rights or warrants; or
(iii) of any reclassification of Common Stock (other
than a subdivision or combination of the outstanding Common
Stock, or a change in par value, or from par value to no par
value, or from no par value to par value); or
19
(iv) of any consolidation or merger to which the
Corporation is a party and for which approval of any
stockholders of the Corporation shall be required, or of the
sale or transfer of all or substantially all of the assets of
the Corporation or of any compulsory share exchange whereby
the Common Stock is converted into other securities, cash or
other property; or
(v) of any Liquidation Event;
then the Corporation shall cause to be filed with the transfer agent for the
Series B Preferred Stock, and shall cause to be mailed to the Registered
Holders, at their last addresses as they shall appear upon the stock transfer
books of the Corporation, at least twenty (20) days prior to the applicable
record date hereinafter specified, a notice stating (x) the date on which a
record (if any) is to be taken for the purpose of such dividend, distribution or
granting of rights or warrants or, if a record is not to be taken, the date as
of which the holders of Common Stock or Series A Preferred Stock of record to be
entitled to such dividend, distribution, rights or warrants are to be determined
and a description of the cash, securities or other property to be received by
such holders upon such dividend, distribution or granting of rights or warrants
or (y) the date on which such reclassification, consolidation, merger, sale,
transfer, share exchange or Liquidation Event is expected to become effective,
the date as of which it is expected that holders of Common Stock of record shall
be entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such exchange or Liquidation Event and the
consideration, including securities or other property, to be received by such
holders upon such exchange; provided, however, that no failure to mail such
notice or any defect therein or in the mailing thereof shall affect the validity
of the corporate action required to be specified in such notice.
(h) Other Changes in Conversion Rate. The Corporation from time
to time may increase the Conversion Rate by any amount for any period of time if
the period is at least 20 days and if the increase is irrevocable during the
period. Whenever the Conversion Rate is so increased, the Corporation shall mail
to the Registered Holders a notice of the increase at least 15 days before the
date the increased Conversion Rate takes effect, and such notice shall state the
increased Conversion Rate and the period it will be in effect.
The Corporation may make such increases in the Conversion
Rate, in addition to those required or allowed by this Section 4, as shall be
determined by it, as evidenced by a resolution of the Board of Directors, to be
advisable in order to avoid or diminish any income tax to holders of Common
Stock resulting from any dividend or distribution of stock or issuance of rights
or warrants to purchase or subscribe for stock or from any event treated as such
for income tax purposes.
20
Notwithstanding anything to the contrary herein, in no case
shall the Conversion Price be adjusted to an amount less than $.001 per share,
the current par value of the Common Stock into which the Series B Preferred
Stock is convertible.
(i) Ambiguities/Errors. The Board of Directors of the
Corporation shall have the power to resolve any ambiguity or correct any error
in the provisions relating to the convertibility of the Series B Preferred
Stock, and its actions in so doing shall be final and conclusive.
5. Mandatory Conversion and Redemption. (a) In the event the
Corporation causes the Series A Preferred Stock to be converted in whole or in
part, into fully paid and nonassessable shares of Common Stock, then the
Corporation shall also convert the Series B Preferred Stock, in whole or in
part, on a pro rata basis among holders of the Series B Preferred Stock, into
fully paid and nonassessable shares of Common Stock using a conversion price of
$.50. Any shares of Series B Preferred Stock so converted shall be treated as
having been surrendered by the holder thereof for conversion pursuant to Section
4 on the date of such mandatory conversion (unless previously converted at the
option of the holder).
(b) If, at any time, the Corporation redeems the Series A
Preferred Stock, the Corporation may, at its option, redeem the Series B
Preferred Stock, in whole or in part, on a pro rata basis among holders of the
Series B Preferred Stock.
(c) No greater than 60 nor fewer than 20 days prior to the
date of any such mandatory conversion or redemption, notice by first class mail,
postage prepaid, shall be given to the holders of record of the Series B
Preferred Stock to be converted or redeemed, addressed to such holders at their
last addresses as shown on the stock transfer books of the Corporation. Each
such notice shall specify the date fixed for conversion or redemption, the place
or places for surrender of shares of Series B Preferred Stock and the then
effective Conversion Rate pursuant to Section 4.
Any notice which is mailed as herein provided shall be
conclusively presumed to have been duly given by the Corporation on the date
deposited in the mail, whether or not the holder of the Series B Preferred Stock
receives such notice; and failure properly to give such notice by mail, or any
defect in such notice, to the holders of the shares to be converted or redeemed
shall not affect the validity of the proceedings for the conversion or
redemption of any other shares of Series B Preferred Stock. On or after the date
fixed for conversion or redemption (the "Take-Out Date") as stated in such
notice, each holder of shares called to be converted or
21
redeemed shall surrender the certificate evidencing such shares to the
Corporation at the place designated in such notice for conversion or redemption.
After the mailing of such notice, but before the Take-Out Date as stated
therein, all rights whatsoever with respect to the shares so called for
conversion or redemption (except the right of the holders to convert such shares
pursuant to Section 4 and to have such shares converted or redeemed, as the case
may be, upon surrender of their certificates therefor, pursuant to this Section
5) shall terminate. On or after the Take-Out Date, notwithstanding that the
certificates evidencing any shares properly called for conversion or redemption
shall not have been surrendered, such shares shall no longer be deemed
outstanding and all rights whatsoever with respect to the shares so called for
conversion or redemption (except the right of the holders to have such shares
converted or redeemed, as the case may be, upon surrender of their certificates
therefor, pursuant to this Section 5) shall terminate.
6. Outstanding Shares. For purposes of this Certificate of
Designation, a share of Series B Preferred Stock, when issued, shall be deemed
outstanding except (i) from the date, or the deemed date, of surrender of
certificates evidencing shares of Series B Preferred Stock, all shares of Series
B Preferred Stock converted into Common Stock or redeemed pursuant to Section 5
and (ii) from the date of registration of transfer, all shares of Series B
Preferred Stock held of record by the Corporation or any subsidiary of the
Corporation.
7. Class Voting Rights. The Corporation shall not, without the
affirmative vote or consent of the holders of at least 50% of all outstanding
Series B Preferred Stock, voting separately as a class, (i) amend, alter or
repeal any provision of the Certificate of Incorporation or the Bylaws of the
Corporation so as to adversely affect the relative rights, preferences,
qualifications, limitations or restrictions of the Series B Preferred Stock;
(ii) authorize or issue, or increase the authorized amount of, Series B
Preferred Stock, other than Series B Preferred Stock issuable in exchange for 8%
Notes or accrued interest thereon or issuable as dividends on Series B Preferred
Stock; or (iii) issue securities ranking prior to, or pari passu with the Series
B Preferred Stock.
8. Status of Acquired Shares. Shares of Series B Preferred
Stock received upon conversion or redemption pursuant to Section 4 or Section 5
or otherwise acquired by the Corporation will be restored to the status of
authorized but unissued shares of Preferred Stock, without designation as to
class, and may thereafter be issued, but not as shares of Series B Preferred
Stock.
9. Preemptive Rights. The Series B Preferred Stock is not
entitled to any preemptive or subscription rights in respect of any securities
of the Corporation.
22
10. Severability of Provisions. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and valid
under applicable law, but if any provision hereof is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or otherwise
adversely affecting the remaining provisions hereof. If a court of competent
jurisdiction should determine that a provision hereof would be valid or
enforceable if a period of time were extended or shortened or a particular
percentage were increased or decreased, then such court may make such changes as
shall be necessary to render the provision in question effective and valid under
applicable law.
IN WITNESS WHEREOF, Sudhir Agrawal, President and Acting Chief
Executive Officer of the Corporation, acting for and on behalf of the
Corporation, has hereunto subscribed his name this ___ day of March, 2001.
HYBRIDON, INC.
By:
------------------------------------------------
Name: Sudhir Agrawal
Title: President and Acting Chief Executive
Officer