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EXHIBIT 3.1
CERTIFICATE OF DESIGNATION, VOTING POWERS,
PREFERENCES AND RIGHTS
OF
SERIES G CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
Pursuant to Section 151(g) of the Delaware General Corporation Law, I,
Alan R. Fox, President of Ascent Pediatrics, Inc., a Delaware corporation (the
"Corporation"), hereby certify that the following is a true and correct copy of
a resolution duly adopted by the Corporation's Board of Directors at a meeting
held on May 8, 1998, at which a quorum was present and acting throughout, and
that said resolution has not been rescinded or amended and is in full force and
effect at the date hereof:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Corporation's Board of Directors by the Certificate of
Incorporation of the Corporation, as amended to date, the Board of Directors
hereby creates a series of Preferred Stock of the Corporation, par value $.01
per share, to be designated "Series G Convertible Exchangeable Preferred Stock"
(hereinafter referred to as the "Series G Preferred Stock") and to consist of
seven thousand (7,000) shares, and hereby fixes the voting powers, designations,
preferences and relative, participating, optional or other rights, and the
qualifications, limitations or restrictions thereof, of the Series G Preferred
Stock, as follows:
1. DEFINITIONS.
1.1. "Affiliate" shall mean any Person controlling, controlled by or
under common control with any other Person. For purposes of this definition,
"control," as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such person, whether through the ownership of voting
securities or by agreement or otherwise.
1.2 "Change of Control" shall mean (A) the sale, lease or transfer of
all or substantially all of the Corporation's assets to any Person or Group (as
such terms are used in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended,), (B) the liquidation or dissolution of the Corporation, (C) any
Person or any Persons acting together which would constitute a "group" (a
"Group") for purposes of Section 13(d) of the Securities and Exchange Act of
1934, as amended (the Exchange Act"), together with any Affiliates (as defined
in the "Exchange Act) or Related Persons thereof (other than an employee benefit
plan of the Corporation) beneficially owns at least fifty percent (50%) of the
aggregate voting power of all classes of capital stock of the Corporation
entitled to vote generally in the election of directors of the Corporation; or
(D) any Person or Group, together with any Affiliates or Related Persons
thereof, shall succeed in having a sufficient number of its or their nominees
elected to the Board of Directors of the Corporation such that such nominees,
when added to any existing directors remaining on the Board of Directors of the
Corporation after such election who is an Affiliate or Related Person of such
Person or Group, shall constitute a majority of the Board of Directors of the
Corporation.
1.3. "Common Stock" shall mean the shares of the Common Stock of the
Corporation, par value $.00004 per share, and any stock into which such Common
Stock may hereafter be changed.
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1.4. "Closing Price" shall mean with respect to the shares of Common
Stock of the Corporation on any day, (i) the last reported sales price regular
way or, in case no such reported sale takes place on such day, the average of
the reported closing bid and asked prices regular way, in either case on the
Nasdaq National Market, or (ii) if the shares of Common Stock are not listed or
admitted to trading on the Nasdaq National Market, the last reported sales price
regular way, or in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, on the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading, or (iii) if the shares of Common Stock are not
listed or admitted to trading on the Nasdaq National Market or any national
securities exchange, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange, Inc. member
firm selected from time to time by the Corporation for that purpose, or (iv) if
such prices in the over-the-counter market are not available, the fair market
value set by, or in a manner established by, the Board of Directors of the
Corporation in good faith.
1.5. "Conversion Price" shall have the meaning set forth in
Section 5.1.
1.6. "Convertible Notes" shall have the meaning set forth in
Section 7.
1.7. "Current Market Price" per share of Common Stock at any date
herein specified shall mean the average daily Closing Prices for thirty (30)
consecutive Trading Days commencing forty-five (45) days before such date.
1.8. "Date of Issuance" shall mean the date upon which the shares of
Series G Preferred Stock were issued and sold by the Corporation.
1.9. "Junior Stock" shall mean the Common Stock or any other class or
series of capital stock of the Corporation which at the time of issuance is not
declared to be senior to or on a parity with the Series G Preferred Stock as to
dividends or rights upon liquidation.
1.10. "Legal Holiday" shall mean a Saturday, Sunday or day on which
banks or trust companies in the State of New York are not required to be open.
1.11. "Person" shall mean any individual, corporation, association,
company, business trust, partnership, joint venture, joint-stock company,
limited liability company, trust, unincorporated organization or association or
government or any agency or political subdivision thereof.
1.12. "Purchase Agreement" shall mean that certain Securities Purchase
Agreement, dated as of May 13, 1998, among the Corporation and the persons named
therein.
1.13 "Related Person" of any Person means any other Person directly or
indirectly owning (A) twenty percent (20%) or more of the outstanding common
stock of such Person (or, in the case of a Person that is not a corporation,
twenty percent (20%) or more of the equity interest in such Person) or (B)
twenty percent (20%) or more of the combined voting power of the voting capital
stock of such Person.
1.14. "SEC" shall mean the Securities and Exchange Commission.
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1.15. "Trading Day" shall mean any day on which trading takes place
(a) if the Common Stock is then listed or admitted to trading on the Nasdaq
National Market, on the Nasdaq National Market, (b) if the Common Stock is then
listed or admitted to trading on a national securities exchange, on the
principal national securities exchange on which the Common Stock is then listed
or admitted to trading, or (c) otherwise, in the over-the-counter-market and
prices reflecting such trading are published by the National Association of
Securities Dealers Automated Quotations System.
1.16. "Unaffiliated Merger" means the merger or consolidation of the
Corporation with a Person which is not an Affiliate of the Corporation.
1.17 "Warrants" means the warrants issued pursuant to the Purchase
Agreement (excluding the New Warrants, as such term is defined in the Purchase
Agreement).
2. DIVIDENDS.
2.1. AMOUNT OF DIVIDENDS.
(a) The holders of shares of Series G Preferred Stock shall be
entitled to receive, in preference to the holders of Common Stock or any other
Junior Stock, cumulative annual dividends at the rate of eight percent (8%) of
the Liquidation Preference (as defined) per annum (such rate, as increased or
decreased in accordance with this Section 2.1, being the "Dividend Rate") in
cash for each share of Series G Preferred Stock held. Dividends payable to
holders of shares of Series G Preferred Stock, as aforesaid, whether or not
declared by the Board of Directors, shall be fully cumulative and shall accrue
without interest, except as provided herein, from and after the Date of
Issuance. Accumulated dividends shall be paid semi-annually out of the assets of
the Corporation legally available therefor on June 1 and December 1 (except that
if any such date is a Legal Holiday then such dividend shall be payable on the
next day that is not a Legal Holiday) (each, a "Dividend Date"), commencing on
December 1, 1998, PROVIDED, HOWEVER, that payment of 50% of the accumulated
dividends otherwise payable on December 1, 1998 and June 1, 1999 shall be
payable, with interest thereon at the Dividend Rate, on December 1, 2001 and
June 1, 2002, respectively, and payment of 50% of the accumulated dividends
otherwise payable on December 1, 1999 and June 1, 2000 shall be payable, with
interest thereon at the Dividend Rate, on December 1, 2002 and June 1, 2003,
respectively. Dividends will be payable to holders of record of the shares of
Series G Preferred Stock as they appear on the stock books of the Corporation on
the date that is ten (10) days preceding the related Dividend Date. The amount
of dividends payable for the initial dividend period and any period shorter than
a full six-month dividend period shall be computed on the basis of a 360-day
year of twelve 30-day months.
(b) If the Corporation fails to timely pay a dividend to a holder
of a share of Series G Preferred Stock within five (5) days of any Dividend Date
(a "Failed Dividend"), then, commencing with such Dividend Date, the Dividend
Rate shall increase by one percentage point and the Dividend Rate shall
thereafter increase by one additional percentage point for each successive
Failed Dividend and dividends shall accrue at the Dividend Rate so increased
until all accrued dividends have been paid in full. However, the Dividend Rate
shall never exceed fifteen percent (15%) of the Liquidation Preference per
annum. Effective upon payment of all accrued Failed Dividends, the Dividend Rate
shall return to the Dividend Rate in effect prior to the Failed Dividend giving
rise to the increase in the Dividend Rate.
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(c) Notwithstanding the provisions of Section 2.1(a) and (b)
above, if the Corporation has not exercised its option to exchange the
outstanding shares of Series G Preferred Stock into Convertible Notes, pursuant
to Section 7 below, prior to the third anniversary of the Date of Issuance,
commencing with the third anniversary of the Date of Issuance dividends will be
payable at the higher of the then effective Dividend Rate or a rate of ten
percent (10%) of the Liquidation Preference per annum and such Dividend Rate
shall increase by an additional two percentage points upon each one year
anniversary thereafter. Notwithstanding the provisions of Section 2.1(b),
following the third anniversary of the Date of Issuance, the Dividend Rate shall
never be below a rate of twelve percent (12%) following the fourth anniversary
of the Date of Issuance, fourteen percent (14%) following the fifth anniversary
of the Date of Issuance or fifteen percent (15%) following the sixth anniversary
of the Date of Issuance. However, the Dividend Rate shall never exceed fifteen
percent (15%) of the Liquidation Preference per annum.
(d) Notwithstanding the provisions of Section 2.1(a), (b) and (c)
above, on the fifth day following a Change of Control the dividend rate shall
increase to twelve percent (12%) of the Liquidation Preference per annum
effective retroactive to the Date of Issuance and the additional dividends that
become payable to the holders of the Series G Preferred Stock due to the
retroactive application of such increased Dividend Rate shall be paid to such
holders on such day.
(e) The portion of accumulated dividends for which payment is
deferred pursuant to the third sentence of Section 2.1(a) shall not be increased
or decreased due to changes in the Dividend Rate subsequent to the Dividend Date
on which such accumulated dividends would have been payable but for the deferral
thereof.
1.2. PAYMENT OF DIVIDENDS ON OTHER CAPITAL STOCK.
(a) No dividends or other distributions shall be declared, paid
or set apart for payment on, and no purchase, redemption or other acquisition
shall be made by the Corporation of, any shares of Common Stock or other Junior
Stock unless and until all accumulated dividends on the Series G Preferred Stock
have been, or contemporaneously are, paid in full or declared and funds set
apart for payment thereof in full, and in the case of any redemption pursuant to
Section 6.1 or 6.2 hereof, the aggregate redemption price for all shares of
Series G Preferred Stock to be so redeemed have been, or contemporaneously are,
paid in full.
(b) Any reference to "distribution" contained in this Section 2
shall not be deemed to include any distribution made in connection with any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary.
2. LIQUIDATION OR DISSOLUTION. Subject to the prior rights of the
Corporation's creditors in respect of distributions upon liquidation,
dissolution or winding-up of the Corporation, and the rights of any class or
series of stock that ranks on liquidation prior and in preference to the Series
G Preferred Stock, in the event of the voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the holders of Series G Preferred
Stock shall be entitled to receive one thousand dollars ($1,000) per share (the
"Liquidation Preference"), together with accumulated and unpaid dividends
payable thereon to the date fixed for payment of such distribution, if any,
before any distribution is made to holders of any Junior Stock. If, upon any
such liquidation, dissolution or winding-up of the Corporation, the assets
distributable among the holders of shares of Series G Preferred Stock (and any
class or series of stock ranking in parity with the Series G Preferred Stock in
respect of distributions upon liquidation, dissolution or winding-up of the
Corporation) shall be insufficient to permit the
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payment in full to such holders of the preferential amount payable to such
holders, then the holders of Series G Preferred Stock will share ratably,
together with any class or series of stock ranking in liquidation preference on
parity with the Series G Preferred Stock, in any distribution of the
Corporation's assets in proportion to the respective preferential amounts that
would have been payable if such assets were sufficient to permit payment in full
of all such amounts. After payment of the full amount of the liquidating
distribution to which they are entitled, the holders of Series G Preferred Stock
will not be entitled to any further participation in any distribution of assets
by the Corporation. Under this Section 3, a distribution of assets in any
dissolution, winding-up, liquidation or reorganization shall not include (a) any
consolidation or merger of the Corporation with or into any other corporation,
(b) any dissolution, liquidation, winding-up or reorganization of the
Corporation immediately followed by reincorporation of a successor corporation
or (c) a sale or other disposition of all or substantially all of the
Corporation's assets in consideration for the issuance of equity securities of
another corporation, provided that the consolidation, merger, dissolution,
liquidation, winding-up, reorganization, sale or other disposition does not
amend, alter, or change the preferences or rights of the Series G Preferred
Stock or the qualifications, limitations or restrictions thereof in a manner
that adversely affects the Series G Preferred Stock.
3. VOTING RIGHTS.
(a) GENERAL. Each share of Series G Preferred Stock shall entitle
the holder thereof to such number of votes as shall equal the number of whole
shares of Common Stock into which such share of Series G Preferred Stock is then
convertible pursuant to Section 5. The holders of Series G Preferred Stock shall
be entitled to vote on all matters as to which holders of the Common Stock shall
be entitled to vote, in the same manner and with the same effect as such holders
of the Common Stock, voting together with the holders of the Common Stock as one
class.
(b) CLASS VOTING RIGHTS. So long as shares of the Series G
Preferred Stock are outstanding, the Corporation shall not, without the
affirmative vote or consent of the holders of at least eighty percent (80%) of
all outstanding shares of Series G Preferred Stock, voting separately as a
class, amend, alter or repeal (by merger or otherwise) any provision of the
Certificate of Incorporation of the Corporation, as amended, so as to adversely
affect the relative rights, preferences, qualifications, limitations or
restrictions of the Series G Preferred Stock.
4. CONVERSION RIGHTS.
4.1. RIGHT OF CONVERSION; CONVERSION PRICE. Any holder of shares of
Series G Preferred Stock shall have the right, at his/her option, at any time
(except that, with respect to any shares of Series G Preferred Stock which shall
be called for redemption, such right shall terminate at the close of business on
the date fixed for redemption of such shares unless the Corporation shall
default in payment due upon redemption thereof), to convert, subject to the
terms and provisions of this Section 5, each share of Series G Preferred Stock
into shares of Common Stock upon surrender of the certificate or certificates
for the shares to be so converted, accompanied by written notice of conversion
duly executed, to the Corporation, at any time during regular business hours at
the office of the transfer agent of the Corporation for the Series G Preferred
Stock, and, if so required by the Corporation, accompanied by a written
instrument or instruments of transfer in form satisfactory to the transfer agent
duly executed by the holder of such shares or his/her duly authorized
representative in writing. The conversion price per share of Series G Preferred
Stock shall be four dollars and seventy five cents ($4.75); or in case an
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adjustment of such price has taken place pursuant to the provisions of this
Section 5, the price as last adjusted (such price or adjusted price being
referred to herein as the "Conversion Price"). The number of shares of Common
Stock issuable upon conversion of a share of Series G Preferred Stock shall be
equal to (a) the sum (the "Conversion Value") of the Liquidation Preference per
share and the dividends on such share accumulated to the date of such
conversion, divided by (b) the Conversion Price. Whenever the Conversion Price
in effect shall be adjusted pursuant to this Section 5, the Corporation shall
promptly file with the transfer agent for the Series G Preferred Stock and shall
as soon as practicable mail to all record holders of Series G Preferred Stock at
their last addresses as they appear in the stock transfer books of the
Corporation, a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price, which notice shall be signed by the
President and the Principal Financial Officer of the Corporation, on behalf of
the Corporation, and shall set forth in reasonable detail a calculation to the
nearest cent of the Conversion Price, the method of calculation and the facts
requiring such adjustment.
4.2. ISSUANCE OF SHARES ON CONVERSION. As promptly as practicable
after the surrender, as herein provided, of any shares of the Series G Preferred
Stock for conversion, the Corporation shall deliver or cause to be delivered to
the office of the transfer agent for the Series G Preferred Stock, to or upon
the written order of the holder of such shares so surrendered, certificates
representing the number of fully paid and nonassessable shares of Common Stock
into which such shares may be converted in accordance with the provisions of
this Section 5, together with a cash adjustment for any fraction of a share, as
hereinafter provided. Such conversion shall be deemed to have been made as of
the close of business on the date that such shares shall have been surrendered
for conversion by delivery thereof with a written notice of conversion duly
executed, so that the rights of the holder of such shares as a holder of Series
G Preferred Stock shall cease at such time and, subject to the following
provisions of this Section, the Person or Persons entitled to receive the shares
of Common Stock upon conversion of such shares shall be treated for all purposes
as having become the record holder or holders of such shares of Common Stock at
such time and such conversion shall be at the Conversion Price in effect at such
time; PROVIDED, HOWEVER, that no such surrender on any date when the stock
transfer books of the Corporation shall be closed shall be effective to
constitute the Person entitled to receive the shares of Common Stock upon such
conversion as the record holder of such shares of Common Stock on such date, but
such surrender shall be effective to constitute the Person entitled to receive
such shares of Common Stock as the record holder thereof for all purposes at the
close of business on the next succeeding day on which such stock transfer books
are open; such conversion shall be at the Conversion Price in effect on the date
that such shares of Series G Preferred Stock shall have been surrendered for
conversion by delivery thereof, as if the stock transfer books of the
Corporation had not been closed. Upon conversion of only a portion of the number
of shares covered by a certificate representing shares of Series G Preferred
Stock surrendered for conversion, the Corporation shall issue and deliver to or
upon the written order of the holder of the certificate so surrendered for
conversion, at the expense of the Corporation, a new certificate covering the
number of shares of Series G Preferred Stock representing the unconverted
portion of the certificate so surrendered, which new certificate shall entitle
in all respects the holder thereof to the rights of Series G Preferred Stock
represented thereby to the same extent as if the certificate theretofore
covering such unconverted shares had not been surrendered for conversion.
All shares of Series G Preferred Stock which shall have been
surrendered for conversion as herein provided shall no longer be deemed to be
outstanding and all rights with respect to such shares, including the rights, if
any, to receive notices and to vote, shall
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immediately cease and terminate on the Conversion Date, except only the right of
the holders thereof to receive shares of Common Stock in exchange therefor.
No payment or adjustment to the Conversion Price in respect of
dividends on the shares of Common Stock shall be made upon the conversion of any
of the shares of Series G Preferred Stock.
4.3. ADJUSTMENT OF CONVERSION PRICE.
(a) In case the Corporation shall at any time issue or sell any
shares of Common Stock, for a consideration per share less than the Conversion
Price in effect immediately prior to the issuance or sale of such shares, or
without consideration, then, and thereafter successively upon each such issuance
or sale, the Conversion Price in effect immediately prior to such issuance or
sale shall forthwith be reduced to a price determined by dividing (i) an amount
equal to (X) the total number of shares of Common Stock outstanding immediately
prior to such issuance or sale multiplied by the Conversion Price in effect
immediately prior to such issuance or sale, plus (Y) the consideration, if any,
received by the Corporation upon such issuance or sale, by (ii) the total number
of shares of Common Stock outstanding immediately after such issuance or sale.
For the purposes of any computation to be made in accordance with the
provisions of this paragraph (a), the following shall be applicable:
(i) In case of the issuance or sale of shares of Common Stock for
a consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by
the Corporation for such shares (or, if such shares of Common Stock are
offered by the Corporation for subscription, the subscription price, or, if
shares of Common Stock shall be sold to underwriters or dealers for public
offering without a subscription offering, the public offering price) before
deducting therefrom any commissions or other expenses paid or incurred by
the Corporation for any underwriting of, or otherwise in connection with
the issuance of such shares;
(ii) In case of the issuance or sale of shares of Common Stock
for a consideration part or all of which shall be other than cash
(otherwise than as a dividend or other distribution on any shares of Common
Stock of the Corporation or on conversion, exercise or exchange of other
securities of the Corporation or upon acquisition of the assets or
securities of another company or upon merger or consolidation with another
entity), the amount of consideration therefor other than cash shall be the
value of such consideration as of the date of the issuance or sale of the
shares of Common Stock, irrespective of any accounting treatment, but as
determined by the Board of Directors of the Corporation in good faith. The
reclassification of securities other than Common Stock into Common Stock
shall be deemed to involve the issuance for a consideration other than cash
of such Common Stock immediately prior to the close of business on the date
fixed for the determination of security holders entitled to receive such
Common Stock;
(iii) In case of the issuance of shares of Common Stock upon
conversion or exchange of any obligations or of any securities of the
Corporation that shall be convertible into or exchangeable for shares of
Common Stock or upon the exercise of rights or options to subscribe for or
to purchase shares of Common Stock (other than upon conversion of the
Series G Preferred Stock and the Convertible Notes), the amount of
consideration received by the Corporation for such shares of Common Stock
shall be deemed to be the sum of (A) the
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amount of the consideration received by the Corporation upon the original
issuance of such obligations, shares, rights or options, as the case may
be, plus (B) the consideration, if any, other than such obligations,
securities, rights or options, received by the Corporation upon such
conversion, exchange, or exercise except in adjustment of interest and
dividends. The amount of the consideration received by the Corporation upon
the original issuance of the obligations, securities, rights or options so
converted, exchanged or exercised and the amount of the consideration, if
any, other than such obligations, securities, rights or options, received
by the Corporation upon such conversion, exchange or exercise shall be
determined in the same manner provided in subparagraphs (i) and (ii) above
with respect to the consideration received by the Corporation in case of
the issuance of shares of Common Stock; if such obligations, securities,
rights or options shall have been issued as a dividend upon any securities
of the Corporation, the amount of the consideration received by the
Corporation upon the original issuance thereof shall be deemed to be zero;
(iv) Shares of Common Stock issuable by way of dividend or other
distribution on any securities of the Corporation shall be deemed to have
been issued and to be outstanding at the close of business on the record
date fixed for the determination of security holders entitled to receive
such dividend or other distribution and shall be deemed to have been issued
without consideration. Shares of Common Stock issued otherwise than as a
dividend, shall be deemed to have been issued and to be outstanding at the
close of business on the date of issue;
(v) The number of shares of Common Stock at any time outstanding
shall not include any shares then owned or held by or for the account of
the Corporation, but shall include the aggregate number of shares
deliverable in respect of options, rights and convertible and exchangeable
securities at all times while such options, rights or securities remain
outstanding and unexercised, unconverted or unexchanged, as the case may
be, and thereafter to the extent such options, rights or securities have
been exercised, converted or exchanged; and
(vi) No adjustment shall be made to the Conversion Price then in
effect in case of the issuance of shares of Common Stock upon conversion or
exchange of any obligations or of any securities of the Corporation that
shall be convertible into or exercisable or exchangeable for shares of
Common Stock or upon the exercise of rights or options to subscribe for or
to purchase shares of Common Stock for which an adjustment in the
Conversion Price has previously been made in accordance with paragraph (b)
of this Section 5.3.
(vii) In the event that any payment is made to the holders of
warrants issued pursuant to the Securities Purchase Agreement dated as of
January 31, 1997 among the Company, Triumph-Connecticut Limited Partnership
and the other purchasers named therein pursuant to Section 8.3(b) (or
successor provision) of such Securities Purchase Agreement which does not
result in a modification pursuant to Section 5.7, the Corporation shall be
deemed to have issued without consideration as of the date of the event
giving rise to such payment a number of shares of Common Stock equal to the
amount of such payment divided by the Closing Price on the date of such
event.
(b) In case the Corporation shall at any time issue options or
rights to subscribe for shares of Common Stock, or issue any obligations or
securities convertible into or exchangeable for shares of Common Stock,
otherwise than as contemplated by Section 5.3(a)(vi)
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hereof, for a consideration per share less than the Conversion Price in effect
immediately prior to the issuance of such options or rights or convertible or
exchangeable securities, or without consideration, the Conversion Price in
effect immediately prior to the issuance of such options or rights or securities
shall be reduced to a price determined by making a computation in accordance
with the provisions of clause (a) of this Section 5.3, provided that:
(i) the aggregate maximum number of shares of Common Stock
deliverable under such options or rights shall be considered to have been
delivered at the time such options or rights were issued, and for a
consideration equal to the minimum purchase price per share of Common Stock
provided for in such options or rights, plus the consideration (determined
in the same manner as consideration received on the issue or sale of Common
Stock), if any, received by the Corporation for such options or rights;
(ii) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or exchange for any such obligations or
securities shall be considered to have been delivered at the time of
issuance of such securities, and for a consideration equal to the
consideration (determined in the same manner as consideration received on
the issue or sale of Common Stock) received by the Corporation for such
securities, plus the consideration, if any, to be received by the
Corporation upon the exchange or conversion thereof; and
(iii) on the expiration of such options or rights, or an increase
in the minimum exercise price thereof, or a decrease in the maximum number
of shares of Common Stock deliverable upon exercise or conversion of such
options, rights or convertible or exchangeable securities pursuant to the
terms thereof (and not as a result of exercise or conversion), or the
termination of such right to convert or exchange, the Conversion Price then
in effect shall forthwith be readjusted to such Conversion Price as would
have obtained (A) in the case of the expiration or termination of options
or rights or the termination of the right to convert or exchange
convertible or exchangeable securities, had no adjustments been made upon
the issuance of such options, rights or convertible or exchangeable
securities, or (B) in the case of an increase in the minimum exercise price
thereof, or a decrease in the maximum number of shares deliverable
thereunder, had the adjustments made upon the issuance of such options,
rights or convertible or exchangeable securities been made upon the basis
of the delivery of only the number of shares of Common Stock (X) actually
deliverable upon the exercise of such options or rights or upon conversion
or exchange of such securities, or (Y) deliverable by reason of such
increase in price or decrease in number of shares.
(c) No adjustment to the Conversion Price shall be made in
connection with the issuance of:
(i) the Series G Preferred Stock, the Convertible Notes, the
Warrants and the New Warrants, as such term is defined in the Purchase
Agreement (together, the "Convertible Securities"), and the securities
issued or issuable upon conversion or exercise of the Convertible
Securities, or other currently outstanding securities that are convertible,
exercisable or exchangeable for shares of Common Stock; and
(ii) shares of Common Stock or rights, options or warrants to
acquire Common Stock issued to directors, employees or consultants of the
Corporation pursuant to a stock option plan, employee stock purchase plan,
restricted stock plan or other similar stock
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plan or agreement (and, in the case of rights, options, or warrants, the
Common Stock issued or issuable upon exercise thereof) and approved by the
Board of Directors.
(d) In case the Corporation shall at any time subdivide or
combine the outstanding shares of Common Stock, the Conversion Price in effect
shall forthwith be proportionately decreased in the case of the subdivision or
proportionately increased in the case of combination to the nearest one cent.
Any such adjustment shall become effective at the close of business on the date
that such subdivision or combination shall become effective.
4.4. NOTICE OF CERTAIN CORPORATE ACTION.
(a) In case:
(i) the Corporation shall declare any dividend (or any other
distribution) on shares of its Common Stock; or
(ii) the Corporation shall authorize the granting to holders
of its shares of Common Stock generally of rights or warrants entitling
them to subscribe for or purchase any shares of capital stock of the
Corporation or of any other rights or warrants; or
(iii) of any reclassification of the shares of Common Stock
of the Corporation, or of any consolidation or merger to which the
Corporation is a party and for which approval of any stockholders of the
Corporation is 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 will be converted into cash or other securities or
property; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation;
then the Corporation shall cause to be filed with the transfer agent for the
Series G Preferred Stock, and shall cause to be mailed to all holders of shares
of Series G Preferred Stock at their last addresses as they shall appear on the
stock transfer books of the Corporation, at least fifteen (15) days prior to the
applicable record date hereinafter specified, a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
redemption or granting of rights or warrants, or, if a record is not to be
taken, the date as of which the holders of shares of Common Stock of record to
be entitled to such dividend, distribution, redemption, rights or warrants are
to be determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected that
holders of shares of Common Stock of record shall be entitled to exchange their
shares of Common Stock for securities, cash or other property deliverable upon
such reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up. Such notice shall also state whether
such transaction will result in any adjustment in the Conversion Price
applicable to the Series G Preferred Stock and, if so, shall state what the
adjusted Conversion Price will be and when it will become effective. Neither the
failure to give the notice required by this Section, nor any defect therein, to
any particular holder of shares of Series G Preferred Stock shall affect the
sufficiency of the notice or the legality or validity of any such dividend,
distribution, redemption, right, warrant, reclassification, consolidation,
merger, sale, transfer, share exchange, liquidation,
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dissolution or winding-up, or the vote on any action authorizing such with
respect to the other holders.
(b) In case the Corporation or any Affiliate of the Corporation
shall propose to engage in a "Rule 13e-3 Transaction" as defined in Rule 13e-3
promulgated under the Securities Exchange Act of 1934, as amended, the
Corporation shall, no later than the date on which any information with respect
to such Rule 13e-3 Transaction is first required to be given to the Securities
and Exchange Commission or any other Person pursuant to such Rule 13e-3, cause
to be mailed to all holders of shares of Series G Preferred Stock at their last
addresses as they shall appear on the stock transfer books of the Corporation, a
copy of all information required to be given to the SEC or such other Person
pursuant to such Rule 13e-3. The information required to be given under this
paragraph shall be in addition to and not in lieu of any other information
required to be given by the Corporation pursuant to this Section 5.4.
4.5. TAXES ON CONVERSIONS.
The Corporation will pay any and all stamp or similar taxes that may
be payable in respect of the issuance or delivery of shares of Common Stock on
conversion of shares of Series G Preferred Stock pursuant hereto. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of shares of
Common Stock in a name other than that of the holder of the shares of Series G
Preferred Stock to be converted, and no such issuance or delivery shall be made
unless and until the Person requesting such issuance has paid to the Corporation
the amount of any such tax, or has established to the satisfaction of the
Corporation that such tax has been paid.
4.6. FRACTIONAL SHARES.
No fractional shares or scrip representing fractional shares shall be
issued upon the conversion of shares of Series G Preferred Stock. If any such
conversion would otherwise require the issuance of a fractional share an amount
equal to such fraction multiplied by the Current Market Price per share of
Common Stock on the day of conversion shall be paid to the holder in cash by the
Corporation. All conversions by the same holder on any particular day shall be
aggregated.
4.7. PROVISIONS IN CASE OF CONSOLIDATION, MERGER OR SALE OF ASSETS.
In the case of any reorganization or reclassification of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination) or in the case of any consolidation of the
Corporation into, or merger of the Corporation with another entity in which the
Corporation is not the surviving entity (or it is the surviving entity, but its
shares of Common Stock become shares of another entity), or in the case of any
sale, lease or conveyance of all, or substantially all, of the property, assets,
business and goodwill of the Corporation as an entirety, each holder of the
Series G Preferred Stock shall thereafter have the right to convert such shares
into the kind and amount of securities, cash and other property receivable upon
such reorganization, reclassification, consolidation, merger or disposition by a
holder of the number of shares of Common Stock which the holder of the Series G
Preferred Stock would have received had it converted its shares of Series G
Preferred Stock immediately prior to such reorganization, reclassification,
consolidation, merger or disposition, at a price equal to the aggregate
Conversion Price then in effect; provided, however, that the kind and amount of
such securities, cash and
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other property shall be determined as if any payment made to the holders of
warrants issued pursuant to the Securities Purchase Agreement dated as of
January 31, 1997 among the Corporation, Triumph-Connecticut Limited Partnership
and the other purchasers named therein upon such reorganization,
reclassification, consolidation, merger or disposition in excess of the amount
such holders would otherwise have been entitled to receive under the terms of
such warrants without regard to Section 8.3(b) (or successor provision) of such
Securities Purchase Agreement had not been made. The foregoing provisions of
this Section shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers and dispositions.
4.8. COVENANT TO RESERVE SHARES.
The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of its authorized shares of Common
Stock, solely for the purpose of issuance upon conversion of shares of Series G
Preferred Stock as herein provided, such number of shares of Common Stock as
shall then be issuable upon the conversion of all outstanding shares of Series G
Preferred Stock. The Corporation covenants that all shares of Common Stock which
shall be so issuable shall be, when issued, duly and validly issued and fully
paid and non-assessable. For purposes of this Section 5.8, the number of shares
of Common Stock which shall be deliverable upon the conversion of all
outstanding shares of Series G Preferred Stock shall be computed as if at the
time of computation all outstanding shares of Series G Preferred Stock were held
by a single holder.
4.9 AUTOMATIC CONVERSION.
The Series G Preferred Stock shall automatically convert into shares
of Common Stock at the applicable Conversion Price, in accordance with this
Section 5, in the event that the average daily Closing Price of the Common Stock
for thirty (30) consecutive Trading Days beginning any time after three years
from the Date of Issuance is greater than twenty dollars ($12) per share,
subject to adjustment for stock splits, stock dividends, combinations and other
similar recapitalizations, so long as the average daily trading volume during
the preceding thirty (30) days is at least thirty five thousand (35,000) shares
(such date being referred to herein as the "Mandatory Conversion Date").
All holders of record of shares of Series G Preferred Stock will be
given written notice of the Mandatory Conversion Date and the place designated
for mandatory conversion of all such shares of Series G Preferred Stock pursuant
to this Section 5.9. Such notice need not be given in advance of the occurrence
of the Mandatory Conversion Date. Such notice shall be sent by first class or
registered mail, postage prepaid, to each record holder of Series G Preferred
Stock at such holder's address last shown on the records of the transfer agent
for the Series G Preferred Stock (or the records of the Corporation, if it
serves as its own transfer agent). Upon receipt of such notice, each holder of
shares of Series G Preferred Stock shall surrender his or its certificate or
certificates for all such shares to the Corporation at the place designated in
such notice, and shall thereafter receive certificates for the number of shares
of Common Stock to which such holder is entitled pursuant to this Section 5.9.
On the Mandatory Conversion Date, all rights with respect to the Series G
Preferred Stock so converted, including the rights, if any, to receive notices
and vote, will terminate, except only 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 Series G Preferred Stock has
been converted. If so required by the Corporation, certificates surrendered for
conversion shall be endorsed or accompanied by written instrument or instruments
or transfer, in form satisfactory to the Corporation, duly
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executed by the registered holder or by his or its attorney duly authorized in
writing. As soon as practicable after the Mandatory Conversion Date and the
surrender of the certificate or certificates for Series G Preferred Stock, the
Corporation shall cause to be issued and delivered to such holder a certificate
or certificates for the number of full shares of Common Stock into which the
Series G Preferred Stock has been converted and cash as provided herein with
respect to any fraction of a share of Common Stock otherwise issuable upon such
conversion.
All certificates evidencing shares of Series G Preferred Stock which
are required to be surrendered for conversion in accordance with the provisions
hereof shall, from and after the Mandatory Conversion Date, be deemed to have
been retired and canceled and the shares of Series G Preferred Stock represented
thereby converted into Common Stock for all purposes, notwithstanding the
failure of the holder or holders thereof to surrender such certificates on or
prior to such date. The Corporation may thereafter take such appropriate action
(without the need for stockholder action) as may be necessary to reduce the
authorized Preferred Stock accordingly.
5. REDEMPTION.
5.1. NOTICE. The Company shall give notice of any Change of Control or
Unaffiliated Merger anticipated by the Company, signed on behalf of the
Corporation by its President and by its Treasurer or an Assistant Treasurer, to
the holders of record of the Series G Preferred Stock not less than twenty (20)
days prior to the anticipated date of the Change of Control or Unaffiliated
Merger. The Company shall give notice of any Change of Control, signed on behalf
of the Corporation by its President and by its Treasurer or an Assistant
Treasurer to the holders of record of the Series G Preferred Stock not less than
five (5) days following the date of the consummation of the Change of Control.
5.2. REDEMPTION AT THE OPTION OF THE COMPANY. If there is a Change of
Control or Unaffiliated Merger, the Corporation may, at its option, redeem not
later than five (5) days (or twenty (20) days in the case of a Change of Control
described in Section 1.2(C)) after the effective date of such Change of Control
or Unaffiliated Merger, the Series G Preferred Stock at a price equal to the
Liquidation Preference plus accumulated and unpaid dividends thereon to the date
fixed for redemption. If the Corporation redeems any shares of Series G
Preferred Stock pursuant to this Section 6.2, it must redeem all of the shares
of Series G Preferred Stock. The right of the Corporation to redeem all shares
of Series G Preferred Stock, pursuant to this Section 6.2 is conditional upon
the issuance to each holder of the shares of Series G Preferred Stock of new
warrants (the "New Warrants") to purchase the number of shares of Common Stock
or other securities, cash or property that would have been issued to such holder
had such holder converted its shares of Series G Preferred Stock immediately
prior to the effective date of the Change of Control or Unaffiliated Merger at a
price equal to the Conversion Price then in effect, substantially in the form of
the warrants issued in connection with the Purchase Agreement and having an
exercise price equal to the then Conversion Price (as defined in Section 5.1) of
the shares of Series G Preferred Stock on the date specified for redemption and
a term ending on the same date as the expiration date of the Warrants.
5.3. NOTICE OF REDEMPTION. The Corporation shall give notice of
redemption pursuant to Section 6.2, signed on behalf of the Corporation by its
President and by its Treasurer or an Assistant Treasurer to the holders of the
shares of Series G Preferred Stock not less than five (5) days prior to the date
upon which the redemption is to be made pursuant to Section 6.3 (the
"Corporation Redemption Notice"), specifying (i) the accrued and unpaid
dividends on each share of Series G Preferred Stock (to and including the date
upon which the redemption is to be made), and (ii) the date
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of such redemption. The Corporation Redemption Notice having been so given, the
amount of the aggregate Liquidation Preference of the shares of Series G
Preferred Stock, and all accrued and unpaid dividends thereon, shall become due
and payable on the specified redemption date and the New Warrants issuable to
the holders of the shares of Series G Preferred Stock, shall be issued on the
specified redemption date.
The Company shall provide, or cause the issuer of the New Warrants to
provide, to the recipients of the New Warrants a written representation and
warranty dated the date of issuance of the New Warrants to the effect that the
New Warrants have been duly authorized for issuance and the shares of Common
Stock or other securities issuable upon exercise of the New Warrants (the "New
Warrant Securities") have been duly authorized and reserved for issuance prior
to the Closing and when the New Warrants have been duly executed and delivered
by the issuer of the New Warrants, (i) the New Warrants will constitute valid
and legally binding obligations of the issuer of the New Warrants enforceable
against the issuer of the New Warrants in accordance with their terms, subject
to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
principles of equity, (ii) the New Warrants are exercisable for the New Warrant
Securities or other cash or property described therein in accordance with their
terms, and (iii) the New Warrant Securities, when issued and delivered in
accordance with the provisions of the New Warrants, will be validly issued,
fully paid and nonassessable.
On or prior to the redemption date, each holder of Series G Preferred
Stock to be redeemed shall surrender such shares of Series G Preferred Stock to
the Corporation, in the manner and at the place designated in the Redemption
Notice, and thereupon the Redemption Price per share plus all accumulated and
unpaid dividends thereon through the Redemption Date shall be payable to the
order of such holder and the New Warrants shall be issued to such holder and
each surrendered share of Series G Preferred Stock shall be canceled. From and
after the redemption date, unless there shall have been a default in the payment
of the Redemption Price, all rights of such holder of Series G Preferred Stock
designated for redemption shall cease with respect to such shares of Series G
Preferred Stock, and such shares of Series G Preferred Stock shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever.
6. EXCHANGE.
(a) At any time after the Date of Issuance and on or prior to the
seventh anniversary of the Date of Issuance, the Corporation, may, at its
option, require the holders of Series G Preferred Stock to exchange all of the
shares of Series G Preferred Stock held by them for convertible subordinated
notes of the Corporation (the "Convertible Notes"). The Convertible Notes shall
be substantially in the form attached hereto as Exhibit A and shall mature at
the end of seven years from the Date of Issuance. Holders of outstanding shares
of Series G Preferred Stock shall be entitled to receive in exchange for each
share of Series G Preferred Stock held by them at the time of the exchange
Convertible Notes in an aggregate principal amount equal to one thousand dollars
($1,000), plus an amount in cash equal to all accumulated and unpaid dividends
through the date of exchange (the "Exchange Date"), which shall be specified by
the Corporation.
(b) The exchange of shares of Series G Preferred Stock for
Convertible Notes shall be deemed to have been made as of the close of business
on the Exchange Date, so that the rights of the holders of Series G Preferred
Stock as stockholders of the Corporation shall cease at such time (except the
right to receive an amount in cash equal to
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all accumulated and unpaid dividends on the shares of Preferred Stock through
the Exchange Date and certificates for the Convertible Notes), and the Person or
Persons entitled to receive the Convertible Notes upon such redemption and
exchange shall be treated for all purposes as the registered holder or holders
of such Convertible Notes at such time. In order to effect the Exchange, the
Corporation shall provide notice thereof at least twenty (20) and not more than
sixty (60) days prior to the Exchange Date to each record holder of the Series G
Preferred Stock, by first class mail, postage prepaid, to such holder at such
holder's last address as the same shall appear on the books of the Corporation.
Such notice shall state: (i) the Exchange Date, (ii) the then current Conversion
Price, (iii) that the shares of Series G Preferred Stock may be converted into
Common Stock at any time before the close of business on the Exchange Date, (iv)
that holders who want to convert shares of Series G Preferred Stock must satisfy
the requirements of Section 5 hereof, (v) the place at which certificates for
shares of Series G Preferred Stock are to be surrendered for exchange for
Convertible Notes, and (vi) that dividends on the shares to be exchanged will
cease to accrue at the close of business on the Exchange Date. Following receipt
of such notice, the holders of Series G Preferred Stock shall promptly surrender
the certificates for such shares to the Corporation at the place designated in
such notice. Upon surrender of certificates for any shares so exchanged in
accordance with such notice (properly endorsed or assigned for transfer, if the
Corporation shall so require and the notice shall so state), the Corporation
will cause the Convertible Notes to be issued and mailed to the holders of
shares of Series G Preferred Stock at their address of record or such other
address as such holders shall specify upon surrender of such certificates and
shall cause such holders to be paid the applicable amount of cash for
accumulated and unpaid dividends.
All certificates evidencing shares of Series G Preferred Stock which
are required to be surrendered for exchange in accordance with the provisions
hereof shall, from and after the Exchange Date, be deemed to have been retired
and canceled and the shares of Series G Preferred Stock represented thereby
exchanged into Convertible Notes for all purposes, notwithstanding the failure
of the holder or holders thereof to surrender such certificates on or prior to
such date. The Corporation may thereafter take such appropriate action (without
the need for stockholder action) as may be necessary to reduce the authorized
Preferred Stock accordingly.
7. NO PREEMPTIVE RIGHTS. Except as described in the Purchase
Agreement, no holder of shares of Series G Preferred Stock shall have any
preemptive or preferential right of subscription to any shares of stock of the
Corporation, or to options, warrants or other interests therein or therefor, or
to any obligations convertible into stock of the Corporation, issued or sold, or
any right of subscription to any thereof other than such, if any, as the Board
of Directors, in its discretion, from time to time may determine and at such
price or prices as the Board of Directors from time to time may fix.
8. AMENDMENTS TO CERTIFICATE OF DESIGNATION. The terms of this
Certificate of Designation may be amended, with the consent of holders of at
least eighty percent (80%) of the shares of the Series G Preferred Stock, which
consent will not be unreasonably withheld, to conform to the commercially
reasonable requirements regarding relative priority of payments under specified
circumstances of a financial institution which proposes to provide Borrowed
Money Indebtedness to the Corporation to the extent permitted by Section 8.1 of
the Purchase Agreement. The Company shall not be charged a fee for providing
such consent.
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IN WITNESS WHEREOF, the undersigned has executed this Certificate this
1st day of June, 1998.
By: /s/ Alan R. Fox, President
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