XOMA CORPORATION
CERTIFICATE OF DESIGNATIONS
OF
NON-VOTING CUMULATIVE
CONVERTIBLE PREFERRED STOCK, SERIES F
(Pursuant to Section 151 of the General Corporation Law
of the State of Delaware)
------
XOMA Corporation, a Delaware corporation (the "Corporation"), in
accordance with the provisions of Section 103 of the General Corporation Law of
the State of Delaware DOES HEREBY CERTIFY:
That pursuant to authority vested in the Board of Directors of the
Corporation (the "Board of Directors" or the "Board") by the Certificate of
Incorporation, as amended, of the Corporation, the Board of Directors, at a
meeting duly called and held on September 16, 1996, adopted a resolution
providing for the creation of a series of the Corporation's Preferred Stock,
$.05 par value, which series is designated "Non-Voting Cumulative Convertible
Preferred Stock, Series F", which resolution is as follows:
RESOLVED, that pursuant to authority vested in the Board of Directors
by the Certificate of Incorporation, as amended, the Board of Directors does
hereby provide for the creation of a series of the Preferred Stock, $.05 par
value (hereafter called the "Preferred Stock"), of the Corporation, and to the
extent that the voting powers and the designations, preferences and relative,
participating, optional or other special rights thereof and the qualifications,
limitations or restrictions of such rights have not been set forth in the
Certificate of Incorporation, as amended, of the Corporation, does hereby fix
the same as follows:
NON-VOTING CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES F
Section 1. Designation and Amount. The shares of such series shall be
designated as "Non-Voting Cumulative Convertible Preferred Stock, Series F" (the
"Series F Convertible Preferred Stock"), and the number of shares constituting
the Series F Convertible Preferred Stock shall be 1,600.
Section 2. Stated Capital. The amount to be represented in stated
capital at all times for each share of Series F Convertible Preferred Stock
shall be the sum of (i) $10,000, and
(ii) to the extent legally available, the accrued but unpaid dividends on such
share of Series F Convertible Preferred Stock.
Section 3. Rank. All Series F Convertible Preferred Stock shall rank
senior to the Common Stock, par value $.0005 per share, of the Corporation, now
or hereafter issued, as to payment of dividends and distribution of assets upon
liquidation, dissolution, or winding up of the Corporation, whether voluntary or
involuntary.
Section 4. Dividends and Distributions. (a) The holders of shares of
Series F Convertible Preferred Stock shall be entitled to receive, when, as, and
if declared by the Board of Directors out of funds legally available for such
purpose, dividends at the rate of $500.00 per annum per share, and no more,
which shall be fully cumulative, shall accrue on a daily basis without interest
from the date of original issuance and shall be payable semiannually on March 31
and September 30 of each year commencing March 31, 1997 (except that if any such
date is a Saturday, Sunday, or legal holiday, then such dividend shall be
payable on the next succeeding day that is not a Saturday, Sunday, or legal
holiday) to holders of record as they appear on the stock books of the
Corporation on such record dates, not more than 20 nor less than 10 days
preceding the payment dates for such dividends, as shall be fixed by the Board.
Dividends on the Series F Convertible Preferred Stock shall be paid in cash or,
subject to the limitations in Section 4(b), shares of Common Stock, $.0005 par
value, including the related Preferred Stock Purchase Rights (the "Common
Stock") of the Corporation or any combination of cash and shares of Common
Stock, at the option of the Corporation as hereinafter provided. The amount of
the dividends payable per share of Series F Convertible Preferred Stock for each
semiannual dividend period shall be computed by dividing the annual dividend
amount by two. The amount of dividends payable for the initial dividend period
and any period shorter than a full semiannual dividend period shall be computed
on the basis of a 365-day year. No dividends or other distributions, other than
dividends payable solely in shares of Common Stock or other capital stock of the
Corporation ranking junior as to dividends to the Series F Convertible Preferred
Stock (collectively, the "Junior Dividend Stock"), shall be declared, paid or
set apart for payment on, and, except for the use by optionees of Common Stock
to pay for the exercise price of stock options granted pursuant to employee
stock option plans of the Corporation and its subsidiaries, no purchase,
redemption, or other acquisition shall be made by the Corporation of, any shares
of Junior Dividend Stock unless and until all accrued and unpaid dividends on
the Series F Convertible Preferred Stock shall have been paid or declared and
set apart for payment.
If at any time any dividend on any capital stock of the Corporation
ranking senior as to dividends to the Series F
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Convertible Preferred Stock (the "Senior Dividend Stock") shall be in arrears,
in whole or in part, no dividend shall be paid or declared and set apart for
payment on the Series F Convertible Preferred Stock unless and until all accrued
and unpaid dividends have been, or contemporaneously are, paid or declared and
set apart for payment on the Senior Dividend Stock for all dividend periods
terminating on or prior to the date of payment of such full dividends. No full
dividends shall be paid or declared and set apart for payment on any class or
series or the Corporation's capital stock ranking, as to dividends, on a parity
with the Series F Convertible Preferred Stock (the "Parity Dividend Stock"), for
any period unless all accrued and unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the Series
F Convertible Preferred Stock for all dividend periods terminating on or prior
to the date of payment of such full dividends. No full dividends shall be paid
or declared and set apart for payment on the Series F Convertible Preferred
Stock for any period unless all accrued and unpaid dividends have been, or
contemporaneously are, paid or declared and set apart for payment on the Parity
Dividend Stock for all dividend periods terminating on or prior to the date of
payment of such full dividends. When dividends are not paid in full upon the
Series F Convertible Preferred Stock and the Parity Dividend Stock, all
dividends paid or declared and set apart for payment upon shares of Series F
Convertible Preferred Stock and the Parity Dividend Stock shall be paid or
declared and set apart for payment pro rata, so that the amount of dividends
paid or declared and set apart for payment per share on the Series F Convertible
Preferred Stock and the Parity Dividend Stock shall in all cases bear to each
other the same ratio that accrued and unpaid dividends per share on the shares
of Series F Convertible Preferred Stock and the Parity Dividend Stock bear to
each other.
Any references to "distribution" contained in this Section 4 shall not
be deemed to include any stock dividend or distributions made in connection with
any liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary.
(b) If the Corporation elects to issue shares of Common Stock in
payment of dividends on the Series F Convertible Preferred Stock, the
Corporation shall issue and dispatch, or cause to be issued and dispatched, to
each holder of such shares a certificate representing the number of whole shares
of Common Stock arrived at by dividing the per share Computed Price (as defined
herein) of such shares of Common Stock into the total amount of cash dividends
such holder would be entitled to receive if the aggregate dividends on the
Series F Convertible Preferred Stock held by such holder which are being paid in
shares of Common Stock were being paid in cash; provided, however, that if
certificates representing shares of Common Stock are issued and dispatched to
holders of Series F Convertible Preferred Stock subsequent to the third trading
day
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after a dividend payment date, the percentage used to calculate the Computed
Price will be reduced by one percentage point for each trading day after the
third trading day following such dividend payment date to the date of dispatch
of shares of Common Stock. No fractional shares of Common Stock shall be issued
in payment of dividends. In lieu thereof, the Corporation may issue a number of
shares of Common Stock to each holder which reflects a rounding to the nearest
whole number of shares of Common Stock or may pay cash. The Corporation shall
not exercise its right to issue shares of Common Stock in payment of dividends
on Series F Convertible Preferred Stock if:
(i) the number of shares of Common Stock at the time authorized,
unissued and unreserved for all purposes, or held in the Corporation's
treasury, is insufficient to pay the portion of such dividends to be paid
in shares of Common Stock;
(ii) the issuance or delivery of shares of Common Stock as a dividend
payment would require registration with or approval of any governmental
authority under any law or regulation, and such registration or approval
has not been effected or obtained;
(iii) the shares of Common Stock to be issued as a dividend payment
have not been authorized for listing, upon official notice of issuance, on
any securities exchange or market on which the Common Stock is then listed;
or have not been approved for quotation if the Common Stock is traded in
the over-the-counter market;
(iv) the Computed Price (determined without regard to the proviso to
the definition thereof) is less than the par value of the shares of Common
Stock;
(v) the shares of Common Stock (A) cannot be sold or transferred
without restriction by unaffiliated holders who receive such shares of
Common Stock as a dividend payment or (B) are no longer listed on a
national securities exchange, the Nasdaq National Market or the Nasdaq
SmallCap Market; or
(vi) the issuance of shares of Common Stock in payment of dividends on
Series F Convertible Preferred Stock held by any Restricted Person (as
defined in Section 8(a)) would result in such Restricted Person
beneficially owning more than such Restricted Person's Restriction
Percentage (as defined in Section 8(a)) of the Common Stock, determined as
provided in the proviso to the second sentence of Section 8(a).
Shares of Common Stock issued in payment of dividends on Series F
Convertible Preferred Stock pursuant to this Section shall
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be, and for all purposes shall be deemed to be, validly issued, fully paid and
nonassessable shares of Common Stock of the Corporation; the issuance and
delivery thereof is hereby authorized; and the dispatch thereof will be, and for
all purposes shall be deemed to be, payment in full of the cumulative dividends
to which holders are entitled on the applicable dividend payment date.
"Computed Price" of shares of Common Stock means the price equal to 87
percent of the Market Price (as defined in Section 8(b)) of the Common Stock on
the applicable dividend payment date; provided however, that, notwithstanding
the foregoing, in no event shall the Computed Price be less than $.0005 per
share.
(c) Notwithstanding any other provision of this Section 4, the
Corporation may elect by written notice mailed to the holders of the Series F
Convertible Preferred Stock at their addresses appearing on the records of the
Corporation not later than the payment date for such dividend not to declare or
make payment of the amount of any semiannual dividend to the holders of shares
of Series F Convertible Preferred Stock on the date therefor provided in Section
4(a), in which case the accrued and unpaid dividends shall be taken into account
at the time of conversion of shares of Series F Convertible Preferred Stock as
provided in Section 8 and the Corporation shall have no further right
subsequently to pay or declare and set aside for payment such dividends for such
dividend payment date unless the Corporation declares and pays dividends in an
amount equal to 113 percent of the amount of such dividends not so declared or
paid on such payment date and otherwise in accordance with Sections 4(a) and
4(b). Such dividends not so declared shall not bear interest.
(d) The Corporation shall not pay, declare or set apart for such
payment, any dividend on shares of Common Stock, Junior Dividend Stock or Junior
Liquidation Stock (as defined herein) other than (1) dividends on shares of
Common Stock solely in the form of additional shares of Common Stock, (2)
dividends on Junior Dividend Stock solely in the form of shares of Common Stock
or additional shares of Junior Dividend Stock, (3) dividends on Junior
Liquidation Stock solely in the form of shares of Common Stock or additional
shares of Junior Liquidation Stock or (4) regular quarterly cash dividends,
unless contemporaneously therewith, the Corporation shall pay or declare and set
apart for payment dividends on the shares of Series F Convertible Preferred
Stock in an amount per share of Series F Convertible Preferred Stock equal to
the aggregate amount of dividends the holder of such share of Series F
Convertible Preferred Stock would otherwise have been entitled to receive had
such holder converted such share of Series F Convertible Preferred Stock in
accordance with Section 8(a) (but without regard to the limitations on
conversion contained in the
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proviso to the second sentence of Section 8(a) or in Section 8(d)) into shares
of Common Stock as if the Conversion Date (as defined herein) were the earlier
of (x) the record date for the payment of such dividend on shares of Common
Stock, Junior Dividend Stock or Junior Liquidation Stock, as the case may be,
and (y) the trading day prior to the date on which ex-dividend trading in the
Common Stock, Junior Dividend Stock or Junior Liquidation Stock, as the case may
be, begins with respect to such dividend thereon.
(e) Neither the Corporation nor any subsidiary of the Corporation
shall redeem, repurchase (other than pursuant to a Tender Offer, as defined in
Section 4(f), which shall be governed by Section 4(f)) or otherwise acquire in
any one transaction or series of related transactions any shares of Common
Stock, Junior Dividend Stock or Junior Liquidation Stock if the number of shares
so repurchased, redeemed or otherwise acquired in such transaction or series of
related transactions is more than either (x) 5.0% of the number of shares of
Common Stock, Junior Dividend Stock or Junior Liquidation Stock, as the case may
be, outstanding immediately prior to such transaction or series of related
transactions or (y) 1% of the number of shares of Common Stock, Junior Dividend
Stock or Junior Liquidation Stock, as the case may be, outstanding immediately
prior to such transaction or series of related transactions if such transaction
or series of related transactions is with any one person or group of affiliated
persons, unless the Corporation or such subsidiary offers to purchase from each
holder of shares of Series F Convertible Preferred Stock at the time of such
redemption, repurchase or acquisition the same percentage of such holder's
shares of Series F Convertible Preferred Stock as the percentage of the number
of outstanding shares of Common Stock, Junior Dividend Stock or Junior
Liquidation Stock, as the case may be, to be so redeemed, repurchased or
acquired at a purchase price per share of Series F Convertible Preferred Stock
equal to the product obtained by multiplying (1) the number of shares of Common
Stock into which such share of Series F Convertible Preferred Stock could be
converted in accordance with Section 8(a) (but without regard to the limitations
on conversion contained in the proviso to the second sentence of Section 8(a) or
in Section 8(d)) on the date of purchase of such share of Series F Convertible
Preferred Stock times (2) the Market Price of one share of Common Stock on the
date of purchase of such share of Series F Convertible Preferred Stock.
(f) Neither the Corporation nor any subsidiary of the Corporation
shall (1) make any tender offer or exchange offer (a "Tender Offer") for
outstanding shares of Common Stock unless the Corporation contemporaneously
therewith makes an offer, or (2) enter into an agreement regarding a Tender
Offer for outstanding shares of Common Stock by any person other than the
Corporation or any subsidiary of the Corporation unless such person agrees with
the Corporation to make an offer, in either such case, to each
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holder of outstanding shares of Series F Convertible Preferred Stock to purchase
the same percentage of shares of Series F Convertible Preferred Stock held by
such holder as the percentage of outstanding shares of Common Stock offered to
be purchased in such Tender Offer, at a price per share of Series F Convertible
Preferred Stock equal to the product obtained by multiplying (1) the number of
shares of Common Stock into which such share of Series F Convertible Preferred
Stock could be converted in accordance with Section 8(a) (but without regard to
the limitations on conversion contained in the proviso to the second sentence of
Section 8(a) or in Section 8(d)) on the date of purchase of such share of Series
F Convertible Preferred Stock times (2) the cash price (or other consideration)
per share of Common Stock offered in such Tender Offer.
Section 5. Liquidation Preference. In the event of a liquidation,
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
the holders of Series F Convertible Preferred Stock shall be entitled to receive
out of the assets of the Corporation, whether such assets constitute stated
capital or surplus of any nature, an amount per share of Series F Convertible
Preferred Stock equal to the sum of (i) all dividends accrued and unpaid thereon
to the date of final distribution to such holders, and (ii) $10,000.00
(collectively, "the Liquidation Preference"), and no more, before any payment
shall be made or any assets distributed to the holders of Common Stock or any
other class or series of the Corporation's capital stock ranking junior as to
liquidation rights to the Series F Convertible Preferred Stock (collectively,
the "Junior Liquidation Stock"); provided, however, that such rights shall
accrue to the holders of Series F Convertible Preferred Stock only in the event
that the Corporation's payments with respect to the liquidation preference of
the holders of capital stock of the Corporation ranking senior as to liquidation
rights to the Series F Convertible Preferred Stock (the "Senior Liquidation
Stock") are fully met. After the liquidation preferences of the Senior
Liquidation Stock are fully met, the entire assets of the Corporation available
for distribution shall be distributed ratably among the holders of the Series F
Convertible Preferred Stock and any other class or series of the Corporation's
capital stock having parity as to liquidation rights with the Series F
Convertible Preferred Stock (the "Parity Liquidation Stock") in proportion to
the respective preferential amounts to which each is entitled (but only to the
extent of such preferential amounts). After payment in full of the liquidation
price of the shares of the Series F Convertible Preferred Stock and the Parity
Liquidation Stock, the holders of such shares shall not be entitled to any
further participation in any distribution of assets by the Corporation. Neither
a consolidation or merger of the Corporation with another corporation nor a sale
or transfer of all or part of the Corporation's assets for cash, securities, or
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other property in and of itself will be considered a liquidation, dissolution,
or winding up of the Corporation.
Section 6. No Mandatory or Optional Redemption. Except as set forth in
Section 8(d), the shares of Series F Convertible Preferred Stock shall not be
subject to mandatory redemption by the Corporation or redemption at the option
of the Corporation.
Section 7. No Sinking Fund. The shares of Series F Convertible
Preferred Stock shall not be subject to the operation of a purchase, retirement,
or sinking fund.
Section 8. Conversion.
(a) Conversion at Option of Holder. The holders of the Series F
Convertible Preferred Stock may convert their shares of Series F Convertible
Preferred Stock into fully paid and nonassessable shares of Common Stock and
such other securities and property as hereinafter provided. Commencing at any
time on or after the SEC Effective Date (as defined herein) and at any time
thereafter to and including the day prior to the Redemption Date (as defined
herein) for such share of Series F Convertible Preferred Stock, each share of
Series F Convertible Preferred Stock may be converted at the principal executive
offices of the Corporation or at such other office or offices, if any, as the
Board of Directors may designate, into whole shares of Common Stock at the rate
equal to the number of fully paid and nonassessable shares of Common Stock
(calculated as to each conversion to the nearest 1/100th of a share) determined
by dividing (y) the sum of (i) $10,000 and (ii) the amount of dividends (whether
or not earned or declared) accrued on a daily basis on such share of Series F
Convertible Preferred Stock to the Conversion Date ("Convertible Dividends") by
(z) the product of (I) the Conversion Percentage (as defined herein) on the
Conversion Date times (II) the Market Price on the Conversion Date; provided,
however, that in no event shall any beneficial owner of shares of Series F
Convertible Preferred Stock be entitled to convert any shares of Series F
Convertible Preferred Stock in excess of that number of shares of Series F
Convertible Preferred Stock upon conversion of which the sum of (1) the number
of shares of Common Stock beneficially owned by such beneficial owner and any
person whose beneficial ownership of shares of Common Stock would be aggregated
with such beneficial owner's beneficial ownership of shares of Common Stock for
purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Regulation 13D-G thereunder (each a "Restricted
Person" and collectively, the "Restricted Persons") (other than shares of Common
Stock deemed beneficially owned through the ownership of unconverted shares of
Series F Convertible Preferred Stock) and (2) the number of shares of Common
Stock issuable upon the conversion of the number of shares of Series F
Convertible Preferred Stock with respect to which the determination
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in this proviso is being made, would result in beneficial ownership by such
Restricted Person of more than the percentage, if any, of the outstanding shares
of Common Stock agreed to in writing with the Corporation by or on behalf of
such beneficial owner at or prior to the time such beneficial owner first
acquired any shares of Series F Convertible Preferred Stock (the "Restriction
Percentage"). For purposes of the proviso to the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange Act and Regulation 13D-G thereunder, except as otherwise provided in
clause (1) of the proviso to the immediately preceding sentence.
(b) Certain Definitions.
As used herein, "Conversion Date" shall mean the date on which the
notice of conversion referred to in Section 8(c) is actually received by the
Corporation (whether by courier, personal delivery or telephone line facsimile
transmission); provided, however, that the Conversion Date for any such notice
which is so received by the Corporation after 4:00 p.m., New York City time, on
any particular day shall be deemed to be the next following trading day.
As used herein, "Conversion Percentage" shall mean 87 percent.
As used herein, the "Market Price" on any date shall mean (i) if the
Common Stock is listed on a national securities exchange, the arithmetic average
of the last reported bid prices per share of the Common Stock on the principal
securities exchange on which the Common Stock is listed that shall be
consolidated for consolidated trading, if applicable to such exchange, for five
consecutive trading days of such exchange immediately preceding such date, or
(ii) if the Common Stock is not so listed, the arithmetic average of the last
reported bid prices per share of the Common Stock as reported on the Nasdaq
National Market for the five consecutive Nasdaq trading days immediately
preceding such date, or (iii) if the Common Stock is neither so listed nor so
reported, the arithmetic average of the last reported bid price per share of the
Common Stock as quoted by a registered broker-dealer for the last five days for
which such quotes are available immediately prior to such date; provided that
such quotes must have been available for at least five days in the preceding
thirty-day period, or (iv) if the Common Stock is not so listed, so reported or
so quoted, the fair value of the Common Stock on such date, as reasonably
determined by the Board of Directors in good faith after taking into account
such factors as the Board of Directors may deem appropriate, including one or
more professional valuations.
As used herein, "Registration Rights Agreement" shall mean
collectively the several Registration Rights Agreements
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entered into between the Corporation and the initial holders of the Series F
Convertible Preferred Stock, as amended from time to time in accordance with
their terms.
As used herein, "Registration Statement" shall mean the Registration
Statement required to be filed by the Corporation pursuant to Section 2(a) of
the Registration Rights Agreement.
As used herein, "SEC" shall mean the United States Securities and
Exchange Commission.
As used herein, "SEC Effective Date" shall mean, with respect to any
share of Series F Convertible Preferred Stock, the date on which the
Registration Statement is first declared effective by the SEC.
(c) Other Provisions. (1) The holders of shares of Series F
Convertible Preferred Stock at the close of business on the record date for any
dividend payment to holders of Series F Convertible Preferred Stock shall be
entitled to receive the dividend payable on such shares on the corresponding
dividend payment date notwithstanding the conversion thereof after such dividend
payment record date or the Corporation's default in payment of the dividend due
on such dividend payment date; provided, however, that the holder of shares of
Series F Convertible Preferred Stock converted during the period between the
close of business on any record date for a dividend payment and the opening of
business on the corresponding dividend payment date shall pay to the Corporation
upon receipt thereof from the Corporation an amount equal to the dividend
payable on such shares on such dividend payment date if such dividend is paid to
such holder, it being understood that nothing contained in this proviso shall
limit the inclusion, without any act on the part of a holder of shares of Series
F Convertible Preferred Stock, of Convertible Dividends, upon any conversion
pursuant to Section 8(a). A holder of shares of Series F Convertible Preferred
Stock on a record date for a dividend payment who (or whose transferee) converts
such shares into shares of Common Stock on or after the corresponding dividend
payment date will receive the dividend payable by the Corporation on such shares
of Series F Convertible Preferred Stock on such date, and the converting holder
will not be obligated to the Corporation for payment of the amount of such
dividend in connection with such conversion of shares of Series F Convertible
Preferred Stock. Except as provided above, no adjustment shall be made in
respect of cash dividends on Common Stock that may be accrued and unpaid at the
date of surrender for conversion.
(2) The right of the holders of Series F Convertible Preferred Stock
to convert their shares shall be exercised by delivering to the Corporation or
its agent, as provided in Section 8(a) above, a written notice, duly signed by
or on behalf of the
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holder, stating the number of shares of Series F Convertible Preferred Stock to
be converted. No fewer than ten shares (or such lesser number of shares, the
conversion of which is permitted at that time in accordance with the proviso to
the second sentence of Section 8(a) and in accordance with Section 8(d)) of
Series F Convertible Preferred Stock, may be converted in any particular
conversion, unless the Corporation consents to conversion of a smaller number of
shares in any particular instance. The Corporation shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issue
and delivery upon conversion of shares of Common Stock or other securities or
property in a name other than that of the holder of the shares of the Series F
Convertible Preferred Stock being converted, and the Corporation shall not be
required to issue or deliver any such shares or other securities or property
unless and until the person or persons requesting the issuance thereof shall
have paid to the Corporation the amount of any such tax or shall have
established to the satisfaction of the Corporation that such tax has been paid.
The holder of shares of Series F Convertible Preferred Stock being converted
shall be responsible for the amount of any withholding tax payable in connection
with such conversion.
(3) If a holder of Series F Convertible Preferred Stock elects to
convert any shares of Series F Convertible Preferred Stock in accordance with
Section 8(a), such holder shall not be required to physically surrender the
certificate(s) representing such shares of Series F Convertible Preferred Stock
to the Corporation unless all of the shares of Series F Convertible Preferred
Stock represented thereby are so converted. Each holder of shares of Series F
Convertible Preferred Stock and the Corporation shall maintain records showing
the number of shares so converted and the dates of such conversions or shall use
such other method, satisfactory to such holder and the Corporation, so as to not
require physical surrender of such certificates upon each such conversion. In
the event of any dispute or discrepancy, such records of the Corporation shall
be controlling and determinative in the absence of manifest error.
Notwithstanding the foregoing, if any shares of Series F Convertible Preferred
Stock evidenced by a particular certificate therefor are converted as aforesaid,
the holder of Series F Convertible Preferred Stock may not transfer the
certificate(s) representing such shares of Series F Convertible Preferred Stock
unless such holder first physically surrenders such certificate(s) to the
Corporation, whereupon the Corporation will forthwith issue and deliver upon the
order of such holder of shares of Series F Convertible Preferred Stock new
certificate(s) of like tenor, registered as such holder of shares of Series F
Convertible Preferred Stock (upon payment by such holder of shares of Series F
Convertible Preferred Stock of any applicable transfer taxes) may request,
representing in the aggregate the remaining number of shares of Series F
Convertible Preferred Stock represented by such certificate(s). Each holder of
shares of Series F Convertible
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Preferred Stock, by acceptance of a certificate for such shares, acknowledges
and agrees that (1) by reason of the provisions of this paragraph and Section
8(d)(1), following conversion of any shares of Series F Convertible Preferred
Stock represented by such certificate, the number of shares of Series F
Convertible Preferred Stock represented by such certificate may be less than the
number of shares stated on such certificate and the number of shares of Common
Stock from the Maximum Share Amount (as defined herein) allocated to the shares
of Series F Convertible Preferred Stock represented by such certificate for
purposes of conversion of such shares may be less than the number thereof on
such certificate and (2) the Corporation may place a legend on the certificates
for shares of Series F Convertible Preferred Stock which refers to or describes
the provisions of this paragraph and Section 8(d)(1).
(4) (A) The Corporation (and any successor corporation) shall take all
action necessary so that 6,686,750 shares (such amount to be subject to
equitable adjustment from time to time for stock splits, stock dividends,
combinations, capital reorganizations and similar events relating to the Common
Stock occurring on or after the date hereof and to reduction for shares of
Common Stock issued on conversion of shares of Series F Convertible Preferred
Stock) of the authorized but unissued Common Stock (or appropriate number of
shares of common stock in the case of any successor corporation) are at all
times reserved by the Corporation (or any successor corporation), free from
preemptive rights, for conversion of the Series F Convertible Preferred Stock
outstanding upon the basis hereinbefore provided, subject to the provisions of
the next succeeding paragraph. (B) If the Corporation shall have obtained the
Stockholder Approval (as defined in Section 8(d)), then thereafter, in addition
to the requirements of this paragraph, the Corporation (and any successor
corporation) shall take all action necessary so that an additional number of
shares of the authorized but unissued Common Stock (or appropriate number of
shares of common stock in the case of any successor corporation) sufficient to
provide for the conversion of the Series F Convertible Preferred Stock
outstanding upon the basis hereinbefore provided are at all times reserved by
the Corporation (or any successor corporation), free from preemptive rights, for
such conversion, subject to the provisions of the next succeeding paragraph. The
sole remedy of any holder for a breach of this clause (B) shall be the right of
redemption as and to the extent provided in Section 8(e). (C) If the Corporation
shall issue any securities or make any change in its capital structure which
would change the number of shares of Common Stock into which each share of the
Series F Convertible Preferred Stock shall be convertible as herein provided,
the Corporation shall at the same time also make proper provision so that
thereafter there shall be a sufficient number of shares of Common Stock
authorized and reserved, free from preemptive rights, for conversion of the
outstanding Series F Convertible Preferred Stock on the new basis.
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(5) In case of any consolidation or merger of the Corporation with any
other corporation (other than a wholly-owned subsidiary of the Corporation) in
which the Corporation is not the surviving corporation, or in case of any sale
or transfer of all or substantially all of the assets of the Corporation, or in
the case of any share exchange pursuant to which all of the outstanding shares
of Common Stock are converted into other securities or property, the Corporation
shall make appropriate provision or cause appropriate provision to be made so
that each holder of shares of Series F Convertible Preferred Stock then
outstanding shall have the right thereafter to convert such shares of Series F
Convertible Preferred Stock into the kind and amount of shares of stock and
other securities and property receivable upon such consolidation, merger, sale,
transfer, or share exchange by a holder of the number of shares of Common Stock
into which such shares of Series F Convertible Preferred Stock could have been
converted immediately prior to the effective date of such consolidation, merger,
sale, transfer, or share exchange. If, in connection with any such
consolidation, merger, sale, transfer, or share exchange, each holder of shares
of Common Stock is entitled to elect to receive either securities, cash, or
other assets upon completion of such transaction, the Corporation shall provide
or cause to be provided to each holder of Series F Convertible Preferred Stock
the right to elect the securities, cash, or other assets into which the Series F
Convertible Preferred Stock held by such holder shall be convertible after
completion of any such transaction on the same terms and subject to the same
conditions applicable to holders of the Common Stock (including, without
limitation, notice of the right to elect, limitations on the period in which
such election shall be made, and the effect of failing to exercise the
election). The Corporation shall not effect any such transaction unless the
provisions of this paragraph have been complied with. The above provisions shall
similarly apply to successive consolidations, mergers, sales, transfers, or
share exchanges.
Whenever the Corporation shall propose to take any of the actions
specified in this fifth paragraph of this Section 8(c), the Corporation shall
cause a notice to be mailed at least 20 days prior to the date on which the
books of the Corporation will close or on which a record will be taken for such
action, to the holders of record of the outstanding Series F Convertible
Preferred Stock on the date of such notice. Such notice shall specify the action
proposed to be taken by the Corporation and the date as of which holders of
record of the Common Stock shall participate in any such actions or be entitled
to exchange their Common Stock for securities or other property, as the case may
be. Failure by the Corporation to mail the notice or any defect in such notice
shall not affect the validity of the transaction.
(6) Upon receipt by the Corporation from a holder of shares of Series
F Convertible Preferred Stock of a telephone line
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facsimile transmission of a notice of conversion of shares of Series F
Convertible Preferred Stock meeting the requirements for conversion as provided
in Section 8(a) and this Section 8(c), the Corporation shall issue and deliver
or cause to be issued and delivered to such holder certificates for the Common
Stock issuable upon such conversion within three business days after such
receipt, and the person converting shall be deemed to be the holder of record of
the Common Stock issuable upon such conversion, and all rights with respect to
the shares of Series F Convertible Preferred Stock being converted shall
forthwith terminate except the right to receive the Common Stock or other
securities, cash, or other assets as herein provided, on the Conversion Date;
provided, however, that the original notice of conversion is received by the
Corporation by the next business day following receipt by the Corporation of the
telephone line facsimile transmission notice of conversion; provided further,
however, that in the event that the original notice of conversion is not
received by the Corporation as herein provided, the Corporation shall issue and
deliver or cause to be issued and delivered certificates for the Common Stock
within two business days of receipt by the Corporation of such original notice
of conversion. If the Corporation shall fail to issue and deliver or cause to be
issued and delivered the certificates for shares of Common Stock upon any such
conversion as required by the foregoing sentence and, as a result of such
failure the holder of the shares of Series F Convertible Preferred Stock so
converted shall suffer any direct damages or liabilities from such failure
(including, without limitation, margin interest and the cost of covering a
purchase (whether by such holder or such holder's securities broker) or
borrowing of shares of Common Stock by such holder for purposes of settling any
trade involving a sale (other than a short sale, as defined in Rule 3b-3 under
the Exchange Act, as in effect from time to time) of shares of Common Stock made
by the holder converting such shares of Series F Convertible Preferred Stock
during the period beginning on the Conversion Date and ending on the date the
Corporation delivers or causes to be delivered to such holder the shares of
Common Stock issuable upon such conversion), then the Corporation shall upon
demand of such holder pay to such holder an amount equal to the actual direct,
out-of-pocket damages and liabilities suffered by such holder which the holder
documents to the reasonable satisfaction of the Corporation; provided, however,
that the Corporation shall not be liable to any such holder to the extent the
failure of the Corporation to deliver or cause to be delivered such shares of
Common Stock results from fire, flood, storm, earthquake, shipwreck, strike,
war, acts of terrorism, crash involving facilities of a common carrier, act of
God or any similar event outside the control of the Corporation; provided
further, however, that a holder converting shares of Series F Convertible
Preferred Stock (1) shall notify the Corporation in writing (or by telephone
conversation, confirmed in writing) as promptly as practicable after becoming
aware that shares of Common Stock issued on conversion of shares of Series F
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Convertible Preferred Stock have not been received as provided in the foregoing
sentence and (2) upon becoming aware such certificates have not been received as
provided in the foregoing sentence, thereafter use commercially reasonable steps
to mitigate any damages or liabilities for which the Corporation may be held
liable to such holder hereunder; and provided even further, however, that in
computing the amount of such actual direct, out-of-pocket damages from covering
a purchase of shares of Common Stock, the amount thereof shall be reduced by the
Market Value on the date of delivery to such holder of the shares of Common
Stock the failure of which to deliver on a timely basis gave rise to liability
of the Corporation hereunder. As used herein, the "Market Value" on any date
shall mean (i) if the Common Stock is listed on a national securities exchange,
the last reported bid price per share of the Common Stock on the principal
securities exchange on which the Common Stock is listed that shall be
consolidated for consolidated trading, if applicable to such exchange on the
date immediately preceding such date of delivery, or (ii) if the Common Stock is
not so listed, the last reported bid price per share of the Common Stock as
reported on the Nasdaq National Market on the date immediately preceding such
date of delivery or (iii) if the Common Stock is neither so listed nor so
reported, the last reported bid price per share of the Common Stock as quoted by
a registered broker-dealer on the date immediately preceding such date of
delivery or for which such quote is available immediately prior to such date;
provided that such quotes must have been available for at least five days in the
preceding thirty-day period, or (iv) if the Common Stock is not so listed, so
reported or so quoted, the fair value of the Common Stock on such date, as
reasonably determined by the Board of Directors in good faith after taking into
account such factors as the Board of Directors may deem appropriate, including
one or more professional valuations.
(7) No fractional shares of Common Stock shall be issued upon
conversion of Series F Convertible Preferred Stock but, in lieu of any fraction
of a share of Common Stock which would otherwise be issuable in respect of the
aggregate number of such shares converted at one time by the same holder, the
Corporation shall round the number of shares of Common Stock issued on such
conversion to the nearest whole share.
(d) Limitation on Shares Issuable on Conversion; Stockholder Approval;
Mandatory Redemption. (1) Notwithstanding any other provision herein, unless the
Stockholder Approval shall have been obtained from the stockholders of the
Corporation or waived by the National Association of Securities Dealers, Inc.
(the "NASD"), the Corporation shall not be required to issue upon conversion of
shares of Series F Convertible Preferred Stock more than 6,686,750 shares (such
amount to be subject to equitable adjustment from time to time for stock splits,
stock dividends,
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combinations, capital reorganizations and similar events relating to the Common
Stock occurring after the date of filing this Certificate of Designations with
the Secretary of State of the State of Delaware) of Common Stock (the "Maximum
Share Amount"), less the aggregate number of shares of Common Stock issued by
the Corporation pursuant to Section 4 as dividends on the Series F Convertible
Preferred Stock, upon conversion of shares of Series F Convertible Preferred
Stock. The foregoing amount of 6,686,750 (as so adjusted from time to time)
shall be allocated among the shares of Series F Convertible Preferred Stock at
the time of initial issuance thereof pro rata based on the total number of
authorized shares of Series F Convertible Preferred Stock provided in Section 1.
Each certificate for shares of Series F Convertible Preferred Stock initially
issued shall bear a notation as to the number of shares constituting the portion
of the Maximum Share Amount allocated to the shares of Series F Convertible
Preferred Stock represented by such certificate for purposes of conversion
thereof. The Corporation shall maintain records which show the number of shares
of Common Stock issued by the Corporation pursuant to Section 4 as dividends on
the shares of Series F Convertible Preferred Stock represented by each
certificate, which records shall be controlling in the absence of manifest
error. Upon surrender of any certificate for shares of Series F Convertible
Preferred Stock for transfer or re-registration thereof (or, at the option of
the holder, for conversion of less than all of the shares of Series F
Convertible Preferred Stock represented thereby), the Corporation shall make a
notation on the new certificate issued upon such transfer or re-registration or
evidencing such unconverted shares, as the case may be, as to the remaining
number of shares of Common Stock from the Maximum Share Amount remaining
available for conversion of the shares of Series F Convertible Preferred Stock
evidenced by such new certificate (including, without limitation, by taking into
account the number of shares of Common Stock issued by the Corporation pursuant
to Section 4 as a dividend on the shares of Series F Convertible Preferred Stock
represented by the certificate so surrendered and not previously reflected on
the certificate so surrendered, as shown on the records maintained by the
Corporation). If any certificate for shares of Series F Convertible Preferred
Stock is surrendered for split-up into two or more certificates representing an
aggregate number of shares of Series F Convertible Preferred Stock equal to the
number of shares of Series F Convertible Preferred Stock represented by the
certificate so surrendered (as reduced by any contemporaneous conversion of
shares of Series F Convertible Preferred Stock represented by the certificate so
surrendered), each certificate issued on such split-up shall bear a notation of
the portion of the Maximum Share Amount allocated thereto determined by pro rata
allocation from among the remaining portion of the Maximum Share Amount
allocated to the certificate so surrendered. If any shares of Series F
Convertible Preferred Stock represented by a single certificate are converted in
full, all of
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the portion of the Maximum Share Amount allocated to such shares of Series F
Convertible Preferred Stock which remains unissued after such conversion shall
be re-allocated pro rata to the outstanding shares of Series F Convertible
Preferred Stock held of record by the holder of record at the close of business
on the date of such conversion of the shares of Series F Convertible Preferred
Stock so converted, and if there shall be no other shares of Series F
Convertible Preferred Stock held of record by such holder at the close of
business on such date, then such portion of the Maximum Share Amount shall be
allocated pro rata among the shares of Series F Convertible Preferred Stock
outstanding on such date.
(2) The Corporation shall promptly, but in no event later than five
business days after the occurrence, give notice to each holder (by telephone
line facsimile transmission at such number as such holder has specified in
writing to the Corporation for such purposes or, if such holder shall not have
specified any such number, by overnight courier or first class mail, postage
prepaid, at such holder's address as the same appears on the stock books of the
Corporation) and any holder may at any time after the occurrence give notice to
the Corporation, in either case, if on any five trading days within any period
of ten consecutive trading days the Corporation would not have been required to
convert shares of Series F Convertible Preferred Stock of such holder as a
consequence of the limitations set forth in Section 8(d)(1) had all outstanding
shares of Series F Convertible Preferred Stock been converted into Common Stock
on each such day, determined without regard to the limitation, if any, on such
holder contained in the proviso to the second sentence of Section 8(a) (any such
notice, whether given by the Corporation or a holder, an "Inconvertibility
Notice"). If the Corporation shall have given or been required to give any
Inconvertibility Notice, or if a holder shall have given any Inconvertibility
Notice, then within ten business days after such Inconvertibility Notice is
given or was required to be given, the holder receiving or giving, as the case
may be, the Inconvertibility Notice shall have the right by written notice to
the Corporation (which written notice may be contained in the Inconvertibility
Notice given by the holder) to direct the Corporation either (i) to convene a
meeting of the holders of Common Stock or to seek written consents of
stockholders in lieu of a meeting as promptly as practicable and use its
reasonable best efforts to obtain the Stockholder Approval, or (ii) to redeem
the portion of such holder's outstanding shares of Series F Convertible
Preferred Stock (which, if applicable, shall be all of such holder's outstanding
shares of Series F Convertible Preferred Stock) as shall not, on the business
day prior to the date of such redemption, be convertible into shares of Common
Stock by reason of the limitations set forth in Section 8(d)(1) (determined
without regard to the limitation, if any, on such holder contained in the
proviso to the second sentence of Section 8(a)), within five business days after
such holder so directs the Corporation, at a
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price per share equal to the Redemption Price (as defined herein). If a holder
so directs the Corporation to convene a meeting of the stockholders or to seek
written consents in lieu thereof to obtain the Stockholder Approval, the
Corporation shall have the right, in lieu of convening such meeting or seeking
such consents, to give a notice of redemption within ten business days after
such holder so directs the Corporation to obtain the Stockholder Approval, and
thereafter shall be obligated to redeem in accordance with such notice of
redemption and this Section 8(d) the portion of such holder's outstanding shares
of Series F Convertible Preferred Stock (which, if applicable, shall be all of
such holder's outstanding shares of Series F Convertible Preferred Stock) as
shall not, on the business day prior to the date of giving notice of such
redemption, be convertible into shares of Common Stock by reason of the
limitations set forth in Section 8(d)(1) (determined without regard to the
limitation, if any, on such holder contained in the proviso to the second
sentence of Section 8(a)), at a price per share equal to the Redemption Price.
If a holder directs the Corporation to convene a meeting of the stockholders or
to seek written consents in lieu thereof to obtain the Stockholder Approval and,
prior to the mailing by the Corporation to its stockholders of proxy materials
for such meeting (or written consents for stockholder action in lieu of such
meeting) (x) the Corporation would have been able, within the limitations set
forth in Section 8(d)(1), to convert all of such holder's outstanding shares of
Series F Convertible Preferred Stock on any three trading days within any period
of five consecutive trading days commencing after the period of ten consecutive
trading days which gave rise to the applicable Inconvertibility Notice from the
Corporation or a holder of shares of Series F Convertible Preferred Stock, as
the case may be, had all outstanding shares of Series F Convertible Preferred
Stock been surrendered for conversion into Common Stock on each such day
(determined without regard to the limitation, if any, on such holder contained
in the proviso to the second sentence of Section 8(a)) or (y) the Corporation
shall have redeemed the outstanding shares of Series F Convertible Preferred
Stock of such holder which shall not, on the business day prior to the date of
giving notice of such redemption, be convertible into shares of Common Stock by
reason of the limitations set forth in Section 8(d)(1) in accordance with this
Section 8(d) (determined without regard to the limitation, if any, on such
holder contained in the proviso to the second sentence of Section 8(a)), at a
price per share equal to the Redemption Price, then in either such case the
Corporation shall have the right to abandon its efforts to seek the Stockholder
Approval in respect of such holder. If a holder directs the Corporation to
redeem outstanding shares of Series F Convertible Preferred Stock and, prior to
the expiration of the five business day period referred to in clause (ii) of the
second sentence of this paragraph with respect thereto, the Corporation would
have been able, within the limitations set forth in Section 8(d)(1), to convert
all of such holder's outstanding shares of
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Series F Convertible Preferred Stock (determined without regard to the
limitation, if any, on such holder contained in the proviso to the second
sentence of Section 8(a)) on any three trading days within any period of five
consecutive trading days commencing after the period of ten consecutive trading
days which gave rise to the applicable Inconvertibility Notice from the
Corporation or such holder of shares of Series F Convertible Preferred Stock, as
the case may be, had all of such holder's outstanding shares of Series F
Convertible Preferred Stock been surrendered for conversion into Common Stock on
each of such three trading days within such five trading day period, then the
Corporation shall not be required to redeem any shares of Series F Convertible
Preferred Stock by reason of such Inconvertibility Notice. In the event the
Stockholder Approval in respect of a holder contemplated in clause (i) of the
second sentence of this paragraph is sought but is not obtained at such meeting
or any adjournment thereof (or through solicitation of written consents), the
Corporation shall thereafter promptly (but in no event more than five business
days thereafter) redeem such portion (which, if applicable, shall be all of such
holder's outstanding shares of Series F Convertible Preferred Stock) of such
holder's outstanding shares of Series F Convertible Preferred Stock as shall
not, on the business day prior to the date of giving notice of such redemption,
be convertible into shares of Common Stock by reason of the limitations set
forth in Section 8(d)(1) (determined without regard to the limitation, if any,
on such holder contained in the proviso to the second sentence of Section 8(a)),
at a price per share equal to the Redemption Price.
(3) Notwithstanding the giving of any notice by the Corporation to the
holders of Series F Convertible Preferred Stock pursuant to Section 8(d)(2) or
the giving or the absence of any notice by the holders of the Series F
Convertible Preferred Stock in response thereto or any redemption of shares of
Series F Convertible Preferred Stock pursuant to Section 8(d)(2) or any
abandonment of the Corporation's efforts to seek the Stockholder Approval
pursuant thereto, thereafter the provisions of Section 8(d)(2) shall continue to
be applicable on any occasion unless the Stockholder Approval shall have been
obtained from the stockholders of the Corporation or waived by the NASD.
(4) Any notice of redemption required to be given by the Corporation
(a "Notice of Redemption") under this Section 8(d) shall be delivered to the
holder of the shares of Series F Convertible Preferred Stock entitled to such
notice at their addresses appearing on the records of the Corporation; provided,
however, that any failure or defect in the giving of notice to any such holder
shall not affect the obligation of the Corporation to redeem shares of the
Series F Convertible Preferred Stock. Any Notice of Redemption shall state (1)
that the Corporation is redeeming all or a portion of such holder's outstanding
shares of Series F Convertible Preferred Stock pursuant to this Section 8(d),
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(2) the number of shares of Series F Convertible Preferred Stock held by such
holder which are to be redeemed, (3) the Redemption Price per share of Series F
Convertible Preferred Stock to be redeemed, determined in accordance with this
Section, and (4) the Redemption Date of such shares of Series F Convertible
Preferred Stock, determined in accordance with this Section 8(d). As used
herein, the term "Redemption Date" means the date on which the Corporation is
required to redeem shares of Series F Convertible Preferred Stock as provided in
this Section 8(d). On the Redemption Date, the Corporation shall make payment in
immediately available funds of the applicable Redemption Price to such holder of
shares of Series F Convertible Preferred Stock to be redeemed to or upon the
order of such holder as specified by such holder in writing to the Corporation
at least one business day prior to the Redemption Date. If the Corporation is
required to redeem all or any portion of a holder's outstanding shares of Series
F Convertible Preferred Stock pursuant to this Section 8(d), the Corporation
shall make payment to such holder of the shares of Series F Convertible
Preferred Stock to be redeemed in respect of each share of Series F Convertible
Preferred Stock to be redeemed of an amount equal to the sum of (A) $11,300.00
and (B) all dividends accrued and unpaid thereon to the applicable Redemption
Date (such sum being referred to herein as the "Redemption Price"). Upon
redemption of less than all of the shares of Series F Convertible Preferred
Stock evidenced by a particular certificate, promptly, but in no event later
than three business days after surrender of such certificate to the Corporation,
the Corporation shall issue a replacement certificate for the shares of Series F
Convertible Preferred Stock evidenced by such certificate which have not been
redeemed. Only whole shares of Series F Convertible Preferred Stock may be
redeemed.
(5) As used in this Section 8(d), "Stockholder Approval" means the
approval by a majority of the votes cast by the holders of shares of Common
Stock (in person or by proxy) at a meeting of the stockholders of the
Corporation (duly convened at which a quorum was present), or a written consent
of holders of shares of Common Stock entitled to such number of votes given
without a meeting, of the issuance by the Corporation of 20% or more of the
outstanding Common Stock of the Corporation for less than the greater of the
book or market value of such Common Stock on conversion of the Series F
Convertible Preferred Stock, as and to the extent required under Section
4460(i)(1)(D) of the rules of the NASD (or any successor or replacement
provision thereof).
(e) Redemption at Option of Holders. (i) Each holder of shares of
Series F Convertible Preferred Stock who at the time is entitled to the benefits
of the Registration Statement shall be entitled, at such holder's option, by
notice to the Corporation given within 20 days after the occurrence of an
Optional Redemption Event, to require the Corporation to redeem all or a portion
of
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such shares (but in no event less than ten shares, unless such holder holds less
than ten shares, in which case such holder must redeem all of such holder's
shares) upon the occurrence of an Optional Redemption Event.
An Optional Redemption Event means any one of the following events:
(A) If, at any time after the Corporation has obtained Stockholder
Approval as contemplated in Section 8(d) of this Certificate of
Designations, the number of authorized but unissued shares of the
Corporation's Common Stock shall not be sufficient to effect the conversion
in full of all outstanding shares of Series F Convertible Preferred Stock
otherwise convertible in accordance with this Certificate of Designations;
(B) For any period of five consecutive trading days following the SEC
Effective Date there shall be no closing bid price of the Common Stock on
any national securities exchange or the Nasdaq National Market;
(C) The Common Stock ceases to be listed for trading on any national
securities exchange or the Nasdaq National Market for ten consecutive days;
or
(D) The inability for 30 or more consecutive days of any holder of
shares of Series F Convertible Preferred Stock who is entitled to optional
redemption rights under this Section 8(e) to sell such shares of Common
Stock issued or issuable on conversion of shares of Series F Convertible
Preferred Stock pursuant to the Registration Statement by reason of the
occurrence of a Black-Out Day (as defined in Section 8(f)) on each day in
such 30-day period.
(ii) To exercise the optional redemption right, a holder of Series F
Convertible Preferred Stock shall deliver to the Corporation a notice of
redemption (an "Optional Redemption Notice"), accompanied by the certificate for
the shares of Series F Convertible Preferred Stock to be redeemed. Any Optional
Redemption Notice shall state (1) that the holder delivering such notice is
thereby requiring the Corporation to redeem shares of Series F Convertible
Preferred Stock pursuant to this Section 8(e), (2) the Optional Redemption Event
giving rise to such redemption, and (3) the number of shares of Series F
Convertible Preferred Stock held by such holder which are to be redeemed. In no
event later than five business days following receipt of such notice by the
Corporation, the Corporation shall make payment in immediately available funds
of the applicable Redemption Price with respect to the shares of Series F
Convertible Preferred Stock to be redeemed to or upon the order of such holder
as specified by such holder in
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the Optional Redemption Notice. Upon redemption of less than all of the shares
of Series F Convertible Preferred Stock evidenced by a particular certificate,
promptly, but in no event later than five business days after surrender of such
certificate to the Corporation, the Corporation shall issue a replacement
certificate for the shares of Series F Convertible Preferred Stock which have
not been redeemed. Only whole shares of Series F Convertible Preferred Stock may
be redeemed.
(f) Conversion at Option of Corporation. So long as the Corporation
shall be in compliance in all material respects with its obligations to the
holders of the Series F Convertible Preferred Stock (including its obligations
under the Registration Rights Agreement and the provisions of this Certificate
of Designations) and so long as the Registration Statement shall be effective
(in the case of application of this Section 8(f) to any period during which the
Registration Statement is required to be kept effective as provided in Section
3(a) of the Registration Rights Agreement), the Corporation shall have the
right, exercisable at any time or from time to time on or after the date which
is 365 days after the SEC Effective Date (the "Corporation Conversion
Commencement Date"), adjusted as described in the proviso below, by notice (a
"Corporation Conversion Notice") to the holders of the Series F Convertible
Preferred Stock to require the holders of the Series F Convertible Preferred
Stock to convert, in accordance with the provisions, and subject to the
limitations, of this Section 8, all or any part of the outstanding shares of
Series F Convertible Preferred Stock into shares of Common Stock effective as of
the date the Corporation Conversion Notice is given to the extent the same are
on such date convertible into shares of Common Stock; provided, however, that
the Corporation Conversion Commencement Date shall be extended by such number of
days as shall correspond to the number of Black-Out Days (as defined herein)
occurring prior to the otherwise applicable Corporation Conversion Commencement
Date. As used herein, the term "Black-Out Days" means such period of time
commencing from a holder's receipt of notice from the Corporation of the
happening of any event of the kind described in Sections 3(e) and 3(f) of the
Registration Rights Agreement until the date of receipt by such holder of the
amendment or supplement to the Prospectus referred to in Section 3(e) therein or
notification of lifting of a stop order or re-effectiveness, as the case may be.
The Corporation Conversion Notice shall state (1) the number of shares of Series
F Convertible Preferred Stock which the Corporation seeks to require to be
converted into shares of Common Stock and (2) the conversion date (which shall
be the date the Corporation Conversion Notice is given). If the Corporation
shall give a Corporation Conversion Notice, then, unless theretofore converted
by the holder in accordance herewith, and, so long as the Registration Statement
shall remain effective on the date such Corporation Conversion Notice is given
(in the case of application of this Section 8(f) to any period during which the
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Registration Statement is required to be kept effective as provided in Section
3(a) of the Registration Rights Agreement) and the Corporation shall be in
compliance in all material respects with its obligations under the Registration
Rights Agreement on the date such Corporation Conversion Notice is given, on the
conversion date properly set forth therein, the lesser of (A) the number of
shares of Series F Convertible Preferred Stock which the Corporation seeks to
require to be converted, as set forth in such Corporation Conversion Notice or
(B) the maximum number of shares of Series F Convertible Preferred Stock which
on such conversion date is convertible in accordance with Sections 8(a) and
8(d), shall be converted into such number of shares of Common Stock as shall be
determined pursuant to this Section 8 as if the conversion of such number of
shares of Series F Convertible Preferred Stock were made by the holders thereof
in accordance herewith without any further action on the part of the holders of
such shares of Series F Convertible Preferred Stock. Upon receipt by the
Corporation of certificates for shares of Series F Convertible Preferred Stock
converted into shares of Common Stock in accordance with this Section 8(e) after
a Corporation Conversion Notice is given, the Corporation shall issue and,
within three trading days after such surrender, deliver to or upon the order of
such holder (1) that number of shares of Common Stock for the number of shares
of Series F Convertible Preferred Stock converted as shall be determined in
accordance herewith, (2) a new certificate for the balance of shares of Series F
Convertible Preferred Stock, if any, and (3) payment of the accrued and unpaid
dividends on the shares of Series F Convertible Preferred Stock so converted
(which payment of dividends may be made in accordance with Section 4 if the
Corporation satisfies the requirements thereof). In connection with any
conversion at the option of the Corporation, the Corporation agrees to indemnify
the holders of Series F Convertible Preferred Stock to the same extent set forth
in Section 8(c)(6) of this Certificate of Designations with respect to any
failure to timely deliver certificates representing the Common Stock issuable
upon such conversion in accordance herewith.
Section 9. Voting Rights. Except as provided below and as otherwise
required by law, shares of Series F Convertible Preferred Stock shall not be
entitled to vote on any matter.
The affirmative vote or consent of the holders of a majority of the
outstanding shares of the Series F Convertible Preferred Stock, voting
separately as a class, will be required for any amendment, alteration, or
repeal, whether by merger or consolidation or otherwise, of the Corporation's
Certificate of Incorporation if the amendment, alteration, or repeal adversely
affects the powers, preferences, or special rights of the Series F Convertible
Preferred Stock; provided, however, that any increase in the authorized
preferred stock of the Corporation or the creation and issuance of any stock
which is both Junior Dividend
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Stock and Junior Liquidation Stock or any other capital stock of the Corporation
ranking on a parity with the Series F Convertible Preferred Stock as to
entitlement to dividends and as to preference on liquidation shall not be deemed
to affect adversely such powers, preferences, or special rights.
Section 10. Outstanding Shares. For purposes of this Certificate of
Designations, all shares of Series F Convertible Preferred Stock shall be deemed
outstanding except (i) from the date of conversion of shares of Series F
Convertible Preferred Stock into Common Stock, all shares of Series F
Convertible Preferred Stock converted into Common Stock; and (ii) from the date
of registration of transfer, all shares of Series F Convertible Preferred Stock
held of record by the Corporation or any subsidiary or Affiliate (as defined
herein) of the Corporation. For the purposes of this Certificate of
Designations, "Affiliate" means any person, other than an initial holder of
shares of Series F Convertible Preferred Stock, directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Corporation. "Control" is the power to direct the management and policies of a
person, directly or through one or more intermediaries, whether through the
ownership of voting securities, by contract, or otherwise.
Section 11. Restriction on Transfer of Shares. No holder of shares of
Series F Convertible Preferred Stock shall sell or otherwise transfer any shares
of Series F Convertible Preferred Stock except to a person who is a Permitted
Transferee. A "Permitted Transferee" means a person which (a) (1) is an
"accredited investor" (as defined in Regulation D under the Securities Act of
1933, as amended (the "Securities Act")), (2) acquires at least 200 shares of
Series F Convertible Preferred Stock from a holder of Series F Convertible
Preferred Stock (or such lesser number of shares as shall be held by such holder
at the time of such sale or transfer) and (3) acquires the shares of Series F
Convertible Preferred Stock in a transaction exempt from registration under the
Securities Act and in accordance with any agreement between the Corporation and
the holder making such sale or other transfer of shares of Series F Convertible
Preferred Stock or (b) in the case of any holder which agreed with the
Corporation to purchase at least 1,000 shares of Series F Convertible Preferred
Stock from the Corporation in connection with the initial issuance of shares of
Series F Convertible Preferred Stock, is any one of up to 5 entities of which
70% or more of the beneficial ownership of such entity is beneficially owned by
the beneficial owners of such holder and which entity would, immediately after
such transfer hold at least 50 shares (or such lesser number of shares as at the
time of such transfer are held by the transferring holder) of Series F
Convertible Preferred Stock, in either the case of clause (a) or (b), subject to
the consent of the Corporation, such consent not to be unreasonably withheld (it
being understood that a proposed
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assignment by the Buyer to a competitor or potential competitor of the
Corporation or a person which the Corporation determines in good faith is
accumulating or is likely to accumulate ownership of shares of Common Stock for
hostile or unfriendly purposes or proposes to acquire Shares for a purpose
adverse to the interests of the Corporation or it stockholders may constitute a
basis for withholding such consent).
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IN WITNESS WHEREOF, XOMA Corporation has caused its corporate seal to
be hereunto affixed and this certificate to be signed by Christopher J.
Margolin, its Vice President, General Counsel and Secretary, as of the 24th day
of September, 1996.
XOMA CORPORATION
By______________________________
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