CERTIFICATE OF THE DESIGNATIONS, POWERS,
PREFERENCES AND RIGHTS
OF THE
SERIES C CONVERTIBLE PREFERRED STOCK
(par value $.001 per share)
of
TITAN PHARMACEUTICALS, INC.
a Delaware Corporation
__________
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
__________
The undersigned DOES HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors (the "Board of Directors") of Titan
Pharmaceuticals, Inc., a Delaware corporation (the "Corporation"), at a meeting
held on July 29, 1997:
RESOLVED, that one series of the class of authorized preferred stock, $.001
par value, of the Corporation is hereby created and that the designations,
powers, preferences and relative, participating, optional or other special
rights of the shares of such series, and qualifications, limitations or
restrictions thereof, are hereby fixed as follows (this instrument hereinafter
referred to as the "Designation"):
1. NUMBER OF SHARES AND DESIGNATIONS. 222,400 shares of the preferred
stock, $.001 par value, of the Corporation are hereby constituted as a series of
preferred stock of the Corporation designated as Series C Convertible Preferred
Stock (the "Series C Preferred Stock").
2. DIVIDEND PROVISIONS. Subject to the rights of any series of Preferred
Stock that may from time to time come into existence, the holders of share of
Series C Preferred Stock shall be entitled to receive dividends, when, as and if
declared by the Board of Directors, out of any assets legally available
therefor, ratably with any declaration or payment of any dividend (payable other
than solely in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of this Corporation) on the Common Stock or other junior
securities of this Corporation.
3. LIQUIDATION PREFERENCE.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary ("Liquidation"), the holders of
record of the shares of the Series C Preferred Stock shall be entitled to
receive, before and in preference to any distribution or
payment of assets of the Corporation or the proceeds thereof may be made or
set apart for the holders of Common Stock or any other security junior to the
Series C Preferred Stock in respect of distributions upon Liquidation out of
the assets of the Corporation legally available for distribution to its
stockholders, an amount in cash equal to $.01 per share (subject to
adjustment in the event of stock splits, combinations or similar events) plus
an amount equal to all accrued and unpaid dividends, if any, on each share of
Series C Preferred Stock on the date fixed for the distribution of assets of
the Corporation (the "Series C Liquidation Preference"). If, upon such
Liquidation, the assets of the Corporation available for distribution to the
holders of Series C Preferred Stock and any other series of preferred stock
then outstanding ranking on parity with the Series C Preferred Stock upon
liquidation ("Parity Stock") shall be insufficient to permit payment in full
to the holders of the Series C Preferred Stock and Parity Stock, then the
entire assets and funds of the Corporation legally available for distribution
to such holders and the holders of the Parity Stock then outstanding shall be
distributed ratably among the holders of the Series C Preferred Stock and
Parity Stock based upon the proportion the total amount distributable on each
share upon liquidation bears to the aggregate amount available for
distribution on all shares of the Series C Preferred Stock and of such Parity
Stock, if any.
(b) Upon the completion of the distributions required by subparagraph
(a) of this Paragraph 3 and any other distribution that may be required with
respect to series of preferred stock that may from time to time come into
existence, the holders of Common Stock shall be entitled to receive an aggregate
amount equal to the sum of stated capital plus additional paid-in capital
attributable to the Common Stock, as reflected on the Corporation's audited
consolidated balance sheet as of the end of the fiscal year next preceding the
date of such distribution, which aggregate amount shall be distributed ratably
among the holders of Common Stock in proportion to the number of shares of
Common Stock held by each such holder. If, upon the occurrence of such event,
the assets and funds thus distributed among the holders of the Common Stock
shall be insufficient to permit the payment to such holders of the full
aforesaid aggregate amount, then the entire remaining assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Common Stock in proportion to the number of shares of
Common Stock held by each such holder.
(c) Upon the completion of the distributions required by subparagraph
(b) of this Paragraph 3, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed among the holders of Series C
Preferred Stock, Parity Stock and the Common Stock PRO RATA based on the number
of shares of Common Stock held by each and issuable upon conversion of all such
Series C Preferred Stock or Parity Stock.
(d) For purposes of this Paragraph 3, a merger or consolidation or a
sale of all or substantially all of the assets of the Corporation shall be
considered a Liquidation except (i) in the event that in such a transaction, the
holders of the Series C Preferred Stock receive securities of the surviving
corporation having substantially similar rights as the Series C Preferred Stock
and the stockholders of the Corporation immediately prior to such transaction
are holders of at least a majority of the voting securities of the surviving
corporation immediately thereafter or (ii) in the event of a merger or
consolidation in which the Corporation is not the surviving entity, the
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Corporation elects to convert the Series C Preferred Stock into an equal number
of shares of Common Stock as set forth in Paragraph 5(b) below.
4. OPTIONAL REDEMPTION BY CORPORATION. In the event that the outstanding
shares of Series C Preferred Stock have not converted into shares of Common
Stock pursuant to Paragraph 5(a) or (b) below or the Corporation has not
received a notice of Conditional Approval (as defined below), then at any time
after September __, 2004 (the "Original Redemption Date"), the Corporation may
redeem all, but not less than all, of the outstanding shares of Series C
Preferred Stock at a redemption price equal to the aggregate par value of such
shares (the "Redemption Price") plus accrued and unpaid dividends, if any. In
the event that a notification from the United States Food and Drug
Administration (the "FDA") granting a conditional approval (a "Conditional
Approval") of either Cea Vac, TriGem or TriAB (the "Drugs") is received by the
Corporation prior to the Original Redemption Date and the outstanding shares of
Series C Preferred Stock have not converted into shares of Common Stock pursuant
to Paragraph 5(a) or (b) below, the Original Redemption Date shall be extended
until the latest date on which the Corporation has received a withdrawal notice
with respect to each Conditional Approval received prior to the Original
Redemption Date (the "Extended Redemption Date") and, in the event the Original
Redemption Date is extended, the Corporation may redeem all, but not less than
all, of the outstanding shares of Series C Preferred Stock at the Redemption
Price, plus accrued and unpaid dividends, if any, at any time after the Extended
Redemption Date. .
5. CONVERSION.
(a) AUTOMATIC CONVERSION. Upon receipt of notification (the
"Notification") from the FDA that any of the Drugs are approved for final
marketing and commercialization by the Corporation (the "Conversion Event"),
PROVIDED that the Conversion Event occurs prior to the (i) Original Redemption
Date or (ii) the Extended Redemption Date in the event a Conditional Approval
exists at the time of the Notification, each share of Series C Preferred Stock
then outstanding shall, by virtue of and immediately prior to the Conversion
Event and without any action on the part of the holder thereof (except as set
forth in Paragraph 5(c) below), be deemed automatically converted into that
number of shares of Common Stock into which the Series C Preferred Stock would
then be converted at the then effective Conversion Rate (as defined below).
Each share of Series C Preferred Stock shall be convertable into one share of
Common Stock (the "Conversion Rate"), subject to adjustment as set forth in
Paragraph 5(d).
(b) OPTIONAL CONVERSION BY CORPORATION. At any time the share of
Series C Preferred Stock are outstanding, the Corporation shall have the right
to elect to convert any or all of the shares of Series C Preferred Stock
outstanding immediately prior to such conversion, and upon such election by the
Corporation, and without any action on the part of the holder thereof (except as
set forth in Paragraph 5(c) below), each share of Series C Preferred Stock then
outstanding shall be deemed automatically converted into that number of shares
of Common Stock into which the Series C Preferred Stock would then be converted
at the then effective Conversion Rate.
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(c) MECHANICS OF CONVERSION. In the event that the Series C
Preferred Stock is converted into shares of Common Stock pursuant to Paragraph
(a) or (b) above, the holder of the Series C Preferred Stock shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for the Series C Preferred Stock, and shall
give written notice to the Corporation at its principal corporate office, which
notice shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. The Corporation
shall, as soon as practicable thereafter, issue and deliver to such holder of
Series C Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Series C Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date.
(d) CONVERSION RATE ADJUSTMENTS. The Conversion Rate of the Series C
Preferred Stock shall be subject to adjustment from time to time as set forth
below.
(i) In case the Corporation shall (a) issue Common Stock as a
dividend or distribution on any class of the capital stock of the Company,
(b) split or otherwise subdivide its outstanding Common Stock, (c) combine the
outstanding Common Stock into a smaller number of shares, or (d) issue by
reclassification of its Common Stock (except in the case of a merger,
consolidation or sale of all or substantially all of the assets of the Company
as set forth in subparagraph 5(d)(ii) below) the Conversion Rate in effect on
the record date for any stock dividend or the effective date of any such other
event shall be adjusted so that the holder of each share of the Series C
Preferred Stock shall thereafter be entitled to receive, upon the conversion of
such share, the number of shares of Common Stock or other capital stock which it
would own or be entitled to receive immediately after the happening of any of
the events mentioned above had such share of the Series C Preferred Stock been
converted immediately prior to the close of business on such record date or
effective date. The adjustments herein provided shall become effective
immediately following the record date for any such stock dividend or the
effective date of any such other events. There shall be no adjustment in the
Conversion Rate in the event that the Company pays a cash dividend.
(ii) In case of any reclassification or similar change of
outstanding shares of Common Stock of the Company, or in case of the
consolidation or merger of the Company with another corporation, subject to
subparagraph 5(b), or the conveyance of all or substantially all of the assets
of the Company in a transaction in which holders of the Common Stock receive
shares of stock or other property including cash, each share of the Series C
Preferred Stock shall, after such event and subject to the other rights of the
Series C Preferred Stock as set forth elsewhere herein, be convertible only into
the number of shares of stock or other securities or property, including cash,
to which a holder of the number of shares of Common Stock of the Company
deliverable upon conversion of such shares of the Series C Preferred Stock
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would have been entitled upon such reclassification, change, consolidation,
merger or conveyance had such share been converted immediately prior to the
effective date of such event.
(e) The Company shall at all times reserve and keep available, out of
its authorized but unissued shares of Common Stock or out of shares of Common
Stock held in its treasury, solely for the purpose of effecting the conversion
of the shares of the Series C Preferred Stock, the full number of shares of
Common Stock deliverable upon the conversion of all shares of the Series C
Preferred Stock from time to time outstanding. The Company shall from time to
time in accordance with Delaware law take all steps necessary to increase the
authorized amount of its Common Stock if at any time the authorized number of
shares of Common Stock remaining unissued shall not be sufficient to permit the
conversion of all of the shares of the Series C Preferred Stock.
(f) (i) No fractional shares or scrip representing fractional shares
of Common Stock shall be issued upon the conversion of the Series C Preferred
Stock. In lieu of any fractional shares to which a holder would otherwise be
entitled, the Company shall pay cash, equal to such fraction multiplied by the
closing price (determined as provided in subparagraph (ii) of this Paragraph
5(f)) of the Common Stock on the day of conversion.
(ii) For the purposes of any computation under subparagraph
5(f)(i), the current market price per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices for the 20 consecutive
business days prior to the day in question. The closing price for each day
shall be the last sales price regular way or in case no sale takes place on such
day, the average of the closing high bid and low asked prices regular way, in
either case (a) as officially quoted by the Nasdaq SmallCap Market or the Nasdaq
National Market or such other market on which the Common Stock is then listed
for trading, or (b) if, in the reasonable judgment of the Board of Directors of
the Company, the Nasdaq SmallCap Market or the Nasdaq National Market is no
longer the principal United States market for the Common Stock, then as quoted
on the principal United States market for the Common Stock, as determined by the
Board of Directors of the Company, or (c) if, in the reasonable judgment of the
Board of Directors of the Company, there exists no principal United States
market for the Common Stock, then as reasonably determined by the Board of
Directors of the Company.
(g) The Company will not, by amendment of its Certificate of
Incorporation, as amended, or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Paragraph 5 and in the taking of all such action as may
be necessary or appropriate in order to protect the conversion rights of the
holders of the Series C Preferred Stock against impairment.
6. VOTING RIGHTS.
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(a) Except as otherwise specifically provided herein or by applicable
law, the Series C Preferred Stock shall have no right to vote with respect to
any question upon which holders of the Corporation's capital stock have the
right to vote.
(b) So long as any shares of the Series C Preferred Stock remain
outstanding, the consent of two-thirds of the holders of the then outstanding
Series C Preferred Stock, voting as one class, either expressed in writing or at
a meeting called for that purpose, shall be necessary to repeal, amend or
otherwise change this Designation or the Certificate of Incorporation of the
Company, as amended, in a manner which would alter or change the powers,
preferences, rights privileges, restrictions and conditions of the Series C
Preferred Stock so as to adversely affect the Series C Preferred Stock. The
Series C Preferred Stock shall have no right to vote with respect to the
authorization and/or issuance by the Company of any new series of preferred
stock whether or not the terms of such preferred stock are junior to, on parity
with, or senior to those of the Series C Preferred Stock.
(c) Each share of the Series C Preferred Stock shall entitle the
holder thereof to one vote on all matters to be voted on by the holders of the
Series C Preferred Stock, as set forth above.
7. STATUS OF REDEEMED OR CONVERTED STOCK. In the event any shares of
Series C Preferred Stock shall be redeemed or converted pursuant to Paragraph 4
or 5 hereof, the shares so redeemed or converted shall be cancelled and shall
not be issuable by the Corporation. The Certificate of Incorporation of the
Corporation, as amended, may be appropriately amended from time to time to
effect the corresponding reduction in the Corporation's authorized capital
stock.
8. TRANSFERABILITY. The holders of the Series C Preferred Stock shall
not sell, assign or otherwise transfer any shares of Series C Preferred Stock
without the written consent of the Corporation.
9. MISCELLANEOUS.
(a) There is no sinking fund with respect to the Series C Preferred
Stock.
(b) The shares of the Series C Preferred Stock shall not have any
preferences, voting powers or relative, participating, optional, preemptive or
other special rights except as set forth above in this Designation and in the
Certificate of Incorporation of the Company, as amended.
10. RIGHT TO ELECT DIRECTORS.
During the period that the Series C Preferred Stock is outstanding and in
the event of a Default, the holders of Series C Preferred Stock shall
immediately have the right to elect two members of the Company's Board of
Directors. "Default" shall be defined to mean the failure of
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the Company to pay any dividend on the Series C Preferred Stock declared by
the Board of Directors when due, which failure shall continue for a period of
two years.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] IN
WITNESS WHEREOF, Titan Pharmaceuticals, Inc. has caused this Designation to
be executed this 23rd day of September, 1997.
TITAN PHARMACEUTICALS, INC.
By: /s/ Louis R. Bucalo
--------------------------------------------
Name: Louis R. Bucalo, M.D.
Title: President and Chief Executive Officer
Attest:
By: /s/ Sunil R. Bhonsle
------------------------------------
Name: Sunil R. Bhonsle
Title: Secretary and Chief Operating
Officer
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