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CERTIFICATE OF THE DESIGNATIONS, POWERS,
PREFERENCES AND RIGHTS
OF THE
SERIES D 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 November 3, 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. 606,061 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 D Convertible Preferred
Stock (the "Series D 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 D 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 D 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 D 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 $.05 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 D Preferred Stock on the date fixed for the distribution of assets of
the Corporation (the "Series D Liquidation Preference"). If, upon such
Liquidation, the assets of the Corporation available for distribution to the
holders of Series D Preferred Stock and any other series of preferred stock
then outstanding ranking on parity with the Series D Preferred Stock upon
liquidation ("Parity Stock") shall be insufficient to permit payment in full
to the holders of the Series D 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 D 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 D 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 D
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 D Preferred Stock or Parity Stock.
4. REDEMPTION. The Series D Preferred Stock is not redeemable.
5. CONVERSION.
(a) OPTIONAL CONVERSION. The holder shall have the right, at any time
after January 29, 1999, to convert any or all of the shares of Series D
Preferred Stock outstanding immediately prior to such conversion into that
number of shares of Common Stock equal to the
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multiple of the following two fractions: (a) the number of shares of Series D
Preferred Stock to be converted divided by 606,061 and (b) 5,000,000 divided
by the conversion price in effect at the time of conversion (the "Conversion
Price"). The Conversion Price shall mean the average of the closing prices
for the Corporation's Common Stock for any 20 consecutive trading days during
the period from January 1, 1999 through June 30, 1999 (the "Market Price")
chosen by Novartis Pharma AG ("Novartis"); provided, however, if the Market
Price is greater than $9.00 (the "Ceiling"), the Conversion Price will be
$9.00 and if the Market Price is less than $7.50 (the "Floor"), the
Conversion Price will be $7.50. The closing price for each day shall be the
last sales price of the day or in case no sale takes place on such day, the
average of the closing high bid and low asked prices, 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
Corporation, 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 Corporation, or (c) if, in the
reasonable judgment of the Board of Directors of the Corporation, there
exists no principal United States market for the Common Stock, then as
reasonably determined by the Board of Directors of the Corporation. The
number of shares of Common Stock into which each share of Series D Preferred
Stock is convertible is hereinafter collectively referred to as the
"Conversion Rate." The Conversion Rate is subject to adjustment pursuant to
the provisions of Paragraph 5(d) below.
(b) AUTOMATIC CONVERSION. If at any time the Corporation effects a
merger, consolidation or sale of substantially all of its assets (a "Conversion
Event"), each share of Series D 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 D Preferred Stock would then be converted at either (i)
the Market Price as of the date of the first public announcement of the
Conversion Event (subject to the Floor and Ceiling set forth in Paragraph 5(a)
above) in the event the Conversion Event occurs prior to the earlier of June 30,
1999 or establishment by Novartis of the Conversion Price or (ii) the Conversion
Price.
(c) MECHANICS OF CONVERSION. In the event that the Series D
Preferred Stock is converted into shares of Common Stock pursuant to Paragraphs
5(a) or 5(b) above, the holder of the Series D 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 D 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 D Preferred Stock to be converted,
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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 shall be
adjusted in case the Corporation shall, at any time prior to conversion of the
Series D Preferred Stock pursuant to Paragraphs 5(a) or 5(b) above, (a) issue
Common Stock as a dividend or distribution on any class of the capital stock of
the Corporation, (b) split or otherwise subdivide its outstanding Common Stock,
(c) combine the outstanding Common Stock into a smaller number of shares, or
(d) issue securities 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 Corporation) so that the holder of each share of the Series D 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 D Preferred Stock been
converted immediately prior to the close of business on such record date or
effective date. There shall be no adjustment in the Conversion Rate in the
event that the Corporation pays a cash dividend.
(e) The Corporation 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 D Preferred Stock, the full number of
shares of Common Stock deliverable upon the conversion of all shares of the
Series D Preferred Stock from time to time outstanding. The Corporation 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 D Preferred Stock.
(f) No fractional shares or scrip representing fractional shares of
Common Stock shall be issued upon the conversion of the Series D Preferred
Stock. In lieu of any fractional shares to which a holder would otherwise be
entitled, the Corporation shall pay cash, equal to such fraction multiplied by
the Market Price of the Common Stock on the day of conversion.
(g) The Corporation 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
Corporation, 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 D Preferred Stock against impairment.
6. VOTING RIGHTS.
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(a) In addition to any other rights provided for herein or by law,
the holders of Series D Preferred Stock shall be entitled to vote, together with
the holders of Common Stock as one class, on all matters as to which holders of
Common Stock shall be entitled to vote, in the same manner and with the same
effect as such Common Stock holders. In any such vote each share of Series D
Preferred Stock shall entitle the holder thereof to one vote per share.
(b) So long as any shares of the Series D Preferred Stock remain
outstanding, the consent of two-thirds of the holders of the then outstanding
Series D 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
Corporation, as amended, in a manner which would alter or change the powers,
preferences, rights privileges, restrictions and conditions of the Series D
Preferred Stock so as to adversely affect the Series D Preferred Stock. The
Series D Preferred Stock shall have no right to vote with respect to the
authorization and/or issuance by the Corporation 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 D Preferred Stock.
(c) Each share of the Series D Preferred Stock shall entitle the
holder thereof to one vote on all matters to be voted on by the holders of the
Series D Preferred Stock, as set forth above.
7. STATUS OF CONVERTED STOCK. In the event any shares of Series D
Preferred Stock shall be redeemed or converted pursuant to Paragraph 5 hereof,
the shares so 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. MISCELLANEOUS.
(a) There is no sinking fund with respect to the Series D Preferred
Stock.
(b) The shares of the Series D 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 Corporation, as amended.
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9. RIGHT TO ELECT DIRECTORS.
During the period that the Series D Preferred Stock is outstanding and in
the event of a Default, the holders of Series D Preferred Stock shall
immediately have the right to elect two members of the Corporation's Board of
Directors. "Default" shall be defined to mean the failure of the Corporation to
pay any dividend on the Series D Preferred Stock declared by the Board of
Directors when due, which failure shall continue for a period of two years.
IN WITNESS WHEREOF, Titan Pharmaceuticals, Inc. has caused this Designation
to be executed this 17th day of November, 1997.
TITAN PHARMACEUTICALS, INC.
By: /s/ Sunil R. Bhonsle
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Name: Sunil R. Bhonsle
Title: Executive Vice President and Chief
Operating Officer
Attest:
By: /s/ Robert E. Farrell
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Name: Robert E. Farrell
Title: Chief Financial Officer
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