Exhibit 10.3
EXHIBIT A
3-DIMENSIONAL PHARMACEUTICALS, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Series B Preferred Stock Purchase Agreement (the "Agreement") is made
as of October 11, 1996 by and between 3-Dimensional Pharmaceuticals, Inc., a
Delaware corporation, having a place of business at Eagleview Corporate Center,
000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxx, Xxxxxxxxxxxx 00000, X.X.X. (the
"Company"), and Merck KGaA, a German corporation, having a place of business at
Xxxxxxxxxxx Xxxxxxx 000, 00000 Xxxxxxxxx, Xxxxxxx ("Merck").
Background
----------
The Company and Merck have entered into a Collaborative Research and
License Agreement (the "Collaborative Agreement") dated as of the date hereof.
In connection with the Collaborative Agreement, Merck has agreed to acquire
1,000,000 shares of Series B Preferred Stock (as hereinafter defined) of the
Company.
Witnesseth:
----------
1. Authorization and Sale of the Shares.
------------------------------------
1.1 Authorization of the Shares. The Company has authorized the
---------------------------
issuance and sale to Merck of 1,000,000 shares (the "Shares") of its Series B
Convertible Preferred Stock, par value $.001 per share (the "Series B Preferred
Stock"). The Series B Preferred Stock has the rights provided for in the Terms
of Series B Preferred Stock attached hereto as Exhibit A (the "Series B
---------
Preferred Stock Terms") and incorporated herein. The Series B Preferred Stock
Terms have been included in an amendment and restatement of the Restated
Certificate of Incorporation, as amended (the "Certificate of Incorporation"),
of the Company. The shares of Common Stock, par value $.001 per share (the
"Common Stock"), of the Company issuable upon conversion of the Shares are
hereinafter referred to as the "Conversion Shares." The Shares and the
Conversion Shares are hereinafter collectively referred to as the "Securities."
1.2 Sale of Shares. Subject to the terms and conditions hereof,
--------------
Merck will purchase the Shares at a purchase price of $2.25 per share, payable
at the Closing by wire transfer in immediately available funds to the account
designated by the Company in Exhibit B hereto and incorporated herein.
---------
2. Closing Date. The closing of the purchase and sale of the Shares to
------------
Merck hereunder (the "Closing") shall be held at the offices of Xxxxxx, Xxxxx &
Xxxxxxx LLP, 0000 Xxx Xxxxx
EXHIBIT X
Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx, 00000, simultaneously with the execution and
delivery of this Agreement, or at such other time and place as the Company and
Merck may agree. The date of the Closing is referred to herein as the "Closing
Date."
3. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to Merck as of the date hereof and as of the Closing Date as
follows:
3.1 Organization and Standing. The Company has been duly
-------------------------
incorporated and is validly existing as a corporation in good standing under the
laws of the State of Delaware.
3.2 Corporate Power; Authorization. The Company has all requisite
------------------------------
legal and corporate power and has taken all requisite corporate action to
execute and deliver this Agreement, to sell and issue the Shares and to carry
out and perform all of its obligations hereunder. This Agreement has been duly
authorized, executed and delivered on behalf of the Company and constitutes the
valid and binding agreement of the Company, enforceable in accordance with its
terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally, (ii) as limited by equitable principles generally
and (iii) rights to indemnification and contribution hereunder may be limited by
applicable law. The consummation of the transactions contemplated herein and
the fulfillment of the terms hereof will not result in a breach of any of the
terms or provisions of, or constitute a default under, the Company's Certificate
of Incorporation, the Company's bylaws, or any material indenture, mortgage,
deed of trust or other agreement or instrument to which the Company is a party
or by which it is bound.
3.3 Stockholder Approval. The holders of Series A-1 Preferred Stock
--------------------
(as defined below), voting separately as a single class in accordance with the
terms of the Certificate of Incorporation, have approved the designation of the
Series B Preferred Stock and the amendment to the Certificate of Incorporation
increasing the authorized capital stock of the Company and establishing the
Series B Preferred Stock Terms. In addition, the holders of Series A-1
Preferred Stock and Common Stock, voting together as a single class in
accordance with the terms of the Certificate of Incorporation and the Delaware
General Corporation Law, as amended, have approved the amendment to the
Certificate of Incorporation increasing the authorized capital stock of the
Company.
3.4 Series A-1 Preferred Stock Waiver. The holders of Series A-1
---------------------------------
Preferred Stock have waived their rights pursuant to Section 4 of the
Stockholders' Agreement to purchase Series B Preferred Stock contemporaneously
with the Closing of this Agreement upon the same terms and conditions as are set
forth herein and in the Series B Preferred Stock Terms.
3.5 Capitalization. As of the date hereof, the authorized capital
--------------
stock of the Company is 28,358,152 shares, consisting of 16,019,076 shares of
Common Stock and 7,005,086 shares of Series A-1 Convertible Preferred Stock, par
value $.001 per share (the "Series A-1 Preferred Stock"), 4,333,990 shares of
Series A-2 Convertible Preferred Stock, par value $.001 per
-2-
EXHIBIT A
share (the "Series A-2 Preferred Stock, and together with the Series A-1
Preferred Stock, the "Series A Preferred Stock"), and 1,000,000 shares of Series
B Preferred Stock. The issued and outstanding shares of capital stock of the
Company as of the date hereof are set forth in Schedule 3.5 hereto.
3.6 Shares; Conversion Shares. The Company has full corporate power
-------------------------
and authority to sell the Shares on the terms and conditions contemplated
herein, and when so sold against payment therefor as provided herein, the Shares
will be validly authorized and issued, fully paid and nonassessable and will
have the rights, preferences and privileges described in the Series B Preferred
Stock Terms. The issuance and delivery of the Shares is not subject to
preemptive or any similar rights of the stockholders of the Company or any liens
or encumbrances arising through the Company, except such preemptive or similar
rights as will have been waived prior to the Closing hereunder; and when the
Conversion Shares are issued in accordance with the Series B Preferred Stock
Terms, they will be validly issued and outstanding, fully paid and nonassessable
and free of any liens or encumbrances arising through the Company.
4. Representations and Warranties of Merck. Merck represents and
---------------------------------------
warrants to the Company as of the date hereof and as of the Closing Date as
follows:
4.1 Investment Representations. Merck is aware of the Company's
--------------------------
business affairs and financial condition, has had an opportunity to ask
questions, review documents and gather information about the Company and has
acquired sufficient information about the Company to reach an informed and
knowledgeable decision to acquire the Securities. Merck has such business and
financial experience as is required to give it the capacity to protect its own
interests in connection with the purchase of the Securities. Merck is an
"accredited investor" as defined in Rule 501(a) under the Securities Act of
1933, as amended (the "Securities Act").
4.2 Investment Intent. Merck is purchasing the Securities for
-----------------
investment for its own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the Securities
Act. Merck understands that the Securities have not been registered under the
Securities Act or registered or qualified under any state securities law in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the bona fide nature of Merck's investment intent as
expressed herein. Merck is familiar with Rule 144 under the Securities Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act.
4.3 No Legal, Tax or Investment Advice. Merck understands that
----------------------------------
nothing in this Agreement or any other materials presented to Merck in
connection with the purchase and sale of the Shares constitutes legal, tax or
investment advice. Merck has consulted such legal, tax and investment advisors
as it, in its sole discretion, has deemed necessary or appropriate in connection
with its purchase of the Shares.
4.4 Corporate Power; Authority. Merck has all requisite legal and
--------------------------
corporate power and has taken all requisite corporate action to execute, deliver
and perform it obligations under this Agreement. This Agreement has been duly
authorized, executed and delivered on behalf
-3-
EXHIBIT A
of Merck and constitutes the valid and binding agreement of Merck, enforceable
in accordance with its terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally, (ii) as limited by equitable
principles generally and (iii) rights to indemnification and contribution
hereunder may be limited by applicable law.
5. Restrictions on Transfer and Registration Rights.
------------------------------------------------
5.1 Restrictions on Transferability. The Securities shall not be
-------------------------------
transferable in the absence of a registration under the Securities Act or an
exemption therefrom or in the absence of compliance with any term of this
Agreement. The Company shall be entitled to give stop transfer instructions to
the transfer agent with respect to the Securities in order to enforce the
foregoing restrictions. The following provisions shall govern the transfer of
the Securities:
5.1.1 Merck, and any other holder of any Securities by
acceptance thereof, agrees that, prior to any transfer of any Securities, such
holder will give written notice to the Company of such holder's intention to
effect such transfer and to comply in all other respects with the provisions of
this Section 5.1. Each such notice shall contain (i) a statement setting forth
the intention of such holder's prospective transferee with respect to its
retention or disposition of such Securities, and (ii) unless waived by the
Company, an opinion of counsel for such holder (who may be the inside or staff
counsel employed by such holder), as to the necessity or non-necessity for
registration under the Securities Act and applicable state securities laws in
connection with such transfer and stating the factual and statutory bases relied
upon by counsel. The following provisions shall then apply:
5.1.1.1 If in the opinion of counsel for the Company the
proposed transfer of such Securities may be effected without registration or
qualification under the Securities Act and any applicable state securities laws,
then the registered holder of such Securities shall be entitled to transfer such
Securities in accordance with the intended method of disposition specified in
the statement delivered by such holder to the Company.
5.1.1.2 If in the opinion of counsel for the Company the
proposed transfer of such Securities may not be effected without registration
under the Securities Act or registration or qualification under any applicable
state securities laws, the registered holder of such Securities shall not be
entitled to transfer such Securities until the requisite registration or
qualification is effective.
5.1.2. Each certificate evidencing the Securities issued upon such
transfer (and each certificate evidencing any untransferred balance of such
Securities) shall bear the legend set forth in Section 5.2 hereof unless (i) in
the opinion of counsel (reasonably acceptable to the Company) addressed to the
Company the registration of future transfers is not required by the applicable
provisions of the Securities Act or applicable state securities laws; (ii) the
Company shall have waived the requirement of such legend; or (iii) in the
reasonable opinion of counsel to the
-4-
EXHIBIT A
Company, such transfer shall have been made in connection with an effective
registration statement filed pursuant to the Securities Act or in compliance
with the requirements of Rule 144 or Rule 144A (or similar or successor rule)
promulgated under the Securities Act, and in compliance with applicable state
securities laws.
5.2 Restrictive Legends. Each certificate representing Securities
-------------------
shall bear substantially the following legends (in addition to any legends
required under applicable securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM.
THE SHARES REPRESENTED BY THIS CERTIFICATE AND THE RIGHTS OF HOLDERS
THEREOF ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER
RESTRICTIONS, AND THE HOLDER OF THE SHARES REPRESENTED BY THIS
CERTIFICATE (INCLUDING ANY HOLDERS) ARE BOUND BY THE TERMS OF A SERIES
B PREFERRED STOCK PURCHASE AGREEMENT BETWEEN THE ORIGINAL PURCHASER
AND THE COMPANY (COPIES OF WHICH MAY BE OBTAINED FROM THE COMPANY).
5.3 Registration of Shares.
----------------------
5.3.1 Registration on Demand. Merck will have the right, on one
----------------------
occasion after the expiration of 12 months after the Company has completed an
initial public offering of the Common Stock, to require the Company to file a
registration statement on Form S-3 (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") under the Securities Act to
register the resale of the Conversion Shares, or if Form S-3 is not available,
to otherwise effect the registration under the Securities Act of the resale of
the Conversion Shares. The Company shall not be obligated to file and cause to
become effective any Registration Statement within a period of four months after
the date of a request for registration pursuant to this Section 5.3.1 if, at the
time of such request, the filing of such registration statement would, as
determined in good faith by a majority of the Board, be seriously detrimental to
the Company or its stockholders or adversely affect a material financing project
or a material proposed or pending acquisition, merger or other similar corporate
transaction to which the Company is or expects to be a party, provided that such
right of the Company to delay a request for registration may be exercised by the
Company not more than once in any one-year period.
5.3.2. Piggyback Registration. If the Company at any time proposes
----------------------
to register any
-5-
EXHIBIT A
of its securities under the Securities Act (other than a registration effected
on either Form S-4 or S-8, or similar or successor forms) for the purpose of
selling such securities to the public whether for its own account or for the
account of any of its security holders or both, the Company shall each such time
promptly give written notice to Merck of its intention so to do. Upon the
written request of Merck given within 15 days after such notice (which request
shall state the number of Conversion Shares to be disposed of by Merck and, if
such offering is not underwritten, the intended method of disposition of such
Conversion Shares by Merck), the Company will use its best efforts to cause
promptly all Conversion Shares of which registration is requested to be
registered or qualified under the Securities Act or any other applicable federal
or state law or regulation so as to permit the sale or other disposition thereof
in accordance with Merck's written request. If the registration is to be
effected in connection with an underwritten offering,
5.3.2.1 Merck shall be required to sell the Conversion Shares
through the underwriter(s);
5.3.2.2 Merck (together with the Company) shall enter into an
underwriting agreement with the managing underwriter in the form customarily
used by such underwriter; and
5.3.2.3. if the managing underwriter thereof determines that the
total number of shares of the Common Stock to be sold in such offering should be
limited due to market conditions or otherwise, subject to any preferential
registration rights of the holders of Series A Preferred Stock set forth in the
Stockholders Agreement (the "Preferential Registration Rights"), the reduction
in the total number of shares offered shall be made by first excluding any
shares of selling stockholders who are not holders of contractual rights to have
such shares registered under the Securities Act, and then, if necessary, by
excluding pro rata (based on the number of shares held by each of such security
holders) the Conversion Shares to be sold by Merck and the holders of other
contractual rights to have such shares registered pursuant to agreements
comparable to this Section 5.3.2 before any reduction is made in the total
number of shares to be sold pursuant thereto by the Company and any holders of
Preferential Registration Rights;
provided, however, that the Company may exclude all Conversion Shares from
-------- -------
registration in connection with the Company's initial public offering in its
sole discretion, whether or not such exclusion is required in the opinion of the
managing underwriter.
-6-
EXHIBIT A
5.4 About Registration.
------------------
5.4.1. The Company shall pay all Registration Expenses (as
hereinafter defined) in connection with any registration, qualification or
compliance hereunder, and Merck shall pay all Selling Expenses (as hereinafter
defined) and other expenses that are not Registration Expenses relating to the
securities ("Registrable Securities") resold by Merck. "Registration Expenses"
shall mean all expenses, except for Selling Expenses, incurred by the Company in
complying with the registration provisions of this Agreement, including without
limitation all federal and state registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration. "Selling Expenses" shall mean
all selling commissions, underwriting fees and stock transfer taxes applicable
to the Registrable Securities and all fees and disbursements of counsel for
Merck.
5.4.2. In the case of any registration effected by the Company
pursuant to these registration provisions, the Company will use its best efforts
to: (i) prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of the Registrable Securities and
keep such Registration Statement effective until the securities covered by such
Registration Statement have been sold, but in no event longer than 180 days;
(ii) furnish such number of prospectuses and other documents incident thereto,
including any amendment of or supplement to the prospectus, as Merck from time
to time may reasonably request; (iii) provide a transfer agent and registrar for
all Registrable Securities registered pursuant to the Registration Statement and
a CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such registration; and (iv) file the documents required of
the Company and otherwise use its best efforts to maintain requisite blue sky
clearance in (A) all jurisdictions in which any of the Conversion Shares is
originally sold and (B) all other states specified in writing by Merck, provided
as to clause (B), however, that the Company shall not be required to qualify to
do business or consent to service of process in any state in which it is not now
so qualified or has not so consented.
5.4.3. Merck shall furnish to the Company such information
regarding it and the distribution proposed by it as the Company may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance described herein. Merck shall
represent that such information is true and complete.
5.5 Expiration of Registration Rights. Notwithstanding anything to
---------------------------------
the contrary contained herein, the registration rights granted hereunder and the
Company's obligations under this Section 5 will expire on the earlier of (i) the
expiration of the five-year period commencing 12 months after the Company has
completed an initial public offering of the Common Stock and (ii) the date on
which all of the Conversion Shares can be sold freely without restriction under
the Securities Act.
-7-
EXHIBIT A
5.6. Indemnification and Contribution.
--------------------------------
5.6.1. The Company agrees to indemnify and hold harmless Merck from
and against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) to which Merck may become subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, any claim by a third party asserting any untrue statement of a
material fact or omission of a material fact contained in a Registration
Statement, on the effective date thereof, or arise out of any failure by the
Company to fulfill any undertaking included in such Registration Statement, and
the Company will, as incurred, reimburse Merck for any legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim; provided, however, that the Company shall not be
-------- -------
liable in any such case to the extent that such loss, claim, damages or
liability arises out of, or is based upon (i) an untrue statement made in such
Registration Statement in reliance upon and in conformity with information
furnished to the Company by or on behalf of Merck for use in preparation of such
Registration Statement or (ii) any untrue statement in any prospectus that is
corrected in any subsequent prospectus that was delivered to Merck prior to the
pertinent sale or sales by Merck.
5.6.2. Merck agrees to indemnify and hold harmless the Company and
its successors, assigns, officers, directors, employees, stockholders, agents
and affiliates from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which the Company may become
subject (under the Securities Act or otherwise) insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) arise out
of, or are based upon any claim by a third party asserting (i) an untrue
statement made in such Registration Statement in reliance upon and in conformity
with information furnished to the Company by or on behalf of Merck for use in
preparation of such Registration Statement, provided that Merck shall not be
liable in any such case for (i) any untrue statement included in any prospectus
which statement has been corrected, in writing, by Merck and delivered to the
Company before the sale from which such loss occurred or (ii) any untrue
statement in any prospectus that is corrected in any subsequent prospectus that
was delivered to Merck prior to the pertinent sale or sales by Merck, and Merck
will, as incurred, reimburse the Company for any legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any such
action, proceeding or claim.
5.6.3. Promptly after receipt by any indemnified person of a notice
of a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 5.6, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal
-8-
EXHIBIT A
expenses subsequently incurred by such indemnified person in connection with the
defense thereof, provided that if there exists or shall exist a conflict of
interest that would make it inappropriate in the reasonable judgment of the
indemnified person for the same counsel to represent both the indemnified person
and such indemnifying person or any affiliate or associate thereof, the
indemnified person shall be entitled to retain its own counsel at the expense of
such indemnifying person.
5.6.4. The obligations of the Company and Merck under this Section
5 shall be in addition to any liability which the Company and Merck may
otherwise have and shall extend, upon the same terms and conditions, to each
person, if any, who controls the Company or Merck within the meaning of the
Securities Act.
5.7. Transfer of Registration Rights. The right to sell Registrable
-------------------------------
Securities pursuant to a Registration Statement described herein may not be
assigned or transferred by Merck.
5.8. Lock-Up Upon Initial Public Offering. Merck agrees that, in the
------------------------------------
event the Company proposes to conduct an underwritten initial public offering of
the Common Stock at a time at which Merck remains the holder of at least fifty
percent of the Securities, Merck will agree to be a party and subject to any
lock-up agreement with the underwriter(s) for such initial public offering with
respect to the sale, transfer, conversion or other disposition of the
Securities, which lock-up agreement will contain no more restrictive terms and
conditions than those to which the Company's then current directors, officers
and significant stockholders will be subject in connection therewith.
6. Miscellaneous.
-------------
6.1. Expenses. The Company and Merck shall each pay its own expenses
--------
incurred in connection with the negotiation, execution and performance of this
Agreement.
6.2. Waivers and Amendments. With the written consent of the Company
----------------------
and the record holders of more than fifty percent of the Shares then
outstanding, the terms of this Agreement may be waived or amended.
6.3. Governing Law. This Agreement shall be governed in all respects
-------------
by the laws of the State of Delaware as such laws are applied to agreements
between Delaware residents entered into and to be performed entirely within
Delaware, without giving effect to the conflicts of laws provisions thereof.
6.4. Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by the Company or
Merck and the Closing.
6.5. Successors and Assigns. The provisions hereof shall inure to the
----------------------
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto (specifically including successors in
interest to the Shares).
-9-
EXHIBIT A
6.6. Entire Agreement. This Agreement constitutes the full and
----------------
entire understanding and agreement between the parties with regard to the
subject hereof.
6.7. Notices, etc. All notices and other communications required or
-------------
permitted hereunder shall be effective upon receipt and shall be in writing and
may be delivered in person, by facsimile, overnight delivery service or U.S.
mail, in which event it may be mailed by first-class, certified or registered,
postage prepaid, addressed (a) if to Merck, at the address set forth at the
beginning of this Agreement or at such other address as Merck shall have
furnished the Company in writing, or (b) if to the Company, at its address set
forth at the beginning of this Agreement, or at such other address as the
Company shall have furnished to Merck in writing.
6.8. Severability of this Agreement. If any provision of this
------------------------------
Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
6.9. Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
6.10. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
-10-
EXHIBIT A
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
3-DIMENSIONAL PHARMACEUTICALS, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
_________________________________
Name:
Title:
MERCK KGaA
By: /s/ J. Sombroek
_________________________________
Name:
Title:
-11-
EXHIBIT A
B. TERMS OF SERIES B PREFERRED STOCK
---------------------------------
The Series B Preferred Stock shall have the following designations, powers,
preferences, relative, participating, optional or other special rights,
qualifications, limitations and restrictions:
6.11. Dividends.
---------
6.11.1 Dividends are payable on the Series B Preferred Stock, when, as
and if declared by the Board of Directors.
6.11.2 So long as any Series B Preferred Stock is outstanding the
Corporation shall not declare or pay any dividend or make any distribution
(whether in cash, shares of capital stock of the Corporation or other property)
on shares of its Common Stock unless prior thereto or simultaneously therewith
any dividends and distributions previously declared on the Series B Preferred
Stock shall have been paid or the Corporation shall have irrevocably deposited
or set aside cash or obligations the payment of which is backed by United States
Obligations sufficient for the payment thereof.
6.11.3 If the Board of Directors declares dividends or other
distributions (other than on Liquidation (as hereinafter defined)) on the Common
Stock in cash, property or securities (including Common Stock) of the
Corporation (or subscription or other rights to purchase or acquire securities
(including Common Stock) of the Corporation), the Board of Directors shall
simultaneously declare a dividend or distribution at the same rate and in the
same form on the Series B Preferred Stock so that the Series B Preferred Stock
participates equally with the Series A Preferred Stock and the Common Stock in
such dividend or distribution. For purposes of determining its proportional
share of the dividend or distribution, each share of the Series B Preferred
Stock shall be deemed to be that number of shares of Common Stock into which
such share of Series B Preferred Stock is then convertible, rounded to the
nearest one-tenth of a share.
6.12. Rights on Liquidation, Dissolution, Winding-up.
----------------------------------------------
6.12.1. In the event of any liquidation, dissolution or winding-up of
the affairs of the Corporation (collectively, a "Liquidation"), whether
voluntary or involuntary, before any payment of cash or distribution of other
property shall be made to the holders of the Common Stock (the "Common
Stockholders") or any other class or series of stock ranking on Liquidation
junior to the Series B Preferred Stock, the holders of Series B Preferred Stock
("Series B Preferred Stockholders"), subject to the rights of any series of
preferred stock ranking senior to the Series A Preferred Stock and the Series B
Preferred Stock, shall be entitled to receive out of the assets of the
Corporation legally available for distribution to its stockholders, $2.25 per
share (as appropriately adjusted for any combinations or divisions or similar
recapitalizations affecting the Series B Preferred Stock after the Original
Series B Issuance Date (as hereinafter defined)) (the "Series B Liquidation
Preference"), whether from capital, surplus or earnings, plus an amount equal to
any declared but unpaid dividends thereon. Upon the occurrence of a Liquidation,
the Series B Preferred
-12-
Stock shall rank pari passu with the Series A Preferred Stock and any other
---- -----
series of preferred stock hereinafter created which ranks pari passu with the
---- -----
Series A Preferred Stock (the "Pari Passu Preferred Stock").
---- -----
6.12.2. If, upon any Liquidation, the assets of the Corporation available
for distribution to its stockholders shall be insufficient to pay the Series A
Preferred Stockholders, the Series B Preferred Stockholders and the holders of
Pari Passu Preferred Stock the full amounts to which they shall be entitled, the
---- -----
Series A Preferred Stockholders, the Series B Preferred Stockholders and the
holders of Pari Passu Preferred Stock shall share ratably in any distribution of
---- -----
assets in proportion to the amounts payable to them if all amounts payable with
respect to such shares on Liquidation were paid in full.
6.12.3. In the event of any Liquidation, so long as the Series A
Preferred Stockholders are entitled to distributions pursuant to Section A.2(c),
after payment shall have been made to the Series A Stockholders, the Series B
Preferred Stockholders and the holders of Pari Passu Preferred Stock of the full
amount to which they shall be entitled pursuant to Section B.2(a), with respect
to each other class or series of capital stock (other than Common Stock) ranking
on Liquidation junior to the Series A Preferred Stock, the Series B Preferred
Stock and the Pari Passu Preferred Stock (in descending order of seniority), the
---- -----
Series A Preferred Stockholders, the Series B Preferred Stockholders and the
holders of Pari Passu Preferred Stock, as a class, shall be entitled to receive
---- -----
an amount equal (and in like kind) to the aggregate preferential amount fixed
for each such junior class or series of capital stock, which amount shall be
distributed among the Series A Preferred Stockholders, the Series B Preferred
Stockholders and the holders of Pari Passu Preferred Stock in an equal amount
per share of the Series A Preferred Stock, the Series B Preferred Stock and the
Pari Passu Preferred Stock then outstanding. If, upon any Liquidation, the
---- -----
assets of the Corporation available for distribution to its stockholders shall
be insufficient to pay the Series A Preferred Stockholders, the Series B
Preferred Stockholders and the holders of Pari Passu Preferred Stock and a class
---- -----
Preferred Stock, the Series B Preferred Stock and the Pari Passu Preferred Stock
---- -----
the full amounts to which they shall be entitled pursuant to the immediately
preceding sentence, the Series A Preferred Stockholders, the Series B Preferred
Stockholders and the holders of Pari Passu Preferred Stock and such other class
---- -----
or series of capital stock shall share ratably in any distribution of assets
according to the respective preferential amounts fixed for the Series A
Preferred Stock, the Series B Preferred Stock and the Pari Passu Preferred Stock
---- -----
and such junior class or series of capital stock which would be payable in
respect of the shares held by them upon such distribution if all amounts payable
on or with respect to such shares were paid in full.
6.12.4. In the event that after payment of the full amount to which the
Series A Preferred Stockholders, Series B Preferred Stockholders and the holders
of Pari Passu Preferred Stock shall be entitled as aforesaid, cash or other
---- -----
property remains, such remaining proceeds shall be distributed pro rata among
--- ----
the Series A Preferred Stock, the Series B Preferred Stock, the Pari Passu
---- -----
Preferred Stock and the Common Stock. For purposes of determining its
proportional share of the cash or other property, each share of the Series B
Preferred Stock shall be deemed to be that number of shares of Common Stock into
which such share of Series B Preferred Stock is then
-13-
convertible, rounded to the nearest one-tenth of a share.
6.13. Voting.
------
6.13.1 General. In addition to the rights otherwise provided for
-------
herein or by law, the Series B Preferred Stockholders shall be entitled to vote,
together with the Series A Preferred Stockholders, the holders of any other
class or series entitled to vote on such matters and the Common Stockholders, as
one class on all matters submitted to a vote of Stockholders, in the same manner
and with the same effect as the Series A Preferred Stockholders and the Common
Stockholders. In any such vote, each share of Series B Preferred Stock shall
entitle the holder thereof to one vote per share for each share of Common Stock
(including fractional shares) into which each share of Series B Preferred Stock
is then convertible, rounded to the nearest one-tenth of a share.
6.13.2 Protective Provision. So long as any Series B Preferred Stock
--------------------
is outstanding, the Corporation shall not, without the written consent in lieu
of a meeting, or the affirmative vote at a meeting called for such purpose, of
Series B Preferred Stockholders of record that hold at least a majority of the
outstanding Series B Preferred Stock, voting as a separate class, amend, alter
or repeal, in any manner whatsoever, the designations, powers, preferences,
relative, participating, optional or other special rights, qualifications,
limitations and restrictions of the Series B Preferred Stock.
-14-
6.14. Conversion.
----------
6.12.1. Right to Convert.
----------------
6.14.1.1. Any Series B Preferred Stockholder shall have the right, at
any time or from time to time, prior to the closing date of the Corporation's
first Underwritten Offering in which all of the then outstanding shares of
Series A Preferred Stock are converted in connection therewith, to convert any
or all of its shares of Series B Preferred Stock into that number of fully paid
and nonassessable shares of Common Stock for each share of Series B Preferred
Stock equal to the quotient of the Series B Liquidation Preference divided by
the Series B Preferred Conversion Price for that share (as defined in Section
B.4(d)) (as last adjusted and then in effect) rounded to one-tenth of a share.
6.14.1.2. Any Series B Preferred Stock that remains unconverted on
such closing date shall be automatically converted without notice and without
any action on the part of the holder thereof into shares of Common Stock on the
closing date in accordance with Section B.4(a)(i). After the closing date all
rights of holders of shares of Series B Preferred Stock with respect to Series B
Preferred Stock, except the right to receive shares of Common Stock in
accordance with this Section B.4, shall cease and the shares of Series B
Preferred Stock shall no longer be deemed to be outstanding, whether or not the
Corporation has received the certificates representing such shares.
The Corporation shall promptly send by first-class mail, postage
prepaid, to each Series B Preferred Stockholder at such holder's address
appearing on the Corporation's records a copy of (i) each registration statement
filed by the Corporation under the Securities Act and each amendment thereof and
each exhibit and schedule thereto and (ii) each order of the Securities and
Exchange Commission declaring any such registration statement to be effective.
Holders of Series B Preferred Stock converted into shares of
Common Stock pursuant to this Section B.4 shall be entitled to payment of any
declared but unpaid dividends payable with respect to such shares of Series B
Preferred Stock, up to and including the Series B Conversion Date (as defined in
Section B.4(b) below) or the closing date, as the case may be.
6.14.2. Mechanics of Conversion.
-----------------------
6.14.2.1. Any Series B Preferred Stockholder that exercises its
right to convert its shares of Series B Preferred Stock into Common Stock shall
deliver the certificate(s) for the shares to be converted ("Series B Preferred
Certificate"), duly endorsed or assigned in blank to the Corporation, during
regular business hours, at the office of the transfer agent of the Corporation,
if any, at the principal place of business of the Corporation or at such other
place as may be designated by the Corporation.
-15-
6.14.2. Each Series B Preferred Certificate shall be accompanied by
written notice stating that such holder elects to convert such shares and
stating the name or names (with address) in which the certificate(s) for the
shares of Common Stock ("Common Certificate") are to be issued. Such conversion
shall be deemed to have been effected on the date when the aforesaid delivery is
made ("Series B Conversion Date").
6.14.2.3. As promptly as practicable thereafter, the Corporation shall
issue and deliver to or upon the written order of such holder, at the place
designated by such holder, a Common Certificate(s) for the number of full shares
of Common Stock to which such holder is entitled and a check or cash for any
fractional interest in a share of Common Stock, as provided in Section B.4(c)
below, and for any declared but unpaid dividends, payable with respect to the
converted shares of Series B Preferred Stock, up to and including the Series B
Conversion Date or the closing date set forth in Section B.4(a)(i), as the case
may be.
6.14.2.4. The person in whose name each Common Certificate is to be
issued shall be deemed to have become a stockholder of record of Common Stock on
the applicable Series B Conversion Date or the closing date set forth in Section
B.4(a)(i), as the case may be, unless the transfer books of the Corporation are
closed on that date, in which event such holder shall be deemed to have become a
stockholder of record on the next succeeding date on which the transfer books
are open; provided, that the Series B Preferred Conversion Price shall be that
--------
in effect on the Series B Conversion Date or such closing date, as the case may
be.
6.14.2.5. Upon conversion of only a portion of the shares covered by a
Series B Preferred Certificate, the Corporation, at its own expense, shall issue
and deliver to or upon the written order of the holder of such Series B
Preferred Certificate, a new Series B Preferred Certificate representing the
number of unconverted shares of Series B Preferred Stock from the Series B
Preferred Certificate so surrendered.
6.14.3. Issuance of Common Stock on Conversion.
--------------------------------------
6.14.3.1. If a Series B Preferred Stockholder shall surrender more
than one Series B Preferred Certificate for conversion at any one time, the
number of such shares of Common Stock issuable upon conversion thereof shall be
computed on the basis of the aggregate number of shares of Series B Preferred
Stock so surrendered.
6.14.3.2 No fractional shares of Common Stock shall be issued upon
conversion of shares of Series B Preferred Stock. The Corporation shall pay a
cash adjustment for such fractional interest in an amount equal to the then
Current Market Price of a share of Common Stock multiplied by such fractional
interest.
6.14.4 Conversion Price; Adjustment. The Series B Preferred
----------------------------
Conversion Price shall initially be equal to the Series B Liquidation Preference
and shall be subject to adjustment from time to time as follows:
-16-
6.14.4.1. If the Corporation shall at any time after the original
issuance of the first share of Series B Preferred Stock (the "Original Series B
Issuance Date") fix a record date for the subdivision or split-up of shares of
Common Stock, then, following the record date fixed for the determination of
holders of Common Stock entitled to receive such subdivision or split-up (or the
date of such subdivisions or split-up, if no record date is fixed), the Series B
Preferred Conversion Price shall be appropriately decreased so that the number
of shares of Common Stock issuable on conversion of each share of the Series B
Preferred Stock shall be increased in proportion to such increase in outstanding
shares.
6.14.4.2. If, at any time after the Original Series B Issuance Date,
the number of shares of Common Stock outstanding is decreased by a combination
of the outstanding shares of Common Stock, then, following the record date fixed
for such combination (or the date of such combination, if no record date is
fixed), the Series B Preferred Conversion Price shall be appropriately increased
so that the number of shares of Common Stock issuable on conversion of each
share of Series B Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares.
6.14.4.3. If, at any time after the Original Series B Issuance Date,
there shall be any capital reorganization, or any reclassification of the
capital stock of the Corporation (other than a change in par value or from par
value to no par value or from no par value to par value or as a result of a
stock dividend or subdivision, split-up or combination of shares), or the
consolidation or merger of the Corporation with or into another corporation
(other than a consolidation or merger in which the Corporation is the continuing
corporation and which does not result in any change in the powers, designations,
preferences and rights (or the qualifications, limitations or restrictions, if
any) of the Series B Preferred Stock) (an "Extraordinary Transaction"), the
Series B Preferred Conversion Price with respect to the Series B Preferred Stock
outstanding after the Extraordinary Transaction shall be adjusted to provide
that the shares of Series B Preferred Stock outstanding immediately prior to the
effectiveness of the Extraordinary Transaction shall be convertible into the
kind and number of shares of stock or other securities or property of the
Corporation or of the corporation resulting from or surviving such Extraordinary
Transaction which the holder of the number of shares of Common Stock deliverable
(immediately prior to the effectiveness of the Extraordinary Transaction) upon
conversion of such Series B Preferred Stock would have been entitled to receive
upon such Extraordinary Transaction. The provisions of this Section B.4(d)(iii)
shall similarly apply to successive Extraordinary Transactions.
6.14.4.4. All calculations under this Section B.4(d) shall be made to
the nearest one-tenth of a cent ($.001) or to the nearest one-tenth of a share,
as the case may be.
6.14.4.5. As used herein, the Current Market Price at any date of one
share of Common Stock shall be deemed to be the average of the daily closing
prices for the thirty (30) consecutive business days ending on the fifth (5th)
business day before the day in question (as adjusted for any stock dividend,
split-up, combination or reclassification that took effect during such thirty
(30) business day period) as follows:
-17-
If the Common Stock is listed or admitted for trading on a national
securities exchange, the closing price for each day shall be the last
reported sales price regular way or, in case no such reported sales took
place on such day, the average of the last reported bid and asked prices
regular way, in either case, on the principal national exchange on which
the Common Stock is listed or admitted to trading.
If the Common Stock is not at the time listed or admitted for trading
on any such exchange, then such price as shall be equal to the last
reported sale price, or, if there is no such sale price, the average of the
last reported bid and asked prices, as reported by the National Association
of Securities Dealers Automated Quotations System ("NASDAQ") on such day.
If, on any day in question, the security shall not be listed or
admitted to trading on a national securities exchange or quoted on the
NASDAQ, then such price shall be equal to the last reported bid and asked
prices on such day as reported by the National Quotation Bureau, Inc. or
any similar reputable quotation and reporting service, if such quotation is
not reported by the National Quotation Bureau, Inc.
If the Common Stock is not traded in such manner that the quotations
referred to in this clause (v) are available for the period required
hereunder, the Current Market Price shall be determined by the Board of
Directors of the Corporation.
6.14.4.6. In any case in which the provisions of this Section B.4(d)
shall require that an adjustment shall become effective immediately after a
record date for an event, the Corporation may defer until the occurrence of that
event (A) issuing to the holder of any share of Series B Preferred Stock
converted after such record date and before the occurrence of such event the
additional shares of capital stock issuable upon such conversion by reason of
the adjustment required by such event over and above the shares of capital stock
issuable upon such conversion before giving effect to such adjustment and (B)
paying to such holder any amount in cash in lieu of a fractional share of
capital stock pursuant to Section B.4(c) above; provided, however, that the
-------- -------
Corporation shall deliver to such holder a due xxxx or other appropriate
instrument evidencing such holder's right to receive such additional shares, in
such case, upon the occurrence of the event requiring such adjustment.
6.14.5. Notice of Adjustments.
---------------------
-18-
6.14.5.1. Whenever the Series B Preferred Conversion Price shall be
adjusted as provided in Section B.4(d) above, the Corporation shall file, at its
principal office, at the office of the transfer agent for the Series B Preferred
Stock, if any, or at such other place as may be designated by the Corporation, a
statement, signed by its President and by its Chief Financial Officer, showing
in detail the facts requiring such adjustment and the Series B Preferred
Conversion Price that shall be in effect after such adjustment. The Corporation
shall also cause a copy of such statement to be sent, by first-class, certified
mail, return receipt requested, postage prepaid, to each Series B Preferred
Stockholder at such holder's address appearing on the Corporation's records.
Where appropriate, such copy may be given in advance and may be included as part
of a notice required to be mailed under the provisions of clause (ii) below.
6.14.5.2. In the event the Corporation shall propose to file a
registration statement under the Securities Act for a Public Offering or to take
any action of the types described in clauses (i), (ii) or (iii) of Section
B.4(d) above, the Corporation shall give notice to each Series B Preferred
Stockholder, in the manner set forth in Section B.4(e)(i) above, which shall
specify the record date, if any, with respect to any such action and the date on
which such action is to take place. The notice shall also set forth such facts
as are reasonably necessary to indicate the effect of such action (to the extent
such effect may be known at the date of such notice) on the Series B Preferred
Conversion Price and the number, kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of such
action or deliverable upon conversion of shares of Series B Preferred Stock. In
the case of any action which would require the fixing of a record date, such
notice shall be given at least ten (10) days prior to the date so fixed, and in
case of all other action, such notice shall be given at least fifteen (15) days
prior to the taking of such proposed action. Failure to give such notice, or any
defect therein, shall not affect the legality or validity of any such action.
6.14.6. Transfer Taxes. The Corporation shall pay all documentary,
--------------
stamp or other transactional taxes (excluding income taxes) attributable to the
issuance or delivery of shares of capital stock of the Corporation upon
conversion of any shares of Series B Preferred Stock; provided, however, that
-------- -------
the Corporation shall not be required to pay any taxes which may be payable in
respect of any transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the holder of the shares of Series
B Preferred Stock in respect of which such shares are being issued.
6.14.7. Reservation of Common Stock. The Corporation shall at all
---------------------------
times reserve, free from preemptive rights, out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of Series B Preferred Stock, sufficient shares of Common Stock to
provide for the conversion of all outstanding shares of Series B Preferred
Stock.
6.14.8. Status of Common Stock. All shares of Common Stock which may
----------------------
be issued in connection with the conversion provisions set forth herein will,
upon issuance by the Corporation, be validly issued, fully paid and
nonassessable, free from preemptive rights and free from all taxes, liens or
charges with respect thereto created or imposed by Corporation.
-19-
6.15. Miscellaneous.
-------------
6.15.1 Shares of Series B Preferred Stock are not subject to or
entitled to redemption or the benefit of a sinking fund.
6.15.2. Converted shares of Series B Preferred Stock shall not be
reissued but shall be retired. Upon the retirement of converted shares the
capital of the Corporation shall be reduced.
6.15.3. The shares of the Series B 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 Restated Certificate of
Incorporation of the Corporation, as amended from time to time.
C. COMMON STOCK
------------
1. Voting.
------
Series A Preferred Stockholders, Series B Preferred Stockholders, any
other class or series of capital stock entitled to vote and Common Stockholders
shall vote together as one class on all matters submitted to a vote of
Stockholders, except that Series A Preferred Stockholders are entitled, in
addition, to vote as a separate class on the matters described in Section A.4(b)
and (c), and Series B Preferred Stockholders are entitled, in addition, to vote
as a separate class on the matters described in Section B.3(b). Each Common
Stockholder shall be entitled to one vote for each share of Common Stock held on
all matters as to which Common Stockholders shall be entitled to vote. The
number of authorized shares of Common Stock may be increased or decreased (but
not below the number of shares thereof then outstanding) by the affirmative vote
of the holders of a majority of the Common Stock, the Series A Preferred Stock,
the Series B Preferred Stock and any other class or series of capital stock
entitled to vote, irrespective of the provisions of Section 242(b)(2) of Title 8
of the Delaware Code.
-20-
