Attached files
file | filename |
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10-K - FORM 10-K - SPECTRUM PHARMACEUTICALS INC | a58896e10vk.htm |
EX-21 - EX-21 - SPECTRUM PHARMACEUTICALS INC | a58896exv21.htm |
EX-23.2 - EX-23.2 - SPECTRUM PHARMACEUTICALS INC | a58896exv23w2.htm |
EX-10.1 - EX-10.1 - SPECTRUM PHARMACEUTICALS INC | a58896exv10w1.htm |
EX-10.6 - EX-10.6 - SPECTRUM PHARMACEUTICALS INC | a58896exv10w6.htm |
EX-23.1 - EX-23.1 - SPECTRUM PHARMACEUTICALS INC | a58896exv23w1.htm |
EX-10.35 - EX-10.35 - SPECTRUM PHARMACEUTICALS INC | a58896exv10w35.htm |
EX-10.18 - EX-10.18 - SPECTRUM PHARMACEUTICALS INC | a58896exv10w18.htm |
EX-10.34 - EX-10.34 - SPECTRUM PHARMACEUTICALS INC | a58896exv10w34.htm |
EX-10.19 - EX-10.19 - SPECTRUM PHARMACEUTICALS INC | a58896exv10w19.htm |
EX-31.2 - EX-31.2 - SPECTRUM PHARMACEUTICALS INC | a58896exv31w2.htm |
EX-32.2 - EX-32.2 - SPECTRUM PHARMACEUTICALS INC | a58896exv32w2.htm |
EX-32.1 - EX-32.1 - SPECTRUM PHARMACEUTICALS INC | a58896exv32w1.htm |
EX-31.1 - EX-31.1 - SPECTRUM PHARMACEUTICALS INC | a58896exv31w1.htm |
EXHIBIT 3.1
STATE OF DELAWARE | ||
SECRETARY OF STATE | ||
DIVISION OF CORPORATIONS | ||
FILED 09:00 AM 05/07/1997 | ||
971149762 2742853 |
CERTIFICATE OF INCORPORATION
OF
NEOTHERAPEUTICS, INC.
ARTICLE 1
The name of this Corporation is NeoTherapeutics, Inc.
ARTICLE 2
The registered office of the Corporation in the State of Delaware is located at 1013 Centre
Road, Wilmington, Delaware 19805, County of New Castle, and Corporation Service Company is the
registered agent of the Corporation.
ARTICLE 3
The purpose of the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation Law, as amended from time to
time.
ARTICLE 4
The aggregate number of shares of all classes of stock which the Corporation shall have
authority to issue is 30,000,000 shares, consisting of (a) 25,000,000 shares of Common Stock, $.001
par value per share (the Common Stock), and (b) 5,000,000 shares of Preferred Stock, $.001 par
value per share (the Preferred Stock).
The Board of Directors is authorized, subject to limitations prescribed by law, to provide for
the issuance of the shares of Preferred Stock in one or more series, and by filing a certificate as
required by the General Corporation Law of the State of Delaware, to establish from time to time
the number of shares to be included in each such series, and to fix the designation, powers,
preferences and relative, participating, optional or other special rights of the shares of each
such series and any qualifications, limitations or restrictions thereof.
ARTICLE 5
A director of this Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director, provided that this
provision shall not eliminate or limit the liability of a director: (i) for any breach of his duty
of loyalty to the Corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve
intentional misconduct or a knowing violation of the law: (iii) under Section 174 of the Delaware
General Corporation Law; or (iv) for any transaction from which the director derives an improper
personal benefit. If the Delaware General Corporation Law is hereafter amended to authorize
corporate action further limiting or eliminating the personal liability of directors, then the
liability of the directors of the Corporation shall be limited or eliminated to the fullest extent
permitted by the Delaware General Corporation Law, as so amended from time to time. Any repeal or
modification of this Article 5 by the stockholders of the Corporation shall be prospective only,
and shall not adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
ARTICLE 6
Elections of directors need not be by written ballot unless otherwise provided in the Bylaws
of the Corporation.
ARTICLE 7
The Board of Directors of the Corporation shall have the power to make, alter, amend, change,
add to or repeal the Bylaws of the Corporation.
ARTICLE 8
Any action which may be taken at any annual or special meeting of stockholders may be taken
without a meeting, without prior notice and without a vote, if and only if a consent or consents in
writing, setting forth the action so taken, is signed by the holders of all of the outstanding
shares of capital stock of the corporation entitled to vote on that action.
ARTICLE 9
The name and address of the Incorporator of the Corporation is as follows:
Matthew P. Thullen, Esq.
660 Newport Center Drive
Suite 1600
Newport Beach, California 92660-6441
660 Newport Center Drive
Suite 1600
Newport Beach, California 92660-6441
I, THE UNDERSIGNED, being the Incorporator, for the purpose of forming a corporation under the
laws of the State of Delaware, do make, file and record this Certificate of Incorporation, do
certify that the facts herein stated are true, and accordingly, have hereinto set my hand this 6th
day of May, 1997.
/s/ Matthew P. Thullen | ||||
Matthew P. Thullen, Esq. | ||||
2
STATE OF DELAWARE |
||
SECRETARY OF STATE |
||
DIVISION OF CORPORATIONS |
||
FILED 02:30 PM 06/18/1997 |
||
971200917 2742853 |
AGREEMENT AND PLAN OF MERGER
OF
NEOTHERAPEUTICS, INC., A DELAWARE CORPORATION,
AND
NEOTHERAPEUTICS, INC., A COLORADO CORPORATION
OF
NEOTHERAPEUTICS, INC., A DELAWARE CORPORATION,
AND
NEOTHERAPEUTICS, INC., A COLORADO CORPORATION
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 17, 1997 (Merger Agreement) is entered
into by and between NeoTherapeutics, Inc., a Colorado corporation (NeoTherapeutics Colorado), and
NeoTherapeutics. Inc., a Delaware corporation (NeoTherapeutics Delaware), which corporations are
sometimes referred to herein as the Constituent Corporations.
R E C I T A L S
A. NeoTherapeutics Colorado is a corporation duly organized and existing under the laws of the
State of Colorado and has authorized capital of 25,000,000 shares of Common Stock, no par value
(the NeoTherapeutics Colorado Common Stock), and 5,000,000 shares of Preferred Stock, no par
value. As of June 17, 1997, 5,371,807 shares of NeoTherapeutics Colorado Common Stock were issued
and outstanding and no shares of Preferred Stock were issued and outstanding.
B. NeoTherapeutics Delaware is a corporation duly organized and existing under the laws of the
State of Delaware and has authorized capital of 25,000,000 shares of Common Stock, par value $.001
per share (the NeoTherapeutics Delaware Common Stock), and 5,000,000 shares of Preferred Stock,
par value $.001 per share. As of June 17, 1997, 100 shares of NeoTherapeutics Delaware Common Stock
were issued and outstanding, all of which were held by NeoTherapeutics Colorado. No shares of
Preferred Stock were issued and outstanding.
C. The Board of Directors of NeoTherapeutics Colorado has determined that it is advisable and
in the best interests of NeoTherapeutics Colorado and its shareholders that NeoTherapeutics
Colorado merge with and into NeoTherapeutics Delaware upon the terms and subject to the conditions
of this Merger Agreement for the purpose of effecting the reincorporation of NeoTherapeutics
Colorado in the State of Delaware.
D. The respective Boards of Directors of NeoTherapeutics Colorado and NeoTherapeutics Delaware
have adopted and approved the terms and conditions of this Merger Agreement.
E. The parties intend by this Merger Agreement to effect a reorganization under Section 368 of
the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements
contained herein, the parties hereto agree, subject to the terms and conditions set forth herein,
as follows:
I.
MERGER
MERGER
1.1 Merger. In accordance with the provisions of this Merger Agreement, the Colorado Business
Corporation Act and the Delaware General Corporation Law, NeoTherapeutics Colorado shall be merged
with and into NeoTherapeutics Delaware (the Merger), the separate existence of NeoTherapeutics
Colorado shall cease and NeoTherapeutics Delaware shall be, and is herein sometimes
referred to as, the Surviving Corporation, and the name of the Surviving Corporation shall be
NeoTherapeutics, Inc.
1.2 Filing and Effectiveness. The Merger shall become effective when the following actions
have been completed:
(a) All of the conditions precedent to the consummation of the Merger specified in this
Merger Agreement and required under the Colorado Business Corporation Act and the Delaware
General Corporation Law have been satisfied or duly waived by the party entitled to
satisfaction thereof:
(b) An executed Articles of Merger or an executed counterpart of this Merger Agreement
meeting the requirements of the Colorado Business Corporation Act has been filed with the
Secretary of State of the State of Colorado; and
(c) An executed Certificate of Merger or an executed counterpart of this Merger Agreement
meeting the requirements of the Delaware General Corporation Law has been filed with the
Secretary of State of the State of Delaware.
The date and time when the Merger shall become effective is herein called the Effective Time
of the Merger.
1.3 Effect of the Merger. At the Effective Time of the Merger, the separate existence and
corporate organization of NeoTherapeutics Colorado shall cease and NeoTherapeutics Delaware, as the
Surviving Corporation, (i) shall continue to possess all of its assets, rights, powers and property
as constituted immediately before the Effective Time of the Merger, (ii) shall be subject to all
actions previously taken by its and
NeoTherapeutics Colorados Board of Directors, (iii) shall succeed, without other transfer, to
all of the assets, rights, powers and property of NeoTherapeutics Colorado in the manner more fully
set forth in Section 259(a) of the Delaware General Corporation Law, (iv) shall continue to be
subject to all of its debts, liabilities and obligations as constituted immediately before the
Effective Time of the Merger and (v) shall succeed, without other transfer, to all of the debts,
liabilities and obligations of NeoTherapeutics Colorado in the same manner as if NeoTherapeutics
Delaware had itself incurred them, all as more fully provided under the applicable provisions of
the Delaware General Corporation Law and the Colorado Business Corporation Act.
II.
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Certificate of Incorporation of NeoTherapeutics Delaware
as in effect immediately before the Effective Time of the Merger shall continue in full force and
effect as the Certificate of Incorporation of the Surviving Corporation until duly amended or
repealed in accordance with the provisions thereof and applicable law.
2.2 Bylaws. The Bylaws of NeoTherapeutics Delaware as in effect immediately before the
Effective Time of the Merger shall continue in full force and effect as the Bylaws of the Surviving
Corporation until duly amended or repealed in accordance with the provisions thereof and applicable
law.
A-2
2.3 Officers and Directors. The persons who are officers and directors of NeoTherapeutics
Colorado immediately prior to the Effective Time of the Merger shall, after the Effective Time of
the Merger, be the officers and directors of the Surviving Corporation, without change until their
successors have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporations Certificate of Incorporation.
Bylaws and applicable law; provided, however, that Frank M. Meeks and Dr. Paul H. Silverman shall
serve as Class I directors of NeoTherapeutics Delaware, with their term of office to expire at the
1998 Annual Meeting of Stockholders of NeoTherapeutics Delaware, and Dr. Alvin J. Glasky Mark J.
Glasky and Dr. Carol OCleireacain shall serve as Class II directors of NeoTherapeutics Delaware,
with their term of office to expire at the 1999 Annual Meeting of Stockholders of NeoTherapeutics
Delaware.
III.
MANNER OF CONVERSION OF STOCK
MANNER OF CONVERSION OF STOCK
3.1 NeoTherapeutics Colorado Shares. Upon the Effective Time of the Merger, each share of
NeoTherapeutics Colorado Common Stock, no par value, issued and outstanding immediately before the
Effective Time of the Merger shall by virtue of the Merger and without any action by the
Constituent Corporations, by the holder of such shares or by any other person, be converted into
and become one fully paid and nonassessable share of Common Stock, $.001 par value per share, of
the Surviving Corporation.
3.2 NeoTherapeutics Colorado Options. Warrants and Convertible Securities. At the Effective
Time of the Merger, the Surviving Corporation shall assume and continue the stock option plans of
NeoTherapeutics Colorado (including the 1987 Incentive Stock Option Plan, the 1991 Stock Incentive
Plan and the 1997 Stock Incentive Plan), the Warrant Agreement between NeoTherapeutics Colorado and
U.S. Stock Transfer Corporation dated as of September 25, 1996, and all other options, warrants and
rights to purchase or acquire shares of NeoTherapeutics Colorado Common Stock. At the Effective
Time of the Merger, each outstanding and unexercised option, warrant and right to purchase or
acquire shares of NeoTherapeutics Colorado Common Stock shall, by virtue of the Merger and without
any action on the part of the holder thereof, be convened into and become an option, warrant or
right to purchase or acquire shares of the Surviving Corporations Common Stock on the basis of one
share of the Surviving Corporations Common Stock for each share of NeoTherapeutics Colorado Common
Stock issuable pursuant to any such option, warrant or right, and under the same terms and
conditions and at an exercise price per share equal to the exercise price per share applicable to
any such NeoTherapeutics Colorado option, warrant or right. No options, warrants or rights to
purchase or acquire Preferred Stock of NeoTherapeutics Colorado currently exist.
A number of shares of the Surviving Corporations Common Stock shall be reserved for issuance
upon the exercise of options, warrants and other securities equal to the number of shares of
NeoTherapeutics Colorado Common Stock so reserved immediately before the Effective Time of the
Merger.
3.3 NeoTherapeutics Delaware Common Stock. Upon the Effective Time of the Merger, each share
of NeoTherapeutics Delaware Common Stock, $.001 par value per share, issued and outstanding
immediately before the Effective Time of the Merger shall, by virtue of the Merger and without any
action by NeoTherapeutics Delaware, by the holder of such shares or by any other person, be
canceled and returned to the status of authorized but unissued shares.
A-3
3.4 Exchange of Certificates. After the Effective Time of the Merger, each holder of an
outstanding certificate representing shares of NeoTherapeutics Colorado Common Stock may, at such
shareholders option, surrender the same for cancellation to U.S. Stock Transfer Corporation, as
transfer agent (the Transfer Agent), and each such holder shall be entitled to receive in
exchange therefor a certificate or certificates representing the number of shares of the Surviving
Corporations Common Stock into which the surrendered shares were converted as herein provided.
Until so surrendered, each outstanding certificate theretofore representing shares of
NeoTherapeutics Colorado Common Stock shall be deemed for all purposes to represent the number of
whole shares of the Surviving Corporations Common Stock into which the shares of NeoTherapeutics
Colorado Common Stock were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation or the Transfer
Agent of any such outstanding certificate shall, until such certificate has been surrendered for
transfer or conversion or otherwise accounted for to the Surviving Corporation or the Transfer
Agent, have and be entitled to exercise any voting or other rights with respect to and to receive
dividends and other distributions upon the shares of Common Stock of the Surviving Corporation
represented by such outstanding certificate as provided above.
Each certificate representing Common Stock of the Surviving Corporation so issued in the
Merger shall bear the same legends, if any, with respect to restrictions on transferability as the
certificates of NeoTherapeutics Colorado so converted and given in exchange therefor, unless
otherwise determined by the Board of Directors of the Surviving Corporation in compliance with
applicable laws.
IV.
GENERAL
GENERAL
4.1 Covenants of NeoTherapeutics Delaware. NeoTherapeutics Delaware covenants and agrees that
it will, on or before the Effective Time of the Merger, take such actions as may be required by the
Colorado Business Corporation Act in order to effectuate the Merger.
4.2 Further Assurances. From time to time, as and when required by NeoTherapeutics Delaware or
by its successors or assigns, there shall be executed and delivered on behalf of NeoTherapeutics
Colorado such deeds and other instruments, and there shall be taken or caused to be taken by it
such further and other actions as shall be appropriate or necessary in order to vest or perfect in
or conform of record or otherwise by NeoTherapeutics Delaware the title to and possession of all
the property, interests, assets, rights, privileges, immunities, powers, franchises and authority
of NeoTherapeutics Colorado and otherwise to carry out the purposes of this Merger Agreement, and
the officers and directors of NeoTherapeutics Delaware are fully authorized in the name and on
behalf of NeoTherapeutics Colorado or otherwise to take all such actions and to execute and deliver
all such deeds and other instruments.
4.3 Deferral. Consummation of the Merger may be deferred by the Board of Directors of
NeoTherapeutics Colorado for a reasonable period of time if the Board of Directors determines that
deferral would be in the best interests of NeoTherapeutics Colorado and its shareholders.
4.4 Amendment. The parties hereto, by mutual consent of their respective Boards of Directors,
may amend, modify or supplement this Merger Agreement in such manner as may be agreed upon by them
in writing at any time
before or after approval of this Merger Agreement by the shareholders of NeoTherapeutics
Colorado and NeoTherapeutics Delaware, but not later than the Effective Time of the
A-4
Merger; provided, however, that no such amendment, modification or supplement not approved by
the shareholders of NeoTherapeutics Colorado and NeoTherapeutics Delaware shall adversely affect
the rights of such shareholders or change any of the principal terms of this Merger Agreement.
4.5 Abandonment. At any time before the Effective Time of the Merger, this Merger Agreement
may be terminated and the Merger may be abandoned for any reason whatsoever by the Board of
Directors of either NeoTherapeutics Colorado or of NeoTherapeutics Delaware, or of both,
notwithstanding the approval of this Merger Agreement by the shareholders of NeoTherapeutics
Colorado or NeoTherapeutics Delaware, or by both, if circumstances arise which make the Merger
inadvisable. In the event of abandonment of this Merger Agreement, as above provided, this Merger
Agreement shall become wholly void and of no effect, and no liability on the part of the Board of
Directors or shareholders of NeoTherapeutics Colorado or NeoTherapeutics Delaware shall arise by
virtue of such termination.
4.6 Expenses. If the Merger becomes effective, the Surviving Corporation shall assume and pay
all expenses in connection therewith not theretofore paid by the respective parties. If for any
reason the Merger shall not become effective, NeoTherapeutics Colorado shall pay all expenses
incurred in connection with all the proceedings taken in respect of this Merger Agreement or
relating thereto.
4.7 Registered Office. The registered office of the Surviving Corporation in the State of
Delaware is located at 1013 Centre Road. Wilmington. Delaware 19805. and Corporation Service
Company is the registered agent of the Surviving Corporation at such address.
4.8 Agreement. An executed copy of this Merger Agreement will be on file at the principal
place of business of the Surviving Corporation at One Technology Drive, Suite I-821, Irvine,
California 92618, and, upon request and without cost, a copy thereof will be furnished to any
shareholder.
4.9 Governing Law. This Merger Agreement shall in all respects be construed, interpreted and
enforced in accordance with and governed by the laws of the State of Delaware and, so far as
applicable, the Merger provisions of the Colorado Business Corporation Act.
4.10 Counterparts. This Merger Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which together shall constitute one and the
same instrument.
A-5
IN WITNESS WHEREOF. NeoTherapeutics Colorado and NeoTherapeutics Delaware have caused this
Merger Agreement to be signed by their respective duly authorized officers.
NEOTHERAPEUTICS, INC., a Colorado corporation |
||||
/s/ Alvin J. Glasky | ||||
Alvin J. Glasky, President and Chief Executive Officer | ||||
ATTEST: |
||||
/s/ Rosalie H. Glasky | ||||
Rosalie H. Glasky, Secretary | ||||
NEOTHERAPEUTICS, INC., a Delaware corporation |
||||
/s/ Alvin J. Glasky | ||||
Alvin J. Glasky, | ||||
President and Chief Executive Officer | ||||
ATTEST: |
||||
/s/ Rosalie H. Glasky | ||||
Rosalie H. Glasky, Secretary | ||||
A-6
CERTIFICATE OF SECRETARY
OF NEOTHERAPEUTICS INC.,
a Delaware corporation
OF NEOTHERAPEUTICS INC.,
a Delaware corporation
The undersigned, Secretary of NeoTherapeutics, Inc., a corporation organized and existing
under the laws of the State of Delaware (NeoTherapeutics Delaware), hereby certifies, pursuant to
the provisions of Sections 103 and 252 of the General Corporation Law of the State of Delaware,
that NeoTherapeutics, Inc., a Colorado corporation (NeoTherapeutics Colorado), the sole
stockholder of NeoTherapeutics Delaware, has voted all outstanding shares of NeoTherapeutics
Delaware in favor of the merger of NeoTherapeutics Colorado with and into NeoTherapeutics Delaware
on the terms and conditions set forth in the Agreement and Plan of Merger to which this
certification is appended.
IN WITNESS WHEREOF, I have subscribed my name this 17th day of June, 1997.
/s/ Rosalie Glasky | ||||
Rosalie Glasky, Secretary | ||||
STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 09:00 AM 01/29/1999 991037228 2742853 |
CERTIFICATE OF DESIGNATION
OF
5% SERIES A PREFERRED STOCK WITH CONVERSION FEATURES
OF
NEOTHERAPEUTICS, INC.
OF
5% SERIES A PREFERRED STOCK WITH CONVERSION FEATURES
OF
NEOTHERAPEUTICS, INC.
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
NEOTHERAPEUTICS, INC., a corporation organized and existing under the General Corporation
Law of the State of Delaware (the Corporation), hereby certifies, pursuant to the authority
contained in the Certificate of Incorporation and in accordance with the provisions of Section 151
of the General Corporation Law of the State of Delaware that the following resolution was duty
adopted by the Board of Directors of the Corporation on January 25,1999, creating a series of its
Preferred Stock designated as 5% Series A Preferred Stock with Conversion Features:
RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of
Directors of the Corporation (the Board) by the provisions of the Certificate of Incorporation of
the Corporation (the Certificate of Incorporation), there hereby is created, out of the 5,000,000
shares of Preferred Stock, par value $0.001 per share, of the Corporation authorized in Article 4
of the Certificate of Incorporation (the Preferred Stock), a series of the Preferred Stock of the
Corporation consisting of 400 shares, which shall be designated 5% Series A Preferred Stock with
Conversion Features, which series shall have the powers, designations, preferences and relative,
participating, optional and other rights, and the qualifications, limitations and restrictions set
forth below:
Section 1. Designation, Amount and Par Value. The series of preferred stock shall be
designated as 5% Series A Preferred Stock with Conversion Features (the Preferred Stocks)
and the number of shares so designated shall be 400 (which shall not be subject to increase without
the consent of the holders of the Preferred Stock (each, a Holder and collectively, the
Holders)); Each share of Preferred Stock shall have a par value of $.001 and a stated
value of $10,000 (the Stated Value).
Section 2. Dividends.
(a) Holders shall be entitled to receive, when and as declared by the Board of Directors
out of funds legally available therefore, and the Company shall pay, cumulative dividends at
the rate per share (as a percentage of the Stated Value per share) equal 5% per annum,
payable, subject to the provisions of this Section 2(a), on a quarterly basis on March 31,
June 30, September 30 and December 31 of each year while such share is outstanding (each a
Dividend Payment Date) and on each Conversion Date (as defined herein) for such
share, commencing on the earlier to occur of the Conversion Date for such share and March
31,1999, in cash or shares of Common Stock (as defined in Section 8). Subject to the terms and
conditions herein, the decision whether to pay
dividends hereunder in Common Stock or cash shall be at the discretion of the Company.
Dividends on the Preferred Stock shall be calculated on the basis of a 360-day year, shall
accrue daily commencing on the Original Issue Date (as defined in Section 8), and shall be
deemed to accrue from such date whether or not earned or declared and whether or not there are
profits, surplus or other funds of the Company legally available for the payment of dividends.
A party that holds shares of Preferred Stock on the record date with respect to a Dividend
Payment Date will be entitled to receive such dividend payment and any other accrued and
unpaid dividends which accrued prior to such Dividend Payment Date, without regard to any sale
or disposition of such Preferred Stock subsequent to the applicable record date. Except as
otherwise provided herein, if at any time the Company pays less than the total amount of
dividends then accrued on account of the Preferred Stock, such payment shall be distributed
ratably among the Holders based upon the number of shares of Preferred Suck held by each
Holder. The Company shall provide the Holders notice of its intention to pay dividends in cash
or shares of Common Stock not less than 10 Trading Days (as defined in Section 8) prior to any
Dividend Payment Date, it being understood that a failure of the Company to timely provide
such notice shall be deemed an election (if permitted hereunder) to pay such dividend in
Shares of Common Stock pursuant to the terms hereof. If the Company has properly elected, and
is permitted hereunder, to pay dividends in shares of Common Stock, then such dividends will
be due and payable on each Conversion Date for the applicable shares of Preferred Stock (and
not on each Dividend Payment Date) and the number of shares of Common Stock issuable on
account of such dividend shall equal the cash amount of such dividend on such Conversion Date
divided by the Conversion Price (as defined below) on such date. Any dividends to be paid in
cash hereunder that are not paid on a Dividend Payment Date shall continue to accrue and shall
entail a late fee, which must be paid in cash, at the rate of 15% per annum or the maximum
amount that is permitted by applicable law, whichever is less (such fees to accrue daily, from
the date such dividend is due hereunder through and including the date of payment).
(b)
Notwithstanding anything to the contrary contained herein, the Company may not issue shares of Common Stock in payment of dividends on the Preferred Stock (and must deliver cash
in respect thereof) if:
(i) the number of shares of Common Stock at the time authorized, unissued and
unreserved for all purposes is insufficient to pay such dividends in shares of Common
Stock;
(ii) after the Dividend Effectiveness Date (as defined in Section 8), such shares
(x) are not registered for resale pursuant to an effective Underlying Securities
Registration Statement (as defined in Section 8) and (y) may not be sold without volume
restrictions pursuant to Rule 144 promulgated under the Securities Act (as defined in
Section 8), as determined by counsel to the Company pursuant to a written opinion letter,
addressed to the Companys transfer agent in the form and substance acceptable to the
applicable Holder and such transfer agent (if the Company is permitted and elects to pay
dividends in shares of Common Stock under this clause (ii) prior to the Dividend
Effectiveness Date and thereafter an Underlying Securities Registration Statement shall
be declared effective by the Commission (as defined in Section 8), the Company shall,
within three (3) Trading Days after the date of such declaration of effectiveness,
exchange such shares for shares of Common Stock that are free of restrictive legends of
any kind);
-2-
(iii) such shares are not then listed or quoted on the Nasdaq National Market (the
NASDAQ) ,or on the New York Stock Exchange, American Stock Exchange or Nasdaq
SmallCap Market (each, a Subsequent Market);
(iv) the Company has failed to timely satisfy its conversion obligations hereunder;
or
(v) the issuance of such shares would result in a violation of Section 5(a)(iii).
(c) So long as any Preferred Stock shall remain outstanding, neither the Company nor any
subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly any
Junior Securities (as defined in Section 8), nor shall the Company directly or indirectly pay
or declare any dividend or make any distribution, (other than a dividend or distribution
described in Section 5 or dividends due and paid in the ordinary course on preference shares
of the Company at such times when the Company is in compliance with its payment and other
obligations hereunder) upon, nor shall any distribution be made in respect of, any Junior
Securities, nor shall any monies be set aside for or applied to the purchase or redemption
(through a sinking fund or otherwise) of any Junior Securities.
Section 3. Voting Rights. Except as otherwise provided herein and as otherwise
required by law, the Preferred Stock shall have no voting rights. However, so long as any shares of
Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the Holders
of all of the shares of the Preferred Stock then outstanding, (a) alter or change adversely the
powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of
Designation, (b) authorize or create any class of stock ranking as to dividends or distribution of
assets upon a Liquidation (as defined in Section 4) senior to or otherwise pari passu with the
Preferred Stock, (c) amend its certificate of incorporation or other charter documents so as to
affect adversely any rights of the Holders, (d) increase the authorized number of shares of
Preferred Stock, or (e) enter into any agreement with respect to the foregoing.
Section 4. Liquidation. Upon any liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary (a Liquidation), the Holder shall be entitled
to receive out of the assets of the Company, whether such assets are capital or surplus, for each
share of Preferred Stock an amount equal to the Stated Value plus all due but unpaid dividends per
share, whether declared or not, before any distribution or payment shall be made to the holders of
any Junior Securities, and if the assets of the Company shall be insufficient to pay in full such
amounts, then the entire assets to be distributed to the Holders shall be distributed among the
Holders ratably in accordance with the respective amounts that would be payable on such shares if
all amounts payable thereon were paid in full. A sale, conveyance or disposition of all or
substantially all of the assets of the Company or the effectuation by the Company of a transaction
or series of related transactions in which more than 33% of the voting power of the Company is
disposed of, or a consolidation or merger of the Company with or into any other company or
companies shall not be treated as a Liquidation, but instead shall be subject to the provisions of
Section 5. The Company
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shall mail written notice of any such Liquidation, not less than 45 days prior to the payment date
stated therein, to each record Holder.
Section 5. Conversion.
(a)(i) Conversions at Option of Holder. Each share of Preferred Stock shall be
convertible into shares of Common Stock (subject to the limitations set forth in Section
5(a)(iii) hereof) at the Conversion Ratio (as defined in Section 8) at the option of the
Holder, at any time and from time to time, from and after the Original Issue Date;
provided, that, (A) from and after the Original Issue Date through the date which is
the ninetieth (90th) day after the Original Issue Date (such ninetieth (90) day, the
Record Date), the Conversion Price applicable to any conversion during such period
shall be the Initial Conversion Price (as defined herein), (B) from and after the Record Date
through the fourth (4th) month thereafter, any conversions of shares of Preferred Stock shall
be limited in each monthly period to 25% of the number of shares of Preferred Stock
outstanding on the Record Date, on a cumulative basis (for example, during the first month
following the Record Date, the Holder may tender conversions of shares of Preferred Stock of
up to 25% of the number of shares of Preferred Stock outstanding on the Record Date and during
the second month following the Record Date, the Holder may tender conversions of shares of
Preferred Stock of up to 50% of the number of shares Preferred Stock outstanding on the Record
Date less such number of shares of Preferred Stock for which conversions have previously been
honored), provided, further, that the restrictions on conversion set forth in this Section
5(a)(i) shall be null and void ab initio from and after the earlier of (i) the date that the
Company delivers to the Holders an Optional Redemption Notice (as defined in Section 6(a)) and
(ii) the date that the Company delivers to the Holders a Subsequent Financing Notice (as
defined in the Purchase Agreement). Holders shall effect conversions by surrendering the
certificate or certificates representing the shares of Preferred Stock to be converted to the
Company, together with the form of conversion notice attached hereto as Exhibit A (a
Conversion Notice). Each Conversion Notice shall specify the number of shares of
Preferred Stock to be converted and the date on which such conversion is to be effected, which
date may not be prior to the date the Holder delivers such Conversion Notice by facsimile (the
Conversion Date). If no Conversion Date is specified in a Conversion Notice, the
Conversion Date shall be the date that the Conversion Notice is deemed delivered hereunder. If
the Holder is converting Less than all shares of Preferred Stock represented by the
certificate or certificates tendered by the Holder with the Conversion Notice, or if a
conversion hereunder cannot be effected in full for any reason, the Company shall promptly
deliver to such Holder (in the manner and within the time set forth in Section 5(b)) a
certificate representing the number of shares of Preferred Stock as have not been converted.
(ii) Automatic Conversion. Subject to the provisions in this paragraph, all
outstanding shares of Preferred Stock for which conversion notices have not previously
been received or for which redemption has not been made or required hereunder shall be
automatically converted on the third anniversary of the later to occur of (i) the
Effectiveness Date (as defined in the Registration Rights Agreement) or (ii) the date
that the Commission declares effective an Underlying Securities Registration Statement,
at the Conversion Price on such date. The conversion contemplated by this paragraph shall
not occur at such time as (a) (1) an Underlying Securities Registration Statement is not
then effective or (2) the Holder is not permitted to resell Underlying Shares (as defined
in Section 8) pursuant to Rule 144(k) promulgated under the
-4-
Securities Act, without volume restrictions, as evidenced by an opinion letter of counsel
acceptable to the Holder and the transfer agent for the Common Stock; (b) there are not
sufficient shares of Common Stock authorized and reserved for issuance upon such
conversion; or (c) the Company shall have defaulted on its covenants and obligations
hereunder or under the Purchase Agreement or Registration Rights Agreement.
Notwithstanding the foregoing, the three-year period for conversion under this Section
shall be extended (on a day-for-day basis) for any Trading Days after the date that the
Commission declares effective an Underlying Securities Registration Statement that the
purchaser is unable to resell Underlying Shares under an Underlying Securities
Registration Statement due to (a) the Common Stock not being listed for trading on the
NASDAQ or any Subsequent Market, (b) the failure of such Underlying Securities
Registration Statement to remain effective during the Effectiveness Period (as defined in
the Registration Rights Agreement) as to all Underlying Shares, or (c) the suspension of
the Holders ability to resell Underlying Shares thereunder.
(iii) Certain Conversion Restrictions.
(A)(1) A Holder may not convert shares of Preferred Stock or receive shares of
Common Stock as payment of dividends hereunder to the extent such conversion or receipt
of such dividend payment would result in the Holder beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules thereunder) in excess of
4.999% of the then issued and outstanding shares of Common Stock, including shares
issuable upon-conversion of, and payment of dividends on, the shares of Preferred Stock
held by such Holder after application of this Section. The Holder shall have the sole
authority and obligation to determine whether the restriction contained in this Section
applies and to the extent that the Holder determines that the limitation contained in
this Section applies, the determination of which shares of Preferred Stock are
convertible shall be in the sole discretion of the Holder. The provisions of this Section
may be waived by a Holder (but only as to itself and not to any other Holder) upon not
less than 75 days prior notice to the Company. Other Holders shall be unaffected by any
such waiver.
(2) A Holder may not convert shares of Preferred Stock or receive shares of
Common Stock as payment of dividends hereunder to the extent such conversion or
receipt of such dividend payment would result in the Holder beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act (as defined in
Section 8) and the rules thereunder) in excess of 9.999% of the then issued and
outstanding shares of Common Stock, including shares issuable upon conversion of,
and payment of dividends on, the shares of Preferred Stock held by such Holder
after application of this Section. The Holder shall have the sole authority and
obligation to determine whether the restriction contained in this Section applies
and to the extent that the Holder determines that the limitation contained in this
Section applies, the determination of which shares of Preferred Stock are
convertible shall be in the sole discretion of the Holder. The provisions of this
Section may be waived by a Holder (but only as to itself and not to any other
Holder) upon not less than 75 days prior notice to the Company. Other Holders shall
be unaffected by any such waiver.
(B) If on any Conversion Date (A) the Common Stock is listed for trading on the
NASDAQ or the Nasdaq SmallCap Market, (B) the Conversion Price then in effect is such
that the aggregate number of shares of Common Stock that would then be issuable upon
conversion in full of all then outstanding shares of Preferred Stock and as payment of
dividends
-5-
thereon in shares of Common Stock, together with any shares of Common Stock previously
issued upon conversion of shares of Preferred Stock and as payment of dividends thereon,
would equal or exceed 20% of the number of shares of Common Stock outstanding on the
Series A Closing Date (as defined in the Purchase Agreement) (such number of shares as
would not equal or exceed such 20% limit, the Issuable Maximum), and (C) the
Company shall not have previously obtained the vote of shareholders (the Shareholder
Approval), if any, as may be required by the applicable rules and regulations of the
Nasdaq Stock Market (or any successor entity) applicable to approve the issuance of
shares of Common Stock in excess of the Issuable Maximum pursuant to the terms hereof,
then the Company shall issue to the Holder so requesting a conversion a number of shares
of Common Stock equal to its pro rata share of the Issuable Maximum (determined by
reference to the number of shares of Preferred Stock issued to all Holders on the Series
A Closing Date) and, with respect to the remainder of the aggregate Stated Value of the
shares of Preferred Stock then held by such Holder for which a conversion in accordance
with the Conversion Price would result in an issuance of shares of Common Stock in excess
of the Issuable Maximum (the Excess Stated Value), the converting Holder shall
have the option to require the Company to either (1) use its best efforts to obtain the
Shareholder Approval applicable to such issuance as soon as is possible, but in any event
not later than the 75th day after such request, or (2)(i) issue and deliver to such
Holder a number of shares of Common Stock as equals (x) the Excess Stated Value, plus
accrued dividends on all shares of Preferred Stock being converted, divided by (y) the
closing sales price of the Common Stock as reported by the NASDAQ on the Series A Closing
Date, and (ii) cash in an amount equal to the product of (x) the Per Share Market Value
on the Conversion Date and (y) the number of shares of Common Stock in excess of such
Holders pro rata portion of the Issuable Maximum that would have otherwise been issuable
to the Holder in respect of such conversion but for the provisions of this Section (such
amount of cash being hereinafter referred to as the Discount Equivalent), or
(3) pay cash to the converting Holder in an amount equal to the Mandatory Redemption
Amount (as defined in Section 8) for the Excess Stated Value. If the Company fails to pay
the Discount Equivalent or the Mandatory Redemption Amount, as the case may be, in full
pursuant to this Section within seven (7) days after the date payable, the Company will
pay interest thereon at a rate of 15% per annum (or the maximum rate permitted by
applicable law, whichever is less) to the converting Holder, accruing daily from the
Conversion Date until such amount, plus all such interest thereon, is paid in full.
(C) Notwithstanding anything herein to the contrary, the Company shall not be
obligated to issue in excess of 1,450,000 Underlying Shares upon conversion of shares of
Preferred Stock and as payment of dividends thereon.
(b)(i) Not later than three (3) Trading Days after any Conversion Date, the Company will
deliver to the Holder (i) a certificate or certificates which shall be free of restrictive
legends and trading restrictions (other than those required by Section 3.1(b) of the Purchase
Agreement) representing the number of shares of Common Stock being acquired upon the
conversion of shares of Preferred Stock (subject to the limitations set forth in Section
5(a)(iii) hereof), (ii) one or more certificates representing the number of shares of
Preferred Stock not converted, (iii) a bank check in the amount of accrued and unpaid
dividends (if the Company has elected to pay accrued dividends in cash), and (iv) if the
Company has elected and is permitted hereunder to pay accrued dividends in shares of Common
Stock, certificates, which shall be free of restrictive legends and trading restrictions
(other than those required by Section 3.1 (b) of the Purchase Agreement), representing such
shares of Common Stock; provided, however, that the
-6-
Company shall not be obligated to issue certificates evidencing the shares of Common Stock
issuable upon conversion of any shares of Preferred Stock until certificates evidencing such
shares of Preferred Stock are delivered for conversion to the Company, or the Holder of such
Preferred Stock notifies the Company that such certificates have been lost, stolen or
destroyed and provides a bond (or other adequate security) reasonably satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection therewith. The
Company shall, upon request of the Holder, if available, use its best efforts to deliver any
certificate or certificates required to be delivered by the Company under this Section
electronically through the Depository Trust Corporation or another established clearing
corporation performing similar functions. If in the case of any Conversion Notice such
certificate or certificates, including for purposes hereof, any shares of Common Stock to be
issued on the Conversion Date on account of accrued but unpaid dividends hereunder, are not
delivered to or as directed by the applicable Holder by the third (3rd) Trading Day after the
Conversion Date, the Holder shall be entitled by written notice to the Company at any time on
or before its receipt of such certificate or certificates thereafter, to rescind such
conversion, in which event the Company shall immediately return the certificates representing
the shares of Preferred Stock tendered for conversion.
(ii) If the Company fails to deliver to the Holder such certificate or certificates
pursuant to Section 5(b)(i), including for purposes hereof, any shares of Common Stock to
be issued on the Conversion Date on account of accrued but unpaid dividends hereunder, by
the third (3rd) Trading Day after the Conversion Date, the Company shall pay to such
Holder, in cash, as liquidated damages and not as a penalty, $5,000 for each Trading Day
after such third (3rd) Trading Day until such certificates are delivered. Nothing herein
shall limit a Holders right to pursue actual damages for the Companys failure to
deliver certificates representing shares of Common Stock upon conversion within the
period specified herein and such Holder shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall not prohibit
the Holders from seeking to enforce damages pursuant to any other Section hereof or under
applicable law. Further, if the Company shall not have delivered any cash due in respect
of conversions of Preferred Stock or as payment of dividends thereon by the third (3rd)
Trading Day after the Conversion Date, the Holder may, by notice to the Company, require
the Company to issue shares of Common Stock pursuant to Section 5(c), except that for
such purpose the Conversion Price applicable thereto shall be the lesser of the
Conversion Price on the Conversion Date and the Conversion Price on the date of such
Holder demand. Any such shares will be subject to the provision of this Section.
(iii) In addition to any other rights available to the Holder, if the Company fails
to deliver to the Holder such certificate or certificates pursuant to Section 5(b)(i),
including for purposes hereof, any shares of Common Stock to be issued, on the Conversion
Date on account of accrued but unpaid dividends hereunder, by the third (3rd) Trading Day
after the Conversion Date, and if after such third (3rd) Trading Day the Holder purchases
(in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a
sale by such Holder of the Underlying Shares which the Holder was entitled to receive
upon such conversion (a Buy-In), then the Company shall (A) pay in cash to the
Holder (in addition to any remedies available to or elected by the Holder) the amount by
which (x) the Holders total purchase price (including brokerage commissions, if any) for
the Common Stock so, purchased exceeds (y) the product of (1) the aggregate number of
shares of Common Stock that such Holder was entitled to receive from the
-7-
conversion at issue multiplied by (2) the market price of the Common Stock at the
time of the sale giving rise to such purchase obligation and (B) at the option of the
Holder, either return the shares of Preferred Stock for which such conversion was not
honored or deliver to such Holder the number of shares of Common Stock that would have
been issued had the Company timely complied with its conversion and delivery obligations
under Section 5(b)(i). For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of
shares of Preferred Stock with respect to which the market price of the Underlying Shares
on the date of conversion was a total of $10,000 under clause (A) of the immediately
preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder
shall provide the Company written notice indicating the amounts payable to the Holder in
respect of the Day-In. Notwithstanding anything contained herein to the contrary, if a
Holder requires the Company to make payment in respect of a Buy-In for the failure to
timely deliver certificates hereunder and the Company timely pays in full such payment,
the Company shall not be required to pay such Holder liquidated damages under Section
5(b)(ii) in respect of the certificates resulting in such Buy-In.
(c)(i) The conversion price for each share of Preferred Stock (the Conversion
Price) in effect on any Conversion Date shall be the lesser of (a) 125% of the average of
the Per Share Market Values for the fifteen (15) Trading Days immediately preceding the
Original Issue Date (the Initial Conversion Price) and (b) 101% of the average of
the ten (10) lowest Per Share Market Values during the thirty (30) Trading Days immediately
preceding the applicable Conversion Date (which, at the Holders option, may include Trading
Days prior to the 120th day following the Original Issue Date), provided, that such
thirty (30) Trading Day period shall be extended for the number of Trading Days, if any,
during such period in which (A) trading in the Common Stock is suspended from the NASDAQ or a
Subsequent Market on which it is listed for trading prior to such suspension, or (B) after the
date declared effective by the Commission, the Underlying Securities Registration Statement is
not effective, or (C) after the date declared effective by the Commission, the Prospectus
included in the Underlying Securities Registration Statement may not be used by the Holder for
the resale of Underlying Shares, provided, further, that during the period
from the Original Issue Date until the 120th day following the Original Issue Date, the
Conversion Price shall be the Initial Conversion Price.
If (a) the Underlying Securities Registration Statement is not filed on or prior to the
Filing Date (if the Company files such Underlying Securities Registration Statement without
affording the Holder the opportunity to review and comment on the same as required by Section
3(a) of the Registration Rights Agreement, the Company shall not be deemed to have satisfied
this clause (a)), or (b) after the earlier of March 31, 1999 and the date of acceptance by the
Commission of the Companys Annual Report on Form 10-K for the annual period ended December
31, 1998 the Company is notified (orally or in writing, whichever is earlier) by the
Commission that an Underlying Securities Registration Statement will not be reviewed, or not
subject to further review or comment and the Company fails to file with the Commission a
request for acceleration in accordance with Rule 12d1-2 promulgated under the Securities
Exchange Act of 1934, as amended, within five (5) days of the date of such notification, or
(c) the Underlying Securities Registration Statement is not declared effective by the
Commission on or prior to the Effectiveness Date, or (d) such Underlying Securities
Registration Statement is filed with and declared effective by the Commission but thereafter
ceases to be effective as to all Registrable Securities (as defined in the Registration Rights
Agreement) at any time prior to the expiration of the Effectiveness Period
-8-
without being succeeded within ten (10) days by a subsequent Underlying Securities
Registration Statement filed with and declared effective by the Commission, or (e) trading in
the Common Stock shall be suspended from the NASDAQ or a Subsequent Market for more than three
(3) Business Days (which need not be consecutive days) other than any halts in trading, which
do not continue for an entire Trading Day, to allow for the release of information by the
Company, (f) the conversion rights of the Holders are suspended for any reason or (g) unless
the Company is notified by the Commission that it is not eligible to file the Underlying
Securities Registration Statement on Form S-3, an amendment to the Underlying Securities
Registration Statement is not filed by the Company with the Commission within fifteen (15)
Business Days of the Commissions notifying the company that such amendment is required in
order for the Underlying Securities Registration Statement to be declared effective (if the
Company files such amendment without affording the Holder the opportunity to review and
comment on the same as required by Section 3(a) of the Registration Rights Agreement, the
Company shall not be deemed to have satisfied this clause (g)) (any such failure or breach
being referred to as an Event, and for purposes of clauses (a), (c), (f) the date on
which such Event occurs, or for purposes of clause (b) the date on which such five (5) day
period is exceeded, or for purposes of clause (d) the date which such 10 day-period is
exceeded, for purposes of clause (e) the date on which such three (3) Business Day-period is
exceeded, or for purposes of clause (g) the date which such 15 Business Day-period is
exceeded, being referred to as Event Date), then, on the Event Date and each monthly
anniversary thereof until the earlier to occur of the second month after the Event Date and
such time as the applicable Event is cured, the Company shall pay to the Holder 1.0% of the
aggregate Stated Value of the shares of Preferred Stock then held by such Holder (which, for
purposes hereof shall include all shares of Preferred Stock tendered for conversion by such
Holder but for which Underlying Shares due in respect thereof shall not have been received by
such Holder) in cash, as liquidated damages and not as a penalty. Commencing on the second
month anniversary after the Event Date and on each monthly anniversary thereof until such time
as the applicable Event is cured, the Company shall pay to the Holder 1.5% of the aggregate
Stated Value of the shares of Preferred Stock then held by such Holder (which, for purposes
hereof shall include all shares of Preferred Stock tendered for conversion by such Holder but
for which Underlying Shares due in respect thereof shall not have been received by such
Holder) in cash, as liquidated damages and nor as a penalty. The provisions of this Section
are not exclusive and shall in no way limit the Companys obligations under the Registration
Rights Agreement.
(ii) If the Company, at any time while any shares of Preferred Stock are
outstanding, shall (a) pay a stock dividend or otherwise make a distribution or
distributions on shares of its Junior Securities or pari passu securities payable in
shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger
number of shares, (c) combine outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification and exchange of the Common Stock any shares of
capital stock of the Company, then the Initial Conversion Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of Common Stock outstanding
before such event and of which the denominator shall be the number of shares of Common
Stock outstanding after the event. Any adjustment made pursuant to this Section 5(c)(ii)
shall become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall became effective
immediately after the effective date in the case of a subdivision, combination or
re-classification.
(iii) If the Company, at any time while any shares of Preferred Stock are
outstanding, shall issue rights, warrants or options to all holders of Common Stock
-9-
entitling them to subscribe for or purchase shares of Common Stock at a price per
share less than the Per Share Market Value at the record date mentioned below, then the
Initial Conversion Price shall be multiplied by a fraction, the numerator of which shall
be (the number of shares of Common Stock outstanding immediately prior to the issuance of
such rights, warrants or options, plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares so offered would purchase at such
Per Share Market Value, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such issuance plus the number of
shares of Common Stock offered for subscription or purchase. Such adjustment shall be
made whenever such rights or warrants are issued, and shall become effective Immediately
after the record date for the determination of stockholders entitled to receive such
rights or warrants. However, upon the expiration of any right, warrant or option to
purchase shares of Common Stock the issuance of which resulted in an adjustment in the
Conversion Price pursuant to this Section 5(c)(iii), if any such right, warrant or option
shall expire and shall not have been exercised, the Conversion Price shall immediately
upon such expiration shall be recomputed and effective immediately upon such expiration
shall be increased to the price which it would have been (but reflecting any other
adjustments in the Conversion Price made pursuant to the provisions of this Section 5
upon the issuance of other rights or warrants) had the adjustment of the Conversion Price
made upon the issuance of such rights, warrants, or options been made on the basis of
offering for subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights, warrants or options actually exercised.
(iv) If the Company or any subsidiary thereof, as applicable with respect to Common
Stock Equivalents (as defined below), at any time while any shares of Preferred Stock are
outstanding, shall issue shares of Common Stock or rights, warrants, options or other
securities or debt that is convertible into or exchangeable for shares) of Common Stock,
other than (i) the granting of options or warrants to employees, officers, directors,
consultants and other service providers (but not Strategic Partners (as defined in the
Purchase Agreement)), and the issuance of shares of Common Stock upon exercise of options
granted, under any stock option plan heretofore or hereinafter duly adopted by the
Company and (ii) the issuance of shares of Common Stock issuable pursuant to the Private
Equity Line of Credit Agreement dated March 27, 1998 between the Company and Kingsbridge
Capital Limited, as described in the Companys Amendment No. 2 on Form SB-2, filed with
the Commission on August 13, 1998 (but not pursuant to any amendment or modification
thereto) (Common Stock Equivalents) entitling any Person to acquire shares of
Common Stock at a price per share less than the Conversion Price, then the Conversion
Price shall be multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to the issuance of such Common Stock
or such Common Stock Equivalents plus the number of shares of Common Stock which the
offering price for such shares of Common Stock or Common Stock Equivalents would purchase
at the Conversion Price, and the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to such issuance this the number of
shares of Common Stock so issued or issuable, provided, that for purposes hereof,
all shares of Common Stock that are issuable upon conversion, exercise or exchange of
Common Stock Equivalents shall be deemed outstanding immediately after the issuance of
such Common Stock Equivalents. Such adjustment shall be made whenever such Common Stock
or Common Stock Equivalents are issued.
(v) If the Company, at any time while shares of Preferred Stock are outstanding,
shall distribute to all holders of Common Stock (and not to Holders) evidences of its
-10-
indebtedness or assets or rights or warrants to subscribe for or purchase any
security (excluding those referred to in Sections 5(c)(ii)-(iv) above), then in each such
case the Initial Conversion Price at which each share of Preferred Stock shall thereafter
be convertible shall be determined by multiplying the Initial Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders entitled to
receive such distribution by a fraction of which the denominator shall be the Per Share
Market Value determined as of the record date mentioned above, and of which the numerator
shall be such Per Share Market Value on such record date less the then fair market value
at such record date of the portion of such assets or evidence of indebtedness so
distributed applicable to one outstanding shares of Common Stock as determined by the
Board of Directors in good faith; provided, however, that in the event of
a distribution exceeding ten percent (10%) of the net assets of the Company, if the
Holders of a majority in interest of the Preferred Stock dispute such valuation, such
fair market value shall be determined by a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of recognized
standing (which may be the firm that regularly examines the financial statements of the
Company) (an Appraiser) selected in good faith by the Holders of a majority in
interest of the shares of Preferred stock then outstanding; and provided,
further, that the Company, after receipt of the determination by such Appraiser
shall have the right to select an additional Appraiser, in good faith, in which case the
fair market value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be described in a statement provided to
the Holders of the portion of assets or evidences of indebtedness so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment shall be
made whenever any such distribution is made and shall become effective immediately after
the record date mentioned above.
(vi) All calculations under this Section 5 shall be made to the nearest cent or the
nearest 1/l00th of a share, as the case may be.
(vii) Whenever the Conversion Price is adjusted pursuant to Section 5(c)(ii), (iii),
(iv), or (v) the Company shall promptly mail to each Holder, a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
(viii) In case of any reclassification of the Common Stock, or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities, cash or
property (other than compulsory share exchanges which constitute Change of Control
Transactions), the Holders of the Preferred Stock then outstanding shall have the right
thereafter to convert such shares only into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of Common Stock
following such reclassification or share exchange, and the Holders of the Preferred Stock
shall be entitled upon such event to receive such amount of securities, cash or property
as a holder of the number of shares of Common Stock of the Company into which such shares
of Preferred Stock could have been converted immediately prior to such reclassification
or share exchange would have been entitled. This provision shall similarly apply to
successive reclassifications or share exchanges.
(ix) If (a) the Company shall declare a dividend (or any Other distribution) on the
Common Stock, (b) the Company shall declare a special nonrecurring cash dividend on or a
redemption of the Common Stock, (c) the Company shall authorize the granting to all
holders of Common Stock rights or warrants to subscribe for or purchase any shares of
capital
-11-
stock of any class or of any rights, (d) the approval of any stockholders of the
Company shall be required in connection with any reclassification of the Common Stock,
any consolidation or merger to which the Company is a. party, any sale or transfer of all
or substantially all of the assets of the Company, of any compulsory share of exchange
whereby the Common Stock is converted into other securities, cash or property, or (e) the
Company shall authorize the voluntary or involuntary dissolution, liquidation or winding
up of the affairs of the Company; then the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of Preferred Stock, and shall cause to
be mailed to the Holders at their last addresses as they shall appear upon the stock
books of the Company, at least 20 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distributions, redemption, rights or
warrants are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become effective
or close, and the date as of which it is expected that holders of Common Stock of record
shall be entitled to exchange their Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or share
exchange. Holders are entitled to convert shares of Preferred Stock during the 20-day
period commencing the date of such notice to the effective date of the event triggering
such notice.
(x) In case of any (I) merger or consolidation of the Company with or into another
Person that would constitute a Change of Control Transaction, or (2) sale by the Company
of more than one-half of the assets of the Company (on an as valued basis) in one or a
series of related transactions, or (3) tender or other offer or exchange (whether by the
Company or another Person) pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, stock, cash or property of the
Company or another Person; then, if a Holder has not exercised its rights of redemption,
if any, under Section 7 hereof, such Holder shall have the right thereafter to (A) if
permitted under Section 7 hereof, exercise its rights of redemption under Section 7 with
respect to such event, (B) convert its shares of Preferred Stock into the shares of stock
and other securities, cash and properly receivable upon or deemed to be held by holders
of Common Stock following such merger, consolidation or sale, and such Holder shall be
entitled upon such event or series of related events to receive such amount of
securities, cash and property as the shares of Common Stock into which such shares of
Preferred Stock could have been converted immediately prior to such merger, consolidation
or sales would have been entitled, (C) in the case of a merger or consolidation, (x)
require the surviving entity to issue shares of convertible preferred stock or
convertible debentures with such aggregate stated value or in such fees amount, as the
case may be, equal to the Stated Value of the shares of Preferred Stock then held by such
Holder, plus all accrued and unpaid dividends and other amounts owing thereon, which
newly issued shares of preferred stork or debentures shall have terms identical
(including with respect to conversion) to the terms of the Preferred Stock (except, in
the case of debentures, as may be required to reflect the differences between debt and
equity) and shall be entitled to all of the rights, and privileges of a Holder of
Preferred Stock set forth herein and the agreements pursuant to which the Preferred Stock
was issued (including, without limitation, as such rights relate to the acquisition,
transferability, registration and listing of such shares of stock other securities
issuable upon conversion thereof), and (y) simultaneously with me issuance of such
convertible preferred stock or convertible debentures, shall have the right to convert
such instrument only into shares and other securities cash and property receivable upon
or deemed to be held by holders of Common Stock following such
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merger or consolidation, or (D) in the event of an exchange or tender offer or other
transaction contemplated by clause (3) of this Section, tender or exchange its shares of
Preferred Stock for such securities, stock, cash and other property receivable upon or
deemed to be held by holders of Common Stock that have tendered or exchanged their shares
of Common Stock following such tender or exchange, and such Holder shall be entitled upon
such exchange or tender to receive such amount of securities, cash and property as the
shares of Common Stock into which such shares of Preferred Stock could have been
converted (taking into account all then accrued and unpaid dividends) immediately prior
to such tender or exchange would have been entitled as would have been issued. In the
case of clause (C), the conversion price applicable for the newly issued shares of
convertible preferred stock or convertible debentures shall be based upon the amount of
securities, cash and property that each share of Common Stock would receive in such
transaction, the Conversion Ratio immediately prior to the effectiveness or closing date
for such transaction and the Conversion Price stated herein. The terms of any such
merger, sale, consolidation, tender or exchange shall include such terms so as continue
to give the Holders of Preferred Stock the right to receive the securities, cash and
property set forth in this Section upon any conversion or redemption following such event
This provision shall similarly apply to successive such events.
(d) The Company covenants that it will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock solely for the purpose of issuance upon
conversion of Preferred Stock and payment of dividends on Preferred Stock, each as herein
provided, free from preemptive rights or any other actual contingent purchase rights of
persons other than the Holders, not less than such number of shares of Common Stock as shall
(subject to any additional requirements of the Company as to reservation of such shares set
form in the Purchase Agreement) be issuable (taking into account the adjustments and
restrictions of Section 5(a) and Section 5(c)) upon the conversion of all outstanding shares
of Preferred Stock and payment of dividends hereunder (assuming all such dividends are paid in
shares of Common Stock). The Company covenants that all shares of Common Stock that shall be
so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, non
assessable and freely tradeable, subject to the legend requirements of Section 3.1(b) of the
Purchase Agreement
(e) Upon a conversion hereunder the Company shall not be required to issue stock
certificate representing fraction of shares of Common Stock, but may if otherwise permitted,
make a cash payment in respect of any final fraction of a share based on the Per Share Market
Value at such time. If the Company elects not, or is unable, to make such a cash payment, the
Holder of a share of Preferred Stock shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
(f) The issuance of certificates for Common Stock on conversion of Preferred Stock and as
payment of dividends in shares of Common Stock shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required to pay any
tax that may be payable in respect of any transfer involved in the issuance and delivery of
any such certificate upon conversion in a name other than that of the Holder of such shares of
Preferred Stock so converted.
(g) Shares of Preferred Stock converted into Common Stock or redeemed in accordance with
the terms hereof shall be canceled and may not be reissued.
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(h) Any and all notices or other communications or deliveries to be provided by the
Holders of the Preferred Stock hereunder, including, without limitation, any Conversion
Notice, shall be in writing and delivered personally, by facsimile or sent by a nationally
recognized overnight courier service, addressed to the attention of the Chief Financial
Officer of the Company at the facsimile telephone number or address of the principal place of
business of the Company as set forth in the Purchase Agreement. Any and all notices or other
communications or deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile or sent by a nationally recognized overnight courier
service, addressed to each Holder at the facsimile telephone number or address of such Holder
appearing on the books of the Company, or if no such facsimile telephone number or address
appears, at the principal place of business of the Holder. Any notice or other communication
or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 8:00 p.m. (New York City time), (ii) the
date after the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section later than 8:00 pm. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date,
(iii) upon receipt, if sent by a nationally recognized overnight courier service, or (iv) upon
actual receipt by the party to whom such notice is required to be given.
Section 6. Optional Redemption.
(a) Subject to the provisions of this Section 6, the Company shall have the right,
exercisable upon five (5) Trading Days notice (an Optional Redemption Notice) to
the Holders of the Preferred Stock after any date on which the closing sales price for the
Common Stock as reported by Bloomberg Information Services, Inc., or any successor to its
function of reporting prices, for the previous ten (10) consecutive Trading Days is either (i)
less than $5.00 or (ii) greater than $20.00 (such date, the Optional Redemption
Qualifying Date), to redeem all or any portion of the shares of Preferred Stock which
have not previously been converted or redeemed, at a price equal to the Optional Redemption
Price (as defined below), provided, that if the Company shall not have provided a
Holder with notice of its intent to redeem shares of Preferred Stock pursuant to this Section
6 within twenty (20) Trading Days from the Optional Redemption Qualifying Date, the Company
shall be precluded from redeeming shares of Preferred Stock pursuant to this Section until the
next Optional Redemption Qualifying Date, if any (the calculation for one Optional Redemption
Qualifying Date may not include any Trading Days used to calculate a prior Optional Redemption
Qualifying Date). The Company shall not be entitled to deliver an Optional Redemption Notice
to the Holders if: (i) the number of shares of Common Stock at the time authorized, unissued
and unreserved for all purposes is insufficient to satisfy the Companys conversion
obligations of all shares of Preferred Stock then outstanding, or (ii) neither the Underlying
Shares then outstanding are registered for resale pursuant to an effective Underlying
Securities Registration Statement nor may such Underlying Shares be sold without volume
restrictions pursuant to Rule 144 promulgated under the Securities Act, as determined by
counsel to the Company pursuant to a written opinion letter, addressed to the Companys
transfer agent in the form and substance acceptable to the Holders and such transfer agent, or
(iii) the Common Stock is not then listed for trading on the NASDAQ or on a Subsequent Market.
The entire Optional Redemption Price shall be paid in cash. Holders may convert (and the
Company shall honor such conversions in accordance with the terms hereof) any shares of
Preferred Stock, including shares subject to an Optional Redemption Notice, during the
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period from the date thereof through the 4th Trading Day after the receipt of an Optional
Redemption Notice, provided, that, notwithstanding anything herein to the contrary,
the Conversion Price applicable to such conversions shall be subject to a floor of $5.00.
(b) If any portion of the Optional Redemption Price shall not be paid by the Company by
the 20th Trading Day after the delivery of an Optional Redemption Notice, interest shall
accrue thereon at the rate of 15% per annum (or the maximum rate permitted by applicable law,
whichever is less) until the Optional Redemption Price plus all such interest is paid in full.
In addition, if any portion of the Optional Redemption Price remains unpaid after the date
due, the Holder of the Preferred Stock subject to such redemption may elect, by written notice
to the Company given at any time thereafter, to either (i) demand conversion of all or any
portion of the shares of Preferred Stock for which such Optional Redemption Price, plus
interest thereof, has not been paid in full (the Unpaid Redemption Shares), in which
event the Per Share Market Value for such shares shall be the lower of the Per Share Market
Value calculated on the date the Optional Redemption Price was originally due and the Per
Share Market Value as of the Holders written demand for conversion, or (ii) invalidate ab
initio such redemption, notwithstanding anything herein contained to the contrary. If the
Holder elects option (i) above, the Company shall within three (3) Trading Days of its receipt
of such election deliver to the Holder the share of Common Stock, issuable upon conversion of
the Unpaid Redemption Shares subject to such Holder conversion demand and otherwise perform
its obligations hereunder with respect thereto; or, If the Holder elects option (ii) above,
the Company shall promptly, and in any event not later than three (3) Trading Days from
receipt of Holders notice of such election, return to the Holder all of the Unpaid Redemption
Shares.
(c) The Optional Redemption Price shall equal the sum of (i) the greater of (A)
the Stated Value of the shares of Preferred Stock to be redeemed and all accrued dividends
thereon and (B) the product of (x) the number of shares of Preferred Stock to be redeemed and
(y) the product of (1) the average Per Share Market Value for the five (5) Trading Days
immediately preceding (x) the date of the Optional Redemption Notice or (y) the date of
payment in full by the Company of the Optional Redemption Price, whichever is greater, and (2)
the Conversion Ratio calculated on the date of the Optional Redemption Notice, and (ii) all
other amounts, costs, expenses and liquidated damages due in respect of such shares of
Preferred Stock.
Section 7. Redemption Upon Triggering Events.
(a) Upon the occurrence of a Triggering Event, each Holder shall (in addition to all
other rights it may have hereunder or under applicable law), have the right, exercisable at
the sole option of such Holder, to require the Company to redeem all or a portion of the
Preferred Stock then held by such Holder for a redemption price, in cash, equal to the sum of
(i) the Mandatory Redemption Amount plus (ii) the product of (A) the number of Underlying
Shares issued in respect of conversions or as payment of dividends hereunder and then hold by
the Holder and (B) the Per Share Market Value on the date such redemption is demanded or the
date the redemption price hereunder is paid in full, whichever is greater (such sum, the,
Redemption Price). The Redemption Price shall be due and payable within (10) days of
the date on which the notice for the payment therefor is provided by a Holder. If the Company
fails to pay the redemption price hereunder in full pursuant to this Section on the date such
amount is due in accordance with this Section, the
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Company will pay interest thereon at a rate of 15% (or the maximum amount permitted under
applicable law, whichever is less) per annum, accruing daily from such date until the
redemption price, plus all such interest thereon, is paid in full. For purposes of this
Section, a share of Preferred Stock is outstanding until such date as the Holder shall have
received Underlying Shares upon & conversion (or attempted conversion) thereof that meets the
requirements hereof.
A Triggering Events means any one or more of the following events (whatever the
reason and whether it shall be voluntary or involuntary or effected by operation of law or
pursuant to any judgement, decree or order of any court, or any order, rule or regulation of
any administrative or governmental body):
(i) the failure of an Underlying Securities Registration Statement to be declared
effective by the Commission on or prior to the 180th day after the Original Issue Date;
(ii) if, during the Effectiveness Period, the effectiveness of the Underlying
Securities Registration Statement lapses for any reason for more than an aggregate of
three (3) Trading Days, or the Holder shall not be permitted to resell Registrable
Securities under the Underlying Securities Registration Statement for more than an
aggregate of three (3) Trading Days (which need not be consecutive Trading Days);
(iii) the failure of the Common Stock to be listed for trading on the NASDAQ or on a
Subsequent Market or the suspension of the Common Stock from trading on the NASDAQ or on
a Subsequent Market, in either case, for more than three (3) Trading Days (which need not
be consecutive Trading Days);
(iv) the Company shall fail for any reason to deliver certificates representing
Underlying Shares issuable upon a conversion hereunder that comply with the provisions
hereof prior to the 10th day after the Conversion Date or the Company shall provide
notice to any Holder, including by way of public announcement, at any time, of its
intention not to comply with requests for conversion of any Preferred Stock in accordance
with the terms hereof;
(v) the Company shall be a party to any Change of Control Transaction, shall agree
to sell (in one or a series of related transactions) all or substantially all of its
assets (whether or not such sale would constitute a Change of Control Transaction) or
shall redeem more than a de minimis number of Common Stock or other Junior Securities
(other than redemptions of Underlying Shares);
(vi) an Event shall not have been cured to the satisfaction of the Holders prior to
the expiration of thirty (30) days from the Event Date relating thereto;
(vii) the Company shall fail for any reason to pay in full the amount of cash due
pursuant to a Buy-In within seven (7) days after notice therefor is delivered hereunder;
or
(viii) the Company shall fail to have available a sufficient number of authorized
and unreserved shares of Common Stock to issue to such Holder upon a conversion
hereunder.
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Section 8. Definitions. For the purposes hereof, the following terms shall have
the following meanings:
Change of Control Transaction means the occurrence of any of (i) an acquisition
after the date hereof by an individual or legal entity or group (as described in Rule
13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or
beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess
of 33% of the voting securities of the Company, (ii) a replacement at one time or over time of
more than one-half of the members of the Companys board of directors which is not approved by
a majority of those individuals who are members of the board of directors on the date hereof
(or by those individuals who are serving as members of the board of directors on any date
whose nomination to the board of directors was approved by a majority of the members of the
board of directors who are members on the date hereof), (iii) the merger of the Company with
or into another entity, consolidation or sale of all or substantially all of the assets of the
Company in one or a series of related transactions, or (iv) the execution by the Company of an
agreement to which the Company is a party or by which it is bound, providing for any of the
events set forth above in (i), (ii) or (iii).
Commission means the Securities and Exchange Commission.
Common Stock means the Companys Common Stock, par value $.001 per share, and
stock of any other class into which such shares may hereafter have been reclassified or
changed.
Conversion Ratio means, at any time, a fraction, the numerator of which is
Stated Value plus accrued but unpaid dividends but only to the extent not paid in Common Stock
in accordance with the terms hereof, and the denominator of which is the Conversion Price at
such time.
Dividend Effectiveness Date means the earlier to occur of (x) the Effectiveness
Date (as defined in the Registration Rights Agreement) and (y) the date that an Underlying
Securities Registration Statement is declared effective by the Commission.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Junior Securities means the Common Stock and all other equity securities of the
Company which are junior in rights and liquidation preference to the Preferred Stock.
Mandatory Redemption Amount for each share of Preferred Stock means the sum of
(i) the greater of (A) the Staled Value and all accrued dividends with respect to such share
and (B) the product of (a) the Per Share Market Value on the Trading Day immediately preceding
(x) the date of the Triggering Event or the Conversion Date, as this case may be, or (y) the
date of payment in full by the Company of the applicable redemption price, whichever is
greater, and (b) the Conversion Ratio calculated on the date of the Triggering Event, or the
Conversion Date, as the case may be, and (ii) all other amounts, costs, expenses and
liquidated damages due in respect of such share of Preferred Stock.
Original Issue Date shall mean the date of the first issuance of any shares of
the Preferred Stock regardless of the number of transfers of any particular shares of
Preferred Stock and regardless of the number of certificates which may be issued to evidence
such Preferred Stock.
-17-
Per Share Market Value means on any particular date (a) the closing bid
price per share of Common Stock on such date on the NASDAQ or on the Subsequent Market on
which the Common Stock is then listed or quoted, or if there is no such price on such date,
then the closing bid price on the NASDAQ or on such Subsequent Market on the date nearest
preceding such date, or (b) if the Common Stock is not then listed or quoted on the NASDAQ or
on a Subsequent Market, the closing bid price for a shares of Common Stock in the
over-the-counter market, as reported by the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at the close of
business on such date, or (c) if the Common Stock is not then reported by the National
Quotation Bureau Incorporated (or similar organization or agency succeeding to its functions
of reporting prices), then the average of the Pink Sheet quotes for the relevant conversion
period, as determined in good faith by the Holder, or (d) if the Common Stock are not then
publicly traded the fair market value of a Common Share as determined by an Appraiser selected
in good faith by the Holders of a majority of the shares of the Preferred Stock.
Person means a corporation, an association, a partnership, organization, a
business, an individual, a government or political subdivision thereof or a governmental
agency.
Purchase Agreement means the Convertible Preferred Stock Purchase Agreement,
dated as of the Original Issue Date, between the Company and the original Holder.
Registration Rights Agreement means the Registration Rights Agreement, dated as
of the Original Issue Date, between the Company and the original Holder.
Securities Act means the Securities Act of 1933, as amended.
Trading Day means (a) a day on which the Common Stock is traded on the NASDAQ
or on the Subsequent Market on which the Common Stock is then listed or quoted, as the case
may be, or (b) it the Common Stocks not listed on the NASDAQ or on a Subsequent Market, a day
on which the Common Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on
which the Common Stock is quoted in the over-the-counter market as reported by the National
Quotation Bureau Incorporated (or any similar organization or agency succeeding its functions
of reporting prices); provided, however, that in the event that the Common
Stock is not listed or quoted as set forth in (a), (b) and (c) hereof, then Trading Day shall
mean any day except Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York are authorized or required by law or other
government action to close.
Underlying Securities Registration Statement means a registration statement
that meets the requirements of the Registration Rights Agreement and registers the resale of
all Underlying Shares by the recipient thereof, who shall be named as a selling stockholder
thereunder.
Underlying Shares means, collectively, the shares of Common Stock into which
the Shares are convertible and the shares of Common Stock issuable upon payment of dividends
thereon in accordance with the terms hereof.
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IN WITNESS WHEREOF, the undersigned has caused this Certificate of Designation to be duly
executed by its Chief Financial Officer this 28th day of January, 1999.
NEOTHERAPEUTICS, INC. |
||||
By: | /s/ Samuel Gulko | |||
Samuel Gulko, Chief Financial Officer | ||||
-19-
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of 5% Series A Preferred Stock with
Conversion Features indicated below, into shares of Common Stock, par value $.001 per share (the
Common Stock), of NeoTherapeutics, Inc. (the Company) according to the
conditions hereof, as of the date written below. If shares are to be issued in the name of a person
other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto
and is delivering herewith such certificates and opinions as reasonably requested by the Company in
accordance therewith. No fee will be charged to the Holder for any conversion, except for such
transfer taxes, if any.
Conversion calculations:
Date to Effect Conversion | ||||
Number of shares of Preferred Stock to be Converted | ||||
Number of shares of Common Stock to be Issued | ||||
Applicable Conversion Price | ||||
Signature | ||||
Name | ||||
Address | ||||
STATE OF DELAWARE | ||
SECRETARY OF STATE | ||
DIVISION OF CORPORATIONS | ||
FILED 09:00 AM 12/18/2000 | ||
001634048 2742853 |
CERTIFICATE OF DESIGNATION OF RIGHTS, PREFERENCES AND PRIVILEGES
OF
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
OF
NEOTHERAPEUTICS, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
of the State of Delaware
Alvin J. Glasky, Ph.D., the Chief Executive Officer, and Samuel Gulko, the Chief Financial
Officer of NeoTherapeutics, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 thereof,
DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the Certificate of
Incorporation of said Corporation, the Board of Directors on December 13, 2000, adopted the
following resolution creating a series of 200,000 shares of Preferred Stock designated as Series B
Junior Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors of the corporation
by the Certificate of Incorporation, the Board of Directors does hereby provide for the issue of a
series of Preferred Stock, $.001 par value, of the Corporation, to be designated Series B Junior
Participating Preferred Stock, initially consisting of 200,000 shares and to the extent that the
designations, powers, preferences and relative and other special rights and the qualifications,
limitations and restrictions of the Series B Junior Participating Preferred Stock are not stated
and expressed in the Certificate of Incorporation, does hereby fix and herein state and express
such designations, powers, preferences and relative and other special rights and the
qualifications, limitations and restrictions thereof, as follows (all terms used herein which are
defined in the Certificate of Incorporation shall be deemed to have the meanings provided therein):
Section 1. Designation and Amount. The shares of such series shall be designated as
Series B Junior Participating Preferred Stock, par value $.001 per share, and the number of
shares constituting such series shall be 200,000. Such number of shares may be increased or
decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the
number of shares of Series B Junior Participating Preferred Stock to a number less than the number
of shares then outstanding plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights, warrants or upon the conversion of any outstanding securities issued
by the Corporation convertible into Series B Junior Participating Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior right of the holders of any shares of any series of
Preferred Stock ranking prior and superior to the shares of Series B Junior Participating
Preferred Stock with respect to dividends, the holders of shares of Series B Junior
Participating Preferred Stock shall be entitled to receive when, as and if declared by the
Board of Directors out of funds legally available for the purpose, quarterly dividends payable
in cash on the last day of March, June, September and December in each year (each such date
being referred to herein as a Quarterly Dividend Payment Date), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of
Series B Junior Participating Preferred Stock, in an amount per share (rounded to the nearest
cent) equal to, subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock
(by reclassification or otherwise), declared on the Common Stock of the Corporation (the
Common Stock) since the immediately preceding Quarterly Dividend Payment Date, or, with
respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series B Junior Participating Preferred Stock. In the event the
Corporation shall at any time after December 13, 2000 (the Rights Declaration Date) (i)
declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case, the amount to which holders of shares of Series B Junior
Participating Preferred Stock were entitled immediately prior to such event under the
preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator
of which is the number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series B Junior
Participating Preferred Stock as provided in paragraph (A) above immediately after it declares
a dividend payable in shares of Common Stock.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series B
Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding
the date of issue of such shares of Series B Junior Participating Preferred Stock, unless the
date of issue of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series B Junior
Participating Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series B Junior
Participating Preferred Stock in an amount less than the total amount of such dividends at the
time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series B Junior Participating Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon, which record date
shall be no more than thirty (30) days prior to the date fixed for the payment thereof.
2
Section 3. Voting Rights. The holders of shares of Series B Junior Participating
Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each share of Series B
Junior Participating Preferred Stock shall entitle the holder thereof to 100 votes on all
matters submitted to a vote of the stockholders of the Corporation. In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each
such case the number of votes per share to which holders of shares of Series B Junior
Participating Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of Series B
Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the Corporation.
(C) Except as required by law, holders of Series B Junior Participating Preferred Stock
shall have no special voting rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common Stock as set forth herein) for taking
any corporate action.
Section 4. Certain Restrictions.
(A) The Corporation shall not declare any dividend on, make any distribution on, or
redeem or purchase or otherwise acquire for consideration any shares of Common Stock after the
first issuance of a share or fraction of a share of Series B Junior Participating Preferred
Stock unless concurrently therewith it shall declare a dividend on the Series B Junior
Participating Preferred Stock as required by Section 2 hereof.
(B) Whenever quarterly dividends or other dividends or distributions payable on the
Series B Junior Participating Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series B Junior Participating Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or redeem or
purchase or otherwise acquire for consideration any shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the Series B
Junior Participating Preferred Stock;
(ii) declare or pay dividends on, make any other distributions on any shares of
stock ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with Series B Junior Participating Preferred Stock, except dividends paid
ratably on the Series B Junior Participating
Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such shares are
then entitled;
3
(iii) redeem or purchase or otherwise acquire for consideration shares of any stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or winding
up) with the Series B Junior Participating Preferred Stock, provided that the Corporation
may at any time redeem purchase or otherwise acquire shares of any such parity stock in
exchange for shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series B Junior
Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of Series B Junior
Participating Preferred Stock, or any shares of stock ranking on a parity with the Series
B Junior Participating Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(C) The Corporation shall not permit any subsidiary of the Corporation to purchase or
otherwise acquire for consideration any shares of stock of the Corporation unless the
Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Junior Participating Preferred
Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired
and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the Board of Directors,
subject to the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock ranking Junior
(either as to dividends or upon liquidation, dissolution or winding up) to the Series B Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of Series B Junior
Participating Preferred Stock shall have received an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of such payment,
plus an amount equal to the greater of (1) $100.00 per share, provided that in the event the
Corporation does not have sufficient assets, after payment of its liabilities and distribution
to holders of Preferred Stock ranking prior to the Series B Junior Participating Preferred
Stock, available to permit payment in full of the $100.00 per share amount, the amount
required to be paid under this Section 6(A)(1) shall, subject to Section 6(B) hereof, equal
the value of the amount of available assets divided by the number of outstanding shares of
Series B Junior Participating Preferred Stock or (2) subject to the provisions for adjustment
hereinafter set forth, 100 times the aggregate per share amount to be distributed to the
holders of Common Stock (the greater of (1) or (2), the Series B Liquidation Preference). In
the event the Corporation shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the amount to which holders of shares of Series B Junior Participating
Preferred Stock were entitled immediately prior to such event under clause (2) of the
preceding sentence shall be adjusted by
4
multiplying such amount by a fraction the numerator of which is the number of shares of Common
Stock that were outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such event.
(B) In the event, however, that there are not sufficient assets available to permit
payment in full of the Series B Liquidation Preference and the liquidation preferences of all
other series of Preferred Stock, if any, which rank on a parity with the Series B Junior
Participating Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares in proportion to their respective liquidation preferences.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other property, then in
any such case the shares of Series B Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or
any other property (payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series B Junior Participating Preferred Stock
shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such event.
Section 8. Redemption. The shares of Series B Junior Participating Preferred Stock
shall not be redeemable.
Section 9. Ranking. The Series B Junior Participating Preferred Stock shall rank
junior to all other series of the Corporations Preferred Stock as to the payment of dividends and
the distribution of assets, unless the terms of any such series shall provide otherwise. The Series
B Junior Participating Preferred Stock shall rank senior to the Corporations Common Stock.
Section 10. Amendment. The Certificate of Incorporation of the Corporation shall not
be further amended in any manner which would materially alter or change the powers, preference or
special rights of the Series B Junior Participating Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a majority or more of the outstanding shares of
Series B Junior Participating Preferred Stock, voting separately as a class
Section 11. Fractional Shares. Series B Junior Participating Preferred Stock may be
issued in fractions of a share which shall entitle the holder, in proportion to such holders
fractional shares, to exercise voting rights, receive dividends, participate in distributions and
to have the benefit of all other rights of holders of Series B Junior Participating Preferred
Stock.
5
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the
foregoing as true under the penalties of perjury this 13th day of December
2000.
/s/ Alvin J. Glasky | ||||
Alvin J. Glasky, Ph.D. | ||||
Chief Executive Officer | ||||
ATTEST: |
||||
/s/ Samuel Gulko | ||||
Samuel Gulko | ||||
Chief Financial Officer |
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NEOTHERAPEUTICS, INC.
a Delaware corporation
OF
CERTIFICATE OF INCORPORATION
OF
NEOTHERAPEUTICS, INC.
a Delaware corporation
NeoTherapeutics, Inc., a corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (this Corporation), DOES HEREBY CERTIFY:
1. That the Board of Directors of this Corporation adopted a resolution setting forth a
proposed amendment of the Certificate of Incorporation of this Corporation at a meeting held on
February 12, 2001. The resolution setting forth the proposed amendment is as follows:
FURTHER, that subject to the approval of the stockholders of the Company, the first sentence
of Article 4 of the Certificate of Incorporation of the Company, be and hereby is amended to read
in its entirety as follows:
The aggregate number of shares of all classes of stock which the Corporation shall have
the authority to issue is 55,000,000 shares, consisting of (a) 50,000,000 shares of common
stock, $.001 par value per share (the Common Stock), and (b) 5,000,000 shares of preferred
stock, $.001 par value per share (the Preferred Stock).
2. That said amendment was duly adopted and approved by the stockholders of this Corporation
at a meeting called for that purpose held on April 6, 2001, in accordance with the provisions of
Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF the undersigned has caused this Certificate of Amendment of Certificate of
Incorporation to be duly executed as of the 6th day of April, 2001 and hereby affirm and
acknowledge under penalty of perjury that the filing of this Certificate of Amendment of
Certificate of Incorporation of NeoTherapeutics, Inc. is the act and deed of NeoTherapeutics, Inc.
NeoTherapeutics, Inc., a Delaware corporation |
||||
By: | /s/ Samuel Gulko | |||
Samuel Gulko | ||||
Senior Vice President Finance, Chief Financial Officer, Secretary and Treasurer |
||||
STATE OF DELAWARE | ||
SECRETARY OF STATE | ||
DIVISION OF CORPORATIONS | ||
FILED 09:00 AM 04/06/2001 | ||
010170629 2742853 |
STATE OF DELAWARE | ||
SECRETARY OF STATE | ||
DIVISION OF CORPORATIONS | ||
FILED 09:00 AM 06/27/2001 | ||
010310057 2742853 |
BY Donna Mendes
CERTIFICATE OF DESIGNATIONS
OF
7% SERIES C PREFERRED STOCK
OF
NEOTHERAPEUTICS, INC.
OF
7% SERIES C PREFERRED STOCK
OF
NEOTHERAPEUTICS, INC.
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
NEOTHERAPEUTICS, INC., a corporation organized and existing under the General Corporation
Law of the State of Delaware (the Corporation), hereby certifies, pursuant to the authority
contained in the Certificate of Incorporation and in accordance with the provisions of Section 151
of the General Corporation Law of the State of Delaware that the following resolution was duly
adopted by the Board of Directors of the Corporation as of June 25, 2001, creating a series of its
Preferred Stock designated as 7% Series C Preferred Stock:
RESOLVED, that pursuant to the authority expressly granted to and vested in the Board of
Directors of the Corporation (the Board) by the provisions of the Certificate of incorporation of
the Corporation (the Certificate of Incorporation), there hereby is created, out of the 5,000,000
shares of Preferred Stock, par value $0,001 per share, of the Corporation authorized in Article 4
of the Certificate of Incorporation, a series of the preferred stock of the Corporation consisting
of shares, which shall be designated 7% Series C Preferred Stock, which series shall have the
powers, designations, preferences and relative participating, optional and other rights, and the
qualifications, limitations and restrictions set forth below:
SECTION 1. Designation, Amount and Par Value. The series of preferred stock shall be
designated as 7% Series C Preferred Stock (the Preferred Stock) and the number of shares so
designated shall be 200 (which shall not be subject to increase without the consent of the holders
of the Preferred Stock (each, a Holder and collectively, the Holders)). Each share of Preferred
Stock shall have a par value of $0.001 and a stated value of S 10,000 (the Stated Value).
SECTION 2. Dividends.
(a) Holders shall be entitled to receive, when and as declared by the Board of Directors
out of funds legally available therefor, and the Corporation shall pay, cumulative dividends
at the rate per share (as a percentage of the Stated Value per share) equal to 7% per annum,
payable, subject to the provisions of this Section 2(a), on each yearly anniversary of the
Original Issue Date (as defined in Section 8) while such share is outstanding (each a
Dividend Payment Date) and on each Conversion Date (as defined herein) for such share,
commencing on the earlier to occur of the Conversion Date for such share and the first
Dividend Payment Date following the Original Issue Date, in cash or shares of Common Stock (as
defined in Section 8); provided, however, that in the event that the payment of such dividend
in shares of Preferred Stock would violate the provisions of Section 5(a)(iv)(B) such
dividends shall be paid monthly in arrears in cash on the first business day of each month
until the required Shareholder
Approval has been obtained. Subject to the terms and conditions herein, the decision whether
to pay dividends hereunder in Common Stock or cash shall be at the discretion of the
Corporation. Dividends on the Preferred Stock shall be calculated on the basis of a 360-day
year, shall accrue daily commencing on the Original Issue Date and shall be deemed to accrue
from such date whether or not earned or declared and whether or not there are profits, surplus
or other funds of the Corporation legally available for the payment of dividends. A party that
holds shares of Preferred Stock on the record date with respect to a Dividend Payment Date
will be entitled to receive such dividend payment and any other accrued and unpaid dividends
which accrued prior to such Dividend Payment Date, without regard to any sale or disposition
of Such Preferred Stock subsequent to the applicable record date. Except as otherwise provided
herein, if at any time the Corporation pays less than the total amount of dividends then
accrued on account of the Preferred Stock, Such payment shall be distributed ratably among the
Holders based upon the number of shares of Preferred Stock held by each Holder. The
Corporation shall provide the Holders notice of its intention to pay dividends in cash or
shares of Common Stock not less than 10 Trading Days (as defined in Section 8) prior to any
Dividend Payment Date, it being understood that a failure of the Corporation to timely provide
such notice shall be deemed an election (if permitted hereunder) to pay such dividends in
shares of Common Stock pursuant to the terms hereof. If the
Corporation has properly elected, and is permitted hereunder, to pay dividends in shares of
Common Stock, then such dividends will be due and payable on each Conversion Date for the
applicable shares of Preferred Stock (and not on each Dividend Payment Date) and the number of
shares of Common Stock issuable on account of such dividend shall equal the cash amount of
such dividend on such Conversion Date divided by the Conversion Price (as defined below) on
such date. Any dividends to be paid in cash hereunder that are not paid on a Dividend Payment
Date shall continue to accrue and shall entail a late fee, which must be paid in cash, at the
rate of 15% per annum or the maximum amount that is permitted by applicable law, whichever is
less (such fees to accrue daily, from the date such dividend is due hereunder through and
including the date of payment).
(b) Notwithstanding anything to the contrary contained herein, the Corporation may not
issue shares of Common Stock in payment of dividends on the Preferred Stock (and must deliver
cash in respect thereof) if:
(i) the number of shares of Common Stock at the time authorized, unissued and
unreserved for all purposes is insufficient to pay such dividends in shares of Common
Stock;
(ii) after the Dividend Effectiveness Date (as defined in Section 8), such shares
(x) are not registered for resale pursuant to an effective Underlying Securities
Registration Statement (as defined in Section 8) and (y) may not be sold without volume
and manner of sale restrictions pursuant to Rule 144 promulgated under the Securities Act
(as defined in Section 8), as determined by counsel to the Corporation pursuant to a
written opinion letter addressed to the Corporations transfer agent in the form and
substance acceptable to the applicable Holder and such transfer agent;
2
(iii) such shares are not then listed or quoted on the Nasdaq National Market (the
NASDAQ), or on the New York Stock Exchange, American Stock Exchange or Nasdaq
SmallCap Market (each, a Subsequent Market);
(iv) the Corporation has failed to timely satisfy its conversion obligations
hereunder; or
(v) the issuance of such shares would result In a violation of Section 5(a)(iv)
(c) So long as any Preferred Stock shall remain outstanding, neither the Corporation nor
any subsidiary thereof shall redeem, purchase or otherwise acquire directly or indirectly any
Junior Securities (as defined in Section 8), nor shall the Corporation directly or indirectly
pay or declare any dividend or make any distribution (other than dividends due and paid in the
ordinary course on preference shares of the Corporation at such times when the Corporation is
in compliance with its payment and other obligations hereunder) upon, nor shall any
distribution be made in respect of, any Junior Securities, nor shall any monies be set aside
for or applied to the purchase or redemption (through a sinking fund or otherwise) of any
Junior Securities.
SECTION 3. Voting Rights. Except as otherwise provided herein and as otherwise
required by law, the Preferred Stock shall have no voting rights. However. so long as any shares of
Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the
Holders of all of the shares of the Preferred Stock then outstanding, alter or change adversely the
powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of
Designation, authorize or create any class of stock ranking as to dividends or distribution of
assets upon a Liquidation (as defined in Section 4) senior to or otherwise pari passu with the
Preferred Stock, amend its certificate of incorporation or other charter documents so as to affect
adversely any rights of the Holders, increase the authorized number of shares of Preferred Stock,
or enter into any agreement with respect to the foregoing that is not conditioned upon the receipt
of an affirmative vote pursuant to this Section.
SECTION 4. Liquidation. Upon any liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary (a Liquidation), the Holders shall be entitled to
receive out of the assets of the Corporation, whether such assets are capital or surplus, for each
share of Preferred Stock an Amount equal to the Stated Value plus all due but unpaid dividends per
share, whether declared or not, on a pari passu basis with any distributions payable by the
Corporation upon such Liquidation to the holders of any shares of preferred stock of the
Corporation issued pursuant to Section 5 or Section 6 of that certain Securities Purchase
Agreement, dated as of September 21, 2000, by and among the Corporation. NeoGene Technologies,
Inc., Montrose Investments Ltd. and Strong River Investments, Inc. (the Pari Passu Stock), before
any distribution or payment shall be made to the holders of any Junior Securities in respect of
such Junior Securities, and if the assets of the Corporation shall be
insufficient to pay in full such amounts, then the entire assets to be distributed to the
Holders and the holders of any outstanding Pari Passu Stock shall be distributed among the Holders
and such holders ratably in accordance with the respective amounts that would be payable on such
shares
3
if all amounts payable thereon were paid in full. A sale, conveyance or disposition of all or
substantially all of the assets of the Corporation or the effectuation by the Corporation of a
transaction or series of related transactions in which more than 33% of the voting power of the
Corporation is disposed of, or a consolidation or merger of the Corporation with or into any other
company of companies shall not be treated as a Liquidation, but instead shall be subject to the
provisions of Section 5. The Corporation shall mail written notice of any such Liquidation, not
less than 45 days prior to the payment date stated therein, to each record Holder.
SECTION 5. Conversion.
(a)
(i) Conversions at Option of Holder. Each share of Preferred Stock shall be
convertible into shares of Common Stock (subject to the limitations set forth in Section
5(a)(iv) hereof) at the Conversion Ratio (as defined in Section 8) at the option of the
Holder, at any time and from time to time, from and after the Original Issue Date.
Holders shall effect conversions by surrendering the certificate or certificates
representing the shares of Preferred Stock to be converted to the Corporation, together
with the form of conversion notice attached hereto as Exhibit A (a
Conversion Notice), provided, that Holders shall not be required to
surrender any such certificate if the Corporation has failed to deliver such certificate
to the Holders pursuant to the Purchase Agreement prior the applicable Conversion Date.
Each Conversion Notice shall specify the number of shares of Preferred Stock to be
convened and the date on which such conversion is to be effected, which date may not be
prior to the date the Holder delivers such Conversion Notice by facsimile (the
Conversion Date). If no Conversion Date is specified in a Conversion Notice,
the Conversion Date shall be the date that the Conversion Notice is deemed delivered
hereunder. If the Holder is converting less than all shares of Preferred Stock
represented by the certificate or certificates tendered by the Holder with the Conversion
Notice, or if a conversion hereunder cannot be effected in full for any reason, the
Corporation shall promptly deliver to such Holder (in the manner and within the time set
forth in Section 5(b)) a certificate representing the number of shares of Preferred Stock
as have not been converted.
(ii) Conversion at Option of Corporation. Upon written notice (the date on
which such notice is given, the Notice Date), the Corporation shall have the
right to force the Holders to convert on the Notice Date any or all of the shares of
Preferred Stock into shares of Common Stock (subject to the limitations set forth in
Section 5(a)(iv) hereof) at the applicable Conversion Price on the Notice Date if (i) the
Per Share Market Value of the Common Stock on each of the 10 Trading Days immediately
preceding (but excluding) the Notice Date is equal to or greater than three times the Per
Share Market Value of the Common Stock on the Closing Date (subject to adjustment
consistent with any adjustments to the Initial Conversion Price pursuant to this Section
5), and (ii) the Common Stock issuable upon such conversion will be freely tradable,
without restriction.
(iii) Automatic Conversion. Subject to the provisions in this paragraph, all
outstanding shares of Preferred Stock for which conversion notices have not previously
been received or for which redemption has not been made or required hereunder shall
4
be automatically converted on the fifth anniversary of the Closing Date (as defined in
Section 8). The conversion contemplated by this paragraph shall not occur at such time as
(a) (I) an Underlying Securities Registration Statement is not then effective or (2) the
Holder is not permitted to resell Underlying Shares (as defined in Section 8) pursuant to
Rule 144(k) promulgated under the Securities Act, without volume or manner of sale
restrictions, as evidenced by an opinion letter of counsel acceptable to the Holder and
the transfer agent for the Common Stock; (b) there are not sufficient shares of Common
Stock authorized and reserved for issuance upon such conversion; or (c) the Corporation
shall have defaulted on its covenants and obligations hereunder or under the Purchase
Agreement (as defined in Section 8) or Registration Rights Agreement (as defined in
Section 8). Notwithstanding the foregoing, the five-year period for conversion under this
Section shall be extended (on a day-for-day basis) for any Trading Days after the date
that the Commission declares effective an Underlying Securities Registration Statement
that a Holder is both unable to resell Underlying Shares pursuant to Rule I44(k)
promulgated under the Securities Act, without volume or manner of sale restrictions and
unable to resell Underlying Shares under an Underlying Securities Registration Statement
due to (a) the Common Stock not being listed for trading on the NASDAQ or any Subsequent
Market, (b) the failure of such Underlying Securities Registration Statement to remain
effective during the Effectiveness Period (as defined in the Registration Rights
Agreement) as to all Underlying Shares; or (c) the suspension of the Holders ability to
resell Underlying Shares thereunder. Notwithstanding anything to the contrary contained
herein, a conversion pursuant to this Section shall not be subject to the provisions of
Section 5(a)(iv)(A).
(iv) Certain Conversion Restrictions.
(A) Notwithstanding any other provision hereof, the aggregate number of shares
of Common Stock into which the Preferred Stock may be converted, together with any
other shares of Common Stock then beneficially owned (as defined in the Securities
Exchange Act of 1934, as amended) by the Holder and its affiliates, shall not
exceed 4.9% of the total outstanding shares of Common Stock as of Such date. The
Corporation shall have no obligation to monitor compliance with the foregoing
limitation.
(B) [Intentionally Deleted]
(b)
(i) Not later than three (3) Trading Days after any Conversion Date, the Corporation
will deliver to the Holder (i) a certificate or certificates which shall be free of
restrictive legends and trading restrictions (other than those required by Section 4.9 of
the Purchase Agreement) representing the number of shares of Common Stock being acquired
upon the conversion of shares of Preferred Stock (subject to the limitations set forth in
Section 5(a)(iv) hereof), (ii) one or more certificates representing the number of shares
of Preferred stock convened, (iii) a bank check in the amount of accrued and unpaid
dividends (if the Corporation has elected to pay accrued dividends in cash) and the Floor
Redemption Price (as defined in Section 5(c)(ii)(B), if applicable, and (iv) if the
Corporation has elected and is permitted hereunder to pay accrued dividends in shores of
Common Stock, certificates, which shall be free of restrictive legends and trading
restrictions (other than those required by Section 4.9 of the
5
Purchase Agreement), representing such shares of Common Stock; provided,
however, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon conversion of any shares of Preferred
Stock until one Trading Day after certificates evidencing such shares of Preferred Stock
are delivered for conversion to the Corporation, or the Holder of such Preferred Stock
notifies the Corporation that such certificates have been lost, stolen or destroyed and
provides a bond (or other adequate security) reasonably satisfactory to the Corporation
to indemnify the Corporation from any loss incurred by it in connection therewith. The
Corporation shall, upon request of the Holder, if available, use its best efforts to
deliver any certificate or certificates required to be delivered by the Corporation
under, this Section electronically through the Depository Trust Corporation or another
established clearing corporation performing similar functions. If in the case of any
Conversion Notice such certificate or certificates, including for purposes hereof, any
shares of Common Stock to be issued on the Conversion Date on account of accrued but
unpaid dividends hereunder, are not delivered to or as directed by the applicable Holder
by the third (3rd) Trading Day after the Conversion Date, the
Holder shall be entitled by written notice to the Corporation at any time on or before
its receipt of such certificate or certificates thereafter, to rescind such conversion,
in which event the Corporation shall immediately return the certificates representing the shares of Preferred Stock tendered for conversion.
(ii) If the Corporation fails to deliver to the Holder such certificate or
certificates pursuant to Section 5(b)(i), including for purposes hereof, any shares of
Common Stock to be issued on the Conversion Date on account of accrued but unpaid
dividends hereunder, by the third (3rd) Trading Day after the Conversion Date, the
Corporation shall pay to such Holder, in cash, as liquidated damages and not as a
penalty, $5,000 for each Trading Day after such third (3rd) Trading Day until such
certificates are delivered. Nothing herein shall limit a Holders right to pursue actual
damages for the Corporations failure to deliver certificates representing shares of
Common Stock upon conversion within the period specified herein and such Holder Shall
have the right to pursue all remedies available to it at law or in equity including,
without limitation, a decree of specific performance and/or injunctive relief. The
exercise of any such rights shall not prohibit the Holders from seeking to enforce
damages pursuant to any other Section hereof or under applicable law. Further, if the
Corporation shall not have delivered any cash due in respect of conversions of Preferred
Stock or as payment of dividends thereon by the third (3rd) Trading Day after the
Conversion Date, the Holder may, by notice to the Corporation, require the Corporation to
issue shares of Common Stock pursuant to Section 5(c), except that for such purpose the
Conversion Price applicable thereto shall be the lesser of the Conversion Price on the
Conversion Date and the Conversion Price on the date of such Holder demand. Any such shares will be subject to the provision of this Section.
(iii) In addition to any other rights available to the Holder, if the Corporation
fails to deliver to the Holder such certificate or certificates pursuant to Section
5(b)(i), including for purposes hereof, any shares of Common Stock to be issued on the
Conversion Date on account of accrued but unpaid dividends hereunder, by the third (3rd)
Trading Day after the Conversion Date, and if after such third (3rd) Trading Day the
Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in
satisfaction of a sale by such Holder of the Underlying Shares which the Holder was
entitled to receive upon such conversion (a Buy-In), then the Corporation shall
(A) pay in cash to the Holder (in
6
addition to any remedies available to or elected by the Holder) the amount by which (x)
the Holders total purchase price (including brokerage commissions, if any) For the
Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares
of Common Stock that such Holder was entitled to receive from the conversion at issue
multiplied by (2) the market price of the Common Stock at the time of the sale giving
rise to such purchase obligation and (B) at the option of the Holder, either return the shares of Preferred Stock for which such conversion was not honored or deliver to such
Holder the number of shares of Common Stock that would have been issued had the
Corporation timely complied with its conversion and delivery obligations under Section
5(b)(i). For example, if the Holder purchases Common Stock having a total purchase price
of $11,000 to cover a Buy-In with respect to an attempted conversion of shares of
Preferred Stock with respect to which the market price of the Underlying Shares on the
date of conversion was a total of $10,000 under clause (A) of the immediately preceding
sentence, the Corporation shall be required to pay the Holder $1,000. The Holder shall
provide the Corporation written notice indicating the amounts payable to the Holder in
respect of the Buy-In. Notwithstanding anything contained herein to the contrary, if a
Holder requires the Corporation to make payment in respect of a Buy-In for the failure to
timely deliver certificates hereunder and the Corporation timely pays in full such
payment, the Corporation shall not be required to pay such Holder liquidated damages
under Section 5(b)(ii) in respect of the certificates resulting in such Buy-In.
(c)
(i) The conversion price for each share of Preferred Stock (the Conversion
Price) in effect on any Conversion Date shall be the lesser of (x) 150% of the
average Per Share Market Value on the five (5) Trading Days immediately preceding (but
excluding) the Original Issue Date (the Initial Conversion Price) and (y) 100% of the
average of the seven (7) lowest Per Share Market Values during the thirty (30) Trading
Days immediately preceding the applicable Conversion Date (which, at the Holders option,
may include Trading Days prior to the Original Issue Date), provided, that such
thirty (30) Trading Day period shall be extended for the number of Trading Days, if any,
during such period in which (A) trading in the Common Stock is suspended from the NASDAQ
or a Subsequent Market on
which it is listed for trading prior to such suspension, or (B) during the
Effectiveness Period (as defined in the Registration Rights Agreement), the Underlying
Securities Registration Statement is not effective, or (C) during the Effectiveness
Period, the Prospectus included in the Underlying Securities Registration Statement may
not be used by the Holder for the resale of Underlying Shares
(ii) If on any Conversion Date, the Conversion Price shall be lower than $2.50
(which number shall be subject to equitable adjustments for stock splits, recombinations
and similar events) (such Conversion Price, the Floor Price and a Conversion Date on
which such condition is met, a Record Date), then the Corporation will have the right,
exercisable by delivery of a written notice to the Holders delivered no later than twenty
Trading Days prior to the Record Date (the Corporation Notice), which notice shall
remain in effect until a subsequent such notice is provided by the Corporation to the
Holders, to elect to honor the conversion at issue by either: (x) issuing all number of shares of Common Stock issuable at the actual Conversion Price pursuant to Section
5(c)(i), or (y) issue the number of shares of Common
7
Stock issuable upon the conversion at issue, as if the conversion price applicable to
such conversion was equal to the Floor Price and pay cash, no later than the third
Trading Day following the Record Date, to the Holder, in an amount equal to the product
of (A) the average of the Per Share Market Values for the five Trading Days preceding the
Conversion Date for such conversion and (B) the number of shares of Common Stock
otherwise issuable at the actual Conversion Price then in effect less the number of shares of Common Stock issuable upon such conversion at the Floor Price (the Floor
Redemption Price). Failure by the Corporation to timely deliver the Corporation Notice
to the Holder pursuant to the terms of this Section shall result conclusively be deemed
an election by the Corporation under subsection (x) hereunder. Failure by the Corporation
to pay any portion of the Floor Redemption Price by the third Trading Day following the
applicable Conversion Date shall result in the invalidation ab initio of the unpaid
portion of such optional redemption. In such event, the Corporation shall, at the option
of the Holder, either, (i) not later than three Trading Days from receipt of Holders
request for such election, return to the Holder all of the shares of Preferred Stock for
which such Floor Redemption Price has not been paid in full (the Unpaid Redemption
Shares) or (ii) convert all or any portion of the Unpaid Redemption Shares in which
event the applicable Conversion Price shall be the lower of the Conversion Price
calculated on the date the Floor Redemption Price was originally due and the Conversion
Price as of the Holders Written demand for conversion, If the Holder elects option (ii)
above, the Corporation shall within three Trading Days of its receipt of such election
deliver to the Holder the shares of Common Stock issuable upon conversion of the Unpaid
Redemption Shares subject to such Holder conversion demand and otherwise perform its
obligations hereunder with respect thereto.
(iii) If the Corporation, at any lime while any shares of Preferred Stock are
outstanding, shall (a) pay a stock dividend or otherwise make a distribution or
distributions on shares of its Junior Securities or pari passu securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger
number of shares, (c) combine outstanding shares of Common Stock into a smaller number of
shares, or (d) issue by reclassification and exchange of the Common Stock any shares of
capital stock of the Corporation, then the Initial Conversion Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common Stock
outstanding before such event and of which the denominator shall be the number of shares
of Common Stock outstanding after such event. Any adjustment made pursuant to this
Section 5(c)(iii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iv) If the Corporation, at any time while shares of Preferred Stock are
outstanding, shall distribute to all holders of Common Stock (and not to Holders)
evidences of its indebtedness or assets or rights or warrants to subscribe for or
purchase any security other than with respect to rights granted pursuant to a
stockholders rights, plan adopted by the Corporation, then in each such case the Initial
Conversion Price shall be adjusted by multiplying the Initial Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders entitled lo
receive such distribution by a
fraction of which the denominator shall be the Per Share Market Value determined as
of the record date mentioned above, and of which the numerator shall be such Per Share
Market Value on such record date less
8
the then fair market value at such record date of the portion of such assets or evidence
of indebtedness or rights or warrants so distributed applicable to one outstanding share
of the Common Stock as determined by the Board of Directors in good faith. In either case
the adjustments shall be described in a statement provided to the Holders of the portion
of assets or evidences of indebtedness or rights or warrants so distributed or such
subscription rights applicable to one share of Common Stock. Such adjustment shall be
made whenever any such distribution is made and shall become effective immediately after
the record date mentioned above.
(v) All calculations under this Section 5 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be.
(vi) Whenever the Initial Conversion Price is adjusted pursuant to the terms hereof,
the Corporation shall promptly mail to each Holder, a notice setting forth the Initial
Conversion Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.
(vii) In case of any reclassification of the Common Stock, or any compulsory share
exchange pursuant to which the Common Stock is converted into other securities, cash or
property (other than compulsory share exchanges which constitute Change of Control
Transactions), the Holders of the Preferred Stock then outstanding shall have the right
thereafter to convert such shares only into the shares of stock and other securities,
cash and property receivable upon or deemed to be held by holders of Common Stock
following such reclassification or share exchange, and the Holders of the Preferred Stock
shall be entitled upon such event to receive such amount of securities, cash or property
as a holder of the number of shares of Common Stock of the Corporation into which such
shares of Preferred Stock could have been converted immediately prior to such
reclassification or share exchange would have been entitled. This provision shall
similarly apply to successive reclassifications or share exchanges.
(viii) If (a) the Corporation shall declare a dividend (or any other distribution)
on the Common Stock, (b) the Corporation shall declare a special nonrecurring cash
dividend on or a redemption of the Common Stock, (c) the Corporation shall authorize the
granting to all holders of Common Stock rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (d) the approval of any
stockholders of the Corporation shall be required in connection with any reclassification
of the Common Stock, any consolidation or merger to which the Corporation is a party, any
sale or transfer of all or substantially all of the assets of the Corporation, of any
compulsory share of exchange whereby the Common Stock is converted into other securities,
cash or property, or (e) the Corporation shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Corporation; then the
Corporation shall cause to be filed at each office or agency maintained for the purpose
of conversion of Preferred Stock, and shall cause to be mailed to the Holders at their
last addresses as they shall appear upon the stock books of the Corporation, at least 20
calendar days prior to the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which
9
the holders of Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is expected to
become effective or close, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their Common Stock for securities, cash or
other property deliverable upon such reclassification, consolidation, merger, sale,
transfer or share exchange. Holders are entitled to convert shares of Preferred Stock
during the 20-day period commencing the date of such notice to the effective date of the
event triggering such notice.
(ix) In case of the closing of any: (1) merger or consolidation of the Corporation
with or into another Person, or (2) sale by the Corporation of more than one-half of the
assets of the Corporation (on a market value basis) in one or a series of related
transactions, a Holder shall have the right to: (A) if permitted under Section 7 hereof,
exercise its rights of redemption under Section 7 with respect to such event, or (B)
convert its shares of Preferred Stock into the shares of stock and other securities, cash
and property receivable upon or deemed to be held by holders of Common Stock following
such merger, consolidation or sale, and such Holder shall be entitled upon conversion of
its shares of Preferred Stock to receive such amount of securities, cash and property as
the shares of Common Stock into which such shares of Preferred Stock could have been
converted immediately prior to such merger, consolidation or sales would have been
entitled. The terms of any such merger, sale or consolidation shall include such terms so
as to continue to give the Holders the right to receive the securities, cash and property
act forth in this Section upon any conversion or redemption following such event. This
provision shall similarly apply to successive such events.
(d) The Corporation covenants that it will at all times reserve and keep available out of
its authorized and unissued shares of Common Stock solely for the purpose of issuance upon
conversion of Preferred Stock and payment of dividends on Preferred Stock, each as herein
provided, free from preemptive rights or any other actual contingent purchase rights of
persons other than the Holders, not less than, such number of shares of Common Stock as shall
(subject to any additional requirements of the Corporation as to reservation of such shares
set forth in the Purchase Agreement) be issuable (taking into account the adjustments and
restrictions of Section 5(a) and Section 5(c)) upon the conversion of all outstanding shares
of Preferred Stock and payment of dividends hereunder (assuming all such dividends are paid in
shares of Common Stock). The Corporation covenants that all shares of Common Stock that shall
be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid,
nonassessable and freely tradeable, subject to the legend requirements of Section 4.9 of the
Purchase Agreement.
(e) Upon a conversion hereunder the Corporation shall not be required to issue stock
certificates representing fractions of shares of Common Stock, but may if otherwise permitted,
make a cash payment in respect of any final fraction of a share based on the Per Share Market
Value at such time. If the Corporation elects not, or is unable, to make such a cash payment,
the Holder of a share of Preferred Stock shall be entitled to receive, in lieu of the final
fraction of a share, one whole share of Common Stock.
10
(f) The issuance of certificates for Common Stock on conversion of Preferred Stock and as
payment of dividends in shares of Common Stock shall be made without charge to the Holders
thereof for any documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Corporation shall not be required to pay
any tax that may be payable in respect of any transfer involved in the issuance and delivery
of any such certificate upon conversion in a name other than that of the Holder of such shares
of Preferred Stock so converted.
(g) Shares of Preferred Stock converted into Common Stock or redeemed in accordance with
the terms hereof shall be canceled and may not be reissued.
(h) Any and all notices or other communications or deliveries to be provided by the
Holders of the Preferred Stock hereunder, including, without limitation, any Conversion
Notice, shall be in writing and delivered personally, by facsimile or sent by a nationally
recognized overnight courier service, addressed to the attention of the Chief Financial
Officer of the Corporation at the facsimile telephone number or address of the principal place
of business of the Corporation as set forth in the Purchase Agreement. Any and all notices or
other communications or deliveries to be provided by the Corporation hereunder shall be in
writing and delivered personally, by facsimile or sent by a nationally recognized overnight
courier service, addressed to each Holder at the facsimile telephone number or address of such
Holder appearing on the books of the Corporation, or if no such facsimile telephone number or
address appears, at the principal place of business of the Holder. Any notice or other
communication or deliveries hereunder shall be deemed given and effective on the earliest of
(i) the date of transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 8:00 p.m. (New York City
time), (ii) the date after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile telephone number specified in this Section later than
8:00 p.m. (New York City time) on any date and earlier
than 11:59 p.m. (New York City time) on such date, (iii) upon receipt, if sent by a
nationally recognized overnight courier service, or (iv) upon actual receipt by the party to
whom such notice is required to be given.
SECTION 6. Optional Redemption.
(a) During the time that any shares of Preferred Stock remain outstanding, the
Corporation shall have the right, exercisable on any Trading Day in which the Conversion Price
shall be less than $1.00 (which number shall be subject to equitable adjustments for stock
splits, recombinations and similar events), in accordance with the terms hereof and upon three
Trading Days prior written notice to the Holders to be redeemed (an Optional Redemption
Notice), to redeem all or any portion of the outstanding shares of Preferred Stock which have
not previously been redeemed or for which Conversion Notices have not previously been
delivered. The redemption price applicable to redemptions under this Section 6 shall equal the
Optional Redemption Price (as defined in Section 8) and shall be paid in cash. The Holders
shall have the right to tender, and the Corporation shall honor, Conversion Notices delivered
on or prior to the expiration of the fifteenth Trading Day after receipt by the Holders of an
Optional Redemption Notice for such Preferred Stock (the fifteenth Trading Day
11
after receipt by the Holders of an Optional Redemption Notice is referred to herein as the
Optional Redemption Date).
(b) The Corporation shall not be entitled to deliver an Optional Redemption Notice to the
Holder (and, if after delivery thereof and prior to the Optional Redemption Date, any of the
following conditions shall cease to be met, such notice, at the option of the Holders, shall
be deemed no longer effective) if: (i) the number of shares of Common Stock at the time
authorized, unissued and unreserved for all purposes is insufficient to satisfy the
Corporations conversion obligations of the shares of Preferred Stock then outstanding, or
(ii) there is neither an effective Underlying Shares Registration Statement under which the
Holders can resell all of the issued Underlying Shares and all of the Underlying Shares as are
issuable upon conversion in full of the shares of Preferred Stock subject to an Optional
Redemption Notice nor may all of such issued and issuable Underlying Shares be sold by the
Holders subject to such redemption without volume restrictions pursuant to Rule 144
promulgated under the Securities Act, as determined by counsel to the Corporation pursuant to
a written opinion letter, addressed to the Corporations transfer agent in the form and
substance acceptable to the Holders and such transfer agent, or (iii) the Common Stock is not
then listed for trading on the NASDAQ or on a Subsequent Market.
(c) If any portion of the Optional Redemption Price shall not be paid by the Corporation
by the Optional Redemption Date, the Optional Redemption Price shall bear interest at the rate
of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable
law) to accrue daily from the date such interest is due hereunder through and including the
date of payment (which amount shall be paid as liquidated damages and not as a penalty). In
addition, if any portion of the Optional Redemption Price remains unpaid through the
expiration of the Optional Redemption Date, the Holder subject to such redemption may elect by
written notice to the Corporation to either (x) demand conversion in accordance with the
formula and the time period therefor set forth in Section 5 of any portion of the shares of
Preferred Stock for which the Optional Redemption Price, plus accrued interest thereon, has
not been paid in full (the Unpaid Redemption Amount), in which event the applicable
Conversion Price shall be the lower of the Conversion Price calculated on the Optional
Redemption Date and the Conversion Price as of the Holders written demand for conversion, or
(y) invalidate ab initio such optional redemption, notwithstanding anything herein contained
to the contrary. If the Holder elects option (x) above, the Corporation shall, within three
Trading Days after such election is deemed delivered hereunder, deliver to the Holder the
shares of Common Stock issuable upon conversion of the Unpaid Redemption Amount subject to
such conversion demand and otherwise perform its obligations hereunder with respect thereto.
If the Holder elects option (y) above, the Corporation shall promptly, and in any event not
later than three (3) Trading Days from receipt of notice of such election, return to the
Holder new shares of Preferred Stock for the full Unpaid Redemption Amount and shall no longer
have any redemption rights under this Section. If, upon an election under option (x) above,
the Corporation fails to deliver certificates representing the shares of Common Stock issuable
upon conversion, of the Unpaid Redemption Amount within the time period set forth in this
Section, the Corporation shall pay to the Holder in
cash, as liquidated damages and not as a penalty, $5,000 per day until the Corporation
delivers such certificates to the Holder.
12
SECTION 7 Redemption Upon Triggering Events. Upon the occurrence of a Triggering
Event, each Holder shall (in addition to all other rights it may have hereunder or under applicable
law), have the right, exercisable at the sole option of such Holder, to require the Corporation to
redeem all or a portion of the Preferred Stock then held by such Holder for a redemption price, in
cash, equal to the sum of (i) the Mandatory Redemption Amount plus (ii) the product of (A) the
number of Underlying Shares issued in respect of conversions or as payment of dividends hereunder
and then held by the Holder (the Redeemable Stock) and (B) the Per Share Market Value on the date
such redemption is demanded or the date the redemption price hereunder is paid in full, whichever
is greater (such sum, the Redemption Price). The Redemption Price shall be due and payable within
(10) days of the date on which the notice for the payment therefor is provided by a Holder. If the
Corporation fails to pay the redemption price hereunder in full pursuant to this Section on the
date such amount is due in accordance with this Section, the Corporation will pay interest thereon
at a rate of 15% (or the maximum amount permitted under applicable law, whichever is less) per
annum, accruing daily from such date until the redemption price, plus all such interest thereon, is
paid in full. For purposes of this Section, a share of Preferred Stock is outstanding until such
date as the Holder shall have received Underlying Shares upon a conversion (or attempted
conversion) thereof that meets the requirements hereof. Upon receipt of the full Redemption Price,
the Holder shall deliver the Redeemable Stock to the Corporation
A Triggering Event means any one or more of the following events (whatever the reason
and whether it shall be voluntary or involuntary or effected by operation of law or pursuant
to any judgement, decree or order of any court, or any order, rule or regulation of any
administrative or governmental body):
(i) the failure of an Underlying Securities Registration Statement to be declared
effective by the Commission on or prior to the 240th day after the Closing Date;
(ii) if; during the Effectiveness Period, the effectiveness of the Underlying
Securities Registration Statement lapses for any reason for more than an aggregate of ten
(10) Trading Days, or the Holder shall not be permitted to resell Registrable Securities
under the Underlying Securities Registration Statement for more than 10 consecutive
Trading Days or an aggregate of 20 Trading Days (which need not be consecutive Trading
Days);
(iii) the failure of the Common Stock to be listed for trading on the NASDAQ or on a
Subsequent Market or the suspension of the Common Stock from trading on the NASDAQ or on
a Subsequent Market, in either case, for more than 10 consecutive Trading Days or an
aggregate of 20 Trading Days (which need not be consecutive Trading Days);
(iv) the Corporation shall fail for any reason to deliver certificates representing
Underlying Shares issuable upon a conversion hereunder that comply with the provisions
hereof prior to the 10th day after the Conversion Date or the Corporation shall provide
notice to any Holder, including by way of public announcement, at any time, of its
intention not to comply with requests for conversion of any Preferred Stock in accordance
with the terms hereof;
13
(v) the Corporation shall, without the consent of the Holders of a majority of the
then outstanding shares of Preferred Stock, be a party to any Change of Control
Transaction, shall agree to sell (in one or a series of related transactions) all or
substantially all of its assets (whether or not such sale would constitute a Change of
Control Transaction) or shall redeem more than a de minimis number of Common Stock or
other Junior Securities (other than redemptions of Underlying Shares);
(vi) as Event (as defined in the Registration Rights Agreement) shall not have been
cured to the satisfaction of the Holders prior to the expiration of thirty (30) days from
the Event Date (as defined in the Registration Rights Agreement) relating thereto other
than an Event resulting from a failure of an Underlying Shares Registration Statement to
be timely declared effective by the Commission;
(vii) the Corporation shall fail for any reason to pay in full the amount of cash
due pursuant to a Buy-In within seven (7) days after notice therefor is delivered
hereunder; or the Corporation shall fail to have available a sufficient number of
authorized and unreserved shares of Common Stock to issue to such Holder upon a
conversion hereunder.
SECTION 8. Definitions. For the purposes hereof, the following terms shall have the
following meanings:
Change of Control Transaction means the occurrence of any of (i) an acquisition
after the date hereof by an individual or legal entity or group (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act) of effective control (whether through legal or beneficial
ownership of capital stock of the Corporation, by contract or otherwise) of in excess of 33% of the
voting securities of the Corporation, (ii) a replacement at one time or over time of more than
one-half of the members of the Corporations board of directors which is not approved by a majority
of those individuals who are members of the board of directors on the date hereof (or by those
individuals who are serving as members of the board of directors on any date whose nomination to
the board of directors was approved by a majority of the members of the board of directors who are
members on the date hereof), (iii) the merger of the Corporation with or into another entity,
consolidation or sale of all or substantially all of the assets of the Corporation in one or a
series of related transactions, or (iv) the execution by the Corporation of an agreement to which
the Corporation is a party or by which it is bound, providing for any of the events set forth above
in (i), (ii) or (iii).
Closing Date shall have the meaning set forth in the Purchase Agreement.
Commission means the Securities and Exchange Commission.
Common Stock means the Corporations Common Stock, par value $.001 per share, and
stock of any other class into which such shares may hereafter have been reclassified or changed.
Conversion Ratio means, at any time, a fraction, the numerator of which is Stated
Value plus accrued but unpaid dividends but only to the extent not paid in Common Stock
14
in accordance with the terms hereof, and the denominator of which is the Conversion Price at such
time.
Dividend Effectiveness Date means the earlier to occur of (x) the Effectiveness Date
(as defined in the Registration Rights Agreement) and (y) the date that an Underlying Securities
Registration Statement is declared effective by the Commission.
Exchange Act means the Securities Exchange Act of 1934, as amended.
Junior Securities means the Common Stock and all other equity securities of the
Corporation which are junior in rights and liquidation preference to the Preferred Stock.
Mandatory Redemption Amount for each share of Preferred Stock means the sum of (i)
the greater of (A) the Stated Value and all accrued dividends with respect to such share and (B)
the product of (a) the Per Share Market Value on the Trading Day immediately preceding (x) the date
of the Triggering Event or the Conversion Date, as the case may be, or (y) the date of payment in
full by the Corporation of the applicable redemption price, whichever is greater, and (b) the
Conversion Ratio calculated on the date of the Triggering Event, or the Conversion Date, as the
case may be, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of
such share of Preferred Stock.
Optional Redemption Price shall be sum of 106% of the Stated Value of the shares of
Preferred Stock to be redeemed pursuant to the terms hereof and all other amounts, costs, expenses
and liquidated damages due in respect of such shares of Preferred Stock.
Original Issue Date shall mean the date of the first issuance of any shares of the
Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock
and regardless of the number of certificates which may be issued to evidence such Preferred Stock.
Per Share Market Value means on any particular date (a) the closing bid price per
share of Common Stock on such date on the NASDAQ or on the Subsequent Market on which the Common
Stock is then listed or quoted, or if there is no such price on such, date, then the closing bid
price on the NASDAQ or on such Subsequent Market on the date nearest preceding such date, or (b) if
the Common Stock is not then listed or quoted on the NASDAQ or on a Subsequent Market, the closing
bid price for a shares of Common Stock in the over-the-counter market, as reported by the National
Quotation Bureau Incorporated or similar organization or agency succeeding to its functions of
reporting prices) at the close of business on such date, or (c) if the Common Stock is not then
reported by the National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), then the average of the Pink Sheet quotes for
the relevant conversion period, as determined in good faith by the Holder, or (d) if the Common
Stock are not then publicly traded the fair market value of a Common Share as determined by an
Appraiser selected in good faith by the Holders of a majority of the shares of the Preferred Stock.
15
Person means a corporation, an association, a partnership, organization, a business,
an individual, a government or political subdivision thereof or a governmental agency.
Purchase Agreement means the Securities Purchase Agreement, dated as of December 18,
2000, to which the Corporation, NeoGene Technologies, Inc. and the original Holders are parties, as
amended, modified or supplemented from time to time in accordance with its terms.
Registration Rights Agreement means the Registration Rights Agreement, dated
December 18, 2000, to which the Corporation and the original Holders are parties, as amended,
modified or supplemented from time to time in accordance with its terms.
Securities Act means the Securities Act of 1933, as amended.
Trading Day means (a) a day on which the Common Stock is traded on the NASDAQ or on
the Subsequent Market on which the Common Stock is then listed or quoted, as the case may be, or
(b) if the Common Stocks not listed on the NASDAQ or on a Subsequent Market, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or
(c) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is
quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or
any similar organization or agency succeeding its functions of reporting prices); provided,
however, that in the event that the Common Stock is not listed or quoted as set forth in
(a), (b) and (c) hereof, then Trading Day shall mean any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the State of York are
authorized or required by law or other government action to close.
Underlying Securities Registration Statement means a registration statement that
meets the requirements of the Registration Rights Agreement and registers the resale of all
Underlying Shares by the recipient thereof, who shall be named as a selling stockholder
thereunder.
Underlying Shares means, collectively, the shares of Common Stock into which the
Shares are convertible and the shares of Common Stock issuable upon payment of dividends thereon in
accordance with the terms hereof.
16
IN WITNESS WHEREOF, NeoTherapeutics, Inc. has caused this Certificate of Designations to be
duly executed by its Chief Financial Officer this 26th day of June, 2001.
NEOTHERAPEUTICS, INC. |
||||
By: | /s/ Samuel Gulko | |||
Samuel Gulko, Chief Financial Officer | ||||
EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert shares of Preferred Stock)
in order to Convert shares of Preferred Stock)
The undersigned hereby elects to convert the number of shares of 7% Series [ ] Preferred
Stock with Conversion Features indicated below, into shares of Common Stock, par value $.001 per
share (the Common Stock), of NeoTherapeutics, Inc. (the Corporation) according
to the conditions hereof, as of the date written below. If shares are to be issued in the name of a
person other than undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably requested by the
Corporation in accordance therewith. No fee will be charged to the Holder for any conversion,
except for such transfer taxes, if any.
Conversion calculations: |
Date to Effect Conversion |
||
Number of shares of Preferred Stock to be Converted |
||
Number of shares of Common Stock to be Issued |
||
Applicable Conversion Price |
||
Signature | ||||
Name | ||||
Address | ||||
STATE OF DELAWARE | ||
SECRETARY OF STATE | ||
DIVISION OF CORPORATIONS | ||
FILED 09:00 AM 08/31/2001 | ||
010433982 2742853 |
CERTIFICATE OF OWNERSHIP AND MERGER
OF
ADVANCED IMMUNOTHERAPEUTICS, INC.
(a California corporation)
INTO
NEOTHERAPEUTICS, INC.
(a Delaware corporation)
OF
ADVANCED IMMUNOTHERAPEUTICS, INC.
(a California corporation)
INTO
NEOTHERAPEUTICS, INC.
(a Delaware corporation)
NeoTherapeutics, Inc., a corporation organized and existing under Laws of the State of
Delaware, does hereby certify:
1. NeoTherapeutics, Inc. (hereinafter sometimes referred to as the Corporation) is a
business corporation of the State of Delaware.
2. The Corporation is the owner of all of the outstanding shares of stock of Advanced
ImmunoTherapeutics, Inc., which is a business corporation of the State of California.
3. The laws of the jurisdiction of organization of NeoTherapeutics, Inc. permit the merger of
a business corporation of that jurisdiction with a business corporation of another jurisdiction.
4. The laws of the jurisdiction of organization of Advanced ImmunoTherapeutics, Inc. permit
the merger of a business corporation of that jurisdiction with a business corporation of another
jurisdiction.
5. The Corporation hereby merges Advanced ImmunoTherapeutics, Inc. into the Corporation.
6. The following is a copy of the resolutions adopted on August 17, 2001 by the Board of
Directors of the Corporation to merge Advanced ImmunoTherapeutics, Inc. into the Corporation:
RESOLVED, that Advanced immunoTherapeutics, Inc. be merged into this Corporation, and
that all of the estate, property, rights, privileges, powers, and franchises of Advanced
ImmunoTherapeutics, Inc. be vested in and held and enjoyed by this Corporation as fully and
entirely and without change or diminution as the same were before held and enjoyed by Advanced
ImmunoTherapeutics, Inc. in its respective name.
RESOLVED FURTHER, that this Corporation assume all of the obligations and liabilities of
Advanced ImmunoTherapeutics, Inc.
RESOLVED FURTHER, that the form, content, terms and conditions of the attached Agreement
and Plan of Merger by and
between this Corporation and Advanced ImmunoTherapeutics, Inc. (the Merger Agreement), is
hereby approved and adopted.
RESOLVED FURTHER, that the officers of this Corporation be, and each of them acting alone
hereby is, authorized to execute, deliver and carry out the terms of the Merger Agreement.
RESOLVED FURTHER, that the outstanding shares of Advanced ImmunoTherapeutics, Inc. shall
not be converted in any manner, nor shall any cash or other consideration be paid or delivered
therefor, but each such share shall be canceled upon the effective time of the merger.
RESOLVED FURTHER, that this Corporation shall cause to be executed and filed and/or
recorded the documents prescribed by the laws of the State of Delaware, by the laws of the
State of California, and by the laws of any other appropriate jurisdiction to effect the
merger and will cause to be performed all necessary acts within the jurisdiction of
organization of Advanced ImmunoTherapeutics, Inc. and of this Corporation and in any other
appropriate jurisdiction to effect the merger.
7. Attached hereto as Exhibit A is a copy of the Agreement and Plan of Merger as executed by
NeoTherapeutics, Inc. and Advanced ImmunoTherapeutics, Inc.
Executed on this 28th day of August, 2001.
NEOTHERAPEUTICS, INC. |
||||
By: | /s/ Samuel Gulko | |||
Samuel Gulko Senior Vice President Finance, Chief Financial Officer, Secretary and Treasurer |
2
EXHIBIT A
3
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of August 28, 2001 (the Merger Agreement), by
and among NeoTherapeutics, a Delaware corporation (NeoTherapeutics) and Advanced
ImmunoTherapeutics, Inc., a California corporation (the Merging Subsidiary).
WITNESSETH:
WHEREAS, NeoTherapeutics is a corporation duly organized and validly existing under and by
virtue of the laws of the State of Delaware;
WHEREAS, the Merging Subsidiary is a corporation duly organized and validly existing under the
laws of its state of incorporation;
WHEREAS, NeoTherapeutics is the holder of 100% of the authorized, issued and outstanding
capital stock of the Merging Subsidiary (the Merging Capital Stock);
WHEREAS, the Board of Directors of NeoTherapeutics deems it advisable that the Merging
Subsidiary merge with and into NeoTherapeutics, upon the terms and subject to the conditions set
forth herein and in accordance with the laws of the States of California and Delaware (the
Merger), and that the shares of Merging Capital Stock be cancelled upon consummation of
the Merger as set forth herein;
WHEREAS, the parties hereto intend that the Merger qualify as tax-free reorganization for
federal income tax purposes; and
WHEREAS, the Board of Directors of NeoTherapeutics has, by resolutions, duly approved and
adopted the provisions of this Merger Agreement as the agreement of merger required by Section 252
of the General Corporation Law of the State of Delaware (the Delaware Law) and Section
1110 of the General Corporation Law of the State of California (the California Law), and
in each case as the foregoing may be applicable to NeoTherapeutics, the Merging Subsidiary and the
Merger.
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Effect of the Merger; Manner and Basis of Converting and Canceling Shares.
1.1 At the Effective Time (as hereinafter defined), the Merging Subsidiary shall be
merged with and into NeoTherapeutics, the separate corporate existence of the Merging
Subsidiary (except as may be continued by operation of law) shall cease, and NeoTherapeutics
shall continue as the surviving corporation, all with the effects provided by applicable law.
NeoTherapeutics, in its capacity as the surviving corporation of the Merger, is hereinafter
sometimes referred to as the Surviving Corporation.
1.2 At the Effective Time, each share of Merging Capital Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and without
any action by the Merging Subsidiary, NeoTherapeutics or any other person, be cancelled and no
cash or securities or other property shall be payable in respect thereof.
1.3 At and after the Effective Time, the Surviving Corporation shall possess all the
rights, privileges, immunities and franchises, of both a public and private nature, and be
subject to all the duties and liabilities, of the Merging Subsidiary; and all rights,
privileges immunities and franchises of the Merging Subsidiary, and all property, real,
personal and mixed, and all debts due on whatever account, including subscriptions to shares,
and all other choses in action, and all and every other interest, of or belonging to the
Merging Subsidiary shall be taken and deemed to be transferred to and vested in the Surviving
Corporation without further act or deed; and title to any real estate, or any interest
therein, vested in any of the Merging Subsidiary shall not revert or be in any way impaired by
reason of the Merger; and the Surviving Corporation shall thenceforth be responsible and
liable for all liabilities and obligations of the Merging Subsidiary; and any claim existing
or action or proceeding pending by or against the Merging Subsidiary may be prosecuted to
judgment as if the Merger had not taken place or the Surviving Corporation may be
substituted in its place; all with the effect set forth in Section 253 of the Delaware Law.
The authority of the officers of the Merging Subsidiary shall continue with respect to the due
execution in the name of the Merging Subsidiary of tax returns, instruments of transfer or
conveyance and other documents where the execution thereof is required or convenient to comply
with any provision of the Delaware Law and California Law, any contract to which the Merging
Subsidiary is or was a party or this Merger Agreement.
SECTION 2. Effective Time.
2.1 As soon as is reasonably practicable after the execution of this Agreement,
NeoTherapeutics and the Merging Subsidiary shall cause a Certificate of Ownership and Merger
to be executed, acknowledged and filed with the Secretary of State of the State of Delaware,
all as provided for in and in accordance with Section 253 of the Delaware Law.
2.2 As soon as is reasonably practicable after the execution of this Agreement,
NeoTherapeutics and the Merging Subsidiary shall deliver for filing to the Secretary of State
of the State of California the original of the Certificate of Ownership as provided for in and
in accordance with Section 1110 of the California Law.
2.3 The Merger shall become effective at the time and date as provided by applicable law
(the Effective Time).
SECTION 3. Certificate of Incorporation and Bylaws; Board of Directors.
3.1 The Certificate of Incorporation and Bylaws of NeoTherapeutics as in effect at the
Effective Time shall govern the Surviving Corporation.
3.2 The members of the Board of Directors and the officers of NeoTherapeutics
holding office immediately prior to the Effective Time shall be the members of the Board of
Directors and the officers (holding the same positions as they held with NeoTherapeutics
immediately prior to the Effective Time) of the Surviving Corporation and shall hold such
offices until the expiration of their current terms, or until their earlier death, resignation
or removal.
2
SECTION 4. Amendment and Termination.
4.1 NeoTherapeutics may amend, modify or supplement this Merger Agreement with respect to
the Merging Subsidiary.
4.2 This Merger Agreement may be terminated and the Merger may be abandoned for any
reason with respect to the Merging Subsidiary by a resolution adopted by the Board of
Directors of the Merging Subsidiary or NeoTherapeutics at any time prior to the Effective
Time. In the event of the termination of this Merger Agreement with respect to any party as
provided herein, this Merger Agreement shall forthwith become void with respect to such party
and there shall be no liability hereunder on the part of such party or its respective officers
and directors, except liability for intentional breach or misrepresentation or common law
fraud.
SECTION 5. Service of Process.
5.1 The Surviving Corporation hereby agrees that it may be served with process in the
State of California in any proceeding for the enforcement of any obligation of Advanced
ImmunoTherapeutics, Inc., and hereby irrevocably appoints the Secretary of State of the State
of California as its agent to accept service of process in any such proceeding.
A copy of any service of process received in connection with Section 7.1 above should be
mailed to:
NeoTherapeutics, Inc.
157 Technology Drive
Irvine, California 92618
Attn: Chief Executive Officer
157 Technology Drive
Irvine, California 92618
Attn: Chief Executive Officer
with copies to:
Latham & Watkins
650 Town Center Drive, 20th Floor
Costa Mesa, California 92626
Attn: Alan W. Pettis
650 Town Center Drive, 20th Floor
Costa Mesa, California 92626
Attn: Alan W. Pettis
SECTION 6. Miscellaneous.
6.1 This Merger Agreement may be executed in one or more counterparts, all of which taken
together shall constitute one and the same instrument.
6.2 The internal law, not the law of conflicts, of the State of Delaware will govern all
questions concerning the construction, validity and interpretation of this Merger Agreement,
except so far as the California Law applies to the Merger.
3
6.3 This Merger Agreement is not intended to confer upon any person (other than the
parties hereto and their respective successors and assigns) any rights or remedies hereunder
or by reason hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement to be signed by their
respective officers thereunto duly authorized all as of the day and year first written above.
NeoTherapeutics, Inc. |
||||
By: | /s/ Alvin J. Glasky | |||
Alvin J. Glasky | ||||
Chief Executive Officer | ||||
By: | /s/ Samuel Gulko | |||
Samuel Gulko | ||||
Senior Vice President Finance, Chief Financial Officer, Secretary and Treasurer |
||||
Advanced ImmunoTherapeutics, Inc. |
||||
By: | /s/ Alvin J. Glasky | |||
Alvin J. Glasky | ||||
Chief Executive Officer | ||||
By: | /s/ Samuel Gulko | |||
Samuel Gulko | ||||
Senior Vice President Finance, Chief Financial Officer, Secretary and Treasurer |
||||
4
STATE OF DELAWARE | ||
SECRETARY OF STATE | ||
DIVISION OF CORPORATIONS | ||
FILED 01:45 PM 09/05/2002 | ||
020556295 2742853 |
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NEOTHERAPEUTICS, INC.,
OF
CERTIFICATE OF INCORPORATION
OF
NEOTHERAPEUTICS, INC.,
NeoTherapeutics, Inc., a corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the Corporation), does hereby certify that:
1. Article 4 of the Corporations Certificate of Incorporation is hereby amended by adding the
following three paragraphs at the end of said Article 4:
Effective as of 11:59 p.m. Eastern Time on the date of the filing of the Certificate of
Amendment that adds this paragraph to this Article 4 (the time of such filing, the Effective
Time), all issued and outstanding shares of Common Stock (Existing Common Stock) shall be
and hereby are automatically combined and reclassified as follows: each twenty-five (25)
shares of Existing Common Stock shall be combined and reclassified as one (1) share of issued
and outstanding Common Stock (New Common Stock), provided, that there shall be no fractional
shares of New Common Stock. In the case of any holder of any number of shares of Existing
Common Stock which, when divided by twenty-five (25), does not result in a whole number, the
holder shall receive cash in lieu of any fractional share of New Common Stock at a price per
share equal to the product of (a) the number of shares of Existing Common Stock held by such
holder immediately prior to the Effective Time which have not been classified into a whole
share of New Common Stock, multiplied by (b) the closing price of the Existing Common Stock as
reported on the Nasdaq National Market on the date of the filing of the Certificate of
Amendment.
The Corporation shall, through its transfer agent, provide certificates representing
shares of New Common Stock to holders of Existing Common Stock in exchange for certificates
representing shares of Existing Common Stock. From and after the Effective Time, certificates
representing shares of Existing
Common Stock are hereby cancelled and shall represent only the right of the holders
thereof to receive shares of New Common Stock.
From and after the Effective Time, the term New Common Stock as used in this Article 4
shall mean Common Stock as provided in this Certificate of Incorporation. The par value of the
Common Stock shall remain $0.001 per share.
2. The amendment of the certificate of incorporation herein certified has been duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment of Certificate
of Incorporation on September 5, 2002.
NEOTHERAPEUTICS, INC., a Delaware corporation |
||||
By: | /s/ Rajesh C. Shrotriya, M.D. | |||
Rajesh C. Shrotriya, M.D. | ||||
Chairman of the Board, Chief Executive Officer and President |
2
STATE OF DELAWARE | ||
SECRETARY OF STATE | ||
DIVISION OF CORPORATIONS | ||
FILED 09:00 AM 12/10/2002 | ||
020757696 2742853 |
CERTIFICATE OF OWNERSHIP AND MERGER
OF
SPECTRUM PHARMACEUTICALS, INC.
(a Delaware corporation)
INTO
NEOTHERAPEUTICS, INC.
(a Delaware corporation)
OF
SPECTRUM PHARMACEUTICALS, INC.
(a Delaware corporation)
INTO
NEOTHERAPEUTICS, INC.
(a Delaware corporation)
NeoTherapeeutics, Inc., a corporation organized and existing under Laws of the State of
Delaware, does hereby certify:
1. NeoTherapeutics, Inc. (hereinafter sometimes referred to as the Corporation is a business
corporation of the State of Delaware.
2. The Corporation is the owner of all of the outstanding shares of stock of Spectrum
Pharmaceuticals, Inc., which is a business corporation of the State of Delaware.
3. The laws of the jurisdiction of organization of NeoTherapeurics, Inc. permit the merger of
a business corporation of that jurisdiction with a business corporation of the same jurisdiction.
4. The laws of the jurisdiction of organization of Spectrum Pharmaceuticals, Inc. permit the
merger of a business corporation of that jurisdiction with a business corporation of the same
jurisdiction.
5. The Corporation hereby merges Spectrum Pharmaceuticals, Inc. into the Corporation.
6. The following is a copy of the November 15, 2002 resolutions adopted by the Board of
Directors at a meeting of the Board of Directors of the Corporation to merge Spectrum
Pharmaceuticals into the Corporation:
RESOLVED, that Spectrum Pharmaceuticals, Inc. be merged into this Corporation, and that all of
the estate, property, rights, privileges, powers and franchises of Spectrum Pharmaceuticals,
Inc. be vested in and held and enjoyed by this Corporation as fully and entirely and without
change or diminution as the same were before held and enjoyed by Spectrum Pharmaceuticals,
Inc. in its respective name.
RESOLVED FURTHER, that this Corporation assume all of the obligations and liabilities of
Spectrum Pharmaceuticals, Inc.
RESOLVED FURTHER, upon effectiveness of the merger of Spectrum Pharmaceuticals, Inc. into this
corporation, the name of this corporation shall be changed to Spectrum Pharmaceuticals, Inc.
RESOLVED FURTHER, that the outstanding shares of Spectrum Pharmaceuticals, Inc. shall not be
converted in any manner, nor shall any cash or other consideration be paid or delivered
therefore, but each such shares shall be cancelled upon the effective time of the merger.
RESOLVED FURTHER, that this Corporation shall cause to be executed and filed and/or recorded
the documents prescribed by the laws of the State of Delaware and by the laws of any other
appropriate jurisdiction to effect the merger and will cause to be performed all necessary
acts within the jurisdiction of organization of Spectrum Pharmaceuticals, Inc. and of this
Corporation and in any other appropriate jurisdiction to effect the merger.
Executed on this 3rd day of December, 2002.
NEOTHERAPEUTICS, INC. |
||||
By: | /s/ Rajesh C. Shrotriya | |||
Rajesh C. Shrotriya, M.D. | ||||
Chairman, Chief Executive Officer and President |
Certificate of Designations, Rights and Preferences
of the
Series D 8% Cumulative Convertible Voting Preferred Stock
of
Spectrum Pharmaceuticals, Inc.
of the
Series D 8% Cumulative Convertible Voting Preferred Stock
of
Spectrum Pharmaceuticals, Inc.
(Pursuant to Section 151 of the General Corporation Law of the State of Delaware)
The undersigned, being the Chief Executive Officer of Spectrum Pharmaceuticals, Inc., a
Delaware corporation (the Corporation), does hereby certify, that the following resolution has
been duly adopted by the board of directors of the Corporation:
Resolved, that pursuant to the authority expressly granted to and vested in the board of
directors of the Corporation (the Board) pursuant to the General Corporation Law of the
State of Delaware, as amended, and by the provisions of the Corporations Certificate of
Incorporation, as amended to date (the Certificate of Incorporation), the Board hereby
creates a series of preferred stock of the Corporation, par value $0.001 per share, each share
having a stated value (the Stated Value) of $10,000.00, such series consisting of 444 shares
(which shall not be subject to increase without the consent of the Holders (as defined below)
of a majority of the outstanding Preferred Stock, which majority shall include each Holder who
acquired in the aggregate more than 100 shares of Preferred Stock, no long as such Holder
continues to hold more than 100 shares of Preferred Stock, which such majority is hereinafter
referred to as a Special Majority), which shall be designated as the Series D 8% Cumulative
Convertible Voting Preferred Stock (hereinafter, the Convertible Preferred Stock or the
Preferred Stock), which series shall have the following powers,
designations, preferences and relative participating, optional, voting or other rights,
and the following qualifications, limitations or restrictions:
1. Dividends: The holders of the Convertible Preferred Stock (each, a Holder and
collectively, the Holders) shall be entitled to receive, when, if and as declared by the
Corporations Board of Directors, out of funds legally available therefore, cumulative dividends
payable as set forth in this Section 1.
a. Dividends on the Convertible Preferred Stock shall accrue and shall be cumulative from
the date of issuance of the shares of Convertible Preferred Stock (the Date of Original
Issue), whether or not earned or declared by the Board of Directors of the Corporation. Until
paid, the right to receive dividends on the Convertible Preferred Stock shall accumulate, and
shall be payable in cash or shares of common stock, par value $0.001 per share, of the
Corporation, or stock of any other class into which such shares may hereafter have been
reclassified or changed (the Common Stock), in arrears, on March 31, June 30, September 30
and December 31 of each year (a Dividend Payment Date), commencing on June 30, 2003 (the
Initial Dividend Payment Date) except that if such Dividend Payment Date is not a business
day, then the Dividend Payment Date will be the immediately preceding business day. The
decision whether to pay dividends hereunder in Common Stock or cash shall be at the discretion
of the Corporation; provided, however,
State of Delaware | ||
Secretary of State | ||
Division of Corporations | ||
Delivered 08:36 AM 05/07/2003 | ||
FILED 08:36 AM 05/07/2003 | ||
SRV 030294814 2742853 FILE |
1
that if the Corporation elects to pay a dividend in Common Stock and the receipt thereof by a
Holder would be in excess of the Beneficial Ownership Cap (as defined in Section 5(g)), then
such dividend shall cumulate for up to 10 years (the Final Distribution Date) and shall be
paid, in whole or in part, on the first date when such payment would not be in excess of the
Beneficial Ownership Cap, and the unpaid portion of any such dividend shall continue to
cumulate and be paid thereafter on the next date when such payment would not be in excess of
the Beneficial Ownership Cap. Any dividends not paid pursuant to the preceding sentence shall
be paid on the Final Distribution Date. It shall be the responsibility of each Holder to
determine such Holders compliance with the Beneficial Ownership Cap and to advise the
Corporation of whether or not, and how much, if any, of the dividends payable in Common Stock
may then be paid to such Holder, and the Corporation, when advised in writing to make such
dividend payment, shall do so promptly. Subject to the foregoing, each such dividend declared
by the Board of Directors on the Convertible Preferred Stock shall be paid to the Holders of
record as they appear on the stock register of the Corporation on the Record Date (defined
below). Dividends in arrears for any past dividend period may be declared by the Board of
Directors of the Corporation and, subject to the provisions with respect to the Beneficial
Ownership Cap, paid on shares of the Convertible Preferred Stock on any date fixed by the
Board of Directors of the Corporation, whether or not a regular Dividend Payment Date, to
Holders of record as they appear on the Corporations stock register on the record date. The
record date (the Record Date), shall be fixed in advance by the Board of Directors, or to
the extent not fixed, shall be the business day immediately preceding the date such dividend
is paid. Any dividend payment made on shares of the Convertible Preferred Stock shall first be
credited against the dividends accumulated with respect to the earliest dividend period for
which dividends have not been paid. Dividends not paid on a Dividend Payment Date shall bear
interest, whether or not such dividend has been declared, at the Dividend Rate (or such lesser
rate equal to the highest rate permitted by applicable law) until paid.
b. The dividend rate (the Dividend Rate) on each share of Convertible Preferred Stock
shall be 8% per share per annum compounded quarterly on the Stated Value of each such share
for the period from the Date of Original Issue until the Initial Dividend Payment Date and,
for each dividend period thereafter, which shall commence on the last day of the preceding
dividend period and shall end on the next Dividend Payment Date, shall be at the Dividend Rate
on such Stated Value. The amount of dividends per share of the Convertible
Preferred Stock payable for each dividend period or part thereof (the Dividend Value)
shall be computed by multiplying the Dividend Rate for such dividend period by a fraction the
numerator of which shall be the number of days in the dividend period or part thereof
(calculated by counting the first day thereof but excluding the last day thereof ) on which
such share was outstanding and the denominator of which shall be 360 and multiplying the
result by the Stated Value. If a dividend is to be paid in kind in Common Stock, the Common
Stock shall be valued at the Current Market Price (as hereinafter defined) as of the Record
Date for such payment date. In furtherance thereof, the Corporation shall reserve out of the
authorized but unissued shares of Common Stock, solely for issuance in respect of the payment
of dividends as herein described, a sufficient number of shares of Common Stock to pay such
dividends, when, if and as and as declared by the Board of Directors.
2
For purposes hereof, Current Market Price means, in respect of any share of Common
Stock on any date herein specified:
(i) if there shall not then be a public market for the Common Stock, the Appraised
Value (as hereinafter defined) per share of Common Stock at such date, or
(ii) if there shall then be a public market for the Common Stock, the average of the
daily market prices for the 20 consecutive trading days immediately before such date. The
daily market price for each such trading day shall be (I) the last sale price on such day
on the principal stock exchange (including NASDAQ) on which such Common Stock is then
listed or admitted to trading, or quoted, as applicable, (II) if no sale takes place on
such day on any such exchange, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange (including NASDAQ), (III) if
the Common Stock is not then listed or admitted to trading on any stock exchange, the
average of the last reported closing bid and asked prices on such day in the
over-the-counter market, as furnished by the National Association of Securities Dealers
Automatic Quotation System or the National Quotation Bureau, Inc., (IV) if neither such
corporation at the time is engaged in the business of reporting such prices, as furnished
by any similar firm then engaged in such business, or (V) if there is no such firm, as
furnished by any member of the NASD selected mutually by the Holders of a Special
Majority of the Preferred Stock and the Corporation or, if they cannot agree upon such
selection, as selected by two such members of NASD, one of which shall be selected by a
Special Majority of the Holders and one of which shall be selected by the Corporation.
For purposes hereof, Appraised Value means, in respect of any share of Common
Stock on any date herein specified, the fair saleable value of such share of Common Stock
(determined without giving effect to the discount for (i) a minority interest or (ii) any
lack of liquidity of the Common Stock or to the fact that the Corporation may have no
class of equity registered under the Securities Exchange Act of 1934, as amended (the
Exchange Act)) as of the last day of the most recent fiscal month and prior to such
date specified, based on the value of the Corporation, as determined by a nationally
recognized investment banking firm selected by the Corporations Board of Directors and
having no prior relationship with the Corporation, and reasonably acceptable to a Special
Majority of the Holders.
c. Except as hereinafter provided, no dividends shall be declared or paid or set apart
for the payment on the shares of Common Stock or any other class or series of capital stock of
the Corporation for any dividend period unless full cumulative dividends have been or
contemporaneously are declared and paid on the Convertible Preferred Stock through the most
recent Dividend Payment Date. If full cumulative dividends have not been paid on shares of the
Convertible Preferred Stock, all dividends declared on shares of the Convertible Preferred
Stock shall be paid pro rata to the Holders in proportion to the full accrued but unpaid
dividends attributable to each such Holders Preferred Stock. No dividend on any other class
or series of
3
capital stock of the Corporation shall be paid unless, at the time of such payment, all
accrued dividends on the Series D Preferred Stock have been paid, and the Corporation has on
hand cash and other liquid assets
sufficient to pay in full, in cash, the Liquidation Preference that would be payable to the
holders of the Series D Preferred Stock under Section 3(a) below, as if such Liquidation
Preference were then payable.
d. So long as any shares of the Convertible Preferred Stock are outstanding, the
Corporation may not, without the prior consent of the Holders of a Special Majority of the
outstanding Preferred Stock, purchase or otherwise acquire for any consideration (except
through a redemption of all the outstanding shares of the Convertible Preferred Stock) any
shares of the Common Stock or any other outstanding shares of the capital stock of the
Corporation.
2. Voting Rights. Except as otherwise provided herein or by law, the Holders shall
have full voting rights and powers, subject to the Beneficial Ownership Cap (as defined in Section
5(g)), equal to the voting rights and powers of holders of Common Stock and shall be entitled to
notice of any stockholders meeting in accordance with the Bylaws of the Corporation, and shall be
entitled to vote, with respect to any equation upon which holders of Common Stock have the right to
vote, including, without limitation, the right to vote for the election of directors, voting
together with the holders of Common Stock as one class. Each Holder shall be entitled to the number
of votes equal to the number of shares of Common Stock into which such shares of Convertible
Preferred Stock could be converted on the record date for the taking of a vote at the then current
Conversion Value (as hereinafter defined), subject to the Beneficial Ownership Cap, or, if no
record date is established, at the day prior to the date such vote is taken or any written consent
of shareholders is first executed. Fractional votes shall not be permitted, and any fractional
voting rights resulting from the above formula (after aggregating all shares into which shares of
Convertible Preferred Stock held by each Holder could be converted) shall be rounded to the nearest
whole number (with one-half being rounded upward), subject to the Beneficial Ownership Cap.
3. Rights on Liquidation.
a. In the event of any voluntary or involuntary liquidation, dissolution or winding up of
the Corporation (any such event being hereinafter referred to as a Liquidation), before any
distribution of assets of the Corporation shall be made to or set apart for the holders of
Common Stock, the Holders shall be entitled to receive payment out of such assets of the
Corporation in an amount equal to the greater of (i) the Liquidation Preference for the
Convertible Preferred Stock, or (ii) the cash or other property distributable upon such
Liquidation with respect to the shares of Common Stock into which such shares of Series D
Preferred Stock, including any accrued dividends thereon, could have been converted
immediately prior to such payment. The Liquidation Preference for the Convertible Preferred
Stock shall be an amount equal to 120% of the Stated Value per share of Convertible Preferred
Stock plus any accumulated and unpaid dividends thereon (whether or not earned or declared).
If the assets of the Corporation available for distribution to the Holders shall not be
sufficient to make in full the payment herein required, such assets shall be distributed
pro-rata among the Holders based on the aggregate Liquidation Preferences of the shares of
Convertible Preferred Stock held by each such Holder.
4
b. If the assets of the Corporation available for distribution to shareholders exceed the
aggregate amount of payable pursuant to paragraph 3(a) above with respect to all shares of
Convertible Preferred Stock then outstanding, then, after the payment required by paragraph
3(a) above shall have been made or irrevocably set aside, the holders of Common Stock shall be
entitled to receive with respect to each share of Common Stock payment of a pro rata portion
of such assets based on the aggregate number of shares of Common Stock held by each such
holder.
4. Actions Requiring the Consent of Holders. As long as more than 20% of the shares of
Convertible Preferred Stock issued on the Date of Original Issue are outstanding, the consent of
the Holders of a Special Majority of the outstanding Preferred Stock, given in person or by proxy,
either in writing without a meeting or by vote at a meeting called for the purpose, shall be
necessary for effecting or validating any of the following transactions or acts:
(a) Any amendment, alteration or repeal of any provision of the Charter or Bylaws which
adversely affects the terms of the Preferred Stock or the relative rights, preferences and
privileges of the Holders of the Preferred Stock as such holders;
(b) Any amendments or changes to the Rights Plan or the adoption of any other similar
plans or arrangements, provided that nothing herein shall be deemed to restrict the right of
the Corporation to redeem
all, but not less than all, of the outstanding Rights (as defined in the Rights Plan ) or
otherwise terminate the Rights Plan (as defined in Section 5(h) hereof);
(c) The offer, sale, designation or issuance by the Corporation or any of its
subsidiaries of any equity or debt security senior to or pari passu with the Preferred Stock
in any respect;
(d) The sale or issuance of any shares of Common Stock, any warrant, option, subscription
or purchase right with respect to shares of Common Stock, any security convertible into,
exchangeable for, or otherwise entitling the holder thereof to acquire shares of Common Stock,
or any warrant, option, subscription or purchaser right with respect to any such convertible,
exchangeable or other security at a price below the Conversion Value (as hereinafter defined),
other than (A) options, warrants, and other rights outstanding on the date hereof to acquire,
directly or indirectly, Common Stock and Common stock acquirable thereunder, and (B) options
granted hereafter to any employee, officer, Director or consultant pursuant to any plan
approved by stockholders for the benefit of employees, officers, Directors and consultants
(Incentive Options), and the Common stock acquirable thereunder, and (C) awards presently
outstanding or hereafter awarded under the Sellers employee stock purchase plan effective as
of January 26, 2001 ( the ESPP), provided that the aggregate number of shares of Common
Stock acquirable under such Incentive Options and awards under the ESPP, and the options which
may hereafter be issued as disclosed in Schedule 3.21, is not greater than 1,300,000;
(e) The entering into by the Corporation or any Subsidiary of any bank or other non-trade
indebtedness for borrowed money;
5
(f) The granting or making by the Corporation or any of its Subsidiaries of any mortgage
or pledge, or the assumption or suffering to exist on, or the imposition on, any of its
material properties or assets any Lien;
(g) The liquidation, dissolution or winding-up of the Corporation or any of its
Subsidiaries or any merger or consolidation of the Corporation or any of its Subsidiaries with
or into another entity or the sale, conveyance or other disposition of all, or substantially
all, the assets, property or business of the Corporation or any of its Subsidiaries;
(h) The reorganization, recapitalization, sale, conveyance, or other disposition of or
encumbrance of all or substantially all of the property or business of the Corporation or any
of its Subsidiaries or the merger into or consolidation with any other corporation (other than
a wholly owned subsidiary corporation) or effect any transaction or series of related
transactions in which, in any case, more than 20% of the voting power of the corporation is
disposed of;
(i) The redemption, purchase, repurchase or other acquisition, directly or indirectly, of
any shares of capital stock of the Corporation, or any of its Subsidiaries or any option,
warrant or other right to purchase or acquire any such shares;
(j) The declaration or payment of any dividend or other distribution (whether cash,
stock, or property) with respect to the capital stock of the Corporation, other than the
Preferred Stock; and
(k) The taking of any action by the Corporation with the primary intent of causing the
Common Stock to be delisted from any securities exchange or quotation system upon which the
Common Stock is then listed.
The restrictions contained in this Section 4 shall cease to apply if for no less than 20
trading days during any period of 30 consecutive trading days following the Date of Original Issue
(i) the Fair Market Value (as defined in that certain purchase agreement between the Corporation
and the original purchase of the Convertible Preferred Stock by which such purchases agreed to
acquire the Convertible Preferred Stock on the Original Issue Date (the Purchase Agreement)) of
the Common Stock exceeds five dollars ($5) per share, (ii) all of the Conversion Shares, Warrants
Shares and Dividend Shares (as defined in the Purchase Agreement) have been duly registered for
sale under an effective registration statement pursuant to the Securities Act of 1933, as amended
(the Securities Act) and such registration statement is effective throughout the aforesaid 30-day
period, and (iii) the actual daily trading volume of the Common Stock is greater than 100,000
shares per day on each day on which the Fair Market Value is greater than five dollars ($5).
5. Conversion.
a. Right to Convert. Subject to the limitation set forth in Section 5(g) hereof,
each Holder shall have the right at any time, at such Holders option, to convert all any
whole number of such Holders shares of Convertible Preferred Stock into such number of fully
paid and non-assessable shares of Common Stock as is determined by dividing (i) the aggregate
Stated Value
6
of the shares of Convertible Preferred Stock to be converted plus any accrued but unpaid
dividends thereon by (ii) the Conversion Value (as hereinafter defined) then in effect for
such Convertible Preferred Stock. No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of any Convertible Preferred Stock. With respect to any
fraction of a share of Common Stock called for upon any conversion, the Corporation shall pay
to the Holder an amount in cash equal to such fraction multiplied by the Current Market Price
per share of the Common Stock.
b. Mechanics of Conversion. Such right of conversion shall be exercised by any
Holder by delivering to the Corporation a conversion notice in the form attached hereto as
Exhibit A (the Conversion Notice), appropriately completed and duly signed and
specifying the number of whole shares of Convertible Preferred Stock that the Holder elects to
convert (the Converting Shares) into shares of Common Stock on the date specified in the
Conversion Notice (which date shall not be earlier than the date on which the Conversion
Notice is delivered to the Corporation), and by surrender of the certificate or certificates
representing such Converting Shares. The Conversion Notice shall also contain a statement of
the name or names (with addresses and tax identification or social security numbers) in which
the certificate or certificates for Common Stock shall be issued, if other than the name in
which the Converting Shares are registered. Promptly, but in no event more than two business
days, after the receipt of the Conversion Notice and surrender of the Converting Shares, the
Corporation shall issue and deliver, or cause to be delivered, to the holder of the Converting
Shares or such holders nominee, a certificate or certificates for the number of shares of
Common Stock issuable upon the conversion of such Converting Shares together with cash in lieu
of any fractional interest in a share of Common Stock together with a new certificate covering
the number of shares of Preferred Stock representing the uncovered portions of the shares
represented by the Preferred Stock certificate surrendered. Such conversion shall be deemed to
have been effected as of the close of business on the date specified in the Conversion Notice
in accordance with the terms hereof (the Conversion Date), and the person or persons
entitled to receive the shares of Common Stock issuable upon conversion shall be treated for
all purposes as the holder or holders of record of such shares of Common Stock as of the close
of business on the Conversion Date.
c. Common Stock Reserved. The Corporation shall at all times reserve and keep
available out of its authorized but unissued Common Stock, solely for issuance upon the
conversion of shares of Convertible Preferred Stock as herein provided, such number of shares
of Common Stock as shall from time to time be issuable upon the conversion of all the shares
of Convertible Preferred Stock at the time outstanding.
d. Conversion Value. The initial conversion value for the Convertible Preferred
Stock shall be $2.35 per share of Common Stock, such value to be subject to adjustment in
accordance with the provisions of this Section 5. Such conversion value in effect from time to
time, as adjusted pursuant to this Section 5, is referred to herein as a Conversion Value.
All of the remaining provisions of this Section 5 shall apply separately to each Conversion
Value in effect from time to time with respect to Convertible Preferred Stock.
7
e. Stock Dividends, Subdivisions and Combinations. If at any time while the
Preferred Stock is outstanding, the Corporation shall:
i. take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend payable in, or other distribution of, additional shares of
Common Stock,
ii. subdivide its outstanding shares of Common Stock into a larger number of shares
of Common Stock, or
iii. combine its outstanding shares of Common Stock into a smaller number of shares
of Common Stock,
then in each such case the Conversion Value shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding immediately before such event and of which the denominator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding immediately after such
event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective
immediately after the record date for the determination of shareholders entitled to receive such
dividend or distribution, and any adjustment pursuant to clauses (ii) or (iii) of this paragraph
shall become effective immediately after the effective date of such subdivision or combination. If
any event requiring an adjustment under this paragraph occurs during the period that a Conversion
Value is calculated hereunder, then the calculation of such Conversion Value shall be adjusted
appropriately to reflect such event.
f. Certain Other Distributions. If, at any time while the Series D Preferred
Stock is outstanding, the Corporation shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive any dividend or other distribution of:
i. cash (other than a cash dividend payable out of earnings or earned surplus
legally available for the payment of dividends under the laws of the jurisdiction of
incorporation of the Corporation),
ii. any evidences of its indebtedness, any shares of stock of any class or any other
securities or property of any nature whatsoever (other than cash, convertible securities
or additional shares of Common Stock), or
iii. any warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or property of any
nature whatsoever (other than cash, convertible securities or additional shares of Common
Stock) (in each case set forth in subparagraphs (i), (ii) and (iii) hereof, the
Distributed Property),
8
then upon any conversion of Series D Preferred Stock that occurs after such record date,
the holder of Series D Preferred Stock shall be entitled to receive, in addition to the
Conversion Shares otherwise issuable upon such conversion, the Distributed Property that
such holder would have been entitled to receive if the Series D Preferred Stock had been
converted into Common Stock as of such record date. If the Distributed Property consists
of property other than cash, then the fair value of such Distributed Property shall be as
determined is good faith by the Board of Directors and set forth in reasonable detail in
a written valuation report (the Valuation Report) prepared by the Board of Directors.
The Corporation shall give written notice of such determination and a copy of the
Valuation Report to all holders of Series D Preferred Stock, and if the holders of 25% of
the outstanding Series D Preferred Stock object to such determination within twenty (20)
business days following the date such notice is given to all of the holders of Series D
Preferred Stock, the Corporation shall submit such valuation to an investment banking
firm of recognized national standing selected by holders of not less than 75% of the
Series D Preferred Stock, and the opinion of such investment banking firm shall be
binding upon the Corporation and the holders of all the Series D Preferred Stock. A
reclassification of the Common Stock (other than a change in par value, or from par value
to no par value or from no par value to par value) into shares of Common Stock and shares
of any other class of stock shall be deemed a distribution by the Corporation to the
holders of its Common Stock of such shares of such other class of stock within the
meaning of this Section 5(f); and if the outstanding shares of Common Stock shall be
changed into a larger or smaller number of share of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination, as the case
may be, of the outstanding shares of Common Stock within the meaning of Section 5(e).
g. Blocking Provision. Notwithstanding any contrary or inconsistent provision
hereof, the number of shares of Convertible Preferred Stock that may be acquired by any Holder
upon any conversion of Convertible Preferred Stock or that shall be entitled to voting rights
under Section 2 hereof shall be limited to the extent necessary to insure that, following such
conversion, the number of shares of Common Stock then beneficially owned by such Holder and
any other persons or entities whose beneficial ownership of Common Stock would be aggregated
with the Holders for purposes of Section 13(d) of the Exchange Act (including shares held by
any group of which the Holder is a member) does not exceed 4.95% of the total number of
shares of Common Stock of the Corporation then issued and outstanding (the Beneficial
Ownership Cap). For
purposes hereof, group has the meaning set forth in Section 13(d) of the Exchange Act
and applicable regulations of the Securities and Exchange Commission, and the percentage held
by the Holder shall be determined in a manner consistent with the provisions of Section 13(d)
of the Exchange Act. Each delivery of a Conversion Notice by a Holder will constitute a
representation by such Holder that it has evaluated the limitation set forth in this paragraph
and determined, subject to the accuracy of information filed under the Securities Act and the
Exchange Act by any person other than such Holder with respect to the outstanding Common Stock
of the Corporation (including securities or property convertible into or exchangeable for
Common Stock, with or without the payment of consideration), that the issuance of the full
number of shares of Common Stock requested in such Conversion Notice is permitted under this
paragraph, and the Corporation shall have no obligations to such Holder to verify compliance
with the Beneficial Ownership Cap. This paragraph shall be construed and administered in such
manner as shall be consistent with the intent of the first
9
sentence of this paragraph. Any provision hereof which would require a result that is not
consistent with such intent shall be deemed severed here from and of no force or affect with
respect to the conversion contemplated by a particular Conversion Notice.
h. Rights Distributed Under Rights Agreement. Capitalized terms used in this
Section 5(h) and which are not otherwise defined herein, shall have the meanings ascribed to
them in the Rights Agreement (the Rights Agreement) dated as of December 13, 2000 between
the Corporation and U.S. Stock Transfer Corporation. While the Rights Agreement or any other
poison pill, rights plan or similar arrangement (each, a Rights Plan) shall be in effect:
i. Holders who convert Preferred Stock before the Distribution Date or before any
Rights Certificates or similar right (each a Right) shall be evidenced by a separate
rights certificate or shall otherwise be transferable otherwise than in connection with
the transfer of the underlying shares of Common Stock (the date of the occurrence of any
of the foregoing being referred to herein as a Rights Distribution Date), will receive,
in addition to shares of Common Stock issued on conversion, one Right for each such
shares of Common Stock.
ii. Upon the occurrence of a Rights Distribution Date, each Holder shall receive,
without any further action by the Corporation, such number of Rights equal to the number
of Rights such Holder would have held if, immediately prior to the Rights Distribution
Date, all of the shares of Convertible Preferred Stock has been converted into shares of
Common Stock at the then current Conversion Value. The Corporation shall issue to each
Holder certificates evidencing such Rights, no later than five business days following
such Rights Distribution Date. In the event the applicable Rights Plan does not permit
such Rights to be granted to each Holder, the Corporation shall promptly (i) amend the
applicable Rights Plan to permit the Corporation to take the actions set forth in this
Section 5(h), or (ii) issue to each Holder an option, right or similar arrangement giving
each Holder the same, rights and benefits as they would have held upon the receipt of the
applicable number of Rights.
6. Other Provisions Applicable to Adjustments. The following provisions shall be
applicable to the making of adjustments of the number of shares of Common Stock into which the
Preferred Stock is convertible and the current Conversion Value provided for in Section 5:
a. When adjustment to be Made. The adjustments required by Section 5 shall be
made whenever and as often as any specified event requiring an adjustment shall occur, except
that any adjustment to the Conversion Value that would otherwise be required may be postponed
up to, but not beyond the Conversion Date if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the shares of Common Stock
into which the
10
Preferred Stock is convertible immediately prior to the making of such adjustment. Any
adjustment representing a change of less than such minimum amount (except as aforesaid) which
is postponed shall be carried forward and made as soon as such adjustment, together with other
adjustments required by Section 5 and not previously made, would result in a minimum
adjustment or on the Conversion Date. For the purpose
of any adjustment, any specified event shall be deemed to have occurred at the close of
business on the date of its occurrence.
b. Fractional Adjustments. In computing adjustments under Section 5, fractional
adjustments to the Conversion Value shall be taken into account to the nearest 1/100th of a
cent.
c. Escrow of Stock. If after any property becomes distributable pursuant to
Section 5 by reason of the taking of any record of the holders of Common Stock, but prior to
the occurrence of the event for which such record is taken, a holder of the Preferred Stock
converts the Preferred Stock, such holder of Preferred Stock shall continue to be entitled to
receive any shares of Common Stock issuable upon conversion under Section 5 by reason of such
adjustment and such shares or other property shall be held in escrow for the holder of the
Preferred Stock by the Corporation to be issued to holder of the Preferred Stock upon and to
the extent that the event actually takes place. Notwithstanding any other provision to the
contrary herein, if the event for which such record was taken fails to occur or is rescinded,
then such escrowed shares shall be canceled by the Corporation and escrowed property returned
to the Corporation.
7. Merger, Consolidation or Disposition of Assets. If, while the Preferred Stock is
outstanding, there occurs: (i) an acquisition by an individual or legal entity or group (as defined
in Rule 13-d of the Exchange Act) of more than one-half of the voting rights or equity interests in
the Corporation; or (ii) a merger or consolidation of the Corporation or a sale, transfer or other
disposition of all or substantially all the Corporations property, assets or business to another
corporation where the holders of the Corporations voting securities prior to such transaction fail
to continue to hold at least a majority of the voting power of the surviving or acquiring
corporation (a Change of Control), and, pursuant to the terms of such Change of Control, shares
of common stock of the surviving or acquiring corporation, or any cash, shares of stock or other
securities or property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or acquiring
corporation (Other Property), are to be received by or distributed to the holders of Common Stock
of the Corporation, then the certificates evidencing the Convertible Preferred Stock shall, as of
and after the Change of Control, evidence only the right to receive, at each Holders election,
which must be delivered by each Holder to the Corporation within 20 days after receiving notice
from the Corporation of the right to make such election, either:
i. the number of shares of common stock of the successor or acquiring corporation or
of the Corporation, if it is the surviving corporation, and Other Property receivable
upon or as a result of such Change of Control by a holder of the number of shares of
Common Stock into which the Convertible Preferred Stock is convertible immediately prior
to such event, or
11
ii. at the effective time of such Change of Control, such Holders Liquidation
Preference.
If a timely election is not made pursuant to this Section 7(a), the holder shall receive the
benefit of Section 7(a)(i) and shall not be entitled to the benefit of Section 7(a)(ii). If notice
of a Change of Control is given but the Change of Control transaction is not, for any reason,
consummated, the elections of the Holders given in connection with such notice shall be of no force
or effect, ab initio.
8. Other Action Affecting Common Stock. In case at any time or from time to time the
Corporation shall take any action in respect of its Common Stock, other than the payment of
dividends permitted by Section 5 or any other action described in Section 5, then, unless such
action will not have a materially adverse effect upon the rights of the holder of Convertible
Preferred Stock, the number of shares of Common Stock or other stock into which the Convertible
Preferred Stock is convertible exercisable and/or the purchase price thereof shall be adjusted in
such manner as may be equitable in the circumstances.
9. Certain Limitations. Notwithstanding anything herein to the contrary, the
Corporation agrees not to enter into any transaction which, by reason of any adjustment hereunder,
would cause the current Conversion Value to be less than the par value per share of Common Stock.
10. Stock Transfer Taxes. The issue of stock certificates upon conversion of the
Convertible Preferred Stock shall be made without charge to the converting holder for any tax in
respect of such issue; provided, however, that the Corporation shall be entitled to withhold any
applicable withholding taxes with respect to such issue, if any.
11. Certificate as to Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Value, the Corporation, at its expense, shall promptly compute each
adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each
Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any Holder, furnish or cause to be furnished to such holder a like
certificates setting forth (i) such adjustments and readjustments, (ii) the Conversion Value at the
time in effect for the Convertible Preferred Stock and (iii) the number of shares of Common Stock
and the amount, if any, or other property which at the time would be received upon the conversion
of Convertible Preferred Stock owned by such holder.
12. Notices of Record Date. In the event of any fixing by the Corporation of a record
date for the holders of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a cash dividend) or other distribution, any
shares of Common Stock or other securities, or any right to subscribe for, purchase or otherwise
acquire, or any option for the purchase of, any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation shall mail to each Holder at
least twenty (20) days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the
12
purpose of such dividend, distribution or rights, and the amount and character of such divided,
distribution or right.
13. Redemption.
a. Redemption at the Holders Elections. If a Redemption Triggering Event (as
defined below) has occurred, and a holder has so elected, the Corporation shall redeem the
Convertible Preferred Stock of any Holder who gives a Demand for Redemption (as defined
below). The Corporation shall, promptly thereafter, redeem the shares of Convertible Preferred
Stock as set forth in the Demand for Redemption, to the extent permitted under Section 160 of
the Delaware General Corporation Law. The Corporation shall effect such redemption by paying
in cash for each such share to be redeemed an amount equal to the sum of such Holders
Liquidation Preference (the Redemption Price). A Redemption Triggering Event is any one of
the following:
i. The Corporations failure or refusal to convert any shares of Convertible
Preferred Stock in accordance with the terms hereof, or the Corporations breach of any
other term or provision of the terms of the Convertible Preferred Stock, other than
Section 4(d) hereof; provided, however, that with respect to the Corporations obligation
to deliver certificates evidencing the Common Stock acquired upon conversion of the
Convertible Preferred Stock, the Corporation shall have a grace period of 3 business days
in addition to the two trading days within which the Corporation is required to issue
such certificates in Section 5(b) (Mechanics of Conversion) hereof, it being understood
that the aforesaid grace period is applicable only with respect to the right of the
Holder to make a Demand for Redemption, and such grace period is not applicable with
respect to any other liability of the Corporation arising out of the Corporations
failure or refusal to deliver certificates evidencing such Common Stock within the period
of two business days required by Section 5(b) hereof.
ii. Any breach of any warranty, covenant (other than Section 5.8(d) of the Purchase
Agreement), or representation of the Corporation or any of its subsidiaries in the
Purchase Agreement or the Registration Rights Agreement (as such term are defined in the
Purchase Agreement) that is reasonably likely to have a material adverse effect on the
Corporation or the Preferred Stock and which breach, if reasonably capable of being
cured, has not been cured within ten (10) days after the Corporation has notice of such
breach (the Breach Cure Period); provided, however, that for purposes of this Section
13(a)(ii), the Corporations breach of, among other provision of paragraph (c) of Section
4 of this Certificate of Designation or paragraph (c) of Section 5.8 of the Purchase
Agreement shall be deemed to constitute a breach that is reasonably likely to have a
material adverse effect on the Corporation or the Preferred Stock; provided, further,
that the preceding clause shall not be construed to imply that any breach of any other
paragraph of Section 4 of the Certificate of Designation or any other paragraph of
Section 5.8 of the Purchase Agreement does not constitute a breach that is reasonably
likely to have a material adverse effect on the Corporation or the Preferred Stock.
The Corporation shall promptly notify each Holder of the occurrence of a Redemption Triggering
Event.
13
b. Demand for Redemption. A Holder desiring to elect a redemption as herein
provided shall deliver a notice (the Demand for Redemption) to the Corporation specifying
the following:
i. The approximate date and nature of the Redemption Triggering Event;
ii. The number of shares of Convertible Preferred Stock to be redeemed; and
iii. The address to which the payment of the Redemption Price shall be delivered,
or, at the election of the Holder, wire instructions with respect to the account to which
payment of the Redemption Price shall be required.
A Holder may deliver the certificate evidencing the Convertible Preferred Stock to be redeemed with
the Demand for Redemption or under separate cover. Payment of the Redemption Price Shall be made
not later than two (2) business days following the Redemption Date. The Redemption Date shall be
the date on which each of the
following conditions has been satisfied: (i) a Holder has delivered a Demand for Redemption and the
certificate evidencing the shares of Convertible Preferred Stock to be redeemed; and (ii) the
Breach Cure Period has expired.
c. Early Redemption at the Corporations Election.
i. If, at any time after the third anniversary of the issuance of the first share of
Preferred Stock, (A) the Common Stock is traded on my national securities exchange or
quoted on the Nasdaq National Market or Nasdaq SmallCap Market, and (B) the closing price
per share of the Common Stock exceeds $10.00 per share for at least 20 consecutive
trading days (the Trading Period), and (C) in such Trading Period the average daily
trading volume is greater than 200,000 shares per day, then the Corporation may, not
later than 5 business days after the end of any such Trading Period (the Call Notice
Period), call for the redemption of all (but not less than all) the Preferred Stock. If
the Corporation does not timely call for such redemption, the Corporation may thereafter
call for redemption as herein provided only if the conditions set forth in clauses (A),
(B), and (C) of the preceding sentence are again fulfilled, and the Corporation calls for
redemption within the new Call Notices Period.
ii. If the corporation elects to redeem the Preferred Stock, the Corporation shall
give written notice thereof (the Call for Redemption), signed by the Chief Executive
Officer or Chief Financial Officer, to the Holders of the Preferred Stock not later than
the end of the Call Notice Period. The Call for Redemption shall (A) specify the
beginning and end of the Trading Period and shall (B) set forth the Corporations
undertaking to pay the Stated Value on each outstanding share of Preferred Stock plus any
accrued but unpaid dividends thereon, and (C) certify that the Corporation has the funds
on hand to make such payments, and that the Corporation is not under any lawful order of
any court or other governmental authority restricting or prohibiting such payment and not
bound by any
14
agreement, undertaking or other obligation which would prohibit or restrict the authority
of the Corporation to make such payment, and (D) set forth the name and address of the
Corporation or, if applicable, any transfer or paying agent, to which the Holders shall
deliver their certificates evidencing the Preferred Stock to obtain payment therefore.
iii. Simultaneously with the Corporations issuance of any Call for Redemption, the
Corporation shall set, aside, in a segregated account, sufficient funds to pay all
amounts owed to the Holders of the Preferred Stock on account of such redemption.
iv. The issuance of a Call for Redemption shall not impair or diminish in any way
the right of the Holders of the Preferred Stock to convert the Preferred Stock into
Common Stock; provided, however, that sixty days after the Call for Redemption, the
Preferred Stock not otherwise converted or redeemed shall be deemed redeemed, and the
certificates therefore shall evidence only the right of the Holder to receive the
payments payable by the Corporation upon redemption.
v. Payment of the Stated Value, plus all accrued, accumulated and unpaid dividends,
shall be made to each Holder not later than two (2) business days following the
Corporations receipt of such Holders certificates evidencing the Preferred Stock, or
the usual and customary proof of loss of such certificates, if applicable.
d. Status of Redeemed or Purchased Shares. Any shares of the Convertible
Preferred Stock at any time purchased, redeemed or otherwise acquired by the Corporation shall
not be reissued and shall be retired.
e. Insufficient Funds. If the funds of the Corporation legally available for
redemption of shares of the Preferred Stock on any Redemption Date are insufficient to redeem
the total number of shares of Preferred Stock to be redeemed on such date, those funds which
are legally available, if any, will be used to redeem the maximum possible number of such
shares ratably among the Holders of such shares to be redeemed based upon the total Redemption
Price applicable to each such Holders shares of Preferred Stock which are subject to
redemption on such Redemption Date. The shares of Preferred Stock not redeemed shall remain
outstanding and entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation are legally available for the redemption
of shares of the Preferred Stock, such funds will immediately be used to redeem the balance of
the shares which the Corporation has become obliged to redeem on any Redemption Date but which
it has not redeemed.
14. Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission,
if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section prior to 4:00 p.m. (New York City time)
on a business day, (b) the next business day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in this Section on a day
that is not a business day or later than 4:00 p.m. (New York City time) on any business day, or (c)
the
15
business day following the date of mailing, if sent by U.S. nationally recognized overnight courier
service such as Federal Express. The address for such notices and communications shall be as
follows: (i) if to the Corporation, to 157 Technology Drive, Irvine, California 92618, facsimile:
949.788.6706, Attention: Chief Executive Officer or (ii) if to a holder of Preferred Stock, to the
address or facsimile number appearing on the Corporations shareholder records or, in either case,
to such other address or facsimile number as the Corporation or a holder of Preferred Stock may
provide to the other in accordance with this Section.
In Witness Whereof, the undersigned has executed this Certificate of Designation on behalf of
the Corporation this 6th day of May, 2003.
/s/ Rajesh G. Shrotriya | ||||
Name: | Rajesh G. Shrotriya, M.D. | |||
Title: | Chairman, Chief Executive Officer and President | |||
16
EXHIBIT A
FORM OF CONVERSION NOTICE
(To be executed by the registered Holder in order to convert shares of Preferred Stock)
The undersigned hereby irrevocably elects to convert the number of shares of Series D 8% Cumulative
Convertible Voting Preferred Stock (the Preferred Stock) indicated below into shares of common
stock, par value $.001 per share (the Common Stock), of Spectrum Pharmaceuticals, Inc., a
Delaware corporation (the Company), according to the Certificate of Designations of the Preferred
Stock and the conditions hereof, as of the date written below. The undersigned hereby requests that
certificates for the shares of Common Stock to be issued to the undersigned pursuant to this
Conversion Notice be issued in the name of, and delivered to, the undersigned or its designee as
indicated below. A copy of the certificate representing the Preferred Stock being converted is
attached hereto.
i of iii
Conversion Information: | [NAME OF HOLDER] |
|||
By: | ||||
Name: | ||||
Title: | ||||
Address of Holder: | ||||
Issue Common Stock to (if different than above): | ||||
Name: | ||||
Address: | ||||
The undersigned represents, subject to the accuracy of information filed under the Securities
Act and the Exchange Act by any person other than such holder with respect to the outstanding
Common Stock of the Company (including securities or property convertible into or exchangeable for
Common Stock, with or without the payment of consideration), as of the date hereof that, after
giving effect to the conversion of Preferred Shares pursuant to this Conversion Notice, the
undersigned will not exceed the Beneficial Ownership Cap contained in Section 5(g) of the
Certificate of Designations of the Preferred Stock.
Name of Holder |
||||
By: | ||||
Name: | ||||
Title: | ||||
ii
State of Delaware | ||
Secretary of State | ||
Division of Corporations Delivered 02:43 PM 05/13/2003 | ||
FILED 02.43 PM 05/13/2003 | ||
SRV 030309508 2742853 FILE |
CERTIFICATE OF INCREASE
OF
SPECTRUM PHARMACEUTICALS INC.
OF
SPECTRUM PHARMACEUTICALS INC.
Pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware
Corporation Law of the State of Delaware
Spectrum Pharmaceuticals, Inc., a corporation organized and existing under and by virtue of
the laws of the State of Delaware (the Corporation), DOES HEREBY CERTIFY:
1. That pursuant to the authority conferred upon the Board of Directors of the Corporation by
the certificate of incorporation of the Corporation, as amended, the Board unanimously adopted the
following recitals and resolutions on May 9, 2003 authorizing the issuance of the Series D 8%
Cumulative Convertible Voting Preferred Stock of the Corporation, which recitals and resolutions
are still in full force and effect and are not in conflict with any provisions of the certificate
of incorporation or bylaws of the Corporation.
WHEREAS, the resolutions adopted by the Board on April 16, 2003 and the Certificate of
Designation, Preferences and Rights of Series D 8% Cumulative Convertible Voting Preferred Stock,
filed with the Delaware Secretary of State on May 7, 2003 (the Series D Certificate of
Designation) stated the number of authorized shares of Series D 8% Cumulative Convertible
Voting Preferred Stock (the Series D Preferred Stock) as 444;
WHEREAS, the Board has determined that it is in the best interest of the Corporation to
increase the number of authorized shares of Series D Preferred Stock to 600;
NOW, THEREFORE, BE IT RESOLVED, that pursuant to authority vested in the Board of Directors by
the Certificate of Incorporation, the Board does hereby increase the number of authorized shares of
Series D Preferred Stock to 600, and does hereby amend and restate the first paragraph of the
Series D Certificate of Designation in its entirety to read as follows:
Resolved, that pursuant to the authority expressly granted to and vested in the board of
directors of the Corporation (the Board) pursuant to the General Corporation Law of the
State of Delaware, as amended, and by the provisions of the Corporations Certificate of
Incorporation, as amended to date (the Certificate of Incorporation), the Board hereby
creates a series of preferred stock of the Corporation, par value $0.001 per share, each share
having a stated value (the Stated Value) of $10,000.00, such series consisting of 600 shares
(which shall not be subject to increase without the consent of the Holders (as defined below)
of a majority of the outstanding Preferred Stock, which majority shall include each Holder who
acquired in the aggregate more than 100 shares of Preferred Stock so long as such Holder
continues to hold more than 100 shares of Preferred Stock, which such majority is hereinafter
referred to as a Special Majority), which shall be designated as the Series D 8% Cumulative
Convertible Voting Preferred Stock (hereinafter, the Convertible Preferred Stock or the
Preferred Stock), which series shall have the following powers, designations, preferences
and relative participating, optional, voting or other rights, and the following
qualifications, limitations or restrictions.
2. That the holders of the shares of the Series D Preferred Stock duly approved of the
increase in the number of authorized shares of Series D Preferred Stock to 600 by written consent
on May 12, 2003, in accordance with the Series D Certificate of Designation.
[Signature Page Follows]
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Increase to be executed by
Rajesh C. Shrotriya, M.D., its Chairman, Chief Executive Officer and President, this 13th day of
May, 2003
SPECTRUM PHARMACEUTICALS, INC. a Delaware corporation |
||||
By: | /s/ Rajesh C. Shrotriya | |||
Rajesh C. Shrotriya, M.D. | ||||
Chairman, Chief Executive Officer and President | ||||
State of Delaware | ||
Secretary of State | ||
Division of Corporations | ||
Delivered 11:17 AM 09/26/2003 | ||
FILED 11:17 AM 09/26/2003 | ||
SRV 030620403 2742853 FILE |
Certificate of Designations, Rights and Preferences
of the
Series E Convertible Voting Preferred Stock
of
Spectrum Pharmaceuticals, Inc.
of the
Series E Convertible Voting Preferred Stock
of
Spectrum Pharmaceuticals, Inc.
(Pursuant to Section 151 of the General Corporation Law of the State of Delaware)
The undersigned, being the Chief Executive Officer of Spectrum Pharmaceuticals, Inc., a
Delaware corporation (the Corporation), does hereby certify, that the following resolution has
been duly adopted by the board of directors of the Corporation:
Resolved, that pursuant to the authority expressly granted to and vested in the board of
directors of the Corporation (the Board) pursuant to the General Corporation Law of the
State of Delaware, as amended, and by the provisions of the Corporations Certificate of
Incorporation, as amended to date (the Certificate of Incorporation), the Board hereby
creates a series of preferred stock of the Corporation, par value $0,001 per share, each share
having a stated value (the Stated Value) of $10,000.00, such series consisting of 2,000
shares (which shall not be subject to increase without the consent of the Holders (as defined
below) of a majority of the outstanding Series E Preferred Stock), which shall be designated
as the Series E Convertible Voting Preferred Stock (the Series E Preferred Stock), which
series shall have the following powers, designations, preferences and relative participating,
optional, voting or other rights, and the following qualifications, limitations or
restrictions:
1. Dividends. The holders of the Series E Preferred Stock (each, a Holder and
collectively, the Holders) shall be entitled to receive dividends, when, if and as declared by
the Board, out of funds legally available therefor. Such dividends shall be payable only when, as
and if declared by the Board.
2. Voting Rights. Except as otherwise provided herein or by law, the Holders shall
have full voting rights and powers, subject to the Beneficial Ownership Cap (as defined in Section
5(g)), equal to the voting rights and powers of holders of common stock, par value $.001 of the
Corporation (the Common Stock) and shall be entitled to
notice of any stockholders meeting in accordance with the Bylaws of the Corporation, and shall
be entitled to vote, with respect to any question upon which holders of Common Stock have the right
to vote, including, without limitation, the right to vote for the election of directors, voting
together with the holders of Common Stock as one class. Each Holder shall be entitled to the number
of votes equal to the
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number of shares of Common Stock into which such shares of Series E Preferred Stock could be
converted on the record date for the taking of a vote at the then current Conversion Value (as
hereinafter defined), subject to the Beneficial Ownership Cap, or, if no record date is
established, at the day prior to the date such vote is taken or any written consent of shareholders
is first executed. Fractional votes shall not be permitted, and any fractional voting rights
resulting from the above formula (after aggregating all shares into which shares of Series E
Preferred Stock held by each Holder could be converted) shall be rounded to the nearest whole
number (with one-half being rounded upward), subject to the Beneficial Ownership Cap.
3. Rights on Liquidation.
(a) The Series E Preferred Stock shall rank, as to liquidation preference provided below,
pari passu with the Corporations Series D 8% Cumulative Convertible Preferred Stock (the
Series D Preferred Stock).
(b) In the event of any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation (any such event being hereinafter referred to as a Liquidation), before
any distribution of assets of the Corporation shall be made to or set apart for the holders of
Common Stock, the Holders shall be entitled to receive payment out of such assets of the
Corporation in an amount equal to the greater of (i) the Liquidation Preference for the Series
E Preferred Stock, or (ii) the cash or other property distributable upon such Liquidation with
respect to the shares of Common Stock into which such shares of Series E Preferred Stock,
including any accrued dividends thereon, could have been converted immediately prior to such
payment. The Liquidation Preference for the Series E Preferred Stock shall be an amount
equal to 120% of the Stated Value per share of Series E Preferred Stock plus any declared and
unpaid dividends thereon. If the assets of the Corporation available for distribution to the
Holders shall not be sufficient to make in full the payment herein required, such assets shall
be distributed pro-rata among the holders of the Series D Preferred Stock and the Holders of
the Series E Preferred Stock based on the aggregate liquidation preferences of the shares of
Series D Preferred Stock and the aggregate Liquidation Preferences of the shares of Series E
Preferred Stock held by each such Holder.
(c) If the assets of the Corporation available for distribution to shareholders exceed
the aggregate amount of payable pursuant to paragraph 3(b) above with respect to all shares of
Series E Preferred Stock then outstanding, then, after the payment required by paragraph 3(b)
above shall have been made or irrevocably set aside, the holders of Common Stock shall be
entitled to receive with respect to each share of Common Stock payment of a pro rata portion
of such assets based on the aggregate number of shares of Common Stock held by each such
holder.
4. Actions Requiring the Consent of Holders. (a) Subject to the rights of the holders
of the Series D Preferred Stock, as long as more than 20% of the shares of Series E Preferred Stock
issued on the date of original issuance of the shares of Series E Preferred Stock (the Date
2
of Original Issue) are outstanding, none of the following actions will take place without the
prior written consent of the holders of a majority of the outstanding Series E Preferred Stock,
which consent may be withheld for any or no reason:
(i) | Any amendment, alteration or repeal of any provision of the Certificate of Incorporation or the Corporations Bylaws which adversely affects the terms of the Series E Preferred Stock or the relative rights, preferences and privileges of the Holders of the Series E Preferred Stock as such holders; | ||
(ii) | Any amendments or changes to the Rights Plan or the adoption of any other similar plans or arrangements, provided that nothing herein shall be deemed to restrict the right of the Corporation to redeem all, but not less than all, of the outstanding Rights (as defined in the Rights Plan (as defined in Section 5(b) hereof)) or otherwise terminate the Rights Plan; | ||
(iii) | The offer, sale, designation or issuance by the Corporation or any of its Subsidiaries of any equity or debt security senior to or pari passu with the Series E Preferred Stock in any respect; | ||
(iv) | The sale or issuance of any shares of Common Stock, any warrant, option, subscription or purchase right with respect to shares of Common Stock, any security convertible into, exchangeable for, or otherwise entitling the holder thereof to acquire shares of Common Stock, or any warrant, option, subscription or purchase right with respect to any such convertible, exchangeable or other security at a price below the Conversion Value (as hereinafter defined), other than (A) options, warrants, and other rights outstanding on the date hereof to acquire, directly or indirectly, Common Stock, and the Common Stock acquirable thereunder (including, without limitation, shares of Common Stock acquirable upon conversion of, or issuable as dividends on, the Series D Preferred Stock), and (B) options granted hereafter to any employee, officer, Director or consultant pursuant to any plan approved by stockholders for the benefit of employees, officers, Directors and consultants (Incentive Options), and the Common Stock acquirable thereunder, and (C) awards presently outstanding or hereafter awarded under the Sellers employee stock purchase plan effective as of January 26, 2001 (the ESPP); | ||
(v) | The entering into by the Corporation or any subsidiary of any bank or other non-trade indebtedness for borrowed money; | ||
(vi) | The granting or making by the Corporation or any of its Subsidiaries of any mortgage or pledge, or the assumption or suffering to exist on, or the imposition on, any of its material properties or assets any Lien; |
3
(vii) | The liquidation, dissolution or winding-up of the Corporation or any of its subsidiaries or any merger or consolidation of the Corporation or any of its subsidiaries with or into another entity or the sale, conveyance or other disposition of all, or substantially all, the assets, property or business of the Corporation or any of its subsidiaries; | ||
(viii) | The reorganization, recapitalization, sale, conveyance, or other disposition of or encumbrance of all or substantially all of the property or business of the Corporation or any of its Subsidiaries or the merger into or consolidation with any other corporation (other than a wholly owned subsidiary corporation) or effect any transaction or series of related transactions in which, in any case, more than 20% of the voting power of the corporation is disposed of, calculated on a post-transaction basis; | ||
(ix) | The redemption, purchase, repurchase or other acquisition, directly or indirectly, of any shares of capital stock of the Corporation or any of its Subsidiaries or any option, warrant or other right to purchase or acquire any such shares; | ||
(x) | The declaration or payment of any dividend or other distribution (whether cash, stock or property) with respect to the capital stock of the Corporation, other than the Series E Preferred Stock and the Series D Preferred Stock; and | ||
(xi) | The taking of any action by the Corporation with the primary intent of causing the Common Stock to be delisted from any securities exchange or quotation system upon which the Common Stock is then listed. |
(b) The restrictions contained in this Section 4 (except for the restriction in Section
4(c)) shall cease to apply if for no less than 10 trading days during any period of 30
consecutive trading days following the Date of Original Issue (i) the Fair Market Value (as
defined in that certain purchase agreement between the Corporation and the original purchasers
of the Series E Preferred Stock by which such purchasers agreed to acquire the Series E
Preferred Stock on the Original Issue Date (the Purchase Agreement")) of the Common Stock
exceeds five dollars ($5) per share and (ii) all of the Conversion Shares and Warrants Shares
have been duly registered for sale under an effective registration statement pursuant to the
Securities Act of 1933, as amended (the Securities Act") and such registration statement is
effective throughout the aforesaid 30-day period.
(c) So long as any shares of the Series E Preferred Stock are outstanding, the
Corporation may not, without the prior consent of the Holders of a majority of the outstanding
Series E Preferred Stock, purchase or
otherwise acquire for any consideration (except through a redemption of all the
outstanding shares of the Series D Preferred Stock or Series E Preferred
4
Stock) any shares of the Common Stock or any other outstanding shares of the capital stock of
the Corporation.
5. Conversion.
(a) Right to Convert. Subject to the limitation set forth in Section 5(g) hereof,
each Holder shall have the right at any time, at such Holders option, to convert all or any
whole number of such Holders shares of Series E Preferred Stock into such number of fully
paid and non-assessable shares of Common Stock as is determined by dividing (i) the aggregate
Stated Value of the shares of Series E Preferred Stock to be converted plus any declared but
unpaid dividends thereon by (ii) the Conversion Value (as hereinafter defined) then in effect
for such Series E Preferred Stock. No fractional shares or scrip representing fractional
shares shall be issued upon the conversion of any Series E Preferred Stock. With respect to
any fraction of a share of Common Stock called for upon any conversion, the Corporation shall
pay to the Holder an amount in cash equal to such fraction multiplied by the Current Market
Price (as defined below) per share of the Common Stock.
Current Market Price means, in respect of any share of Common Stock on any date herein
specified:
(i) if there shall not then be a public market for the Common Stock, the Appraised
Value (as hereinafter defined) per share of Common Stock at such date, or
(ii) if there shall then be a public market for the Common Stock, the average of the
daily market prices for the 20 consecutive trading days immediately before such date. The
daily market price for each such trading day shall be (I) the last sale price on such day
on the principal stock exchange (including Nasdaq) on which such Common Stock is then
listed or admitted to trading, or quoted, as applicable, (II) if no sale takes place on
such day on any such exchange, the average of the last reported closing bid and asked
prices on such day as officially quoted on any such exchange (including Nasdaq), (III) if
the Common Stock is not then listed or admitted to trading on any stock exchange, the
average of the last reported closing bid and asked prices on such day in the
over-the-counter market, as furnished by the National Association of Securities Dealers
Automatic Quotation System or the National Quotation Bureau, Inc., (IV) if neither such
corporation at the time is engaged in the business of reporting such prices, as furnished
by any similar firm then engaged in such business, or (V) if there is no such firm, as
furnished by any member of the NASD selected mutually by the Holders of a majority of the
Series E Preferred Stock and the Corporation or, if they cannot agree upon such
selection, as selected by two such members of the NASD, one of which shall be selected by
a majority in interest of the Holders and one of which shall be selected by the
Corporation.
5
Appraised Value means, in respect of any share of Common Stock on any date herein specified,
the fair saleable value of such share of Common Stock (determined without giving effect to the
discount for (i) a minority interest or (ii) any lack of liquidity of the Common Stock or to the
fact that the Corporation may have no class of equity registered under the Securities Exchange Act
of 1934, as amended (the Exchange Act)), as of the last day of the most recent fiscal month end
prior to such date specified, based on the value of the Corporation, as determined by a nationally
recognized investment banking firm selected by the Corporations Board of Directors and having no
prior relationship with the Corporation, and reasonably acceptable to a majority in interest of the
Holders.
(b) Mechanics of Conversion. Such right of conversion shall be exercised by any
Holder by delivering to the Corporation a conversion notice in the form attached hereto as
Exhibit A (the Conversion Notice), appropriately completed and duly signed and
specifying the number of whole shares of Series E Preferred Stock that the Holder elects to
convert (the Converting Shares) into shares of Common Stock on the date specified in the
Conversion Notice (which date shall not be earlier than the date on which the Conversion
Notice is delivered to the Corporation), and by surrender of the certificate or
certificates representing such Converting Shares. The Conversion Notice shall also contain a
statement of the name or names (with addresses and tax identification or social security
numbers) in which the certificate or certificates for Common Stock shall be issued, if other
than the name in which the Converting Shares are registered. Promptly, but in no event more
than two business days, after the receipt of the Conversion Notice and surrender of the
Converting Shares, the Corporation shall issue and deliver, or cause to be delivered, to the
holder of the Converting Shares or such holders nominee, a certificate or certificates for
the number of shares of Common Stock issuable upon the conversion of such Converting Shares
together with cash in lieu of any fractional interest in a share of Common Stock together with
a new certificate covering the number of shares of Series E Preferred Stock representing the
unconverted portion of the shares represented by the Series E Preferred Stock certificate
surrendered. Such conversion shall be deemed to have been effected as of the close of business
on the date specified in the Conversion Notice in accordance with the terms hereof (the
Conversion Date), and the person or persons entitled to receive the shares of Common Stock
issuable upon conversion shall be treated for all purposes as the holder or holders of record
of such shares of Common Stock as of the close of business on the Conversion Date.
(c) Common Stock Reserved. The Corporation shall at all times reserve and keep
available out of its authorized but unissued Common Stock, solely for issuance upon the
conversion of shares of Series E Preferred Stock as herein provided, such number of shares of
Common Stock as shall from time to time be issuable upon the conversion of all the shares of
Series E Preferred Stock at the time outstanding.
(d) Conversion Value. The initial conversion value for the Series E Preferred
Stock shall be $5.00 per share of Common Stock, such value to be subject to adjustment in
accordance with the provisions of this Section 5. Such conversion value in effect from time to
6
time, as adjusted pursuant to this Section 5, is referred to herein as the Conversion Value.
All of the remaining provisions of this Section 5 shall apply separately to each Conversion
Value in effect from time to time with respect to Series E Preferred Stock.
(e) Stock Dividends, Subdivisions and Combinations. If at any time while the
Series E Preferred Stock is outstanding, the Corporation shall:
(i) take a record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend payable in, or other distribution of, additional shares of
Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a larger number of shares
of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a smaller number of shares
of Common Stock,
then in each such case the Conversion Value shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock (excluding treasury shares, if any)
outstanding immediately before such event and of which the denominator shall be the number of
shares of Common Stock (excluding treasury shares, if any) outstanding immediately after such
event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective
immediately after the record date for the determination of shareholders entitled to receive such
dividend or distribution, and any adjustment pursuant to clauses (ii) or (iii) of this paragraph
(e) shall become effective immediately after the effective date of such subdivision or combination.
If any event requiring an adjustment under this paragraph occurs during the period that a
Conversion Value is calculated hereunder, then the calculation of such Conversion Value shall be
adjusted appropriately to reflect such event.
(f) Certain Other Distributions. If, at any time while the Series E Preferred
Stock is outstanding, the Corporation shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive any dividend or other distribution of:
(i) cash (other than a cash dividend payable out of earnings or earned surplus
legally available for the payment of dividends under the laws of the jurisdiction of
incorporation of the Corporation),
(ii) any evidences of its indebtedness, any shares of stock of any class or any
other securities or property of any nature whatsoever (other than cash, convertible
securities or additional shares of Common Stock), or
(iii) any warrants or other rights to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or property of
7
any nature whatsoever (other than cash, convertible securities or additional shares of
Common Stock) (in each case set forth in subparagraphs (i), (ii) and (iii) hereof, the
Distributed Property),
then upon any conversion of Series E Preferred Stock that occurs after such record date, the holder
of Series E Preferred Stock shall be entitled to receive, in addition to the Conversion Shares
otherwise issuable upon such conversion, the Distributed Property that such Holder would have been
entitled to receive if the Series E Preferred Stock had been converted into Common Stock as of such
record date. If the Distributed Property consists of property other than cash, then the fair value
of such Distributed Property shall be as determined in good faith by the Board of Directors and set
forth in reasonable detail in a written valuation report (the Valuation Report) prepared by the
Board of Directors. The Corporation shall give written notice of such determination and a copy of
the Valuation Report to all holders of Series E Preferred Stock, and if the holders of 25% of the
outstanding Series E Preferred Stock object to such determination within twenty (20) business days
following the date such notice is given to all of the holders of Series E Preferred Stock, the
Corporation shall submit such valuation to an investment banking firm of recognized national
standing selected by holders of not less than 75% of the Series E Preferred Stock, and the opinion
of such investment banking firm shall be binding upon the Corporation and the holders of all the
Series E Preferred Stock. A reclassification of the Common Stock (other than a change in par value,
or from par value to no par value or from no par value to par value) into shares of Common Stock
and shares of any other class of stock shall be deemed a distribution by the Corporation to the
holders of its Common Stock of such shares of such other class of stock within the meaning of this
Section 5(f); and if the outstanding shares of Common Stock shall be changed into a larger or
smaller number of shares of Common Stock as a part of such reclassification, such change shall be
deemed a subdivision or combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 5(e).
(g) Blocking Provision. Notwithstanding any contrary or inconsistent provision
hereof, the number of shares of Common Stock that may be acquired by any Holder upon any
conversion of Series E Preferred Stock or that shall be entitled to voting rights under
Section 2 hereof shall be limited to the extent necessary to insure that, following such
conversion, the number of shares of Common Stock then beneficially owned by such Holder and
any other persons or entities whose beneficial ownership of Common Stock would be aggregated
with the Holders for purposes of Section I3(d) of the Exchange Act (including shares held by
any group of which the Holder is a member) does not exceed 4.95% of the total number of
shares of Common Stock of the Corporation then issued and outstanding (the Beneficial
Ownership Cap). For purposes hereof, group has the meaning set forth in Section 13(d) of
the Exchange Act and applicable regulations of the Securities and Exchange Commission, and the
percentage held by the Holder shall be determined in a manner consistent with the provisions
of Section 13(d) of the Exchange Act. Each delivery of a Conversion Notice by a Holder will
constitute a representation by such Holder that it has evaluated the limitation set forth in
this paragraph and determined, subject to the accuracy of information filed under the
Securities Act and the Exchange Act by any person other than such Holder with respect to the
outstanding
8
Common Stock of the Corporation (including securities or property convertible into or
exchangeable for Common Stock, with or without the payment of consideration), that the
issuance of the full number of shares of Common Stock requested in such Conversion Notice is
permitted under this paragraph, and the Corporation shall have no obligations to such Holder
to verify compliance with the Beneficial Ownership Cap. This paragraph shall be construed and
administered in such manner as shall be consistent with the intent of the first sentence of
this paragraph. Any provision hereof which would require a result that is not consistent with
such intent shall be deemed severed herefrom and of no force or effect with respect to the
conversion contemplated
by a particular Conversion Notice. Notwithstanding the foregoing provisions of Section 5(g),
any Holder of Series E Preferred Stock shall have the right prior to the Date of Original
Issue upon written notice to the Corporation, or after the Date of Original Issue upon 61 days
prior written notice to the Corporation, to choose not to be governed by the Beneficial
Ownership Cap provided herein.
(h) Rights Distributed Under Rights Agreement. Capitalized terms used in this
Section 5(h) and which are not otherwise defined herein, shall have the meanings ascribed to
them in the Rights Agreement (the Rights Agreement") dated as of December 13, 2000 between
the Corporation and U.S. Stock Transfer Corporation. While the Rights Agreement or any other
poison pill, rights plan or similar arrangement (each, a Rights Plan") shall be in effect:
(i) Holders who convert Series E Preferred Stock before the Distribution Date or
before any Rights Certificates or similar right (each a Right") shall be evidenced by a
separate rights certificate or shall otherwise be transferable otherwise than in
connection with the transfer of the underlying shares of Common Stock (the date of the
occurrence of any of the foregoing being referred to herein as a Rights Distribution
Date"), will receive, in addition to shares of Common Stock issued on conversion, one
Right for each such shares of Common Stock.
(ii) Upon the occurrence of a Rights Distribution Date, each Holder shall receive,
without any further action by the Corporation, such number of Rights equal to the number
of Rights such Holder would have held if, immediately prior to the Rights Distribution
Date, all of the shares of Series E Preferred Stock had been converted into shares of
Common Stock at the then current Conversion Value. The Corporation shall issue to each
Holder certificates evidencing such Rights, no later than five business days following
such Rights Distribution Date. In the event the applicable Rights Plan does not permit
such Rights to be granted to each Holder, the Corporation shall promptly (i) amend the
applicable Rights Plan to permit the Corporation to take the actions set forth in this
Section 5(h), or (ii) issue to each Holder an option, right or similar arrangement giving
each Holder the same rights and benefits as they would have held upon the receipt of the
applicable number of Rights.
6. Other Provisions Applicable to Adjustments. The following provisions shall be
applicable to the making of adjustments of the number of shares of Common Stock into which
9
the Series E Preferred Stock is convertible and the current Conversion Value provided for in
Section 5:
(a) When Adjustments to Be Made. The adjustments required by Section 5 shall be
made whenever and as often as any specified event requiring an adjustment shall occur, except
that any adjustment to the Conversion Value that would otherwise be required may be postponed
up to, but not beyond the Conversion Date if such adjustment either by itself or with other
adjustments not previously made adds or subtracts less than 1% of the shares of Common Stock
into which the Series E Preferred Stock is convertible immediately prior to the making of such
adjustment Any adjustment representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made as soon as such adjustment,
together with other adjustments required by Section 5 and not previously made, would result in
a minimum adjustment or on the Conversion Date. For the purpose of any adjustment, any
specified event shall be deemed to have occurred at the close of business on the date of its
occurrence.
(b) Fractional Adjustments. In computing adjustments under Section 5, fractional
adjustments to the Conversion Value shall be taken into account to the nearest 1/100th of a
cent.
(c) Escrow of Stock. If after any property becomes distributable pursuant to
Section 5 by reason of the taking of any record of the holders of Common Stock, but prior to
the occurrence of the event for which such record is taken, a holder of the Series E Preferred
Stock converts the Series E Preferred Stock, such holder of Series E Preferred Stock shall
continue to be entitled to receive any shares of Common Stock issuable upon conversion under
Section 5 by reason of such adjustment and such shares or other property shall be held in
escrow for the holder of the Series E Preferred Stock by the Corporation to be issued to
holder of the Series E Preferred Stock upon and to the extent that the event actually takes
place. Notwithstanding any other provision to the contrary herein, if the event for which such
record was taken fails to occur or is rescinded, then such escrowed shares shall be canceled
by the Corporation and escrowed property returned to the Corporation.
7. Merger, Consolidation or Disposition of Assets. If, while the Series E Preferred
Stock is outstanding, there occurs: (i) an acquisition by an individual or legal entity or group
(as defined in Section 13(d) of the Exchange Act) of more than one-half of the voting rights or
equity interests in the Corporation; or (ii) a merger or consolidation of the Corporation or a
sale, transfer or other disposition of all or substantially all the Corporations property, assets
or business to another person or entity where the holders of the Corporations voting securities
prior to such transaction fail to continue to hold at least a majority of the voting power of the
surviving or acquiring entity (a Change of Control"), and, pursuant to the terms of such Change of
Control, shares of common stock of the surviving or acquiring entity (or other interests, as
applicable), or any cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or in lieu of common
10
stock of the successor or acquiring entity (Other Property), are to be received by or distributed
to the holders of Common Stock of the Corporation, then the certificates evidencing the Series E
Preferred Stock shall, as of and after the Change of Control, evidence only the right to receive,
at each Holders election, which must be delivered by each Holder to the Corporation within 20 days
after receiving notice from the Corporation of the right to make such election, either:
(i) the number of shares of common stock of the successor or acquiring person (or other
interests, as applicable) or of the Corporation, if it is the surviving person, and Other
Property receivable upon or as a result of such Change of Control by a holder of the number of
shares of Common Stock into which the Series E Preferred Stock is convertible immediately
prior to such event, or
(ii) at the effective time of such Change of Control, such Holders Liquidation
Preference.
If a timely election is not made pursuant to this Section 7(a), the holder shall receive the
benefit of Section 7(a)(i) and shall not be entitled to the benefit of Section 7(a)(i). If notice
of a Change of Control is given but the Change of Control transaction is not, for any reason,
consummated, the elections of the Holders given in connection with such notice shall be of no force
or effect, ab initio.
8. Other Action Affecting Common Stock. In case at any time or from time to time the
Corporation shall take any action in respect of its Common Stock, other than the payment of
dividends permitted by Section 5 or any other action described in Section 5, then, unless such
action will not have a materially adverse effect upon the rights of the holder of Series E
Preferred Stock, the number of shares of Common Stock or other stock into which the Series E
Preferred Stock is convertible exercisable and/or the purchase price thereof shall be adjusted in
such manner as may be equitable in the circumstances.
9. Certain Limitations. Notwithstanding anything herein to the contrary, the
Corporation agrees not to enter into any transaction which, by reason of any adjustment hereunder,
would cause the current Conversion Value to be less than the par value per share of Common Stock.
10. Stock Transfer Taxes. The issue of stock certificates upon conversion of the
Series E Preferred Stock shall be made without charge to the converting holder for any tax in
respect of such issue; provided, however, that the Corporation shall be entitled to withhold any
applicable withholding taxes with respect to such issue, if any.
11. Certificate as to Adjustments. Upon the occurrence of each adjustment or
readjustment of the Conversion Value, the Corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each
Holder a certificate setting forth such adjustment or readjustment and showing in detail the
11
facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any Holder, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Value at the
time in effect for the Series E Preferred Stock and (iii) the number of shares of Common Stock and
the amount, if any, or other property which at the time would be received upon the conversion of
Series E Preferred Stock, owned by such holder.
12. Notices of Record Date. In the event of any fixing by the Corporation of a record
date for the holders of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend (other than a cash dividend) or other distribution, any
shares of Common Stock or other securities, or any right to subscribe for, purchase or otherwise
acquire, or any option for the purchase of, any shares of stock of any class or any other
securities or property, or to receive any other right, the Corporation shall mail to each Holder at
least twenty (20) days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or rights, and the
amount and character of such dividend, distribution or right.
13. Redemption at the Corporations Election.
(a) If at any time (A) the Common Stock is traded on any national securities exchange or
quoted on the Nasdaq National Market or Nasdaq SmallCap Market, (B) the closing price per
share of the Common Stock exceeds $12.00 per share for at least 20 consecutive trading days
(the Trading Period), (C) in such Trading Period the average daily trading volume is greater
than 100,000 shares per day, and (D) the Corporation has, legally available for such purpose,
sufficient funds to pay all amounts owed to the Holders on account of the redemption of all of
the Series E Preferred Stock, then the Corporation may, not later than 5 business days after
the end of any such Trading Period (the Call Notice Period), call for the redemption of all
(but not less than all) the Series E Preferred Stock. If the Corporation does not timely call
for such redemption, the Corporation may thereafter call for redemption as herein provided
only if the conditions set forth in clauses (A), (B), (C), and (D) of the preceding sentence
are again fulfilled, and the Corporation calls for redemption within the new Call Notice
Period.
(b) If the Corporation elects to redeem the Series E Preferred Stock, the Corporation
shall give written notice thereof (the Call for Redemption), signed by the Chief Executive
Officer or Chief Financial Officer, to the Holders of the Series E Preferred Stock not later
than the end of the Call Notice Period. The Call for Redemption shall (A) specify the
beginning and end of the Trading Period and shall (B) set forth the Corporations undertaking
to pay the Stated Value on each outstanding share of Series E Preferred Stock plus any
declared but unpaid dividends thereon, and (C) certify that the Corporation has the funds on
hand to make such payments, and that the Corporation is not under any lawful order of any
court or other governmental authority restricting or prohibiting such payment and not bound by
any agreement, undertaking or other obligation which would prohibit or restrict the authority
of the Corporation
12
to make such payment, and (D) set forth the name and address of the Corporation or, if
applicable, any transfer or paying agent, to which the Holders shall deliver their
certificates evidencing the Series E Preferred Stock to obtain payment therefor.
(c) Simultaneously with the Corporations issuance of any Call for Redemption, the
Corporation shall set aside, in a segregated account, sufficient funds to pay all amounts owed
to the Holders of the Series E Preferred Stock on account of such redemption.
(d) The issuance of a Call for Redemption shall not impair or diminish in any way the
right of the Holders of the Series E Preferred Stock to convert the Series E Preferred Stock
into Common Stock; provided, however, that at the end of the third business day after the Call
for Redemption is received by the Holders, the Series E Preferred Stock not otherwise
converted or redeemed shall be deemed redeemed, and; provided, further, that certificates for
any shares of Series E Preferred Stock deemed redeemed shall evidence only the right of the
Holder to receive the payments payable by the Corporation upon redemption.
(e) Payment of the Stated Value, plus all accrued, accumulated and unpaid dividends,
shall be made to each Holder not later than two (2) business days following the Corporations
receipt of such Holders certificates evidencing the Series E Preferred Stock, or the usual
and customary proof of loss of such certificates, if applicable.
(f) To the extent that following a Call for Redemption, any Holder of shares of Series E
Preferred Stock delivers to the Corporation a Conversion Notice and any such shares of Series
E Preferred Stock are not converted on the date specified in the Conversion Notice due to the
operation of Section 5(g), all such shares of Series E Preferred Stock that are not so
converted shall be deemed converted automatically under Section 5
at the first moment thereafter when Section 5(g) would not prevent such conversion.
Notwithstanding the preceding sentence, following the Call for Redemption, the right to: (a)
the liquidation preference of the Series E Preferred Stock, including, without limitation, the
right to be treated as holders of Series E Preferred Stock in the event of a merger or
consolidation; (b) the consent rights described in Section 4 hereof and those consent rights
described in Section 5.8 of the Purchase Agreement; (c) the redemption rights in Section 14
hereof, and (d) all other preferential contractual rights granted to holders of the Series E
Preferred Stock (but not the Common Stock), shall cease immediately. The Corporation shall not
be obligated to deliver Common Stock certificates in respect of Series E Preferred Stock that
is automatically converted pursuant to this Section 13(f) until the Holder notifies the
Corporation in writing that such shares are no longer subject to the operation of Section
5(g).
14. Product-Triggered Redemption.
(a) Definition of Product-Triggered Redemption Event. A Product-Triggered
Redemption Event shall mean that the Corporation has failed to acquire from another person or
entity, by December 26, 2003, either (A) all right, title and interest to an oncology-
13
related molecule or compound that it previously had no rights in or to and that has entered at
least a Phase I clinical trial (a Compound) or (B) an exclusive license or sublicense to
further develop a Compound together with (i) the right to practice under all Intellectual
Property Rights necessary for the further development of such Compound throughout North
America and (ii) one or more agreements providing that the Corporation or another party to
such agreements shall have all Intellectual Property Rights necessary to manufacture, promote,
market and sell the Compound throughout North America. If any of the rights (as set forth in
the previous sentence) to the Compound are acquired by means of one or more license or
sublicense agreements, such agreements would satisfy the requirements set forth in the
previous sentence notwithstanding that they may require the Corporation to pay reasonable
royalties to the licensor or sublicensor. In addition, if the Corporation acquires a Compound
indirectly through the acquisition by the Corporation of another person or entity (whether by
stock, merger or otherwise) that has the rights listed above in (A) or (B) to such Compound,
then such acquisition would satisfy the requirements set forth in the first sentence of this
Section 14(a). For purposes of this Section 14, Intellectual Property Rights shall mean all
patents (including any registrations, continuations, continuations in part, renewals,
reissues, extensions and applications for any of the foregoing), confidential or proprietary
information that derives economic value (actual or potential) from not being generally known
to other persons who can obtain economic value from its disclosure, know how, copyrights and
trademarks.
(b) Product-Triggered Redemption Notice. The Corporation shall notify each holder
in reasonable detail not later than December 30, 2003 (or not later than five days after the
date of an event described in clause (y) hereof) if (x) a Product-Triggered Redemption Event
has taken place or (y) the Corporation has completed the acquisition of a Compound as
contemplated in Section 14(a) hereof (the Product-Triggered Redemption Notice), and such
Product-Triggered Redemption Notice shall be reasonably acceptable in substance to the Holder.
To the extent such Technology-Triggered Redemption Notice contains material non-public
information of the Corporation, the Corporation shall simultaneously disclose such information
in a filing on Form 8-K, provided, however, that if a Holder determines that the
Product-Triggered Redemption Notice is not reasonably acceptable in substance, and the Holder
demands that the Company provide additional information that constitutes material non-public
information, then the Holder shall enter into a standard confidentiality agreement with
respect to the additional information prior to the Companys disclosure to the Holder and the
Company shall not be required to disclose such additional information in a filing on Form 8-K.
(c) Redemption. If a Product-Triggered Redemption Event has occurred, the
Corporation shall redeem on a pro rata basis up to one-half of the Series E Preferred Stock
issued on the Date of Original Issue to any Holder who gives a Demand for Product-Triggered
Redemption (as defined in Section 14(d) below). The Corporation shall effect such redemption
by paying in cash for each such share to be redeemed an amount equal to the Product-Triggered
Redemption Price, which shall equal (i) all declared but unpaid dividends as of the
Product-Triggered Redemption Date (as defined below) with respect to each share to be
redeemed, plus
(ii) 100% of the Stated Value of each share to be redeemed. A redemption pursuant to this
Section 14(c) shall be referred to as a Product-Triggered Redemption.
14
(d) Demand for Product-Triggered Redemption. (i) A Holder desiring to elect a
redemption as herein provided shall deliver a notice (the Demand for Product-Triggered
Redemption) to the Corporation specifying the following:
(A) | The number of shares of Series E Preferred Stock to be redeemed; and | ||
(B) | the address to which the payment of the Product-Triggered Redemption Price shall be delivered, or, at the election of the Holder, wire instructions with respect to the account to which payment of the Product-Triggered Redemption Price shall be required. |
(ii) A Holder may deliver the certificates evidencing the Series E Preferred Stock
to be redeemed with the Demand for Product-Triggered Redemption or under separate cover
not later than January 27, 2004. Payment of the Product-Triggered Redemption Price shall
be made promptly, but in any case not later than January 30, 2004 (the Product-Triggered
Redemption Date).
(e) Status of Redeemed or Purchased Shares. Any shares of the Series E Preferred
Stock at any time purchased, redeemed or otherwise acquired by the Corporation (whether due to
a Product-Triggered Redemption or otherwise) shall not be reissued and shall be retired.
(f) Insufficient Funds. If the funds of the Corporation legally available for
redemption of shares of the Series E Preferred Stock on any Product-Triggered Redemption Date
are insufficient to redeem the total number of shares of Series E Preferred Stock to be
redeemed on such date, those funds which are legally available, if any, will be used to redeem
the maximum possible number of such shares ratably among the Holders of such shares to be
redeemed based upon the total Product-Triggered Redemption Price applicable to each such
Holders shares of Series E Preferred Stock which are subject to redemption on such
Product-Triggered Redemption Date. The shares of Series E Preferred Stock not redeemed shall
remain outstanding and entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation are legally available for the redemption
of shares of the Series E Preferred Stock, such funds will immediately be used to redeem the
balance of the shares which the Corporation has become obliged to redeem on any
Product-Triggered Redemption Date but which it has not redeemed.
(g) Waiver of Product-Triggered Redemption Right. Any Holder may at any time
irrevocably waive its Product-Triggered Redemption Right with respect to all or any part of
its Series E Preferred Stock by delivering a written notice to the Company to such effect.
15
15. Notices. Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given and effective on
the earliest of (a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile number specified in this Section prior to 4:00 p.m. (New York City time)
on a business day, (b) the next business day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in this Section on a day
that is not a business day or later than 4:00 p.m. (New York City time) on any business day, or (c)
the business day following the date of mailing, if sent by U.S. nationally recognized overnight
courier service such as Federal Express. The address for such notices and communications shall be
as follows: (i) if to the Corporation, to 157 Technology Drive, Irvine, California 92618,
facsimile: 949.788.6706, Attention: Chief Executive Officer or (ii) if to a holder of Series E
Preferred Stock, to the address or facsimile number appearing on the Corporations shareholder
records or, in either case, to such other address or facsimile number as the Corporation or a
holder of Series E Preferred Stock may provide to the other in accordance with this Section.
16
IN WITNESS WHEREOF, the undersigned has executed this Certificate of Designation on behalf of
the Corporation this 26th day of September, 2003
/s/ Rajesh C. Shrotriya, M.D. | ||||
Rajesh C. Shrotriya, M.D. | ||||
Chairman, President and Chief Executive Officer |
EXHIBIT A
FORM OF CONVERSION NOTICE
(To be executed by the registered Holder in order to convert shares of Series E Preferred Stock)
The undersigned hereby irrevocably elects to convert the number of shares of Series E Convertible
Voting Preferred Stock (the Series E Preferred Stock) indicated below into shares of common
stock, par value $.001 per share (the Common Stock), of Spectrum Pharmaceuticals, Inc., a
Delaware corporation (the Company), according to the Certificate of Designations of the Series E
Preferred Stock and the conditions hereof, as of the date written below. The undersigned hereby
requests that certificates for the shares of Common Stock to be issued to the undersigned pursuant
to this Conversion Notice be issued in the name of, and delivered to, the undersigned or its
designee as indicated below. A copy of the certificate representing the Series E Preferred Stock
being converted is attached hereto.
i of ii
Conversion Information:
[NAME OF HOLDER] |
||||
By: | ||||
Name: | ||||
Title: | ||||
Address of Holder: | ||||
Issue Common Stock to (if different than above): | ||||
Name: | ||||
Address: | ||||
The undersigned represents, subject to the accuracy of information filed under the Securities
Act and the Exchange Act by any person other than such holder with respect to the outstanding
Common Stock of the Company (including securities or property convertible into or exchangeable for
Common Stock, with or without the payment of consideration), as of the date hereof that, after
giving effect to the conversion of Preferred Shares pursuant to this Conversion Notice, the
undersigned will not exceed the Beneficial Ownership Cap contained in Section 5(g) of the
Certificate of Designations of the Series E Preferred Stock.
Name of Holder |
||||
By: | ||||
Name: | ||||
Title: | ||||
ii
State of Delaware | ||
Secretary of State | ||
Division of Corporations | ||
Delivered 12:45 PM 07/07/2006 | ||
FILED 12:45 PM 07/07/2006 | ||
SRV 060647116 2742853 FILE |
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SPECTRUM PHARMACEUTICALS, INC.,
a Delaware corporation
SPECTRUM PHARMACEUTICALS, INC., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware (f/k/a Neotherapeutics, Inc.) (the
Corporation), DOES HEREBY CERTIFY:
1. That the Board of Directors of this Corporation adopted a resolution setting forth a
proposed amendment of the first paragraph of Article 4 of our Certificate of Incorporation, as
amended, which would read in its entirety as follows:
The aggregate number of shares of all classes of stock which the Corporation shall have authority to issue is 105,000,000 shares, consisting of (a) 100,000,000 shares of common stock, $.001 par value per share (the Common Stock), and (b) 5,000,000 shares of preferred stock, $.001 par value per share (the Preferred Stock). |
2. This Certificate of Amendment of Certificate of incorporation as amended was duly adopted
and approved by the stockholders of this Corporation in accordance with the provisions of Section
242 of the Delaware General Corporation Law.
{Signatures follow on next page}
IN WITNESS WHEREOF, SPECTRUM PHARMACEUTICALS, INC, has caused this Certificate of Amendment of
Certificate of Incorporation to be duly executed by its Chief Executive Officer and President.
Dated: July 6, 2006 |
||||
SPECTRUM PHARMACEUTICALS, INC. |
||||
By: | /s/ Rajesh C. Shrotriya | |||
Rajesh C. Shrotriya, M.D. | ||||
Title: | Chief Executive Officer and President |
2
State of Delaware | ||
Secretary of State | ||
Division of Corporations | ||
Delivered 12:45 PM 07/07/2006 | ||
FILED 12:50 PM 07/07/2006 | ||
SRV 060647118 2742853 FILE |
FIRST AMENDMENT TO THE
CERTIFICATE OF DESIGNATION OF
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
OF
SPECTRUM PHARMACEUTICALS, INC.
CERTIFICATE OF DESIGNATION OF
SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
OF
SPECTRUM PHARMACEUTICALS, INC.
SPECTRUM PHARMACEUTICALS, INC., a Delaware corporation (f/k/a Neotherapeutics, Inc.) (the
Corporation), by its Chief Executive Officer and President, certifies that pursuant to the
authority contained in Article 4 of its Certificate of Incorporation (as amended and restated from
time to time), and the Certificate of Designation of Rights, Preferences and Privileges of Series B
Junior Participating Preferred Stock and in accordance with the provisions of Section 151 of the
General Corporation Law of the State of Delaware, its Board of Directors has adopted the following
resolution to amend the Certificate of Designation of Rights, Preferences and Privileges of Series
B Junior Participating Preferred Stock filed with the Delaware Secretary of State on December 18,
2000, as follows:
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby amends Section 1 of the
Certificate of Designation of Series B Junior Participating Preferred Stock (Certificate of
Designation) in its entirety to read as follows:
Section 1. Designation and Amount. The shares of such series shall be designated
as Series B Junior Participating Preferred Stock, par value $.001 per share, and the
number of shares constituting such series shall be 1,000,000. Such number of shares may
be increased or decreased by resolution of the Board of Directors; provided, that no
decreased shall reduce the number of shares of Series B Junior Participating Preferred
Stock to a number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights, warrants
or upon the conversion of any outstanding securities issued by the Corporation
convertible into Series B Junior Participating Preferred Stock.
IN WITNESS WHEREOF, SPECTRUM PHARMACEUTICALS, INC. has caused this First Amendment to the
Certificate of Designation of Series B Junior Participating Preferred Stock to be duly executed by
its Chief Executive Officer and President.
{Signatures follow on next page}
IN WITNESS WHEREOF, SPECTRUM PHARMACEUTICALS, INC. has caused this First Amendment to the
Certificate of Designation of Series B Junior Participating Preferred Stock to be duly executed by
its Chief Executive Officer and President.
Dated: July 6,
2006 SPECTRUM PHARMACEUTICALS, INC. |
|||||
By: | /s/ Rajesh C. Shrotriva | ||||
Rajesh C. Shrotriva, M.D. | |||||
Title: | Chief Executive Officer and President | ||||
2
State of Delaware Secretary of State |
||||||||
Division of Corporations | ||||||||
Delivered 02:37 PM 12/13/2010 | ||||||||
FILED 02:37 PM 12/13/2010 | ||||||||
SRV 101179514 - 2742853 FILE |
Certificate Eliminating Series Of Preferred Stock
From The
Certificate Of Incorporation
Of
Spectrum Pharmaceuticals, Inc.
(Pursuant to Section 151(g) of the Delaware General Corporation Law)
Spectrum Pharmaceuticals, Inc. (the Corporation), a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the DGCL), does herby certify:
1. The name of the Corporation is Spectrum Pharmaceuticals, Inc.
2. The series of shares of preferred stock of the Corporation to which this certificate
relates are the Series B Junior Participating Preferred Stock.
3. The powers, designations, preferences, and the relative, participating, optional, or other
rights, and the qualifications, limitations, and restrictions of the Corporations Series B Junior
Participating Preferred Stock were provided for in resolutions adopted by the Board of Directors of
the Corporation pursuant to the authority expressly vested in it by the provisions of the
Certificate of Incorporation of the Corporation. A Certificate setting forth such resolutions have
been heretofore filed with the Secretary of State of Delaware pursuant to the provisions of Section
151(g) of the DGCL.
4. No shares of the Corporations Series B Junior Participating Preferred Stock are
outstanding.
5. The Board of Directors of the Corporation has adopted the following resolutions:
WHEREAS, in connection with a rights agreement dated as of December 12, 2000, between Spectrum
Pharmaceuticals, Inc. (the Company) and Computer share Trust Company, N.A. (formerly U.S.
Stock Transfer Corporation), as amended from time to time (the 2000 Rights Agreement),
the Company filed a Certificate of Designation, Preferences and Privileges creating a series of
preferred stock termed the Series B Junior Participating Preferred Stock; and
WHEREAS, on December 13, 2010, the 2000 Rights Agreement terminates according to its terms.
NOW, THEREFORE, BE IT RESOLVED, that on the date hereof no shares of the Companys Series B Junior
Participating Preferred Stock are outstanding and that no shares of the Series B Junior
Participating Preferred Stock will be issued subject to the Certificate of Designation, Preferences
and Privileges previously filed with respect to the Series B Junior Participating Preferred Stock.
RESOLVED FURTHER, that, if on December 13, 2010, the foregoing resolutions remain true, the
appropriate officers of the Company are directed to file with the Secretary of State of the State
of Delaware, on or after December 13, 2010, a certificate pursuant to DGCL § 151(g) setting forth
the foregoing resolutions in order to eliminate from the Companys Amended Certificate of
Incorporation all matters set forth in the previously filed Certificate of Designation, Preferences
and Privileges with respect to the Series B Junior Participating Preferred Stock.
2
IN
WITNESS WHEREOF, this Certificate is executed on this 9th day of December, 2010.
/s/ Shyam Kumaria | ||||
Name: | Shyam Kumaria | |||
Title: | Senior Vice President, Finance |
State of Delaware Secretary of State |
||||||||
Division of Corporations | ||||||||
Delivered 02:37 PM 12/13/2010 | ||||||||
FILED 02:38 PM 12/13/2010 | ||||||||
SRV 101179534 - 2742853 FILE |
Certificate Of Designation, Preferences, And Rights
Of
Series B Junior Participating Preferred Stock
OF
Spectrum Pharmaceuticals, Inc.
Of
Series B Junior Participating Preferred Stock
OF
Spectrum Pharmaceuticals, Inc.
Pursuant to Section 151 of the General Corporation Law of the State of Delaware
Spectrum
Pharmaceuticals, Inc., a Delaware corporation (the
Company), does hereby certify that:
1. The name of the Corporation is Spectrum Pharmaceuticals, Inc.
2. The certificate of incorporation, as amended, of the Corporation authorizes the issuance of
5,000,000 shares of Preferred Shares of a par value of $0.001 each and expressly vests in the Board
of Directors of the Corporation the authority provided therein to issue any or all of said shares
in one or more series and by resolution or resolutions, the designation, number, full or limited
voting powers, or the denial of voting powers, preferences and relative, participating, optional,
and other special rights and the qualifications, limitations, restrictions, and other
distinguishing characteristics of each series to be issued.
3. That pursuant to the authority conferred upon the Board of Directors by the Amended Certificate
of Incorporation of the Corporation, the said Board of Directors on November 29, 2010, adopted the
following resolution creating a series of Preferred Stock designated as Series B Junior
Participating Preferred Stock (as hereinafter defined):
RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation in
accordance with the provisions of its Certificate of Incorporation, a series of Preferred Stock of
the Corporation be and it hereby is created, and that the designation and amount thereof and the
voting powers, preferences and relative, participating, optional and other special rights of the
shares of such series, and the qualifications, limitations, and restrictions thereof are as
follows:
Section 1. Designation and Amount. The shares of such series shall be designated as Series
B Junior Participating Preferred Stock and the number of shares constituting such series shall be
1,500,000.
Section 2.
Dividends and Distributions.
(a) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of Series B Junior
Participating Preferred Stock with respect to dividends, the holders of shares of Series B Junior
Participating Preferred Stock, in preference to the holders of shares of Common Stock, par value
$0.001 per share, of the Corporation (the Common Stock), and of any
other junior stock, shall be entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly dividends payable in cash on
the last day of March, June, September, and December in each year (each such date being referred to
herein as a Quarterly Dividend Payment Date), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of Series B Junior
Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the
greater of (i) $1.00 or (ii) subject to the provision for adjustment hereinafter set forth, 1000
times the aggregate per share amount of all cash dividends, and 1000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share of Series B Junior Participating
Preferred Stock. In the event the Corporation shall at any time after November 29, 2010 (the
Rights Dividend Declaration Date) (A) declare any dividend on Common Stock payable in
shares of Common Stock, (B) subdivide the outstanding Common Stock, or (C) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the amount to which holders of
shares of Series B Junior Participating Preferred Stock were entitled immediately prior to such
event under clause (ii) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on the Series B Junior Participating
Preferred Stock as provided in Section 2(a) above immediately after it declares a dividend or
distribution on the Common Stock (other than a dividend payable in shares of Common Stock);
provided, that, in the event no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series B Junior Participating
Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on outstanding shares of Series B Junior
Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of
issue of such shares of Series B Junior Participating Preferred Stock, unless the date of issue of
such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series B Junior Participating Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of
Series B Junior Participating Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
2
allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of holders of shares of Series B
Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the date fixed for the
payment thereof.
Section 3. Voting Rights. The holders of shares of Series B Junior Participating Preferred
Stock shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set forth, each share of Series B Junior
Participating Preferred Stock shall entitle the holder thereof to 1000 votes on all matters
submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at
any time after the Rights Dividend Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the number of votes per share to which holders of shares of Series B
Junior Participating Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the denominator of which is the number
of shares of Common Stock that were outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the holders of shares of Series B Junior
Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one
class on all matters submitted to a vote of stockholders of the Corporation.
(c) (i) If at any time dividends on any Series B Junior Participating Preferred Stock shall be in
arrears in an amount equal to six quarterly dividends thereon, the occurrence of such contingency
shall mark the beginning of a period (herein called a
default period) that shall extend until
such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for
the current quarterly dividend period on all shares of Series B Junior Participating Preferred
Stock then outstanding shall have been declared and paid or set apart for payment. During each
default period, all holders of Preferred Stock (including holders of the Series B Junior
Participating Preferred Stock) with dividends in arrears in an amount equal to six quarterly
dividends thereon, voting as a class, irrespective of series, shall have the right to elect two
directors.
(ii) During any default period, such voting right of the holders of Series B Junior Participating
Preferred Stock may be exercised initially at a special meeting called pursuant to Section
3(c)(iii) or at any annual meeting of stockholders, and thereafter at annual meetings of
stockholders, provided, that such voting right shall not be exercised unless the holders of 10% in
number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence
of a quorum of the holders of Common Stock shall not affect the exercise by the holders of
Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall
exercise such voting right initially during an existing default period, they shall have the right,
voting as a
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class, to elect directors to fill such vacancies, if any, in the Board of Directors as may then
exist up to two directors or, if such right is exercised at an annual meeting, to elect two
directors. If the number that may be so elected at any special meeting does not amount to the
required number, the holders of Preferred Stock shall have the right to make such increase in the
number of directors as shall be necessary to permit the election by them of the required number.
After the holders of Preferred Stock shall have exercised their right to elect directors in any
default period and during the continuance of such period, the number of directors shall not be
increased or decreased except by vote of the holders of Preferred Stock as herein provided or
pursuant to the rights of any equity securities ranking senior to or pari passu
with the Series B Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an existing default period, have
previously exercised their right to elect directors, the Board of Directors may order, or any
stockholder or stockholders owning in the aggregate not less than 10% of the total number of shares
of Preferred Stock outstanding, irrespective of series, may request, the calling of a special
meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the
President, a Vice President, or the Secretary of the Corporation. Notice of such meeting and of any
annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this Section
3(c)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such
notice to such holder at such holders last address as the same appears on the books of the
Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60
days after such order or request or in default of the calling of such meeting within 60 days after
such order or request, such meeting may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than 10% of the total number of shares of Preferred
Stock outstanding. Notwithstanding the provisions of this Section 3(c)(iii), no such special
meeting shall be called during the period within 60 days immediately preceding the date fixed for
the next annual meeting of the stockholders.
(iv) In any default period, the holders of Common Stock, and other classes of stock of the
Corporation if applicable, shall continue to be entitled to elect the whole number of directors
until the holders of Preferred Stock shall have exercised their right to elect two directors voting
as a class, after the exercise of which right (A) the directors so elected by the holders of
Preferred Stock shall continue in office until their successors shall have been elected by such
holders or until the expiration of the default period, and (B) any vacancy in the Board of
Directors may (except as provided in Section 3(c)(ii)) be filled by vote of a majority of the
remaining directors theretofore elected by the holders of the class of stock that elected the
director whose office shall have become vacant. References in this Section 3(c) to directors
elected by the holders of a particular class of stock shall include directors elected by such
directors to fill vacancies as provided in clause (B) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (A) the right of the holders of Preferred
Stock as a class to elect directors shall cease, (B) the term of any directors elected by the
holders of Preferred Stock as a class shall terminate, and (C) the number of directors shall be
such number as may be provided for in the Certificate of Incorporation or Bylaws irrespective of
any increase made pursuant to the provisions of
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Section 3(c)(ii) (such number being subject, however, to change thereafter in any manner
provided by law or in the Certificate of Incorporation or Bylaws). Any vacancies in the Board of
Directors effected by the provisions of clauses (B) and (C) in the preceding sentence may be filled
by a majority of the remaining directors.
(d) Except as set forth herein, holders of Series B Junior Participating Preferred Stock shall have
no special voting rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.
Section 4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions payable on the Series B
Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until
all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series B
Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation
shall not:
(i) declare or pay dividends on, or make any other distributions on, any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution, or winding up) to the
Series B Junior Participating Preferred Stock;
(ii) declare or pay dividends on, or make any other distributions on, any shares of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution, or winding up) with
the Series B Junior Participating Preferred Stock, except dividends paid ratably on the Series B
Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking
junior (either as to dividends or upon liquidation, dissolution, or winding up) to the Series B
Junior Participating Preferred Stock, provided, that the Corporation may at any time
redeem, purchase, or otherwise acquire shares of any such junior stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation, or winding up) to the Series B Junior Participating Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for consideration any shares of Series B Junior
Participating Preferred Stock, or any shares of stock ranking on a parity with the Series B Junior
Participating Preferred Stock, except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of such shares upon such terms
as the Board of Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall determine in good faith
will result in fair and equitable treatment among the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the Corporation to purchase or
otherwise acquire for consideration any shares of stock of the Corporation
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unless the Corporation could, under Section 4(a), purchase or otherwise acquire such shares at such
time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Junior Participating Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the Board of Directors,
subject to the conditions and restrictions on issuance set forth herein, in the Certificate of
Incorporation, or in any other Certificate of Designation creating a series of Preferred Stock or
any similar stock, or as otherwise required by law.
Section 6. Liquidation, Dissolution, or Winding Up.
(a) Upon any liquidation (voluntary or otherwise), dissolution, or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either
as to dividends or upon liquidation, dissolution, or winding up) to the Series B Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of Series B Junior
Participating Preferred Stock shall have received an amount equal to $1000 per share of Series B
Participating Preferred Stock, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the Series B
Liquidation Preference). Following the payment of the full amount of the Series B Liquidation
Preference, no additional distributions shall be made to the holders of shares of Series B Junior
Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall
have received an amount per share (the Common Adjustment) equal to the quotient obtained
by dividing (i) the Series B Liquidation Preference by (ii) 1000 (as appropriately adjusted as set
forth in Section 4(c) below to reflect such events as stock splits, stock dividends, and
recapitalizations with respect to the Common Stock) (such number in clause (ii), the
Adjustment Number). Following the payment of the full amount of the Series B Liquidation
Preference and the Common Adjustment in respect of all outstanding shares of Series B Junior
Participating Preferred Stock and Common Stock, respectively, holders of Series B Junior
Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number
to one with respect to such Preferred Stock and Common Stock, on a per share basis, respectively.
(b) In the event, however, that there are not sufficient assets available to permit payment in
full of the Series B Liquidation Preference and the liquidation preferences of all other series of
preferred stock, if any, which rank on a parity with the Series B Junior Participating Preferred
Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares
in proportion to their respective liquidation preferences. In the event, however, that there are
not sufficient assets available to permit payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the holders of Common Stock.
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(c) In the event the Corporation shall at any time after the Rights Dividend Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of
shares, then in each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 7.
Consolidation, Merger, etc. In case the Corporation shall enter into any
consolidation, merger, combination, or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash, or any other property, then in any
such case the shares of Series B Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1000 times the aggregate amount of stock, securities, cash, or any
other property (payable in kind), as the case may be, into which or for which each share of Common
Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights
Dividend Declaration Date (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series B Junior Participating
Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which
is the number of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
Section 8. No Redemption. The shares of Series B Junior Participating Preferred Stock
shall not be redeemable.
Section 9. Ranking. The Series B Junior Participating Preferred Stock shall rank
junior to all other series of the Corporations Preferred Stock as to the payment of dividends and
the distribution of assets, unless the terms of any such series shall provide otherwise.
Section 10. Amendment. At any time when any shares of Series B Junior Participating
Preferred Stock are outstanding, neither the Certificate of Incorporation of the Corporation nor
this Certificate of Designation shall be amended in any manner that would materially alter or
change the powers, preferences, or special rights of the Series B Junior Participating Preferred
Stock so as to affect them adversely without the affirmative vote of the holders of two-thirds or
more of the outstanding shares of Series B Junior Participating Preferred Stock, voting separately
as a class.
Section 11. Fractional Shares. The Series B Junior Participating Preferred Stock may
be issued in fractions of a share that shall entitle the holder, in proportion to such holders
fractional shares, to exercise voting rights, receive dividends, participate in
7
distributions, and to have the benefit of all other rights of holders of Series B Junior
Participating Preferred Stock.
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IN WITNESS
WHEREOF, Spectrum Pharmaceuticals, Inc. has caused this Certificate of Designation to be
signed by the undersigned this 9th day of December, 2010.
SPECTRUM PHARMACEUTICALS, INC. |
||||
By: | /s/ Shyam Kumaria | |||
Name: | Shyam Kumaria | |||
Title: | Senior Vice President, Finance | |||
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