Certificate of Incorporation - EarthWeb Inc.
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
EARTHWEB INC.
This Amended and Restated Certificate of Incorporation amends, restates and
integrates the provisions of the Certificate of Incorporation of said
corporation in their entirety and has been duly adopted in accordance with the
provisions of Section 242 and 245 of the General Corporation Law of the State of
Delaware (the "DGCL") by the written consent of the holders of the outstanding
stock entitled to vote thereon in accordance with the provisions of Section 228
of the DGCL.
ARTICLE I
NAME
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The name of the corporation is EarthWeb Inc. (the "Company").
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ARTICLE II
PURPOSE
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The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of the
State of Delaware.
ARTICLE III
INCORPORATOR
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The name and mailing address of the incorporator is as follows:
Name Mailing Address
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Jack D. Hidary. c/o Earth Web Inc.
3 Park Avenue, 38th Floor
New York, NY 10016
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ARTICLE IV
BOARD OF DIRECTORS
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The number of directors of the Corporation shall be such as from time to
time shall be fixed in the manner provided in the By-Laws of the Corporation.
The election of directors of the Corporation need not be by ballot unless the
By-Laws so require.
ARTICLE V
REGISTERED AGENT
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The address of the registered office of the Corporation in the State of
Delaware is 9 East Loockerman Street, City of Dover, County of Kent, 19901. The
name of the registered agent of the Corporation at such address is National
Registered Agents, Inc.
ARTICLE VI
CAPITAL STOCK
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6.1. Authorized Shares.
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(a) The total number of shares of capital stock that the Company is
authorized to issue 26,500,000 shares, consisting of 21,750,000 shares of common
stock, $0.01 par value per share (the "Common Stock") and 4,750,000 shares of
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Preferred Stock, $0.01 par value per share (the "Preferred Stock"). The shares
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of Preferred Stock are hereby designated as follows:
(i) 1,000,000 shares are designated as Series A Convertible
Preferred Stock (the "Series A Preferred Stock")
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(ii) 600,000 shares are designated as Series B Convertible
Preferred Stock (the "Series 13 Preferred Stock")
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(iii) 1,150,000 shares are designated as Series C Convertible
Preferred Stock (the "Series C Preferred Stock"); and
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(iv) 2,000,000 shares are undesignated shares of Preferred
Stock.
(b) Any of the 2,000,000 undesignated shares of Preferred Stock
("Undesignated Preferred Stock") may be issued from time to time in one or more
series. Subject to the limitations and restrictions set forth in this paragraph
the Board of Directors or a Committee of the Board of Directors, to the extent
permitted by law and the Bylaws of the Corporation or a resolution of the Board
of Directors, by resolution or resolutions, is authorized to create or provide
for any such series, and to fix the designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including, without limitation, the authority to fix or
alter the dividend rights, dividend rates,
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conversion rights, exchange rights, voting rights, rights and terms of
redemption (including sinking and purchase fund provisions), the redemption
price or prices, the dissolution preferences and the rights in respect to any
distribution of assets of any wholly unissued series of Undesignated Preferred
Stock and the number of shares constituting any such series, and the designation
thereof, or any of them and to increase or decrease the number of shares of any
series so created, subsequent to the issue of that series but not below the
number of shares of such series then outstanding. In case the number of shares
of any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
(c) The designations, powers, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereof, with respect to the Preferred Stock which
is not Undesignated Preferred Stock and the Common Stock are as set forth in
this Article VI.
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6.2. Definitions.
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For purposes of this Amended and Restated Certificate of Incorporation of
the Company, the following terms shall have the meanings given to them below:
"Accruing Dividends" has the meaning given to it in Section 6.3(a) of this
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Article VI.
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"Affiliate" means, with respect to any specified Person, (1) any other
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Person who, directly or indirectly, owns or controls, is under common ownership
or control with, or is owned or controlled by, such specified Person, (2) any
other Person who is a director, officer or partner, or is, directly or
indirectly, the beneficial owner of ten percent (10%) or more of any class of
equity securities, of the specified Person or a Person described in clause (1)
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above, (3) any other Person of whom the specified Person is a director, officer
or partner or is, directly or indirectly, the beneficial owner of ten percent
(10%) or more of any class of equity securities, (4) any other Person in whom
the specified Person has a substantial beneficial interest or as to whom the
specified Person serves as trustee or in a similar capacity, or (5) any relative
or spouse of the specified Person or any of the foregoing Persons, any relative
of such spouse or any spouse of any such relative. As used in this definition,
the term "control" means the possession, directly or indirectly, of the power to
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direct the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
"Arbitration Procedure" means the following procedure to determine the
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Market Value of a security (the "valuation amount"). The valuation amount shall
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be determined by an investment banking firm of national recognition, which firm
shall be reasonably acceptable to the Company and the Requisite Convertible
Preferred Holders. If the Company and the Requisite Convertible Preferred
Holders are unable to agree upon an acceptable investment banking firm within
ten (10) days after the date on which either the Company or the Requisite
Convertible Preferred Holders proposed that one be selected, the investment
banking firm will be selected by an arbitrator located in the City of New York,
New York, selected by the American Arbitration Association (or if such
organization ceases to exist, the arbitrator shall be chosen by a court of
competent jurisdiction). The arbitrator shall select the investment banking firm
(within ten (10) days of his appointment) from a list, jointly prepared by the
Company and the Requisite
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Convertible Preferred Holders, of not more than six investment banking firms of
national standing in the United States, of which no more than three may be named
by the Company and no more than three may be named by the Requisite Convertible
Preferred Holders. The arbitrator may consider, within the ten-day period
allotted, arguments from the Company and the Requisite Convertible Preferred
Holders regarding which investment banking firm to choose, but the selection by
the arbitrator shall be made in its sole discretion from the list of six. The
determination by such investment banking firm of the valuation amount shall be
final and binding upon the Company and the Convertible Preferred Holders. The
Company shall pay one-half the fees and expenses of the investment banking firms
and arbitrators (if any) used to determine the valuation amount, and the
Convertible Preferred Holders shall, ratably based on the number of shares of
Common Stock and Common Stock Equivalents held by each of them, pay the other
half of such fees and expenses. If required by any such investment banking firm
or arbitrator, the Company shall execute a retainer and engagement letter
containing reasonable terms and conditions, including customary provisions
concerning the rights of indemnification and contribution by the Company in
favor of such investment banking firm or arbitrator and its officers, directors,
partners employees, agents and Affiliates (other than for claims resulting from
such firm's or arbitrator's gross negligence, bad faith, or willful misconduct),
and each of the Company and the Convertible Preferred Holders shall, if
reasonably requested by any such investment banking firm or arbitrator, waive
all claims each of them may have against such firm or arbitrator (other than any
such claim arising out of such firm's or arbitrator's gross negligence, bad
faith or willful misconduct).
"Board" means the board of directors of the Company.
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"Common Stock" has the meaning set forth in Section 6.1 (a) of this Article
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VI.
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"Common Stock Equivalent" means the right to acquire, whether or not
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immediately exercisable, one share of Common Stock, whether evidenced by an
option, warrant, convertible security or other instrument or agreement.
"Company" has the meaning set forth in Article I.
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"Conversion Date" has the meaning set forth in Section 6.6(b) of this
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Article VI.
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"Convertible Price" has the meaning set forth in Section 6.6(a) of this
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Article VI.
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"Convertible Preferred Stock" means, collectively, the Series A Preferred
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Stock, the Series 13 Preferred Stock and the Series C Preferred Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or
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any successor federal statute, and the rules and regulations of the Securities
and Exchange Commission thereunder, all as the same shall be in effect from time
to time.
"Excluded Securities" means options (and the shares of Common Stock which
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may be issued upon the exercise thereof) granted under the Stock Plan to
purchase up to the maximum amount of 331,722 shares of Common Stock (adjusted to
reflect stock splits, stock dividends, stock combinations, recapitalizations and
like occurrences with respect to the Common Stock).
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"Fully Diluted Basis" means a calculation of the number of shares of Common
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Stock outstanding which includes, in addition to the shares of Common Stock then
issued and outstanding, the aggregate number of shares of Common Stock then
issuable upon the exercise, conversion or exchange of all options (including all
options issuable under the Stock Plan), warrants, preferred stock and any other
security of the Company exercisable, convertible or exchangeable for or into
Common Stock.
"Governmental Authority" shall mean any domestic or foreign government or
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political subdivision thereof, whether on a federal, state or local level and
whether executive, legislative or judicial in nature, including any agency,
authority, board, bureau, commission, court, department or other instrumentality
thereof.
"Junior Stock" has the meaning given to it in Section 6.4(a) of this
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Article VI.
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"Liquidation" means any voluntary or involuntary liquidation, dissolution
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or winding up of the Company.
"Liquidation Preference" means, with respect to any share of a Series of
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Convertible Preferred Stock, the price paid for such share of Convertible
Preferred Stock when it was originally issued (subject to proportionate
adjustment in the event of any stock dividend or distribution paid in shares of
such series of Convertible Preferred Stock or stock split, reverse stock split
or combination or other similar pro rata recapitalization event affecting such
Series of Convertible Preferred Stock), plus an amount equal to all accrued and
unpaid dividends (whether or not declared) on such share, if any.
"Liquidity Event" means any Liquidation or Sale of the Company (other than
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a Qualified Sale of the Company).
"Mandatory Conversion Event" means the first to occur of either;
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(i) a Qualified Public Offering; or
(ii) a Qualified Sale of the Company.
"Mandatory Conversion Notice" has the meaning given to it in Section 6.7(b)
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of this Article VI.
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"Market Value" means as to any security, the average of the closing prices
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of such security's sales on the principal national securities exchange on which
such security may at the time be listed, or, if there have been no sales on such
exchange on any day, the average of the highest bid and lowest asked prices on
such exchange at the end of such day, or, if on any day such security is not so
listed, the average of the representative bid and asked prices quoted in the
NASDAQ System as of 4:00 P.M., New York time, on such day, or, if on any day
such Security is not quoted in the NASDAQ System, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated ("NOBI"), or any similar
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or successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which such "Market Value" is being determined and
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the 20 consecutive business days prior to such day, or, if there have been no
bid
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or asked prices in the domestic over-the-counter market reported by NOBI, the
fair market value thereof determined in good faith jointly by the Company and
the Requisite Convertible Preferred Holders; provided however, that if the
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Company and the Requisite Convertible Preferred Holders are not able to agree
within, a reasonable period of time (not to exceed ten (10) days) what amount
constitutes the Market Value thereof, then the Market Value thereof shall be
determined pursuant to the Arbitration Procedure.
"Optional Conversion Notice" has the meaning set forth in Section 6.6(b) of
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this Article VI.
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"Optional Conversion Rights" has the meaning given to it in Section 6.6 of
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this Article VI.
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"Original Cost" means, with respect to any share of any Series of
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Convertible Preferred Stock, as of any particular date, the amount originally
paid for such share when it was originally issued. In the event of any change
(by way of any stock dividend or distribution payable in shares of such Series
of Convertible Preferred Stock, or stock split, reverse stock split or
combination or other pro rata recapitalization event affecting such Series of
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Convertible Preferred Stock) in the number or kind of shares of such Series of
Convertible Preferred Stock, the Original Cost of the shares of such Series of
Convertible Preferred Stock immediately prior to such change shall be ratably
adjusted among such shares of such Series of Convertible Preferred Stock
immediately after such change.
"Original Issuance Date" means, with respect to a share of any Series of
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Convertible Preferred Stock, the date on which such share was first issued.
"Person" shall be construed as broadly as possible and shall include an
individual or natural person, a partnership (including a limited liability
partnership), a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization and
a Governmental Authority.
"Preferred Stock" has the meaning set forth in Section 6.1(a) of this
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Article VI.
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"Qualified Public Offering" means the consummation of a firm commitment,
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underwritten public offering of Common Stock registered under the Securities
Act, other than an offering in connection with an acquisition or an employee
benefit plan, that results in proceeds to the Company (net of any and all
underwriters) discounts and commissions) of at least $15,000,000 at a price per
share of Common Stock equal to at least the minimum price per share of Common
Stock determined by the following formula:
Where Z = Minimum price per share of Common Stock;
W = The Original Cost of a share of Series A
Preferred Stock;
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x = The Original Cost of a share of Series B Preferred
Stock;
y = The Original Cost of the initial share of Series C
Preferred Stock issued by the Company;
a = The fraction, the numerator of which is the
maximum number of Common Stock Equivalents
represented by the outstanding shares of Series A
Preferred Stock and the denominator of which is
the maximum number of Common Stock Equivalents
represented by all outstanding shares of
Convertible Preferred Stock, in each case
immediately before the consummation of such
underwritten public offering;
b = The fraction, the numerator of which is the
maximum number of Common Stock Equivalents
represented by the outstanding shares of Series B
Preferred Stock and the denominator of which is
the maximum number of Common Stock Equivalents
represented by all outstanding shares of
Convertible Preferred Stock, in each case
immediately before the consummation of such
underwritten public offering; and
c = The fraction, the numerator of which is the
maximum number of Common Stock Equivalents
represented by the outstanding shares of Series C
Preferred Stock and the denominator of which is
the maximum number of Common Stock Equivalents
represented by all outstanding shares of
Convertible Preferred Stock, in each case
immediately before the consummation of such
underwritten public offering;
Then z = w(a) + 3(x)(b) + 3(y)(c).
"Qualified Sale of the Company" means, with respect to any Series of
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Convertible Preferred Stock, the closing of a Sale of the Company that results
in the holders of the outstanding shares of such Series of Convertible Preferred
Stock receiving on or with respect to, or in exchange for, each share of such
Series of Convertible Preferred Stock (after giving effect to the conversion of
such share), cash equivalents or securities registered under the Securities Act
and the Exchange Act with an aggregate Market Value equal to at least the
product of(x) the Original Cost for a share of such Series of Convertible
Preferred Stock times (y) either (A) one (1), in the case of a share of Series A
Preferred Stock, or (B) three (3), in the case of a share of Series B Preferred
Stock or Series C Preferred Stock.
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"Requisite Convertible Preferred Holders" means the holders of a majority
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of the outstanding shares of Convertible Preferred Stock of all Series at the
time in question..
"Requisite Series A Preferred Holders" means the holders of a majority of
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the outstanding shares of the Series A Preferred Stock at the time in question.
"Requisite Series B Preferred Holders" means the holders of a majority of
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the outstanding shares of the Series B Preferred Stock at the time in question.
"Requisite Series C Preferred Holders" means the holders of a majority of
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the outstanding shares of the Series C Preferred Stock at the time in question.
"Sale of the Company" means any sale of the Company to one or more Persons
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who or which are not Affiliates of the Company in a single transaction or Series
of related transactions, whether by way of (i) the sale or other disposition of
all or substantially all of the assets of the Company, (ii) the merger or
consolidation of the Company with or into another Person or (iii) the sale or
other transfer of a majority of the capital stock of the Company.
"Securities Act" means the Securities Act of 1933, as amended, or any
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successor federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same shall be in effect from time to
time.
"Series A Preferred Stock" has the meaning set forth in Section 6.1(a)(i)
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of this Article VI.
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"Series B Preferred Stock" has the meaning set forth in Section 6.1 (a)(ii)
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of this Article VI.
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"Series C Preferred Stock" has the meaning set forth in Section 6.1(a)(iii)
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of this Article VI.
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"Stock Plan" means the Company's 1996 Stock Plan as in effect on the date
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hereof.
6.3. Dividends.
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(a) The holders of the Convertible Preferred Stock shall be entitled
to receive, out of funds legally available therefor, cumulative dividends at the
following rates: (i) 7% per share per annum, compounded annually, on the
Original Cost of each share of Convertible Preferred Stock, until October 24,
2003, (ii) commencing on October 24, 2003, 9% per annum, compounded annually, on
the Original Cost of each share of Convertible Preferred Stock, until October
24, 2004, and (iii) commencing on October 24, 2004, 11% per annum, compounded
annually, on the Original Cost of each share of Convertible Preferred Stock
(collectively, the "Accruing Dividends"), payable in preference and priority to
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any payment of any cash dividend on Common Stock or any other shares of capital
stock of the Company other than the Convertible Preferred Stock or other class
or series of stock ranking on par with, or senior to the Convertible Preferred
Stock in respect of dividends, when and as declared by the Board; provided,
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however, that dividends on shares of Convertible Preferred Stock will cease to
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accrue upon the conversion of such shares of Convertible Preferred Stock to
Common Stock. The Accruing Dividends shall
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accrue from day to day, whether or not earned or declared, but shall be payable
if and only (i) if, as and when declared by the Board and (ii) upon a Liquidity
Event that does not constitute a Mandatory Conversion Event.
(b) So long as any shares of a Series of Convertible Preferred Stock
are outstanding, the Company shall not pay or declare or set apart for payment
any dividend or make any other distribution on or with respect to any shares of
Common Stock or any other shares of capital stock of the Company ranking on a
parity with or junior to such Series of Convertible Preferred Stock with respect
to dividends or redeem, repurchase or otherwise acquire any such shares unless
the Company has paid, or at the time pays, all accrued but unpaid dividends on
such series of Convertible Preferred Stock pursuant to this Section 6.3.
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(c) No dividend or distribution shall be paid to the holders of a
series of Convertible Preferred Stock pursuant to this Section 6.3 in any form
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of consideration other than cash unless the Requisite Series A Preferred
Holders, the Requisite Series B Preferred Holders or the Requisite Series C
Preferred Holders, as applicable, at the time of the distribution, approve such
distribution (including the valuation of the consideration being distributed).
(d) Except as otherwise provided herein, if at any time the Company
pays less than the total amount of dividends then accrued with respect to the
Convertible Preferred Stock, such payment shall be distributed ratably among the
holders of the Convertible Preferred Stock based upon the aggregate amount of
accrued and unpaid dividends on the shares of Convertible Preferred Stock of
each series then held by each such holder.
(e) Whenever the Company shall declare or pay any dividends on its
Common Stock, each holder of a share of Convertible Preferred Stock shall be
entitled to participate in such dividends on a ratable basis based upon the
Common Stock Equivalents represented by such share of Convertible Preferred
Stock, but only if the amount of such dividends would be greater than any
dividends then payable pursuant to Section 6.3(a). Dividends payable pursuant to
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this Section 6.3(e) on any share of Convertible Preferred Stock shall be reduced
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by any dividends paid pursuant to Section 6.3(a) on such share.
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6.4. Liquidity Event.
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(a) Upon the occurrence of a Liquidity Event, the holders of shares
of a series of Convertible Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Company available for distribution to its
shareholders, after and subject to the payment in full of all amounts required
to be distributed to the holders of any other class or series of stock of the
Company ranking on liquidation prior and in preference to such series of
Convertible Preferred Stock, but before any payment shall be made to the holders
of Common Stock or any other class or series of stock ranking on liquidation
junior to such series of Convertible Preferred Stock (such Common Stock and
other stock being collectively referred to as "Junior Stock") by reason of their
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ownership thereof, an amount per share equal to the Liquidation Preference of
such share. If upon any Liquidity Event the remaining assets of the Company
available for distribution to its shareholders shall be insufficient to pay the
holders of shares of Convertible Preferred Stock the full amount to which they
shall be entitled, the holders of shares of Convertible Preferred Stock and any
class or series of stock ranking on liquidation on a parity with the Convertible
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Preferred Stock shall share ratably in any distribution of the remaining assets
and funds of the Company in proportion to the respective amounts which would
otherwise be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to such shares were paid
in full.
(b) After the distributions described in Section 6.3 above have been
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paid in full, upon a Liquidity Event, all of the remaining assets and funds of
the Company available for distribution to its shareholders shall be distributed
ratably among the holders of the Common Stock.
(c) Anything contained in this Section 6.4 to the contrary
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notwithstanding, each holder of shares of a Series of Convertible Preferred
Stock shall have the right to convert all or any part of the shares of such
series of Convertible Preferred Stock held by such holder into shares of Common
Stock pursuant to Section 6.6 in lieu of receiving the Liquidation Preference in
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connection with any Liquidity Event.
6.5. Voting.
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(a) Each holder of outstanding shares of a series of Convertible
Preferred Stock shall be entitled to the number of votes equal to the number of
whole shares of Common Stock into which the shares of such series of Convertible
Preferred Stock held by such holder are convertible (as adjusted from time to
time pursuant to Section 6.6), at each meeting of such shareholders of the
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Company (and written actions of shareholders in lieu of meetings) with respect
to any and all matters presented to the shareholders of the Company for their
action or consideration. Except as provided by law, by the provisions of Section
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6.5(b) or by the provisions establishing any other series of Preferred Stock,
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holders of each series of Convertible Preferred Stock and holders of any other
outstanding series of Preferred Stock shall vote together with the holders of
Common Stock as a single class.
(b) The Company shall not amend, alter or repeal any of the
preferences, rights, powers or other terms, or issue any shares, of a series of
Convertible Preferred Stock so as to affect adversely such series of Convertible
Preferred Stock or the outstanding shares thereof, without the written consent
or affirmative vote of the Requisite Series A Preferred Holders, the Requisite
Series B Preferred Holders or the Requisite Series C Preferred Holders, as the
case may be, given in writing or by vote at a meeting, consenting or voting (as
the case may be) separately as a class. For this purpose, without limiting the
generality of the foregoing, the authorization or issuance of any shares of any
series of Preferred Stock, or the reclassification of any series of stock which
is outstanding into any other series of stock, in each case, which is on a
parity with or has preference or priority over a series of Convertible Preferred
Stock as to the right to receive either dividends or amounts distributable upon
a Liquidity Event shall be deemed to affect adversely such series of Convertible
Preferred Stock and the outstanding shares thereof.
6.6. Optional Conversion.
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The holders of each series of Convertible Preferred Stock shall have
optional conversion rights (the "Optional Conversion Rights") as follows:
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(a) Right to Convert. Subject to and in compliance with the
----------------
applicable provisions of this Section 6.6, each holder of shares of a series of
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Convertible Preferred Stock shall have the right, at such holder's option, at
any time and from time to time to convert any such share into that number of
fully paid and nonassessable shares of Common Stock equal to the quotient
obtained by dividing (x) the Original Cost of such share of such series of
Convertible Preferred Stock by (y) the applicable Conversion Price, as last
adjusted and then in effect, by surrender of the certificate representing such
share to be converted. The conversion price per share at which shares of Common
Stock shall be issuable upon conversion of shares of Convertible Preferred Stock
(the "Conversion Price") shall initially be equal to the Original Cost of such
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share of Convertible Preferred Stock, and shall be subject to adjustment from
time to time as set forth in Section 6.6(i) below. Upon any conversion pursuant
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to the provisions of this Section 6.6(a) no adjustment to the Conversion Price
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shall be made for any accrued and unpaid dividends on the Convertible Preferred
Stock surrendered for conversion or on the Common Stock delivered upon
conversion. The holder, upon electing to make a conversion, waives his right to
such accrued but unpaid dividends.
(b) Mechanics. The holder of any shares of Convertible Preferred
---------
Stock may exercise such holder's conversion right for such shares pursuant to
Section 6.6(a) by delivering to the Company the certificate or certificates for
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the shares to be converted, duly assigned in blank or duly endorsed to the
Company (if required by it), accompanied by written notice (the "Optional
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Conversion Notice") stating that the holder elects to convert such shares and
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stating the name or names (with address) in which the certificate or
certificates for the shares of Common Stock are to be issued. Conversion shall
be deemed to have been effected on the date when such delivery is made (the
"Conversion Date"). Upon conversion, any and all accrued but unpaid dividends on
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the shares so converted shall cease to exist and the holder shall have no right
thereto. As promptly as practicable thereafter, the Company shall issue and
deliver to or upon the written order of such holder, to the place designated by
such holder, a certificate or certificates for the number of full shares of
Common Stock to which such holder is entitled. The person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a shareholder of record on the applicable Conversion Date unless the
transfer books of the Company are closed on that date, in which event such
person shall be deemed to have become a shareholder of record on the next
succeeding date on which the transfer books are open, but the Conversion Price
shall be that in effect on the Conversion Date. Upon conversion of only a
portion of the number of shares covered by a certificate representing shares of
Convertible Preferred Stock surrendered for conversion, the Company shall issue
and deliver to or upon the written order of the holder of the certificate so
surrendered for conversion, at the expense of the Company, a new certificate
covering the number of shares of Convertible Preferred Stock representing the
unconverted portion of thc certificate so surrendered.
(c) RESERVED.
(d) Taxes Incident to Conversion. The Company shall pay any and all
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issue taxes and other similar taxes that may be payable by the Company on its
issue or delivery of shares of Common Stock on conversion of any shares of
Convertible Preferred Stock. The Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of, or any exchange, conversion or recapitalization of, shares of
Common Stock in a name other than that in which the Convertible Preferred Stock
so converted
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was registered. No such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Company the amount of any such tax,
or has established, to the satisfaction of the Company, that such tax has been
paid.
(e) Sufficient Reserves of Stock. The Company shall at all times
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reserve and keep available, out of its authorized but unissued Common Stock,
solely for the purpose of effecting the conversion of the Convertible Preferred
Stock, the full number of shares of Common Stock deliverable upon the conversion
of all shares of Convertible Preferred Stock from time to time outstanding.
(f) Registration of Reserves. If any shares of Common Stock to be
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reserved for the purpose of conversion of shares of Convertible Preferred Stock
require registration, listing with, or approval of, any governmental authority,
stock exchange or other regulatory body under any federal or state law or
regulation or otherwise, before such shares may be validly issued or delivered
upon conversion to the holder immediately prior to conversion, the Company will
in good faith and as expeditiously as possible endeavor to secure such
registration, listing or approval.
(g) Valid Issue for Conversion. All shares of Common Stock which may
--------------------------
be issued upon conversion of the shares of Convertible Preferred Stock will,
upon issuance by the Company, be validly issued, fully paid, (to the extent such
Convertible Preferred Stock was fully paid), nonassessable, and free from all
taxes, liens and charges with respect to their issuance due to any act of the
Company.
(h) Cancellation of Convertible Preferred Stock on Conversion. All
---------------------------------------------------------
certificates of a series of Convertible Preferred Stock surrendered for
conversion shall be appropriately canceled on the books of the Company, and the
shares so converted represented by such certificates shall be restored to the
status of authorized but unissued shares of such Series of Convertible Preferred
Stock of the Company.
(i) Adjustment of Conversion Price
------------------------------
The Conversion Price applicable to a series of Convertible Preferred
Stock shall be subject to adjustment from time to time as follows:
(i) If the Company shall, at any time or from time to time alter
the Original Issuance Date, issue any Common Stock or Common Stock
Equivalent, other than any Excluded Securities, for a consideration per
share on a Common Stock Equivalent basis less than the Conversion Price in
effect immediately prior to such issuance, then the Conversion Price in
effect immediately prior to each such issuance shall forthwith be lowered
to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of (x) the total number of
shares of Common Stock outstanding (including any shares of
Common Stock deemed to have been issued pursuant to subdivision
(C) of clause (iii) below) immediately prior to such issuance,
multiplied by the
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<PAGE>
Conversion Price, plus (y) the consideration received by the Company
upon such issuance; by
(B) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been issued
pursuant to subdivision (C) of clause (iii) below) immediately after
-------------- -----------
the issuance of such Common Stock.
(ii) If the Company shall, at any time or from time to time after the
Original Issuance Date, issue any Common Stock or Common Stock Equivalent for a
consideration per share an a Common Stock Equivalent basis equal to or greater
than the Conversion Price in effect immediately prior to such issuance, then the
Conversion Price in effect at such time shall not be adjusted.
(iii) For the purposes of any adjustment of the Conversion Price
applicable to a series of Convertible Preferred Stock pursuant to Section
-------
6.6(i)(i) above, the following provisions shall be applicable:
--------
(A) In the case of the issuance of Common Stock for cash in a
public offering or private placement, the consideration shall be
deemed to be the amount of cash paid therefor (before deducting
therefrom any discounts, commissions or placement fees payable by the
Company to any underwriter or placement agent in connection with the
issuance and sale thereof).
(B) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the Market Value thereof.
(C) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities by their terms
convertible into or exchangeable for Common Stock, or options to
purchase or rights to subscribe for such convertible or exchangeable
securities:
(I) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have
been issued at the time such options or rights were issued
and for a consideration equal to the consideration
(determined in the manner provided in subdivisions (A) and
----------------
(B) above), if any, received by the Company upon the
---
issuance of such options or rights plus the minimum purchase
price provided in such options or rights for the Common
Stock covered thereby (determined in the manner provided in
subdivisions (A) and (B) above) (and no further adjustment
---------------- ---
shall be made upon the issuance of shares of Common Stock
upon the exercise, conversion or exchange of such
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<PAGE>
securities to the extent adjustments therefor have already
been made);
(II) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for
such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been
issued at the time such securities, options, or rights were
issued and for a consideration equal to the consideration
received by the Company for any such securities and related
options or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company upon
the conversion or exchange of such securities or the
exercise of any related option or rights (the consideration
in each case to be determined in the manner provided in
subdivisions (A) and (B) above) (and no further adjustment
---------------- ---
shall be made upon the issuance of shares of Common Stock
upon the exercise, conversion or exchange of such securities
to the extent adjustments therefor have already been made);
(III) on any change in the number of shares or
exercise price of Common Stock deliverable upon exercise of
any such options or rights or conversions of or exchange for
such securities, other than a change resulting from the
antidilution provisions thereof, the Conversion Price shall
forthwith be readjusted (provided, however, that such event
-------- -------
has not already resulted in an adjustment to the Conversion
Price, in which event no such adjustment shall be made) to
such Conversion Price as would have obtained had the
adjustment made upon the issuance of such options, rights or
securities not converted prior to such change or options or
rights related to such securities not converted prior to
such change been made upon the basis of such change; and
(IV) on the expiration of any such options or rights,
the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such
convertible or exchangeable securities, the Conversion Price
shall forthwith be readjusted to such Conversion Price as
would have obtained had the adjustment made upon the
issuance of such options, rights, securities or options or
rights related to such securities, and any adjustment
subsequent thereto under clause (III) above, been made upon
------------
the basis of the issuance of only the number of shares of
Common Stock actually issued upon the exercise of such
options or rights, upon the conversion or exchange of such
securities, or
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<PAGE>
upon the exercise of the options or rights related to such
securities and subsequent conversion or exchange thereof.
(iv) If, at any time after the original Issuance Date, the
number of shares of Common Stock outstanding is increased by a stock
dividend payable in shares of Common Stock or by a subdivision or split-up
of shares of Common Stock, then, following the record date for the
determination of holders of Common Stock entitled to receive such stock
dividend, subdivision or split-up (or if no record date is set, the date
such stock dividend, subdivision of stock split is consummated), the
Conversion Price shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of each share of the
applicable series of Convertible Preferred Stock shall be increased in
proportion to such increase in outstanding shares.
(v) If, at any time after the Original Issuance Date, the number
of shares of Common Stock outstanding is decreased by a combination or
reverse stock split of the outstanding shares of Common Stock, then,
following the record date for such combination, the Conversion Price shall
be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of the applicable series of
Convertible Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares.
(vi) In the event of any capital reorganization of the Company,
any reclassification of the stock of the Company (other than a change in
par value or from no par value to par value or from par value to no par
value or as a result of a stock dividend or subdivision, split-up or
combination of shares), or any consolidation or merger of the Company, each
share of the applicable series of Convertible Preferred Stock shall after
such reorganization, reclassification, consolidation, or merger be
convertible into the kind and number of shares of stock or other securities
or property of the Company or of the corporation resulting from such
consolidation or surviving such merger to which the holder of the number of
shares of Common Stock deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation or merger) upon conversion
of such share of the applicable series of Convertible Preferred Stock would
have been entitled upon such reorganization, reclassification,
consolidation or merger. The provisions of this clause shall similarly
apply to successive reorganizations, reclassifications, consolidations or
mergers.
(vii) If any event occurs of the type contemplated by the
provisions of this Section 6.6(i) but not expressly provided for by such
--------------
provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity
features), then the Board shall make an appropriate reduction in the
Conversion Price so as to protect the rights of the holders of the
applicable series of Convertible Preferred Stock.
(viii) All calculations under this paragraph shall be made to
the nearest one hundredth (1/100) of a cent.
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<PAGE>
(ix) In any case in which the provisions of this Section 6.6
-----------
shall require that an adjustment shall become effective immediately after a
record date of an event, the Company may defer until the occurrence of such
event issuing to the holder of any share of the applicable Series of
Convertible Preferred Stock converted after such record date and before the
occurrence of such event the shares of capital stock issuable upon such
conversion by reason of the adjustment required by such event in addition
to the shares of capital stock issuable upon such conversion before giving
effect to such adjustments; provided, however, that the Company shall
-------- -------
deliver to such holder an appropriate instrument evidencing such holder's
right to receive such additional shares.
(x) Whenever the Conversion Price shall be adjusted as provided
in this Section 6.6(i), the Company shall make available for inspection
--------------
during regular business hours, at its principal executive offices or at
such other place as may be designated by the Company, a statement, signed
by its chief executive officer, showing in detail the facts requiring such
adjustment and the Conversion Price that shall be in effect after such
adjustment. The Company shall also cause a copy of such statement to be
sent by first class certified mail, return receipt requested and postage
prepaid, to each holder of the applicable Series of Convertible Preferred
Stock at such holder's address appearing on the Company's records. Where
appropriate, such copy may be given in advance and may be included as part
of any notice required to be mailed under the provisions of clause (xi)
----------
below.
(xi) If the Company shall propose to take any action of the types
described in clauses (iv), (v) or (vi) of this Section 6.6(i) above, the
------------ --- ---- --------------
Company shall give notice to each holder of shares of the applicable Series
of Convertible Preferred Stock, in the manner set forth in clause x above,
--------
which notice shall specify the record date, if any, with respect to any
such action and the date on which such action is to take place. Such
notice shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action (to the extent
such effect may be known at the date of such notice) on the Conversion
Price and the number, kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the occurrence of
such action or deliverable upon conversion of shares of the applicable
series of Convertible Stock. In the case of any action which would require
the fixing of a record date, such notice shall be given at least ten days
(10) prior to the date so fixed, and in case of all other action, such
notice shall be given at least ten (10) days prior to the taking of such
proposed action. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(xii) Waiver of Adjustment. In the event that the Requisite
----- --------------------
Convertible Preferred Holders shall consent to limit, or waive in its
entirety, any anti-dilution adjustment to which the holders of any Series
of Convertible Preferred Stock would otherwise be entitled hereunder, the
Corporation shall not be required to make any adjustment whatsoever with
respect to such Series of Convertible Preferred Stock, as appropriate, in
excess of such limit, as the terms of such consent may dictate.
6.7. Mandatory Conversion.
--------------------
16
<PAGE>
(a) Events of Mandatory Conversion. The Company shall have the right
------------------------------
to require each holder of Convertible Preferred Stock to convert all (but not
less than all) of the shares of any Series of Convertible Stock then held by
such holder into shares of Common Stock upon the occurrence of any Mandatory
Conversion Event with respect to such Series of Convertible Preferred Stock.
Upon any such conversion pursuant to the provisions of this Section 6.7(a), no
--------------
adjustment to the Conversion Price shall be made for any accrued and unpaid
dividends on such series of Convertible Stock surrendered for conversion or on
the Common Stock delivered upon conversion; the holder, upon the occurrence of a
conversion required by the Company after the occurrence of a Mandatory
Conversion Event, waives his right to such accrued but unpaid dividends.
(b) Mechanics. The Company shall exercise its rights under Section
--- --------- -------
6.7(a) above by mailing to each holder of the applicable Series of Convertible
------
Preferred Stock at the address of such holder last known to the Company, not
less than ten (10) nor more than 60 days prior to the date of the requested
conversion, a notice to such effect (the "Mandatory Conversion Notice"). Each
---------------------------
such conversion shall be deemed to have been effected as of the close of
business on the date specified in the Mandatory Conversion Notice, and from and
after such time, the rights of each holder of shares of the Series of
Convertible Preferred Stock subject to such conversion, as a holder of shares of
such Series of Convertible Preferred Stock, shall cease, any and all accrued but
unpaid dividends on the shares subject to such conversion shall cease to exist
and such holder shall have no right thereto, such holder shall be deemed to have
become the holder of the shares of Common Stock issuable upon conversion, and
the shares of such Series of Convertible Preferred Stock shall represent only
the right to receive that number of shares of Common Stock into which such
shares of such Series of Convertible Preferred Stock is convertible.
(c) Conversion. The number of shares of Common Stock into which a series
----------
of Convertible Stock is convertible upon the exercise by the Company of its
rights under Section 6.6(a) shall be determined in accordance with the
--------------
applicable provisions of Section 6.6, except as otherwise provided in this
-----------
Section 6.7.
-----------
ARTICLE VII
INDEMNIFICATION AND LIMITATION OF DIRECTOR LIABILITY
----------------------------------------------------
The Company shall, to the fullest extent permitted by the Delaware General
Corporation Law, as the same may be from time to time amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify under the
Delaware General Corporation Law from and against any and all of the expenses,
liabilities or other matters referred to in or covered by the Delaware General
Corporation Law, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which any person may be entitled under any By-
law, resolution of shareholders, resolution of directors, agreement or
otherwise, as permitted by the Delaware General Corporation Law, as to action in
any capacity in which he served at the request of the Company.
17
<PAGE>
A director of the Company shall not be personally liable to the Company or
its shareholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its shareholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under (S)174(a) of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived any improper personal benefit.
If the Delaware General Corporation Law is amended after the date of
incorporation of the Company to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a
director of the Company shall be deemed to be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the shareholders
of the Company shall not adversely affect any right or protection of a director
of the Company existing at the time of such repeal or modification.
ARTICLE VIII
------------
AMENDMENTS
----------
This Certificate constitutes an agreement between the Company and the
holders of each Series of Convertible Preferred Stock and may only be amended
with the prior written consent of the Company, the Requisite Series A Preferred
Holders, the Requisite Series B Preferred Holders and the Requisite Series C
Preferred Holders; provided, however, that any such amendment that would
-------- -------
adversely affect the rights hereunder of any holder of any Series of Convertible
Preferred Stock, in its capacity as such a holder, without similarly affecting
the rights hereunder of all holders of such Series of Convertible Preferred
Stock, in their capacities as such holders, shall not be effective as to such
holder of such Series of Convertible Preferred Stock without its prior written
consent.
ARTICLE IX
POWERS OF THE BOARD OF DIRECTORS
--------------------------------
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation and of its directors and stockholders, it is further
provided:
(a) In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is expressly
authorized and empowered:
(i) to make, alter, amend or repeal the By-laws in any manner not
inconsistent with the laws of the State of Delaware or this Certificate of
Incorporation;
(ii) without the assent or vote of the stockholders, to authorize
and issue securities and obligations of the Corporation, secured or
unsecured, and to include therein such provisions as to redemption,
conversion or other terms thereof as the Board
18
<PAGE>
of Directors in its sole discretion may determine, and to authorize the
mortgaging or pledging, as security therefor, of any property of the
Corporation, real or personal, including after-acquired property;
(iii) to determine whether any, and if any, what part, of the
net profits of the Corporation or its surplus shall be declared in
dividends and paid to the stockholders, and to direct and determine the use
and disposition of any such net profits or such surplus; and
(iv) to fix from time to time the amount of net profits of the
Corporation or of its surplus to be reserved as working capital or for any
other lawful purpose.
In addition to the powers and authorities herein or by statute expressly
conferred upon it, the Board of Directors may exercise all such powers and do
all such acts and things as may be exercised or done by the Corporation,
subject, nevertheless, to the provisions of the laws of the State of Delaware,
of this Certificate of Incorporation and of the By-laws of the Corporation.
(b) Any director or any officer elected or appointed by the
stockholders or by the Board of Directors may be removed at any time in such
manner as shall be provided in the By-laws of the Corporation.
(c) From time to time any of the provisions of this Certificate of
Incorporation may be altered, amended or repealed, and other provisions
authorized by the laws of the State of Delaware at the time in force may be
added or inserted, in the manner and at the time prescribed by said laws, and
all rights at any time conferred upon the stockholders of the Corporation by
this Certificate of Incorporation are granted subject to the provisions of this
paragraph (c).
(d) The directors shall be divided, with respect to the terms for
which they severally hold office, into three classes, as nearly equal in number
of directors as possible, as determined by the Board of Directors, with the term
of office of the first class to expire at the first Annual Meeting of
Stockholders to be held after the effectiveness of such registration statement,
the term of office of the second class to expire at the second Annual Meeting of
Stockholders to be held after the effectiveness of such registration statement,
and the term of office of the third class to expire at the third Annual Meeting
of Stockholders to be held after the effectiveness of such registration
statement with each class of directors to hold office until their successors are
duly elected and have qualified. At each Annual Meeting of Stockholders
following such initial classification and election, directors elected to succeed
those directors whose terms expire at such annual meeting, other than those
directors elected under particular circumstances by a separate class vote of the
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation of the Corporation, shall be elected
to hold office for a term expiring at the Annual Meeting of Stockholders in the
third year following the year of their election and until their successors are
duly elected and have qualified. When the number of directors is changed, any
newly created directorships or any decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly equal in number
of directors as possible, as determined by the Board of Directors. No decrease
in the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.
19
<PAGE>
ARTICLE X
POWERS OF THE COURTS
--------------------
Whenever a compromise or arrangement is proposed between the Corporation
and its creditors or any class of them and/or between the Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for the Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for the Corporation under
the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing three-
fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree on any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
IN WITNESS WHEREOF, EarthWeb Inc. has caused this Certificate to be signed
by Jack D. Hidary, its President, on the 6th day of November, 1998.
------------------
Jack D. Hidary
20