Certificate of Incorporation - Imaginex Inc.
CERTIFICATE OF INCORPORATION
OF
IMAGINEX, INC.
The undersigned, a natural person, for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the
acts amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the corporation (hereinafter the "Corporation")
is Imaginex, Inc.
SECOND: The address, including street, number, city and county, of
the registered office of the Corporation in the State of Delaware is Corporation
Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
The name of the registered agent of the Corporation in the State of Delaware at
such address is The Corporation Trust Company.
THIRD: The nature of the business and the purposes to be conducted
and promoted by the Corporation, which shall be in addition to the authority of
the Corporation to conduct any lawful business, to promote any lawful purpose,
and to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware, are as
follows:
To purchase, receive, take by grant, gift, devise, boquest, or otherwise,
lease, or otherwise acquire, own, hold, improve, employ, use, and otherwise deal
in and with real or personal property, or any interest therein, wherever
situated, and to sell, convey, lease, exchange, transfer, or otherwise dispose
of, or mortgage or pledge, all or any of its property and assets, or any
interest therein, wherever situated.
To engage generally in the real estate business as principal, agent,
broker, and in any lawful capacity, and generally to take, lease, purchase,
or otherwise acquire, and to own, use, hold, sell, convey, exchange, lease,
mortgage, work, clear, improve, develop, divide, and otherwise handle, manage,
operate, deal in, and dispose of real estate, real property, lands,
multiple-dwelling structures, houses, buildings, and other works, and any
interest or right therein; to take, lease, purchase, or otherwise acquire, and
to own, use, hold sell, convey, exchange, hire lease, pledge, mortgage, and
otherwise handle, and deal in and dispose of, as principal, agent, broker, and
in any lawful capacity, such personal property, chattels, chattels real, rights,
easements, privileges, chooses in action, notes, bonds, mortgages and securities
as may lawfully be acquired, held, or disposed of; and to acquire, purchase,
sell, assign, transfer, dispose of, and generally deal in and with as principal,
agent, broker, and in any lawful capacity, mortgages and other interests in
real, personal, and mixed properties; to carry on a general construction,
contracting, building, and realty management business as principal, agent,
representative, contractor, subcontractor, and in any other lawful capacity.
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To carry on a general mercantile, industrial, investing, and trading
business in all its branches; to devise, invent, manufacture, fabricate,
assemble, install, service, maintain, alter, buy, sell, import, export, license
as licensor or licensee, lease as lessor or lessee, distribute, job, enter into,
negotiate, execute, acquire, and assign contracts in respect of, acquire,
receive, grant, and assign licensing arrangements, options, franchises, and
other rights in respect of, and generally deal in and with, at wholesale and
retail, as principal, and as sales, business, special or general agent,
representative, broker, factor, merchant, distributor, jobber, advisor, and in
any other lawful capacity, goods, wares, merchandise, commodities, and
unimproved, improved, finished, processed, and other real, personal, and mixed
property of any and all kinds, together with the components, resultants, and
by-products thereof.
To apply for, register, obtain, purchase, lease, take licenses in respect
of or otherwise acquire, and to hold, own, use, operate, develop, enjoy, turn to
account, grant licenses and immunities in respect of, manufacture under and to
introduce, sell, assign, mortgage, pledge, or otherwise dispose of, and, in any
manner deal with and contract with reference to:
(a) inventions, devices, formulae, processes, and any
improvements and modifications thereof;
(b) letters patent, patent rights, patented processes,
copyrights, designs, and similar rights, trade-marks, trade names,
trade symbols, and other indications of origin and ownership
granted by or recognized under the laws of the United States of
America, the District of Columbia, any state or subdivision
thereof, and any commonwealth, territory, possession, dependency,
colony, agency or instrumentality of the United States of America
and of any foreign country, and all rights connected therewith or
appertaining thereunto;
(c) franchises, licenses, grants, and concessions.
To guarantee, purchase, take, receive, subscribe for, and otherwise
acquire, own, hold, use, and otherwise employ, sell, lease, exchange, transfer,
and otherwise dispose of, mortgage, lend, pledge, and otherwise deal in and
with, securities (which term, for the purpose of this Article THIRD, includes,
without limitation of the generality thereof, any shares of stock, bonds,
debentures, notes, mortgages, other obligations, and any certificates,
receipts, or other instruments representing rights to receive, purchase, or
subscribe for the same, or representing any other rights or interests therein
or in any property or assets) of any persons, domestic and foreign firms,
associations, and corporations, and of any government or agency or
instrumentality thereof; to make payment therefor in any lawful manner, and,
while owner of any such securities, to exercise any and all rights, powers and
privileges in respect thereof, including the right to vote.
To make, enter into, perform, and carry out contracts of every kind and
description with any person, firm, association, corporation, or government or
agency or instrumentality thereof.
To acquire by purchase, exchange, or otherwise, all, or any part of, or
any interest in, the properties, assets, business, and good will of any one or
more persons, firms, associations, or
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corporations heretofore or hereafter engaged in any business for which a
corporation may now or hereafter be organized under the laws of the State of
Delaware; to pay for the same in cash, property, or its own or other securities;
to hold, operate, reorganize, liquidate, sell, or in any mannor dispose of the
whole or any part thereof, and in connection therewith, to assume or guarantee
performance of any liabilities, obligations, or contracts of such persons,
firms, associations, or corporations, and to conduct the whole or any part of
any business thus acquired.
To lend money in furtherance of its corporate purposes and to invest and
reinvest its funds from time to time to such extent, to such persons, firms,
associations, corporations, governments or agencies or instrumentalities
thereof, and on such terms and on such security, if any, as the Board of
Directors of the Corporation may determine.
To make contracts of guaranty and suretyship of all kinds and endorse or
grarantee the payment of principal, interest, or dividentds upon, and to
guarantee the performance of sinking fund or other obligations of, any
securities, and to guarantee in any way permitted by law the performance of any
of the contracts or other undertakings in which the Corporation may otherwise
be or become interested, of any person, firm, association, corporation,
government or agency or instrumentality thereof, or of any other combination,
organization, or entity whatsoever.
To borrow money without limit as to amount and at such rates of interest
as it may determine; from time to time to issue and sell its own securities,
including its shares of stock, notes, bonds, debentures, and other obligations,
in such amounts, on such terms and conditions, for such purposes and for such
prices, now or hereafter permitted by the laws of the State of Delaware and by
this Certificate of Incorporation, as the Board of Directors of the Corporation
may determine; and to secure any of its obligations by mortgage, pledge, or
other encumbrance of all of any of its property, franchises, and income.
To be a promoter or manager of other corporations of any type or kind;
and to participate with others in any corporation, partnership, limited
partnership, joint venture, or other association of any kind, or in any
transaction, undertaking, or arrangement which the Corporation would have power
to conduct by itself, whether or not such participation involves sharing or
delegation of control with or to others.
To draw, make, accept, endorse, discount, execute, and issue promissory
notes, drafts, bills of exchange, warrants, bonds, debentures, and other
negotiable or transferable instruments and evidences of indebtedness whether
secured by mortgage or otherwise, as well as to secure the same by mortgage or
otherwise, so far as may be permitted by the laws of the State of Delaware.
To purchase, receive, take, reacquire, or otherwise acquire, own and
hold, sell, lend, exchange, reissue, transfer, or otherwise dispose of, pledge,
use, cancel, and otherwise deal in and with its own shares and its other
securities from time to time to such an extent and in such manner and upon such
terms as the Board of Directors of the Corporation shall determine; provided
that the Corporation shall not use its funds or property for the purchase of its
own shares of capital stock when its capital is impaired or when such use would
cause any impairment of its capital, except to the extent permitted by law.
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To organize, as an incorporator, or cause to be organized under the laws
of the State of Delaware, or of any other State of the United States of
America, or of the District of Columbia, or of any commonwealth, territory,
colony, possession, agency, or instrumentality of the United States of America,
or of any foreign country, a corporation or corporations for the purpose of
conducting and promoting any business or purpose for which corporations may be
organized, and to dissolve, wind up, liquidate, merge, or consolidate any such
corporation or corporations or to cause the name to be dissolved, wound up,
liquidated, merged, or consolidated.
To conduct its business, promote its purposes, and carry on its
operations in any and all of its branches and maintain offices both within and
without the State of Delaware, in any and all States of the United States of
America, in the District of Columbia, and in any or all commonwealths,
territories, dependencies, colonies, possessions, agencies, or
instrumentalities of the United States of America and of foreign governments.
To promote and exercise all or any part of the foregoing purposes and
powers in any and all parts of the world, and to conduct its business in all or
any of its branches as principal, agent, broker, factor, contractor, and in any
other lawful capacity, either alone or through or in conjunction with any
corporations, associations, partnerships, firms, trustees, syndicates,
individuals, organizations, and other entities in any part of the world, to
make and perform any contracts and to do any acts and things, and to carry on
any business, and to exercise any powers and privileges suitable, convenient,
or proper for the conduct, promotion, and attainment of any of the business and
purposes herein specified or which at any time may be incidental thereto or may
appear conducive to or expedient for the accomplishment of any of such business
and purposes and which might be engaged in or carried on by a corporation
incorporated or organized under the General Corporation Law of the State of
Delaware, and to have and exercise all of the powers conferred by the laws of
the State of Delaware upon corporations incorporated or organized under the
General Corporation Law of the State of Delaware.
The foregoing provisions of this Article THIRD shall be construed both as
purposes and powers and each as an independent purpose and power. The foregoing
enumeration of specific purposes and powers shall not be held to limit or
restrict in any manner the purposes and powers of the Corporation, and the
purposes and powers herein specified shall, except when otherwise provided in
this Article THIRD, be in no wise limited or restricted by reference to, or
inference from, the terms of any provisions of this or any Article of this
Certificate of Incorporation; provided, that the Corporation shall not conduct
any business, promote any purpose, or exercise any power or privilege within or
without the State of Delaware which, under the laws thereof, the Corporation may
not lawfully conduct, promote, or exercise.
FOURTH: The Corporation shall be authorized to issue Twenty-two
Million (22,000,000) shares of capital stock with $0.01 (one penny) par value
per share, in two classes. The total amount of authorized common stock of the
Corporation is Twenty Million (20,000,000) shares having $0.01 (one penny) par
value per share. The total amount of authorized preferred stock of the
Corporation is Two Million (2,000,000) shares having $0.01 (one penny) par
value per share.
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FIFTH: The name and the mailing address of the incorporator are as
follows:
Name Mailing Address
---- ---------------
Gregory P. Cirillo, Esquire Galland, Kharasch, et al.
Canal Square
1054 Thirty-First Street, N.W.
Second Floor
Washington, D.C. 20007-4492
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
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 this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this 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 this 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 this 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 this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as 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 this Corporation, as the case may be,
and also on this Corporation.
EIGHTH:
1. 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 of its
stockholders or any class thereof, as the case may be, it is further provided:
a. The management of the business and the conduct of the
affairs of the Corporation shall be vested in its Board of Directors.
The number of directors which shall constitute the whole Board of
Directors shall be fixed by, or in the manner provided in, the Bylaws.
The phrase "whole Board" and the phrase "total number of directors"
shall be deemed to have the same meaning, to wit, the total number of
directors which the Corporation would have if there were no vacancies.
No election of directors need be by written ballot.
b. The name and address of the person who shall serve as the
initial director constituting the whole Board of Directors of the
Corporation until the first annual meeting
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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 Article ELEVENTH.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Incorporation on this 30th day of July, 1996.
/s/ GREGORY P. CARILLO
-----------------------------
Gregory P. Carillo, Esquire
Incorporator
<PAGE> 7
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 04:00 PM 10/22/1996
960307115 - 2650098
AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
IMAGINEX, INC.
BEFORE RECEIPT OF PAYMENT FOR STOCK
The undersigned, a natural person, for the purpose of amending the
Certificate of Incorporation of Imaginex, Inc. (hereinafter the "Corporation")
under the provisions and subject to the requirements of the laws of the State
of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts
amendatory thereof and supplemental thereto, and known, identified, and
referred to as the "General Corporation Law of the State of Delaware"), hereby
certifies that:
FIRST: The name of the Corporation is changed to EMAGINET, INC.
SECOND: The Corporation has not received any payment for any of
its stock.
THIRD: This Amendment of the Certificate of Incorporation has
been duly adopted in accordance with the provisions of
Section 341 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Amendment of the
Certificate of Incorporation on this 8th day of October, 1996, and has
acknowledged under penalty of perjury that this instrument is the act and deed
of the Corporation and that the facts stated herein are true.
/s/ KARARAN AMJADIR
----------------------------------------
Kararan Amjadir
Initial Director (constituting the whole
Board of Directors of the Corporation)
<PAGE> 8
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EMAGINET, INC.
Pursuant to Section 242
of the General Corporation Law of
the State of Delaware
Emaginet, Inc. (hereinafter called the "Corporation"), organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation a resolution
was duly adopted, pursuant to Section 242 of the General Corporation Law of the
State of Delaware, setting forth an amendment to the Certificate of
Incorporation of the Corporation and declaring said amendment to be advisable.
The stockholders of the Corporation duly approved said proposed amendment by
written consent in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware, and written notice of such consent has
been given to all stockholders who have not consented in writing to said
amendment. The resolution setting forth the amendment is as follows:
RESOLVED: That Article FOURTH of the Certificate of Incorporation of the
Corporation be and hereby is deleted in its entirety and the following Article
FOURTH is inserted in lieu thereof:
<PAGE> 9
FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is (i) 22,000,000 shares of Common
Stock, $0.01 par value per share ("Common Stock") and (ii) 2,000,000 shares of
Preferred Stock, $0.01 par value per share ("Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
1. General. The voting, dividend and liquidation rights of the
holders of the Common Stock are subject to and qualified by the rights of the
holders of the Preferred Stock of any series as may be designated by the Board
of Directors upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote
for each share held at all meetings of stockholders (and written actions in lieu
of meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased
or decreased (but not below the number of shares thereof then outstanding) by
the affirmative vote of the holders of a majority of the stock of the
Corporation entitled to vote, irrespective of the provisions of Section 242(b)
(2) of the General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the
Corporation, whether voluntary or involuntary, holders of Common Stock will be
entitled to receive all assets of the Corporation available for distribution to
its stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of
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<PAGE> 10
the Corporation as hereinafter provided. Any shares of Preferred Stock which may
be redeemed, purchased or acquired by the Corporation may be reissued except as
otherwise provided by law. Different series of Preferred Stock shall not be
construed to constitute different classes of shares for the purposes of voting
by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
special voting rights, conversion rights, redemption privileges and liquidation
preferences, as shall be stated and expressed in such resolutions, all to the
full extent now or hereafter permitted by the General Corporation Law of
Delaware. Without limiting the generality of the foregoing, the resolutions
providing for issuance of any series of Preferred Stock may provide that such
series shall be superior or rank equally or be junior to the Preferred Stock of
any other series to the extent permitted by law. Except as otherwise
specifically provided in this Certificate of Incorporation, no vote of the
holders of the Preferred Stock or Common Stock shall be a prerequisite to the
issuance of any shares of any series of the Preferred Stock authorized by and
complying with the conditions of this Certificate of Incorporation, the right
to have such vote being expressly waived by all present and future holders of
the capital stock of the Corporation.
C. SERIES A CONVERTIBLE PREFERRED STOCK.
One Million Five Hundred Thousand (1,500,000) shares of the authorized
and unissued Preferred Stock of the Corporation are hereby designated "Series A
Convertible Preferred Stock" (the "Series A Preferred Stock") with the
following rights, preferences, powers, privileges and restrictions,
qualifications and limitations.
1. Dividends.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive, out of funds legally available therefor, dividends of
$0.225 per share per annum (subject to appropriate adjustment in the event of
any stock dividend, stock split, combination or other similar recapitalization
affecting
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<PAGE> 11
such shares), payable when and as declared by the Board of Directors of the
Corporation and payable in the discretion of the Board of Directors of the
Corporation in either cash or, based on the then fair market value of the Common
Stock of the Corporation, Common Stock of the Corporation. Such dividends shall
accrue and shall be cumulative from the date of issuance of each share of Series
A Preferred Stock, whether or not declared.
(b) The Corporation shall not declare or pay any distributions
(as defined below) on shares of Common Stock until the holders of the Series A
Preferred Stock then outstanding shall have first received a distribution at the
rate specified in paragraph (a) of this Section 1.
(c) For purposes of this Section 1, unless the context requires
otherwise, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
Common Stock or other securities of the Corporation, or the purchase or
redemption of shares of the Corporation (other than repurchases of Common Stock
held by employees or directors of, or consultants to, the Corporation upon
termination of their employment or services pursuant to agreements providing for
such repurchase at a price equal to the original issue price of such shares and
other than redemptions in liquidation or dissolution of the Corporation) for
cash or property, including any such transfer, purchase or redemption by a
subsidiary of this Corporation.
2. Liquidation, Dissolution or Winding Up; Certain Mergers,
Consolidations and Asset Sales.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, 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 Corporation ranking on
liquidation prior and in preference to the Series A Preferred Stock
(collectively referred to as "Senior 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 the Series A Preferred Stock (such Common
Stock and other stock being collectively referred to as "Junior Stock") by
reason of their ownership thereof, an amount equal to $4.50 per share (subject
to appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares), plus any
dividends declared but unpaid thereon and any accrued but unpaid
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<PAGE> 12
dividends thereon. If upon any such liquidation, dissolution or winding up of
the Corporation the remaining assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the holders of
shares of Series A Preferred Stock the full amount to which they shall be
entitled, the holders of shares of Series A Preferred Stock and any class or
series of stock ranking on liquidation on a parity with the Series A Preferred
Stock shall share ratably in any distribution of the remaining assets and funds
of the Corporation 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 payment of all preferential amounts required to
be paid to the holders of Senior Preferred Stock, Series A Preferred Stock and
any other class or series of stock of the Corporation ranking on liquidation on
a parity with the Series A Preferred Stock, upon the dissolution, liquidation or
winding up of the Corporation, the holders of shares of Junior Stock then
outstanding shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders.
(c) A consolidation or merger of the Corporation with or into
another corporation or entity, or a sale of all or substantially all of the
assets of the Corporation, shall not be regarded as a liquidation, dissolution
or winding up of the Corporation within the meaning of this Section 2.
3. Voting.
(a) Each holder of outstanding shares of Series A 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 Series A Preferred Stock held by
such holder are then convertible (as adjusted from time to time pursuant to
Section 4 hereof), at each meeting of stockholders of the Corporation (and
written actions of stockholders in lieu of meetings) with respect to any and all
matters presented to the stockholders of the Corporation for their action or
consideration. Except as provided by law, by the provisions of Subsection 3(b)
below or by the provisions establishing any other series of Series Preferred
Stock, holders of Series A Preferred Stock and of any other outstanding series
of Series Preferred Stock shall vote together with the holders of Common Stock
as a single class.
(b) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series A Preferred Stock so
as to affect adversely the Series A Preferred
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<PAGE> 13
of the shareholders or until his successors are elected and qualify is
Kamran Amjadi, Three Bethesda Metro Center, Suite 700, Bethesda,
Montgomery County, Maryland 20814.
c. The incorporator of the Corporation shall have and may
exercise the rights and powers and shall perform the duties vested in or
required by him by the General Corporation Law of the State of Delaware
and by this Certificate of Incorporation and when said duties have been
performed, said incorporator shall cease to have any interest in the
Corporation.
2. After the original or other Bylaws of the Corporation have been
adopted, amended, or repealed, as the case may be, in accordance with the
provisions of Section 109 of the General Corporation Law of the State of
Delaware, and after the Corporation has received any payment for any of its
stock, the power to adopt, amend, or repeal the Bylaws of the Corporation may
be exercised by the Board of Directors of the Corporation; provided, however,
that any provision for the classification of directors of the Corporation for
staggered terms pursuant to the provisions of subsection (d) of Section 141 of
the General Corporation Law of the State of Delaware shall be set forth in an
initial Bylaw or in a Bylaw adopted by the stockholders entitled to vote of the
Corporation unless provisions for such classification shall be set forth in
this Certificate of Incorporation.
3. Whenever the Corporation shall be authorized to issue only one
class of stock, each outstanding share shall entitle the holder thereof to
notice of and the right to vote at, any meeting of stockholders. Whenever the
Corporation shall be authorized to issue more than one class of stock, no
outstanding share of any class of stock which is denied voting power under the
provisions of the Certificate of Incorporation shall entitle the holder thereof
to the right to vote at any meeting of stockholders except as the provisions of
paragraph (2) of subsection (b) of Section 242 of the General Corporation Law
of the State of Delaware shall otherwise require; provided, that no share of
any such class which is otherwise denied voting power shall entitle the
holder thereof to vote upon the increase or decrease in the number of authorized
shares of said class.
NINTH: The personal liability of the directors of the Corporation
is hereby eliminated to the fullest extent permitted by the provisions of
paragraph (7) of subsection (h) of Section 102 of the General Corporation Law
of the State of Delaware, as the same may be amended and supplemented.
TENTH: The Corporation shall, to the fullest extent permitted by
the provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities, or other matters referred to
in or covered by said section, and the indemnification provided for herein
shall not be deemed exclusive of any other rights to which those indemnified
may be entitled under any Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director, officer,
employee, or agent and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
ELEVENTH: From time to time any of the provisions of this Certificate
of Incorporation may be amended, altered, or repealed, and other provisions
authorized by the laws of the State of
<PAGE> 14
Stock, without the written consent or affirmative vote of the holders of a
majority of the then outstanding shares of Series A Preferred Stock, 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 of any shares of capital stock with preference or
priority over the Series A Preferred Stock as to the right to receive either
dividends or amounts distributable upon liquidation, dissolution or winding up
of the Corporation shall be deemed to affect adversely the Series A Preferred
Stock, and the authorization of any shares of capital stock on a parity with
Series A Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the Corporation
shall not be deemed to affect adversely the Series A Preferred Stock. The
number of authorized shares of Series A Preferred Stock may be increased or
decreased (but not below the number of shares then outstanding) by the
directors of the Corporation pursuant to Section 151 of the General Corporation
Law of Delaware or by the affirmative vote of the holders of a majority of the
then outstanding shares of the Common Stock, Series A Preferred Stock and all
other classes or series of stock of the Corporation entitled to vote thereon,
voting as a single class, irrespective of the provisions of Section 242(b)(2)
of the General Corporation Law of Delaware.
4. Optional Conversion. The holders of the Series A Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock
shall be convertible, at the option of the holder thereof, at any time and from
time to time, and without the payment of additional consideration by the holder
thereof, into such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing $4.50 by the Conversion Price (as defined
below) in effect at the time of conversion. The "Conversion Price" shall
initially be $4.50. Such initial Conversion Price, and the rate at which shares
of Series A Preferred Stock may be converted into shares of Common Stock, shall
be subject to adjustment as provided below.
In the event of a liquidation of the Corporation, the Conversion Rights
shall terminate at the close of business on the first full day preceding the
date fixed for the payment of any amounts distributable on liquidation to the
holders of Series A Preferred Stock.
(b) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of the Series A Preferred
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<PAGE> 15
Stock. In lieu of any fractional shares to which the holder would otherwise be
entitled, the Corporation shall pay cash equal to such fraction multiplied by
the then effective Conversion Price.
(c) Mechanics of Conversion.
(i) In order for a holder of Series A Preferred Stock to
convert shares of Series A Preferred Stock into shares of Common Stock, such
holder shall surrender the certificate or certificates for such shares of
Series A Preferred Stock, at the office of the transfer agent for the Series A
Preferred Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent), together with written notice
that such holder elects to convert all or any number of the shares of the
Series A Preferred Stock represented by such certificate or certificates. Such
notice shall state such holder's name or the names of the nominees in which such
holder wishes the certificate or certificates for shares of Common Stock to be
issued. If required by the Corporation, certificates surrendered for conversion
shall be endorsed or accompanied by a written instrument or instruments of
transfer, in form satisfactory to the Corporation, duly executed by the
registered holder or his or its attorney duly authorized in writing. The date
of receipt of such certificates and notice by the transfer agent (or by the
Corporation if the Corporation serves as its own transfer agent) shall be the
conversion date ("Conversion Date"). The Corporation shall, as soon as
practicable after the Conversion Date, issue and deliver at such office to such
holder of Series A Preferred Stock, or to his or its nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder
shall be entitled, together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when the Series A
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the Series A Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding Series A Preferred Stock. Before taking any action which
would cause an adjustment reducing the Conversion Price below the then par
value of the shares of Common Stock issuable upon conversion of the Series A
Preferred Stock, the Corporation will take any corporate action which may, in
the opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and nonassessable shares of Common Stock
at such adjusted Conversion Price.
(iii) Upon any such conversion, no adjustment to the
Conversion Price shall be made for any declared but unpaid
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<PAGE> 16
dividends or any accrued but unpaid dividends on the Series A Preferred Stock
surrendered for conversion or on the Common Stock delivered upon conversion.
(iv) All shares of Series A Preferred Stock which shall
have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Conversion Date, except only the right of the holders thereof
to receive shares of Common Stock in exchange therefor and payment of any
dividends declared but unpaid thereon. Any shares of Series A Preferred Stock
so converted shall be retired and cancelled and shall not be reissued, and the
Corporation (without the need for stockholder action) may from time to time
take such appropriate action as may be necessary to reduce the authorized
Series A Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issuance or delivery of
shares of Common Stock upon conversion of shares of Series A Preferred Stock
pursuant to this Section 4. The Corporation shall not, however, be required to
pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of shares of Common Stock in a name other than that in
which the shares of Series A Preferred Stock so converted were registered, and
no such issuance or delivery shall be made unless and until the person or
entity requesting such issuance has paid to the Corporation the amount of any
such tax or has established, to the satisfaction of the Corporation, that such
tax has been paid.
(d) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the Original Issue
Date effect a subdivision of the outstanding Common Stock, the Conversion Price
then in effect immediately before that subdivision shall be proportionately
decreased. If the Corporation shall at any time or from time to time after the
date on which a share of Series A Preferred Stock was first issued (the
"Original Issue Date") combine the outstanding shares of Common Stock, the
Conversion Price then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this paragraph shall become
effective at the close of business on the date the subdivision or combination
becomes effective.
(e) No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger,
-8-
<PAGE> 17
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of the Series A Preferred Stock against
impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred Stock 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 of Series A Preferred Stock, furnish or cause to be furnished
to such holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of Series A Preferred Stock.
(g) Notice of Record Date. In the event:
(i) that the Corporation declares a dividend (or any
other distribution) on its Common Stock payable in
Common Stock or other securities of the Corporation;
(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination
of its outstanding shares of Common Stock or a stock
dividend or stock distribution thereon), or of any
consolidation or merger of the Corporation into or
with another corporation, or of the sale of all or
substantially all of the assets of the Corporation;
or
(iv) of the involuntary or voluntary dissolution,
liquidation or winding up of the Corporation;
-9-
<PAGE> 18
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock, and shall cause to
be mailed to the holders of the Series A Preferred Stock at their last addresses
as shown on the records of the Corporation or such transfer agent, at least ten
days prior to the date specified in (A) below or twenty days before the date
specified in (B) below, a notice stating
(A) the record date of such dividend, distribution, subdivision
or combination, 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, distribution, subdivision or
combination are to be determined, or
(B) the date on which such reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it
is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution
or winding up.
5. Mandatory Conversion.
(a) Upon the closing of the sale of shares of Common Stock, at
a price of at least $10.00 per share (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other similar recapitalizations
affecting such shares), in a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, resulting in at least $10,000,000 of gross proceeds to the
Corporation or on the date that is immediately prior the consolidation or merger
of the Corporation with or into another corporation or entity or the sale of all
or substantially all of the assets of the Corporation (the first of such dates
to occur being the "Mandatory Conversion Date"), (i) all outstanding shares of
Series A Preferred Stock shall automatically be converted into shares of Common
Stock, at the then effective conversion rate and (ii) the number of authorized
shares of Preferred Stock shall be automatically reduced by the number of shares
of Preferred Stock that had been designated as Series A Preferred Stock, and all
provisions included under the caption "Series A Convertible Preferred Stock",
and all references to the Series A Preferred Stock, shall be deleted and shall
be of no further force or effect.
-10-
<PAGE> 19
(b) All holders of record of shares of Series A Preferred Stock
shall be given written notice of the Mandatory Conversion Date and the place
designated for mandatory conversion of all such shares of Series A Preferred
Stock pursuant to this Section 5. Such notice need not be given in advance of
the occurrence of the Mandatory Conversion Date. Such notice shall be sent by
first class or registered mail, postage prepaid, to each record holder of Series
A Preferred Stock at such holder's address last shown on the records of the
transfer agent for the Series A Preferred Stock (or the records of the
Corporation, if it serves as its own transfer agent). Upon receipt of such
notice, each holder of shares of Series A Preferred Stock shall surrender his or
its certificate or certificates for all such shares to the Corporation at the
place designated in such notice, and shall thereafter receive certificates for
the number of shares of Common Stock to which such holder is entitled pursuant
to this Section 5. On the Mandatory Conversion Date, all rights with respect to
the Series A Preferred Stock so converted, including the rights, if any, to
receive notices and vote (other than as a holder of Common Stock) will
terminate, except only the rights of the holders thereof, upon surrender of
their certificate or certificates therefor, to receive certificates for the
number of shares of Common Stock into which such Series A Preferred Stock has
been converted, and payment of any declared but unpaid dividends thereon. If so
required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
by his or its attorney duly authorized in writing. As soon as practicable after
the Mandatory Conversion Date and the surrender of the certificate or
certificates for Series A Preferred Stock, the Corporation shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash as
provided in Subsection 4(b) in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series A Preferred
Stock which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the Mandatory Conversion Date, be deemed
to have been retired and cancelled and the shares of Series A Preferred Stock
represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. The Corporation may thereafter take such
appropriate action (without
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<PAGE> 20
the need for stockholder action) as may be necessary to reduce the authorized
Series A Preferred Stock accordingly.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
and attested by its Secretary this 19th day of June, 1997.
EMAGINET, INC.
By: /s/ KAMRAN AMJADI
-----------------------------
PRESIDENT
Kamran Amjadi
ATTEST:
MEHRDAD AKHAVAN
----------------------
SECRETARY
Mehrdad Akhavan
[CORPORATE SEAL]
<PAGE> 21
CORRECTED CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EMAGINET, INC.
Pursuant to Section 103
of the General Corporation Law of
the State of Delaware
---------------------------------
Emaginet, Inc. (hereinafter called the "Corporation"), organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation a resolution
was duly adopted, pursuant to Section 242 of the General Corporation Law of the
State of Delaware, setting forth an amendment to the Certificate of
Incorporation of the Corporation and declaring said amendment to be advisable.
The stockholders of the Corporation duly approved said proposed amendment by
written consent in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware, and written notice of such consent
has been given to all stockholders who have not consented in writing to said
amendment. The Certificate of Amendment filed on June 20, 1997 with respect to
such amendment was incorrect in setting forth the number shares of Common Stock
the Corporation shall have authority to issue and the number of Preferred
shares to be designated Series A Convertible Preferred
<PAGE> 22
Shares. Attached hereto is the corrected Certificate of Amendment in its
entirety.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Corrected Certificate of Amendment to be signed by its
President and attested by its Secretary this 29th day of August, 1997.
EMAGINET, INC.
By: /s/ KAMRAN AMJADI
-----------------------------
Kamran Amjadi, President
ATTEST:
/s/ MEHRDAD AKHAVAN
-----------------------------
Mehrdad Akhavan, Secretary
[CORPORATE SEAL]
-2-
<PAGE> 23
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EMAGINET, INC.
Pursuant to Section 242
of the General Corporation Law of
the state of Delaware
----------------------------------
Emaginet, Inc. (hereinafter called the "Corporation"), organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation a resolution
was duly adopted, pursuant to Section 242 of the General Corporation Law
of the State of Delaware, setting forth an amendment to the Certificate of
Incorporation of the Corporation and declaring said amendment to be advisable.
The stockholders of the Corporation duly approved said proposed amendment by
written consent in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware, and written notice of such consent has
been given to all stockholders who have not consented in writing to said
amendment. The resolution setting forth the amendment is as follows:
RESOLVED: That Article FOURTH of the Certificate of Incorporation of the
Corporation be and hereby is deleted in its entirety and the following Article
FOURTH is inserted in lieu thereof:
<PAGE> 24
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is (i) 20,000,000 shares of Common
Stock, $0.01 par value per share ("Common Stock") and (ii) 2,000,000 shares of
Preferred Stock, $0.01 par value per share ("Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
1. General. The voting, dividend and liquidation rights of the
holders of the Common Stock are subject to and qualified by the rights of the
holders of the Preferred Stock of any series as may be designated by the Board
of Directors upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote
for each share held at all meetings of stockholders (and written actions in
lieu of meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased
or decreased (but not below the number of shares thereof then outstanding) by
the affirmative vote of the holders of a majority of the stock of the
Corporation entitled to vote, irrespective of the provisions of Section
242(b)(2) of the General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the
Corporation, whether voluntary or involuntary, holders of Common Stock will be
entitled to receive all assets of the Corporation available for distribution to
its stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of
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<PAGE> 25
the Corporation as hereinafter provided. Any shares of Preferred Stock which may
be redeemed purchased or acquired by the Corporation may be reissued except
as otherwise provided by law. Different series of Preferred Stock shall not be
construed to constitute different classes of shares for the purposes of voting
by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, including without limitation thereof,
dividend rights, special voting rights, conversion rights, redemption privileges
and liquidation preferences, as shall be stated and expressed in such
resolutions, all to the full extent now or hereafter permitted by the General
Corporation Law of Delaware. Without limiting the generality of the foregoing,
the resolutions providing for issuance of any series of Preferred Stock may
provide that such series shall be superior or rank equally or be junior to the
Preferred Stock of any other series to the extent permitted by law. Except as
otherwise specifically provided in this Certificate of Incorporation, no vote of
the holders of the Preferred Stock or Common Stock shall be a prerequisite to
the issuance of any shares of any series of the Preferred Stock authorized by
and complying with the conditions of this Certificate of Incorporation, the
right to have such vote being expressly waived by all present and future
holders of the capital stock of the Corporation.
C. SERIES A CONVERTIBLE PREFERRED STOCK.
One Million Seven Hundred Thousand (1,700,000) shares of the authorized
and unissued Preferred Stock of the Corporation are hereby designated "Series A
Convertible Preferred Stock" (the "Series A Preferred Stock") with the following
rights, preferences, powers, privileges and restrictions, qualifications and
limitations.
1. Dividends.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive, out of funds legally available therefor, dividends of
$0.225 per share per annum (subject to appropriate adjustment in the event of
any stock dividend, stock split, combination or other similar recapitalization
affecting
-3-
<PAGE> 26
such shares), payable when and as declared by the Board of Directors of the
Corporation and payable in the discretion of the Board of Directors of the
Corporation in either cash or, based on the then fair market value of the Common
Stock of the Corporation, Common Stock of the Corporation. Such dividends shall
accrue and shall be cumulative from the date of issuance of each share of
Series A Preferred Stock, whether or not declared,
(b) The Corporation shall not declare or pay any distributions
(as defined below) on shares of Common Stock until the holders of the Series A
Preferred Stock then outstanding shall have first received a distribution at the
rate specified in paragraph (a) of this Section 1.
(c) For purposes of this Section 1, unless the context requires
otherwise, "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
Common Stock or other securities of the Corporation, or the purchase or
redemption of shares of the Corporation (other than repurchases of Common Stock
held by employees or directors of, or consultants to, the Corporation upon
termination of their employment or services pursuant to agreements providing for
such repurchase at a price equal to the original issue price of such shares and
other than redemptions in liquidation or dissolution of the Corporation) for
cash or property, including any such transfer, purchase or redemption by a
subsidiary of this Corporation.
2. Liquidation, Dissolution or Winding Up; Certain Mergers,
Consolidations and Asset Sales.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, 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 Corporation ranking on
liquidation prior and in preference to the Series A Preferred Stock
(collectively referred to as "Senior 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 the Series A Preferred Stock (such Common
Stock and other stock being collectively referred to as "Junior Stock") by
reason of their ownership thereof, an amount equal to $4.50 per share (subject
to appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares), plus any
dividends declared but unpaid thereon and any accrued but unpaid
-4-
<PAGE> 27
dividends thereon. If upon any such liquidation, dissolution or winding up of
the Corporation the remaining assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the holders of
shares of Series A Preferred Stock the full amount to which they shall be
entitled, the holders of shares of Series A Preferred Stock and any class or
series of stock ranking on liquidation on a parity with the Series A Preferred
Stock shall share ratably in any distribution of the remaining assets and funds
of the Corporation 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 payment of all preferential amounts required to
be paid to the holders of Senior Preferred Stock, Series A Preferred Stock and
any other class or series of stock of the Corporation ranking on liquidation on
a parity with the Series A Preferred Stock, upon the dissolution, liquidation or
winding up of the Corporation, the holders of shares of Junior Stock then
outstanding shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders.
(c) A consolidation or merger of the Corporation with or into
another corporation or entity, or a sale of all or substantially all of the
assets of the Corporation, shall not be regarded as a liquidation, dissolution
or winding up of the Corporation within the meaning of this Section 2.
3. Voting
(a) Each holder of outstanding shares of Series A 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 Series A Preferred Stock held by
such holder are then convertible (as adjusted from time to time pursuant to
Section 4 hereof), at each meeting of stockholders of the Corporation (and
written actions of stockholders in lieu of meetings) with respect to any and all
matters presented to the stockholders of the Corporation for their action or
consideration. Except as provided by law, by the provisions of Subsection 3(b)
below or by the provisions establishing any other series of Series Preferred
Stock, holders of Series A Preferred Stock and of any other outstanding series
of Series Preferred Stock shall vote together with the holders of Common Stock
as a single class.
(b) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series A Preferred Stock so
as to affect adversely the Series A Preferred
-5-
<PAGE> 28
Stock, without the written consent or affirmative vote of the holders of a
majority of the then outstanding shares of Series A Preferred Stock, 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 of any shares of capital stock with preference or
priority over the Series A Preferred Stock as to the right to receive either
dividends or amounts distributable upon liquidation, dissolution or winding up
of the Corporation shall be deemed to affect adversely the Series A Preferred
Stock, and the authorization of any shares of capital stock on a parity with
Series A Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the Corporation
shall not be deemed to affect adversely the Series A Preferred Stock. The number
of authorized shares of Series A Preferred Stock may be increased or decreased
(but not below the number of shares then outstanding) by the directors of the
Corporation pursuant to Section 151 of the General Corporation Law of Delaware
or by the affirmative vote of the holders of a majority of the then outstanding
shares of the Common Stock, Series A Preferred Stock and all other classes or
series of stock of the Corporation entitled to vote thereon, voting as a single
class, irrespective of the provisions of Section 242(b) (2) of the General
Corporation Law of Delaware.
4. Optional Conversion. The holders of the Series A Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock
shall be convertible, at the option of the holder thereof, at any time and from
time to time, and without the payment of additional consideration by the holder
thereof, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $4.50 by the Conversion Price (as defined below) in
effect at the time of conversion. The "Conversion Price" shall initially be
$4.50. Such initial Conversion Price, and the rate at which shares of Series A
Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided below.
In the event of a liquidation of the Corporation, the Conversion Rights
shall terminate at the close of business on the first full day preceding the
date fixed for the payment of any amounts distributable on liquidation to the
holders of Series A Preferred Stock.
(b) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of the Series A Preferred
-6-
<PAGE> 29
Stock. In lieu of any fractional shares to which the holder would otherwise be
entitled, the Corporation shall pay cash equal to such fraction multiplied by
the then effective Conversion Price.
(c) Mechanics of Conversion.
(i) In order for a holder of Series A Preferred Stock to
convert shares of Series A Preferred Stock into shares of Common Stock, such
holder shall surrender the certificate or certificates for such shares of Series
A Preferred Stock, at the office of the transfer agent for the Series A
Preferred Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent), together with written notice that
such holder elects to convert all or any number of the shares of the Series A
Preferred Stock represented by such certificate or certificates. Such notice
shall state such holder's name or the names of the nominees in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued.
If required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by a written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
his or its attorney duly executed by the registered holder or his or its
attorney duly authorized in writing. The date of receipt of such certificates
and notice by the transfer agent (or by the Corporation if the Corporation
serves as its own transfer agent) shall be the conversion date ("Conversion
Date"). The Corporation shall, as soon as practicable after the Conversion Date,
issue and deliver at such office to such holder of Series A Preferred Stock, or
to his or its nominees, a certificate or certificates for the number of shares
of Common Stock to which such holder shall be entitled, together with cash in
lieu of any fraction of a share.
(ii) The Corporation shall at all times when the Series A
Preferred Stock shall be outstanding, reserve and keep available out of its
authorized but unissued stock, for the purpose of effecting the conversion of
the Series A Preferred Stock, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding Series A Preferred Stock. Before taking any action which
would cause an adjustment reducing the Conversion Price below the then par value
of the shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, the Corporation will take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Corporation may validly and
legally issue fully paid and nonassessable shares of Common Stock at such
adjusted Conversion Price.
(iii) Upon any such conversion, no adjustment to the
Conversion Price shall be made for any declared but unpaid
-7-
<PAGE> 30
dividends or any accrued but unpaid dividends on the Series A Preferred Stock
surrendered for conversion or on the Common Stock delivered upon conversion.
(iv) All shares of Series A Preferred Stock which shall
have been surrendered for conversion as herein provided shall no longer be
deemed to be outstanding and all rights with respect to such shares, including
the rights, if any, to receive notices and to vote, shall immediately cease and
terminate on the Conversion Date, except only the right of the holders thereof
to receive shares of Common Stock in exchange therefor and payment of any
dividends declared but unpaid thereon. Any shares of Series A Preferred Stock so
converted shall be retired and cancelled and shall not be reissued, and the
Corporation (without the need for stockholder action) may from time to time take
such appropriate action as may be necessary to reduce the authorized Series A
Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issuance or delivery of shares
of Common Stock upon conversion of shares of Series A Preferred Stock pursuant
to this Section 4. The Corporation shall not, however, be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of shares of Common Stock in a name other than that in which the shares
of Series A Preferred Stock so converted were registered, and no such issuance
or delivery shall be made unless and until the person or entity requesting such
issuance has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(d) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the Original Issue
Date effect a subdivision of the outstanding Common Stock, the Conversion
Price then in effect immediately before that subdivision shall be
proportionately decreased. If the Corporation shall at any time or from time to
time after the date on which a share of Series A Preferred Stock was first
issued (the "Original Issue Date") combine the outstanding shares of Common
Stock, the Conversion Price then in effect immediately before the combination
shall be proportinately increased. Any adjustment under this paragraph shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(e) No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger,
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dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of the Series A Preferred Stock against
impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred Stock 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 any time
of any holder of Series A Preferred Stock, furnish or cause to be furnished to
such holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price then in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion of Series A Preferred Stock.
(g) Notice of Record Date. In the event:
(i) that the Corporation declares a dividend (or any
other distribution) on its Common Stock payable in
Common Stock or other securities of the Corporation;
(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination
of its outstanding shares of Common Stock or a stock
dividend or stock distribution thereon), or of any
consolidation or merger of the Corporation into or
with another corporation, or of the sale of all or
substantially all of the assets of the Corporation;
or
(iv) of the involuntary or voluntary dissolution,
liquidation or winding up of the Corporation;
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<PAGE> 32
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock, and shall cause to
be mailed to the holders of the Series A Preferred Stock at their last
addresses as shown on the records of the Corporation or such transfer agent, at
least ten days prior to the date specified in (A) below or twenty days before
the date specified in (B) below, a notice stating
(A) the record date of such dividend, distribution, subdivision
or combination, 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, distribution, subdivision or
combination are to be determined, or
(B) the date on which such reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it
is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution
or winding up.
5. Mandatory Conversion.
(a) Upon the closing of the sale of shares of Common Stock, at
a price of at least $10.00 per share (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other similar recapitalizations
affecting such shares), in a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, resulting in at least $10,000,000 of gross proceeds to the
Corporation or on the date that is immediately prior the consolidation or merger
of the Corporation with or into another corporation or entity or the sale of all
or substantially all of the assets of the Corporation (the first of such dates
to occur being the "Mandatory Conversion Date"), (i) all outstanding shares of
Series A Preferred Stock shall automatically be converted into shares of Common
Stock, at the then effective conversion rate and (ii) the number of authorized
shares of Preferred Stock shall be automatically reduced by the number of shares
of Preferred Stock that had been designated as Series A Preferred Stock, and all
provisions included under the caption "Series A Convertible Preferred Stock",
and all references to the Series A Preferred Stock, shall be deleted and shall
be of no further force or effect.
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<PAGE> 33
(b) All holders of record of shares of Series A Preferred Stock shall be
given written notice of the Mandatory Conversion Date and the place designated
for mandatory conversion of all such shares of Series A Preferred Stock pursuant
to this Section 5. Such notice need not be given in advance of the occurrence of
the Mandatory Conversion Date. Such notice shall be sent by first class or
registered mail, postage prepaid, to each record holder of Series A Preferred
Stock at such holder's address last shown on the records of the transfer agent
for the Series A Preferred Stock (or the records of the Corporation, if it
serves as its own transfer agent). Upon receipt of such notice, each holder of
shares of Series A Preferred Stock shall surrender his or its certificate or
certificates for all such shares to the Corporation at the place designated in
such notice, and shall thereafter receive certificates for the number of shares
of Common Stock to which such holder is entitled pursuant to this Section 5. On
the Mandatory Conversion Date, all rights with respect to the Series A Preferred
Stock so converted, including the rights, if any, to receive notices and vote
(other than as a holder of Common Stock) will terminate, except only the rights
of the holders thereof, upon surrender of their certificate or certificates
therefor, to receive certificates for the number of shares of Common Stock into
which such Series A Preferred Stock has been converted, and payment of any
declared but unpaid dividends thereon. If so required by the Corporation,
certificates surrendered for conversion shall be endorsed or accompanied by
written instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or by his or its attorney
duly authorized in writing. As soon as practicable after the Mandatory
Conversion Date and the surrender of the certificate or certificates for Series
A Preferred Stock, the Corporation shall cause to be issued and delivered to
such holder, or on his or its written order, a certificate or certificates for
the number of full shares of Common Stock issuable on such conversion in
accordance with the provisions hereof and cash as provided in Subsection 4(b)
in respect of any fraction of a share of Common Stock otherwise issuable upon
such conversion.
(c) All certificates evidencing shares of Series A Preferred Stock which
are required to be surrendered for conversion in accordance with the provisions
hereof shall, from and after the Mandatory Conversion Date, be deemed to have
been retired and cancelled and the shares of Series A Preferred Stock
represented thereby converted into Common Stock for all purposes,
notwithstanding the failure of the holder or holders thereof to surrender such
certificates on or prior to such date. The Corporation may thereafter take such
appropriate action (without
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<PAGE> 34
the need for stockholder action) as may be necessary to reduce the authorized
Series A Preferred Stock accordingly.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
and attested by its Secretary this 19th day of June, 1997.
EMAGINET, INC.
By: /s/ KAMRAN AMJADI
-----------------
Kamran Amjadi, President
ATTEST:
/s/ MEHRDAD AKHAVAN
-------------------
Mehrdad Akhavan, Secretary
[Corporate Seal]
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<PAGE> 35
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EMAGINET, INC.
PURSUANT TO SECTION 242
OF THE GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE
Emaginet, Inc. (hereinafter called the "Corporation"), organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation a resolution
was duly adopted, pursuant to Section 242 of the General Corporation Law of the
State of Delaware, setting forth an amendment to the Certificate of
Incorporation of the corporation and declaring said amendment to be advisable.
The stockholders of the Corporation duly approved said proposed amendment by
written consent in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware, and written notice of such consent has
been given to all stockholders who have not consented in writing to said
amendment. The resolution setting forth the amendment is as follows:
RESOLVED: That Article FOURTH of the Certificate of Incorporation of the
Corporation be and hereby is deleted in its entirety and the following Article
FOURTH is inserted in lieu thereof:
FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is (i) 20,000,000 shares of Common
Stock, $0.01 par value per share ("Common Stock") and (ii) 5,000,000 shares of
Preferred Stock, $0.01 par value per share ("Preferred Stock").
<PAGE> 36
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
1. General. The voting, dividend and liquidation rights of the holders
of the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the Board of Directors
upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote
for each share held at all meetings of stockholders (and written actions in lieu
of meetings). There shall be no cumulative voting.
The number of authorized shares of Common Stock may be increased
or decreased (but not below the number of shares thereof then outstanding) by
the affirmative vote of the holders of a majority of the stock of the
Corporation entitled to vote, irrespective of the provisions of Section
242(b)(2) of the General Corporation Law of Delaware.
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<PAGE> 37
3. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefore as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the
Corporation, whether voluntary or involuntary, holders of Common Stock will be
entitled to receive all assets of the Corporation available for distribution to
its stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of
shares for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing
for the issue of the shares thereof, to determine and fix such
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<PAGE> 38
voting powers, full or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without
limitation thereof, dividend rights, special voting rights, conversion rights,
redemption privileges and liquidation preferences, as shall be stated and
expressed in such resolutions, all to the full extent now or hereafter
permitted by the General Corporation Law of Delaware. Without limiting the
generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or
rank equally or be junior to the Preferred Stock of any other series to the
extent permitted by law. Except as otherwise specifically provided in this
Certificate of Incorporation, no vote of the holders of the Preferred Stock or
Common Stock shall be a prerequisite to the issuance of any shares of any
series of the Preferred Stock authorized by and complying with the conditions of
this Certificate of Incorporation, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.
C. SERIES A CONVERTIBLE PREFERRED STOCK.
Two Million (2,000,000) shares of the authorized and unissued Preferred
Stock of the Corporation are hereby designated "Series A Convertible Preferred
Stock" (the "Series A Preferred Stock") and Three Million (3,000,000) shares of
the authorized and unissued Preferred Stock of the Corporation are hereby
designated "Series B Convertible Preferred Stock" (the "Series B Preferred
Stock") with the following rights, preferences, powers, privileges and
restrictions, qualifications and limitations.
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<PAGE> 39
1. Dividends.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive, out of funds legally available therefor, dividends of
$0.225 per share per annum (subject to appropriate adjustment in the event of
any stock dividend, stock split, combination or other similar recapitalization
affecting such shares), payable when and as declared by the Board of Directors
of the Corporation and payable in the discretion of the Board of Directors of
the Corporation in either cash or, based on the then fair market value of the
Common Stock of the Corporation, Common Stock of the Corporation. Such
dividends shall accrue and shall be cumulative from the date of issuance of
each share of Series A Preferred Stock, whether or not declared.
(b) The Corporation shall not declare or pay any distributions
(as defined below) on any shares junior in dividend rights until the holders of
the Series A Preferred Stock then outstanding shall have first received the
preferential dividend at the rate specified in paragraph (a) of this Section 1.
(c) For purposes of this Section 1, unless the context requires
otherwise, "distribution" shall mean (i) the transfer of cash or property
without consideration, whether by way of dividend or otherwise, excluding a
dividend payable in Common Stock or in other junior securities of the
Corporation, or (ii) the purchase or redemption of shares of the Corporation or
subsidiary of the Corporation (excluding repurchases of Common Stock held by
employees or
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<PAGE> 40
directors of, or consultants to, the Corporation upon termination of their
employment or services pursuant to agreements providing for such repurchase at
a price equal to the original issue price of such shares) and excluding
redemptions in liquidation or dissolution or winding up of the Corporation or
subsidiary.
(d) The holders of shares of Class B Preferred Stock shall not
be entitled to receive any predetermined or preferential amount of dividends as
the holders of Class A Preferred Stock shall be entitled, but shall be entitled
to participate equally (based on the amount of Common Stock they would receive
if they were to convert their Preferred Stock holding to a Common Stock
holding) in any dividends that may be declared and paid on the Common Stock
from funds lawfully available therefore as and when determined by the Board of
Directors and subject to any preferential payment.
2. Liquidation, Dissolution or Winding Up: Certain Mergers,
Consolidations and Asset Sales.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the respective holders of shares
of Series A Preferred Stock then outstanding shall first be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders, 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
Corporation ranking on liquidation prior and in preference to the Series A
Preferred Stock (referred to as "Senior
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<PAGE> 41
Preferred Stock"), but before any payment shall be made to the holders of Series
B Preferred Stock or Common Stock or any other class or series of stock ranking
on liquidation junior to the Series A Preferred Stock (such Common Stock and
other stock being collectively referred to as "Junior Stock") by reason of their
ownership thereof, an amount equal to $4.50 per share for Series A Preferred
Stock (subject to appropriate adjustment in the event of any stock dividend,
stock split, combination or other similar recapitalization affecting such
shares), plus any dividends declared but unpaid thereon and any accrued but
unpaid dividends thereon. If upon any such liquidation, dissolution or winding
up of the Corporation the remaining assets of the Corporation available for
distribution to its stockholders shall be insufficient to pay the holders of
shares of Series A Preferred Stock the full amount to which they shall be
entitled, the holders of shares of Series A Preferred Stock and any class or
series of stock ranking on liquidation on a parity with the Series A Preferred
Stock shall share ratably in any distribution of the remaining assets and funds
of the Corporation 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 payment of all preferential amounts required to
be paid to the holders of Series A Preferred Stock and any other class or series
of stock of the Corporation ranking on liquidation on a parity with the Series A
Preferred Stock, upon the dissolution, liquidation or winding up of the
Corporation, the holders of shares of Series B Preferred Stock then outstanding
shall then be entitled to receive before any distribution or payment is made
upon any stock ranking in liquidation junior to the Series B Preferred Stock
including, but not limited to
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<PAGE> 42
the Common Stock, $6.OO per share for Series B Preferred Stock (subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares), plus any
dividends declared but unpaid thereon. If upon any such liquidation, dissolution
or winding up of the Corporation the remaining assets of the Corporation
available for distribution to its stockholders shall be insufficient to pay the
holders of shares of Series B Preferred Stock the full amount to which they
shall be entitled, the holders of shares of Series B Preferred Stock and any
class or series of stock ranking on liquidation on a parity with the Series B
Preferred Stock shall share ratably in any distribution of the remaining assets
and funds of the Corporation 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.
(c) After the payment of all preferential amounts required to
be paid to the holders of Series A Preferred Stock and Series B Preferred Stock
and any other class or series of stock of the Corporation ranking on liquidation
on a parity with the Series A Preferred Stock and Series B Preferred Stock, upon
the dissolution, liquidation or winding up of the Corporation, the holders of
shares of Common Stock then outstanding shall then be entitled to receive the
remaining assets and funds of the Corporation available for distribution to its
stockholders. Holders of Series A Preferred Stock and Series B Preferred Stock
shall not be entitled to any more distributions than their preferential amounts.
(d) A consolidation or merger of the Corporation with or into
another corporation or entity, or a sale of all or substantially all of the
assets of the Corporation, shall not
8
<PAGE> 43
be regarded as a liquidation, dissolution or winding up of the Corporation
within the meaning of this Section 2.
3. Voting.
(a) Each holder of outstanding shares of Series A Preferred
Stock or Series B 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 Series A
Preferred Stock or Series B Preferred Stock held by such holder are then
convertible (as adjusted from time to time pursuant to Section 4 hereof), at
each meeting of stockholders of the Corporation (and written actions of
stockholders in lieu of meetings) with respect to any and all matters presented
to the stockholders of the Corporation for their action or consideration. Except
as provided by law, by the provisions of Subsection 3(b) below or by the
provisions establishing any other series of Series Preferred Stock, holders of
Series A Preferred Stock or Series B Preferred Stock and of any other
outstanding series of Series Preferred Stock shall vote together with the
holders of Common Stock as a single class.
(b) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series A Preferred Stock or
Series B Preferred Stock so as to affect adversely the Series A Preferred Stock
or Series B Preferred Stock, without the written consent or affirmative vote of
the holders of a majority of the then outstanding shares of Series A Preferred
Stock or Series B Preferred Stock, given in writing or by vote at a meeting,
consenting
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<PAGE> 44
or voting (as the case may be) separately as a class. For this purpose, without
limiting the generality of the foregoing, the authorization of any shares of
capital stock with preference or priority over the Series A Preferred Stock or
Series B Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the Corporation
shall be deemed to affect adversely the Series A Preferred Stock or Series B
Preferred Stock, and the authorization of any shares of capital stock on a
parity with Series A Preferred Stock or Series B Preferred Stock as to the right
to receive either dividends or amounts distributable upon liquidation,
dissolution or winding up of the Corporation shall not be deemed to affect
adversely the Series A Preferred Stock or Series B Preferred Stock. The number
of authorized shares of Series A Preferred Stock or Series B Preferred Stock may
be increased or decreased (but not below the number of shares then outstanding)
by the directors of the Corporation pursuant to Section 151 of the General
Corporation Law of Delaware or by the affirmative vote of the holders of a
majority of the then outstanding shares of the Common Stock, Series A Preferred
Stock or Series B Preferred Stock and all other classes or series of stock of
the Corporation entitled to vote thereon, voting as a single class, irrespective
of the provisions of Section 242(b)(2) of the General Corporation Law of
Delaware.
4. Optional Conversion. The holders of the Series A Preferred Stock
or Series B Preferred Stock shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock or
Series B Preferred Stock shall be convertible, at the option of the holder
thereof, at any time and from time
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<PAGE> 45
to time, and without the payment of additional consideration by the holder
thereof, into such number of fully paid and nonassessable shares of Common
Stock as is determined by dividing $4.50 with respect to the Series A Preferred
Stock and $6.00 with respect to the Series B Preferred Stock by the Conversion
Price (as defined below) in effect at the time of conversion. The "Conversion
Price" shall initially be $4.50 for the Series A Preferred Stock and $6.00 for
the Series B Preferred Stock. Such initial Conversion Price, and the rate at
which shares of Series A Preferred Stock or Series B Preferred Stock may be
converted into shares of Common Stock, shall be subject to adjustment as
provided below.
In the event of a liquidation of the Corporation, the Conversion Rights
shall terminate at the close of business on the first full day preceding the
date fixed for the payment of any amounts distributable on liquidation to the
holders of Series A Preferred Stock or Series B Preferred Stock.
(b) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of the Series A Preferred Stock or Series B
Preferred Stock. In lieu of any fractional shares to which the holder would
otherwise be entitled, the Corporation shall pay cash equal to such fraction
multiplied by the then effective Conversion Price.
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<PAGE> 46
(c) Mechanics of Conversion.
(i) In order for a holder of Series A Preferred Stock or
Series B Preferred Stock to convert shares of Series A Preferred Stock or Series
B Preferred Stock into shares of Common Stock, such holder shall surrender the
certificate or certificates for such shares of Series A Preferred Stock or
Series B Preferred Stock at the office of the transfer agent for the Series A
Preferred Stock or Series B Preferred Stock (or at the principal office of the
Corporation if the Corporation serves as its own transfer agent), together with
written notice that such holder elects to convert all or any number of the
shares of the Series A Preferred Stock or Series B Preferred Stock represented
by such certificate or certificates. Such notice shall state such holder's name
or the names of the nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. If required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or his
or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the conversion date
("Conversion Date"). The Corporation shall, as soon as practicable after the
Conversion Date, issue and deliver at such office to such holder of Series A
Preferred Stock or Series B Preferred Stock, or to his or its nominees, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled, together with cash in lieu of any fraction of a
share.
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<PAGE> 47
(ii) The Corporation shall at all times when the Series A
Preferred Stock or Series B Preferred Stock shall be outstanding, reserve and
keep available out of its authorized but unissued stock, for the purpose of
effecting the conversion of the Series A Preferred Stock or Series B Preferred
Stock, such number of its duly authorized shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding Series A
Preferred Stock or Series B Preferred Stock. Before taking any action which
would cause an adjustment reducing the Conversion Price below the then par
value of the shares of Common Stock issuable upon conversion of the Series A
Preferred Stock or Series B Preferred Stock, the Corporation will take any
corporate action which may, in the opinion of its counsel, be necessary in
order that the Corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Conversion Price.
(iii) Upon any such conversion, no adjustment to the
Conversion Price shall be made for any declared but unpaid dividends or any
accrued but unpaid dividends on the Series A Preferred Stock or Series B
Preferred Stock surrendered for conversion or on the Common Stock delivered upon
conversion.
(iv) All shares of Series A Preferred Stock or Series B
Preferred Stock which shall have been surrendered for conversion as herein
provided shall no longer be deemed to be outstanding and all rights with
respect to such shares, including the rights, if any, to receive notices and to
vote, shall immediately cease and terminate on the Conversion Date, except only
the right of the holders thereof to receive shares of Common Stock in exchange
therefor and
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<PAGE> 48
payment of any dividends declared but unpaid thereon. Any shares of Series A
Preferred Stock or Series B Preferred Stock so converted shall be retired and
cancelled and shall not be reissued, and the Corporation (without the need for
stockholder action) may from time to time take such appropriate action as may
be necessary to reduce the authorized Series A Preferred Stock or Series B
Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issuance or delivery of shares
of Common Stock upon conversion of shares of Series A Preferred Stock or Series
B Preferred Stock pursuant to this Section 4. The Corporation shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of shares of Common Stock in a
name other than that in which the shares of Series A Preferred Stock or Series B
Preferred Stock so converted were registered, and no such issuance or delivery
shall be made unless and until the person or entity requesting such issuance has
paid to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(d) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Conversion Price then
in effect immediately before that subdivision shall be proportionately
decreased. If the Corporation shall at any time or from time to time after the
date on which a share of Series A Preferred Stock or Series B Preferred Stock
was first issued (the "Original Issue Date") combine the outstanding shares of
Common Stock, the Conversion Price
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<PAGE> 49
then in effect immediately before the combination shall be proportionately
increased. Any adjustment under this paragraph shall become effective at the
close of business on the date the subdivision or combination becomes effective.
(e) No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Series A Preferred Stock or Series B Preferred Stock against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and furnish to each holder of
Series A Preferred Stock or Series B Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which each
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock or Series B
Preferred Stock, furnish or cause to be furnished to such holder a similar
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price then in effect, and (iii) the number of shares of Common Stock
and the amount,
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<PAGE> 50
if any, of other property which then would be received upon the conversion of
Series A Preferred Stock or Series B Preferred Stock.
(g) Notice of Record Date. In the event:
(i) that the Corporation declares a dividend (or any
other distribution) on its Common Stock payable in
Common Stock or other securities of the Corporation;
(ii) that the Corporation subdivides or combines its
outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock of the
Corporation (other than a subdivision or combination
of its outstanding shares of Common Stock or a stock
dividend or stock distribution thereon), or of any
consolidation or merger of the Corporation into or
with another corporation, or of the sale of all or
substantially all of the assets of the Corporation;
or
(iv) of the involuntary or voluntary dissolution,
liquidation or winding up of the Corporation;
16
<PAGE> 51
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Series A Preferred Stock or Series B
Preferred Stock, and shall cause to be mailed to the holders of the Series A
Preferred Stock or Series B Preferred Stock, at their last addresses as shown
on the records of the Corporation, or such transfer agent, at least ten days
prior to the date specified in (A) below or twenty days before the date
specified in (B) below, a notice stating
(A) the record date of such dividend, distribution, subdivision
or combination, 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, distribution, subdivision or
combination are to be determined, or
(B) the date on which such reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it
is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution
or winding up.
17
<PAGE> 52
5. Mandatory Conversion
(a) Upon the closing of the sale of shares of Common Stock, at
a price of at least $10.00 per share (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other similar recapitalizations
affecting such shares), in a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, resulting in at least $10,000,000 of gross proceeds to the
Corporation or on the date that is immediately prior the consolidation or merger
of the Corporation with or into another corporation or entity or the sale of all
or substantially all of the assets of the Corporation (the first of such dates
to occur being the "Mandatory Conversion Date"), (i) all outstanding shares of
Series A Preferred Stock and Series B Preferred Stock shall automatically be
converted into shares of Common Stock, at the then effective conversion rate and
(ii) the number of authorized shares of Preferred Stock shall be automatically
reduced by the number of shares of Preferred Stock that had been designated as
Series A Preferred Stock or Series B Preferred Stock, and all provisions
included under the caption "Series A Convertible Preferred Stock" or "Series B
Convertible Preferred Stock" and all references to the Series A Preferred Stock
or Series B Preferred Stock, shall be deleted and shall be of no further force
or effect.
(b) All holders of record of shares of Series A Preferred Stock
and Series B Preferred Stock shall be given written notice of the Mandatory
Conversion Date and the place designated for mandatory conversion of all such
shares of Series A Preferred Stock and Series B Preferred Stock pursuant to this
Section 5. Such notice need not be given in advance of
18
<PAGE> 53
the occurrence of the Mandatory Conversion Date. Such notice shall be sent by
first class or registered mail, postage prepaid, to each record holder of Series
A Preferred Stock and Series B Preferred Stock at such holder's address last
shown on the records of the transfer agent for the Series A Preferred Stock or
Series B Preferred Stock (or the records of the Corporation, if it serves as its
own transfer agent). Upon receipt of such notice, each holder of shares of
Series A Preferred Stock or Series B Preferred Stock shall surrender his or its
certificate or certificates for all such shares to the Corporation at the place
designated in such notice, and shall thereafter receive certificates for the
number of shares of Common Stock to which such holder is entitled pursuant to
this Section 5. On the Mandatory Conversion Date, all rights with respect to the
Series A Preferred Stock or Series B Preferred Stock so converted, including the
rights, if any, to receive notices and vote (other than as a holder of Common
Stock) will terminate, except only the rights of the holders thereof, upon
surrender of their certificate or certificates therefor, to receive certificates
for the number of shares of Common Stock into which such Series A Preferred
Stock or Series B Preferred Stock has been converted, and payment of any
declared but unpaid dividends thereon. If so required by the Corporation,
certificates surrendered for conversion shall be endorsed or accompanied by
written instrument or instruments of transfer, in form satisfactory to the
Corporation, duly executed by the registered holder or by his or its attorney
duly authorized in writing. As soon as practicable after the Mandatory
Conversion Date and the surrender of the certificate or certificates for Series
A Preferred Stock or Series B Preferred Stock, the Corporation shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash as
provided in Subsection
19
<PAGE> 54
4(b) in respect of any fraction of a share of Common Stock otherwise issuable
upon such conversion.
(c) All certificates evidencing shares of Series A Preferred
Stock or Series B Preferred Stock which are required to be surrendered for
conversion in accordance with the provisions hereof shall, from and after the
Mandatory Conversion Date, be deemed to have been retired and cancelled and the
shares of Series A Preferred Stock or Series B Preferred Stock represented
thereby converted into Common Stock for all purposes, notwithstanding the
failure of the holder or holders thereof to surrender such certificates on or
prior to such date. The Corporation may thereafter take such appropriate action
(without the need for stockholder action) as may be necessary to reduce the
authorized Series A Preferred Stock or Series B Preferred Stock accordingly.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
and attested by its Secretary this 3rd day of February, 1999.
EMAGINET, INC.
By: /s/ KAMRAN AMJADI
------------------------
Kamran Amjadi
President
20
<PAGE> 55
ATTEST:
/s/ MEHRDAD AKHAVAN
------------------------
Mehrdad Akhavan
Secretary
[Corporate Seal]
21
<PAGE> 56
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EMAGINET, INC.
PURSUANT TO SECTION 242
OF THE GENERAL CORPORATION LAW OF
THE STATE OF DELAWARE
Emaginet, a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Certificate of Incorporation of Emaginet, Inc. be
amended by changing the First Article thereof so that, as amended, said Article
shall be and read as follows:
"The name of the corporation shall be e-centives, Inc."
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
and attested by its Secretary this 11th day of March, 1999.
EMAGINET, INC.
BY: /s/ KAMRAN AMJADI
------------------------
Kamran Amjadi
President
ATTEST:
/s/MEHRDAD AKHAVAN
-------------------
Mehrdad Akhavan
Secretary
[Corporate Seal]
<PAGE> 57
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 01/24/2000
001036051 - 2650098
CERTIFICATE OF AMENDMENT
OF
AMENDED CERTIFICATE OF INCORPORATION
OF
E-CENTIVES, INC.
It is hereby certified that:
FIRST: The name of the corporation is e-centives, Inc. (the
"Corporation"), and the Corporation is organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the "DGCL").
SECOND: The Board of Directors of the Corporation, for the
purpose of taking action without a meeting pursuant to Section 141(f) of the
DGCL, duly adopted by unanimous written consent, a resolution setting forth a
proposed amendment of the Amended Certificate of Incorporation of the
Corporation, declaring such amendment to be advisable and authorized and
directed the Corporation's officers to submit such amdendment to the
Corporation's stockholders for approval in accordance with the DGCL. The
resolution setting forth the proposed amendment is as follows:
NOW THEREFORE BE IT RESOLVED, that the Board of Directors of the
Company hereby approves and adopts the following amendment (the
"Certificate Amendment") to Article FOURTH of the Company's
Amended Certificate of Incorporation, so that the first paragraph
of such Article FOURTH shall read in its entirety:
"FOURTH: The total number of shares of all classes of stock which
the Corporation shall have the authority to issue is thirty-five
million (35,000,000), of which (i) twenty-five million
(25,000,000) of such shares shall be common stock, having a
par value of $.01 per share ("Common Stock"), and (ii) ten million
(10,000,000) of such shares shall be preferred stock, having a par
value of $.01 per share ("Preferred Stock").
THIRD: The amendment to the Amended Certificate of Incorporation
herein has been duly adopted and written consent has been given in accordance
with the provisions of Sections 228 and 242 of the DGCL.
<PAGE> 58
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Kamran Amjadi, its Chief Executive Officer, and
attested by Mehrdad Akhavan, its President, Chief Operating Officer and
Corporate Secretary, this 21st day of January, 2000.
E-CENTIVES, INC.
By: /s/ KAMRAN AMJADI
-----------------------------
Kamran Amjadi
Chief Executive Officer
Attest:
By: /s/ MEHRDAD AKHAVAN
-----------------------------
Mehrdad Akhavan
President, Chief Operating
Officer and Corporate Secretary
2
<PAGE> 59
CERTIFICATE OF DESIGNATIONS
RIGHTS, PREFERENCES, PRIVILEGES AND RESTRICTIONS
OF SERIES C CONVERTIBLE PREFERRED STOCK
BY RESOLUTION OF
THE BOARD OF DIRECTORS OF
E-CENTIVES, INC.
PURSUANT TO SECTION 151 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
SERIES C CONVERTIBLE PREFERRED STOCK
I, Kamran Amjadi, Chief Executive Officer of e-centives, Inc. (the
"Corporation"), a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware ("DGCL"), DO HEREBY CERTIFY
that, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation, as amended, of the Corporation (the "Certificate
of Incorporation"), the Board of Directors, in accordance with the provisions of
Section 151 of the DGCL, adopted the following resolution, effective as of
February , 2000, providing for the creation of the Series C Convertible
Preferred Stock:
RESOLVED that, pursuant to Article Fourth of the Certificate of
Incorporation of the Corporation, there be and hereby is authorized and created
a series of Convertible Preferred Stock consisting of 2,330,000 shares having a
par value of $.01 per share, which series shall be titled "Series C Convertible
Preferred Stock."
The designations, rights, preferences, privileges and restrictions of the
Series C Convertible Preferred Stock shall be made as follows:
1. Designation and Amount.
The series of Preferred Stock shall be designated and known as
"Series C Convertible Preferred Stock" (the "Series C Preferred Stock") and
shall consist of 2,330,000 shares having a par value of $0.01 per share. Certain
defined terms used herein are defined in paragraph 7 below.
2. Dividends.
Holders of Series C Preferred Stock shall be entitled to receive
dividends, when and as declared by the Corporation's Board of Directors, but
only out of funds that are legally available therefor. In the event that
the Corporation declares or pays any dividends upon the Common Stock (whether
payable in cash, securities or other property), other than dividends payable
solely in shares of
<PAGE> 60
Common Stock, the Corporation shall also declare and pay to the holders of the
Series C Preferred Stock at the same time that it declares and pays such
dividends to the holders of the Common Stock, the dividends which would have
been declared and paid with respect to the Common Stock issuable upon conversion
of the Series C Preferred Stock had all of the outstanding Series C Preferred
Stock been converted immediately prior to the record date for such dividend, or
if no record date is fixed, the date as of which the record holders of Common
Stock entitled to such dividends are to be determined. No dividends shall be
paid or declared, and no distribution shall be made, on any Common Stock, Series
A Convertible Preferred Stock or Series B Convertible Preferred Stock of the
Corporation, other than cumulative dividends paid upon the Series A Convertible
Preferred Stock as required under the Certificate of Incorporation, unless
equivalent dividends (determined on an as-converted basis) are concurrently paid
on the Series C Preferred Stock, and no shares of Common Stock, Series A
Convertible Preferred Stock or Series B Convertible Preferred Stock shall be
purchased, redeemed, or acquired by the Corporation and no funds shall be paid
into or set aside or made available for a sinking fund for the purchase,
redemption, or acquisition thereof; provided, however, that this restriction
shall not apply to the repurchase of shares of Common Stock approved by the
Board of Directors held by employees, officers, directors, consultants or other
persons performing services for the Corporation or any wholly-owned subsidiary
(including, but not by way of limitation, distributors and sales
representatives) that are subject to restrictive securities purchase agreements
under which the Corporation has the option to repurchase such shares.
3. Liquidation Rights.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of the Common Stock, the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock and any
other stock of the Corporation that is not by its terms expressly senior to in
right of payment to the Series C Preferred Stock, the holders of Series C
Preferred Stock shall be entitled to be paid out of the assets of the
Corporation with respect to each share of Series C Preferred Stock an amount
equal to the sum of (i) $10.20 (the "Original Series C Issue Price"), as
appropriately adjusted for any future stock splits, stock combinations, stock
dividends or similar transactions affecting the Series C Preferred Stock, plus
(ii) all declared but unpaid dividends thereon (the "Series C Liquidation
Value"). If, upon any liquidation, dissolution or winding up, the assets of the
Corporation shall be insufficient to make payment in full to all holders of
Series C Preferred Stock, then such assets shall be distributed among the
holders of Series C Preferred Stock at the time outstanding, ratably in
proportion to the full amounts to which they would otherwise be respectively
entitled. After payment in full to the holder of Series C Preferred Stock of the
aggregate liquidation preference
2
<PAGE> 61
as aforesaid, the holder of the Series C Preferred Stock shall, as such, have
no right or claim to any of the remaining assets of the Corporation.
(b) The following events shall be considered a liquidation for
purposes of Section 3(a):
(i) any merger, consolidation, business combination,
reorganization or recapitalization of the Corporation in which the Corporation
is not the surviving entity or in which the stockholders of the Corporation
immediately prior to such transaction own capital stock representing less than
fifty percent (50%) of the Corporation's voting power immediately after such
transaction (an "Acquisition"); or
(ii) a sale, lease or other disposition of all or substantially
all of the assets of the Corporation (an "Asset Transfer").
(c) Effect of Noncompliance. In the event the requirements of
this Section 3 are not complied with, the Corporation shall forthwith either
cause the closing of the transaction to be postponed until such requirements
have been complied with, or cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock and Series C Preferred Stock shall
revert to and be the same as such rights, preferences and privileges existing
immediately prior to the date of the first notice referred to in Section 6(k)
hereof.
4. Voting
(a) Generally. Except as otherwise provided herein or as
required by law, the Series C Preferred Stock shall vote with the shares of the
Common Stock and any other class of capital stock of the Corporation having
similar voting rights (and not as a separate class) at any annual or special
meeting of stockholders of the Corporation, and may act by written consent in
the same manner as the Common Stock, in either case upon the following basis:
each holder of shares of Series C Preferred Stock shall be entitled to such
number of votes as shall be equal to the whole number of shares of Common Stock
into which such holder's aggregate number of shares of Series C Preferred Stock
are convertible pursuant to Section 6 below immediately after the close of
business on the record date fixed for such meeting or the effective date of such
written consent.
(b) Election of Directors. So long as 470,000 shares of Series C
Preferred Stock are outstanding, in the election of directors of the
Corporation, the holders of the Series C Preferred Stock, voting separately as a
single class to the exclusion of all other classes of the Corporation's capital
stock and with each share of Series C Preferred Stock entitled to one vote,
shall be entitled to elect one director to serve on the Corporation's Board of
Directors. Each director elected by the holders of
3
<PAGE> 62
Series C Preferred Stock shall serve until such person's successor is duly
elected by the holders of the Series C Preferred Stock entitled to elect such
director or such person is removed from office by such holders. If the holders
of Series C Preferred Stock for any reason fail to elect a director to fill any
such directorship, such position shall remain vacant until such time as the
holders of Series C Preferred Stock elect a director to fill such position and
shall not be filled by resolution or vote of the Corporation's Board of
Directors of the Corporation's other stockholders.
(c) Class Vote Requirements. So long as 470,000 shares of
Series C Preferred Stock are outstanding, without the affirmative vote or
consent of the holders of a majority of the outstanding shares of Series C
Preferred Stock, voting or consenting as a single class, the Corporation
will not:
(i) create, issue or authorize the issuance of any other
capital stock of the Corporation that is senior to or pari passu with the Series
C Preferred Stock with respect to the payment of dividends, redemptions,
conversion, voting or payments in connection with the liquidation of the
Corporation,
(ii) redeem, purchase or otherwise acquire (or pay into or set
funds aside for a sinking fund for such purpose) any outstanding capital stock
other than capital stock permitted to be redeemed pursuant to the Certificate of
Incorporation,
(iii) enter into any agreement that would restrict the
Corporation's ability to (A) perform its obligations under the Series C
Convertible Preferred Stock Purchase Agreement, dated as of February __, 2000,
among the Corporation and the holders of the Series C Preferred Stock or (B)
redeem the Series C Preferred Stock if required under the provisions of
Section 5 hereof,
(iv) amend the Corporation's Certificate of Incorporation or
by-laws in a manner that adversely affects the rights and preferences of the
holders of the Series C Preferred Stock (except that the Corporation may effect
a reverse split of its Common Stock without obtaining any consent of the holders
of the Series C Preferred Stock),
(v) issue any additional capital stock to employees, officers
or directors of the Corporation, except for capital stock issuable under (x)
existing contractual arrangements with Kamran Amjadi and Mehrdad Akhavan in
existence on the Original Issue Date, (y) upon the exercise of options and
warrants outstanding as of the Original Issue Date, or (z) upon the exercise of
options or warrants granted after the Original Issue Date with an exercise price
not less than the fair market value of the securities subject to such options or
warrants, as determined by the Board of Directors or the Corporation,
4
<PAGE> 63
(vi) adopt any additional employee stock option or stock
purchase plans or increase the number of shares of stock reserved under employee
stock option or stock purchase plans,
(vii) increase or decrease the authorized number of shares of
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock or
Series C Preferred Stock,
(viii) engage in any merger, consolidation, business combination,
reorganization or recapitalization of the Corporation in which the stockholders
of the Corporation immediately prior to such transaction own capital stock
representing less than fifty percent (50%) of the surviving corporation's voting
power immediately after such transaction, or a sale, lease or other disposition
of all or substantially all of the assets of the Corporation,
(ix) pay or declare any dividend upon the Common Stock,
(x) sell securities of any subsidiary to a third party,
(xi) grant additional registration rights after the Original
Issue Date with respect to any shares of capital stock of the Corporation other
than the Series C Preferred Stock,
(xii) change the number of directors of the Corporation to
greater than five (5) members, or
(xiii) liquidate, dissolve or wind up the Corporation.
The provisions of this Section 4(c) shall not, however, apply to (i) the
acquisition or issuance of shares of any common stock of the Corporation solely
in exchange for shares of any other stock of the Corporation, or (ii) the
repurchase or redemption of stock held by current or former employees, directors
or consultants in connection with termination of employment or service as an
employee, director or consultant pursuant to contractual repurchase rights or
that is otherwise approved by the Corporation's Board of Directors.
5. Redemption Rights.
(a) Redemption. At any time after December 31, 2004, holders of
a majority of the outstanding shares of Series C Preferred Stock may, upon
ninety (90) days prior written notice, require that the Corporation redeem all
of the then-outstanding shares of Series C Preferred Stock at a price per share
equal to the Series C Liquidation Value (as adjusted for any stock dividends,
combinations or splits with respect to such shares) plus all declared or
accumulated but unpaid
5
<PAGE> 64
dividends on such shares. If the redemption of fewer than all of the outstanding
shares of Series C Preferred Stock is requested pursuant to this Section 5(a),
such redemption shall be made on a pro rata basis among all of the holders of
the Series C Preferred Stock based on the number of shares of such series held
by such holders.
(b) Redemption Payments. For each share of Series C Preferred
Stock which is to be redeemed hereunder, the Corporation shall be obligated to
pay to the holder thereof (upon surrender by such holder at the Corporation's
principal office of the certificate representing such share) an amount in cash
equal to the Series C Liquidation Value. If the funds of the Corporation legally
available for redemption of Series C Preferred Stock are insufficient to
redeemed the total number of shares to be redeemed, those funds which are
legally available shall be used to redeem the maximum possible number of shares
pro rata among the holders of Series C Preferred Stock to be redeemed based upon
the aggregate Series C Liquidation Value of the Series C Preferred Stock held by
each such holder. At any time thereafter when additional funds of the
Corporation are legally available for the redemption of Series C Preferred
Stock, such funds shall immediately be used to redeem the balance of the shares
which the Corporation has become obligated to redeem but which it has not
redeemed.
6. Conversion Rights.
The holders of the Series C Preferred Stock shall have the
following rights with respect to the conversion of the Series C Preferred Stock
into shares of Common Stock:
(a) Optional Conversion. Subject to and in compliance with the
provisions of this Section 6, each share of Series C Preferred Stock may, at the
option of the holder, be converted at any time into fully-paid and nonassessable
shares of Common Stock of the Corporation. The number of shares of Common Stock
to which a holder of Series C Preferred Stock shall be entitled upon conversion
shall be the product obtained by multiplying the Series C Conversion Rate then
in effect (determined as provided in Section 6(b)) by the number of shares of
Series C Preferred Stock being converted.
(b) Conversion Rates. The conversion rate in effect at any time
for conversion of the Series C Preferred Stock (the "Series C Conversion Rate")
shall be the quotient obtained by dividing the Original Series C Issue Price by
the Series C Conversion Price calculated as provided in Section 6(c).
(c) Conversion Price. The conversion price for the Series C
Preferred Stock (the "Series C Conversion Price") shall initially be the
Original Series C Issue Price.
6
<PAGE> 65
The initial Series C Conversion Price shall be adjusted from time
to time in accordance with this Section 6. For purposes of determining the
adjusted Series C Conversion Price, the following shall be applicable:
(i) Certain Sales below Series C Conversion Price Before
First Anniversary. If on or after the date of original issuance of shares of
Series C Preferred Stock (the "Original Issue Date") and prior to the first
anniversary of the Original Issue Date the Corporation issues or sells, or in
accordance with this Section 6(c) is deemed to have issued or sold, any shares
of its Common Stock (other than pursuant to a Permitted Issuance) for a
consideration per share less than the Series C Conversion Price in effect
immediately prior to the time of such issue or sale, then immediately upon such
issue or sale or deemed issue or sale, the Series C Conversion Price shall be
reduced to the price per share at which such shares of Common Stock have been
issued or sold or deemed to have been issued or sold in such transaction;
provided, however, that no reduction shall be made if such issue or sale or
deemed issue or sale (a) is to one or more third parties that are not Affiliates
of the Corporation, and (b) involves, or is part of a series of related
transactions involving, the issue or sale or deemed issue or sale, in a
transaction with a legitimate business purpose, the primary purpose of which is
not to raise capital for the Corporation, of not more than 100,000 shares of
Common Stock or securities convertible into such number of shares of Common
Stock (as appropriately adjusted for any future stock splits, stock
combinations, stock dividends or similar transactions); and provided further
that the Corporation shall not be permitted to issue or sell more than an
aggregate of 250,000 shares of Common Stock or securities convertible into
such number of shares of Common Stock (as appropriately adjusted for any future
stock splits, stock combinations, stock dividends or similar transactions)
pursuant to the exception provided above in unrelated transactions. If the
provisions of this Section 6(c)(i) apply to require a reduction to the Series C
Conversion Price in connection with an issuance or sale or deemed issuance or
sale, no other adjustment to the Series C Conversion Price shall apply in
connection with such transaction.
(ii) Sale below Series C Conversion Price. If on or after
the first anniversary of the Original Issue Date the Corporation issues or
sells, or in accordance with this Section 6(c) is deemed to have issued or sold,
any shares of its Common Stock (other than pursuant to a Permitted Issuance or
in a transaction to which the provisions of Section 6(c)(i) apply) for a
consideration per share less than the Series C Conversion Price in effect
immediately prior to the time of such issue or sale, then immediately upon such
issue or sale or deemed issue or sale the Series C Conversion Price shall be
reduced to the amount determined by dividing (a) the sum of (1) the product
derived by multiplying the Series C Conversion Price in effect immediately prior
to such issue or sale by the number of shares of Common Stock Deemed Outstanding
immediately prior to such issue or sale, plus (2) the
7
<PAGE> 66
consideration, if any, received or deemed to have been received by the
Corporation upon such issue or sale, by (b) the number of shares of Common Stock
Deemed Outstanding immediately after such issue or sale.
(iii) Issuance of Rights or Options. If the Corporation in
any manner grants or sells any Options and the price per share for which Common
Stock is issuable upon the exercise of such Options, or upon conversion or
exchange of any Convertible Securities issuable upon exercise of such Options,
is less than the Series C Conversion Price in effect immediately prior to the
time of the granting or sale of such Options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or upon
conversation or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to have
been issued and sold by the Corporation at the time of the granting or sale of
such Options for such price per share. For purposes of this paragraph, the
"price per share for which Common Stock is issuable" shall be determined by
dividing (A) the total amount, if any, received or receivable by the Corporation
as consideration for the granting or sale of such Options, plus the minimum
aggregate amount of additional consideration payable to the Corporation upon
exercise of all such Options, plus in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options. No further adjustment of
the applicable Conversion Price shall be made when Convertible Securities are
actually issued upon the exercise of such Options or when Common Stock is
actually issued upon the exercise of such Options or the conversion or exchange
of such Convertible Securities.
(iv) Issuance of Convertible Securities. If the
Corporation in any manner issues or sells any Convertible Securities and the
price per share for which Common Stock is issuable upon conversion or exchange
thereof is less than the Series C Conversion Price in effect immediately prior
to the time of such issue or sale, then the maximum number of shares of Common
Stock issuable upon conversion or exchange of such Convertible Securities shall
be deemed to have been issued and sold by the Corporation at the time of the
issuance or sale of such Convertible Securities for such price per share. For
the purposes of this paragraph, the "price per share for which Common Stock is
issuable" shall be determined by dividing (A) the total amount received or
receivable by the Corporation as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such
8
<PAGE> 67
Convertible Securities. No further adjustment of the Series C Conversion Price
shall be made when Common Stock is actually issued upon the conversion or
exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which an
adjustment of the Series C Conversion Price had been or are to be made pursuant
to other provisions of this Section 6, no further adjustment of the Series C
Conversion Price shall be made by reason of such issue or sale.
(v) Change in Option Price or Conversion Rate. If the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock changes at any time, the Series C Conversion Price
in effect at the time of such change shall be immediately adjusted to the Series
C Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold.
(vi) Treatment of Expired Options and Unexercised
Convertible Securities. Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Series C Conversion Price then in effect
hereunder shall be adjusted immediately to Series C Conversion Price which would
have been in effect at the time of such expiration or termination had such
Option or Convertible Security, to the extent outstanding immediately prior to
such expiration or termination, never been issued.
(vii) Calculation of Consideration Received. If any Common
Stock, Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the amount received by the Corporation therefor. If any Common Stock, Option
or Convertible Security is issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Corporation
shall be the fair value of such consideration as determined by the Board of
Directors in good faith, except where such consideration consists of securities,
in which case the amount of consideration received by the Corporation shall be
the Market Price thereof as of the date of receipt. If any Common Stock, Option
or Convertible Security is issued to the owners of the non-surviving entity in
connection with any merger in which the Corporation is the surviving
corporation, the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Option or Convertible Security, as the
case may be. The fair value of any consideration other than cash and securities
shall be determined in good faith by the Board of Directors of the Corporation.
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(viii) Integrated Transactions. In case any Option is
issued in connection with the issue or sale of other securities of the
Corporation, together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration determined in good faith
by the Board of Directors of the Corporation.
(ix) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Stock.
(d) Adjustment for Stock Splits and Combinations. If the
Corporation shall at any time or from time to time after the Original Issue Date
effect a subdivision of the outstanding Common Stock, the Series C Conversion
Price in effect immediately before that subdivision shall be proportionately
decreased. Conversely, if the Corporation shall at any time or from time to time
after the Original Issue Date combine the outstanding shares of Common Stock
into a smaller number of shares, the Series C Conversion Price in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this Section 6(d) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(e) Adjustment for Common Stock Dividends and Distributions. If
the Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series C Conversion Price then in
effect shall be decreased as of the time of such issuance or, in the event such
record date is fixed, as of the close of business on such record date, by
multiplying each Series C Conversion Price then in effect by a fraction (1) the
numerator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date, and (2) the denominator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date plus the
number of shares of Common Stock issuable in payment of such dividend or
distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, the Series C Conversion Price shall be recomputed accordingly as
of the close of business on such record date and thereafter the Series C
Conversion Price shall be adjusted pursuant to this Section 6(e) to reflect the
actual payment of such dividend or distribution.
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(f) Adjustments for Other Dividends and Distributions. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Series C Preferred Stock shall receive
upon conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of other securities of the Corporation which
they would have received had their Series C Preferred Stock been converted into
Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period,
subject to all other adjustments called for during such period under this
Section 6 with respect to the rights of the holders of the Series C Preferred
Stock or with respect to such other securities by their terms.
(g) Adjustment for Reclassification, Exchange and Substitution. If at
any time or from time to time after the Original Issue Date, the Common Stock
issuable upon the conversion of the Series C Preferred Stock is changed into
the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares or stock dividend or a reorganization,
merger or consolidation provided for elsewhere in this Section 6), in any such
event each holder of Series C Preferred Stock shall have the right thereafter
to convert such stock into the kind and amount of stock and other securities
and property receivable in connection with such recapitalization,
reclassification or other change with respect to the maximum number of shares
of Common Stock into which such shares of Series C Preferred Stock could have
been converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustments as provided herein or with respect
to such other securities or property by the terms thereof.
(h) Reorganizations, Mergers or Consolidations. If at any time or from
time to time after the Original Issue Date, the Common Stock is converted into
other securities or property, whether pursuant to a reorganization, merger,
consolidation or otherwise (other than a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 6), as a part of such transaction, provision shall be
made so that the holders of the Series C Preferred Stock shall thereafter be
entitled to receive upon conversion thereof the number of shares of stock or
other securities or property to which a holder of the maximum number of shares
of Common Stock deliverable upon conversion would have been entitled in
connection with such transaction, subject to adjustment in respect of such
stock or securities by the terms thereof. In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 6
with respect to the rights of the holders Series C Preferred Stock after such
transaction to the end that the provisions of this Section
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6 (including adjustment of the Series C Conversion Price then in effect and the
number of shares issuable upon conversion of the Series C Preferred Stock)
shall be applicable after that event and be as nearly equivalent as
practicable. The Corporation shall not be a party to any reorganization, merger
or consolidation in which the Corporation is not the surviving entity unless
the entity surviving such transaction assumes all of the Corporation's
obligations hereunder in a manner reasonably satisfactory to the Board of
Directors of the Corporation acting in good faith.
(i) Limitations on Adjustments. Anything herein to the contrary
notwithstanding, no adjustment in the Series C Conversion Price shall be
required unless such adjustment, either by itself or with other adjustments not
previously made, would require a change of at least $0.01 (one cent) in the
Series C Conversion Price: provided, that any adjustment which by reason of
this subparagraph 6(i) is not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations of shares of
Common Stock or Series C Preferred Stock under this paragraph 6 shall be
rounded to the nearest three decimal points. If any action would require
adjustment of the Series C Conversion Price pursuant to more than one paragraph
of this Section 6, only one adjustment shall be made as determined in good
faith by the Board of Directors of the Corporation, which determination shall
be final and binding on the Corporation and all of the holders of the Series C
Preferred Stock.
(j) Certificate of Adjustment. In each case of an adjustment or
readjustment of the Series C Conversion Price or the number of shares of Common
Stock or other securities issuable upon conversion of the Series C Preferred
Stock, the Corporation, at its expense, shall compute such adjustment or
readjustment in accordance with the provisions hereof and prepare a certificate
showing such adjustment or readjustment, and shall mail such certificate, by
first class mail, postage prepaid, to each registered holder of Series C
Preferred Stock at the holder's address as shown in the Corporation's books.
The certificate shall set forth such adjustment or readjustment, showing in
detail the facts upon which such adjustment or readjustment is based, including
a statement of (1) the consideration received or deemed to be received by the
Corporation for any additional shares of Common Stock issued or sold or deemed
to have been issued or sold, (2) the Series C Conversion Price in effect before
and after such adjustment, (3) the number of additional shares of Common Stock
issued or sold or deemed to have been issued or sold, and (4) the type and
amount, if any, of other property which at the time would be received upon
conversion of the Series C Preferred Stock.
(k) Notices of Record Date. Upon (i) any taking by the Corporation of
a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section 3(b)) or
other capital reorganization of the
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Corporation, any reclassification or recapitalization of the capital stock of
the Corporation, any merger or consolidation of the Corporation with or into
any other corporation, any Asset Transfer (as defined in Section 3(b)), or any
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, the Corporation shall mail to each holder of Series C Preferred
Stock at least twenty (20) days prior to the record date specified therein (or
such lesser number of days as is reasonably practicable under the
circumstances) a notice specifying (1) the date on which any such record is to
be taken for the purpose of such dividend or distribution and a description of
such dividend or distribution, (2) the date on which any such Acquisition,
reorganization, reclassification, transfer, consolidation, merger, Asset
Transfer, dissolution, liquidation or winding up is expected to become
effective, and (3) the date, if any, that is to be fixed for determining the
holders of record of Common Stock (or other securities) that shall be entitled
to exchange their shares of Common Stock (or other securities) for securities
or other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset transfer,
dissolution, liquidation or winding up.
(l) Automatic Conversion. Each share of Series C Preferred Stock shall
automatically be converted into shares of Common Stock based on the then
effective Series C Conversion Price, (x) at any time upon the written election
of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the
then outstanding shares of Series C Preferred Stock, or (y) immediately upon
the closing of a firmly underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Corporation in which
(i) the offering price per share to the public is at least one hundred and
fifty percent (150%) of the then-effective Series C Conversion Price, and (ii)
the gross cash proceeds to the Corporation (before underwriting discounts,
commissions and fees) are at least $20,000,000.
(m) Mechanics of Conversion.
(i) Optional Conversion. Each holder of Series C Preferred
Stock who desires to convert the same into shares of Common Stock pursuant to
this Section 6 shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or any transfer agent for the Series
C Preferred Stock, and shall give written notice to the Corporation at such
office that such holder elects to convert the same. Such notice shall state the
number of shares of Series C Preferred Stock being converted. Thereupon, the
Corporation shall promptly issue and deliver at such office to such holder a
certificate or certificates for the number of shares of Common Stock to which
such holder is entitled, and shall promptly pay in cash or, to the extent
sufficient funds are not then legally available therefor, in Common Stock (at
the Common Stock's fair market value determined by the Board of Directors as of
the date of such conversion) or a combination of cash and Common Stock, any
declared but unpaid dividends on the
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shares of Series C Preferred Stock being converted. Such conversion shall be
deemed to have been made at the close of business on the date of such surrender
of the certificate representing the shares of Series C Preferred Stock to be
converted, and the person entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder of such shares of Common Stock on such date.
(ii) Automatic Conversion. Upon the occurrence of the event
specified in Section 6(1) above, the outstanding shares of Series C Preferred
Stock shall be converted into Common Stock automatically without any further
action by the holders of such shares and whether or not the certificates
representing such shares arc surrendered to the Corporation or its transfer
agent; provided, however, that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such
conversion unless the certificates evidencing such shares of Series C Preferred
Stock are either delivered to the Corporation or its transfer agent as provided
below, or the holder notifies the Corporation or its transfer agent that such
certificates have been lost, stolen or destroyed and executes an agreement
reasonably satisfactory to the Corporation to indemnify the Corporation from
any loss incurred by it in connection with such certificates. Upon surrender by
any holder of the certificates formerly representing shares of Series C
Preferred Stock at the office of the Corporation or any transfer agent for the
Series C Preferred Stock, there shall be issued and delivered to such holder
promptly at such office and in its name as shown on such surrendered
certificate or certificates, a certificate or certificates for the number of
shares of Common Stock into which the shares of Series C Preferred Stock
surrendered were convertible on the date on which such automatic conversion
occurred, and the Corporation shall promptly pay in cash or, to the extent
sufficient funds are not legally available therefor, in Common Stock (at the
Common Stock's fair market value determined by the Board as of the date of such
conversion) or a combination of cash and Common Stock, all declared but unpaid
dividends on the shares of Series C Preferred Stock being converted. Until
surrendered as provided above, each certificate formerly representing shares of
Series C Preferred Stock shall be deemed for all corporate purposes to
represent the number of shares of Common Stock resulting from such automatic
conversion.
(n) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of Series C Preferred Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share
of Series C Preferred Stock by a holder thereof shall be aggregated for
purposes of determination whether the conversion would result in the issuance
of any fractional share. If, after the aforementioned aggregation, the
conversion would result in the issuance of any fractional share, the
Corporation shall, in lieu of issuing any fractional share, pay cash equal to
the product of such fraction multiplied by the
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Common Stock's fair market value (as determined by the Board of Directors in
good faith) on the date of conversion.
7. Certain Definitions.
"Affiliate" means, with respect to any person, any other person
Controlling, Controlled by or under common Control with such person. "Control"
(including the terms "Controlled by" and "under common Control with") means, as
used with respect to any person, possession, directly or indirectly or as a
trustee or executor, of power to direct or cause the direction of management or
policies of such person (whether through ownership of voting securities, as
trustee or executor, by agreement or otherwise).
"Common Stock Deemed Outstanding" means, at any given time, the
sum of the number of shares of Common Stock actually outstanding at such time
plus the number of shares of Common Stock issuable upon the exercise of Options
or the conversion of Convertible Securities outstanding at such time, whether
or not the Options or Convertible Securities are actually exercisable or
convertible at such time.
"Convertible Securities" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock.
"Market Price" of any security means the average of the closing
prices of such security's sales on all securities exchanges on which such
security may at the time be listed, or, if there has been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges 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 Stock Market as of 4:00 P.M., New York time, or, if on any day
such security is not quoted in the Nasdasq Stock Market, 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, or any similar successor organization, in each such case averaged
over the twenty (20) consecutive trading days prior to the day as of which
"Market Price" is being determined. If at any time such security is not listed
on any securities exchange or quoted in the Nasdaq Stock Market or
over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Board of Directors in good faith.
"Options" means any rights, warrants or options to sucscribe for or
purchase Common Stock or Convertible Securities.
"Permitted Issuance" means (i) any issuance of Common Stock upon
conversion of shares of Series C Preferred Stock, (ii) any issuance of Common
Stock
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upon the exercise of any Options or conversion of any Convertible Securities
outstanding as of the Original Issue Date, (iii) any issuance of Common Stock
or Options to purchase Common Stock to employees, directors or consultants of
the Corporation or its Subsidiaries issued pursuant to a plan or agreement
approved by the Corporation's Board of Directors, provided that in the case of
Options such Options have an exercise price not less than the fair market value
of the Common Stock subject to such Options as determined by the Board of
Directors, or (iv) any issuance of warrants to purchase equity securities of
the Corporation in connection with a commercial of debt financing transaction
approved by the Corporation's Board of Directors.
"person" means an individual, partnership, corporation, firm,
association, joint stock company, trust, joint venture, unincorporated
organization, or governmental, quasi-governmental or regulatory authority (or
any department, agency or political subdivision thereof), or any other legally
recognized entity.
"Subsidiary" means any corporation of which the shares of
outstanding capital stock possessing the voting power (under ordinary
circumstances) in electing the board of directors are, at the time as of which
any determination is being made, owned by the Corporation either directly or
indirectly through Subsidiaries.
8. Amendment and Waiver.
No amendment, modification or waiver of any of the terms or
provisions of the Series C Preferred Stock shall be binding or effective
without the prior written consent of the holders of a majority of the
outstanding shares of Series C Preferred Stock, and no change in the terms
hereof may be accomplished by merger or consolidation of the Corporation with
another corporation or entity unless the Corporation has obtained the prior
written consent of the holders of a majority of the outstanding shares of
Series C Preferred Stock, except that any amendment, modification or waiver of
the provisions of Section 6(1) hereof shall require the prior writteen consent
of at least sixty-six and two-thirds percent (66 2/3%) of the then outstanding
shares of Series C Preferred Stock. Any amendment, modification or waiver of
any of the terms or provisions of the Series C Preferred Stock by the requisite
number of holders of outstanding shares of Series C Preferred Stock pursuant to
this Section 8, whether prospective or retroactively effective, shall be
binding upon all holders of Series C Preferred Stock.
9. Registration of Transfer.
The Corporaion shall keep at its principal office a register for
the registration of the Series C Preferred Stock. Upon the surrender of any
certificate representing Series C Preferred Stock at such place, the
Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the
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Corporation's expense) a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares represented by the
surrendered certificate. Each such new certificate shall be registered in such
name and shall represent such number of shares as is requested by the holder of
the surrendered certificate and shall be substantially identical in form to the
surrendered certificate.
10. Replacement.
Upon receipt of evidence reasonably satisfactory to the Corporation
(an affidavit of the registered holder shall be satisfactory) of the ownership
and the loss, theft, destruction or mutilation of any certificate evidencing
shares Series C Preferred Stock, and in the case of any such loss, theft or
destruction, upon receipt of idemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
execute and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
11. Reservation of Common Stock Issuable Upon Conversion.
The Corporation shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series C Preferred Stock, such
number of its shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of the Series C Preferred
Stock. If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the conversion of all then-outstanding
shares of Series C Preferred Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
12. Notices.
Any notice required by the provisions of this Certificate shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified, (ii) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All notices to
stockholders shall be addressed to each holder of record at the address of such
holder appearing on the books of the Corporation.
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13. Payment of Taxes.
The Corporation will pay all taxes (other than taxes based upon
income) and other governmental charges that may be imposed with respect to the
issue or delivery of shares of Common Stock upon conversion of shares of Series
C Preferred Stock, excluding any tax or other charge imposed in connection with
any transfer involved in the issue and delivery of shares of Common Stock in a
name other than that in which the shares of Series C Preferred Stock so
converted were registered.
14. No Dilution or Impairment.
The Corporation shall not amend its Certificate of Incorporation or
participate in any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, for the
purpose of avoiding or seeking to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of
Section 6 hereof and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series C Preferred Stock against impairment. This provision shall not restrict
the Corporation's right to amend its Certificate of Incorporation with the
requisite stockholder consent.
* * * * *
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the undersigned has hereunto signed his name and
affirms that the statements made herein are true under the penalties of perjury
this 18th day of February, 2000.
/s/ KAMRAN AMJADI
--------------------------
Kamran Amjadi
Chief Executive Officer
ATTEST:
/s/ MEHRDAD AKHAVAN
---------------------
Mehrdad Akhavan
President and Secretary
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