Articles of Incorporation - Finisar Corp.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
FINISAR CORPORATION
Jerry S. Rawls and Wynette Levinson certify that:
They are the President and Secretary, respectively, of Finisar
Corporation, a California corporation (the "Corporation").
The Amended and Restated Articles of Incorporation of the Corporation
are hereby amended and restated in their entirety to read as set forth:
***
I.
The name of this corporation is Finisar Corporation.
II.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law other than the banking business, the trust company business or the practice
of a profession permitted to be incorporated by the California Corporations
Code.
III.
AUTHORIZATION TO ISSUE TWO CLASSES. This Corporation is authorized to
issue two classes of shares designated, respectively, Preferred Stock and Common
Stock. The Corporation is authorized to issue 24,200,000 shares of Preferred
Stock, no par value (the "Preferred Stock") and 75,000,000 shares of Common
Stock, no par value (the "Common Stock").
IV.
A. SERIES A CONVERTIBLE REDEEMABLE PREFERRED STOCK
1. DESIGNATION. A total of Twelve Million One Hundred Thousand
(12,100,000) shares of the Corporation's Preferred Stock shall be designated as
Series A Convertible Redeemable Preferred Stock, no par value per share (the
"Convertible Preferred Stock").
2. ELECTION OF DIRECTORS; VOTING.
(a) ELECTION OF DIRECTORS. The holders of outstanding shares
of Convertible Preferred Stock shall, voting together as a separate class, be
entitled to elect one (1) Director
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("Director") of the Corporation. Such Director shall be the candidate receiving
the highest number of affirmative votes (with only the holders of Convertible
Preferred Stock entitled to cast one vote for or against each candidate with
respect to each share of Convertible Preferred Stock held by such holder) of the
outstanding shares of Convertible Preferred Stock (the "Convertible Preferred
Stock Director Designee"), with votes cast against such candidates and votes
withheld having no legal effect. The election of the Convertible Preferred Stock
Director Designee by the holders of the Convertible Preferred Stock shall occur
(i) at the annual meeting of holders of capital stock, (ii) at any special
meeting of holders of capital stock, (iii) at any special meeting of holders of
Convertible Preferred Stock called by holders of a majority of the outstanding
shares of Convertible Preferred Stock or (iv) by the written consent of holders
of a majority of the outstanding shares of Convertible Preferred Stock. If at
any time when any share of Convertible Preferred Stock is outstanding the
Convertible Preferred Stock Director Designee should cease to be a Director for
any reason, the vacancy shall only be filled by the vote or written consent of
the holders of the outstanding shares of Convertible Preferred Stock, voting
together as a separate class, in the manner and on the basis specified above.
(b) VOTING GENERALLY. Each holder of Convertible Preferred
Stock shall be entitled to the number of votes equal to the largest number of
full shares of Common Stock into which the shares of Convertible Stock held by
such holder could be converted pursuant to Section A.6 hereof on the record date
for such meeting or the effective date of the written consent of shareholders,
if applicable. Each holder of Convertible Preferred Stock shall be entitled to
notice of any shareholders' meeting in accordance with the bylaws of the
Corporation and shall vote with holders of the Common Stock, voting together as
a single class, upon all matters submitted to a vote of shareholders excluding
those matters required to be submitted to a class or series vote pursuant to the
terms hereof (including without limitation Section A.8) or by law.
3. DIVIDENDS.
(a) The holders of shares of Convertible Preferred Stock will
be entitled to receive, if when and as declared by the Board of Directors, out
of any funds legally available therefor, noncumulative dividends at the rate of
6% of the Convertible Base Liquidation Preference Amount (as defined below) per
share per annum (appropriately adjusted for stock splits and combinations) for
each share of Convertible Preferred Stock then held by them ( the "Convertible
Preferred Stock Dividend Rate"). Such dividends may be payable quarterly or
otherwise as the Board of Directors may from time to time determine. Dividends
may be declared and paid upon shares of Common Stock in any fiscal year of the
Corporation, only if dividends shall have been paid to or declared and set apart
upon all shares of Convertible Preferred Stock, and all shares of any other
series of Preferred Stock on a parity with the Convertible Preferred Stock, at
its annual rate for each quarter of such fiscal year of the Corporation,
including the quarter in which such dividends upon shares of Common Stock are
declared, or if the amount of dividends to be paid on each share of Common Stock
exceed the amount payable at the Convertible Preferred Stock Dividend Rate, an
amount of dividends on each share of Convertible Preferred Stock equal to the
amount to be paid on each share of Common Stock in excess of the amount to be
paid on each share of Common Stock, and all
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redemptions then due and payable on the Convertible Preferred Stock shall have
been paid in full or set apart for payment in full. No right shall accrue to
holders of Convertible Preferred Stock by reason of the fact that dividends on
said shares are not declared in any prior year, nor shall any undeclared or
unpaid dividends bear or accrue interest.
(b) If any dividend or other distribution payable in property
other than cash is declared on the Common Stock excluding any dividend or other
distribution for which adjustment to the Conversion Price (as defined below) is
provided by Section A.7(a), each holder of shares of Convertible Preferred Stock
on the record date for such dividend or distribution shall be entitled to
receive on the date of payment or distribution of such dividend or other
distribution, the same property that such holder would have received if on such
record date such holder was the holder of record of the number of shares of
Common Stock into which the shares of Convertible Preferred Stock then held by
such holder are convertible.
4. LIQUIDATION.
(a) LIQUIDATION PREFERENCE.
(i) Upon any Liquidation Event (as defined below), each
holder of outstanding shares of Convertible Preferred Stock shall be entitled to
be paid first out of the assets of the Corporation available for distribution to
shareholders, whether such assets are capital, surplus or earnings, and before
any amount shall be paid or distributed to the holders of Common Stock or of any
other stock ranking on liquidation junior to the Convertible Preferred Stock, an
amount in cash equal to (i) $2.1932 per share of Convertible Preferred Stock
held by such holder (adjusted appropriately for stock splits, stock dividends,
recapitalizations and the like with respect to the Convertible Preferred Stock)
(the "Convertible Base Liquidation Preference Amount"), plus (ii) any accrued
but unpaid dividends to which such holder of outstanding shares of Convertible
Preferred Stock is then entitled pursuant to Sections A.3 and A.5(d) hereof,
plus (iii) any interest accrued pursuant to Section A.5(c) to which such holder
of Convertible Preferred Stock is entitled (collectively, the "Convertible
Preferred Liquidation Preference Amount"), and thereafter shall share ratably
with the holders of Common Stock, with such distributions to be made as if each
share of Convertible Preferred Stock had been converted into the number of
shares of Common Stock issuable upon the conversion of such holder's shares of
Convertible Preferred Stock immediately prior to any such Liquidation Event;
PROVIDED, HOWEVER, that if, upon any Liquidation Event, the amounts payable with
respect to the Convertible Preferred Stock are not paid in full, the holders of
the Convertible Preferred Stock shall share ratably any distribution of assets
in proportion to the full preferential amounts to which they are entitled. The
provisions of this Section A.4 shall not in any way limit the right of the
holders of Convertible Preferred Stock to elect to convert their shares of
Convertible Preferred Stock into Redeemable Preferred Stock and Common Stock
pursuant to Section A.6 prior to or in connection with any Liquidation Event.
(ii) For purposes of these Articles, the term
"Liquidation Event" shall mean (v) any liquidation, dissolution or winding up of
the Corporation or any of its subsidiaries; (w) a merger or consolidation of the
Corporation with or into another entity or any other
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transaction or series of related transactions, in any such case in connection
with or as a result of which the Corporation is not the surviving entity or the
owners of the Corporation's outstanding equity securities prior to the
transaction or series of related transactions do not own at least a majority of
the outstanding equity securities of the surviving, resulting or consolidated
entity; (x) any purchase by any party of shares of capital stock of the
Corporation (either through a negotiated stock purchase or a tender for such
shares), the effect of which is that such party that did not beneficially own a
majority of the voting power of the outstanding shares of capital stock of the
Corporation immediately prior to such purchase beneficially owns at least a
majority of such voting power immediately after such purchase; (y) the
redemption or repurchase of shares representing a majority of the voting power
of the outstanding shares of capital stock of the Corporation; or (z) the sale
or lease or other disposition of all or substantially all of the assets of the
Corporation or winding up of the Corporation and shall entitle the holders of
the Convertible Preferred Stock to receive at the closing in cash, securities or
other property (valued as provided in Section A.4(a)(iii) below) amounts as
specified in Section A.4(a)(i).
(iii) Whenever the distribution provided for in this
Section A.4(a) shall be payable in securities or property other than cash, the
value of such distribution shall be the fair market value of such securities or
other property. Securities shall be valued in the manner set forth in the
definitive agreement for such acquisition, merger, consolidation or other
transaction, and if no such method of valuation is set forth in such definitive
agreement:
(x) If traded on a securities exchanges or through
the Nasdaq National Market, the value shall be deemed to
be the average of the closing prices of the securities on
such exchange or system over the thirty (30) day period
ending three (3) days prior to the closing;
(y) If actively traded over-the-counter but not on
the Nasdaq National Market, the value shall be deemed to
be the average of the closing bid or sale prices
(whichever is applicable) over the thirty (30) day period
ending three (3) days prior to the closing; and
(z) If there is no active market, the value shall be
the fair market value thereof, as determined in good
faith by the Board of Directors of the Corporation.
(b) NOTICE. Prior to the occurrence of any Liquidation
Event, the Corporation will furnish each holder of Convertible Preferred Stock
notice in accordance with Section A.9 together with a certificate prepared by
the chief financial officer of the Corporation describing in detail the facts of
such Liquidation Event, stating in detail the amount(s) per share of Convertible
Preferred Stock each holder of Convertible Preferred Stock would receive
pursuant to the provisions of Section A.4(a) hereof and stating in detail the
fact upon which such amount was determined.
5. REDEMPTION.
(a) REDEMPTION EVENTS.
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(i) The holder or holders of not less than a majority in
voting power of the outstanding Convertible Preferred Stock may require the
Corporation to redeem the outstanding Convertible Preferred Stock in three equal
installments with the first such installment for thirty-three and one-third
percent (33-1/3%) of the then outstanding shares of Convertible Preferred Stock
being due and payable on November 6, 2004 the second such installment for fifty
percent (50%) of the then-outstanding shares of Convertible Preferred Stock
being due and payable on November 6, 2005 and the third and final such
installment for all remaining outstanding shares of Convertible Preferred Stock
being due and payable on November 6, 2006.
(ii) An election pursuant to subparagraph (i) of this
Section A.5(a) shall be made by such holders giving the Corporation and each
other holder of Convertible Preferred Stock not less than ninety (90) days prior
written notice, which notice shall set forth the date for such redemption.
(b) REDEMPTION DATE; REDEMPTION PRICE. Upon the election of
the holders of at least a majority of the voting power of the outstanding
Convertible Preferred Stock to cause the Corporation to redeem the Convertible
Preferred Stock pursuant to Section A.5(a)(i), all holders of Convertible
Preferred Stock shall be deemed to have elected to cause all of the Convertible
Preferred Stock to be so redeemed. Any date upon which a redemption shall occur
in accordance with Section A.5(a) shall be referred to as a "Convertible
Preferred Redemption Date." The redemption price for each share of Convertible
Preferred Stock redeemed pursuant to Section A.5 shall be an amount in cash
equal to (i) the Convertible Base Liquidation Preference Amount plus (ii) any
accrued but unpaid dividends on such shares of Convertible Preferred Stock
pursuant to Sections A.3 and A.5(d) hereof, plus (iii) any interest accrued with
respect to such share of Convertible Preferred Stock pursuant to Section A.5(c)
to which such holder of Convertible Preferred Stock is entitled (collectively,
the "Convertible Preferred Redemption Price"). The aggregate Convertible
Preferred Redemption Price shall be payable in cash in immediately available
funds to the respective holders of the Convertible Preferred Stock on the
Convertible Preferred Redemption Date, subject to Section A.5(c). After an
election has been made under this Section A.5(b) by the holders of at least a
majority of the voting power of the outstanding Convertible Preferred Stock,
until the full Convertible Preferred Redemption Price has been paid to such
holders for all shares of Convertible Preferred Stock being redeemed: (A) no
dividend whatsoever shall be paid or declared, and no distribution shall be
made, on any capital stock of the Corporation (other than the Convertible
Preferred Stock in accordance with Section A.5(d)); and (B) no shares of capital
stock of the Corporation (other than the Convertible Preferred Stock in
accordance with this Section A.5) shall be purchased, redeemed or acquired by
the Corporation and no monies shall be paid into or made available for a sinking
fund or set aside or made available for the purchase, redemption or acquisition
thereof. Notwithstanding the election to cause the Corporation to redeem the
Convertible Preferred Stock as provided above, until the full Convertible
Preferred Redemption Price has been paid to the holders of the Convertible
Preferred Stock, the holders of at least a majority of the voting power of the
outstanding Convertible Preferred Stock may rescind such election by providing
written notice thereof to the Corporation.
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(c) REDEMPTION PROHIBITED. If, at a Convertible Preferred
Redemption Date, the Corporation is prohibited under the Corporations Code of
the State of California from redeeming all shares of Convertible Preferred Stock
for which redemption is required hereunder, then it shall redeem such shares on
a pro-rata basis among the holders of Convertible Preferred Stock in proportion
to the full respective redemption amounts to which they are entitled hereunder
to the extent possible and shall redeem the remaining shares to be redeemed as
soon as the Corporation is not prohibited from redeeming some or all of such
shares under the Corporations Code of the State of California. The shares of
Convertible Preferred Stock not redeemed shall remain outstanding and entitled
to all of the rights and preferences provided in these Articles. In the event
that the Corporation fails to redeem shares for which redemption is required
pursuant to this Section A.5, then during the period from the applicable
Convertible Preferred Redemption Date through the date on which such shares are
redeemed, the applicable Convertible Preferred Redemption Price of such shares
shall bear interest at the per annum rate of the greater of (i) 9% or (ii) 3%
over the Citibank, N.A. prime rate published in the Wall Street Journal on such
Convertible Preferred Redemption Date, compounded annually; PROVIDED, HOWEVER,
that in no event shall such interest exceed the maximum permitted rate of
interest under applicable law (the "Maximum Permitted Rate"). In the event that
fulfillment of any provision hereof results in such rate of interest being in
excess of the Maximum Permitted Rate, the obligation to be fulfilled shall
automatically be reduced to the extent required to eliminate such excess.
(d) DIVIDEND AFTER CONVERTIBLE PREFERRED REDEMPTION DATE.
From and after a Convertible Preferred Redemption Date, no shares of Convertible
Preferred Stock subject to redemption shall be entitled to dividends, if any, as
contemplated by Section A.3; PROVIDED, HOWEVER, that in the event that shares of
Convertible Preferred Stock are unable to be redeemed and continue to be
outstanding in accordance with Section A.5(c), such shares shall continue to be
entitled to dividends and interest thereon as provided in Sections A.3 and
A.5(c) until the date on which such shares are actually redeemed by the
Corporation.
(e) SURRENDER OF CERTIFICATES. The Corporation shall give,
not less than 10 days prior to the Convertible Preferred Redemption Date,
written notice (the "Redemption Notice") to all holders of the Convertible
Preferred Stock, which shall require each holder submitting shares for
redemption to surrender to the Corporation on or before the Convertible
Preferred Redemption Date, at the place designated in the Redemption Notice,
such holder's certificate or certificates representing the shares of Convertible
Preferred Stock to be redeemed. On or prior to the Redemption Date, each holder
of shares of Convertible Preferred Stock submitted for redemption shall
surrender the certificate or certificates evidencing such shares to the
Corporation, at the place designated in the Redemption Notice and shall
thereupon be entitled to receive payment of the appropriate Redemption Price by
certified check or wire transfer. In the event the certificate or certificates
are lost, stolen or missing, the holder of Convertible Preferred Stock shall
deliver an affidavit or agreement satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection therewith (an
"Affidavit of Loss") with respect to such certificates at the place set forth in
the Redemption Notice. Each surrendered certificate shall be cancelled and
retired; PROVIDED, HOWEVER, that if the holder has exercised its redemption
right pursuant to Section A.5(a)(i) or the Corporation is prohibited from
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redeeming all shares of Convertible Preferred Stock as provided in Section
A.5(c), the holder shall not be required to surrender said certificate(s) to the
Corporation until said holder has received a new stock certificate for those
shares of Convertible Preferred Stock not so redeemed.
6. CONVERSION. The holders of the Convertible Preferred Stock
shall have the following conversion rights:
(a) CONVERSION UPON ELECTION. Upon the written election of
the holder or holders of not less than a majority in voting power of the
outstanding shares of Convertible Preferred Stock, which may be exercised at any
time, and without the payment of any additional consideration, each of the
outstanding shares of Convertible Preferred Stock shall be automatically
converted into (i) the number of fully paid and nonassessable shares of Common
Stock which results from dividing the Conversion Price (as defined in this
Section A.6(a)) per share in effect for the Convertible Preferred Stock at the
time of conversion into the per share Conversion Value (as defined in this
Section A.6(a)) of the Convertible Preferred Stock and (ii) one (1) fully paid
and non-assessable share of Redeemable Preferred Stock per share of Convertible
Preferred Stock. The foregoing election may be conditioned on the occurrence of
any Liquidation Event or initial public offering. The "Conversion Price" for
each share of Convertible Preferred Stock shall initially be $2.1932 and the
"Conversion Value" for each share of Convertible Preferred Stock shall be
initially $2.1932. The Conversion Price per share of Convertible Preferred Stock
shall be subject to adjustment from time to time as provided in Section A.7
hereof. The number of shares of Common Stock into which a share of Convertible
Preferred Stock is convertible is hereinafter referred to as the "Common Stock
Conversion Rate." The number of shares of Redeemable Preferred Stock into which
a share of Convertible Preferred Stock is convertible is hereinafter referred to
as the "Redeemable Conversion Rate." If the holders of shares of Convertible
Preferred Stock elect to convert the outstanding shares of Convertible Preferred
Stock at a time when there are any accrued but unpaid dividends or other amounts
due on or in respect of such shares, such dividends and other amounts shall
become part of the Redeemable Liquidation Preference Amount, and shall become
payable and shall be paid in full upon a Liquidation Event as set forth in
Section B.4 or redemption of the Redeemable Preferred Stock (as set forth in
Section B.5).
(b) AUTOMATIC CONVERSION UPON QPO. Each share of Convertible
Preferred Stock shall automatically be converted, without the payment of any
additional consideration (except as set forth in the final paragraph of this
Section A.6(b)), into shares of Common Stock and Redeemable Preferred Stock as
of, and in all cases subject to, the closing of the Corporation's first QPO (as
defined below in this Section A.6(b)); PROVIDED that if a closing of a QPO
occurs, all outstanding shares of Convertible Preferred Stock shall be deemed to
have been converted into shares of Common Stock and Redeemable Preferred Stock
as provided herein immediately prior to such closing. Any such conversion shall
be at the Common Stock Conversion Rate and Redeemable Conversion Rate in effect
upon the closing of the QPO, as provided in Section A.6(a). "QPO" and "Qualified
Public Offering" mean a firm commitment public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, PROVIDED
that (i) such registration statement covers the offer and sale of Common Stock
of which the aggregate net proceeds after deducting underwriting discounts and
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commissions attributable to sales for the account of the Corporation exceed
$20,000,000 at a per share price to public (as set forth in the final prospectus
in connection with such public offering (the "Public Offering Price") equal to
at least two (2) times the Conversion Price, and (ii) all shares of Redeemable
Preferred Stock which are outstanding or issuable upon such automatic conversion
are redeemed immediately upon and as of the closing of such offering or
contemporaneously with such offering for cash.
If the holders of shares of Convertible Preferred Stock are required to
convert the outstanding shares of Convertible Preferred Stock pursuant to this
Section A.6(b) at a time when there are any accrued but unpaid dividends or
other amounts due on or in respect of such shares, such dividends and other
amounts shall be paid in full in cash by the Corporation in connection with such
conversion.
(c) PROCEDURE FOR CONVERSION UPON ELECTION. Upon the
execution of the election to convert pursuant to Section A.6(a), all outstanding
shares of Convertible Preferred Stock shall be converted automatically into
shares of Common Stock and Redeemable Preferred Stock at the applicable
conversion rates specified in Section A.6(a), without any further action by the
holders of such shares and whether or not the certificates representing such
shares of Convertible Preferred Stock are surrendered to the Corporation or its
transfer agent. The Corporation shall not be obligated to issue certificates
evidencing the shares of Redeemable Preferred Stock or Common Stock issuable
upon such conversion unless certificates evidencing such shares of the
Convertible Preferred Stock so converted, or an Affidavit or Affidavits of Loss
with respect to such certificates, are delivered to the Corporation or its
transfer agent. Upon such conversion, all rights with respect to the Convertible
Preferred Stock so converted shall terminate, except any of the rights of the
holders thereof upon surrender of their certificate or certificates therefor or
delivery of an Affidavit of Loss thereof to receive certificates for the number
of shares of Common Stock and Redeemable Preferred Stock into which such
Convertible Preferred Stock has been converted. Upon such surrender of a
certificate representing Convertible Preferred Stock, or delivery of an
Affidavit of Loss, the Corporation shall issue and send by hand delivery, by
courier or by first class mail (postage prepaid) to the holder thereof or to
such holder's designee, at the address designated by such holder, certificates
for the number of shares of Common Stock and Redeemable Preferred Stock to which
such holder shall be entitled upon conversion. The issuance of certificates for
Common Stock and Redeemable Preferred Stock upon conversion of Convertible
Preferred Stock will be made without charge to the holders of such shares for
any issuance tax in respect thereof or other costs incurred by the Corporation
in connection with such conversion and the related issuance of such stock.
Certificates so surrendered 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. Notwithstanding anything to the contrary set forth in this Section
A.6(c), in the event that the holders of shares of Convertible Preferred Stock
elect to convert such shares pursuant to Section A.6(a) conditioned upon the
occurrence of any Liquidation Event or initial public offering, then (i) the
conversion shall be effective as of and shall be subject to the occurrence of
such Liquidation Event or initial public offering, and (ii) if such Liquidation
Event or initial public offering occurs, then the conversion shall be deemed to
have occurred immediately prior thereto; provided that the Corporation shall
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make appropriate provisions (x) for the Common Stock issued upon such conversion
to be treated on the same basis as all other Common Stock in such Liquidation
Event or initial public offering, provided further that such conversion shall
not be construed to provide or require the registration of any shares of Common
Stock for sale; and (y) for the payment of the Redeemable Liquidation Preference
Amount (as defined in Section B.4) in connection with any Liquidation Event or
the redemption of the Redeemable Preferred Stock (issued upon such conversion)
upon election of such redemption in connection with any Liquidation Event or
initial public offering, if applicable, as provided herein.
(d) PROCEDURE FOR AUTOMATIC CONVERSION. As of, and in all
cases subject to, the closing of a QPO (the "Automatic Conversion Date"), all
outstanding shares of Convertible Preferred Stock shall be converted
automatically into shares of Common Stock and Redeemable Preferred Stock at the
applicable conversion rates specified in Section A.6(a) and without any further
action by the holders of such shares and whether or not the certificates
representing such shares of Convertible Preferred Stock are surrendered to the
Corporation or its transfer agent; PROVIDED, HOWEVER, that all holders of
Convertible Preferred Stock shall be given prior written notice of the
occurrence of a QPO in accordance with Section A.9 hereof. The Corporation shall
not be obligated to issue certificates evidencing the shares of Redeemable
Preferred Stock or Common Stock issuable on the Automatic Conversion Date (or
the payment for the shares of Redeemable Preferred Stock which are redeemed
immediately after such automatic conversion as provided below and in Section
B.5(a)(i)) unless certificates evidencing such shares of the Convertible
Preferred Stock being converted, or an Affidavit or Affidavits of Loss with
respect to such certificates, are delivered to the Corporation or its transfer
agent. On the Automatic Conversion Date, all rights with respect to the
Convertible Preferred Stock so converted shall terminate, except any of the
rights of the holders thereof upon surrender of their certificate or
certificates therefor or delivery of an Affidavit of Loss thereof to receive
certificates for the number of shares of Common Stock and Redeemable Preferred
Stock into which such Convertible Preferred Stock has been converted (or the
payment to which such holder is entitled as provided below and in Sections
A.6(b) and B.5(a)(i)). All accrued and unpaid dividends shall be paid in full
prior to or upon the closing of such QPO. Certificates so surrendered 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. Upon surrender of such
certificates or Affidavit of Loss the Corporation shall issue and deliver to
such holder, promptly (and in any event in such time as is sufficient to enable
such holder to participate in such QPO) 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 and number of shares of Redeemable
Preferred Stock into which the shares of the Convertible Preferred Stock
surrendered were convertible on the Automatic Conversion Date. Notwithstanding
anything to the contrary set forth in this Section A.6(d), the Corporation may
deliver, in lieu of certificates for Redeemable Preferred Stock, a payment in an
amount and form determined pursuant to Section B.5(b) hereof on account of the
redemption of such Redeemable Preferred Stock, and upon such payment the
Redeemable Preferred Stock into which such Convertible Preferred Stock would
have been converted shall be deemed to have been issued and redeemed by the
Corporation.
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(e) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock and Redeemable Preferred Stock solely for
the purpose of effecting the conversion of the shares of Convertible Preferred
Stock such number of its shares of Common Stock and Redeemable Preferred Stock
as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Convertible Preferred Stock, and if at any time the number
of authorized but unissued shares of Convertible Preferred Stock, shares of
Common Stock and Redeemable Preferred Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Convertible Preferred Stock,
the Corporation will take such corporate action as may be necessary to increase
its authorized but unissued shares of Common Stock and Redeemable Preferred
Stock to such number of shares as shall be sufficient for such purpose.
(f) NO CLOSING OF TRANSFER BOOKS. The Corporation shall not
close its books against the transfer of shares of Convertible Preferred Stock in
any manner which would interfere with the timely conversion of any shares of
Convertible Preferred Stock.
7. ADJUSTMENTS. The Conversion Price in effect from time to time
shall be subject to adjustment from and after the original issue date of the
Convertible Preferred Stock, as follows:
(a) ADJUSTMENTS TO CONVERSION PRICE.
(i) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. Upon
the issuance of additional shares of Common Stock as a dividend or other
distribution on outstanding Common Stock, the subdivision of outstanding shares
of Common Stock into a greater number of shares of Common Stock, or the
combination of outstanding shares of Common Stock into a smaller number of
shares of the Common Stock, the Conversion Price shall simultaneously with the
happening of such dividend, subdivision or split be adjusted by multiplying the
then effective Conversion Price by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such event
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event. An adjustment made pursuant to this
Section A.7(a)(i) shall be given effect, upon payment of such a dividend or
distribution, as of the record date for the determination of shareholders
entitled to receive such dividend or distribution (on a retroactive basis) and
in the case of a subdivision or combination shall become effective immediately
as of the effective date thereof.
(ii) SALE OF COMMON STOCK. In the event the Corporation
shall at any time, or from time to time, issue, sell or exchange any shares of
Common Stock (including shares held in the Corporation's treasury, but excluding
up to an aggregate 6,075,611 shares of Common Stock (as appropriately adjusted
for stock splits, stock dividends and the like)) issued or issuable to officers,
Directors, employees of, or consultants, advisors, independent contractors to
the Corporation (collectively, "Eligible Employees") or upon the exercise of
options or other rights issued to such Eligible Employees (the "Excluded
Shares"), for a consideration per share less than the Conversion Price in effect
immediately prior to the issuance, sale or exchange of such shares, then, and
thereafter successively upon ech such issuance, sale or exchange, the Conversion
Price in effect immediately prior to the issuance, sale or exchange of such
shares
<PAGE>
shall forthwith be reduced to an amount determined by multiplying such
Conversion Price by a fraction:
(A) the numerator of which shall be (X) the number
of shares of Common Stock and Preferred Stock of all classes outstanding
immediately prior to the issuance of such additional shares of Common Stock
(excluding treasury shares but including shares of Common Stock issuable upon
conversion or exchange of outstanding convertible or exchangeable securities of
the Company), plus (Y) the number of shares of Common Stock to which the net
aggregate consideration received by the Corporation for the total number of such
additional shares of Common Stock so issued would purchase at the Conversion
Price (prior to adjustment), and
(B) the denominator of which shall be (X) the number
of shares of Common Stock and Preferred Stock of all classes outstanding
immediately prior to the issuance of such additional shares of Common Stock
(excluding treasury shares but including shares of Common Stock issuable upon
conversion or exchange of outstanding convertible or exchangeable securities of
the Company), plus (Y) the number of such additional shares of Common Stock so
issued.
(iii) SALE OF OPTIONS, RIGHTS OR CONVERTIBLE SECURITIES.
In the event the Corporation shall at any time or from time to time, issue
options, warrants or rights to subscribe for shares of Common Stock or issue any
securities convertible into or exchangeable for shares of Common Stock (other
than any options or warrants for Excluded Shares), for a consideration per share
(determined by dividing the Net Aggregate Consideration (as determined below) by
the aggregate number of shares of Common Stock that would be issued if all such
options, warrants, rights or convertible securities were exercised or converted
to the fullest extent permitted by their terms) less than the Conversion Price
in effect immediately prior to the issuance of such options or rights or
convertible or exchangeable securities, the Conversion Price in effect
immediately prior to the issuance of such options, warrants or rights or
securities shall be reduced to an amount determined by multiplying such
Conversion Price by a fraction:
(A) the numerator of which shall be (X) the number
of shares of Common Stock and Preferred Stock of all classes outstanding
immediately prior to the issuance of such options, rights or convertible
securities (excluding treasury shares but including shares of Common Stock
issuable upon conversion or exchange of outstanding convertible or exchangeable
securities of the Company), plus (Y) the number of shares of Common Stock which
the total amount of consideration received by the Corporation for the issuance
of such options, warrants, rights or convertible securities plus the minimum
amount set forth in the terms of such security as payable to the Corporation
upon the exercise or conversion thereof (the "Net Aggregate Consideration")
would purchase at the Conversion Price prior to adjustment, and
(B) the denominator of which shall be (X) the number
of shares of Common Stock and Preferred Stock of all classes outstanding
immediately prior to the issuance of such options, warrants, rights or
convertible securities (excluding treasury shares but including shares of Common
Stock issuable upon conversion or exchange of outstanding
<PAGE>
convertible or exchangeable securities of the Company), plus (Y) the aggregate
number of shares of Common Stock that would be issued if all such options,
warrants, rights or convertible securities were exercised or converted.
(iv) EXPIRATION OR CHANGE IN PRICE. If the consideration
per share provided for in any options or rights to subscribe for shares of
Common Stock or any securities exchangeable for or convertible into shares of
Common Stock changes at any time, the Conversion Price in effect at the time of
such change shall be readjusted to the Conversion Price which would have been in
effect at such time had such options or convertible securities provided for such
changed consideration per share (determined as provided in Section A.7(a)(iii)
hereof), at the time initially granted, issued or sold; PROVIDED that such
adjustment of the Conversion Price will be made only as and to the extent that
the Conversion Price effective upon such adjustment remains less than or equal
to the Conversion Price that would be in effect if such options, rights at
securities had not been issued. No adjustment of the Conversion Price shall be
made under this Section A.7(a) upon the issuance of any additional share of
Common Stock which are issued pursuant to the exercise of any warrants, options
or other subscription or purchase rights or pursuant to the exercise of any
conversion or exchange rights in any convertible securities if an adjustment
shall previously have been made upon the issuance of such warrants, options or
other rights. Any adjustment of the Conversion Price shall be disregarded if,
as, and when the rights to acquire shares of Common Stock upon exercise or
conversion of the warrants, options, rights or convertible securities which gave
rise to such adjustment expire or are canceled without having been exercised, so
that the Conversion Price effective immediately upon such cancellation or
expiration shall be equal to the Conversion Price in effect at the time of the
issuance of the expired or canceled warrants, options, rights or convertible
securities, with such additional adjustments as would have been made to that
Conversion Price had the expired or canceled warrants, options, rights or
convertible securities not been issued.
(b) OTHER ADJUSTMENTS. In the event the Corporation shall
make or issue, or fix 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, then and in
each such event lawful and adequate provision shall be made so that the holders
of Convertible Preferred Stock shall receive upon conversion thereof in addition
to the number of shares of Common Stock receivable thereupon, the number of
securities of the Corporation which they would have received had their
Convertible Preferred Stock been converted into Common Stock and Redeemable
Preferred Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the date of conversion,
retained such securities receivable by them as aforesaid during such period,
giving application to all adjustments called for during such period under this
Section A.7 as applied to such distributed securities.
If the Common Stock issuable upon the conversion of the
Convertible Preferred Stock shall be changed into the same or different
number of shares of any class or classes of stock, whether by
reclassification or otherwise (other than a subdivision or combination of
shares or stock dividend provided for above, or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section A.7),
then and in each such event the holder of each share
<PAGE>
of Convertible Preferred Stock shall have the right thereafter to convert such
share into the kind and amount of shares of stock and other securities and
property receivable upon such reorganization, reclassification or other change,
by holders of the number of shares of Common Stock into which such shares of
Convertible Preferred Stock might have been converted immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided herein.
(c) MERGERS AND OTHER REORGANIZATIONS. If at any time or from
time to time there shall be a capital reorganization of the Common Stock (other
than a subdivision, combination, reclassification or exchange of shares provided
for elsewhere in this Section A.7) or a merger or consolidation of the
Corporation with or into another Corporation or the sale of all or substantially
all of the Corporation's properties and assets to any other person, then, as a
part of and as a condition to the reorganization, merger, consolidation or sale,
lawful and adequate provision shall be made so that the holders of the
Convertible Preferred Stock shall thereafter be entitled to receive upon
conversion of the Convertible Preferred Stock the number of shares of stock or
other securities or property of the Corporation or of the successor Corporation
resulting from such merger or consolidation or sale, to which a holder of Common
Stock deliverable upon conversion would have been entitled on such capital
reorganization, merger, consolidation, or sale. In any such case, appropriate
provisions shall be made with respect to the rights of the holders of the
Convertible Preferred Stock after the reorganization, merger, consolidation or
sale to the end that the provisions of this Section A.7 (including without
limitation provisions for adjustment of the Conversion Price and the number of
shares purchasable upon conversion of the Convertible Preferred Stock) shall
thereafter be applicable, as nearly as may be, with respect to any shares of
stock, securities or assets to be deliverable thereafter upon the conversion of
the Convertible Preferred Stock.
(d) SPECIAL ADJUSTMENTS TO CONVERSION PRICE OF CONVERTIBLE
PREFERRED STOCK. In addition to the foregoing adjustments, if the Corporation
shall effect a firmly-underwritten initial public offering prior to July 30,
2000, the Conversion Price shall be adjusted as follows:
(i) If the Public Offering Price ("POP") is less than or
equal to $4.4113, then no adjustment shall be made to the Conversion Price under
this Section A.7(d).
(ii) If the POP is greater than $4.4113 and less than or
equal to $5.7135, then the Conversion Price shall be adjusted by the following
formula (rounded to the nearest hundredth of a cent):
Conversion Price = $2.1932+[(POP - $4.4113)/($5.7135-$4.4113)]*
($2.5250-$2.1932).
(iii) If the POP is greater than $5.7135 and less than or
equal to $7.0955, then the Conversion Price shall be adjusted by the following
formula (rounded to the nearest hundredth of a cent):
Conversion Price = $2.5250+[(POP - $5.7135)/($7.0955-$5.7135)]*
($2.9398-$2.5250).
<PAGE>
(iv) If the POP is greater than $7.0955, then the
Conversion Price shall be $2.9398, subject to adjustment as provided elsewhere
in this Section A.7.
The prices set forth above, including the POP, wherever appearing,
shall be adjusted for stock splits, stock dividends, reclassifications,
combinations and the like.
(e) CERTIFICATE OF ADJUSTMENT. Upon the occurrence of each
adjustment or readjustment pursuant to this Section A.7, the Corporation at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Convertible
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustments is
based. The Corporation shall, upon written request at any time of any holder of
Convertible Preferred Stock, furnish or cause to be furnished to such holder a
like certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Prices before and after such adjustment or readjustment, and (iii)
the number of shares of Common Stock and Redeemable Preferred Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of such holder's shares of Convertible Preferred Stock.
8. COVENANTS. So long as any shares of Convertible Preferred Stock
shall be outstanding, the Corporation shall not, without first having provided
the written notice of such proposed action to each holder of outstanding shares
of Convertible Preferred Stock and having obtained the affirmative vote or,
written consent of the holders of at least a majority in voting power of the
outstanding shares of Convertible Preferred Stock, voting as a single class,
with each share of Convertible Preferred Stock entitling the holder thereof to
one vote per share of Convertible Preferred Stock held by such holder:
(a) directly or indirectly redeem, purchase, or otherwise
acquire for consideration any share of its Common Stock or any other class of
its capital stock except for (i) redemption of Convertible Preferred Stock or
Redeemable Preferred Stock pursuant to and as provided in this Certificate, (ii)
repurchase of up to 14,610,000 shares of Common Stock from the shareholders of
the Corporation pursuant to Repurchase Agreements entered into before December
4, 1998, (iii) redemption or repurchase of Common Stock valued at a maximum of
$10,000 per annum issued pursuant to the Plan from Eligible Employees (as
defined in Section A.7(a)(ii)) pursuant to an agreement containing vesting
and/or repurchase provisions approved by the Board of Directors of the
Corporation or a committee thereof, or (iv) repurchase of Common Stock pursuant
to and only to the extent required by the Amended and Restated Shareholders'
Agreement dated effective November 4, 1998 by and among the Corporation, the
Investors and the Employee Holders (as defined therein);
(b) adopt any amendment to these Articles, to the
Corporation's Bylaws or adopt any certificate of designations, preferences and
rights for another series of the Corporation's capital stock that eliminates,
amends or restricts or otherwise adversely affects the rights and preferences of
the Convertible Preferred Stock or the Redeemable Preferred Stock, or increase
the authorized shares of Convertible Preferred Stock or Redeemable Preferred
Stock;
(c) with the exception of the repurchase of up to 14,610,000
shares of
<PAGE>
Common Stock within thirty (30) days of the filing of these Articles, declare or
make dividend payments on any shares of Common Stock or any other class of the
Corporation's capital stock;
(d) create, or obligate itself to create, any class or series
of shares having preference over or being on a parity with the Convertible
Preferred Stock or the Redeemable Preferred Stock;
(e) increase the size of the Board of Directors to more than
seven (7) members; or
(f) pay any bonuses to the Corporation's executive officers
other than bonuses consistent with past practices unless any such bonus shall
have been approved by the compensation committee of the Board of Directors.
Further, the Corporation and each subsidiary of the Corporation shall
not, by amendment of these Articles of Incorporation or any certificate of
designations, preferences and rights for another series of the Corporation's
capital stock or through any Liquidation Event or other 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 and
each subsidiary of the Corporation but shall at all times in good faith assist
in the carrying out of all the provisions of these Articles and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the holders of the Convertible Preferred Stock and the Redeemable
Preferred Stock set forth in these Articles against impairment. Any successor to
the Corporation or any subsidiary of the Corporation shall agree, as a condition
to such succession, to carry out and observe the obligations of the Corporation
hereunder with respect to the Convertible Preferred Stock and the Redeemable
Preferred Stock.
9. NOTICE.
(a) LIQUIDATION EVENTS. In the event (i) the Corporation
establishes a record date to determine the holders of any class of securities
who are entitled to receive any dividend or other distribution or who are
entitled to vote at a meeting (or by written consent) in connection with any of
the transactions identified in clause (ii) hereof, or (ii) any Liquidation Event
(as defined in Section A.4), QPO (as defined in Section A.6) or any other public
offering becomes reasonably likely to occur, the Corporation shall mail or cause
to be mailed by first class mail (postage prepaid) to each holder of Convertible
Preferred Stock (or each holder of Redeemable Preferred Stock, as applicable) at
least twenty (20) business days prior to such record date specified therein or
the expected effective date of any such transaction, whichever is earlier, a
notice specifying (A) the date of such record date for the purpose of such
dividend or distribution or meeting or consent and a description of such
dividend or distribution or the action to be taken at such meeting or by such
consent, (B) the date on which any such Liquidation Event, QPO or other public
offering is expected to become effective, and (C) the date on which the books of
the Corporation shall close or a record shall be taken with respect to any such
event.
(b) WAIVER OF NOTICE. The holder or holders of not less than
a majority in
<PAGE>
voting power of the outstanding shares of Convertible Preferred Stock (or
Redeemable Preferred Stock, as applicable) may, at any time upon written notice
to the Corporation, waive any notice provisions specified herein for the benefit
of such holders, and any such waiver shall be binding upon the holders of all
such securities.
(c) GENERAL. In the event that the Corporation provides any
notice, report or statement to any holder of Common Stock, the Corporation shall
at the same time provide a copy of any such notice, report or statement to each
holder of outstanding shares of Convertible Preferred Stock (or Redeemable
Preferred Stock, as applicable).
10. NO REISSUANCE OF CONVERTIBLE PREFERRED STOCK. No share or
shares of Convertible Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued, and all such
shares shall be cancelled, retired and eliminated from the shares which the
Corporation shall be authorized to issue.
B. REDEEMABLE PREFERRED STOCK
1. DESIGNATION. A total of Twelve Million One Hundred Thousand
(12,100,00) shares of the Corporation's Preferred Stock shall be designated
as Redeemable Preferred Stock, no par value per share (the "Redeemable
Preferred Stock").
2. VOTING.
(a) VOTING GENERALLY. Except with respect to the election to
redeem the Redeemable Preferred Stock pursuant to Section B.5, the holders of
Redeemable Preferred Stock shall not be entitled to vote on any matters except
to the extent otherwise required under the Corporations Code of the State of
California.
(b) WAIVER OF NOTICE. The holder or holders of not less than
a majority in voting power of the outstanding shares of Redeemable Preferred
Stock may, at any time upon written notice to the Corporation, waive any notice
provisions specified herein for the benefit of such holders, and any such waiver
shall be binding upon the holders of all such securities.
3. DIVIDENDS.
(a) The holders of shares of Redeemable Preferred Stock will
be entitled to receive, if, when and as declared by the Board of Directors, out
of any funds legally available therefor, noncumulative dividends at the rate of
6% of the Redeemable Base Liquidation Preferred Amount (as defined below) per
share per annum (appropriately adjusted for stock splits and combinations) for
each share of Redeemable Preferred Stock then held by them. Such dividends may
be payable quarterly or otherwise as the Board of Directors may from time to
time determine. Dividends may be declared and paid upon shares of Common Stock
in any fiscal year of the Corporation, only if dividends shall have been paid to
or declared and set apart upon all shares of Redeemable Preferred Stock, and all
shares of any other series of Preferred Stock on a parity with the Redeemable
Preferred Stock, at its annual rate for each quarter of such fiscal year of the
Corporation, including the quarter in which such dividends upon shares of Common
Stock
<PAGE>
are declared and all redemptions then due and payable on the Convertible
Preferred Stock and the Redeemable Preferred Stock shall have been paid in full
or set apart for payment in full. No right shall accrue to holders of Redeemable
Preferred Stock by reason of the fact that dividends on said shares are not
declared in any prior year, nor shall any undeclared or unpaid dividends bear or
accrue interest.
(b) If any dividend or other distribution payable in property
other than cash is declared on the Common Stock, each holder of shares of
Redeemable Preferred Stock on the record date for such dividend or distribution
shall be entitled to receive on the date of payment or distribution of such
dividend or other distribution the same property that such holder would have
received if such holder was the holder of a like number of shares of Common
Stock.
4. LIQUIDATION. Upon any Liquidation Event, each holder of an
outstanding share of Redeemable Preferred Stock shall be entitled to be paid out
of the assets of the Corporation available for the distribution to shareholders,
whether such assets are capital, surplus or earnings, and before any amount
shall be paid or distributed to the holders of Common Stock or of any other
stock ranking on liquidation junior to the Redeemable Preferred Stock, an amount
in cash equal to the sum of (a) $0.6345 per share of Redeemable Preferred Stock
held by such holder (adjusted appropriately for stock splits, stock dividends,
recapitalizations and the like with respect to the Redeemable Preferred Stock)
(which amount shall be referred to hereinafter as the "Initial Redeemable Base
Liquidation Amount" or "IRBLA"), plus (b) any accrued but unpaid dividends to
which such holder of outstanding shares of Redeemable Preferred Stock is
entitled pursuant to Sections B.3 and B.5(d) hereof (the sum of the IRBLA and
the amount determined under clause (b) being referred to hereinafter as the
"Redeemable Base Liquidation Amount" or "RBLA"), plus (c) any accrued but unpaid
dividends or other amounts due in respect of the shares of Convertible Preferred
Stock converted into such shares of Redeemable Preferred Stock, plus (d) any
interest accrued pursuant to Section B.5(c) to which such holder of outstanding
shares of Redeemable Preferred Stock is entitled, if any (the sum of the RBLA
and the amount determined under clause (c) being referred to hereinafter as the
"Redeemable Liquidation Preference Amount"); PROVIDED, HOWEVER, that if, upon
any Liquidation Event, the amounts payable with respect to the Redeemable
Liquidation Preference Amount are not paid in full, the holders of the
Redeemable Preferred Stock shall share ratably in any distribution of assets in
proportion to the full respective preferential amounts to which they are
entitled.
Notwithstanding the foregoing, if the Corporation effects a
firmly-underwritten initial public offering, the Initial Redeemable Base
Liquidation Amount shall be adjusted as follows:
(i) If the POP is less than or equal to $4.4113, then no
adjustment shall be made to the IRBLA.
(ii) If the POP is greater than $4.4113 and less than or
equal to $5.7135, then the IRBLA shall be determined by the following formula
(rounded to the nearest hundredth of cent):
IRBLA = $0.6345 - [(POP - $4.4113)/($5.7135 - $4.4113)]* ($0.6345-
$0.4269).
<PAGE>
(iii) If the POP is greater than $5.7135 and less than or
equal to $7.0955, then the IRBLA shall be determined by the following formula
(rounded to the nearest hundredth of a cent):
IRBLA = $0.4269 - [(POP - $5.7135)/($7.0955 -
$5.7135)]*($0.4269-$0.2193).
(iv) If the POP is greater than $7.0955, then the IRBLA
shall be $0.2193.
The prices set forth above, including the POP, wherever appearing,
shall be adjusted for stock splits, stock dividends, reclassifications,
combinations and the like.
5. REDEMPTION.
(a) REDEMPTION EVENTS.
(i) UPON ELECTION OF HOLDERS UPON A QPO. Upon the
election of the holder or holders of not less than a majority of the outstanding
Redeemable Preferred Stock, the Corporation shall redeem in cash all (and not
less than all, except as set forth in Section B.5(c)) of the outstanding shares
of Redeemable Preferred Stock upon the closing of the QPO. The foregoing
election shall be made by such holders giving the Corporation and each other
holder of the Redeemable Preferred Stock written notice not less than five (5)
days prior to the closing of the QPO.
(ii) UPON ELECTION OF CORPORATION UPON A QPO. The
Corporation may elect to redeem in cash all (but not less than all, other than
pursuant to Section B.5(c) below) of the outstanding shares of Redeemable
Preferred Stock at any time upon the closing of a QPO. The foregoing election
shall be made by the Corporation giving each holder of Redeemable Preferred
Stock written notice not less than five (5) days prior to the closing of a QPO.
(iii) LAPSE OF TIME.
(A) At any time after the sixth anniversary of the
issuance of the Convertible Preferred Stock on any one occasion any holder of
Redeemable Preferred Stock may require the Corporation to redeem in cash up to
thirty-three percent (33%) of the outstanding shares of Redeemable Preferred
Stock held by such holder at such time.
(B) At any time after the seventh anniversary of the
issuance of the Convertible Preferred Stock on any one occasion any holder of
Redeemable Preferred Stock may require the Corporation to redeem up to sixty-six
percent (66%) of the outstanding shares of Redeemable Preferred Stock held by
such holder at such time.
(C) At any time after the eighth anniversary of the
issuance of the Convertible Preferred Stock on any one occasion any holder of
Redeemable Preferred Stock may require the Corporation to redeem in cash up to
one hundred percent (100%) of the outstanding shares of Redeemable Preferred
Stock held by such holder at such time.
<PAGE>
(D) UPON A LIQUIDATION EVENT. Upon the election of
the holder or holders of not less than a majority in voting power of the
outstanding Redeemable Preferred Stock, the Corporation shall redeem in cash all
(and not less than all, other than pursuant to Section B.5(c) below) of the
outstanding shares of Redeemable Preferred Stock upon the occurrence of a
Liquidation Event or public offering not constituting a QPO. The foregoing
election shall be made by such holders giving the Corporation and each other
holder of Redeemable Preferred Stock (or Convertible Stock, as applicable) not
less than five (5) days prior written notice, which notice shall set forth the
date for such redemption.
(b) REDEMPTION DATE, REDEMPTION PRICE. Any holder of
Redeemable Preferred Stock may exercise such holder's right of redemption
pursuant to Section B.5(a)(iii) by such holder giving the Corporation not less
than ten (10) days prior written notice, which notice shall set forth the date
for such redemption. Upon the election of the holders of not less than a
majority in voting power of the outstanding Redeemable Preferred Stock to cause
the Corporation to redeem the Redeemable Preferred Stock pursuant to Section
B.5(a)(i) or (a)(iv), all holders of Redeemable Preferred Stock shall be deemed
to have elected to cause the Redeemable Preferred Stock subject to such election
to be so redeemed. Any date upon which a redemption shall actually occur in
accordance with Section B.5(a) shall be referred to as a "Redemption Date." The
redemption price for each share of Redeemable Preferred Stock redeemed pursuant
to this Section B.5 shall be the per share Redeemable Liquidation Preference
Amount (the "Redemption Price"). The aggregate Redemption Price shall be payable
in cash in immediately available funds on the Redemption Date. Until the
aggregate Redemption Price, including any interest thereon, has been paid in
cash for all shares of Redeemable Preferred Stock redeemed as of the applicable
Redemption Date or Redemption Notes have been issued pursuant to Section
B.5(a)(i); (A) no dividend whatsoever shall be paid or declared, and no
distribution shall be made, on any capital stock of the Corporation (other than
the Redeemable Preferred Stock in accordance with Section B.5(d)); and (B) no
shares of capital stock of the Corporation (other than the Redeemable Preferred
Stock in accordance with this Section B.5) shall be purchased, redeemed or
acquired by the Corporation and no monies shall be paid into or set aside or
made available for a sinking fund for the purchase, redemption or acquisition
thereof.
(c) REDEMPTION PROHIBITED. If, at a Redemption Date,
the Corporation is prohibited under the Corporations Code of the State of
California from redeeming all shares of Redeemable Preferred Stock for which
redemption is required hereunder, then it shall redeem such shares on a
pro-rata basis among the holders of Redeemable Preferred Stock in proportion
to the full respective redemption amounts to which they are entitled
hereunder to the extent possible and shall redeem the remaining shares to be
redeemed as soon as the Corporation is not prohibited from redeeming some or
all of such shares under the Corporations Code of the State of California,
subject to the last paragraph of Section A.8. The shares of Redeemable
Preferred Stock not redeemed shall remain outstanding and entitled to all of
the rights and preferences provided in these Articles. In the event that the
Corporation fails for any reason to redeem shares for which redemption is
triggered pursuant to Section B.5 (other than pursuant to the third sentence
of Section B.5(a)(i)), including without limitation due to a prohibition of
such redemption under the Corporations Code of the State of California, then
during the period from the applicable Redemption Date through the date on
which such shares are redeemed, the
<PAGE>
applicable Redeemable Base Liquidation Amount of such shares shall bear
interest at the greater of (i) 9% or (ii) 3% over the Citibank N.A. prime rate
published in the Wall Street Journal on the Redemption Date, compounded
annually; provided, however, that in no event shall such interest rate exceed
the Maximum Permitted Rate.
(d) DIVIDEND AFTER REDEMPTION DATE. From and after the
closing of a QPO or upon consummation of a Liquidation Event or a public
offering not constituting a QPO (in the case of a redemption pursuant to Section
B.5(a)(i) or (iv)) or the date specified for redemption in the election notice
as set forth in Section B.5(a)(ii) or (v) or Section B.5(v), no shares of
Redeemable Preferred Stock subject to redemption shall be entitled to any
further dividends pursuant to Section B.3 hereof; PROVIDED, HOWEVER, that in the
event that shares of Redeemable Preferred Stock are unable to be redeemed and
continue to be outstanding in accordance with Section B.5(c), such shares shall
continue to be entitled to dividends and interest thereon as provided in
Sections B.3 and B.5(c) until the date on which such shares are actually
redeemed by the Corporation.
(e) SURRENDER OF CERTIFICATES. The Corporation shall
give, not less than 10 days prior to the Redemption Date, a Redemption Notice to
all holders of the Redeemable Preferred Stock which shall require each holder
submitting shares for redemption to surrender to the Corporation on or before
the Redemption Date, at the place designated in the Redemption Notice, such
holder's certificate or certificates representing the shares of Redeemable
Preferred Stock to be redeemed. On or prior to the Redemption Date, each holder
of shares of Redeemable Preferred Stock submitted for redemption shall surrender
the certificate or certificates evidencing such shares to the Corporation, at
the place designated in the Redemption Notice and shall thereupon be entitled to
receive payment of the appropriate Redemption Price by certified check or wire
transfer. In the event the certificates are lost, stolen or missing, the holder
of Redeemable Preferred Stock shall deliver an Affidavit of Loss with respect to
such certificates at the place set forth in the Redemption Notice. Each
surrendered certificate shall be canceled and retired; PROVIDED, HOWEVER, that
if the holder has exercised its right pursuant to Section B.5(a)(iii)(A) or the
Corporation has exercised its right pursuant to Section B.5(a)(v)(A), the holder
shall not be required to surrender said certificate(s) to the Corporation until
said holder has received a new stock certificate for those shares of Redeemable
Preferred Stock not so redeemed.
6. NOTICE. In the event that the Corporation provides or is
required to provide notice to any holder of Convertible Preferred Stock or any
holder of Common Stock in accordance with the provisions of this Certificate
(including the provisions of Section A.9) and/or the Corporation's bylaws, the
Corporation shall at the same time provide a copy of such notice to each holder
of outstanding Redeemable Preferred Stock.
7. NO REISSUANCE OF REDEEMABLE PREFERRED STOCK. No share or shares
of Redeemable Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued, and all such
shares shall be canceled, retired and eliminated from the shares which the
Corporation shall be authorized to issue.
<PAGE>
1. LIMITATION OF DIRECTORS' LIABILITY. The liability of the
directors of this corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.
2. INDEMNIFICATION OF CORPORATION AGENTS. This corporation is
authorized to provide indemnification of its agents (as defined in Section 310
of the California General Corporations Law) through bylaws provisions,
agreements with agents, vote of shareholders or disinterested directors, or
otherwise, in excess of the indemnification otherwise permitted by such Section
317, subject only to the limits set forth in Section 204 of the California
General Corporations Law with respect to actions for breach of duty to the
corporation and shareholders.
3. REPEAL OR MODIFICATION. Any repeal or modification of the
foregoing provisions of this Article V shall not adversely affect any right of
indemnification or limit of liability of an agent of this corporation relating
to acts or omissions occurring prior to such repeal or modification."
* * *
The foregoing amendment and restatement has been duly approved by the
Board of Directors of the Company.
The foregoing amendment and restatement has been duly approved by the
required vote of shareholders in accordance with Sections 902 and 903 of the
California General Corporations Law. The total number of outstanding shares is
45,737,660 shares of Common Stock. The number of shares voting in favor of the
amendment equaled or exceeded the votes required. The percentage vote was more
than 50% of the outstanding Common Stock.
We further declare under penalty of perjury under the laws of
California that the matters set forth in this amendment and restatement are true
of our own knowledge.
Executed in Palo Alto, California on November 1, 1998.
/s/ Jerry S. Rawls
---------------------------------
Jerry S. Rawls, President
/s/ Wynette Levinson
---------------------------------
Wynette Levinson, Secretary