Certificate of Incorporation - Quokka Sports Inc.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
QUOKKA SPORTS, INC.
Alan Ramadan and Les Schmidt hereby certify that:
1. The name of this corporation is Quokka Sports, Inc.
2. The Certificate of Incorporation of this corporation was filed by the
Secretary of State of the State of Delaware on August 15, 1996, in the name of
Quokka Productions, Inc. The corporation's name was changed to Quokka Sports,
Inc. in an Amended and Restated Certificate of Incorporation filed by the
Secretary of State on September 16, 1996.
3. They are the duly elected and acting President and Secretary,
respectively, of Quokka Sports, Inc., a Delaware corporation.
4. The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
ARTICLE I
NAME
The name of this corporation is Quokka Sports, Inc. (the "Corporation"
or the "Company").
ARTICLE II
ADDRESS
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington
19801, County of Newcastle; and the name of the registered agent of the
Corporation in the State of Delaware at such address is The Corporation Trust
Company.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
STOCK
This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock."
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1. AUTHORIZED COMMON STOCK. The total number of shares of Common Stock
which the Corporation is authorized to issue is Forty Five Million Seven Hundred
Thousand (45,700,000) shares, each having a par value of One One-Hundredth of
One Cent ($0.0001) per share. The Common Stock shall be issued in two series,
Voting Common Stock and Nonvoting Common Stock. Forty Five Million Four Hundred
Thousand (45,400,000) shares shall be Voting Common Stock. Three Hundred
Thousand (300,000) shares shall be Nonvoting Common Stock.
2. RIGHTS, PREFERENCES AND PRIVILEGES OF COMMON STOCK. The rights,
preferences, privileges, restrictions and other matters relating to the Voting
Common Stock and Nonvoting Common Stock shall be in all respects identical,
except as otherwise required by law or expressly provided in this Section 2.
(a) VOTING RIGHTS. Except as provided by Delaware General
Corporation Law, the holders of Nonvoting Common Stock shall not be entitled to
vote their shares on any matter which the holders of Common Stock shall
otherwise be entitled to vote their shares.
(b) CONVERSION RIGHTS. The holders of the Nonvoting Common Stock
shall have the following rights with respect to the conversion of the Nonvoting
Common Stock into shares of Voting Common Stock:
(1) OPTIONAL CONVERSION. Subject to and in compliance
with the provisions of this Section 2, any shares of Nonvoting Common Stock may,
after March 1, 1999, at the option of the holder, be converted at any time into
fully-paid and nonassessable shares of Voting Common Stock. The number of shares
of Voting Common Stock to which a holder of Nonvoting Common Stock shall be
entitled upon conversion shall be the product obtained by multiplying the
"Nonvoting Conversion Rate" then in effect (determined as provided in Section
2(b)(2)) of Article IV by the number of shares of Nonvoting Common Stock being
converted. The "Nonvoting Original Issue Price" is $0.50 per share.
(2) CONVERSION RATE. The conversion rate in effect at
any time for conversion of the Nonvoting Common Stock (the "Nonvoting Conversion
Rate") shall be the quotient obtained by dividing the Nonvoting Original Issue
Price by the "Nonvoting Conversion Price" as defined in Section 2(b)(3) of
Article IV.
(3) CONVERSION PRICE. The conversion price for the
Nonvoting Common Stock shall initially be the Nonvoting Original Issue Price
(the "Nonvoting Conversion Price"). Such initial Nonvoting Conversion Price
shall be adjusted from time to time in accordance with this Section 2(b). All
references to the Nonvoting Conversion Price herein shall mean the Nonvoting
Conversion Price as so adjusted.
(4) MECHANICS OF CONVERSION. Each holder of Nonvoting
Common Stock who desires to convert the same into shares of Voting Common Stock
pursuant to this Section 2(b) shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or any transfer agent
for the Nonvoting Common 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 Nonvoting Common Stock being converted. Thereupon,
the
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Corporation shall promptly issue and deliver at such office to such holder a
certificate or certificates for the number of shares of Voting 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 Voting Common Stock
(at the Voting Common Stock's fair market value determined by the Board of
Directors as of the date of such conversion), any declared and unpaid dividends
on the shares of Nonvoting Common 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 certificates representing the shares of Nonvoting Common Stock
to be converted, and the person entitled to receive the shares of Voting Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder of such shares of Voting Common Stock on such date. If such
conversion is in connection with a dissolution or liquidation of the Corporation
or a Sale or Merger, the holder may condition such conversion upon the
consummation of such Sale or Merger transaction or the effectiveness of such
dissolution or liquidation.
(5) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the date that the first
share of Nonvoting Common Stock is issued (the "Nonvoting Original Issue Date")
effect a subdivision of the outstanding Voting Common Stock, the Nonvoting
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 Nonvoting Original Issue Date combine the
outstanding shares of Voting Common Stock into a smaller number of shares, the
Nonvoting Conversion Price in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 2(b)(5) of Article
IV shall become effective at the close of business on the date the subdivision
or combination becomes effective.
(6) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Nonvoting Original
Issue Date, the Voting Common Stock issuable upon the conversion of the
Nonvoting Common 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, consolidation or sale of assets provided
for elsewhere in this Section 2(b)), in any such event each holder of Nonvoting
Common Stock shall have the right thereafter to convert such stock into the kind
and amount of stock and other securities and property receivable upon such
recapitalization, reclassification or other change by holders of the maximum
number of shares of Voting Common Stock into which such shares of Nonvoting
Common Stock could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.
(7) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time after the Nonvoting Original Issue
Date, there is a capital reorganization of the Voting Common Stock (other than a
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 2(b)), as a part
of such capital reorganization, provision shall be made so that the holders of
the Nonvoting Common Stock shall thereafter be entitled to receive upon
conversion of the Nonvoting Common Stock the number of shares of stock or other
securities or property of the Corporation to which a holder of the number of
shares of Voting Common Stock deliverable
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upon conversion would have been entitled on such capital reorganization, 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 2(b) with respect to the rights of the holders of
Nonvoting Common Stock after the capital reorganization to the end that the
provisions of this Section 2(b) (including adjustment of the Nonvoting
Conversion Price then in effect and the number of shares issuable upon
conversion of the Nonvoting Common Stock) shall be applicable after that event
and be as nearly equivalent as practicable.
(8) NOTICES OF RECORD DATE. Upon (i) any taking by the
Corporation of a record of the holders of any class or series of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any capital reorganization of the
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, or any transfer of all or substantially all the assets of the
Corporation to any other person, or any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the Corporation shall mail to each
holder of Nonvoting Common Stock at least twenty (20) days prior to the record
date specified therein 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
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective, and (3) the date, if
any, that is to be fixed as to when the holders of record of Voting Common Stock
(or other securities) shall be entitled to exchange their shares of Voting
Common Stock (or other securities) for securities or other property deliverable
upon such reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation or winding up.
(9) AUTOMATIC CONVERSION.
(i) Each share of Nonvoting Common Stock shall
automatically be converted into shares of Voting Common Stock, based on the
then-effective Nonvoting Common Stock Price, 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. Upon such automatic
conversion, any declared and unpaid dividends shall be paid in accordance with
the provisions of Section 2(b)(4).
(ii) Upon the occurrence of the event specified
in paragraph (i) above, the outstanding shares of Nonvoting Common Stock shall
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, however, that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Voting Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Nonvoting Common 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 satisfactory to
the Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. Upon the occurrence of such automatic
conversion of the Nonvoting Common Stock, the holders of Nonvoting Common Stock
shall surrender the certificates representing such
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shares at the office of the Corporation or any transfer agent for the Nonvoting
Common Stock. Thereupon, 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
Voting Common Stock into which the shares of Nonvoting Common Stock surrendered
were convertible on the date on which such automatic conversion occurred, and
any declared and unpaid dividends shall be paid in accordance with the
provisions of Section 2(b)(4) of Article IV.
(10) FRACTIONAL SHARES. No fractional shares of Voting
Common Stock shall be issued upon conversion of Nonvoting Common Stock. All
shares of Voting Common Stock (including fractions thereof) issuable upon
conversion of more than one share of Nonvoting Common Stock by a holder thereof
shall be aggregated for purposes of determining 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 Voting Common Stock's
fair market value (as determined by the Board) on the date of conversion.
(11) 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 Voting Common
Stock upon conversion of shares of Nonvoting Common Stock, excluding any tax or
other charge imposed in connection with any transfer involved in the issue and
delivery of shares of Voting Common Stock in a name other than that in which the
shares of Nonvoting Common Stock so converted were registered.
(12) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Voting Common Stock, solely for the purpose of effecting
the conversion of the shares of the Nonvoting Common Stock, such number of its
shares of Voting Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of the Nonvoting Common Stock. If at
any time the number of authorized but unissued shares of Voting Common Stock
shall not be sufficient to effect the conversion of all then outstanding shares
of the Nonvoting Common 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 Voting Common Stock to such number of shares as shall be
sufficient for such purpose.
3. AUTHORIZED PREFERRED STOCK. The total number of shares of Preferred
Stock which the Corporation is presently authorized to issue is Twenty Seven
Million Six Hundred Thousand (27,600,000) shares, each having a par value of One
One-Hundredth of One Cent ($0.0001).
4. BLANK CHECK PREFERRED STOCK. The Preferred Stock may be issued from
time to time in one or more series. The Board of Directors is hereby authorized,
within the limitations and restrictions stated in this Amended and Restated
Certificate of Incorporation, to provide for the issue of all or any of the
shares of Preferred Stock in one or more series, and to fix the number of shares
and to determine or alter for each such series, such voting powers, full or
limited, or no voting powers, and such designations, preferences, and relative,
participating,
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optional, or other rights and such qualifications, limitations, or restrictions
thereof, as shall be stated and expressed in the resolution or resolutions
adopted by the Board of Directors providing for the issue of such shares and as
may be permitted by the General Corporation Law of the State of Delaware. The
Board of Directors is also authorized to increase or decrease the number of
shares of any series other than the Series A Preferred and the Series B
Preferred (each as defined below) subsequent to the issue of shares of that
series, but not below the number of shares of such series then outstanding. In
case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
5. RIGHTS, PREFERENCES AND PRIVILEGES OF PREFERRED STOCK. Seven Million
Nine Hundred Sixty Five Thousand Six Hundred Eighty Eight (7,965,688) of the
authorized shares of Preferred Stock are hereby designated "Series A Preferred
Stock" ("Series A Preferred"). Eleven Million One Hundred Twenty Seven Thousand
Six Hundred Twenty (11,127,620) of the authorized shares of Preferred Stock are
hereby designated "Series B Preferred Stock" ("Series B Preferred"). Eight
Million Five Hundred Thousand (8,500,000) of the authorized shares of Preferred
Stock are hereby designated "Series C Preferred Stock" ("Series C Preferred").
The rights, preferences, privileges, restrictions and other matters relating to
the Series A Preferred, Series B Preferred and Series C Preferred are as
follows:
(a) DIVIDEND RIGHTS.
(1) The holders of Series C Preferred, Series B
Preferred and Series A Preferred, prior to and in preference to the holders of
any other stock of the Company ("Junior Stock"), shall be entitled to receive
dividends at the rate of 8% of the respective Original Issue Price (as defined
in Section 5(c)(1)) per annum on each outstanding share of Series C Preferred,
Series B Preferred and Series A Preferred (as adjusted for any stock dividends,
combinations or splits with respect to such shares), payable out of funds
legally available therefor. Such dividends shall be payable only when, as, and
if declared by the Board of Directors and shall be noncumulative from the
Original Issue Date (as defined in Section 5(d)(6) below).
(2) No dividend, whether cash or property, shall be paid
or declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Company be purchased, redeemed or
otherwise acquired for value by the Company (except for acquisitions of Common
Stock by the Company pursuant to any agreement which permits the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer) until
all dividends (set forth in Section 5(a)(1) above) on the Series C Preferred,
Series B Preferred and Series A Preferred shall have been paid or declared and
set apart. No dividends will be paid on any share of Junior Stock unless (i) a
dividend equal to at least 8% of the Original Issue Price applicable to such
series of Preferred Stock has been paid on the Series C Preferred, Series B
Preferred and Series A Preferred for the prior 12 months pursuant to the above
provisions of this Section 5(a) and (ii) a dividend (including the amount of any
dividends paid pursuant to the above provisions of this Section 5(a)) is paid
with respect to all outstanding shares of Series C Preferred, Series B Preferred
and Series A Preferred in an amount for each share of Series C Preferred, Series
B Preferred and Series A Preferred equal to or greater than the aggregate amount
of such dividends for all shares of the Company's Voting Common Stock (which for
the purposes of this Section 5
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of Article IV will be referred to as "Common Stock") into which each such share
of Series C Preferred, Series B Preferred and Series A Preferred could then be
converted. The provisions of this Section 5(a)(2) shall not apply to (i) a
dividend payable in Common Stock, (ii) the acquisition of shares of any Junior
Stock in exchange for shares of any other Junior Stock, or (iii) any repurchase
of any outstanding securities of the Company that is approved by the Company's
Board of Directors.
(b) VOTING RIGHTS. Except as otherwise provided herein, including
Section 5(e) or as required by law, the shares of Series C Preferred, Series B
Preferred and Series A Preferred shall be entitled to vote with the shares of
the Common Stock, and not as a separate class, at any annual or special meeting
of stockholders, 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, Series B Preferred and Series A Preferred shall be entitled to the
number of votes equal to the number of shares of Common Stock into which such
shares of Series C Preferred, Series B Preferred and Series A Preferred could be
converted immediately after the close of business on the record date fixed for
such meeting or the effective date of such written consent.
(1) Until the Company has had a firmly-underwritten
public offering that meets the provisions of Section 5d(2)(i) below, the holders
of Series A Preferred, voting as a separate class, shall have the right to elect
two directors. Such right can be exercised, from time to time, at any annual
meeting or at any special meeting called for such purpose, or any adjournment
thereof, or by the written consent, delivered to the Secretary of the Company,
of the holders of a majority of all outstanding shares of Series A Preferred.
Upon the written request of the holders of record of a majority of the
outstanding Series A Preferred, the Secretary of the Company will call a special
meeting of the holders of such shares for the election of such two directors.
Such meeting must be held within 30 days after delivery of such request to the
Secretary, at the place and upon the notice provided by law and in the Bylaws
for the holding of meetings of Stockholders, or at a place and time designated
in the foregoing written request. Directors elected by the Series A Preferred
will serve until their successors have been elected, or their removal, by the
holders of the Series A Preferred. If any vacancy occurs among the directors
elected by the holders of the Series A Preferred as a class, the remaining
director who has been so elected can appoint a successor to hold office for the
expired term of the director whose place is vacant. If both directors elected by
the Series A Preferred cease to serve as directors before their terms expire,
the holders of the Series A Preferred then outstanding and entitled to vote for
such directors can, by written consent, at a special meeting of such holders as
provided above, or at the next annual meeting, elect successors to hold office
for the unexpired terms of the directors whose places become vacant.
(2) Until the Company has had a firmly-underwritten
public offering that meets the provisions of Section 5d(2)(i) below, any
amendment to the Bylaws of the Company to increase the number of directors above
eight (8) members shall require the approval of the holders of record of a
majority of all outstanding shares of Series C Preferred, Series B Preferred and
Series A Preferred, voting together as a separate class.
(c) LIQUIDATION RIGHTS.
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(1) Upon any liquidation (as defined below), dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of Series C Preferred shall be entitled to receive, prior and in preference to
any distribution of any of the assets or surplus funds of the Corporation to the
holders of Series B Preferred, Series A Preferred or Junior Stock by reason of
their ownership thereof, the sum of (A) Three Dollars and Twenty-Five Cents
($3.25) (the "Series C Original Issue Price") plus (B) any declared and unpaid
dividends from the Original Issue Date (as defined in Section 5(d)(6) below)
until the date of payment (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such shares) for each
share of Series C Preferred held by them. If the assets of the Corporation are
insufficient to make payment in full to all holders of Series C Preferred
pursuant to this Section 5(c)(1), then such assets shall be distributed among
the holders of Series C Preferred at the time outstanding ratably in proportion
to the full amounts to which they would otherwise be entitled under this Section
5(c)(1).
(2) After the payment of the full liquidation preference
of the Series C Preferred as set forth above in Section 5(c)(1), upon any
liquidation (as defined below), dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of Series B Preferred shall be
entitled to receive, prior and in preference to any distribution of any of the
assets or surplus funds of the Corporation to the holders of Series A Preferred
or Junior Stock by reason of their ownership thereof, the sum of (A) One Dollar
Fifty Cents ($1.50) (the "Series B Original Issue Price") plus (B) any declared
and unpaid dividends from the Original Issue Date (as defined in Section 5(d)(6)
below) until the date of payment (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) for each share of Series B Preferred held by them. If the assets of the
Corporation are insufficient to make payment in full to all holders of Series B
Preferred pursuant to this Section 5(c)(2), then such assets shall be
distributed among the holders of Series B Preferred at the time outstanding
ratably in proportion to the full amounts to which they would otherwise be
entitled under this Section 5(c)(2).
(3) After the payment of the full liquidation preference
of the Series C Preferred as set forth above in Section 5(c)(1) and the Series B
Preferred as set forth above in Section 5(c)(2), upon any liquidation (as
defined below), dissolution or winding up of the Corporation, whether voluntary
or involuntary, the holders of Series A Preferred shall be entitled to receive,
prior and in preference to any distribution of any of the assets or surplus
funds of the Corporation to the holders of Junior Stock by reason of their
ownership thereof, the sum of (A) Sixty Eight Cents ($0.68) (the "Series A
Original Issue Price") plus (B) any declared and unpaid dividends from the
Original Issue Date (as defined in Section 5(d)(6) below) until the date of
payment (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) for each share of
Series A Preferred held by them. If the remaining assets of the Corporation
after payment of the full liquidation preference of the Series C Preferred and
Series B Preferred in accordance with Sections 5(c)(1) and 5(c)(2) above are
insufficient to make payment in full to all holders of Series A Preferred
pursuant to this Section 5(c)(3), then such assets shall be distributed among
the holders of the Series A Preferred at the time outstanding ratably in
proportion to the full amounts to which they would otherwise be entitled under
this Section 5(c)(3).
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(4) After payment of the full liquidation preference of
the Series C Preferred, Series B Preferred and Series A Preferred as set forth
above in Sections 5(c)(1), 5(c)(2) and 5(c)(3), upon any liquidation (as defined
below), dissolution or winding up of the Corporation, whether voluntary or
involuntary:
(i) where the amount payable on account thereof
per share of Voting Common Stock (assuming all Non-Voting Common Stock, Series A
Preferred, Series B Preferred and Series C Preferred are deemed converted into
Voting Common Stock at the then applicable conversion rates immediately prior to
such liquidation, dissolution or winding up of the Corporation) is less than
Three Dollars ($3.00), the holders of the Series B Preferred, the holders of the
Series A Preferred and the holders of the Common Stock shall receive the
remaining assets on a pro rata, as-converted basis.
(ii) where the amount payable on account thereof
per share of Voting Common Stock (assuming all Non-Voting Common Stock, Series A
Preferred, Series B Preferred and Series C Preferred are deemed converted into
Voting Common Stock at the then applicable conversion rates immediately prior to
such liquidation, dissolution or winding up of the Corporation) is equal to or
greater than Three Dollars ($3.00) and less than Four Dollars Fifty Cents
($4.50), the holders of the Series B Preferred and the holders of the Common
Stock shall receive the remaining assets on a pro rata, as-converted basis.
(iii) where the amount payable on account
thereof per share of Voting Common Stock (assuming all Non-Voting Common Stock,
Series A Preferred, Series B Preferred and Series C Preferred are deemed
converted into Voting Common Stock at the then applicable conversion rates
immediately prior to such liquidation, dissolution or winding up of the
Corporation) is equal to or greater than Four Dollars Fifty Cents ($4.50), the
holders of the Common Stock shall receive the remaining assets on a pro-rata
basis.
(5) Notwithstanding anything in Sections 5(c)(1),
5(c)(2), 5(c)(3) or 5(c)(4) above to the contrary, in the event of a
liquidation:
(i) the holders of Series A Preferred shall be
entitled to participate in distributions to holders of the Common Stock such
that, after giving effect to all distributions as set forth therein, the holders
of Series A Preferred receive aggregate distributions equal to the greater of
the amounts payable to the Series A Preferred pursuant to Sections 5(c)(3) and
5(c)(4)(i) above and the amounts that such holders would have received if the
Series A Preferred had been converted into Common Stock immediately prior to
such liquidation of the Corporation;
(ii) the holders of Series B Preferred shall be
entitled to participate in distributions to holders of the Common Stock such
that, after giving effect to all distributions as set forth therein, the holders
of Series B Preferred receive aggregate distributions equal to the greater of
the amounts payable to Series B Preferred pursuant to Sections 5(c)(2) and
5(c)(4)(ii) above and the amounts that such holders would have received if the
Series B Preferred had been converted into Common Stock immediately prior to
such liquidation of the Corporation; and
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(iii) the holders of Series C Preferred shall be
entitled to participate in distributions to holders of the Common Stock such
that, after giving effect to all distributions as set forth therein, the holders
of Series C Preferred receive aggregate distributions equal to the greater of
the amounts payable to the Series C Preferred pursuant to Sections 5(c)(1) above
and the amounts that such holders would have received if the Series C Preferred
had been converted into Common Stock immediately prior to such liquidation of
the Corporation.
(6) The following events shall be considered a
liquidation under this Section:
(i) any consolidation or merger of the Company
with or into any other corporation or other entity or person, or any other
corporate reorganization, in which the stockholders of the Company immediately
prior to such consolidation, merger or reorganization, own less than fifty
percent (50%) of the Company's voting power immediately after such
consolidation, merger or reorganization, or any transaction or series of related
transactions in which in excess of fifty percent (50%) of the Company's voting
power is transferred (an "Acquisition"); or
(ii) a sale, lease, or other disposition of all
or substantially all of the assets of the Company (an "Asset Transfer").
(d) CONVERSION RIGHTS. The holders of the Series C Preferred,
Series B Preferred and Series A Preferred shall have the following rights with
respect to the conversion of the Series C Preferred, Series B Preferred and
Series A Preferred into shares of Common Stock (the "Conversion Rights"):
(1) OPTIONAL CONVERSION. Subject to and in compliance
with the provisions of this Section 5(d), any shares of Series C Preferred,
Series B Preferred and Series A Preferred may, at the option of the holder, be
converted at any time into fully-paid and nonassessable shares of Common Stock.
The number of shares of Common Stock to which a holder of Series C Preferred
will be entitled upon conversion will be the product obtained by multiplying the
"Series C Conversion Rate" then in effect (determined as provided in Section
5(d)(3)) by the number of shares of Series C Preferred being converted. The
number of shares of Common Stock to which a holder of Series B Preferred will be
entitled upon conversion will be the product obtained by multiplying the "Series
B Conversion Rate" then in effect (determined as provided in Section 5(d)(3)) by
the number of shares of Series B Preferred being converted. The number of shares
of Common Stock to which a holder of Series A Preferred will be entitled upon
conversion will be the product obtained by multiplying the "Series A Conversion
Rate" then in effect (determined as provided in Section 5(d)(3)) by the number
of shares of Series A Preferred being converted.
(2) AUTOMATIC CONVERSION.
(i) Each share of Series C Preferred, Series B
Preferred and Series A Preferred shall automatically be converted into shares of
Common Stock, based on the then-effective Series C Conversion Price, Series B
Conversion Price or Series A Conversion Price (as defined in Section 5(d)(4)),
respectively, at any time upon (i) the affirmative vote of the
10.
<PAGE> 11
holders of at least seventy-five percent (75%) of the Preferred Stock then
outstanding, or (ii) 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 (at a per share price not less than Four
Dollars ($4.50) per share), in which the gross cash proceeds to the Corporation
(before underwriting discounts, commissions and fees) are at least $15,000,000.
Upon such automatic conversion, any declared and unpaid dividends shall be paid
in accordance with the provisions of Section 5(d)(5).
(ii) PAY TO PLAY PROVISION. (A) For purposes of
this Section 5(d)(2)(ii), the following definitions apply:
i) "INVESTOR" shall mean the holders of
the Company's outstanding Series A Preferred and Series B Preferred; provided,
however, that affiliated entities shall be aggregated together and considered a
single "Investor" for purposes of determining whether such Investor has
purchased its full Pro Rata Share.
ii) "NEW SECURITIES" shall mean any
capital stock (including Common Stock) of the Company now or hereafter
authorized, and rights, options or warrants to purchase capital stock, and
securities of any type whatsoever, that are, or may become, convertible into
capital stock, issued by the Company after the Original Issue Date (as defined
in Section 5(d)(6)) and designated by the Company's Board of Directors and the
holders of a majority of the then outstanding shares of Series A Preferred and
Series B Preferred as "New Securities" for purposes of this Section 5(d)(2)(ii).
Such a designation of New Securities by the Company's Board of Directors and the
holders of the majority of the then outstanding shares of Series A Preferred and
Series B Preferred shall be considered a cash call by the Company triggering the
"pay to play" provisions of this Section 5(d)(2)(ii).
iii) "PURCHASE PRICE" shall mean the
price per share of the New Securities.
iv) "CLOSING" shall mean the original
issuance date of the New Securities.
v) "PRO RATA SHARE" with respect to an
Investor shall mean (i) the dollar investment determined by the Purchase Price
multiplied by the number of shares of the New Securities multiplied by (ii) a
fraction, the numerator of which is the number of shares of Voting Common Stock
into which the shares of Series A Preferred and Series B Preferred then held by
that Investor are convertible, and the denominator of which is the total number
of shares of Voting Common Stock into which all outstanding shares of Preferred
Stock are convertible.
vi) "PARTICIPATING INVESTOR" shall mean
any Investor that agrees to purchase at least its Pro Rata Share of New
Securities pursuant to Section 5(d)(2)(ii)(B) hereof.
vii) "NON-PARTICIPATING INVESTOR" shall
mean any Investor that does not purchase at least its full Pro Rata Share of the
New Securities.
11.
<PAGE> 12
viii) "NON-PARTICIPATING SHARES" shall
be calculated separately with respect to each Non-participating Investor and
shall mean for each of the Series A Preferred and Series B Preferred the number
of shares of either such series of Preferred Stock (including options, warrants
and other rights to acquire shares of such series of Preferred Stock) held by
such Non-participating Investor multiplied by such Non-participating Investor's
Non-participating Percentage.
ix) "NON-PARTICIPATING PERCENTAGE" shall
mean the percentage obtained pursuant to the following formula:
1 - (Participating Consideration / Pro Rata Share)
x) "PARTICIPATING CONSIDERATION" shall
mean the consideration paid by an Investor to the Company for the purchase of
the New Securities; provided that if such Investor does not purchase any New
Securities, the Non-Participating Percentage will be 100%.
(B) In the event the Board of Directors and the
holders of a majority of the then outstanding shares of Series A Preferred and
Series B Preferred approve the issuance of New Securities, the Company shall
give each Investor a written notice (the "Issuance Notice") of its intention,
describing the type of New Securities, the price and the general terms upon
which the Company proposes to issue the same. Each Investor shall, within
fifteen (15) days from the date of the Issuance Notice, provide written notice
to the Company that (i) such Investor agrees to become a Participating Investor
for the price and upon the terms specified in the Issuance Notice or (ii) such
Investor shall be a Non-participating Investor and specifying the portion, if
any, of its Pro Rata Share it will be purchasing. Any Investor who shall fail to
provide such written notice within such fifteen (15) day period shall be deemed
to be a Non-participating Investor who has elected not to purchase any New
Securities.
(C) Each and every Non-participating Share of
Series B Preferred held by each and every Non-participating Investor shall be
automatically converted immediately prior to the Closing into such number of
shares of Voting Common Stock (or options, warrants or other rights to acquire
such number of shares of Voting Common Stock as applicable), as is determined by
dividing the Series B Original Issue Price by the then applicable Series B
Conversion Price. Each and every Non-participating Share of Series A Preferred
held by each and every Non-participating Investor shall be automatically
converted immediately prior to the Closing into such number of shares of Voting
Common Stock, options, warrants or other rights to acquire such number of shares
of Voting Common Stock (as applicable), as is determined by dividing the Series
A Original Issue Price by the then applicable Series A Conversion Price. As of
immediately prior to the Closing, shares of Series B Preferred and Series A
Preferred converted pursuant to this Section 5(d)(2)(ii) shall no longer be
outstanding on the books of the Company and the Non-participating Investors
shall be treated for all purposes as the record holder of the shares of Voting
Common Stock issued upon conversion thereof on the date of the Closing.
12.
<PAGE> 13
In no event shall any share of any series of Preferred Stock be
automatically converted into a share of Voting Common Stock pursuant to this
Section 5(d)(2)(ii) unless it constitutes a Non-participating Share as defined
in Section 5(d)(2)(ii)(A)(viii) hereof.
(iii) Upon the occurrence of either event
specified in paragraph (i) or, with respect to the Series A Preferred and Series
B Preferred, the event specified in paragraph (ii) above, the outstanding shares
of Series C Preferred, Series B Preferred and Series A Preferred shall be
converted automatically as of the date of such occurrence, pursuant to paragraph
(i) or as of the date of Closing pursuant to paragraph (ii), without any further
action by the holders of such shares and whether or not the certificates
representing such shares are 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, Series B
Preferred and Series A Preferred 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 satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such certificates.
Upon the occurrence of such automatic conversion of the Series C Preferred,
Series B Preferred and Series A Preferred, the holders of Series C Preferred,
Series B Preferred and/or Series A Preferred shall surrender the certificates
representing such shares at the office of the Corporation or any transfer agent
for the Series C Preferred, Series B Preferred or Series A Preferred. Thereupon,
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, Series B Preferred and Series A Preferred
surrendered were convertible on the date on which such automatic conversion
occurred, and the Corporation shall promptly pay in cash or, at the option of
the Corporation, Common Stock (at the Common Stock's fair market value
determined by the Board as of the date of such conversion), or, at the option of
the Corporation, both, all declared and unpaid dividends on the shares of Series
C Preferred, Series B Preferred and Series A Preferred being converted, up to
and including the date of such conversion.
(3) CONVERSION RATE. The Conversion Rate in effect at
any time for conversion of the Series C Preferred (the "Series C Conversion
Rate"), the Series B Preferred (the "Series B Conversion Rate") and the Series A
Preferred (the "Series A Conversion Rate") shall be the quotient obtained by
dividing the Original Issue Price applicable to such series by the Conversion
Price applicable to such series, calculated as provided in Section 5(d)(4)
below.
(4) CONVERSION PRICE. The Conversion Price for the
Series C Preferred shall initially be the Series C Original Issue Price (the
"Series C Conversion Price"). The Conversion Price for the Series B Preferred
shall initially be the Series B Original Issue Price (the "Series B Conversion
Price"). The conversion price for the Series A Preferred shall initially be the
Series A Original Issue Price (the "Series A Conversion Price"). Such initial
Series C Conversion Price, Series B Conversion Price and Series A Conversion
Price shall be adjusted from time to time in accordance with this Section 5(d).
All references to the Series C Conversion Price, Series B Conversion Price and
the Series A Conversion Price herein shall mean the Series C Conversion Price,
Series B Conversion Price and Series A Conversion Price, respectively, as so
adjusted.
13.
<PAGE> 14
(5) MECHANICS OF CONVERSION. Each holder of Series C
Preferred, Series B Preferred or Series A Preferred who desires to convert the
same into shares of Common Stock pursuant to this Section 5(d)(5) shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or any transfer agent for the Series C Preferred, Series B
Preferred or Series A Preferred 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, Series B Preferred or Series A
Preferred 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), any
declared and unpaid dividends on the shares of Series C Preferred, Series B
Preferred or Series A Preferred being converted. Such conversion shall be deemed
to have been made at the close of business on the date of such surrender of the
certificates representing the shares of the Series C Preferred, Series B
Preferred or Series A Preferred 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.
(6) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation at any time or from time to time after the date that the first share
of Series C Preferred is issued (the "Original Issue Date") effects a
subdivision of the outstanding Common Stock, the Conversion Price of each series
of Preferred Stock in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Corporation at any time or from
time to time after the Original Issue Date combines the outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price of each
series of Preferred Stock in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 5(d)(6) shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(7) 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 Conversion
Price of each series of Preferred Stock that is 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 such
Conversion Price then in effect by a fraction (A) 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
(B) 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, such Conversion Price
shall be recomputed accordingly as of the close of business on such record date
and thereafter such Conversion Price shall be adjusted pursuant to this Section
5(d)(7) to reflect the actual payment of such dividend or distribution.
14.
<PAGE> 15
(8) 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,
Series B Preferred and Series A Preferred 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, Series B Preferred or Series A Preferred 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 5(d) with respect to the rights of the holders of the Series C
Preferred, Series B Preferred and Series A Preferred or with respect to such
other securities by their terms.
(9) 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, Series
B Preferred and Series A Preferred 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, consolidation or sale of assets
provided for elsewhere in this Section 5(d)), in any such event each holder of
Series C Preferred, Series B Preferred and Series A Preferred shall have the
right thereafter to convert such stock into the kind and amount of stock and
other securities and property receivable upon such recapitalization,
reclassification or other change by holders of the maximum number of shares of
Common Stock into which such shares of Series C Preferred, Series B Preferred
and Series A Preferred could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.
(10) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES
OF ASSETS. If at any time or from time to time after the Original Issue Date
there is a capital reorganization, merger, consolidation or sale of all or
substantially all of the Corporation's assets (a "Capital Reorganization") of
the Common Stock (other than a recapitalization, subdivision, combination,
reclassification, exchange or substitution of shares provided for elsewhere in
this Section 5(d)), as a part of such Capital Reorganization, provision shall be
made so that the holders of the Series C Preferred, Series B Preferred and
Series A Preferred shall thereafter be entitled to receive upon conversion of
the Series C Preferred, Series B Preferred and Series A Preferred the number of
shares of stock or other securities or property of the Corporation to which a
holder of the number of shares of Common Stock deliverable upon conversion would
have been entitled on such Capital Reorganization, 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 5(d)(10) with respect to the rights of the holders of Series C
Preferred, Series B Preferred and Series A Preferred after the Capital
Reorganization to the end that the provisions of this Section 5(d)(10)
(including adjustment of the Conversion Price applicable to such series then in
effect and the number of shares issuable upon conversion of the
15.
<PAGE> 16
Series C Preferred, Series B Preferred and Series A Preferred) shall be
applicable after that event and be as nearly equivalent as practicable.
(11) SALE OF SHARES BELOW CONVERSION PRICE.
(i) If at any time or from time to time after
the Original Issue Date, the Company issues or sells, or is deemed by the
express provisions of this subsection (11) to have issued or sold, Additional
Shares of Common Stock (as defined in subsection (11)(iv) below), other than as
a dividend or other distribution on any class of stock as provided in Section
5(d)(7) above, and other than a subdivision or combination of shares of Common
Stock as provided in Section 5(d)(6) above, for an Effective Price (as defined
in subsection (11)(iv) below) less than the then effective Conversion Price with
respect to any series of Preferred Stock, then and in each such case the then
existing Conversion Price for such series of Preferred Stock shall be
automatically reduced, as of the opening of business on the date of such issue
or sale, to a price determined by multiplying such Conversion Price by a
fraction (i) the numerator of which shall be (A) the number of shares of Common
Stock outstanding (as defined below) immediately prior to such issuance or sale,
plus (B) the number of shares of Common stock which the aggregate consideration
received (as defined in subsection (11)(ii)) by the Company for the total number
of Additional Shares of Common Stock so issued would purchase at such Conversion
Price, and (ii) the denominator of which shall be (C) the number of shares of
Common Stock deemed outstanding (as defined below) immediately prior to such
issue or sale, plus (D) the total number of Additional Shares of Common Stock so
issued. For the purposes of the preceding sentence, the number of shares of
Common Stock deemed outstanding as of a given date shall be the sum of (A) the
number of shares of Common Stock actually outstanding, and (B) the number of
shares of Common Stock into which the then outstanding shares of Series C
Preferred, Series B Preferred and Series A Preferred could be converted if fully
converted on the date immediately preceding the given date.
(ii) For the purpose of making any adjustment
required under this subsection (11), the consideration received by the Company
for any issue or sale of securities shall (A) to the extent it consists of cash,
be computed at the net amount of cash received by the Company after deduction of
any underwriting or similar commissions, compensation or concessions paid or
allowed by the Company in connection with such issue or sale but without
deduction of any expenses payable by the Company; (B) to the extent it consists
of property other than cash, be computed at the fair value of that property as
determined in good faith by the Board of Directors, after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Company in connection with such issue or sale, but without deduction of
any expenses payable by the Company; or (C) if Additional Shares of Common
Stock, Convertible Securities (as defined in subsection (11)(iii)) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Company for a consideration which covers both, be computed as the
portion of the consideration so received that may be reasonably determined in
good faith by the Board of Directors to be allocable to such Additional Shares
of Common Stock, Convertible Securities or rights or options.
(iii) For the purpose of the adjustment required
under this subsection (11), if the Company issues or sells any rights or options
for the purchase of, or stock
16.
<PAGE> 17
or other securities convertible into, Additional Shares of Common Stock (such
convertible stock or securities being herein referred to as "Convertible
Securities") and if the Effective Price of such Additional Shares of Common
Stock is less than the Conversion Price with respect to any series of Preferred
Stock, in each case the Company shall be deemed to have issued at the time of
the issuance of such rights or options or Convertible Securities the maximum
number of Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such shares an
amount equal to the total amount of the consideration, if any, received by the
Company for the issuance of such rights or options or Convertible Securities,
plus, in the case of such rights or options, the minimum amount of
consideration, if any, payable to the Company upon the exercise of such rights
or options, plus, in the case of Convertible Securities, the minimum amount of
consideration, if any, payable to the Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
conversion thereof; provided that if in the case of Convertible Securities the
minimum amount of such consideration cannot be ascertained, but is a function of
antidilution or similar protective clauses, the Company shall be deemed to have
received the minimum amount of consideration without reference to such clauses;
provided further that if the minimum amounts of consideration payable to the
Company upon the exercise or conversion of rights, options or Convertible
Securities is reduced over time or on the occurrence or non-occurrence of
specified events other than by reason of antidilution adjustments, the Effective
Price shall be recalculated using the figure to which such minimum amount of
consideration is reduced; provided further that if the minimum amount of
consideration payable to the Company upon the exercise or conversion of such
rights, options, or Convertible Securities is subsequently increased, the
Effective Price shall be again recalculated using the increased minimum amount
of consideration payable to the Company upon the exercise or conversion of such
rights, options or Convertible Securities.
No further adjustment of the Conversion Price with respect to any
series of Preferred Stock, as adjusted upon the issuance of such rights, options
or Convertible Securities, shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities. If any such rights or
options or the conversion privilege represented by any such Convertible
Securities shall expire without having been exercised, such Conversion Price as
adjusted upon the issuance of such rights, options or Convertible Securities
shall be readjusted to such Conversion Price which would have been in effect had
an adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or rights of conversion
of such Convertible Securities, and such Additional Shares of Common Stock, if
any, were issued or sold for the consideration actually received by the Company
upon such exercise, plus the consideration, if any, actually received by the
Company for the granting of all such rights or options, whether or not
exercised, plus the consideration received for issuing or selling the
Convertible Securities actually converted, plus the consideration, if any,
actually received by the Company (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) on the conversion of such
Convertible Securities, provided that such readjustment shall not apply to prior
conversions of Series C Preferred, Series B Preferred and Series A Preferred.
17.
<PAGE> 18
(iv) "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued by the Company or deemed to be issued
pursuant to this subsection (11), whether or not subsequently reacquired or
retired by the Company, other than (1) shares of Common Stock issued upon
conversion of the Series C Preferred, Series B Preferred and Series A Preferred;
(2) shares of Common Stock and/or options, warrants or other rights (as adjusted
for any stock dividends, combinations, splits, recapitalization and the like)
after the Original Issue Date to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board; (3) shares of Preferred or Common Stock, or any warrant therefor or other
convertible security, issued in conjunction with equipment lease financing
arrangements; (4) shares issued after repurchase pursuant to any restricted
stock purchase agreement following a termination; and (5) shares of Common Stock
issued pursuant to the exercise or conversion of options, warrants or
convertible securities (including, without limitation, the Nonvoting Common
Stock) outstanding as of the Original Issue Date.
The "Effective Price" of Additional Shares of Common Stock shall mean
the quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold, or deemed to have been issued or sold by the
Company under this subsection (11), into the aggregate consideration received,
or deemed to have been received by the Company for such issue under this
subsection (11), for such Additional Shares of Common Stock.
(v) Notwithstanding anything to the contrary in
this subsection (11), the Conversion Price of Series C Preferred, Series B
Preferred and Series A Preferred automatically converted into shares of Voting
Common Stock in connection with Section 5(d)(2)(ii) shall not be reduced by this
subsection (11) with respect to the issuance of New Securities that triggers the
automatic conversion pursuant to Section 5(d)(2)(ii).
(12) CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of the Conversion Price with respect to any series of
Preferred Stock or the number of shares of Common Stock or other securities
issuable upon conversion of the Series C Preferred, Series B Preferred or Series
A Preferred, 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, Series B Preferred or Series A Preferred 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 (A) the Conversion
Price with respect to such series at the time in effect, and (B) the type and
amount, if any, of other property that at the time would be received upon
conversion of the Series C Preferred, Series B Preferred or Series A Preferred.
(13) NOTICES OF RECORD DATE. Upon (A) 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 (B) any capital reorganization of the
corporation, any reclassification or recapitalization of the capital stock of
the Corporation, any Acquisition (as defined in Section 5(c)(3)(i)), or any
Asset Transfer (as defined in Section 5(c)(3)(ii)), or any voluntary or
involuntary dissolution, liquidation or winding
18.
<PAGE> 19
up of the Corporation, the Corporation shall mail to each holder of Series C
Preferred, Series B Preferred and Series A Preferred, at least 20 days prior to
the record date specified therein, a notice specifying (A) 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, (B) the date on which any such
reorganization, reclassification, Acquisition, Asset Transfer, dissolution,
liquidation or winding up is expected to become effective, and (C) the date, if
any, that is to be fixed as to when the holders of record of Common Stock (or
other securities) shall be entitled to exchange their shares of Common Stock (or
other securities) for securities or other property deliverable upon such
reorganization, reclassification, Acquisition, Asset Transfer, dissolution,
liquidation or winding up.
(14) FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of the Series C Preferred, Series B Preferred or
Series A Preferred. All shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one share of Series C Preferred, Series B
Preferred or Series A Preferred by a holder thereof shall be aggregated for
purposes of determining 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 Common Stock's per share fair market value (as
determined in good faith by the Board of Directors) on the date of conversion.
(15) 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, solely for the purpose of effecting the
conversion of the shares of the Series C Preferred, Series B Preferred and
Series A Preferred, such number of its shares of Common Stock as will from time
to time be sufficient to effect the conversion of all outstanding shares of the
Series C Preferred, Series B Preferred and Series A Preferred. If at any time
the number of authorized but unissued shares of Common Stock is not sufficient
to effect the conversion of all then outstanding shares of the Series C
Preferred, Series B Preferred and Series A Preferred, the Corporation shall 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 will be sufficient for such purpose.
(16) NOTICES. Any notice required by the provisions of this
Section 5(d) to be given to the holders of shares of the Series C Preferred,
Series B Preferred and Series A Preferred shall be deemed given upon the earlier
of actual receipt or 15 days after the same has been deposited in the United
States mail, by certified or registered mail, return receipt requested, postage
prepaid, and addressed to each holder of record at the address of such holder
appearing on the books of the Corporation.
(17) PAYMENT OF TAXES. The Corporation shall 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, Series B Preferred or Series A Preferred,
excluding any tax or other charge imposed in connection with 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 C Preferred, Series B Preferred or
Series A Preferred so converted were registered.
19.
<PAGE> 20
(e) PROTECTIVE PROVISIONS.
(1) So long as any shares of Series C Preferred are
outstanding, the Corporation shall not, without the vote or written consent of
the holders of at least a majority of the shares of the Series C Preferred,
voting together as a single class, alter or change the rights, preferences or
privileges of the shares of the Series C Preferred so as to affect adversely the
shares of the Series C Preferred, [; provided, however, that an increase in the
authorized number of shares of Series C Preferred shall not require such a vote
or written consent] [or] [including increasing the authorized number of shares
of Series C Preferred]. So long as any shares of Series B Preferred are
outstanding, the Corporation shall not, without the vote or written consent of
the holders of at least a majority of the shares of the Series B Preferred,
voting together as a single class, alter or change the rights, preferences or
privileges of the shares of the Series B Preferred so as to affect adversely the
shares of the Series B Preferred, including increasing the authorized number of
shares of Series B Preferred. So long as any shares of Series A Preferred are
outstanding, the Corporation shall not, without the vote or written consent of
the holders of at least a majority of the shares of the Series A Preferred,
voting together as a single class, alter or change the rights, preferences or
privileges of the shares of the Series A Preferred so as to affect adversely the
shares of the Series A Preferred, including increasing the authorized number of
shares of Series A Preferred.
(2) So long as at least Five Hundred Thousand (500,000)
shares of Preferred Stock (as adjusted for any stock dividends, combinations,
splits, recapitalizations and the like with respect to such shares) remain
issued and outstanding, the Corporation shall not, without the vote or written
consent of the holders of at least a majority of the shares of Preferred Stock,
voting together as a single class:
(i) authorize or issue any class of security
senior to the Series C Preferred, Series B Preferred or Series A Preferred;
provided, however, that any security with a dividend or liquidation preference
that is greater than that of the Series C Preferred, Series B Preferred or
Series A Preferred solely as a result of, or in connection with, a higher per
share initial purchase price of such security shall not be deemed senior for
purposes hereof;
(ii) authorize an Asset Transfer, Acquisition,
or any other merger, consolidation or reorganization of the Company; or
(iii) effect a repurchase or other acquisition
of the Company's own shares from Alan Ramadan, John Bertrand or Quokka Sports
Pty. Ltd. as Trustee for Ozware Developments Unit Trust.
ARTICLE V
MANAGEMENT
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, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
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1. 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
that will constitute the whole Board of Directors shall be fixed by the Board of
Directors in the manner provided in the Bylaws.
2. The Board of Directors may from time to time make, amend, supplement
or repeal the Bylaws; provided, however, that the stockholders may change or
repeal any Bylaws adopted by the Board of Directors by the affirmative vote of
the holders of a majority of the voting power of all of the then outstanding
shares of the capital stock of the Corporation; and, provided, further, that no
amendment or supplement to the Bylaws adopted by the Board of Directors shall
vary or conflict with any amendment or supplement thus adopted by the
stockholders.
3. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
4. At any time at which the requirements of Section 2115(b) of the
California Corporations Code are applicable to this Corporation (but not
otherwise), the following shall apply:
(a) Every stockholder entitled to vote in any election of
directors of this Corporation may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the stockholder's shares are
otherwise entitled, or distribute the stockholder's votes on the same principle
among as many candidates as such stockholder thinks fit;
(b) No stockholder, however, may cumulate such stockholder's
votes for one or more candidates unless (i) the names of such candidates have
been properly placed in nomination, in accordance with the Bylaws of the
Corporation, prior to the voting, (ii) the stockholder has given advance notice
to the Corporation of the intention to cumulate votes pursuant to the Bylaws,
and (iii) the stockholder has given proper notice to the other stockholders at
the meeting, prior to voting, of such stockholder's intention to cumulate such
stockholder's votes; and
(c) If any stockholder has given proper notice, all stockholders
may cumulate their votes for any candidates who have been properly placed in
nomination. The candidates receiving the highest number of votes of the shares
entitled to be voted for them up to the number of directors to be elected by
such shares shall be declared elected.
ARTICLE VI
LIABILITY OF DIRECTORS
A. A director of the Corporation shall, to the fullest extent permitted
by the Delaware General Corporation Law as it now exists or as it may hereafter
be amended, not be personally liable to the Corporation or its stockholders for
monetary damages for any breach of fiduciary duty as a director, except for
liability (a) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (b) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the Delaware
21.
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General Corporation Law, or (d) for any transaction from which the director
derived an improper personal benefit. If the Delaware General Corporation Law is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director shall be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
ARTICLE VII
AMENDMENT
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon the stockholders herein are granted subject to this reservation."
* * * * *
5. This Amended and Restated Certificate has been duly adopted by the
Corporation's Board of Directors and stockholders in accordance with Sections
228, 242 and 245 of the Delaware General Corporation Law and written notice of
such was given by the Corporation in accordance with said Section 228.
[This Space Intentionally Left Blank]
22.
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IN WITNESS WHEREOF, this Certificate has been subscribed this 22nd day
of December, 1998 by the undersigned, who affirms that the statements made
herein are true and correct.
QUOKKA SPORTS, INC.
By: /s/ ALAN RAMADAN
----------------------------------
Alan Ramadan
President
ATTEST:
By: /s/ LES SCHMIDT
---------------------------------
Les Schmidt
Secretary