Certificate of Incorporation - Red Hat Inc.
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RED HAT, INC.
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Pursuant to Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware
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Red Hat, Inc. (the "Corporation"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
as follows:
1. The name of the Corporation is Red Hat, Inc. The Corporation was
originally incorporated under the name Red Hat Software, Inc. The original
certificate of incorporation of the Corporation was filed with the office of the
Secretary of State of Delaware on September 17, 1998. An amended and restated
certificate of incorporation of the Corporation was filed with the office of the
Secretary of State of Delaware on September 29, 1998. A Second Amended and
Restated Certificate was filed with the office of the Secretary of the State of
Delaware on February 24, 1999, and amended on March 31, 1999 and June 4, 1999.
2. This Third Amended and Restated Certificate of Incorporation was
recommended to the stockholders for approval as being advisable and in the best
interests of the Corporation by written action of the Board of Directors on June
2, 1999.
3. That in lieu of a meeting and vote of stockholders, consents in writing
have been signed by holders of outstanding stock having not less than the
minimum number of votes that is necessary to consent to this amendment and
restatement, and, if required, prompt notice of such action shall be given in
accordance with the provisions of Section 228 of the General Corporation Law of
the State of Delaware.
4. This Third Amended and Restated Certificate of Incorporation restates and
integrates and further amends the certificate of incorporation of the
Corporation, as heretofore amended or supplemented.
The text of the Corporation's second amended and restated certificate
of incorporation is amended and restated in its entirety as follows:
FIRST. The name of the Corporation is Red Hat, Inc.
SECOND. The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
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THIRD. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of all classes of capital stock
which the Corporation shall have authority to issue is 246,972,726 shares
consisting of 225,000,000 shares of Common Stock with a par value of $.0001 per
share (the "Common Stock") and 21,972,726 shares of Preferred Stock with a par
value of $.0001 per share, (the "Preferred Stock"), of which 5,000,000 are
undesignated, 6,801,400 shares are designated as Series A Convertible Preferred
Stock, 8,116,550 shares are designated as Series B Convertible Preferred Stock
and 2,054,776 shares are designated as Series C Convertible Preferred Stock.
A description of the respective classes of stock and a statement of the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions of the Preferred Stock and Common Stock are as
follows:
A. COMMON STOCK
1. GENERAL. All shares of Common Stock will be identical and will
entitle the holders thereof to the same rights, powers and privileges. The
rights, powers and privileges of the holders of the Common Stock are subject to
and qualified by the rights of holders of the Preferred Stock.
2. DIVIDENDS. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
3. DISSOLUTION, LIQUIDATION OR WINDING UP. In the event of any
dissolution, liquidation or winding up of the affairs of the Corporation,
whether voluntary or involuntary, each issued and outstanding share of Common
Stock shall entitle the holder thereof to receive an equal portion of the net
assets of the Corporation available for distribution to the holders of Common
Stock, subject to any preferential rights of any then outstanding Preferred
Stock.
4. VOTING RIGHTS. Except as otherwise required by law or this Third
Amended and Restated Certificate of Incorporation, each holder of Common Stock
shall have one vote in respect of each share of stock held of record by such
holder on the books of the Corporation for the election of directors and on all
matters submitted to a vote of stockholders of the Corporation. Except as
otherwise required by law or provided herein, holders of Common Stock shall vote
together with holders of the Preferred Stock as a single class, subject to any
special or preferential voting rights of any then outstanding Preferred Stock.
There shall be no cumulative voting.
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B. PREFERRED STOCK
The Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the Board of Directors of
the Corporation may determine. Each series shall be so designated as to
distinguish the shares thereof from the shares of all other series and classes.
Except as otherwise provided in this Third Amended and Restated Certificate of
Incorporation, different series of Preferred Stock shall not be construed to
constitute different classes of shares for the purpose of voting by classes.
C. UNDESIGNATED PREFERRED STOCK
The Board of Directors is expressly authorized to provide for the
issuance of all or any shares of the undesignated Preferred Stock in one or more
series, each with such designations, preferences, voting powers (or special,
preferential or no voting powers), relative, participating, optional or other
special rights and privileges and such qualifications, limitations or
restrictions thereof as shall be stated in the resolution or resolutions adopted
by the Board of Directors to create such series, and a certificate of said
resolution or resolutions (a "Certificate of Designation") shall be filed in
accordance with the General Corporation Law of the State of Delaware. The
authority of the Board of Directors with respect to each such series shall
include, without limitation of the foregoing, the right to provide that the
shares of each such series may be: (i) subject to redemption at such time or
times and at such price or prices; (ii) entitled to receive dividends (which may
be cumulative or non-cumulative) at such rates, on such conditions, and at such
times, and payable in preference to, or in such relation to, the dividends
payable on any other class or classes or any other series; (iii) entitled to
such rights upon the dissolution of, or upon any distribution of the assets of,
the Corporation; (iv) convertible into, or exchangeable for, shares of any other
class or classes of stock, or of any other series of the same or any other class
or classes of stock of the Corporation at such price or prices or at such rates
of exchange and with such adjustments, if any; (v) entitled to the benefit of
such limitations, if any, on the issuance of additional shares of such series or
shares of any other series of Preferred Stock; or (vi) entitled to such other
preferences, powers, qualifications, rights and privileges, all as the Board of
Directors may deem advisable and as are not inconsistent with law and the
provisions of this Third Amended and Restated Certificate of Incorporation.
D. SERIES A, SERIES B AND SERIES C CONVERTIBLE PREFERRED STOCK
1. DIVIDENDS. The Corporation shall not declare or pay any dividends on
shares of Common Stock (except for dividends payable solely in the form of
Common Stock) until the holders of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock then outstanding shall have first
received, or simultaneously receive, a distribution on each outstanding share of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
in an amount at least equal to the product of (i) the per share amount, if any,
of the dividends to be declared, paid or set aside for the Common Stock,
multiplied by (ii) the number of whole shares of Common Stock into which such
share of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock is then convertible. The Corporation shall not declare or pay
any dividends on any shares of Preferred Stock unless, at the same
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time, a dividend in a like amount per share shall be paid upon, or declared and
set apart for, all shares of Preferred Stock then outstanding.
2. LIQUIDATION, DISSOLUTION OR WINDING UP; CERTAIN MERGERS,
CONSOLIDATIONS AND ASSET SALES.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders, before any payment shall be made
to the holders of Common Stock or any other class or series of stock ranking on
liquidation junior to the Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock (such Common Stock and other stock being collectively
referred to as "Junior Stock") by reason of their ownership thereof, an amount
equal to the greater of (i) $.343 per share, in the case of Series A Preferred
Stock, $.996 per share, in the case of Series B Preferred Stock, and $3.893 per
share in the case of the Series C Preferred Stock (each subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting such shares), plus any dividends declared but
unpaid thereon, or (ii) such amount per share as would have been payable had
each such share been converted into Common Stock pursuant to Section 4
immediately prior to such liquidation, dissolution or winding up. If upon any
such liquidation, dissolution or winding up of the Corporation the remaining
assets of the Corporation available for distribution to its stockholders shall
be insufficient to pay the holders of shares of Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock the full amount to which they
shall be entitled, the holders of shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock and any class or series of stock
ranking on liquidation on a parity with the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock shall share ratably in any
distribution of the remaining assets and funds of the Corporation in proportion
to the respective amounts which would otherwise be payable pursuant to clause
(i) above in respect of the shares held by them upon such distribution. The
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
of the Corporation shall be deemed to rank on a parity with each other with
respect to the liquidation, dissolution or winding-up of the Corporation.
(b) After the payment of all preferential amounts required to
be paid to the holders of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock and any other class or series of stock of the
Corporation ranking on liquidation on a parity with the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock, upon the
dissolution, liquidation or winding up of the Corporation, the holders of shares
of Junior Stock then outstanding shall be entitled to receive the remaining
assets and funds of the Corporation available for distribution to its
stockholders.
(c) Any (i) merger or consolidation of the Corporation or a
subsidiary of the Corporation into or with another corporation (except one in
which the holders of capital stock of the Corporation immediately prior to such
merger or consolidation continue to hold at least
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50% by voting power of the capital stock of the Corporation or the surviving or
acquiring corporation), (ii) acquisition, in one transaction or a series of
related transactions by a person or group of affiliated persons, of 50% or more
of the outstanding voting stock of the Company or (iii) sale of all or
substantially all the assets of the Corporation, shall be deemed to be a
liquidation of the Corporation for purposes of this Section 2 unless the holders
of a majority of the then outstanding Preferred Stock elect in writing not to
treat such merger, consolidation or sale as a liquidation, and any agreement or
plan of merger or consolidation to which the Company is a party shall provide
that the consideration payable to the stockholders of the Corporation (in the
case of a merger or consolidation), or consideration payable to the Corporation,
together with all other available assets of the Corporation (in the case of an
asset sale), shall be distributed to the holders of capital stock of the
Corporation in accordance with Subsections 2(a) and 2(b) above. The amount
deemed distributed to the holders of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock upon any such merger, consolidation
or sale shall be the cash or the value of the property, rights or securities
distributed to such holders by the Corporation or the acquiring person, firm or
other entity. The value of such property, rights or other securities shall be
determined in good faith by the Board of Directors of the Corporation.
3. VOTING.
(a) Each holder of outstanding shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock shall be entitled
to the number of votes equal to the number of whole shares of Common Stock into
which the shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock held by such holder are then convertible (as adjusted
from time to time pursuant to Section 4 hereof), at each meeting of stockholders
of the Corporation (and written actions of stockholders in lieu of meetings)
with respect to any and all matters presented to the stockholders of the
Corporation for their action or consideration. Except as provided by law, by the
provisions of Subsection 3(b) below or by the provisions establishing any other
series of Preferred Stock, holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and any other outstanding series of
Preferred Stock shall vote together with the holders of Common Stock as a single
class.
(b) The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock so as to affect adversely
the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock, without the written consent or affirmative vote of the holders of a
majority of the then outstanding shares of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, as the case may be, given in
writing or by vote at a meeting, consenting or voting (as the case may be)
separately as a class. For this purpose, without limiting the generality of the
foregoing, the authorization of any shares of capital stock with preference or
priority over the Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock as to the right to receive either dividends or amounts
distributable upon liquidation, dissolution or winding up of the Corporation
shall be deemed to affect adversely the Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, and the authorization of any shares
of capital stock on a parity with Series A Preferred Stock,
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Series B Preferred Stock and Series C Preferred Stock as to the right to receive
either dividends or amounts distributable upon liquidation, dissolution or
winding up of the Corporation shall not be deemed to affect adversely the Series
A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock.
4. OPTIONAL CONVERSION. The holders of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) (i) SERIES A RIGHT TO CONVERT. Each share of Series A
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time and from time to time, and without the payment of additional
consideration by the holder thereof, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $.343 by the
Series A Conversion Price (as defined below) in effect at the time of
conversion. The "Series A Conversion Price" shall initially be $.343. Such
initial Series A Conversion Price, and the rate at which shares of Series A
Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided below.
(ii) SERIES B RIGHT TO CONVERT. Each share of Series B
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time and from time to time, and without the payment of additional
consideration by the holder thereof, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $.996 by the
Series B Conversion Price (as defined below) in effect at the time of
conversion. The "Series B Conversion Price" shall initially be $.996. Such
initial Series B Conversion Price, and the rate at which shares of Series B
Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided below.
(iii) SERIES C RIGHT TO CONVERT. Each share of Series C
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time and from time to time, and without the payment of additional
consideration by the holder thereof, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing $3.893 by the
Series C Conversion Price (as defined below) in effect at the time of
conversion. The "Series C Conversion Price" shall initially be $3.893. Such
initial Series C Conversion Price, and the rate at which shares of Series C
Preferred Stock may be converted into shares of Common Stock, shall be subject
to adjustment as provided below.
(iv) In the event of a notice of redemption of any shares
of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock pursuant to Section 6 hereof, the Conversion Rights of the shares
designated for redemption shall terminate at the close of business on the fifth
full day preceding the date fixed for redemption, unless the redemption price is
not paid when due, in which case the Conversion Rights for such shares shall
continue until such price is paid in full. In the event of a liquidation of the
Corporation, the Conversion Rights shall terminate at the close of business on
the first full day preceding the date fixed for the payment of any amounts
distributable on liquidation to the holders of Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock.
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(b) FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of the Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Corporation shall pay cash
equal to such fraction multiplied by the then effective Series A Conversion
Price, Series B Conversion Price or Series C Conversion Price.
(c) MECHANICS OF CONVERSION.
(i) In order for a holder of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock to convert its shares of
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
into shares of Common Stock, such holder shall surrender the certificate or
certificates for such shares of Preferred Stock, at the office of the transfer
agent for the Preferred Stock (or at the principal office of the Corporation if
the Corporation serves as its own transfer agent), together with written notice
(a "Conversion Notice") that such holder elects to convert all or any number of
the shares of the Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock represented by such certificate or certificates. The Conversion
Notice shall state such holder's name or the names of the nominees in which such
holder wishes the certificate or certificates for shares of Common Stock to be
issued. If required by the Corporation, certificates surrendered for conversion
shall be endorsed or accompanied by a written instrument or instruments of
transfer, in form satisfactory to the Corporation, duly executed by the
registered holder or his or its attorney duly authorized in writing. The date of
receipt of such certificates and Conversion Notice by the transfer agent (or by
the Corporation if the Corporation serves as its own transfer agent) shall be
the conversion date ("Conversion Date"). The Corporation shall, as soon as
practicable after the Conversion Date, issue and deliver at such office to such
holder of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, or to his or its nominees, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled,
together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock shall be
outstanding, reserve and keep available out of its authorized but unissued
stock, for the purpose of effecting the conversion of the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock, such number of its
duly authorized shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock. Before taking any action which
would cause an adjustment reducing the Series A Conversion Price, Series B
Conversion Price or Series C Conversion Price below the then par value of the
shares of Common Stock issuable upon conversion of the Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock, the Corporation will take
any corporate action which may, in the opinion of its counsel, be necessary in
order that the Corporation may validly and legally issue fully paid and
nonassessable shares of Common Stock at such adjusted Series A Conversion Price,
Series B Conversion Price or Series C Conversion Price.
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(iii) Upon any such conversion, no adjustment to the
Series A Conversion Price, Series B Conversion Price or Series C Conversion
Price shall be made for any declared but unpaid dividends on the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as
applicable, surrendered for conversion or on the Common Stock delivered upon
such conversion.
(iv) All shares of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock which shall have been surrendered
for conversion as herein provided shall no longer be deemed to be outstanding
and all rights with respect to such shares, including the rights, if any, to
receive notices and to vote, shall immediately cease and terminate on the
Conversion Date, except only the right of the holders thereof to receive shares
of Common Stock in exchange therefor and payment of any dividends declared but
unpaid thereon. Any shares of Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock so converted shall be retired and cancelled and
shall not be reissued, and the Corporation (without the need for stockholder
action) may from time to time take such appropriate action as may be necessary
to reduce the authorized number of shares of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock accordingly.
(v) The Corporation shall pay any and all issue and other
taxes that may be payable in respect of any issuance or delivery of shares of
Common Stock upon conversion of shares of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock pursuant to this Section 4. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issuance and delivery of shares of
Common Stock in a name other than that in which the shares of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock so converted were
registered, and no such issuance or delivery shall be made unless and until the
person or entity requesting such issuance has paid to the Corporation the amount
of any such tax or has established, to the satisfaction of the Corporation, that
such tax has been paid.
(d) ADJUSTMENTS TO SERIES A CONVERSION PRICE, SERIES B
CONVERSION PRICE OR SERIES C CONVERSION PRICE FOR DILUTING
ISSUES:
(i) SPECIAL DEFINITIONS. For purposes of this Subsection
4(d), the following definitions shall apply:
(A) "OPTION" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities.
(B) "SERIES A ORIGINAL ISSUE DATE" shall mean the date
on which the first share of Series A Preferred Stock was issued.
(C) "SERIES B ORIGINAL ISSUE DATE" shall mean the date
on which the first share of Series B Preferred Stock was issued.
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(D) "SERIES C ORIGINAL ISSUE DATE" shall mean the date
on which the first share of Series C Preferred Stock was issued.
(E) "CONVERTIBLE SECURITIES" shall mean any evidences
of indebtedness, shares or other securities directly or indirectly convertible
into or exchangeable for Common Stock.
(F) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares of Common Stock issued (or, pursuant to Subsection 4(d)(iii) below,
deemed to be issued) by the Corporation after the Series C Original Issue Date,
other than:
(I) shares of Common Stock issued or issuable upon
conversion of any shares of Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock;
(II) shares of Common Stock issued or issuable
upon conversion of any Convertible Securities (other than shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock) or
exercise of any warrants outstanding on the Series C Original Issue Date;
(III) shares of Common Stock issued or issuable as
a dividend or distribution on Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock;
(IV) shares of Common Stock issued or issuable by
reason of a dividend, stock split, split-up or other distribution on shares of
Common Stock that is covered by Subsection 4(e) or 4(f) below;
(V) up to 3,717,400 shares of Common Stock
(including issuances prior to the Series C Original Issue Date) (subject to
appropriate adjustment in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares), plus such
additional number of shares of Common Stock as may be approved by the Board of
Directors of the Corporation and by a majority of the members of the Board of
Directors who are not employees of the Company or any of its subsidiaries,
issued or issuable to employees or directors of, or consultants to, the
Corporation pursuant to employer stock option plans;
(VI) securities issued pursuant to any equipment
leasing arrangement or debt financing from a bank or similar financial
institution approved by the Board of Directors of the Corporation and by a
majority of the members of the Board of Directors who are not employees of the
Corporation or any of its subsidiaries; or
(VII) securities issued in connection with
strategic transactions approved by the Board of Directors of the Corporation and
by a majority of the members of the Board of Directors who are not employees of
the Corporation or any of its subsidiaries involving the Company and other
entities, including (a) joint ventures,
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manufacturing, marketing or distribution arrangements or (b) technology transfer
or development arrangements.
(ii) NO ADJUSTMENT OF CONVERSION PRICE.
(A) No adjustment in the number of shares of Common
Stock into which the Series A Preferred Stock is convertible shall be made, by
adjustment in the applicable Series A Conversion Price thereof: (a) unless the
consideration per share (determined pursuant to Subsection 4(d)(v)) for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the applicable Series A Conversion Price in effect
immediately prior to the issue of such Additional Shares, or (b) if prior to
such issuance, the Corporation receives written notice from the holders of at
least 66-2/3% of the then outstanding shares of Series A Preferred Stock
agreeing that no such adjustment shall be made as the result of the issuance of
Additional Shares of Common Stock.
(B) No adjustment in the number of shares of Common
Stock into which the Series B Preferred Stock is convertible shall be made, by
adjustment in the applicable Series B Conversion Price thereof: (a) unless the
consideration per share (determined pursuant to Subsection 4(d)(v)) for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the applicable Series B Conversion Price in effect
immediately prior to the issue of such Additional Shares, or (b) if prior to
such issuance, the Corporation receives written notice from the holders of at
least 66-2/3% of the then outstanding shares of Series B Preferred Stock
agreeing that no such adjustment shall be made as the result of the issuance of
Additional Shares of Common Stock.
(C) No adjustment in the number of shares of Common
Stock into which the Series C Preferred Stock is convertible shall be made, by
adjustment in the applicable Series C Conversion Price thereof: (a) unless the
consideration per share (determined pursuant to Subsection 4(d)(v)) for an
Additional Share of Common Stock issued or deemed to be issued by the
Corporation is less than the applicable Series C Conversion Price in effect
immediately prior to the issue of such Additional Shares, or (b) if prior to
such issuance, the Corporation receives written notice from the holders of at
least 66-2/3% of the then outstanding shares of Series C Preferred Stock
agreeing that no such adjustment shall be made as the result of the issuance of
Additional Shares of Common Stock.
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(iii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL
SHARES OF COMMON STOCK.
If the Corporation at any time or from time to time after the Series A
Original Issue Date, Series B Original Issue Date or Series C Original Issue
Date, as applicable, shall issue any Options (excluding Options covered by
Subsection 4(d)(i)(F)(IV) above) or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled to
receive any such Options or Convertible Securities, then the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that (x)
for the purposes of adjusting the Series A Conversion Price, Additional Shares
of Common Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Subsection 4(d)(v) hereof) of such Additional
Shares of Common Stock would be less than the applicable Series A Conversion
Price in effect on the date of and immediately prior to such issue, or such
record date, as the case may be, (y) for the purposes of adjusting the Series B
Conversion Price, Additional Shares of Common Stock shall not be deemed to have
been issued unless the consideration per share (determined pursuant to
Subsection 4(d)(v) hereof) of such Additional Shares of Common Stock would be
less than the applicable Series B Conversion Price in effect on the date of and
immediately prior to such issue, or such record date, as the case may be, and
(z) for the purposes of adjusting the Series C Conversion Price, Additional
Shares of Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to Subsection 4(d)(v) hereof) of
such Additional Shares of Common Stock would be less than the applicable Series
C Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common Stock are deemed to be issued:
(A) No further adjustment in the Series A Conversion
Price, Series B Conversion Price or Series C Conversion Price shall be made upon
the subsequent issue of Convertible Securities or shares of Common Stock upon
the exercise of such Options or conversion or exchange of such Convertible
Securities;
(B) If such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, upon the exercise,
conversion or exchange thereof, the Series A Conversion Price, Series B
Conversion Price or Series C Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities;
<PAGE>
-12-
(C) Upon the expiration or termination of any such
unexercised Option, the Series A Conversion Price, Series B Conversion Price and
Series C Conversion Price shall be readjusted, to the Series A Conversion Price,
Series B Conversion Price or Series C Conversion Price as would have been in
effect at the time of such expiration or termination had such Option never been
issued;
(D) In the event of any change in the number of
shares of Common Stock issuable upon the exercise, conversion or exchange of any
such Option or Convertible Security, including, but not limited to, a change
resulting from the anti-dilution provisions thereof, the Series A Conversion
Price, Series B Conversion Price and Series C Conversion Price then in effect
shall forthwith be readjusted to such Series A Conversion Price, Series B
Conversion Price or Series C Conversion Price as would have obtained had the
adjustment which was made upon the issuance of such Option or Convertible
Security not exercised or converted prior to such change been made upon the
basis of such change; and
(E) No readjustment pursuant to clauses (B) or (D)
above shall have the effect of increasing the Series A Conversion Price, Series
B Conversion Price or Series C Conversion Price to an amount which exceeds the
lower of (i) the Series A Conversion Price, Series B Conversion Price or Series
C Conversion Price on the original adjustment date, or (ii) the Series A
Conversion Price, Series B Conversion Price or Series C Conversion Price, as the
case may be, that would have resulted from any issuances of Additional Shares of
Common Stock between the original adjustment date and such readjustment date.
In the event the Corporation, after the Series A Original Issue Date,
the Series B Original Issue Date or the Series C Original Issue Date, amends the
terms of any such Options or Convertible Securities (whether such Options or
Convertible Securities were outstanding on such respective original issue date
or were issued after such respective original issue date), then such Options or
Convertible Securities, as so amended, shall be deemed to have been issued after
such respective original issue date and the provisions of this Subsection
4(d)(iii) shall apply.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK.
(A) In the event the Corporation shall at any time
after the Series A Original Issue Date issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
Subsection 4(d)(iii), but excluding shares issued as a stock split or
combination as provided in Subsection 4(e) or upon a dividend or distribution as
provided in Subsection 4(f)), without consideration or for a consideration per
share less than the applicable Series A Conversion Price in effect immediately
prior to such issue, then and in such event, such Series A Conversion Price
shall be reduced, concurrently with such issue, to a price (calculated to the
nearest cent) determined by multiplying such Series A Conversion Price by a
fraction, (A) the numerator of which shall be (1) the number of shares of Common
Stock outstanding immediately prior to such issue plus (2) the number of
<PAGE>
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shares of Common Stock which the aggregate consideration received or to be
received by the Corporation for the total number of Additional Shares of Common
Stock so issued would purchase at such Series A Conversion Price; and (B) the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of such Additional Shares of
Common Stock so issued; PROVIDED THAT, (i) for the purpose of this Subsection
4(d)(iv), all shares of Common Stock issuable upon exercise or conversion of
vested Options or Convertible Securities outstanding immediately prior to such
issue shall be deemed to be outstanding, and (ii) the number of shares of Common
Stock deemed issuable upon exercise or conversion of such outstanding vested
Options and Convertible Securities shall not give effect to any adjustments to
the conversion price or conversion rate of such Options or Convertible
Securities resulting from the issuance of Additional Shares of Common Stock that
is the subject of this calculation.
(B) In the event the Corporation shall at any time
after the Series B Original Issue Date issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
Subsection 4(d)(iii), but excluding shares issued as a stock split or
combination as provided in Subsection 4(e) or upon a dividend or distribution as
provided in Subsection 4(f)), without consideration or for a consideration per
share less than the applicable Series B Conversion Price in effect immediately
prior to such issue, then and in such event, such Series B Conversion Price
shall be reduced, concurrently with such issue, to a price (calculated to the
nearest cent) determined by multiplying such Series B Conversion Price by a
fraction, (A) the numerator of which shall be (1) the number of shares of Common
Stock outstanding immediately prior to such issue plus (2) the number of shares
of Common Stock which the aggregate consideration received or to be received by
the Corporation for the total number of Additional Shares of Common Stock so
issued would purchase at such Series B Conversion Price; and (B) the denominator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of such Additional Shares of Common Stock so
issued; PROVIDED THAT, (i) for the purpose of this Subsection 4(d)(iv), all
shares of Common Stock issuable upon exercise or conversion of vested Options or
Convertible Securities outstanding immediately prior to such issue shall be
deemed to be outstanding, and (ii) the number of shares of Common Stock deemed
issuable upon exercise or conversion of such outstanding vested Options and
Convertible Securities shall not give effect to any adjustments to the
conversion price or conversion rate of such Options or Convertible Securities
resulting from the issuance of Additional Shares of Common Stock that is the
subject of this calculation.
(C) In the event the Corporation shall at any time
after the Series C Original Issue Date issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
Subsection 4(d)(iii), but excluding shares issued as a stock split or
combination as provided in Subsection 4(e) or upon a dividend or distribution as
provided in Subsection 4(f)), without consideration or for a consideration per
share less than the applicable Series C Conversion Price in effect immediately
prior to such issue, then and in such event, such Series C Conversion Price
shall be reduced, concurrently with such issue, to a price (calculated to the
nearest cent) determined by multiplying such Series C Conversion Price by a
fraction, (A) the numerator of which shall be (1) the number of
<PAGE>
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shares of Common Stock outstanding immediately prior to such issue plus (2) the
number of shares of Common Stock which the aggregate consideration received or
to be received by the Corporation for the total number of Additional Shares of
Common Stock so issued would purchase at such Series C Conversion Price; and (B)
the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of such Additional
Shares of Common Stock so issued; PROVIDED THAT, (i) for the purpose of this
Subsection 4(d)(iv), all shares of Common Stock issuable upon exercise or
conversion of vested Options or Convertible Securities outstanding immediately
prior to such issue shall be deemed to be outstanding, and (ii) the number of
shares of Common Stock deemed issuable upon exercise or conversion of such
outstanding vested Options and Convertible Securities shall not give effect to
any adjustments to the conversion price or conversion rate of such Options or
Convertible Securities resulting from the issuance of Additional Shares of
Common Stock that is the subject of this calculation.
(V) DETERMINATION OF CONSIDERATION. For purposes of this
Subsection 4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(A) CASH AND PROPERTY: Such consideration shall:
(I) insofar as it consists of cash, be computed
at the aggregate of cash received by the Corporation, excluding amounts paid or
payable for accrued interest;
(II) insofar as it consists of property other
than cash, be computed at the fair market value thereof at the time of such
issue, as determined in good faith by the Board of Directors; and
(III) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (I) and (II) above,
as determined in good faith by the Board of Directors.
(B) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Subsection 4(d)(iii),
relating to Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for
<PAGE>
-15-
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities, by
(y) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
(vi) MULTIPLE CLOSING DATES. In the event the Corporation
shall issue on more than one date Additional Shares of Common Stock which are
comprised of shares of the same series or class of Preferred Stock, and such
issuance dates occur within a period of no more than 120 days, then, upon the
final such issuance, the Series A Conversion Price, Series B Conversion Price
and Series C Conversion Price shall be adjusted to give effect to all such
issuances as if they occurred on the date of the final such issuance (and
without giving effect to any adjustments as a result of such prior issuances
within such period).
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If
the Corporation shall at any time or from time to time after the Series C
Original Issue Date effect a subdivision of the outstanding Common Stock, the
Series A Conversion Price, Series B Conversion Price and Series C Conversion
Price then in effect immediately before that subdivision each shall be
proportionately decreased. If the Corporation shall at any time or from time to
time after the Series C Original Issue Date combine the outstanding shares of
Common Stock, the Series A Conversion Price, Series B Conversion Price and
Series C Conversion Price then in effect immediately before the combination each
shall be proportionately increased. Any adjustment under this paragraph shall
become effective at the close of business on the date the subdivision or
combination becomes effective.
(f) ADJUSTMENT FOR CERTAIN DIVIDENDS AND
DISTRIBUTIONS. In the event the Corporation at any time, or from time to time
after the Series C Original Issue Date, as the case may be, 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 additional shares of
Common Stock, then and in each such event the Series A Conversion Price, Series
B Conversion Price and Series C Conversion Price then in effect immediately
before such event each shall be decreased as of the time of such issuance or, in
the event such a record date shall have been fixed, as of the close of business
on such record date, by multiplying the Series A Conversion Price, Series B
Conversion Price and Series C Conversion Price, as the case may be, then in
effect by a fraction:
(1) the numerator of which shall be 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
<PAGE>
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(2) the denominator of which shall be 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, if such record date shall have been fixed and such dividend
is not fully paid or if such distribution is not fully made on the date fixed
therefor, the Series A Conversion Price, Series B Conversion Price and Series C
Conversion Price each shall be recomputed accordingly as of the close of
business on such record date and thereafter the Series A Conversion Price,
Series B Conversion Price and Series C Conversion Price, as the case may be,
shall be adjusted pursuant to this paragraph as of the time of actual payment of
such dividends or distributions; and provided further, however, that no such
adjustment shall be made if the holders of Series A Preferred Stock, the holders
of the Series B Preferred Stock and the holders of the Series C Preferred Stock
simultaneously receive (i) a dividend or other distribution of shares of Common
Stock in a number equal to the number of shares of Common Stock as they would
have received if all outstanding shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock had been converted into Common
Stock on the date of such event or (ii) a dividend or other distribution of
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock which are convertible, as of the date of such event, into such
number of shares of Common Stock as is equal to the number of additional shares
of Common Stock being issued with respect to each share of Common Stock in such
dividend or distribution.
(g) ADJUSTMENTS FOR OTHER DIVIDENDS AND
DISTRIBUTIONS. In the event the Corporation at any time or from time to time
after the Series C Original Issue Date 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 provision shall be made so that the
holders of the Series A Preferred Stock, the holders of the Series B Preferred
Stock and the holders of Series C Preferred Stock shall receive upon conversion
thereof in addition to the number of shares of Common Stock receivable
thereupon, the amount of securities of the Corporation that they would have
received had the Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, as the case may be, 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, giving application to all
adjustments called for during such period under this paragraph with respect to
the rights of the holders of the Series A Preferred Stock, the rights of the
holders of the Series B Preferred Stock and the rights of the holders of the
Series C Preferred Stock, as the case may be; and provided further, however,
that no such adjustment shall be made if the holders of Series A Preferred
Stock, the holders of the Series B Preferred Stock and the holders of the Series
C Preferred Stock, as the case may be, simultaneously receive a dividend or
other distribution of such securities in an amount equal to the amount of such
securities as they would have received if all outstanding shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as the
case may be, had been converted into Common Stock on the date of such event.
<PAGE>
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(h) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE, OR
SUBSTITUTION. If the Common Stock issuable upon the conversion of the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall be
changed into the same or a different number of shares of any class or classes of
stock, whether by capital reorganization, 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 below), then and in each such event the holders of each such share of Series
A Preferred Stock, the holders of each such share of Series B Preferred Stock
and the holders of each such share of Series C 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 Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock, as the case may be, might have been converted
immediately prior to such reorganization, reclassification, or change, all
subject to further adjustment as provided herein.
(i) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In
case of any consolidation or merger of the Corporation with or into another
corporation or the sale of all or substantially all of the assets of the
Corporation to another corporation (other than a consolidation, merger or sale
which is covered by Subsection 2(c)), each share of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall thereafter be
convertible (or shall be converted into a security which shall be convertible)
into the kind and amount of shares of stock or other securities or property to
which a holder of the number of shares of Common Stock of the Corporation
deliverable upon conversion of such Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, as the case may be, would have been entitled
upon such consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors) shall be made
in the application of the provisions in this Section 4 set forth with respect to
the rights and interest thereafter of the holders of the Series A Preferred
Stock, the holders of the Series B Preferred Stock and the holders of the Series
C Preferred Stock, to the end that the provisions set forth in this Section 4
(including provisions with respect to changes in and other adjustments of the
Series A Conversion Price, Series B Conversion Price and the Series C Conversion
Price) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other property thereafter deliverable upon
the conversion of the Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock, as the case may be.
(j) NO IMPAIRMENT. The Corporation will not, by
amendment of its Certificate of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Section 4 and in the taking of all such action as may
be necessary or appropriate in order to protect the Conversion Rights of the
holders of the Series A Preferred
<PAGE>
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Stock, the holders of the Series B Preferred Stock and the holders of the Series
C Preferred Stock against impairment.
(k) CERTIFICATE AS TO ADJUSTMENTS. Upon the
occurrence of each adjustment or readjustment of the Series A Conversion Price,
the Series B Conversion Price or the Series C Conversion Price pursuant to this
Section 4, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to each holder
of Series A Preferred Stock, each holder of the Series B Preferred Stock and
each holder of the Series C Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock, any holder of
Series B Preferred Stock or any holder of Series C Preferred Stock, furnish or
cause to be furnished to such holder a similar certificate setting forth (i)
such adjustments and readjustments, (ii) the Series A Conversion Price, Series B
Conversion Price or Series C Conversion Price, as applicable, then in effect,
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which then would be received upon the conversion of Series A Preferred
Stock, Series B Preferred Stock or Series C Preferred Stock, as the case may be.
(l) NOTICE OF RECORD DATE. In the event:
(i) that the Corporation declares a dividend
(or any other distribution) on its Common
Stock payable in Common Stock or other
securities of the Corporation;
(ii) that the Corporation subdivides or combines
its outstanding shares of Common Stock;
(iii) of any reclassification of the Common Stock
of the Corporation (other than a
subdivision or combination of its
outstanding shares of Common Stock or a
stock dividend or stock distribution
thereon), or of any consolidation or merger
of the Corporation into or with another
corporation, or of the sale of all or
substantially all of the assets of the
Corporation; or
(iv) of the involuntary or voluntary
dissolution, liquidation or winding up of
the Corporation;
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Preferred Stock, and shall use its best
efforts to cause to be mailed to the holders of the Series A Preferred Stock,
the holders of the Series B Preferred Stock and the holders of the Series C
Preferred Stock at their last addresses as shown on the records of the
Corporation or such transfer agent, prior to the dates specified in (A) and (B)
below, a notice stating
<PAGE>
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(A) the record date of such dividend, distribution,
subdivision or combination, or, if a record is
not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such
dividend, distribution, subdivision or
combination are to be determined, or
(B) the date on which such reclassification,
consolidation, merger, sale, dissolution,
liquidation or winding up is expected to become
effective, and the date as of which it is
expected that holders of Common Stock of record
shall be entitled to exchange their shares of
Common Stock for securities or other property
deliverable upon such reclassification,
consolidation, merger, sale, dissolution or
winding up.
5. MANDATORY CONVERSION.
(a) Upon (i) the closing of the sale of shares of Common
Stock, at a price to the public of at least $4.75 per share (subject to
appropriate adjustment for stock splits, stock dividends, combinations and other
similar recapitalizations affecting such shares), in a public offering pursuant
to an effective registration statement under the Securities Act of 1933, as
amended, resulting in at least $15,000,000 of net proceeds to the Corporation (a
"Qualified IPO") or (ii) the delivery to the Corporation of a Conversion Notice
or Notices covering at least 75% of the outstanding shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock (the "Mandatory
Conversion Date"), (A) all outstanding shares of Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall automatically be
converted into shares of Common Stock, at the then effective applicable
conversion rate and (B) the number of authorized shares of Preferred Stock shall
be automatically reduced by the number of shares of Preferred Stock that had
been designated as Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock and all references to the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock shall be deleted and shall be of no
further force or effect.
(b) All holders of record of shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock shall be given
written notice of the Mandatory Conversion Date and the place designated for
mandatory conversion of all such shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock pursuant to this Section 5 . Such
notice need not be given in advance of the occurrence of the Mandatory
Conversion Date. Such notice shall be sent by first class or registered mail,
postage prepaid, to each record holder of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock at such holder's address last shown
on the records of the transfer agent for the Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, as the case may be (or the records
of the Corporation, if it serves as its own transfer agent). Upon receipt of
such notice, each holder of shares of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock shall surrender his or its
certificate or certificates for all such shares
<PAGE>
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to the Corporation at the place designated in such notice, and shall thereafter
receive certificates for the number of shares of Common Stock to which such
holder is entitled pursuant to this Section 5. On the Mandatory Conversion Date,
all rights with respect to the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock so converted, including the rights, if any,
to receive notices and vote (other than as a holder of Common Stock) will
terminate, except only the rights of the holders thereof, upon surrender of
their certificate or certificates therefor, to receive certificates for the
number of shares of Common Stock into which such Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock has been converted, and
payment of any declared but unpaid dividends thereon. If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or by
his or its attorney duly authorized in writing. As soon as practicable after the
Mandatory Conversion Date and the surrender of the certificate or certificates
for Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock, the Corporation shall cause to be issued and delivered to such holder, or
on his or its written order, a certificate or certificates for the number of
full shares of Common Stock issuable on such conversion in accordance with the
provisions hereof and cash as provided in Subsection 4(b) in respect of any
fraction of a share of Common Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock which are required
to be surrendered for conversion in accordance with the provisions hereof shall,
from and after the Mandatory Conversion Date, be deemed to have been retired and
cancelled and the shares of Series A Preferred Stock, Series B Preferred Stock
or Series C Preferred Stock represented thereby converted into Common Stock for
all purposes, notwithstanding the failure of the holder or holders thereof to
surrender such certificates on or prior to such date. Such converted Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock may not be
reissued, and the Corporation may thereafter take such appropriate action
(without the need for stockholder action) as may be necessary to reduce the
authorized number of shares of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock, accordingly.
6. REDEMPTION.
(a) The Corporation will, subject to the conditions set forth
below, on February 25, 2004 and on each of the first and second anniversaries
thereof (each such date being referred to hereinafter as a "Mandatory Redemption
Date"), upon receipt not less than 60 nor more than 120 days prior to the
applicable Mandatory Redemption Date of written request(s) for redemption from
holders of shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock representing at least 66-2/3% of the aggregate number
of shares of Common Stock issuable upon conversion of the then outstanding
shares of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock (a "Redemption Request"), redeem from each holder of shares of
Series A Preferred Stock, Series B Preferred Stock and/or Series C Preferred
Stock that requests redemption pursuant to the Redemption Request or pursuant to
a subsequent election made in accordance with this Section
<PAGE>
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6(a) (a "Requesting Holder"), at a price equal to $.343 per share, in the case
of the Series A Preferred Stock, $.996 per share, in the case of the Series B
Preferred Stock, and $3.893 in the case of the Series C Preferred Stock, plus in
each case any dividends declared but unpaid thereon, subject to appropriate
adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting such shares (the "Mandatory Redemption
Price"), the number of shares of Series A Preferred Stock, Series B Preferred
Stock and/or Series C Preferred Stock requested to be redeemed by each
Requesting Holder, but not more than the following respective portions of the
number of shares each series of Preferred Stock held by such Requesting Holder
on the applicable Mandatory Redemption Date.
Maximum
Mandatory Portion of Shares of Series of
REDEMPTION DATE PREFERRED STOCK TO BE REDEEMED
--------------- ------------------------------
February 25, 2004 33%
February 25, 2005 50%
February 25, 2006 All shares of Series
The Corporation shall provide notice of its receipt of Redemption Request,
specifying the time, manner and place of redemption and the Mandatory Redemption
Price (a "Redemption Notice"), by first class or registered mail, postage
prepaid, to each holder of record of Series A Preferred Stock, to each holder of
Series B Preferred Stock and to each holder of Series C Preferred Stock at the
address for such holder last shown on the records of the transfer agent therefor
(or the records of the Corporation, if it serves as its own transfer agent), not
less than 45 days prior to the applicable Mandatory Redemption Date. Each holder
of Series A Preferred Stock, each holder of Series B Preferred Stock and each
holder of Series C Preferred Stock (other than a holder who has made the
Redemption Request) may elect to become a Requesting Holder on such Mandatory
Redemption Date by so indicating in a written notice mailed to the Company, by
first class or registered mail, postage prepaid, at least 30 days prior to the
applicable Mandatory Redemption Date. Except as provided in Section 6(b) below,
each Requesting Holder shall surrender to the Corporation on the applicable
Mandatory Redemption Date the certificate(s) representing the shares to be
redeemed on such date, in the manner and at the place designated in the
Redemption Notice. Thereupon, the Mandatory Redemption Price shall be paid to
the order of each such Requesting Holder and each certificate surrendered for
redemption shall be cancelled.
(b) If the funds of the Corporation legally available for
redemption of Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock on any Mandatory Redemption Date are insufficient to redeem the
number of shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock required under this Section 6 to be redeemed on such
date from Requesting Holders, those funds which are legally available will be
used to redeem the maximum possible number of each such shares ratably on the
basis of the number of each such series which would be redeemed on such date if
the funds of the Corporation legally available therefor had been sufficient to
redeem all shares required to be redeemed on such date. At any time thereafter
when additional funds of the Corporation
<PAGE>
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become legally available for the redemption of Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock, such funds will be used, at the
end of the next succeeding fiscal quarter, to redeem the balance of the shares
which the Corporation was theretofore obligated to redeem, ratably on the basis
set forth in the preceding sentence.
(c) Unless there shall have been a default in payment of the
Mandatory Redemption Price, on the applicable Mandatory Redemption Date, all
rights of the holder of each share redeemed on such date as a stockholder of the
Corporation by reason of the ownership of such share will cease, except the
right to receive such Mandatory Redemption Price of such share, without
interest, upon presentation and surrender of the certificate representing such
share, and such share will not from and after such Mandatory Redemption Date be
deemed to be outstanding.
(d) Any shares of Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock redeemed pursuant to this Section 6 will be
cancelled and will not under any circumstances be reissued, sold or transferred
and the Corporation may from time to time take such appropriate action as may be
necessary to reduce the authorized shares of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock accordingly.
7. WAIVER. Any of the respective rights of the holders of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock set forth
herein may be waived by the affirmative vote of the holders of not less than
66-2/3% of the shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock, then outstanding, voting together as a separate class;
PROVIDED, HOWEVER, that any waiver which does not affect all series of Preferred
Stock in the same manner may only be waived by the holders of not less than
66-2/3% of the shares of Preferred Stock so affected.
8. NEGATIVE COVENANTS. So long as at least 25% of the shares of Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
outstanding on the Series C Original Issue Date (such numbers to be
proportionately adjusted in the event of any stock splits, stock dividends,
recapitalizations or similar events) are outstanding, the Corporation shall not,
without the prior written consent of the holders of shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock representing not
less than 66-2/3% of the shares of Common Stock into which all outstanding
shares of such Preferred Stock are then convertible:
(a) merge or consolidate into or with another corporation
(except a merger or consolidation in which the holders of capital stock of the
Corporation immediately prior to such merger or consolidation continue to hold
at least 50% by voting power of the capital stock of the surviving or acquiring
corporation), or sell all or substantially all the assets of the Corporation;
(b) acquire (whether by merger, stock purchase, asset purchase
or otherwise) all or substantially all of the properties, assets or stock of any
other corporation or entity;
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(c) amend the Certificate of Incorporation (including through
the filing of a Certificate of Designation) of the Corporation to authorize any
additional shares of Common Stock or Preferred Stock or to authorize or
designate any other class or series of stock in addition to Common Stock and
Preferred Stock;
(d) declare or pay any dividends or distributions on Common
Stock (other than dividends payable solely in Common Stock and repurchases of
Common Stock for a price equal to its original purchase price pursuant to
restricted stock agreements);
(e) voluntarily liquidate or dissolve;
(f) incur any indebtedness for borrowed money or purchase
money financing in excess of the greater of (i) $1.5 million or (ii) 25% of the
amount, if any, by which the Corporation's total assets exceeds its total
liabilities (as reflected in the Corporation's most recent balance sheet);
(g) guarantee directly or indirectly, any indebtedness or
obligations (except for guarantees of trade accounts of any subsidiary arising
in the ordinary course of business);
(h) make any loan or advance to any person or entity, except
advances and similar expenditures in the ordinary course of business or under
the terms of an employee stock or option plan approved by the Board of
Directors; or
(i) engage in any strategic transaction in which securities of
the Company are issued, including (a) joint ventures, manufacturing, marketing
or distribution agreements, or (b) technology transfer or development
agreements.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. The following provisions are included for the management of
the business and the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the
Corporation and of its Board of Directors and stockholders:
1. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors of the Corporation.
2. The Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal the by-laws of the Corporation, subject to
any limitation thereof contained in the by-laws. The stockholders shall also
have the power to adopt, amend or repeal the by-laws of the Corporation;
PROVIDED, however, that, in addition to any vote of the holders of any class or
series of stock of the Corporation required by law or by this Third Amended and
Restated Certificate of Incorporation, the affirmative vote of the holders of at
least seventy-five percent (75%) of the voting power of all of the then
outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single
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class, shall be required to adopt, amend or repeal any provision of the by-laws
of the Corporation.
3. Stockholders of the Corporation may not take any action by
written consent in lieu of a meeting.
4. Special meetings of stockholders may be called at any time
only by the Chief Executive Officer, the President, the Chairman of the Board of
Directors (if any) or a majority of the Board of Directors. Business transacted
at any special meeting of stockholders shall be limited to matters relating to
the purpose or purposes stated in the notice of meeting.
5. The books of the Corporation may be kept at such place
within or without the State of Delaware as the by-laws of the Corporation may
provide or as may be designated from time to time by the Board of Directors of
the Corporation.
SEVENTH.
1. NUMBER OF DIRECTORS. The number of directors which shall constitute
the whole Board of Directors shall be determined by resolution of a majority of
the Board of Directors, but in no event shall the number of directors be less
than three. The number of directors may be decreased at any time and from time
to time by a majority of the directors then in office, but only to eliminate
vacancies existing by reason of the death, resignation, removal or expiration of
the term of one or more directors. The directors shall be elected at the annual
meeting of stockholders by such stockholders as have the right to vote on such
election. Directors need not be stockholders of the Corporation.
2. CLASSES OF DIRECTORS. The Board of Directors shall be and is divided
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class.
3. ELECTION OF DIRECTORS. Elections of directors need not be by written
ballot except as and to the extent provided in the by-laws of the Corporation.
4. TERMS OF OFFICE. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided, however, that each initial director in Class I
shall serve for a term ending on the date of the annual meeting next following
the end of the Corporation's fiscal year ending February 29, 2000; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting next following the end of the Corporation's fiscal year ending February
28, 2001; and each initial director in Class III shall serve for a term ending
on the date of the annual meeting next following the end of the Corporation's
fiscal year ending February 28, 2002.
5. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR
DECREASES IN THE NUMBER OF DIRECTORS. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as director of the class of which he or she is a
member until the expiration of such director's current term or his or
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her prior death, removal or resignation and (ii) the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors so as to ensure that
no one class has more than one director more than any other class. To the extent
possible, consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at the
earliest dates following such allocation, unless otherwise provided for from
time to time by resolution adopted by a majority of the directors then in
office, though less than a quorum. No decrease in the number of directors
constituting the whole Board of Directors shall shorten the term of an incumbent
director.
6. TENURE. Notwithstanding any provisions to the contrary contained
herein, each director shall hold office until his or her successor is elected
and qualified, or until his or her earlier death, resignation or removal.
7. VACANCIES. Unless and until filled by the stockholders, any vacancy
in the Board of Directors, however occurring, including a vacancy resulting from
an enlargement of the Board of Directors, may be filled only by vote of a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director. A director elected to fill a vacancy shall be elected
for the unexpired term of his or her predecessor in office, if applicable, and a
director chosen to fill a position resulting from an increase in the number of
directors shall hold office until the next election of the class for which such
director shall have been chosen and until his or her successor is elected and
qualified, or until his or her earlier death, resignation or removal.
8. QUORUM. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
9. ACTION AT MEETING. At any meeting of the Board of Directors at which
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law or the
Corporation's by-laws.
10. REMOVAL. Any one or more or all of the directors may be removed
with cause only by the holders of at least seventy-five percent (75%) of the
shares then entitled to vote at an election of directors. Directors may not
be removed without cause.
11. STOCKHOLDER NOMINATIONS AND INTRODUCTION OF BUSINESS, ETC. Advance
notice of stockholder nominations for election of directors and other business
to be brought by stockholders before a meeting of stockholders shall be given in
the manner provided in the by-laws of the Corporation.
12. RIGHTS OF PREFERRED STOCK. The provisions of this Article are
subject to the rights of the holders of any series of Preferred Stock from time
to time outstanding.
<PAGE>
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EIGHTH. No director (including any advisory director) of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director notwithstanding
any provision of law imposing such liability; provided, however, that, to the
extent provided by applicable law, this provision shall not eliminate the
liability of a director (i) for any breach of the director's duty of loyalty to
the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of the State of Delaware,
or (iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply to or have any
effect on the liability or alleged liability of any director for or with respect
to any acts or omissions of such director occurring prior to such amendment or
repeal.
NINTH. The Board of Directors of the Corporation, when evaluating any
offer of another party (a) to make a tender or exchange offer for any equity
security of the Corporation or (b) to effect a business combination, shall, in
connection with the exercise of its judgment in determining what is in the best
interests of the Corporation as whole, be authorized to give due consideration
to any such factors as the Board of Directors determines to be relevant,
including, without limitation:
(i) the interests of the Corporation's stockholders, including the
possibility that these interests might be best served by the continued
independence of the Corporation;
(ii) whether the proposed transaction might violate federal or state
laws;
(iii) not only the consideration being offered in the proposed
transaction, in relation to the then current market price for the
outstanding capital stock of the Corporation, but also to the market price
for the capital stock of the Corporation over a period of years, the
estimated price that might be achieved in a negotiated sale of the
Corporation as a whole or in part or through orderly liquidation, the
premiums over market price for the securities of other corporations in
similar transactions, current political, economic and other factors
bearing on securities prices and the Corporation's financial condition and
future prospects; and
(iv) the social, legal and economic effects upon employees, suppliers,
customers, creditors and others having similar relationships with the
Corporation, upon the communities in which the Corporation conducts its
business and upon the economy of the state, region and nation.
In connection with any such evaluation, the Board of Directors is authorized to
conduct such investigations and engage in such legal proceedings as the Board of
Directors may determine.
TENTH. The Corporation reserves the right to amend or repeal any
provision contained in this Third Amended and Restated Certificate of
Incorporation in the manner prescribed by the laws of the State of Delaware and
all rights conferred upon stockholders are granted subject to this reservation,
PROVIDED, HOWEVER, that in addition to any vote of the holders of any class or
series of stock of the Corporation required by law, this Third Amended and
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Restated Certificate of Incorporation or a Certificate of Designation with
respect to a series of Preferred Stock, the affirmative vote of the holders of
shares of voting stock of the Corporation representing at least seventy-five
percent (75%) of the voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to (i) reduce or
eliminate the number of authorized shares of Common Stock or the number of
authorized shares of Preferred Stock set forth in Article FOURTH or (ii) amend
or repeal, or adopt any provision inconsistent with, Parts A and B of Article
FOURTH and Articles FIFTH, SIXTH, SEVENTH, EIGHTH, NINTH and this Article TENTH
of this Third Amended and Restated Certificate of Incorporation.
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IN WITNESS WHEREOF, the undersigned has hereunto signed his name and
affirms that the statements made in this Third Amended and Restated Certificate
of Incorporation are true under the penalties of perjury this ____ day of _____,
1999.
By:
-----------------------------------
Name: Robert F. Young
Title: Chief Executive Officer
[SEAL]
Attest:
By:
------------------------
David Shummanfang
Secretary