RESTATED
ARTICLES OF INCORPORATION
OF
ALPHAREL, INC.
I
The name of the corporation is Alpharel, Inc.
II
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
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
(a) This corporation is authorized to issue two classes of capital stock
designated "Common Stock" and "Preferred Stock," respectively. The number of
shares of Common Stock authorized to be issued is 7,000,000 and the number of
shares of Preferred Stock authorized to be issued is 1,000,000. The Preferred
Stock shall have a par value of $1.00 per share and an aggregate par value of
$1,000,000.00.
(b) The Preferred Stock may be divided into such number of series as the
Board of Directors may determine. The Board of Directors may determine and
alter the rights, preferences, privileges and restrictions granted to or
imposed upon and wholly unissued series of Preferred Stock, and may fix the
number of shares and the designation of shares of any such series. The Board
of Directors, within the limits and restrictions stated in any resolution of
the Board of Directors originally fixing the number of shares constituting any
series of Preferred Stock, may increase or decrease (but not below the number
of shares of such series then outstanding) the number of shares of such series
subsequent to the issuance of shares of such series.
1. DESIGNATION AND AMOUNT. The initial series of Preferred Stock shall
be designated "Series A Preferred Stock." The number of shares constituting
the Series A Preferred Stock shall be 478,261 shares.
2. DEFINITIONS. For purposes hereof, the following definitions shall
apply:
2.1 "Board" shall mean the Board of Directors of the Company.
2.2 "Common Stock" shall refer to the Common Stock of the Company.
2.3 "Company" shall mean Alpharel, Inc., a California corporation.
2.4 "Preferred Stock" shall refer to the Class A Preferred Stock of
the Company designated herein.
2.5 "Subsidiary" shall mean any corporation at least 50% of whose
outstanding voting stock is at the time owned directly or indirectly by the
Company or by one or more Subsidiaries.
3. DIVIDENDS.
3.1 RIGHT TO DIVIDENDS. The holders of then outstanding Preferred
Stock shall be entitled to receive, when and as declared by the Board, and out
of any funds legally available therefor, cash dividends at a rate of $0.69 per
share per annum, such dividends to accrue on each share of Preferred Stock
beginning three years from the date of original issuance of such share, whether
or not earned or declared. Such dividends may be payable quarterly or
otherwise as the Board may from time to time determine.
3.2 PRIORITY; PARTICIPATION. Such dividends shall be cumulative so
that unless dividends on the Preferred Stock at the foregoing annual rate for
the then current fiscal quarter shall have been paid or declared and a sum
sufficient for the payment thereof set apart, (i) no dividend whatsoever (other
than a dividend payable solely in Common Stock) shall be paid or declared, and
no distribution shall be made, on any Common Stock, and (ii) no shares of
Common Stock shall be purchased, redeemed or acquired by the Company and no
money shall be paid into or set aside or made available for a sinking fund for
the purchase, redemption or acquisition thereof; PROVIDED, however, that this
restriction shall not apply to the repurchase of shares of Common Stock from
directors, officers, employees or consultants of the Company or any Subsidiary
pursuant to agreements under which the Company has the option or obligation to
repurchase such shares upon the occurrence of certain events, including the
termination of employment or consultation. After all cumulative dividends on
the Preferred Stock as provided above have been paid or declared and a sum
sufficient for payment thereof set apart, if the Board shall elect to make
further distributions of dividends, the holders of the Preferred Stock shall be
entitled to participate pro rata in all such dividends, as and when declared by
the Board, based on the number of full shares of Common Stock into which such
Preferred Stock is then convertible pursuant to the provisions of Section 7
hereof.
4. LIQUIDATION RIGHTS.
4.1 PREFERENCE ON PREFERRED STOCK. In the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or involuntary, the
holders of each share of Preferred Stock then outstanding shall be entitled to
be paid out of the assets of the Company available for distribution to its
shareholders, whether such assets are capital, surplus or earnings, before any
payment or declaration and setting apart for payment of any amount shall be
made in respect of the Common Stock, an amount equal to $11.50 per share plus
an amount equal to all declared and unpaid dividends thereon to and including
the date full payment shall be tendered to the holders of the Preferred Stock
with respect to such liquidation, dissolution or winding up. If upon any
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, the assets to be distributed to the holders of the Preferred Stock
shall be insufficient
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to permit the payment to such shareholders of the full preferential amounts
as aforesaid, then all of the assets of the Company to be distributed shall
be distributed ratably to the holders of the Preferred Stock.
4.2 REMAINING ASSETS. After the payment or distribution of the full
preferential amounts aforesaid, the holders of the Preferred Stock shall be
entitled to no further participation in the distribution of the assets of the
Company and shall have no further rights of conversion, and the holders of
Common Stock outstanding shall be entitled to receive ratably all remaining
assets of the Company to be distributed.
4.3 REORGANIZATION. A consolidation or merger of the Company with
or into any other corporation or corporations or sale of all or substantially
all of the assets of the Company in which the shareholders of the Company
receive solely capital stock of the acquiring corporation (or of the direct or
indirect parent party of the acquiring corporation), except for cash in lieu of
fractional shares, shall not be deemed a liquidation, dissolution or winding up
of the Company for the purpose of Section 4.
4.4 VALUATION. Whenever the distribution provided for herein shall
be paid in property other than cash, the value of such distribution shall be
the fair market value of such property as determined in good faith by the Board
of Directors of the Company.
5. RESTRICTION ON REDEMPTION. The Company shall not have the right to
call or redeem any or all of the Preferred Stock. The Company shall not
purchase or otherwise acquire for value any outstanding shares of Preferred
Stock unless the Company makes a tender offer to all holders of Preferred Stock
to purchase such stock from them pro rata, based on the number of shares of
Preferred Stock held by each such holder, as the same cash purchase price for
each share.
6. VOTING RIGHTS.
6.1 PREFERRED STOCK. Each holder of shares of Preferred Stock shall
be entitled to vote on all matters submitted to a vote of the holders of Common
Stock and, except as otherwise expressly provided herein, shall be entitled to
the number of votes equal to the largest number of full shares of Common Stock
into which such shares of Preferred Stock could be converted, pursuant to the
provisions of Section 7 hereof, at the record date for the determination of the
shareholders entitled to vote on such matters or, if no such record date is
established, at the date such vote is taken or any written consent of
shareholders is solicited.
6.2 COMMON STOCK. Each holder of shares of Common Stock shall be
entitled to one vote for each share thereof held. Except as otherwise
expressly provided herein or as required by law, the holders of Preferred Stock
and the holders of Common Stock shall vote together and not as separate
classes.
7. CONVERSION. The holders of Preferred Stock shall have the following
conversion rights:
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7.1 RIGHT TO CONVERT. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share, at the office of the Company or any transfer agent for
the Preferred Stock or Common Stock, into fully paid and nonassessable shares
of Common Stock, at the Conversion Price (as hereinafter defined) in effect at
the time of conversion.
7.2 CONVERSION PRICE. Each share of Preferred Stock shall be
convertible into the number of shares of Common Stock which results from
dividing the Conversion Price per share in effect at the time of conversion
into $11.50. The initial Conversion Price per share shall be $11.50. Such
Initial Conversion Price shall be subject to adjustment from time to time as
provided below.
7.3 MECHANICS OF CONVERSION. Before any holder of Preferred Stock
shall be entitled to convert the same into shares of Common Stock, he shall
surrender the certificate or certificates therefor, duly endorsed, at the
office of the Company or of any transfer agent for the Preferred Stock or
Common Stock, and shall give written notice to the Company at such office that
such holder elects to convert the same and shall state therein the number of
shares of Preferred Stock being converted. Thereupon, the Company 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 all declared and unpaid dividends on
the shares of Preferred Stock being converted to and including the time of
conversion. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted, and the person entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all purposes
as the record holder of such shares of Common Stock on such date.
7.4 ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company at
any time or from time to time after the original issuance of the Preferred
Stock effects a subdivision of the outstanding Common Stock, the Conversion
Price then in effect immediately before that subdivision shall be
proportionately decreased, and conversely, if the Company at any time or from
time to time after the original issuance of the Preferred Stock combines the
outstanding shares of Common Stock, the Conversion Price then in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this paragraph (d) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
7.5 ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event the Company at any time or from time to time after the original issuance
of the Preferred Stock 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, then and in each such event the
Conversion Price then in effect shall be decreased as of the time of such
issuance or, in the event such a record date is fixed, as of the close of
business on such record date, by multiplying the Conversion Price then in
effect by a fraction (i) 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 (ii) 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
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Common Stock issuable in payment of such dividend or distribution; PROVIDED,
however, that if such record date is fixed and such dividend is not fully
paid or if such distribution is not fully made on the date fixed therefor,
the Conversion Price shall be recomputed accordingly as of the close of
business on such record date and thereafter the Conversion Price shall be
adjusted pursuant to this paragraph (e) as of the time of actual payment of
such dividend or distribution.
7.6 ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the event
the Company at any time or from time to time after the original issuance of the
Preferred Stock 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 company other than shares of Common Stock, then in each
such event provision shall be made so that the holders of 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 Company which they
would have received had their Preferred Stock been converted into Common Stock
on the date of such event and had they thereafter, during the period from the
date of such event to and including the Conversion Date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments before or during such period under this Section 7 with
respect to the rights of the holders of the Preferred Stock.
7.7 ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If
the Common Stock issuable upon the conversion of the Preferred Stock is changed
into the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than a
subdivision or combination of shares of stock dividend or other reorganization,
merger, consolidation or sale of assets, provided for elsewhere in this
Section 7), then, and in any such event, each holder of Preferred 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 number of shares of Common
Stock into which such shares of Preferred Stock might have been converted
immediately prior to such recapitalization, reclassification or change, all
subject to further adjustment as provided herein.
7.8 REORGANIZATION, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If
at any time or from time to time there is a capital reorganization of the
Common Stock (other than a recapitalization, subdivision, combination,
reclassification or exchange of shares provided for elsewhere in this
Section 7) or a merger or consolidation of the Company with or into another
corporation, or the sale of all or substantially all of the Company's
properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made so that
the holders of the Preferred Stock shall thereafter be entitled to receive upon
conversion of the Preferred Stock the number of shares of stock or other
securities or property of the Company, or of the successor corporation
resulting from such merger or consolidation or sale, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
capital reorganization, merger, consolidation or sale. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 7 with respect to the rights of the holders of the Preferred Stock
after the reorganization, merger, consolidation or sale to the end that the
provisions of this Section 7 (including adjustment of the Conversion Price then
in effect and number of shares purchasable upon conversion of the Preferred
Stock) shall be
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applicable after that event and be as nearly equivalent to the provisions
hereof as may be practicable.
7.9 CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Conversion Price or the number of shares of Common Stock or
other securities issuable upon conversion of the Preferred Stock, the Chief
Financial Officer of the Company 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 the Preferred Stock at the
holder's address as shown in the Company's books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based.
7.10 NOTICES OF RECORD DATE. In the event of any taking by the
Company 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 to vote on or consent to any capital reorganization of
the Company, any reclassification or recapitalization of the capital stock of
the Company, any consolidation or merger involving the Company, or any transfer
of all or substantially all of the assets of the Company to any other person or
any voluntary or involuntary dissolution, liquidation or winding up of the
Company, the Company shall mail to each holder of Preferred Stock at least
20 days prior to the record date specified therein, a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend
or distribution and description of such dividend or distribution, (ii) the date
on which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (iii) the time, 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, transfer,
consolidation, merger, dissolution, liquidation or winding up.
7.11 AUTOMATIC CONVERSION.
(1) Each share of Preferred Stock shall automatically be
converted into shares of Common Stock based on the then effective Conversion
Price immediately upon (i) the closing of an underwritten public offering
pursuant to any effective Regulation A notification or a registration statement
under the Securities Act of 1933, as amended, covering the offering and sale of
Common Stock for the account of the Company in which the aggregate gross
proceeds received by the Company at the public offering price equals or exceeds
$6,000,000, the public offering price per share of which equals or exceeds
$11.50 per share of Common Stock (appropriately adjusted for subdivisions and
combinations of shares of Common Stock and dividends payable in shares of
Common Stock) and the obligation of the underwriters is that if any of the
securities being offered are purchased, all such securities must be purchased;
or (ii) the effective date of (A) a consolidation or merger of the Company with
or into another corporation or corporations; (B) a consolidation or merger in
which the Company is a constituent corporation, it survives the consolidation
or merger and its shareholders receive capital stock of another corporation; or
(C) a sale of all or substantially all of the assets of the Company, PROVIDED,
however, that one of the other constituent corporations, the acquiring
corporation or the parent of
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any such corporation has at that time a class of securities publicly traded
on a national securities exchange or quoted on a national quotation system or
otherwise has a class of securities registered under Section 12 of the
Securities Exchange Act of 1934, as amended.
(2) Upon the occurrence of the events specified in
paragraph (1) above, the outstanding shares of Preferred 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 Company or its transfer agent; PROVIDED, however, that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such conversion unless the certificates evidencing
such shares of Preferred Stock are either delivered to the Company or its
transfer agent as provided below, or the holder notifies the Company or its
transfer agent that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates. Upon the
occurrence of such automatic conversion of the Preferred Stock, the holders of
Preferred Stock shall surrender the certificates representing such shares at
the office of the Company or any transfer agent for the Preferred Stock or
Common Stock. Thereupon, there shall be issued and delivered to such holder
promptly at such office and in his 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 Preferred Stock surrendered
were convertible on the date on which such automatic conversion occurred and
the Company shall promptly pay, or cause to be paid, in cash all declared and
unpaid dividends on the shares of Preferred Stock being converted to and
including the time of conversion.
7.12 FRACTIONAL SHARES. No fractional shares of Common Stock shall
be issued upon conversion of Preferred Stock. In lieu of any fractional shares
to which the holder would otherwise be entitled, the Company shall pay cash
equal to the product of such fraction multiplied by the fair market value of
one share of the Company's Common Stock on the date of conversion, as
determined in good faith by the Board.
7.13 RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
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 Preferred Stock such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of the Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Preferred Stock, the
Company will take such corporate action as may be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
8. RESTRICTIONS AND LIMITATIONS.
8.1 So long as any shares of Preferred Stock remain outstanding, the
Company shall not, and shall not permit any Subsidiary to, without the vote or
written consent by the holders of more than 50% of the then outstanding shares
of Preferred Stock;
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(1) Redeem, purchase or otherwise acquire for value, any share
or shares of Preferred Stock, except as otherwise permitted under Section 5;
(2) Purchase, redeem or otherwise acquire (or pay into or set
aside for a sinking fund for such purpose) any of the Common Stock; PROVIDED,
however, that this restriction shall not apply to the repurchase of shares of
Common Stock from directors, officers, employees or consultants of the Company
or any Subsidiary pursuant to agreements under which the Company has the option
or obligation to repurchase such shares upon the occurrence of certain events,
including the termination of their employment or consultation;
(3) Authorize or issue, or obligate itself to issue, any other
equity security senior to the Preferred Stock as to redemption rights,
liquidation preferences, conversion rights, voting rights or otherwise;
(4) Increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Preferred Stock.
8.2 The Company shall not amend its Articles of Incorporation
without the approval, by vote or written consent, of the holders of more than
50% of the Preferred Stock if such amendment would change any of the rights,
preferences, privileges of or limitations provided for herein for the benefit
of any shares of Preferred Stock. Without limiting the generality of the next
preceding sentence, the Company will not amend its Articles of Incorporation
without the approval by the holders of more than 50% of the Preferred Stock if
such amendment would:
(1) Reduce the dividend rate on Preferred Stock provided for
herein, or cancel declared and unpaid dividends, or change the relative
seniority rights of the holders of Preferred Stock as to the payment of
dividends in relation to the holders or Common Stock of the Company;
(2) Reduce the amount payable to the holders of Preferred Stock
upon the voluntary or involuntary liquidation, dissolution or winding up of the
Company, or change the relative seniority of the liquidation preferences of the
holders of Preferred Stock to the rights upon liquidation of the holders of
Common Stock of the Company;
(3) Cancel or modify the conversion rights provided for in
Section 7 hereof;
(4) Authorize any other equity security senior to the Preferred
Stock; or
(5) Make the Preferred Stock redeemable at the option of the
Company except as specified in Section 5 hereof.
9. NO REISSUANCE OF PREFERRED STOCK. No share or shares of Preferred
Stock acquired by the Company by reason of redemption, purchase, conversion or
otherwise shall be reissued, and all such shares shall be canceled, retired and
eliminated from the shares which the Company shall be authorized to issue.
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