Exhibit 4.4
CERTIFICATE OF DESIGNATIONS
OF
PREFERRED STOCK
OF
NX NETWORKS, INC.
TO BE DESIGNATED
SERIES C 8% CONVERTIBLE PREFERRED STOCK
____________
PURSUANT TO SECTION 151(G) OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
____________
The undersigned DO HEREBY CERTIFY that the following resolution was duly
adopted by the Board of Directors of Nx Networks, Inc., a Delaware corporation
(the "Corporation"), at a meeting duly convened and held, at which a quorum was
present and acting throughout:
"RESOLVED, that pursuant to the authority conferred on the Board of
Directors of the Corporation (the "Board of Directors") by the
Corporation's Certificate of Incorporation, the issuance of a series of
preferred stock, $.05 par value per share, of the Corporation which shall
consist of 15,400 shares of preferred stock be, and the same hereby is,
authorized; and the Chief Executive Officer and Secretary or Assistant
Secretary of the Corporation be, and they hereby are, authorized and
directed to execute and file with the Secretary of State of the State of
Delaware the Certificate of Designations of Preferred Stock of the
Corporation fixing the designations, powers, preferences and rights of the
shares of such series, and the qualifications, limitations or restrictions
thereof (in addition to the designations, powers, preferences and rights,
and the qualifications, limitations or restrictions thereof, set forth in
the Certificate of Incorporation which may be applicable to the
Corporation's preferred stock), as follows:
1. NUMBER OF SHARES; DESIGNATION. A total of 15,400 shares of
preferred stock, par value $.05 per share, of the Corporation are hereby
designated as Series C 8% Convertible Preferred Stock (the "Series"). The
number of authorized shares of the Series may be reduced by the Board of
Directors by the filing of a certificate pursuant to the provisions of the
General Corporation Law of the State of Delaware (the "GCL") stating that
the reduction has been so authorized.
2. RANK. The Series shall, with respect to payment of dividends,
redemption payments and rights upon liquidation, dissolution or winding up
of the affairs of the Corporation, rank:
(i)senior and prior to the Common Stock, par value $.05 per share, of the
Corporation (the "Common Stock"), and any additional series of
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preferred stock which may in the future be issued by the Corporation
and are designated in the amendment to the Certificate of Incorporation
or the certificate of designations establishing such additional
preferred stock as ranking junior to the shares of the Series. Any
shares of the Corporation's capital stock which are junior to the
shares of the Series with respect to the payment of dividends are
hereinafter referred to as "Junior Dividend Shares" and any shares
which are junior to the shares of the Series with respect to
redemption, payment and rights upon liquidation, dissolution or winding
up of the affairs of the Corporation are hereinafter referred to as
"Junior Liquidation Shares."
(ii) PARRI PASSU with any additional series of preferred stock which may
in the future be issued by the Corporation and are designated in the
amendment to the Certificate of Incorporation or the certificate of
designations establishing such additional preferred stock as ranking
equal to the shares of the Series or which do not state they are Junior
Dividend Shares or Senior Dividend Shares (as defined below). Any
shares of the Corporation's capital stock which are equal to the shares
of the Series with respect to the payment of dividends are hereinafter
referred to as "Parity Dividend Shares" and any shares which are equal
to the shares of the Series with respect to redemption, payment and
rights upon liquidation, dissolution or winding up of the affairs of
the Corporation are hereinafter referred to as "Parity Liquidation
Shares." The shares of the Series shall rank PARI PASSU with the Series
B Preferred Stock of the Corporation.
(iii) Junior to any additional series of preferred stock which may in the
future be issued by the Corporation and are designated in the amendment
to the Certificate of Incorporation or the certificate of designations
establishing such additional preferred stock as ranking senior to the
shares of the Series. Any shares of the Corporation's capital stock
which are senior to the shares of the Series with respect to the
payment of dividends are hereinafter referred to as "Senior Dividend
Shares" and any shares which are senior to the shares of the Series
with respect to redemption, payment and rights upon liquidation,
dissolution or winding up of the affairs of the Corporation are
hereinafter referred to as "Senior Liquidation Shares."
The Corporation may not issue additional shares of preferred stock which
are not (a) Junior Stock (as defined in paragraph 3(a) below) or (b) both
Parity Dividend Shares and Parity Liquidation Shares without the consent of
the holders of a majority of the outstanding shares of the Series.
3. DIVIDENDS. (a) The dividend rate on shares of the Series shall be
$13.00 per share per annum, subject to adjustment as provided in paragraph
3(d). Dividends on shares of the Series shall be fully cumulative,
accruing, without interest, from the date of original issuance of the
Series through the date of redemption or conversion thereof, and shall be
payable in arrears, when, as and if declared by the Board of Directors out
of funds legally available for the payment of dividends, on May 31 and
November 30 of each year, commencing May 31, 2001, except that if such date
is not a business day then the dividend shall be payable on the first
immediately succeeding business day (as used herein, the
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term "business day" shall mean any day except a Saturday, Sunday or day on
which banking institutions are legally authorized to close in Herndon,
Virginia) (each such period being hereinafter referred to as a "Dividend
Period"). Dividends shall be payable in cash or Common Stock, at the
discretion of the Corporation. The means of payment (cash or Common Stock)
of each dividend shall be designated by the Board of Directors at the time
it fixes the record date for determining holders of shares of the Series
entitled to receive such dividend payment. Each dividend shall be paid to
the holders of record of shares of the Series as they appear on the stock
register of the Corporation on the record date, not less than 10 nor more
than 60 days preceding the payment date thereof, as shall be fixed by the
Board of Directors. If any dividend is designated as being payable in
Common Stock, the amount of Common Stock issued in satisfaction of such
dividend shall be determined by dividing the amount of the dividend payable
with respect to each share of the Series by the Current Market Price (as
defined in Section 10) for the Common Stock as of the close of business on
the business day the Board of Directors fixes the record date for
determining the holders entitled to receive such dividend. Dividends
payable for each Dividend Period shall be computed on the basis of a
360-day year of twelve 30-day months and rounded to the nearest cent. No
fractional share of Common Stock shall be issued with respect to any
dividend paid in Common Stock. The aggregate number of shares issuable to
each holder of shares of the Series will be calculated, and in lieu of
issuing a fractional share the Corporation shall pay the cash value of such
fractional share as determined by reference to the Current Market Price
used for purposes of calculating the number of shares of Common Stock to be
issued in such dividend. Dividends on account of arrearages for any past
Dividend Period may be declared and paid at any time, without reference to
any regular dividend payment date, to holders of record on such date, not
exceeding 45 days preceding the payment date thereof, as may be fixed by
the Board of Directors of the Corporation. Dividends shall accrue
regardless of whether the Corporation has earnings, whether there are funds
legally available therefor and whether declared. No interest shall be
payable with respect to any dividend payment that may be in arrears.
Holders of Shares of the Series called for redemption between the close of
business on a dividend payment record date and the close of business on the
corresponding dividend payment date shall, in lieu of receiving such
dividend on the dividend payment date fixed therefor, receive such dividend
payment on the date fixed for redemption together with all other accrued
and unpaid dividends to the date fixed for redemption. The holders of
shares of the Series shall be not be entitled to any dividends other than
the cash dividends provided for in this paragraph 3.
(b) No dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on any Parity Dividend
Shares for any period unless full cumulative dividends have been or
contemporaneously are declared and paid or declared and set aside for
payment for all accrued dividends with respect to the Series through the
most recent Dividend Period ending on or prior to the date of payment, or
setting apart for payment, of such dividends on such Parity Dividend
Shares. Unless dividends accrued and payable but unpaid on shares of the
Series and any Parity Dividend Shares at the time outstanding have been
paid in full, all dividends declared by the Corporation upon shares of the
Series or Parity Dividend Shares shall be declared PRO RATA with respect to
all such shares, so that the amounts of any dividends declared on shares of
the Series and the
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Parity Dividend Shares shall in all cases bear to each other the same ratio
that, at the time of the declaration, all accrued but unpaid dividends on
shares of the Series and the other Parity Dividend Shares, respectively, bear
to each other.
(c) If at any time the Corporation has failed to (x) pay or set apart for
payment all accrued dividends on any shares of the Series through the then
most recent Dividend Period and (y) set apart for payment an amount in cash
equal to the scheduled dividend payments for each of the next two Dividend
Periods, the Corporation shall not, and shall not permit any corporation or
other entity directly or indirectly controlled by the Corporation to:
(i)declare or pay or set aside for payment any dividend or other
distribution on or with respect to the Junior Dividend Shares,
whether in cash, securities, obligations or otherwise (other than
dividends or distributions paid in shares of capital stock of the
Corporation ranking junior to shares of the Series both as to the
payment of dividends and as to rights in liquidation, dissolution or
winding up of the affairs of the Corporation ("Junior Stock"), or
options, warrants or rights to subscribe for or purchase shares of
Junior Stock); or
(ii) redeem, purchase or otherwise acquire, or pay into, set apart
money or make available for a sinking or other analogous fund for
the redemption, purchase or other acquisition of, any shares of the
Series (unless all of the shares of the Series are concurrently
redeemed), Parity Dividend Shares, Parity Liquidation Shares or
Shares of Junior Stock for any consideration (except by conversion
into or exchange for Junior Stock),
unless, in each such case, all dividends accrued on shares of the Series
through the most recent Dividend Period and on any Parity Dividend Shares
have been or contemporaneously are declared and paid in full.
(c) Any reference to "distribution" contained in this paragraph 3 shall
not be deemed to include any distribution made in connection with any
liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary.
(d) If the Corporation has not filed an amendment to its Certificate of
Incorporation on or before March 31, 2001, which amendment provides for an
increase in the number of authorized shares of Common Stock from 55
million shares to at least 65 million shares, then the dividend rate
provided in paragraph 3(a) will be adjusted. The adjustment will be to
increase the dividend rate by 1% per annum (or, if less, the maximum
permitted by law) on April 1, 2001 and on the first day of each calendar
month thereafter until the amendment is filed. Upon filing, the dividend
rate will return to $13.00 per share of the Series per annum, but such
change will not affect dividends accrued during the period between April
1, 2001 and the date the amendment was filed.
4. LIQUIDATION. (a) The liquidation value per share of shares of the
Series, in case of the voluntary or involuntary liquidation, dissolution
or winding-up of the affairs of the Corporation, shall be $162.50 per
share, plus
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an amount equal to the cash value of dividends accrued and unpaid thereon,
whether or not declared, to the payment date (such aggregate amount being
hereinafter referred to as the "Liquidation Amount").
(b) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the holders of shares of the
Series (i) shall not be entitled to receive the liquidation value of the
shares held by them until the liquidation value of all Senior Liquidation
Shares shall have been paid in full and (ii) shall be entitled to receive
the liquidation value of such shares held by them in preference to and in
priority over any distributions upon the Junior Liquidation Shares. Upon
payment in full of the liquidation value to which the holders of shares of
the Series are entitled, the holders of shares of the Series will not be
entitled to any further participation in any distribution of assets by the
Corporation. If the assets of the Corporation are not sufficient to pay in
full the liquidation value payable to the holders of shares of the Series
and the liquidation value payable to the holders of any Parity Liquidation
Shares, the holders of all such shares shall share ratably in such
distribution of assets in accordance with the amounts that would be
payable on the distribution if the amounts to which the holders of shares
of the Series and the holders of Parity Liquidation Shares are entitled
were paid in full.
(c) Neither a consolidation or merger of the Corporation with or into
any other entity, nor a merger of any other entity with or into the
Corporation, nor a sale or transfer of all or any part of the
Corporation's assets for cash or securities or other property shall be
considered a liquidation, dissolution or winding-up of the Corporation
within the meaning of this paragraph 4.
(d) Written notice of any liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when and the place or
places where the amounts distributable in such circumstances shall be
payable, shall be given by first class mail, postage prepaid, not less
than 30 days prior to any payment date stated therein, to the holders of
record of shares of the Series at their respective addresses as the same
shall appear on the books of the transfer agent with respect to the
Series.
5. OPTIONAL REDEMPTION. (a) Shares of the Series will be redeemable at
the option of the Corporation, in whole or in part, from and after the
time that (x) the Shares are convertible into Common Stock pursuant to
paragraph 7(a), and (y) the Current Market Price for the Common Stock for
a period of 10 consecutive trading days equals or exceeds $5.00 per share
and (z) the Common Stock underlying the Shares can be sold by the holder
thereof without restriction on resale. The redemption price will be
payable in cash and equal to $500.00 per share, together with an amount
equal to the dividends accrued and unpaid thereon, whether or not
declared, to the redemption date. The aggregate payment to each holder of
shares of the Series to be redeemed will be rounded to the nearest cent.
Notwithstanding the foregoing, if the date fixed for redemption occurs
after a record date for a dividend and prior to the corresponding payment
date, such dividend shall be paid, on the payment date and the amount
payable with respect to each share of the Series redeemed shall not
include the amount of the dividend to be so paid.
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(b) Not less than 30 nor more than 60 days prior to the date fixed for
any redemption of shares of the Series pursuant to this paragraph 5, a
notice of redemption shall be mailed by first class mail, postage prepaid,
to each holder of shares of the Series to be redeemed at such holder's
last address as it appears on the books of the transfer agent for the
Series. Such notice shall state: (i) that the Corporation has elected to
redeem all or a portion of the shares of the Series, as specified in such
notice, (ii) the redemption price, (iii) the redemption date, (iv) that,
unless the Corporation defaults in the payment of the redemption price,
all shares of the Series called for redemption shall cease to accrue
dividends after the redemption date and shall cease to be outstanding
after such date and (v) any other information required by applicable law
to be included therein and any other procedures that a holder of shares of
the Series must follow to receive payment for their redeemed shares.
Neither failure to mail such notice, nor any defect therein or in the
mailing thereof, to any particular holder shall affect the sufficiency of
the notice or the validity of the proceedings for redemption with respect
to any other holder. Any notice mailed in the manner herein provided shall
be conclusively presumed to have been duly given whether or not the holder
receives the notice. On or after the redemption date, each holder of
shares of the Series to be redeemed shall present and surrender such
holder's certificate or certificates for such shares to the Corporation at
the place designated in the redemption notice and thereupon the redemption
price of the shares shall be paid to or on the order of the person whose
name appears on such certificate or certificates as the owner thereof, and
each surrendered certificate shall be canceled. In case less than all the
shares represented by any such certificate are redeemed, a new certificate
shall be issued to the holder representing the unredeemed shares of the
Series.
(c) If a notice of redemption has been given pursuant to this paragraph
5 and if, on or before the date fixed for redemption, the funds necessary
for such redemption shall have been set aside by the Corporation, separate
and apart from its other funds, in trust for the PRO RATA benefit of the
holders of the shares of the Series so called for redemption, then,
notwithstanding that any certificates for such shares have not been
surrendered for cancellation, on the redemption date dividends shall cease
to accrue on the shares of the Series to be redeemed, and at the close of
business on the redemption date the holders of such shares shall cease to
be stockholders with respect to those shares, shall have no interest in or
claims against the Corporation by virtue thereof and shall have no voting
or other rights with respect thereto, except the right to receive the
moneys payable upon such redemption, without interest thereon, upon
surrender (and endorsement, if required by the Corporation) of their
certificates, and the shares evidenced thereby shall no longer be
outstanding. Subject to applicable escheat laws, any moneys so set aside
by the Corporation and unclaimed at the end of two years from the
redemption date shall revert to the Corporation, after which reversion the
holders of such shares so called for redemption shall look only to the
Corporation for the payment of the redemption price. Any interest accrued
on funds so deposited shall be paid to the Corporation from time to time.
(d) If a notice of redemption has been given pursuant to this paragraph
5, and any holder of shares of the Series shall, prior to the close of
business on the date fixed for redemption, give written notice to the
Corporation pursuant to paragraph 7 below of the conversion of any or all
of the shares
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to be redeemed held by the holder, then such redemption shall not become
effective as to such shares to be converted and such conversion shall
become effective as provided in paragraph 7 below, whereupon any funds
deposited by the Corporation, or on its behalf, with a payment agent or
segregated and held in trust by the Corporation for the redemption of such
shares shall (subject to any right of the holder of such shares to receive
the dividend payable thereon as provided in paragraph 7 below) immediately
upon such conversion be returned to the Corporation or, if then held in
trust by the Corporation, shall be discharged from the trust.
(e) In every case of redemption of less than all of the outstanding
shares of the Series pursuant to this paragraph 5, the shares to be
redeemed shall be selected PRO RATA or by lot or in such other manner as
the Board of Directors may determine, as may be prescribed by resolution
of the Board of Directors of the Corporation, provided that only whole
shares shall be selected for redemption. Notwithstanding the foregoing,
the Corporation shall not redeem any of the shares of the Series at any
time outstanding until all dividends accrued and in arrears upon all
shares of the Series then outstanding shall have been paid for all past
dividend periods.
6. MANDATORY REDEMPTION. The shares of the Series are not subject to
mandatory redemption or sinking fund requirements.
7. CONVERSION. (a) Holders of shares of the Series will have the right,
exercisable at any time after (x) an amendment to the Certificate of
Incorporation of the Corporation is filed with the Secretary of State of
the State of Delaware which increases the number of authorized shares of
Common Stock from 55 million shares to at least 65 million shares and (y)
prior to redemption of such shares (as described in paragraph 5), to
convert shares of the Series into shares of Common Stock (calculated as to
each conversion to the nearest 1/100th of a share) at the conversion price
of $1.625, subject to adjustment as described below (the "Conversion
Price"). The number of shares of Common Stock into which each share of the
Series shall be convertible shall be determined by dividing $162.50,
subject to proportional adjustment to reflect any split or consolidation
of the Common Stock or any dividend payable on the Common Stock in
additional shares of Common Stock (the "Conversion Amount"), by the
Conversion Price then in effect. In the case of shares of the Series
called for redemption, conversion rights will expire at the close of
business on the business day next preceding the redemption date. Upon
conversion of shares of the Series, the Corporation will pay to the holder
of the converted shares an amount equal to the dividends accrued but
unpaid thereon through the date the notice of conversion is delivered to
the Corporation. Such payment shall be made in cash, or at the option of
the Corporation, in Common Stock valued at the Current Market Price of the
Common Stock on the date the notice of conversion is delivered to the
Corporation. Notwithstanding the foregoing, holders of record of shares of
the Series on a record date fixed for the payment of a dividend on such
shares shall be entitled to receive the dividend notwithstanding the
conversion of the shares prior to the dividend payment date. A share of
the Series may not be converted in part.
(b) In order to exercise the conversion right, the holder of each share
of the Series to be converted shall surrender the certificate representing
such share, duly endorsed or assigned to the Corporation or in blank, at
the office of the Corporation in Herndon, Virginia (or such other address
as the
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Corporation may designate) and shall give written notice to the Corporation
in the form set forth on the reverse of the stock certificates for the shares
of the Series that such holder elects to convert the shares represented by
such certificate or a portion thereof. Such notice shall also state the name
or names (with address) in which the certificate or certificates for the
shares of Common Stock which shall be issuable upon such conversion shall be
issued, and shall be accompanied by funds in an amount sufficient to pay any
transfer or similar tax required by the provisions of paragraph 7(e) below.
Each share surrendered for conversion shall, unless the shares issuable on
conversion are to be issued in the same name as the name in which such share
of the Series is registered, be duly endorsed by, or be accompanied by
instruments of transfer (in each case, in form reasonably satisfactory to the
Corporation), duly executed by the holder or such holder's duly authorized
attorney-in-fact.
(c) As promptly as practicable after the surrender of certificates for
shares of the Series for conversion and the receipt of such notice and funds,
if any, as aforesaid, the Corporation shall issue and shall deliver to such
holder, or on such holder's written order, a certificate or certificates for
the number of shares of Common Stock issuable upon the conversion of such
shares of the Series in accordance with the provisions of this paragraph 7,
and a check or cash in respect of any fractional interest in respect of a
share of Common Stock arising upon such conversion, as provided in paragraph
7(d) below. Each conversion with respect to any shares of the Series shall be
deemed to have been effected immediately prior to the close of business on
the date on which the certificates for shares of the Series shall have been
surrendered (accompanied by the funds, if any, required by paragraph 7(e)
below) and such notice and assignment, if any, shall have been received by
the Corporation as aforesaid, and the person or persons entitled to receive
the Common Stock issuable upon such conversion shall be deemed for all
purposes to be the record holder or holders of such Common Stock upon that
date.
(d) No fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon conversion of shares of the Series. If more than
one share of the Series shall be surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate number of
shares of the Series so surrendered. Instead of any fractional share of
Common Stock otherwise issuable upon conversion of any shares of the Series,
the Corporation shall pay a cash adjustment in respect to such fraction in an
amount equal to the same fraction of the Current Market Price of the Common
Stock at the close of business on the day of conversion.
(e) If a holder converts shares of the Series, the Corporation shall pay
any and all documentary, stamp or similar issue or transfer tax payable in
respect of the issue or delivery of the shares of the Series (or any other
securities issued on account thereof pursuant hereto) or Common Stock upon
the conversion; PROVIDED, HOWEVER, the Corporation shall not be required to
pay any such tax that may be payable because any such shares are issued in a
name other than the name of the holder.
(f) From and after the date an amendment to the Certificate of
Incorporation of the Corporation is filed with the Secretary of State of the
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State of Delaware which increases the number of authorized shares of Common
Stock from 55 million shares to at least 65 million shares, the Corporation
shall reserve out of its authorized but unissued Common Stock or its Common
Stock held in treasury sufficient shares of Common Stock to permit the
conversion of all of the outstanding shares of the Series. The Corporation
shall from time to time, in accordance with the GCL, increase the authorized
amount of its Common Stock if at any time the authorized amount of its Common
Stock remaining unissued shall not be sufficient to permit the conversion of
all shares of the Series at the time outstanding. If any shares of Common
Stock required to be reserved for issuance upon conversion of shares of the
Series hereunder require registration with or approval of any governmental
authority under any federal or state law before the shares may be issued upon
conversion, the Corporation shall in good faith and as expeditiously as
possible endeavor to cause the shares to be so registered or approved. All
shares of Common Stock delivered upon conversion of the shares of the Series
will, upon delivery, be duly authorized and validly issued, fully paid and
nonassessable, free from all taxes, liens and charges with respect to the
issue thereof.
(g) The Conversion Price shall be subject to adjustment from time to time
as follows:
(i)In the event that the Corporation shall (A) pay a dividend or make
a distribution, in shares of Common Stock, on any class of Capital
Stock of the Corporation or any subsidiary which is not directly or
indirectly wholly owned by the Corporation, (B) split or subdivide
its outstanding Common Stock into a greater number of shares or (C)
combine its outstanding Common Stock into a smaller number of
shares, then in each such case the Conversion Price in effect
immediately prior thereto shall be adjusted so that the holder of
each share of the Series thereafter surrendered for conversion shall
be entitled to receive the number of shares of Common Stock that
such holder would have owned or have been entitled to receive after
the occurrence of any of the events described above had such share
of the Series been converted immediately prior to the occurrence of
such event. An adjustment made pursuant to this paragraph 7(g)(i)
shall become effective immediately after the close of business on
the record date in the case of a dividend or distribution (except as
provided in paragraph 7(k) below) and shall become effective
immediately after the close of business on the effective date in the
case of such subdivision, split or combination, as the case may be.
Any shares of Common Stock issuable in payment of a dividend shall
be deemed to have been issued immediately prior to the close of
business on the record date for such dividend for purposes of
calculating the number of outstanding shares of Common Stock under
clauses (ii) and (iii) below.
(ii) In the event that the Corporation shall commit to issue or
distribute Common Stock or issue rights, warrants, options or
convertible or exchangeable securities entitling the holder thereof
to subscribe for or purchase, convert into or exchange for Common
Stock, in any such case at a price per share less than the Current
Market Price per share on the earliest of (i) the date the
Corporation shall enter into a firm contract for such issuance or
distribution, (ii) the record date for the determination of
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stockholders entitled to receive any such rights, warrants, options
or convertible or exchangeable securities, if applicable, or (iii)
the date of actual issuance or distribution of any such Common Stock
or rights, warrants, options or convertible or exchangeable
securities (provided that the issuance of Common Stock upon the
exercise of rights, warrants, options or convertible or exchangeable
securities will not cause an adjustment in the Conversion Price if
no such adjustment would have been required at the time such right,
warrant, option or convertible or exchangeable security was issued),
then the Conversion Price in effect immediately prior to such
earliest date shall be adjusted so that the Conversion Price shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to such earliest date by the fraction:
(x)whose numerator shall be the number of shares of Common Stock
outstanding on such date plus the number of shares which the
aggregate offering price of the total number of shares so offered
would purchase at such Current Market Price (such amount, with
respect to any such rights, warrants, options or convertible or
exchangeable securities, determined by multiplying the total
number of shares subject thereto by the exercise price of such
rights, warrants, options or convertible or exchangeable
securities and dividing the product so obtained by the Current
Market Price), and
(y)whose denominator shall be the number of shares of Common Stock
outstanding on such date plus the number of additional shares of
Common Stock to be issued or distributed or receivable upon
exercise of any such right, warrant, option or convertible or
exchangeable security.
Such adjustment shall be made successively whenever any such Common
Stock, rights, warrants, options or convertible or exchangeable
securities are issued or distributed. In determining whether any
rights, warrants or options entitle the holders to subscribe for or
purchase shares of Common Stock at less than such Current Market
Price, and in determining the aggregate offering price of shares of
Common Stock so issued or distributed, there shall be taken into
account any consideration received by the Corporation for such
Common Stock, rights, warrants, options, or convertible or
exchangeable securities, the value of such consideration, if other
than cash, to be determined by the Board of Directors, whose
determination shall be conclusive and described in a certificate
filed with the records of corporate proceedings of the Corporation.
If any right, warrant, option or convertible or exchangeable
security to purchase or acquire Common Stock, the issuance of which
resulted in an adjustment in the Conversion Price pursuant to this
subsection (b) shall expire and shall not have been exercised, the
Conversion Price shall immediately upon such expiration be
recomputed to the Conversion Price which would have been in effect
had the adjustment of the Conversion Price made upon the issuance of
such right, warrant, option or convertible or exchangeable security
been made on the basis of offering for subscription, purchase or
issuance, as the case may be, only of that number of shares of
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Common Stock actually purchased or issued upon the actual exercise
of such right, warrant, option or convertible or exchangeable
securities.
(iii) No adjustment in the Conversion Price shall be required unless
the adjustment would require an increase or decrease of at least 1%
in the Conversion Price then in effect; PROVIDED, HOWEVER, that any
adjustments that by reason of this paragraph 7(g)(i) are not
required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this paragraph
7(g)(i) shall be made to the nearest cent or nearest 1/100th of a
share.
(iv) Notwithstanding anything to the contrary set forth in this
paragraph 7(g), no adjustment shall be made to the Conversion Price
upon (A) the issuance of shares of Common Stock pursuant to any
compensation or incentive plan for officers, directors, employees or
consultants of the Corporation which plan has been approved by the
Compensation Committee of the Board of Directors (or if there is no
such committee then serving, by the majority vote of the Directors
then serving who are not employees or officers of the Corporation, a
5% or greater stockholder of the Corporation or an officer, employee
or Affiliate or Associate (as defined in paragraph 10 below) of any
such 5% or greater stockholder) (unless the exercise price thereof
is changed after the date hereof other than solely by operation of
the anti-dilution provisions thereof or by the Compensation
Committee of the Board of Directors or, if applicable, the Board of
Directors and, if required by law, the stockholders of the
Corporation as provided in this clause (A)), (B) the issuance of
shares to the former owners of AetherWorks Corporation in
furtherance of the acquisition agreement dated December 31, 1999 by
and among AetherWorks Corporation, Nx Networks, Inc. and Nx1
Acquisition Corp. or (C) the issuance of Common Stock upon the
conversion or exercise of the options or warrants of the Corporation
outstanding on January 15, 2001, unless the conversion or exercise
price thereof is changed after January 15, 2001 (other than solely
by operation of the anti-dilution provisions thereof).
(v)The Corporation from time to time may reduce the Conversion Price
by any amount for any period of time in the discretion of the Board
of Directors. A voluntary reduction of the Conversion Price does not
change or adjust the conversion price otherwise in effect for
purposes of this paragraph 7(g).
(vii) In the event that, at any time as a result of an adjustment made
pursuant to paragraph 7(g)(i) through 7(g)(iii) above, the holder of
any share of the Series thereafter surrendered for conversion shall
become entitled to receive any shares of the Corporation other than
shares of the Common Stock, thereafter the number of such other
shares so receivable upon conversion of any share of the Series
shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in paragraphs 7(g)(i) through
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7(g)(vi) above, and the other provisions of this paragraph 7(g)(vii)
with respect to the Common Stock shall apply on like terms to any
such other shares.
(h) In case of any reclassification of the Common Stock (other than in a
transaction to which paragraph 7(g)(i) applies), any consolidation of the
Corporation with, or merger of the Corporation into, any other entity, any
merger of another entity into the Corporation (other than a merger that does
not result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Corporation), any sale or transfer
of all or substantially all of the assets of the Corporation or any
compulsory share exchange, pursuant to which share exchange the Common Stock
is converted into other securities, cash or other property, then lawful
provision shall be made as part of the terms of such transaction whereby the
holder of each share of the Series then outstanding shall have the right
thereafter, during the period such share shall be convertible, to convert
such share only into the kind and amount of securities, cash and other
property receivable upon the reclassification, consolidation, merger, sale,
transfer or share exchange by a holder of the number of shares of Common
Stock of the Corporation into which a share of the Series might have been
converted immediately prior to the reclassification, consolidation, merger,
sale, transfer or share exchange assuming that such holder of Common Stock
failed to exercise rights of election, if any, as to the kind or amount of
securities, cash or other property receivable upon consummation of such
transaction subject to adjustment as provided in paragraph 7(g) above
following the date of consummation of such transaction. As a condition to any
such transaction, the Corporation or the person formed by the consolidation
or resulting from the merger or which acquires such assets or which acquires
the Corporation's shares, as the case may be, shall make provisions in its
certificate or articles of incorporation or other constituent document to
establish such right. The certificate or articles of incorporation or other
constituent document shall provide for adjustments which, for events
subsequent to the effective date of the certificate or articles of
incorporation or other constituent document, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this paragraph 7. The
provisions of this paragraph 7(h) shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share
exchanges.
(i) If:
(i) the Corporation shall take any action which would
require an adjustment in the Conversion Price pursuant to
Section 7(g); or
(ii) the Corporation shall authorize the granting to the holders of its
Common Stock generally of rights or warrants to subscribe for or
purchase any shares of any class or any other rights or warrants; or
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(iii) there shall be any reclassification or change of the Common Stock
(other than a subdivision or combination of its outstanding Common
Stock or a change in par value) or any consolidation, merger or
statutory share exchange to which the Corporation is a party and for
which approval of any stockholders of the Corporation is required,
or the sale or transfer of all or substantially all of the assets of
the Corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, the Corporation shall cause to be filed with the transfer agent for the
Series and shall cause to be mailed to the holders of shares of the Series at
their addresses as shown on the books of the transfer agent for the Series,
as promptly as possible, but at least 30 days prior to the applicable date
hereinafter specified, a notice stating (A) the date on which a record is to
be taken for the purpose of such dividend, distribution or granting of rights
or warrants, 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 or rights or warrants are to be determined or (B) the date on
which such reclassification, change, consolidation, merger, statutory share
exchange, sale, transfer, dissolution, liquidation or winding up is expected
to become effective or occur, 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, change, consolidation, merger, statutory share exchange,
sale, transfer, dissolution, liquidation or winding up. Failure to give such
notice or any defect therein shall not affect the legality or validity of the
proceedings described in this paragraph 7(i).
(j) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly file with the transfer agent for the Series a
certificate of an officer of the Corporation setting forth the Conversion
Price after the adjustment and setting forth a brief statement of the facts
requiring such adjustment and a computation thereof. The Corporation shall
promptly cause a notice of the adjusted Conversion Price to be mailed to each
registered holder of shares of the Series.
(k) In any case in which paragraph 7(g) provides that an adjustment shall
become effective immediately after a record date for an event and the date
fixed for such adjustment pursuant to paragraph 7(g) occurs after such record
date but before the occurrence of such event, the Corporation may defer until
the actual occurrence of such event (i) issuing to the holder of any shares
of the Series converted after such record date and before the occurrence of
such event the additional shares of Common Stock issuable upon such
conversion by reason of the adjustment required by such event over and above
the Common Stock issuable upon such conversion before giving effect to such
adjustment and (ii) paying to such holder any amount in cash in lieu of any
fraction pursuant to paragraph 7(d).
(l) In case the Corporation shall take any action affecting the Common
Stock, other than actions described in this paragraph 7, which in the opinion
of the Board of Directors would materially adversely affect the conversion
right of the holders of the shares of the Series, the Conversion Price may be
adjusted, to the extent permitted by law, in such manner, if any, and at such
time, as the Board of Directors may determine to be equitable in the
circumstances; PROVIDED, HOWEVER, that in no event shall the Board of
Directors be required to take any such action.
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(m) The Corporation will endeavor to list the shares of Common Stock
required to be delivered upon conversion of shares of the Series, prior to
delivery, upon each national securities exchange, the Nasdaq Stock Market or
any similar system of automated dissemination of securities prices, if any,
upon which the Common Stock is listed at the time of delivery.
(n) In the event the Corporation has not filed an amendment to its
Certificate of Incorporation increasing its authorized number of shares of
Common Stock from 55 million shares to at least 65 million shares on or
before September 30, 2001, then the Corporation will conduct a repurchase
offer to redeem the shares of the Series. The repurchase price will equal the
Liquidation Amount plus an amount equal to 110% of the difference between the
Conversion Price then in effect and the Current Market Price of the Common
Stock on the date the offer commences. The repurchase offer will be held open
by the Corporation for at least 30 days.
8. STATUS OF SHARES. All shares of the Series that are at any time
redeemed or converted pursuant to paragraph 5 above, and all shares of the
Series that are otherwise reacquired by the Corporation and subsequently
canceled by the Board of Directors, shall have the status of authorized but
unissued shares of preferred stock, without designation as to series, subject
to reissuance by the Board of Directors as shares of any one or more other
series.
9. VOTING RIGHTS. Except as otherwise required by law, holders of shares
of the Series shall have no vote with respect to any matter submitted to the
stockholders of the Corporation for vote or consent. In connection with any
right to vote or give consent provided by law, each holder of shares of the
Series will have one vote for each share held.
10. CERTAIN DEFINITIONS. As used in this Certificate, the following terms
shall have the following respective meanings:
"AFFILIATE" of any specified person means any other person directly or
indirectly controlling or controlled by or under common control with such
specified person. For purposes of this definition, "control" when used with
respect to any person means the power to direct the management and policies
of such person, directly or indirectly, whether through the ownership of
voting securities or otherwise; and the term "controlling" and "controlled"
having meanings correlative to the foregoing.
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An "ASSOCIATE" of a person means (A) any corporation or organization,
other than the Corporation or any subsidiary of the Corporation, of which the
person is an officer or partner or is, directly or indirectly, the beneficial
owner of 10% or more of any class of equity securities; (B) any trust or
estate in which the person has a substantial beneficial interest or as to
which the person serves as trustee or in a similar fiduciary capacity; and
(C) any relative or spouse of the person, or any relative of the spouse, who
has the same home as the person or who is a director or officer of the person
or any of its parents or subsidiaries.
"CAPITAL STOCK" of any person or entity means any and all shares,
interests, rights to purchase, warrants, options, participations or other
equivalents of or interests in the common stock or preferred stock of such
person or entity, including, without limitation, partnership and membership
interests.
"CURRENT MARKET PRICE" means, when used with respect to any security as of
any date, the last bid price regular way of such security as reported on the
Nasdaq National Market for such date, or, if such security is not listed or
admitted to trading on the Nasdaq National Market, as reported on the Nasdaq
SmallCap Market for such date, or, in case such security is listed on a
national securities exchange other than Nasdaq, the last sales price of such
security on such date as reported for consolidated transactions with respect
to securities listed on the principal national securities exchange on which
such security is listed or admitted to trading or, if such security is not
listed or admitted to trading on the Nasdaq Stock Market or any national
securities exchange, the average of the high bid and low asked prices of such
security on such date in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System
or such other system then in use or, if such security is not quoted by any
such organization, the average of the closing bid and asked prices of such
security as of such date furnished by a New York Stock Exchange member firm
selected by the Corporation, or if such security is not quoted by any such
organization and no such New York Stock Exchange member firm is able to
provide such prices, such price as is determined by the Independent Directors
in good faith.
"INDEPENDENT DIRECTORS" means directors that (i) are not 5% or greater
stockholders of the Corporation or the designee of any such stockholder; (ii)
are not officers or employees of the Corporation, any of its subsidiaries or
of a stockholder referred to above in clause (i); (iii) are not Related
Persons; and (iv) do not have relationships that, in the opinion of the Board
of Directors, would interfere with their exercise of independent judgment in
carrying out the responsibilities of the directors.
"RELATED PERSON" means an individual related to an officer, director or
employee of the Corporation or any of its Affiliates which relation is by
blood, marriage or adoption and not more remote than first cousin.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly
executed on its behalf by its undersigned Chief Executive Officer and
attested to by its Secretary this 23rd day of January, 2001.
/s/ John E. DuBois
_________________________________
John E. DuBois
Chief Executive Officer
ATTEST:
/s/ Jay R. Schifferli
________________________________
Jay R. Schifferli
Secretary