EXHIBIT 4.1
CERTIFICATE OF DESIGNATIONS
OF
PREFERRED STOCK
OF
NX NETWORKS, INC.
TO BE DESIGNATED
SERIES E 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 19,000 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 19,000 shares of preferred
stock, par value $.05 per share, of the Corporation are hereby designated
as Series E 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
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, Series C Preferred Stock and Series D
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
$10.12 per share per annum. 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. Dividends on the shares of the Series shall cumulate quarterly on
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July 31, October 31, January 31 and April 30 of each year. Accrued
dividends shall be paid in arrears, when, as and if declared by the Board
of Directors out of funds legally available for the payment of dividends,
on April 30 of each year, commencing April 30, 2002, 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 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 annual payment 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 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
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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 Parity Dividend Shares shall in all cases bear to each
other the same ratio that, at the time of the declaration, all accrued and
payable 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 and payable 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.
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 $126.50 per share,
plus 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").
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(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 Current Closing Market Price for the Common Stock for a period
of 10 consecutive trading days equals or exceeds $5.00 per share and (y)
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 $132.83 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.
(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 registered mail, return receipt
requested, 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
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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. 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 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
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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. NO SINKING FUND.
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 May 19, 2001, and 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 (as defined in paragraph 10).
The number of shares of Common Stock into which each share of the Series
shall be convertible shall be determined by dividing $126.50, 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, no such payment of accrued dividends will be made if the notice
of conversion and the related documents required by paragraph 7(b) below
are delivered after a record date for the payment of dividends and before
the related dividend payment date; instead 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 Corporation may designate) or the Corporation's transfer agent and
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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. Except as provided in
paragraph 6(a) 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.
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(f) 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 and/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
(calculated as set forth below) 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 and/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 Common Stock actually purchased or issued upon
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the actual exercise of such right, warrant, option or convertible or
exchangeable securities. For purposes of calculating the price per share of any
security pursuant to this Section 7(g)(ii), the issuance of rights, warrants,
options, or convertible or exchangeable securities in conjunction with an
issuance or distribution of Common Stock will be ascribed no value if (x) the
number of shares of Common Stock issuable pursuant to such rights, warrants,
options, or convertible or exchangeable securities does not exceed 20% of the
number of shares of Common Stock to with respect to which they shall have been
issued and (y) the exercise or conversion price of such rights, warrants,
options, or convertible or exchangeable securities is at least 125% of the
Current Market Price on the date the related Common Stock is issued. In all
other cases, the price per share of the security with respect to which such
rights, warrants, options, or convertible or exchangeable securities is issued
shall be reduced by the value of such rights, warrants, options, or convertible
or exchangeable securities determined by reference to a Black-Scholes pricing
model. In addition to the foregoing, if the Corporation shall commit to issue or
distribute 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 that is equal
to or in excess of 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 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 rights, warrants, options or convertible or
exchangeable securities (the "Commitment Date") (such that no adjustment to the
Conversion Price is made on the Commitment Date pursuant to the foregoing
provisions of this paragraph 7(g)(ii)) but which thereafter may become
exerciseable or exchangeable for Common Stock at a price per share less than the
Current Market Price per share on the Commitment Date (other than by reason of
the anit-dilution provisions thereof), then the issue of Common Stock after the
Commitment Date pursuant to such rights, warrants, options or convertible or
exchangeable securities at a price per share less than the Current Market Price
on the Commitment Date shall be deemed to be a new issue of Common Stock as of
the date of such exercise or exchange and, for this purpsose the Current Market
Price on the date of such exercise or exchange shall be deemed to be equal to
the Current Market Price on the Commitment Date related to such rights,
warrants, options or convertible or exchangeable.
(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
11
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 April 1, 2001, unless the conversion or
exercise price thereof is changed after April 1, 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 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
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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
(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
13
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.
(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.
8. STATUS OF SHARES. All shares of the Series that are at any time
redeemed or converted pursuant to paragraphs 5, 6 ot 7 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
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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.
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.
"CONVERSION PRICE" means, as of any date, the lesser of (x) 87% of the
volume weighted average sales price of the Corporation's Common Stock for
the five day period preceding the date with respect to which the Conversion
Price is being determined or (y) $1.265; provided, however, that the
Conversion Price will not be less than $0.575 per share. For purposes of
this definition, the volume weighted average sales price of the
Corporation's Common Stock shall be as reported by Bloomberg L.P. or, if
such information is not available from Bloomberg L.P., from such other
source as the Corporation and the holder may mutually agree.
"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
15
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.
[signature page follows]
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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 14th day of May 2001.
/s/ John E. DuBois
------------------------------------
John E. DuBois
Chief Executive Officer
ATTEST:
/s/ Jay R. Schifferli
- --------------------------------
Jay R. Schifferli
Secretary