Exhibit 3.3
CERTIFICATE OF DESIGNATION
SERIES B CONVERTIBLE PREFERRED STOCK
OF
NOVATEL WIRELESS, INC.
It is hereby certified that:
1. The name of the corporation is Novatel Wireless, Inc. (the
"Corporation").
2. The Corporation was formed under the laws of the State of
Delaware on April 26, 1996.
3. The Certificate of Designation - Series B Convertible
Preferred Stock is attached hereto as Exhibit A.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Designation this 9th day of May 2003.
/s/ Peter Leparulo
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Peter Leparulo
Chief Executive Officer
EXHIBIT A
NOVATEL WIRELESS, INC.
SERIES B CONVERTIBLE PREFERRED STOCK
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation by Article IV of the Corporation's Amended and
Restated Certificate of Incorporation, a series of Preferred Stock of the
Corporation be, and it hereby is, created out of the authorized but unissued
shares of the capital stock of the Corporation, such series to be designated
Series B Preferred Stock (the "Series B Preferred Stock"), to consist of 10,000
shares, par value $.001 per share, of which the preferences and relative and
other rights, and the qualifications, limitations or restrictions thereof, shall
be (in addition to those set forth in the Corporation's Amended and Restated
Certificate of Incorporation) as follows:
SECTION 1. DIVIDENDS. The holders of Series B Preferred Stock shall be
entitled to receive, from funds legally available therefor, a cumulative
dividend at the rate per annum of 8% of $1,000 per share of Series B Preferred
Stock (such per share figure, which shall be adjusted to reflect appropriately
any stock splits, combinations of the Series B Preferred Stock, and similar
transactions, the "Initial Purchase Price") held by such holder, payable,
subject to any applicable contractual restrictions, upon any liquidation,
dissolution or winding up of the affairs of the Corporation, as described in
Section 2, upon any redemption described in Section 5, or otherwise quarterly in
arrears when and as declared by the Board of Directors each January 1, April 1,
July 1 and October 1 of the applicable year. No dividends shall be declared, or
paid to the holders of common stock, par value $.001 per share, of the
Corporation (the "Common Stock"), to the holders of the Series A Preferred
Stock, par value $0.001 per share, of the Corporation ("Series A Preferred
Stock") or any holders of any series of Preferred Stock having dividend and
liquidation rights junior to the Series B Preferred Stock (such Series A
Preferred Stock and any such other series of junior Preferred Stock, "Junior
Preferred Stock") (except for in-kind distributions in connection with the
conversion of such Junior Preferred Stock into Common Stock), unless the holders
of Series B Preferred Stock have been paid in full all of the dividends to which
they are entitled. The Series B Preferred Stock shall also participate in any
dividend or distribution, other than a liquidating distribution, declared or
paid on the Common Stock, pro rata, on the basis of the number of shares of
Common Stock (as determined on an as-converted basis for the Series B Preferred
Stock) into which such Series B Preferred Stock is then convertible.
Subject to this Section 1, dividends may be declared and paid on Common
Stock from funds lawfully available therefor as and when determined by the Board
of Directors of the Corporation.
SECTION 2. LIQUIDATION RIGHTS.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or involuntary, the holders of
each share of Series B Preferred Stock shall be entitled preferentially to be
paid first out of the assets of the Corporation available for distribution to
holders of the Corporation's capital stock of all classes an amount per share of
Series B Preferred Stock equal to 150% times the sum of the
Initial Purchase Price, plus all dividends accrued but unpaid thereon (the
"Liquidation Preference"), to and including the date full payment shall be
tendered to the holders of the Series B Preferred Stock with respect to such
liquidation, dissolution or winding up. Neither the consolidation or merger of
the Corporation into or with another corporation or corporations, nor the sale,
lease, transfer or conveyance of all or substantially all of the assets of the
Corporation to another corporation or any other entity shall be deemed to be a
liquidation, dissolution or winding up of the affairs of the Corporation within
the meaning of this Section 2(a).
After payment in full of the Liquidation Preference to which the
holders of the Series B Preferred Stock are entitled, distributions will be made
to the holders of the Junior Preferred Stock until their respective liquidation
preference has been paid in full.
After payment in full of the liquidation preference to which the
holders of the Junior Preferred Stock are entitled, distributions will be made
to the holders of the Series B Preferred Stock, any series of Junior Preferred
Stock which participates with the Common Stock upon liquidation and the Common
Stock, in proportion to the number of shares of Common Stock (including shares
of Common Stock issuable upon conversion of the Series B Preferred Stock and, as
applicable, any such shares of Junior Preferred Stock) held by each such holder.
Upon conversion of shares of Series B Preferred Stock into shares of
Common Stock pursuant to Section 3, the holders of such Common Stock shall not
be entitled to any preferential payment or distribution in case of any
liquidation, dissolution or winding up, but shall share ratably in any
distribution of the assets of the Corporation among the holders of Common Stock.
(b) DISTRIBUTIONS OTHER THAN CASH. Whenever the distributions provided
for in this Section 2 shall be payable in property other than cash, the value of
such distributions shall be determined as follows: If the assets distributed are
securities traded in a public market, the fair market value of such assets shall
be the closing price of such securities reported for the business day
immediately before such assets are distributed. If such assets are not traded in
a public market, the Board of Directors of the Corporation shall initially
determine fair market value in its reasonable good faith judgment. At the time
of any such distribution, the Corporation shall provide the holders of the
Series B Preferred Stock with written notice (within 10 days after the date of
such distribution) of its fair market value determination. If the holders of a
majority of the outstanding shares of Series B Preferred Stock ("Majority
Holders") deliver written notice, within 30 days following the delivery of the
Corporation's written notice, objecting to such determination, the fair market
value of the assets distributed shall be determined pursuant to the Appraisal
Procedure (as described in Section 3(c)(iii)(6) below), which determination
shall be binding on the holders of the Series B Preferred Stock and the
Corporation.
(c) NOTICE. Written notice of any proposed liquidation, dissolution or
winding up of the affairs of the Corporation, stating a payment date, the amount
of the Liquidation Preference and the place where such Liquidation Preference
shall be payable, shall be delivered to the holders of Series B Preferred Stock
not less than 45 days prior to the proposed date of such proposed liquidation,
dissolution or winding up.
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SECTION 3. CONVERSION. The holders of Series B Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(a) OPTIONAL CONVERSION: SERIES B CONVERSION PRICE. Subject to Section
3(b), each share of Series B Preferred Stock shall be convertible, without the
payment of any additional consideration by the holder thereof and at the option
of the holder thereof, at any time after the date such share was issued, at the
office of the Corporation or any transfer agent for the Series B Preferred
Stock, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing (i) the Initial Purchase Price plus an amount equal
to all accrued and unpaid dividends by (ii) the Series B Conversion Price,
determined as hereinafter provided, in effect at the time of conversion. The
conversion price at which shares of Common Stock shall be deliverable upon
conversion of Series B Preferred Stock without the payment of any additional
consideration by the holder thereof (the "Series B Conversion Price") shall
initially be $0.70 per share of Common Stock. Such initial Series B Conversion
Price shall be subject to further adjustment, in order to adjust the number of
shares of Common Stock into which the Series B Preferred Stock is convertible,
as hereinafter provided.
(b) MECHANICS OF OPTIONAL CONVERSION. Before any holder of Series B
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, the holder shall surrender the certificate or certificates therefor at
the office of the Corporation or of any transfer agent for Series B Preferred
Stock, shall give written notice to the Corporation at such office that the
holder elects to convert the same and shall state therein the holder's name or
the name or, subject to any legal or contractual restrictions on transfer
thereof, names of the holder's nominees in which the holder wishes the
certificate or certificates for shares of Common Stock to be issued and shall
pay any transfer or similar tax, if required. The date on which the holder
satisfies all these requirements is the "Conversion Date". On the Conversion
Date, all rights with respect to the Series B Preferred Stock so converted shall
terminate, except for any of the rights of the holder thereof, upon surrender of
the holder's certificate or certificates therefor, to receive certificates for
the number of shares of Common Stock into which such Series B Preferred Stock
has been converted. If so required by the Corporation, certificates surrendered
for conversion shall be endorsed or accompanied by written instrument or
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the registered holder or by the holder's attorney duly authorized in writing.
No fractional share of Common Stock shall be issued upon the conversion of
Series B Preferred Stock. In lieu of any fractional share to which the holder
would otherwise be entitled, the Corporation shall pay cash equal to such
fraction multiplied by the applicable Series B Conversion Price then in effect.
Within five business days after the Conversion Date, the Corporation shall issue
and deliver to such holder of Series B Preferred Stock, or, subject to any legal
or contractual restrictions on transfer thereof, to the holder's nominee or
nominees, a certificate or certificates for the number of shares of Common Stock
to which the holder shall be entitled as aforesaid. The person or persons
entitled to receive the shares of Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on the Conversion Date.
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(c) ADJUSTMENTS TO THE CONVERSION PRICE.
(i) SPECIAL PROVISIONS. For purposes of this Section 3(c), the
following definitions shall apply:
(1) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Corporation (including those deemed to be issued
pursuant to Section 3(c)(iii)(7)) after the first date on which a share of
Series B Preferred Stock was issued (the "Series B Original Issue Date") for any
reason, including without limitation as a result of sales of Common Stock or
rights to acquire Common Stock, the issuance of Options, stock dividends,
distributions payable in common stock, stock splits, reverse stock splits,
recapitalizations, reclassifications, combinations or exchanges of shares,
separations, reorganizations, liquidations or other similar event, other than:
(a) securities issued or issuable as a dividend or
distribution on the Series B Preferred Stock;
(b) not more than ten shares of capital stock of the
Corporation on an "as converted to common stock" basis, the issuance of which
resulted from mathematical or other error or inadvertence, provided that the
transaction in which such shares were issued was approved at the time by vote of
a majority of the Board of Directors of the Corporation;
(c) the first 500,000 shares of Common Stock issued or
issuable pursuant to Employee Equity Issuances after the Series B Original Issue
Date (it being understood that the first such 500,000 shares shall not be
subject to Section 3(c)(iii)(2), and any subsequent Employee Equity Issuances
shall be subject to Section 3(c)(iii)(2); provided, further, such 500,000 share
figure shall be appropriately adjusted to reflect transactions described in
Section 3(c)(ii) and Sections 3(d), 3(e) and 3(f));
(d) securities issued or issuable as a dividend or
distribution on the Series A Preferred Stock upon the conversion of the Series A
Preferred Stock to Common Stock; and
(e) any securities issued or issuable as a result of an
adjustment of the Series B Conversion Price made pursuant to this Section 3(c).
(2) "Convertible Securities" means any evidences of indebtedness,
shares of stock, or other securities directly or indirectly convertible into or
exchangeable for Common Stock or the value of which is otherwise derived from or
based upon the value of the Common Stock.
(3) "Employee Equity Issuances" means the issuance of shares of
Common Stock or Options to officers, directors or employees of, or consultants
to, the Corporation pursuant to stock option or stock purchase plans or
agreements on terms approved by the Board of Directors.
(4) "Option" means any right, option, or warrant to subscribe
for, purchase, or otherwise acquire Common Stock or Convertible Securities.
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(ii) ADJUSTMENT OF THE SERIES B CONVERSION PRICE FOR DIVIDENDS,
DISTRIBUTIONS, SUBDIVISIONS, COMBINATIONS OR CONSOLIDATIONS OF COMMON STOCK.
(1) Stock Dividends, Distributions or Subdivisions. In the event
the Corporation shall be deemed to have issued Additional Shares of Common Stock
in a stock dividend, stock distribution or subdivision, the Series B Conversion
Price and the number of shares of Common Stock issuable upon conversion of each
share of Series B Preferred Stock in effect immediately prior to such deemed
issuance shall, concurrently with the effectiveness of such deemed issuance, be
proportionately decreased or increased, as appropriate.
(2) Combinations or Consolidations. In the event the outstanding
shares of Common Stock shall be combined, consolidated or otherwise changed, by
recapitalizations, reclassifications, stock splits, reverse stock splits,
exchanges of shares, separations, reorganizations, liquidations or otherwise,
the Series B Conversion Price and the number of shares of Common Stock issuable
upon conversion of each share of Series B Preferred Stock in effect immediately
prior to any such combination, consolidation or other event shall, concurrently
with the effectiveness of such event, be proportionately decreased or increased,
as appropriate.
(iii) ADJUSTMENT OF SERIES B PRICE CONVERSION PRICE FOR DILUTIVE
ISSUANCES.
(1) Dilutive Issuances (other than due to Employee Equity
Issuances). If the Corporation shall issue, after the Series B Original Issue
Date, any Additional Shares of Common Stock (other than issuances pursuant to
transactions described in Section 3(c)(ii) but expressly excluding any new
issuances concurrent with such transactions) without consideration or for a
consideration per share less than the Series B Conversion Price in effect
immediately prior to the issuance of such Additional Shares of Common Stock, the
Series B Conversion Price in effect immediately prior to each such issuance
shall forthwith be adjusted to be equal to the amount of consideration per share
received in connection with such issuance. Notwithstanding the foregoing, the
provisions of this Section 3(c)(iii)(1) shall not apply to Additional Shares of
Common Stock issued through an Employee Equity Issuance.
(2) Dilutive Issuances due to Employee Equity Issuances. If the
Corporation shall issue, after the Series B Original Issue Date, any Additional
Shares of Common Stock through an Employee Equity Issuance without consideration
or for a consideration per share less than the Series B Conversion Price in
effect immediately prior to the issuance of such Additional Shares of Common
Stock, the Series B Conversion Price in effect immediately prior to each such
issuance shall forthwith be adjusted to be equal to a price determined by
multiplying the Series B Conversion Price then in effect by a fraction (which
shall in no event be greater than one), the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issuance
plus the number of shares of Common Stock that the aggregate consideration
received by the Corporation for such issuance would purchase at the Series B
Conversion Price; and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance plus the number of
shares of such Additional Shares of Common Stock. For
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purposes of the foregoing computation, the number of shares of Common Stock
outstanding shall be deemed to include all shares of Common Stock actually
outstanding and all shares of Common Stock deemed to be outstanding as a result
of the application of the rules set forth in subsection (c)(iii)(7).
(3) In the case of the issuance of Additional Shares of Common
Stock for cash, the consideration shall be deemed to be the amount of cash paid
therefor after deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this Corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
(4) In the case of the issuance of Additional Shares of Common
Stock for a consideration in whole or in part other than cash, the consideration
other than cash shall initially be deemed to be the fair value thereof as
determined in good faith by the Board of Directors. The Corporation shall
provide the holders of the Series B Preferred Stock with written notice of its
fair market value determination pursuant to this Section 3(c)(iii)(4) within 30
days following such issuance of the Additional Shares of Common Stock. If the
Majority Holders deliver to the Corporation, within 30 days following delivery
of the Corporation's written notice, written notice of their objection to such
determination, the fair market value shall be determined pursuant to the
Appraisal Procedure set forth in Section 3(c)(iii)(6), which determination shall
be binding on the holders of the Series B Preferred Stock and the Corporation.
(5) The consideration for Additional Shares of Common Stock
issued together with other property of the Corporation for consideration that
covers both shall be determined in good faith by the Board of Directors. The
Corporation shall provide the holders of the Series B Preferred Stock with
written notice of its fair market value determination pursuant to this Section
3(c)(iii)(5) within 30 days following such issuance of the Additional Shares of
Common Stock. If the Majority Holders deliver to the Corporation, within 30 days
following delivery of the Corporation's written notice, written notice of their
objection to such determination, the fair market value shall be determined
pursuant to the Appraisal Procedure set forth in Section 3(c)(iii)(6), which
determination shall be binding on the holders of the Series B Preferred Stock
and the Corporation.
(6) Appraisal Procedure. In the event of a challenge to the fair
market value determinations of the Board of Directors pursuant to Section 2(b)
or the amount of consideration determined pursuant to Section 3(c)(iii)(4) or
Section 3(c)(iii)(5), the Corporation and the Majority Holders shall attempt to
select an investment banking firm to resolve such dispute. In the event that the
Corporation and the Majority Holders are unable to agree upon an investment
banking firm, within 30 days following the delivery of the Holder's (or Majority
Holders') written objection ("Objection Date"), the Corporation and the Majority
Holders, within 45 days following the Objection Date, shall each select an
investment banking firm with a national reputation and the two firms so selected
shall agree upon a third investment banking firm, which shall resolve such
dispute. The findings of the investment banking firm so selected shall be
binding on the Corporation and the Majority Holders. The fees and costs of the
investment banking firm selected shall be borne one-half by the Corporation and
one-half by the Majority Holders challenging the valuation.
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(7) In the case of the issuance of Options or Convertible
Securities, the following provisions shall apply for all purposes of this
Section 3(c)(iii):
(a) The aggregate maximum number of shares of Common Stock
deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) of such Options (and, in
the case of Options to acquire Convertible Securities, the maximum number of
shares of Common Stock issuable upon conversion or exchange of such Convertible
Securities) shall be deemed to have been issued at the time such Options were
issued and for a consideration equal to the consideration (determined in the
manner provided in subsections (c)(iii)(3), (c)(iii)(4) and (c)(iii)(5)), if
any, received by the Corporation upon the issuance of such Options plus the
minimum exercise price provided in such Options (without taking into account
potential antidilution adjustments) for the Common Stock covered thereby (plus,
in the case of Options to acquire Convertible Securities, the minimum additional
consideration, if any, deliverable upon conversion or exchange of such
Convertible Securities).
(b) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange (assuming the satisfaction of any
conditions to convertibility or exchangeability, including, without limitation,
the passage of time, but without taking into account potential antidilution
adjustments) for such Convertible Securities shall be deemed to have been issued
at the time such Convertible Securities were issued and for a consideration
equal to the consideration, if any, received by the Corporation for any such
Convertible Securities (excluding any cash received on account of accrued
interest or accrued dividends), plus the minimum additional consideration, if
any, to be received by the Corporation (without taking into account potential
antidilution adjustments) upon the conversion or exchange of such Convertible
Securities (the consideration in each case to be determined in the manner
provided in subsections (c)(iii)(3), (c)(iii)(4) and (c)(iii)(5)).
(c) If, following the issuance of Options or Convertible
Securities and the determination of the impact of such issuance pursuant to
subsection (c)(iii)(7)(a) or (c)(iii)(7)(b) above, there is any change in the
number of shares of Common Stock deliverable or in the consideration payable to
this Corporation upon exercise of such Options or upon conversion of or in
exchange for such Convertible Securities, including, but not limited to, a
change resulting from the antidilution provisions thereof, the Series B
Conversion Price, to the extent in any way affected by or computed using such
Options or Convertible Securities, shall be recomputed to reflect such change,
but no further adjustment shall be made for the actual issuance of Common Stock
or any payment of such consideration upon the exercise of any such Options or
the conversion or exchange of such Convertible Securities.
(d) The number of shares of Common Stock deemed issued and the
consideration deemed paid therefor pursuant to subsections (c)(iii)(7)(a) and
(c)(iii)(7)(b) shall be appropriately adjusted to reflect any change of the type
described in subsection (c)(iii)(7)(c).
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(e) For purposes of Section 3, securities (including Options
or Convertible Securities) shall be deemed to be issued on the earliest to occur
of the grant, issuance, or sale of, or the fixing of a record date with respect
to the distribution or issuance of, such securities.
(d) ADJUSTMENTS FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the event
that at any time or from time to time after the Series B Original Issue Date,
the Corporation shall make or issue, or fix a record date for the determination
of holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Corporation other than shares of Common Stock, then
and in each such event provision shall be made so that the holders of Series B
Preferred Stock shall receive upon conversion thereof, in addition to the number
of shares of Common Stock receivable thereupon, the amount of securities of the
Corporation that they would have received had their Series B Preferred Stock
been converted into Common Stock on the date of such event and had they
thereafter, during the period from the date of such event to and including the
actual conversion date, retained such securities receivable by them as aforesaid
during such period, giving application during such period to all adjustments
called for herein.
(e) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. In the
event that at any time or from time to time after the Series B Original Issue
Date, the Common Stock issuable upon the conversion of Series B Preferred Stock
shall be changed into the same or a different number of shares of any class or
classes of stock, whether by capital reorganization, reclassification, or
otherwise (other than a subdivision or combination of shares or stock dividend
provided for in Section 3(c)(ii) above, or a merger, consolidation, or sale of
assets provided for in Section 3(f) below) then and in each such event the
holder of any share or shares of Series B Preferred Stock shall have the right
thereafter to convert such shares into the kind and amount of shares of stock
and other securities and property receivable upon such reorganization,
reclassification, or other change, by the holder of a number of shares of Series
B Preferred Stock might have been converted immediately prior to such
reorganization, reclassification, or change, all subject to further adjustment
as provided herein.
(f) ADJUSTMENT FOR MERGER, CONSOLIDATION OR SALE OF ASSETS. In the
event that at any time or from time to time after the Series B Original Issue
Date, the Corporation shall sell all or substantially all of its assets or merge
or consolidate with or into another entity, each share of Series B Preferred
Stock shall thereafter be convertible into the kind and amount of shares of
stock or other securities or property to which a holder of the number of shares
of Common Stock of the Corporation deliverable upon conversion of Series B
Preferred Stock would have been entitled to receive upon such consolidation,
merger or sale; and, in such case, appropriate adjustment (as determined in good
faith by the Board of Directors) shall be made in the application of the
provisions set forth in this Section 3 with respect to the rights and interest
thereafter of the holders of Series B Preferred Stock, to the end that the
provisions set forth in this Section 3 (including provisions with respect to
changes in and other adjustments of the Series B Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other property thereafter deliverable upon the conversion of
the Series B Preferred Stock.
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(g) NO IMPAIRMENT. The Corporation shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, including, without limitation, voluntary bankruptcy
proceedings, avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed hereunder by the Corporation but shall at all
times in good faith assist in the carrying out of all the provisions of this
Section 3 and in the taking of all such actions as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series B Preferred Stock under this Section 3 against impairment.
(h) CERTIFICATE AS TO ADJUSTMENT. Upon the occurrence of each
adjustment or readjustment of the Series B Conversion Price pursuant to this
Section 3, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to each affected
holder of Series B Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment is
based; provided, however, that the Corporation shall not be required to provide
each holder with such a certificate more than one time per calendar quarter. The
Corporation shall, upon the written request at any time of any affected holder
of Series B Preferred Stock, furnish or cause to be furnished to such holder a
like certificate setting forth (i) such adjustments and readjustments, (ii) the
Series B Conversion Price in effect at the time, and (iii) the number of shares
of Common Stock and the amount, if any, of other property which at the time
would be received upon the conversion of each share of Series B Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record date of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, the Corporation shall deliver to each
holder of Series B Preferred Stock at least twenty days prior to such record
date a notice specifying the date on which any such record is to be taken for
the purpose of such dividend or distribution.
(j) COMMON STOCK RESERVE. The Corporation shall reserve and keep
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect conversion of
the Series B Preferred Stock.
(k) CERTAIN TAXES. The Corporation shall pay any issue or transfer
taxes payable in connection with the conversion of Series B Preferred Stock,
provided, however, that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer to a name other than that of the
holder of the Series B Preferred Stock.
(l) CLOSING OF BOOKS. The Corporation shall at no time close its
transfer books against the transfer of any Series B Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Series B Preferred Stock in any manner which interferes with the timely
conversion or permitted transfer of such Series B Preferred Stock or Common
Stock.
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SECTION 4. VOTING RIGHTS.
(a) Except as otherwise provided herein or as required by law, the
holders of the Series B Preferred Stock shall be entitled to notice of any
meeting of stockholders and shall vote together with the holders of the Series A
Preferred Stock and Common Stock as a single class upon any matter submitted to
the stockholders for a vote. Holders of Series B Preferred Stock shall have that
number of votes per share as is equal to the number of whole shares of Common
Stock into which each such share of Series B Preferred Stock held by such holder
could be converted on the date for determination of stockholders entitled to
vote at the meeting or on the date of any written consent.
(b) Notwithstanding any other provision of this Section 4, in the event
that it is determined by Nasdaq (after full process, including any appeal
process available to the Corporation) that the voting provisions set forth in
this Section 4 violate or conflict with Nasdaq Marketplace Rule 4351, the number
of votes to which each share of Series B Preferred Stock is entitled shall be
reduced to the extent required to comply with such rule.
SECTION 5. REDEMPTION.
(a) REDEMPTION AT OPTION OF THE HOLDER.
(i) On or at any time following the earliest of:
(A) a Change of Control (as defined below); and
(B) the seventh anniversary of the Series B Original Issue Date.
then each holder of Series B Preferred Stock may elect to have the Corporation
redeem from it, to the extent the Corporation has funds legally available for
such purpose, and subject to Section 5(a)(iii), any or all shares of Series B
Preferred Stock held by such holder; provided, however, that if a Change of
Control occurs as a result of the acquisition by a holder of Series B Preferred
Stock or such holder's "affiliates" (as such term is defined in Rule 405 under
the Securities Act of 1933, as amended) of beneficial ownership of securities of
the Corporation representing more than 50% of the voting power of the
Corporation (whether such acquisition is made by such holder or such holder's
affiliates, individually or as a member of a "group" (as described in Rule
13d-5(b)(1) promulgated under the Securities Exchange Act of 1934)), such holder
shall not be entitled, as a result of such Change of Control, to require the
Corporation to redeem its or its affiliates Series B Preferred Stock pursuant to
this Section 5(a). Such election may be made only by delivering to the
Corporation (x) a written notice signed by such holder specifying the number of
shares of Series B Preferred Stock so to be redeemed, and (y) certificates for
the shares of the Series B Preferred Stock so to be redeemed, together with
stock powers therefor duty executed by such holder in blank (such written
election, certificates and stock powers being referred to collectively as
"Redemption Notice").
(ii) The Corporation shall redeem from holders of Series B Preferred
Stock from whom the Corporation received a Redemption Notice, within 30 days of
its receipt of such Redemption Notice, all the shares of the Series B Preferred
Stock as to which Redemption Notices have been given, to the extent the
Corporation has funds legally
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available for such purpose, and subject to Section 5(a)(iii), by paying to the
respective holders the amount equal to (x) the number of shares of Series B
Preferred Stock submitted for redemption multiplied by (y)(i) the Liquidation
Preference, plus (ii) all accrued but unpaid dividends thereon to and including
the date of such redemption, whether or not declared.
(iii) If the funds of the Corporation legally available for
redemption of shares of Series B Preferred Stock are insufficient to redeem the
total number of shares of Series B Preferred Stock submitted for redemption
pursuant to Redemption Notices, those funds which are legally available will be
used to redeem the maximum possible number of whole shares ratably among the
holders of such shares who have submitted Redemption Notices as of such date of
determination. The shares of Series B Preferred Stock not redeemed shall remain
outstanding and, notwithstanding anything herein to the contrary, shall remain
entitled to all rights and preferences otherwise provided herein.
(b) REDEMPTION AT THE OPTION OF THE CORPORATION.
(i) On or at any time following the seventh anniversary of the
Series B Issue Date, the Corporation may redeem, in whole or in part, the Series
B Preferred Stock at a redemption price per share equal to the Liquidation
Preference as of the Redemption Date (the "Redemption Price"); provided, that
the Corporation may not exercise such right of redemption unless: (i) the
Registration Statement (as defined below) is effective, (ii) the average of the
closing prices of the Common Stock as reported by The Nasdaq Stock Market over
the twenty consecutive trading-day period ending not more than five business
days prior to the date of the Corporation Notice (as defined below) is greater
than or equal to the product of (x) the Series B Conversion Price in effect on
the last day of such twenty consecutive trading-day period and (y) 2.50, and
(iii) during the period beginning on the date of the Corporation Notice (as
defined below) and ending on the Redemption Date (as defined below) (1) the
Corporation shall not have received any request from the SEC or any other
federal or state governmental authority for amendments or supplements to the
Registration Statement or related prospectus or for additional information; (2)
no stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose shall have been issued by the SEC
or any other federal or state governmental authority; (3) the Corporation shall
not have received any notification with respect to the suspension of the
qualification or exemption from qualification of the Common Stock for sale in
any jurisdiction or the initiation of any proceeding for such purpose; and (4)
there shall not have occurred any event or circumstance which would necessitate
the making of any changes in the Registration Statement or related prospectus,
or any document incorporated or deemed to be incorporated therein by reference,
so that, in the case of the Registration Statement, it will not contain any
untrue statement of a material fact or any omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and that in the case of the related prospectus, it will not contain
any untrue statement of a material fact or any omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. Any
redemption effected pursuant to this Section (5)(b)(i) shall be made on a pro
rata basis among the holders of the Series B Preferred Stock in proportion to
the number of shares of Series B Preferred Stock then held by them.
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(ii) The Corporation shall provide written notice (the "Corporation
Notice") by first class mail postage prepaid, to each holder of record
(determined at the close of business on the business day next preceding the day
on which the Corporation Notice is given) of the Series B Preferred Stock to be
redeemed, at the address last shown on the records of this Corporation for such
holder, notifying such holder of the redemption to be effected, specifying the
number of shares to be redeemed from such holder, specifying the date of
redemption (the "Redemption Date"), the Redemption Price, the place at which
payment may be obtained and calling upon such holder to surrender to the
Corporation, in the manner and at the place designated, his, her or its
certificate or certificates representing the shares to be redeemed; provided
that the Redemption Date shall be not less than 10 days from the date of the
Corporation Notice. Except as provided in Section (5)(b)(iii), on or after the
Redemption Date, each holder of Series B Preferred Stock to be redeemed shall
surrender to the Corporation the certificate or certificates representing such
shares, in the manner and at the place designated in the Corporation Notice, and
thereupon the Redemption Price of such shares shall be payable to the order of
the person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be cancelled. In the event less
than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares.
(iii) From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
shares of Series B Preferred Stock designated for redemption in the Corporation
Notice as holders of Series B Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the Corporation legally
available for redemption of shares of Series B Preferred Stock on any Redemption
Date are insufficient to redeem the total number of shares of Series B Preferred
Stock to be redeemed on such date, those funds which are legally available will
be used to redeem the maximum possible number of such shares ratably among the
holders of such shares to be redeemed based upon their holdings of Series B
Preferred Stock. The shares of Series B Preferred Stock not redeemed shall
remain outstanding and entitled to all the rights and preferences provided
herein. At any time thereafter when additional funds of the Corporation are
legally available for the redemption of shares of Series B Preferred Stock, such
funds will immediately be used to redeem the balance of the shares which the
Corporation has become obliged to redeem on any Redemption Date but which it has
not redeemed.
(c) DEFINITIONS.
(i) "Change of Control" shall mean: (i) the acquisition by any
person or "group" (as described in Rule 13d-5(b)(1) promulgated under the
Securities Exchange Act of 1934), of beneficial ownership of securities of the
Corporation representing more than 50% of the voting power of the Corporation;
or (ii) a merger or consolidation of the Corporation or a sale of all or
substantially all of the assets of the Corporation in one or a series of related
transactions, unless following such transaction or series of transactions, the
holders of the Corporation's securities prior to the first such transaction
continue to hold at least a majority of the voting power of the surviving entity
or acquirer of such assets.
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(ii) "Registration Effective Date" shall mean the first date on
which the Registration Statement has been declared effective.
(iii) "Registration Statement" shall mean the Corporation's
registration statement under the Securities Act of 1933, as amended, covering
the registration of (a) the shares of Common Stock issuable upon conversion of
the Series B Preferred Stock and (b) the shares of Common Stock issuable upon
exercise of the Warrants (as defined).
(iv) "Warrants" shall mean, collectively, those Common Stock
Purchase Warrants to purchase shares of Common Stock to be issued pursuant to
the Securities Purchase Agreement by and among the Corporation and the other
parties thereto.
(d) NO REDEMPTION OF JUNIOR PREFERRED STOCK. So long as any shares of
Series B Preferred Stock are outstanding, the Corporation shall not redeem any
shares of Junior Preferred Stock or any other shares of Preferred Stock that
have liquidation or dividend rights that are subordinate to those of the Series
B Preferred Stock; provided, however, the foregoing shall not prohibit the
Corporation from redeeming shares of Series A Preferred Stock pursuant to
Section 5(a) of the Certificate of Designation of Series A Convertible Preferred
Stock as in effect on the Series B Original Issue Date (the "Series A
Certificate") if (x) a number of shares of Series B Preferred Stock equal to or
greater than 80% of the sum of the total number of shares of Series B Preferred
Stock (1) issued upon conversion of the Tranche I Notes (as defined in that
certain Securities Purchase Agreement, dated as of March 12, 2003, by and
between the Corporation and certain purchasers ("Securities Purchase
Agreement")), and (2) issued and, as of the date of such Change of Control,
issuable under the Sanmina Notes (as defined in the Securities Purchase
Agreement), and (3) without duplication, any other shares of Series B Preferred
Stock issued in connection with the Third Closing (as defined in the Securities
Purchase Agreement) and any other shares of Series B Preferred Stock issued on
the Series B Original Issue Date, have been either (1) redeemed, (2) submitted
for redemption pursuant to a redemption notice under Section 5 of this
Certificate of Designation and/or (3) converted into Common Stock pursuant to
Section 3 of this Certificate of Designation, and (y) the Corporation has
actually redeemed all shares of Series B Preferred Stock as to which a
redemption notice has been submitted to the Corporation.
SECTION 6. NOTICES. All notices, requests, consents, demands and other
communications required or permitted under this Series B Preferred Stock
Certificate of Designation shall be in writing and shall be deemed to have been
duly given, made and received (a) when delivered against receipt, (b) upon
transmitter's confirmation of the receipt of a facsimile transmission, which
shall be followed by an original sent otherwise in accordance with this Section
6, (c) upon confirmed delivery by a standard overnight carrier, or (d) if to a
U.S. resident, upon expiration of three business days after the day when
deposited in the U.S. mail, first class postage prepaid, addressed to the
Corporation at its principal executive office, or at such other address of which
the Corporation may notify the holders of Series B Preferred Stock from time to
time, or if to a holder of Series B Preferred Stock or Common Stock, to such
holder's address as shown by the records of the Corporation.
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SECTION 7. STATUS OF REACQUIRED SHARES. Shares of Series B Preferred
Stock which have been issued and converted, redeemed or reacquired in any manner
shall (upon compliance with any applicable provisions of the laws of the State
of Delaware) have the status of authorized and unissued Preferred Stock
undesignated as to Series and may be redesignated and reissued.
SECTION 8. ISSUANCE OF ADDITIONAL SHARES OF SERIES B. Except as
required under the Securities Purchase Agreement, the Company may not issue
shares of the Series B Preferred Stock without the consent of a majority of the
shares of Series B Preferred Stock then outstanding.
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IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Certificate of Designation this 9th day of May 2003.
/s/ Peter Leparulo
-----------------------
Peter Leparulo
Chief Executive Officer
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